<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-64551
THE INFORMATION CONTAINED HEREIN IS NOT COMPLETE AND MAY BE CHANGED. NEITHER
THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS IS AN OFFER TO SELL
THESE SECURITIES NOR IS IT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE SUCH OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 13, 1999
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED MARCH 25, 1999)
$616,668,000
(APPROXIMATELY)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION V,
DEPOSITOR
PAINE WEBBER REAL ESTATE SECURITIES INC. and
MERRILL LYNCH MORTGAGE CAPITAL INC.,
MORTGAGE LOAN SELLERS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-C1
----------------
[sidebar]
You should carefully consider the risk factors beginning on page S-22 of this
Prospectus Supplement and on page 14 of the accompanying Prospectus.
Payments on the mortgage loans backing these securities represent the sole
source of payment on these securities. These securities do not represent an
interest in or an obligation of the Depositor or any of its affiliates.
Neither these securities nor the underlying Mortgage Loans are insured or
guaranteed by the Depositor, either Underwriter, any governmental agency or any
other person.
This Prospectus Supplement and the accompanying Prospectus relate only to the
Offered Certificates. The Private Certificates are not offered by this
document.
[end sidebar]
THE TRUST:
o The Trust will primarily consist of a pool of conventional fixed rate,
monthly pay mortgage loans.
o The Mortgage Loans are primarily secured by first priority liens on fee
simple or leasehold interests in multifamily, retail, office, hospitality,
industrial, credit tenant, health-care related, mixed use, mobile home park
and self storage properties.
o Multifamily, retail, office, hospitality and industrial, properties will
represent security for a material concentration of the Mortgage Loans
included in the Trust.
THE CERTIFICATES:
o The Offered Certificates consist of the six Classes of pass-through
Certificates described in the table below. The Offered Certificates are the
only securities offered pursuant to this Prospectus Supplement and the
accompanying Prospectus.
o Seven additional Classes of "Private Certificates" are also being issued by
the Trust. The Private Certificates are not offered by this Prospectus
Supplement.
o The Private Certificates are subordinate to the Offered Certificates, and
each Class of Offered Certificates (other than the Class A Certificates and
the Class X Certificates) is subordinate to each other Class of Offered
Certificates that has an earlier alphabetical designation.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Initial Class Certificate
Balance or Notional
Amount Pass-Through
Class (+/-5%) Rate
- -------------------------------------------------------------
<S> <C> <C>
Class A-1 ......... $ 153,627,000 %
- -------------------------------------------------------------
Class A-2 ......... $ 357,327,000 %
- -------------------------------------------------------------
Class X ........... $ 704,764,603(1) (2)
- -------------------------------------------------------------
Class B ........... $ 35,238,000 %(3)
- -------------------------------------------------------------
Class C ........... $ 37,000,000 %(3)
- -------------------------------------------------------------
Class D ........... $ 33,476,000 %(3)
- -------------------------------------------------------------
<CAPTION>
Anticipated
Ratings
Assumed Final Rated Final ---------------------------
Class Distribution Date(4) Distribution Date(5) Moody's(6) Fitch IBCA(7)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 ......... December 15, 2007 June 15, 2032 Aaa AAA
- --------------------------------------------------------------------------------------------
Class A-2 ......... April 15, 2009 June 15, 2032 Aaa AAA
- --------------------------------------------------------------------------------------------
Class X ........... October 15, 2023 June 15, 2032 Aaa AAA
- --------------------------------------------------------------------------------------------
Class B ........... May 15, 2009 June 15, 2032 Aa2 AA
- --------------------------------------------------------------------------------------------
Class C ........... June 15, 2009 June 15, 2032 A2 A
- --------------------------------------------------------------------------------------------
Class D ........... December 15, 2009 June 15, 2032 Baa2 BBB
- --------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(footnotes to table appear on page S-2)
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE OFFERED CERTIFICATES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE, ADEQUATE OR COMPLETE.
We expect that PaineWebber Mortgage Acceptance Corporation V will sell the
Offered Certificates to PaineWebber Incorporated and Merrill Lynch, Pierce,
Fenner & Smith Incorporated (the "Underwriters") on or about June 7, 1999 and
that the Underwriters will sell the Offered Certificates from time to time in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale.
----------------
PAINEWEBBER INCORPORATED MERRILL LYNCH & CO.
----------------
, 1999
<PAGE>
SOUTH
DAKOTA
1 property
$2,228,908
0.32% of
total
WASHINGTON
2 properties
$11,047,648
1.57% of total
CALIFORNIA
13 properties
$51,491,340
7.31% of total
NEVADA
2 properties
$15,736,629
2.23% of
total
ARIZONA
7 properties
$28,086,100
3.99% of
total
NEW MEXICO
1 property
$9,170,484
1.30% of
total
COLORADO
1 property
$2,099,147
0.30% of
total
TEXAS
19 properties
$90,817,375
12.89% of
total
OKLAHOMA
2 properties
$2,609,089
0.37% of
total
MINNESOTA
6 properties
$27,887,748
3.96% of
total
WISCONSIN
2 properties
$ 8,387,448
1.19% of
total
ILLINOIS
8 properties
$11,968,978
1.70% of total
MICHIGAN
5 properties
$27,460,974
3.90% of total
INDIANA
2 properties
$ 6,289,120
0.89% of total
VERMONT
1 property
$ 5,962,720
0.85% of total
PENNSYLVANIA
5 properties
$14,274,883
2.03% of
total
OHIO
9 properties
$15,114,190
2.14% of
total
MARYLAND
6 properties
$83,501,308
11.85% of
total
VIRGINIA
2 properties
$ 9,944,159
1.41% of total
TENNESSEE
4 properties
$ 6,818,354
0.97% of
total
GEORGIA
10 properties
$19,924,665
2.83% of
total
LOUISIANA
3 properties
$ 3,819,487
0.54% of
total
MISSISSIPPI
2 properties
$ 4,547,719
0.65% of
total
ALABAMA
2 properties
$ 5,173,475
0.73% of
total
FLORIDA
23 properties
$55,038,335
7.81% of
total
KANSAS
1 property
$ 1,447,974
0.21% of
total
NEW
HAMPSHIRE
2 properties
$13,387,211
1.90% of
total
MASSACHUSETTS
8 properties
$ 9,093,868
1.29% of
total
CONNECTICUT
1 property
$ 2,756,214
0.39% of
total
NEW YORK
14 properties
$48,366,192
6.86% of
total
NEW JERSEY
14 properties
$52,966,816
7.52% of
total
DISTRICT OF
COLUMBIA
1 property
$ 3,819,352
0.54% of
total
NORTH
CAROLINA
8 properties
$24,173,118
3.43% of
total
SOUTH
CAROLINA
5 Properties
$20,688,973
2.94% of
total
PUERTO RICO
1 property
$ 8,664,604
1.23% of
total
(less than) 1.00% of Cut-Off Allocated Loan Amount [ ]
1.00 - 5.99% of Cut-Off Date Allocated Loan Amount [ ]
6.00 - 9.99% of Cut-Off Date Allocated Loan Amount [ ]
(greater than) 9.99% of Cut-Off Date Allocated Loan Amount [ ]
<PAGE>
Footnotes to the Table on the Cover Page of the Prospectus Supplement
(1) The Class X Certificates are interest-only Certificates. Class X
Certificateholders will not receive any principal. However, they will be
entitled to receive interest that accrues on a notional amount (the
"Notional Amount") equal to the aggregate of the Stated Principal
Balances of the Mortgage Loans determined as described herein from time
to time.
(2) The Class X Pass-Through Rate with respect to any Distribution Date shall
be equal to the excess, if any, of (i) the weighted average for such
Distribution Date of the Mortgage Rates of the Mortgage Loans net of the
related servicing fee rate, over (ii) the weighted average of the
Pass-Through Rates of the other Classes of Certificates for such
Distribution Date, as more fully described herein.
(3) The Pass-Through Rate of each Class of the Class B, Class C and Class D
Certificates for any Distribution Date will equal the lesser of (i) the
indicated fixed rate per annum for such Class and (ii) the weighted
average for such Distribution Date of the Mortgage Rates of the Mortgage
Loans, net of the related servicing fee rate, as more fully described in
"Description of the Certificates--General" herein.
(4) The Assumed Final Distribution Dates set forth above have been determined
on the basis of the assumptions described in "Description of the
Certificates--Assumed Final Distribution Date; Rated Final Distribution
Date" herein.
(5) The Rated Final Distribution Date is the first Distribution Date after
the 36th month following the end of the amortization term of the Mortgage
Loan that, as of the Cut-off Date, has the longest remaining amortization
term.
(6) Moody's Investors Service, Inc. ("Moody's").
(7) Fitch IBCA, Inc. ("Fitch IBCA").
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
In this Prospectus Supplement, the terms "Depositor", "we", "us" and "our"
refer to PaineWebber Mortgage Acceptance Corporation V.
We tell you about the Offered Certificates in two separate documents that
progressively provide more detail. These documents are:
o the Prospectus, which provides general information, some of which may
not apply to a particular series of Certificates, including your
series; and
o this Prospectus Supplement, which describes the specific terms of your
series of Certificates.
IF WE DESCRIBE TERMS OF THE OFFERED CERTIFICATES DIFFERENTLY IN THIS
PROSPECTUS SUPPLEMENT THAN WE DO IN THE PROSPECTUS, YOU SHOULD RELY ON THE
INFORMATION IN THIS PROSPECTUS SUPPLEMENT RATHER THAN ON THE MORE GENERAL
INFORMATION IN THE PROSPECTUS. HOWEVER, YOU SHOULD CAREFULLY REVIEW THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TOGETHER, BECAUSE NEITHER ONE BY
ITSELF PROVIDES COMPLETE INFORMATION ABOUT THE OFFERED CERTIFICATES.
This Prospectus Supplement and the Prospectus include cross-references to
sections in these materials where you can find further related discussions. The
Table of Contents in this Prospectus Supplement and the Prospectus identify the
pages where these cross-referenced sections are located.
THE PHOTOGRAPHS OF THE MORTGAGED PROPERTIES INCLUDED IN THIS PROSPECTUS
SUPPLEMENT ARE NOT REPRESENTATIVE OF ALL OF THE MORTGAGED PROPERTIES OR OF ANY
PARTICULAR TYPE OF MORTGAGED PROPERTY.
Whenever we use words like "intends," "anticipates" or "expects" or
similar words in this Prospectus Supplement, we are making a forward-looking
statement, or a projection of what we think will happen in the future.
Forward-looking statements are inherently subject to a variety of
circumstances, many of which are beyond our control, that could cause actual
results to differ materially from what we think they will be. Any
forward-looking statements in this Prospectus Supplement speak only as of the
date of this Prospectus Supplement. We do not assume any responsibility to
update or review any forward-looking statement contained in this Prospectus
Supplement to reflect any change in our expectation with respect to the subject
of such forward-looking statement or to reflect any change in events,
conditions or circumstances on which any such forward-looking statement is
based.
In this Prospectus Supplement and the Prospectus we use capitalized terms
to refer to many concepts which are referenced under the caption "Index of
Significant Definitions" beginning on page S-127 in this Prospectus Supplement
and under the caption "Index of Principal Definitions" beginning on page 14 in
the Prospectus.
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
SUMMARY OF STRUCTURE ..................... S-4
Overview of Series 1999-C1
Certificates ....................... S-4
Summary of Subordination Levels........ S-5
SUMMARY OF TERMS ......................... S-6
RISK FACTORS ............................. S-22
Risks Relating to the Offered
Certificates ....................... S-22
Risks Related to the Mortgage
Loans .............................. S-25
DESCRIPTION OF THE
MORTGAGE POOL ......................... S-41
General ............................... S-41
Certain Terms and Conditions of
the Mortgage Loans ................. S-42
Additional Mortgage Loan
Information ........................ S-51
Ten Largest Mortgage Loans ............ S-62
Underwritten Net Cash Flow ............ S-64
Assessments of Property Condition S-66
The Mortgage Loan Sellers ............. S-66
PWRES' Underwriting Standards ......... S-67
MLMC's Underwriting Standards ......... S-69
Representations and Warranties;
Repurchases ........................ S-71
DESCRIPTION OF THE
CERTIFICATES .......................... S-77
General ............................... S-77
Book-Entry Registration and
Definitive Certificates ............ S-78
Distributions ......................... S-79
Allocation of Prepayment
Premiums and Yield
Maintenance Charges ................ S-86
Subordination; Allocation of
Collateral Support Deficit ......... S-87
Advances .............................. S-89
Appraisal Reductions .................. S-90
Reports to Certificateholders;
Certain Available Information ...... S-91
Voting Rights ......................... S-96
Termination; Retirement of
Certificates ....................... S-96
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
The Trustee ........................... S-97
Fiscal Agent .......................... S-98
Paying Agent, Certificate Registrar
and Authenticating Agent ........... S-98
YIELD AND MATURITY
CONSIDERATIONS ........................ S-99
Yield Considerations .................. S-99
Weighted Average Life ................. S-101
SERVICING OF THE
MORTGAGE LOANS ........................ S-105
General ............................... S-105
The Master Servicer ................... S-107
The Special Servicer .................. S-107
Servicing and Other Compensation
and Payment of Expenses ............ S-108
Maintenance of Insurance .............. S-109
Modifications, Waiver and
Amendments ......................... S-110
Realization Upon Defaulted
Mortgage Loans ..................... S-112
Inspections; Collection of
Operating Information .............. S-114
Certain Matters Regarding the
Master Servicer, the Special
Servicer and the Depositor ......... S-115
Events of Default ..................... S-116
Rights Upon Event of Default .......... S-117
Amendment ............................. S-117
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES ...................... S-118
METHOD OF DISTRIBUTION ................... S-120
LEGAL MATTERS ............................ S-121
RATINGS .................................. S-121
LEGAL INVESTMENT
CONSIDERATIONS ........................ S-122
ERISA CONSIDERATIONS ..................... S-122
Index of Principal Definitions ........... S-125
Annex A-1 -- Certain Characteristics
of the Mortgage Loans ................. A-1
Annex A-2 -- Credit Tenant Loans ......... A-2
Annex B -- Servicer Reports .............. B
Annex C -- Interest Reserve Loans ........ C
</TABLE>
S-3
<PAGE>
SUMMARY OF STRUCTURE
This summary highlights selected information contained in this document
and does not contain all of the information that you need to consider in
deciding whether to buy any Class of Offered Certificates. To understand all of
the terms of the Offered Certificates, you should read this entire Prospectus
Supplement and the Prospectus with care.
OVERVIEW OF SERIES 1999-C1 CERTIFICATES:
<TABLE>
<CAPTION>
INITIAL
AGGREGATE WEIGHTED
RATINGS CERTIFICATE AVERAGE PRINCIPAL OR
----------------- BALANCE OR PASS-THROUGH LIFE NOTIONAL
MOODY'S FITCH NOTIONAL % OF RATE PASS-THROUGH (APPROX. AMOUNT
CLASS (1) IBCA (2) AMOUNT (3) TOTAL DESCRIPTION RATE YEARS) (7) WINDOW (7)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Classes
A-1 Aaa AAA $ 153,627,000 21.80 Fixed % 5.32 7/1999-12/2007
A-2 Aaa AAA $ 357,327,000 50.70 Fixed % 9.27 12/2007- 4/2009
X Aaa AAA $ 704,764,603(4) N/A Variable (6) 9.24 7/1999-10/2023
Subordinated Classes
B Aa2 AA $ 35,238,000 5.00 Fixed (5) % 9.86 4/2009- 5/2009
C A2 A $ 37,000,000 5.25 Fixed (5) % 9.94 5/2009- 6/2009
D Baa2 BBB $ 33,476,000 4.75 Fixed (5) % 10.14 6/2009-12/2009
E Baa3 BBB- $ 8,809,000 1.25 Fixed (5) % 10.73 12/2009-10/2010
F Ba2 NR (8) $ 35,238,000 5.00 Fixed (5) % 12.52 10/2010-10/2013
G B2 NR (8) $ 24,666,000 3.50 Fixed (5) % 16.08 10/2013-10/2017
H B3 NR (8) $ 7,400,000 1.05 Fixed (5) % 18.86 10/2017- 6/2018
I NR (8) NR (8) $ 11,983,603 1.70 Fixed (5) % 21.29 6/2018-10/2023
Residual Classes
R N/A N/A N/A N/A N/A N/A N/A N/A
LR N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
(1) Moody's Investors Service, Inc. ("Moody's").
(2) Fitch IBCA, Inc. ("Fitch IBCA")
(3) Subject to a permitted variance of plus or minus 5%.
(4) The Class X Certificates are interest-only Certificates. Class X
Certificateholders will not receive any principal. However, they will be
entitled to receive interest that accrues on a notional amount (the
"Notional Amount") equal to the aggregate of the Stated Principal
Balances of the Mortgage Loans determined as described herein from time
to time.
(5) The Pass-Through Rates of each Class of Certificates (other than Class
A-1, Class A-2, Class X and the Residual Classes) with respect to any
Distribution Date shall be the lesser of (i) the indicated fixed rate per
annum for such Class and (ii) the weighted average, for such Distribution
Date, of the Mortgage Rates of the Mortgage Loans, net of the related
Servicing Fee Rate, as more fully described in "Description of the
Certificates--General."
(6) The Class X Pass-Through Rate with respect to any Distribution Date shall
be equal to the excess, if any, of (i) the weighted average for such
Distribution Date of the Mortgage Rates of the Mortgage Loans, net of the
related Servicing Fee Rate, over (ii) the weighted average, for such
Distribution Date, of the Pass-Through Rates of the other Classes of
Certificates, as more fully described herein in "Description of the
Certificates--General." The initial Pass-Through Rate of the Class X
Certificates will be approximately %.
(7) The weighted average life and the period during which distributions of
principal (or, for the Class X Certificates, reductions in the Notional
Amount) will occur have been calculated using assumptions set forth under
"Yield and Maturity Considerations--Weighted Average Life" herein and
assuming that there are no extensions of Stated Maturity Dates,
delinquencies, losses or prepayments (other than with respect to the ARD
Loans, which are assumed to prepay on their respective Anticipated
Repayment Dates).
(8) Not Rated.
S-4
<PAGE>
SUMMARY OF SUBORDINATION LEVELS:
Credit support for certain Classes of Certificates is provided by:
o the sequential payment of interest and principal to the Certificates
in alphabetical order (other than to the Class X Certificates, which
are pari passu with the Class A Certificates in respect of interest),
and
o the allocation of losses, certain shortfalls and other reductions of
the assets of the Trust in reverse alphabetical order. The Notional
Amount of the Class X Certificates will be reduced by distributions of
principal on, and allocations of losses and other reductions of the
assets of the Trust to, any other Class of Certificates.
The following chart summarizes the protection afforded to each Class of
Certificates by the initial principal amount of other Classes that are
subordinated to such Class.
<TABLE>
<CAPTION>
CLASS SIZE AS A
PRINCIPAL AND INITIAL RATINGS PERCENTAGE
APPROXIMATE INITIAL INTEREST-ONLY INTEREST CERTIFICATE -------------------- OF INITIAL POOL
CREDIT SUPPORT CERTIFICATES CERTIFICATES BALANCE MOODY'S FITCH IBCA BALANCE (1)
<S> <C> <C> <C> <C> <C> <C>
27.50% Class A-1 $153,627,000 Aaa AAA 21.80%
27.50% Class A-2 $357,327,000 Aaa AAA 50.70%
22.50% Class B $ 35,238,000 Aa2 AA 5.00%
17.25% Class C $ 37,000,000 A2 A 5.25%
Class X
12.50% Class D $ 33,476,000 Baa2 BBB 4.75%
11.25% Class E $ 8,809,000 Baa3 BBB- 1.25%
(Aaa/AAA)
6.25% Class F $ 35,238,000 Ba2 NR (2) 5.00%
2.75% Class G $ 24,666,000 B2 NR (2) 3.50%
1.70% Class H $ 7,400,000 B3 NR (2) 1.05%
0.00% Class I $ 11,983,603 NR (2) NR (2) 1.70%
(1) Initial Pool Balance means the aggregate of the Stated Principal Balances of the Mortgage Loans
on the Cut-off Date.
(2) NR=Not Rated
</TABLE>
S-5
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information from this Prospectus
Supplement. It does not contain all of the information you need to consider in
making your investment decisions. To understand all of the terms of the
offering of the Offered Certificates, you should read this entire document and
the accompanying Prospectus carefully.
RELEVANT PARTIES
The Depositor............... PaineWebber Mortgage Acceptance Corporation V,
a Delaware corporation, as depositor (the
"Depositor", "we" or "us"), is forming a trust
(the "Trust") that will issue the Commercial
Mortgage Pass-Through Certificates, Series
1999-C1.
The primary assets of the Trust (the "Trust
Assets") are the mortgage loans (the "Mortgage
Loans"), which we describe in this Prospectus
Supplement under "--The Mortgage Pool" and
"Description of the Mortgage Pool." We are a
wholly-owned limited purpose finance subsidiary
of PaineWebber Group Inc. We are an affiliate of
PaineWebber Incorporated, one of the
Underwriters, and of Paine Webber Real Estate
Securities Inc., one of the Mortgage Loan
Sellers. Our address is 1285 Avenue of the
Americas, New York, New York 10019. Our
telephone number is (212) 713-7900.
Master Servicer............. Banc One Mortgage Capital Markets, LLC, a
Delaware limited liability company, will be the
master servicer of the Mortgage Loans for the
Certificateholders.
Special Servicer............ Banc One Mortgage Capital Markets, LLC will be
the special servicer of the Mortgage Loans for
the Certificateholders. We anticipate that Banc
One Mortgage Capital Markets, LLC will be
purchasing all of the Private Certificates other
than the Class R and Class LR Certificates.
Trustee..................... LaSalle Bank National Association, a national
banking association, is the trustee for the
Certificateholders.
Fiscal Agent................ ABN AMRO Bank N.V., a Netherlands banking
corporation, is the fiscal agent for the
Certificateholders and the indirect corporate
parent of the Trustee.
The Mortgage Loan Sellers... We expect to purchase the Mortgage Loans from
Paine Webber Real Estate Securities Inc., a
Delaware corporation ("PWRES") and Merrill Lynch
Mortgage Capital Inc., a Delaware corporation
("MLMC"). We refer to PWRES and MLMC as the
"Mortgage Loan Sellers." PWRES is an affiliate of
the Depositor and of PaineWebber Incorporated,
one of the Underwriters. MLMC is an affiliate of
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, one of the Underwriters. For more
information about each of the Mortgage Loan
Sellers, see "Description of the Mortgage
Pool--The Mortgage Loan Sellers" in this
Prospectus Supplement.
S-6
<PAGE>
<TABLE>
<CAPTION>
% OF INITIAL
MORTGAGE LOAN SELLER POOL BALANCE NUMBER OF MORTGAGE LOANS
- ---------------------- -------------- -------------------------
<S> <C> <C>
PWRES 66.35% 143
MLMC 33.65% 34
</TABLE>
Underwriters................ PaineWebber Incorporated and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. See "Method
of Distribution" in this Prospectus Supplement.
RELEVANT DATES AND PERIODS
Closing Date................ We expect to deliver the Offered Certificates
on or about June 7, 1999.
Cut-off Date................ June 1, 1999, except that with respect to one
Mortgage Loan, the Cut-off Date is June 5, 1999.
All payments on any Mortgage Loan that are due on
or before its Cut-off Date, whenever received,
are not included in the Trust Assets.
Distribution Date........... The 15th day of each month or, if such 15th day
is not a business day, the business day
immediately following such 15th day, commencing
in July 1999.
Interest Accrual Period..... With respect to each Distribution Date, the
calendar month preceding the month in which such
Distribution Date occurs.
Record Date................. With respect to each Distribution Date, the
last business day of the month preceding the
month in which that Distribution Date occurs.
Assumed Final
Distribution Date........... We expect that the final distribution on each
Class of Offered Certificates will be made on the
following dates (which we refer to as the related
"Assumed Final Distribution Dates"), assuming
that there are no prepayments (other than with
respect to ARD Loans, which we assume will prepay
on their respective Anticipated Repayment Dates),
defaults, delinquencies or modifications with
respect to the Mortgage Loans after June 1, 1999:
<TABLE>
<CAPTION>
ASSUMED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
- --------------------- ------------------
<S> <C>
Class A-1 ......... December 15, 2007
Class A-2 ......... April 15, 2009
Class X ........... October 15, 2023
Class B ........... May 15, 2009
Class C ........... June 15, 2009
Class D ........... December 15, 2009
</TABLE>
S-7
<PAGE>
Rated Final
Distribution Date........... June 15, 2032, which is the first Distribution
Date after the 36th month following the end of
the amortization term for the Mortgage Loan that,
as of the Cut-off Date, has the longest remaining
amortization term. Moody's and Fitch IBCA have
indicated that their ratings of the Offered
Certificates address the likelihood of timely
payment of interest and ultimate payment of
principal amounts due to Certificateholders on or
before the Rated Final Distribution Date and not
any other date.
OFFERED CERTIFICATES
General..................... The following six classes of Commercial
Mortgage Pass-Through Certificates
(collectively, the "Offered Certificates") are
being offered by this Prospectus Supplement as
part of Series 1999-C1:
o Class A-1
o Class A-2
o Class X
o Class B
o Class C
o Class D
Series 1999-C1 will consist of a total of 13
classes, the following 7 of which are not being
offered through this Prospectus Supplement and
the accompanying Prospectus: Class E, Class F,
Class G, Class H, Class I, Class R and Class LR
(collectively, the "Private Certificates"; we
refer to the Class R and Class LR Certificates
as the "Residual Certificates"). We refer to the
Offered Certificates and the Private
Certificates collectively as the "Series 1999-C1
Certificates" or the "Certificates."
The Certificates will represent beneficial
ownership interests in the Trust created by
PaineWebber Mortgage Acceptance Corporation V.
The Trust's primary assets will be 177 Mortgage
Loans secured by first liens on commercial and
multifamily properties.
Certificate Principal Amount or
Notional Amount........... Each Class of Offered Certificates will have
the approximate aggregate initial principal
balance or notional amount set forth below,
subject to a variance of plus or minus 5%:
<TABLE>
<CAPTION>
<S> <C> <C>
Class A-1 ......... $153,627,000 Principal Balance
Class A-2 ......... $357,327,000 Principal Balance
Class X ........... $704,764,603 Notional Amount
Class B ........... $ 35,238,000 Principal Balance
Class C ........... $ 37,000,000 Principal Balance
Class D ........... $ 33,476,000 Principal Balance
</TABLE>
The notional amount of the Class X Certificates
will be equal to 100% of the aggregate Stated
Principal Balance of the Mortgage Loans
outstanding from time to time.
S-8
<PAGE>
Pass-Through Rates.......... Your certificates will accrue interest at an
annual rate called a "Pass-Through Rate", which
is set forth below:
<TABLE>
<CAPTION>
<S> <C>
Class A-1 ......... %
Class A-2 ......... %
Class X ........... The excess, if any of (i) the Weighted
Average Net Mortgage Rate over
(ii) the weighted average of the
Pass-Through Rates of the other
Certificates (other than Classes R
and LR), weighted on the basis of
their respective Certificate Balances.
Class B ........... %, but not in excess of the
Weighted Average Net Mortgage
Rate.
Class C ........... %, but not in excess of the
Weighted Average Net Mortgage
Rate.
Class D ........... %, but not in excess of the
Weighted Average Net Mortgage
Rate.
</TABLE>
The Class X Certificates will receive interest
only; they will not be entitled to distributions
of principal. Interest on the Certificates will
be calculated based on a 360-day year consisting
of twelve 30-day months (i.e., a 30/360 basis).
The "Weighted Average Net Mortgage Rate" for a
particular Distribution Date is the weighted
average of the interest rates of the Mortgage
Loans minus the related Servicing Fee Rates,
weighted on the basis of the Stated Principal
Balances of the Mortgage Loans as of the
preceding Distribution Date (after giving effect
to the distribution of principal on such
Distribution Date). See "Description of the
Certificates--Distributions" in this Prospectus
Supplement for a more precise description of how
we calculate the Pass-Through Rates on the
Certificates.
For purposes of calculating the Weighted Average
Net Mortgage Rate, (1) the interest rates of the
Mortgage Loans will not reflect any default
interest rate or any rate increase occurring
after an Anticipated Repayment Date, (2) the
interest rates of the Mortgage Loans will be
determined without regard to any loan
modifications agreed to by the Master Servicer
or the Special Servicer or resulting from the
borrower's bankruptcy or insolvency and (3) if a
Mortgage Loan does not accrue interest on a
30/360 basis, its interest rate for any month
that is not a 30-day month will be recalculated
so that the amount of interest that would accrue
at that rate in such month, calculated on a
30/360 basis, will equal the amount of interest
that actually
S-9
<PAGE>
accrues on that loan in that month. See
"Description of the
Certificates--Distributions--Priority" in this
Prospectus Supplement for a more precise
definition of the term "Weighted Average Net
Mortgage Rate."
Distributions
A. Amount and Order of
Distributions........... On each Distribution Date, the Available
Distribution Amount (as defined below) from the
Mortgage Loans, will be distributed in the
following amounts and order of priority:
Step 1/Class A and Class X: To interest on
Classes A-1 and A-2 and Class X, pro rata, in
accordance with their interest entitlements.
Step 2/Class A: To the extent of funds available
for principal, as principal to Classes A-1 and
A-2, in that order, until reduced to zero. If
each Class of certificates other than Class A
has been reduced to zero, funds available for
principal will be distributed to Classes A-1 and
A-2, pro rata, rather than sequentially.
Step 3/Class A: To reimburse Classes A-1 and
A-2, pro rata, for any previously unreimbursed
losses on the Mortgage Loans allocable to
principal that were previously borne by those
classes.
Step 4/Class B: To Class B in this order: (a) to
interest on Class B in the amount of its
interest entitlement; (b) to the extent of funds
available for principal, as principal to Class B
until reduced to zero; and (c) to reimburse
Class B for any previously unreimbursed losses
on the mortgage loans allocable to principal
that were previously borne by that Class,
together with interest.
Step 5/Class C: To Class C in a manner analogous
to the Class B allocations of Step 4.
Step 6/Class D: To Class D in a manner analogous
to the Class B allocations of Step 4.
Step 7/Private Certificates: To each Class of
Private Certificates (other than the Residual
Certificates), in the amounts and order of
priority described in "Description of the
Certificates--Distributions" in this Prospectus
Supplement, in each case in a manner analogous
to the Class B allocations of Step 4, and then
to the Residual Certificates.
The "Available Distribution Amount" with respect
to any Distribution Date will generally be an
amount equal to:
o the scheduled monthly payments due on the
Mortgage Loans in the month in which such
Distribution Date occurs and received or
advanced by the Master Servicer, Trustee or
Fiscal Agent with respect to such
Distribution Date;
S-10
<PAGE>
plus
o all Balloon Payments and Insurance and
Condemnation Proceeds, Liquidation Proceeds,
and other voluntary and involuntary principal
prepayments (excluding any Yield Maintenance
Charges or Prepayment Premiums paid by
borrowers in connection with such prepayment)
and unscheduled collections on the Mortgage
Loans, in each case to the extent actually
received during the one month period ending
on the related Due Date for each Mortgage
Loan (the "Due Period"), together with any
accompanying payments of interest;
minus
o expenses of the Trust (which include fees
payable to, and may include indemnity
payments reimbursable to, the Master
Servicer, the Special Servicer, the Trustee
or the Fiscal Agent).
A more detailed description of the Available
Distribution Amount is provided herein under
"Description of the
Certificates--Distributions--Available
Distribution Amount."
B. Interest and Principal
Entitlements............. On each Distribution Date each Class is
generally entitled, subject to the priority of
payments, to receive interest accrued on its
Certificate Balance or Notional Amount at the
applicable Pass-Through Rate during the month
preceding the month in which that Distribution
Date occurs. We describe each Class's interest
entitlement in "Description of the Certificates--
Distributions" in this Prospectus Supplement. As
described in that section, there are
circumstances relating to the timing of
prepayments in which your interest entitlement
for a Distribution Date could be less than one
full month's interest at the Pass-Through Rate
on your certificate's principal balance or
notional amount. We call this type of shortfall
a "Prepayment Interest Shortfall."
The amount of principal required to be
distributed to the Classes entitled to principal
on a particular Distribution Date also can be
found in "Description of the Certificates--
Distributions" in this Prospectus Supplement.
C. Prepayment Premiums and Yield
Maintenance Charges...... In certain circumstances, a borrower that
voluntarily prepays a Mortgage Loan may be
required to make an additional payment intended
to compensate the lender for the adverse effect
that the prepayment has on the lender's
anticipated yield on the related Mortgage Loan.
We call these additional payments "Prepayment
Premiums" and "Yield Maintenance Charges," and we
describe the circumstances under which they must
be paid under "--The Mortgage Pool" and
"Description of the Mortgage Pool."
We describe the manner in which any Prepayment
Premiums and Yield Maintenance Charges received
during a particular Due Period will be allocated
to the Class X Certificates, on the
S-11
<PAGE>
one hand, and to certain Classes of Certificates
entitled to distributions of principal, on the
other hand, in "Description of the
Certificates--Distributions" in this Prospectus
Supplement.
Advances of Principal and Interest
A. General................ The Master Servicer is required to make an
advance (each, a "P&I Advance") of delinquent
monthly mortgage loan payments, if it determines
that the amount of the P&I Advance will be
recoverable. P&I Advances will generally equal
the delinquent portion of the monthly mortgage
loan payment (less the Servicing Fee on such
Mortgage Loan). The Master Servicer will not be
required to advance interest in excess of a
loan's regular interest rate (such as any default
rate or any rate increase after an Anticipated
Repayment Date). The Master Servicer also is not
required to advance Prepayment Premiums, Yield
Maintenance Charges or the portion of any
Prepayment Interest Shortfalls not offset by the
portion of the Servicing Fee that represents
compensation to the Master Servicer.
The Master Servicer will not be required to
advance the amount of any balloon payments. If a
borrower fails to pay amounts due on the Stated
Maturity Date of a Mortgage Loan, the Master
Servicer will be required (subject to a
determination of recoverability) on and after
such date and until final liquidation of such
Mortgage Loan, to advance only an amount equal
to the interest and principal portion of the
monthly debt service payment due on that
Mortgage Loan immediately prior to the Stated
Maturity Date (less the Servicing Fee on such
Mortgage Loan) to the extent not received.
If the Master Servicer fails to make a required
P&I Advance, the Trustee will be required to
make the P&I Advance. If the Trustee fails to
make such P&I Advance, the Fiscal Agent will be
required to make such P&I Advance. Any such
obligation to make a P&I Advance will also be
subject to a determination of recoverability.
P&I Advances are intended to maintain a regular
flow of scheduled interest and principal
payments to the Certificateholders and are not
intended to guarantee or insure against losses.
P&I Advances, and any other advance, which
cannot be reimbursed out of collections on, or
in respect of, the specific Mortgage Loans with
respect to which they were made will be
reimbursed directly from any other collections
on the Mortgage Loans as provided in this
Prospectus Supplement. The Master Servicer, the
Trustee or the Fiscal Agent, as the case may be,
will be entitled to interest on any advances
made, such interest accruing at the rate and
payable under the circumstances described
herein. The accrual of interest on P&I Advances
may cause losses to be borne by
Certificateholders in the priority specified in
this Prospectus Supplement.
For a more detailed discussion of advances, See
"Description of the Certificates--Advances" in
this Prospectus Supplement and "Description of
the Certificates--Advances in Respect of
Delinquencies" and "Description of the
Agreements--Certificate Account" in the
Prospectus.
S-12
<PAGE>
B. Appraisal
Reduction Events............ Certain adverse events affecting a Mortgage Loan
may require the Special Servicer to obtain a new
appraisal of the related Mortgaged Property.
Based on the new appraisal, it may be necessary
to calculate the amount of an "Appraisal
Reduction." The amount required to be advanced in
respect of a Mortgage Loan that has been subject
to an Appraisal Reduction will be reduced so that
the Master Servicer will not be required to
advance interest in respect of the Appraisal
Reduction (as described in this Prospectus
Supplement). Due to the payment priorities
described above, this will reduce the funds
available to pay interest on the most subordinate
Class or Classes of Certificates then
outstanding. See "Description of the
Certificates--Appraisal Reductions" in this
Prospectus Supplement.
Subordination
A. General................. The chart below describes the manner in which
the rights of various Classes will be senior to
the rights of other Classes. Entitlement to
receive principal and interest on any
distribution date is depicted in descending
order. The manner in which Mortgage Loan losses
are allocated is depicted in ascending order.
Class A-1, Class A-2, Class X
Class B
Class C
Class D
Class E
Class F
Class G
Class H
Class I
S-13
<PAGE>
NO OTHER FORM OF CREDIT ENHANCEMENT WILL BE
AVAILABLE FOR THE BENEFIT OF THE HOLDERS OF THE
OFFERED CERTIFICATES.
For a more detailed description of subordination
and credit enhancement, see "Summary of
Structure--Summary of Subordination Levels" and
"Description of the Certificates--Subordination"
in this Prospectus Supplement.
B. Shortfalls in
Available Funds............. The following types of shortfalls in available
funds will be allocated in the same manner as
Mortgage Loan losses: (i) shortfalls resulting
from additional compensation (other than the
Servicing Fee) which the Master Servicer or
Special Servicer is entitled to receive; (ii)
shortfalls resulting from interest on Advances
made by the Master Servicer, the Trustee or the
Fiscal Agent (to the extent not covered by
Default Interest and other Penalty Charges paid
by the related borrower); (iii) shortfalls
resulting from extraordinary expenses of the
Trust; and (iv) shortfalls resulting from a loan
modification agreed to by the Master Servicer or
the Special Servicer or from a reduction of a
Mortgage Loan's interest rate by a bankruptcy
court or from other unanticipated or
default-related expenses of the Trust.
However, shortfalls in Mortgage Loan interest as
a result of the timing of prepayments (net of
the Servicing Fee payable on the related
Distribution Date) will be allocated to each
Class of Certificates, pro rata, based upon
their respective interest entitlements. See
"Description of the Certificates--Distributions"
in this Prospectus Supplement.
THE MORTGAGE POOL
Characteristics of the Mortgage Pool
A. General................ We provide a more complete description of the
Mortgage Loans and the Mortgaged Properties in
the following sections of this Prospectus
Supplement:
o "Description of the Mortgage Pool";
o "Risk Factors--Risks Related to the Mortgage
Loans";
o "Annex A-1--Certain Characteristics of the
Mortgage Loans;"
o "Annex A-2--Credit Tenant Loans."
All numerical information provided in this
Prospectus Supplement with respect to the
Mortgage Loans is approximate.
All weighted average information regarding the
Mortgage Loans reflects weighting of the
Mortgage Loans by the unpaid principal balance
of the Mortgage Loans as of the Cut-off Date.
Where a Mortgage Loan is secured by multiple
Mortgaged Properties that have separately
allocated loan amounts, the information on such
Mortgaged Properties is presented separately
based upon an allocated loan amount.
Statistical information on the Mortgage Loans
may change prior to the date of issuance of the
Certificates due to changes in the composition
of the Mortgage Pool prior to the Closing Date.
S-14
<PAGE>
B. Principal Balances...... The Trust's primary assets will consist of 177
Mortgage Loans with an Initial Pool Balance of
$704,764,603, subject to a permitted variance of
plus or minus 5%. As of the Cut-off Date, the
outstanding principal balances of the Mortgage
Loans in the Mortgage Pool ranged from $724,743
to $33,176,730 and the Mortgage Loans had an
average balance of $3,981,721. See "Description
of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans" in this
Prospectus Supplement.
C. Non-Recourse............ All of the Mortgage Loans are non-recourse
obligations (subject to customary exceptions
described in this Prospectus Supplement). No
Mortgage Loan will be insured or guaranteed by
any governmental entity or private insurer, or by
any other person except that certain Credit
Tenant Loans, representing 5.85% of the Initial
Pool Balance, are insured by residual value
insurance policies and/or lease enhancement
insurance policies.
D. Fee Simple/Leasehold.... Each Mortgage Loan is secured by a first
mortgage lien on a fee simple estate in an
income-producing property (or, in the case of one
Mortgage Loan, which represents approximately
0.54% of the Initial Pool Balance, is secured by
a first mortgage lien on a leasehold estate in an
income-producing property).
E. Property Purpose........ Set forth below are the number of Mortgaged
Properties operated for each indicated purpose,
and the approximate percentage of the Initial
Pool Balance represented by the related Mortgage
Loans that are secured by such Mortgaged
Properties:
<TABLE>
<CAPTION>
PERCENTAGE
OF INITIAL NUMBER OF
PROPERTY TYPE POOL BALANCE PROPERTIES
- ---------------------------- -------------- -----------
<S> <C> <C>
Multifamily .............. 31.65% 62
Retail ................... 13.29% 30
Office ................... 12.98% 21
Hospitality .............. 11.44% 35
Industrial ............... 10.04% 18
CTL ...................... 7.04% 7
Nursing Home ............. 4.66% 2
Mixed .................... 3.20% 3
Mobile Home Park ......... 1.79% 7
Senior Housing ........... 1.41% 3
Health Care .............. 1.06% 1
Self-Storage ............. 0.37% 2
Other .................... 1.07% 2
Totals ................... 100.00% 193
</TABLE>
F. Property Location....... Set forth below are the number of Mortgaged
Properties located in the six states with the
highest concentrations of Mortgaged Properties
and the approximate percentage of the Initial
Pool Balance represented by the related Mortgage
Loans that are secured by such Mortgaged
Properties:
<TABLE>
<CAPTION>
PERCENTAGE
OF INITIAL NUMBER OF
STATE POOL BALANCE PROPERTIES
- ---------------------- -------------- -----------
<S> <C> <C>
Texas .............. 12.89% 19
Maryland ........... 11.85% 6
Florida ............ 7.81% 23
New Jersey ......... 7.52% 14
California ......... 7.31% 13
New York ........... 6.86% 14
</TABLE>
S-15
<PAGE>
The remaining Mortgaged Properties, representing
45.77% of the Initial Pool Balance, are located
throughout 29 other states, the District of
Columbia and Puerto Rico. No other state or
territory has a concentration of Mortgaged
Properties that represents security for more
than 3.99% of the Initial Pool Balance.
G. Other Mortgage Loan
Features................ As of the Cut-off Date, it is expected that the
Mortgage Loans will have the following
approximate characteristics:
o No scheduled payment of principal of or
interest on any Mortgage Loan was thirty days
or more past due, and no Mortgage Loan has
been thirty days or more delinquent in the
past year.
o 23 groups of Mortgage Loans were made to the
same borrower or to borrowers that are
affiliated with one another through partial
or complete direct or indirect common
ownership. The four largest of these groups
of Mortgage Loans represent approximately
9.11%, 8.27%, 4.66% and 4.23%, respectively,
of the Initial Pool Balance.
o 21 Mortgage Loans, representing
approximately 14.02% of the Initial Pool
Balance, are each secured by a Mortgaged
Property that is leased in its entirety to a
single tenant.
o All Mortgage Loans bear interest at fixed
rates, although seven of the Mortgage Loans
are ARD Loans (as defined below) and provide
for an increase in the rate of interest
following their Anticipated Repayment Dates,
as described in this Prospectus Supplement.
H. Loan Amortization....... 151 of the Mortgage Loans, representing
approximately 89.98% of the Initial Pool Balance,
provide for one of the following:
o Monthly payments based on amortization
schedules significantly longer than their
respective terms to maturity (144 of such
Mortgage Loans, representing approximately
74.94% of the Initial Pool Balance); these
Mortgage Loans will require the payment of a
Balloon Payment on their respective Stated
Maturity Dates unless they are prepaid
earlier; or
o Increases in the Mortgage Rate and/or
accelerated amortization of principal that
create an incentive for the related borrower
to prepay any of seven of the Mortgage Loans,
representing approximately 15.04% of the
Initial Pool Balance (the "ARD Loans");
substantial principal payments may be made on
an ARD Loan on the date (which is prior to
the related Stated Maturity Date) upon which
such an increase occurs (the "Anticipated
Repayment Date") unless such Mortgage Loan is
prepaid at an earlier date.
All of the remaining Mortgage Loans are fully
amortizing (as described herein) through their
respective Stated Maturity Dates.
S-16
<PAGE>
I. Prepayment Provisions... As of the Cut-off Date, the Mortgage Loans
restrict voluntary principal prepayments as
follows:
o 113 Mortgage Loans, representing
approximately 54.39% of the Initial Pool
Balance, contain provisions that prohibit all
voluntary prepayments.
o 50 Mortgage Loans, representing
approximately 36.52% of the Initial Pool
Balance, prohibit all voluntary prepayments
until a specified date (generally between
four and seven months prior to the Maturity
Date or Anticipated Repayment Date of the
related Mortgage Loan) and without
restriction thereafter.
o Ten Mortgage Loans, representing
approximately 5.82% of the Initial Pool
Balance, contain provisions that prohibit
voluntary prepayment for a period of up to
generally one to five years after origination
and permit voluntary prepayment at any time
thereafter with the payment of a Yield
Maintenance Charge until a specified date
(generally up to four months prior to the
Stated Maturity Date or Anticipated Repayment
Date).
o Three Mortgage Loans representing
approximately 2.94% of the Initial Pool
Balance, contain provisions that prohibit
voluntary prepayment for a period of up to
generally two to eight years after
origination and permit voluntary prepayment
at any time thereafter with the payment of a
Prepayment Premium until a specified date
(generally between four and seven months
prior to the Stated Maturity Date or
Anticipated Repayment Date of the related
Mortgage Loan) and without restriction
thereafter.
o One Mortgage Loan, representing
approximately 0.33% of the Initial Pool
Balance, permits voluntary prepayments at any
time with the payment of a Yield Maintenance
Charge.
J. Mortgage Loan Ranges and
Weighted Averages........ As of the Cut-off Date, the Mortgage Pool is
expected to have the following additional
characteristics:
i. Mortgage Rates......... Mortgage rates ranging from 6.260% per annum to
9.590% per annum, and a weighted average mortgage
rate of 7.402% per annum;
ii. Remaining Terms....... Remaining terms to the Stated Maturity Date or
Anticipated Repayment Date ranging from 50 months
to 292 months, and a weighted average remaining
term to the Stated Maturity Date or Anticipated
Repayment Date of 127 months;
iii. Remaining Amortization
Terms.................. Remaining amortization terms ranging from 169
months to 360 months, and a weighted average
remaining amortization term of 316 months, as
described herein in "Description of the Mortgage
Pool--Additional Mortgage Loan Information";
S-17
<PAGE>
iv. Accrual Method........ 173 Mortgage Loans, representing approximately
94.99% of the Initial Pool Balance accrue
interest on an Actual/360 Basis. Four Mortgage
Loans, representing approximately 5.01% of the
Initial Pool Balance accrue interest on a 30/360
Basis.
v. Loan-to-Value Ratios... Loan-to-value ratios ranging from approximately
17.67% to approximately 80.10% and a weighted
average loan-to-value ratio (calculated as
described in this Prospectus Supplement under
"Description of the Mortgage Pool--Additional
Mortgage Loan Information") of approximately
71.03%.
vi. Debt Service Coverage
Ratios................. Debt service coverage ratios range from
approximately 1.20 x to approximately 4.01x and
the weighted average debt service coverage ratio
is approximately 1.46x (calculated as described
in this Prospectus Supplement under "Description
of the Mortgage Pool--Additional Mortgage Loan
Information").
All loan-to-value ratios and debt service
coverage ratios exclude Credit Tenant Loans.
We describe the Mortgage Loans in more detail in
"Description of the Mortgage Pool" and in the
tables in Annex A-1. Certain information
relating specifically to the Credit Tenant Loans
is set forth in Annex A-2. In addition, we
briefly summarize the material terms of the ten
largest Mortgage Loans in "Description of the
Mortgage Pool--Ten Largest Mortgage Loans."
ADDITIONAL ASPECTS OF THE CERTIFICATES
Ratings..................... The Offered Certificates will not be issued
unless each of the offered Classes receives the
following ratings from Fitch IBCA Inc. and
Moody's Investors' Service:
<TABLE>
<CAPTION>
RATINGS
CLASS (FITCH IBCA/MOODY'S)
- -------------------------------------- ---------------------
<S> <C>
Class A-1, A-2 and Class X ......... AAA/Aaa
Class B ............................ AA/Aa2
Class C ............................ A/A2
Class D ............................ BBB/Baa2
</TABLE>
A rating agency may lower or withdraw a security
rating at any time.
See "Ratings" in this Prospectus Supplement and
the Prospectus for a discussion of the basis
upon which ratings are given, the limitations of
and restrictions on the ratings, and the
conclusions that should not be drawn from a
rating.
Optional Termination........ On any Distribution Date on which the aggregate
principal balance of the Mortgage Loans remaining
in the Trust is less than 1% of the aggregate
unpaid balance of the Mortgage Loans as of the
Cut-off Date, the Master Servicer, the Special
Servicer, the Certificateholder holding the
largest amount of the Control-
S-18
<PAGE>
ling Class and any holder of a majority interest
in the Class LR Certificates, in that order,
will have the option to purchase all of the
remaining Mortgage Loans (and all property
acquired through exercise of remedies in respect
of any Mortgage Loan), at the purchase price
specified in this Prospectus Supplement.
Exercise of this option will terminate the Trust
and retire the then-outstanding Certificates.
We describe optional termination in more detail
in "Description of the
Certificates--Termination; Retirement of the
Certificates" in this Prospectus Supplement and
"Description of the Certificates--Termination"
in the Prospectus.
Denominations............... You may hold and trade your Certificates only
in minimum denominations of $25,000 and multiples
of $1,000 in excess thereof, with one Certificate
of each Class evidencing an additional amount
equal to the remainder of the certificate balance
or notional amount of such Class, as applicable.
Registration, Clearance and
Settlement................ Your Certificates will be registered in the
name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"), and will not be registered
in your name. You will not receive a definitive
certificate representing your interest, except in
very limited circumstances described in this
Prospectus Supplement. As a result, you will
receive distributions on your Certificates only
through DTC, or through participants in DTC.
Transfers within DTC will be made in accordance
with the usual rules and operating procedures of
DTC. We describe these in "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates" in this Prospectus
Supplement.
We expect that the Offered Certificates will be
delivered in book-entry form through the
facilities of DTC on the Closing Date.
Certain Federal Income Tax
Consequences.............. For federal income tax purposes, elections will
be made to treat the assets comprising the Trust
as two separate real estate mortgage investment
conduits. All of the Offered Certificates and the
Class E, Class F, Class G, Class H and Class I
Certificates will constitute the "regular
interests" in the Upper-Tier REMIC. The Class R
Certificates will constitute the "residual
interests" in the Upper-Tier REMIC and the Class
LR Certificates will constitute the "residual
interests" in the Lower-Tier REMIC.
For federal income tax purposes, the
Certificates (other than the Residual
Certificates) generally will be treated as newly
originated debt instruments issued by the
Upper-Tier REMIC. You will be required to
include in income all interest on your
S-19
<PAGE>
Certificates in accordance with the accrual
method of accounting, regardless of your usual
method of accounting. We anticipate that the
Class Certificates will be issued with
original issue discount ("OID"). We further
anticipate that the Class Certificates will be
issued at a premium. We also anticipate that the
Class Certificates will be issued with de
minimis OID for federal income tax purposes.
The prepayment assumption that will be used in
determining the rate of accrual of OID for
federal income tax purposes or whether such OID
is de minimis, and that may be used to amortize
premium, is 0% Constant Prepayment Rate ("CPR");
provided that it is assumed that each ARD Loan
prepays on its Anticipated Repayment Date. We
make no representation that the Mortgage Loans
will prepay at that rate or at any other rate.
For further information regarding the federal
income tax consequences of an investment in the
Offered Certificates, see "Certain Federal
Income Tax Consequences" in this Prospectus
Supplement and in the Prospectus.
ERISA Considerations........ Subject to the considerations discussed under
"ERISA Considerations" in this Prospectus
Supplement and in the Prospectus, the Class A-1,
Class A-2 and Class X Certificates may be
acquired by ERISA plans. However, ERISA plans may
not acquire any other Class of Certificates. You
may not use the assets of an ERISA plan to
acquire any such other Class of Certificates.
For further information about considerations
that are relevant to an investment in the
Offered Certificates by employee benefit plans,
see "ERISA Considerations" in this Prospectus
Supplement and in the Prospectus.
Legal Investment............ The Offered Certificates will not constitute
"mortgage related securities" within the meaning
of the Secondary Mortgage Market Enhancement Act
of 1984 ("SMMEA").
You should consult your legal advisors to
determine whether and to what extent the Offered
Certificates are a legal investment for you. See
"Legal Investments" in this Prospectus
Supplement.
Information Available to
Certificateholders........ On each Distribution Date, commencing in July
1999, the Trustee must prepare and distribute to
each Certificateholder, the Depositor, the Master
Servicer, the Special Servicer, each Underwriter,
each Rating Agency, certain financial market
publishers (which are initially expected to be
Bloomberg, L.P. and Charter Research Corporation)
and, if requested, any potential investors in the
Certificates, a statement as to the distribution
made on such date setting forth the amounts
distributed to the holders of each Class of
Certificates. Starting
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in August 1999 the Trustee must also prepare and
distribute a report, based on information that
it receives from the Master Servicer or Special
Servicer, containing certain information
regarding the Mortgage Loans as of the end of
the related Due Period.
In addition, subject to the limitations set
forth in the Pooling and Servicing Agreement,
the Trustee must also make available to you at
its office (i) all statements delivered to
holders of Offered Certificates on each
Distribution Date since the Closing Date, (ii)
the most recent property inspection report
prepared by or on behalf of the Master Servicer
in respect of each Mortgaged Property and
delivered to the Trustee, (iii) any and all
statements and reports delivered to, or
collected by, the Master Servicer or the Special
Servicer, from the borrowers, including the most
recent annual property operating statements,
rent rolls and borrower financial statements
delivered to the Trustee, (iv) any and all
modifications, waivers and amendments of the
terms of a Mortgage Loan entered into by the
Master Servicer or Special Servicer and
delivered to the Trustee and (v) the Pooling and
Servicing Agreement and any amendments thereto.
In addition, the Trustee must forward to you
certain reports that are prepared by the Master
Servicer in the form attached to this Prospectus
Supplement as "Annex B."
In addition, you will be entitled to request
copies of the annual "Operating Statement
Analysis Report" and "NOI Adjustment Worksheet"
with respect to the Mortgage Loans.
We provide more detailed information about the
reports that you will receive in "Description of
the Certificates--Reports to Certificateholders;
Available Information."
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RISK FACTORS
In deciding whether to purchase any Offered Certificates, you should
consider the following risk factors as well as the risk factors that begin on
page 14 of the Prospectus.
RISKS RELATING TO THE OFFERED CERTIFICATES
The Certificates are Supported by Limited Assets. If the Available
Distribution Amount is insufficient to make payments on your Certificates in
accordance with the priority of payments and the subordination arrangements
described in this Prospectus Supplement, no other assets will be available to
you for payment of the deficiency.
Risks Related to the Rate of Prepayment of the Mortgage Loans. The yield
on your Certificates will be affected by a variety of factors, including the
following:
o the related Pass-Through Rate (and whether, except in the case of the
Class A Certificates, such rate is limited by the weighted average Net
Mortgage Rate of the Mortgage Loans);
o the purchase price paid for such Certificates (and whether such price
represents a premium over or discount to the principal amount
represented by such Certificate);
o the rate and timing of principal payments (including voluntary and
involuntary principal prepayments and delinquent payments) and
principal losses on the Mortgage Loans; and
o the extent to which such principal payments are allocated on any
Distribution Date in reduction of the Certificate Balance of the Class
to which such Certificates belong.
If you purchase your Certificates at a discount, you should consider the
risk that a slower than anticipated rate of principal payments on the Mortgage
Loans will result in an actual yield that is lower than your expected yield.
Conversely, if you purchase your Certificates at a premium, you should consider
the risk that a faster than anticipated rate of principal payments on the
Mortgage Loans will result in an actual yield that is lower than your expected
yield. Insofar as your initial investment in any Offered Certificate is repaid,
you may not be able to reinvest such amounts in an alternative investment with
a yield comparable to the yield on your Certificates.
We cannot predict the actual rate of prepayment of principal of the
Mortgage Loans. See "--Risks Relating to the Mortgage Loans Enforcement of
Prepayment Restrictions" below for a more complete discussion of prepayment
issues.
The investment performance of your Certificates may vary materially and
adversely from your investment expectations due to prepayments on the Mortgage
Loans (whether voluntary or otherwise) being higher or lower than you
anticipated. Even if the actual yield is equal to your anticipated yield, you
may not realize your expected total return on investment or the expected
weighted average life of your Certificate.
In deciding whether to purchase any Certificates, you should make an
independent decision as to the appropriate prepayment assumptions to be used.
The structure of the Certificates causes the yield of certain Classes to
be sensitive to changes in the rates of prepayment of the Mortgage Loans and
other factors. If you are purchasing any Class of Subordinate Certificates you
will not receive any principal distributions until the Certificate Balance of
each Class that is senior to your Class is reduced to zero, and if you are
purchasing the Class A-2 Certificates you will not receive any principal
distributions prior to the earlier to occur of (i) the date on which the
Certificate Balance of the Class A-1 Certificates has been reduced to zero or
(ii) the date on which the Certificate Balance of each Class of Subordinate
Certificates is reduced to zero.
If you purchase Class X Certificates, your yield to maturity will be
extremely sensitive to the rate and timing of principal payments (including
prepayments) and principal losses with respect to the Mortgage Loans. Investors
should fully consider the associated risks, including the risk that a rapid
rate of principal payments and/or principal losses on the Mortgage Pool could
result in the failure by investors in the Class X Certificates to fully recoup
their initial investments. See "Yield and Maturity Considerations--Yield
Sensitivity of the Class X Certificates" herein.
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Risks Related to Enforcement of Prepayment Restrictions. All of the
Mortgage Loans contain provisions prohibiting voluntary prepayments for a
specified amount of time after origination (the "Lockout Period") and/or allow
voluntary prepayments only with the payment of an additional charge intended to
compensate the lender for foregone interest (the "Yield Maintenance Charge" or
the "Prepayment Premium") for a specified amount of time from origination. The
requirement to pay Yield Maintenance Charges or Prepayment Premiums in
connection with a prepayment is intended to result in prepayments of the
Mortgage Loans occurring at a lower rate than would have been the case if the
borrowers were not required to pay such additional amount. However, we cannot
give you any assurance that the imposition of a Yield Maintenance Charge or a
Prepayment Premium will provide a sufficient disincentive to prevent a
voluntary principal prepayment. For example:
o in certain circumstances, such as markedly low interest rate
environments, the terms of refinancing or sale may be so attractive
that borrowers will prepay their Mortgage Loans notwithstanding the
obligation to pay Yield Maintenance Charges or Prepayment Premiums,
o Yield Maintenance Charges and Prepayment Premiums may be unenforceable
under state or federal law (including federal bankruptcy law) under
certain circumstances, particularly if they are required to be paid
following a default,
o certain state or federal laws (including federal bankruptcy law) may
limit the amount that may be collected from a borrower.
Even if the requirement to pay a Yield Maintenance Charge or Prepayment
Premium following default is enforceable, the foreclosure proceeds received
with respect to a defaulted Mortgage Loan may be insufficient to make such
payment. For a description of Prepayment Premiums and Yield Maintenance Charges
and related Lockout Periods, see "Description of the Mortgage Pool" herein.
Most of the Mortgage Loans that do not permit prepayment permit the
borrower to defease the Mortgage Loan with non-callable U.S. government
securities as described herein. The ability to enforce defeasance provisions is
subject to some of the same risks that affect prepayment, particularly to the
extent that defeasance provisions may be challenged as a penalty that
effectuates a restraint on alienation of real property. However, a Mortgage
Loan that locks the borrower out from prepayment but permits defeasance may,
under the laws of certain states, be less susceptible to legal challenges than
a Mortgage Loan that locks the borrower out from prepayment and does not permit
the borrower to obtain the release of the related Mortgaged Property.
Yield Risk Associated With Changes in Concentrations. To the extent that
any borrower pays down the principal of a Mortgage Loan (including Balloon
Payments and prepayments on an Anticipated Repayment Date), the remaining
Mortgage Loans as a group may exhibit increased concentration with respect to
the type of properties, property characteristics, number of borrowers and
affiliated borrowers or geographic location.
Potential Liability to the Trust Relating to Environmental Conditions. A
"Phase I" environmental site assessment was performed at each Mortgaged
Property generally during the 12-month period prior to the date of origination
of the related Mortgage Loan. In certain cases, the environmental consultant
identified a condition or circumstance:
o which was remediated or for which an escrow for remediation costs has
been established and/or
o for which an entity other than the related borrower is responsible for
remediation or the cost of such remediation and/or
o for which the consultant recommended an operations and maintenance
plan or periodic monitoring of the subject properties and/or nearby
properties, which recommendations were required to be implemented in a
manner consistent with industry-wide practices.
"Phase II" testing was performed with respect to 14 Mortgaged Properties,
representing approximately 9.46% of the Initial Pool Balance and with respect
to 13 of such Mortgaged Properties the environmental consultant concluded as a
result of such testing that either no further action or no further
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remediation was necessary. With respect to one Mortgaged Property, with a
Cut-off Date Balance of approximately $409,085, representing approximately
0.06% of the Initial Pool Balance, the "Phase II" testing discovered evidence
of a leak in the piping related to an underground storage tank, which is
planned to be removed from the related site. The borrower has escrowed an
amount, as determined by the environmental consultant, that is sufficient to
cover the costs of such remediation.
Federal law requires owners of multifamily housing constructed prior to
1978 to disclose to potential residents or purchasers any condition on the
property that causes exposure to lead-based paint and the related hazards to
pregnant women and young children. Property owners may be liable for tenant
injuries from such exposure under federal and state laws that impose
affirmative discovery and remediation obligations on owners of multifamily
housing containing lead-based paint. The environmental assessments revealed the
existence of lead-based paint at certain of the multifamily properties. In
these cases, the borrowers have either implemented operations and maintenance
programs or have removed or are in the process of removing the lead-based
paint.
The Pooling and Servicing Agreement requires the Special Servicer to
obtain an environmental site assessment of a Mortgaged Property securing a
defaulted Mortgage Loan prior to acquiring title thereto or assuming its
operation. This restriction may delay enforcement of the security for the
related Mortgage Note and will interfere with the ability of the Master
Servicer or Special Servicer to foreclose on a Mortgaged Property if a
satisfactory environmental site assessment is not obtained (or required
remedial action is not taken). This prohibition is meant to decrease the
likelihood that the Trust will become liable for an environmental condition at
any Mortgaged Property. However, we cannot assure you that the requirements of
the Pooling and Servicing Agreement will completely protect the assets of the
Trust from liability for an environmental condition. See "Servicing of the
Mortgage Loans--Realization Upon Defaulted Mortgage Loans" herein and "Risk
Factors--Environmental Risks" and "Certain Legal Aspects of Mortgage
Loans--Environmental Risks" in the Prospectus.
Certain Tax Considerations Related to Foreclosure. If the Trust were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or deed in lieu of foreclosure, the Special
Servicer would be required to retain an independent contractor to operate and
manage the REO Property. Any "net income from foreclosure property" arising
from such operation and management, other than qualifying "rents from real
property" (as defined in Section 856(d) of the Code), will subject the Trust to
federal (and possibly state or local) tax on such income at the highest
marginal corporate tax rate (currently 35%) and in certain circumstances may
subject the Trust to a "prohibited transaction" tax on such income at a rate of
100%. Any such tax will reduce net proceeds available for distribution to you
and to other Certificateholders. The Trust will generally be permitted to
receive such taxable "net income from foreclosure property" if the Special
Servicer determines that the net after-tax recovery to the Trust would be
greater than it would be if such REO Property were leased to a third party at a
fixed rental so as to produce qualifying "rents from real property" or if such
property could not reasonably be so leased.
Risks Relating to Lack of Certificateholder Control Over Trust. Your
Certificates generally do not entitle you to vote, except with respect to
required consents to certain amendments to the Pooling and Servicing Agreement
and, in certain cases, with respect to votes to replace parties to the Pooling
and Servicing Agreement. Generally, you have only very limited rights to
participate in decisions with respect to the administration of the Trust
because the Pooling and Servicing Agreement provides that decisions are
generally made by the Master Servicer, the Trustee or the Special Servicer, as
applicable.
Any decision made by one of those parties in respect of the Trust, even if
made in the best interests of the Certificateholders (as determined by such
party in its good faith and reasonable judgment), may be contrary to the
decision that would have been made by the holders of any particular Class or
Classes of Offered Certificates and may negatively affect the interests of such
holders.
Certain Conflicts of Interest. Although it is not a condition to
settlement of the Offered Certificates, the Master Servicer, the Special
Servicer or one or more of their respective affiliates is expected to purchase
all of the Class E, Class F, Class G, Class H and Class I Certificates and to
be the initial Directing Certificateholder. In such event, the Master Servicer
and/or Special Servicer may be subject to a conflict
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of interest because it would have an economic interest in the Trust that is
distinct from that of holders of other Classes of Certificates. However, the
Pooling and Servicing Agreement requires the Master Servicer and the Special
Servicer to service Mortgage Loans in accordance with specified objective
standards and without regard to ownership of any Certificates by the Master
Servicer, the Special Servicer or any affiliate of either. See "Servicing of
the Mortgage Loans--General" herein.
Each of the Underwriters is affiliated with one of the Mortgage Loan
Sellers and may be subject to certain conflicts of interest arising from the
related Mortgage Loan Seller's desire to consummate a sale of its Mortgage
Loans to the Trust.
Sequential Pay and Subordination of Subordinate Offered Certificates. The
sequential pay and subordination features governing the priority of
distributions to Certificateholders may result in delays in the payment of
interest and/or principal to any subordinated Class of Certificates or to the
reduction of the related Certificate Balance (and a corresponding reduction in
the Notional Amount of the Class X Certificates) in connection with the
allocation of a Collateral Support Deficit which may remain unreimbursed. Any
such delay or reduction will adversely effect the yield to maturity of such
Class of Certificates. See "Description of the
Certificates--Distributions--Priority" and "--Subordination; Allocation of
Collateral Support Deficit" herein.
Risks Associated with Year 2000. The change of date on January 1, 2000 may
have a disruptive effect on the ability of computerized systems relied on by
the Master Servicer, the Special Servicer and the Trustee to perform basic
functions. Such disruptions could affect the following functions, among others:
o processing information with respect to the Mortgage Loans and the
Certificates;
o collecting payments on the Mortgage Loans;
o remitting payments to Certificateholders; and
o servicing the Mortgage Loans.
You could be adversely affected if the computer systems of the Master
Servicer, the Special Servicer or the Trustee are not fully Year 2000 capable
before January 1, 2000. The Master Servicer, the Special Servicer and the
Trustee have made certain representations in the Pooling and Servicing
Agreement with respect to the steps that they are taking to address the Year
2000 problem. See "Description of the Certificates--The Trustee" and "Servicing
of the Mortgage Loans--Certain Matters Regarding the Master Servicer, the
Special Servicer and the Depositor."
RISKS RELATED TO THE MORTGAGE LOANS
Borrower Default; Nonrecourse Mortgage Loans. The Mortgage Loans will not
be an obligation of, or be insured or guaranteed by, any governmental entity,
or by the Depositor, the Mortgage Loan Sellers, the Master Servicer, the
Special Servicer, the Trustee or any of their respective affiliates.
Each Mortgage Loan generally is a nonrecourse loan as to which, in the
event of a default under such Mortgage Loan (other than a default resulting
from fraud or other willful misconduct of the borrower, waste and environmental
matters), recourse generally may be had only against the specific properties
and other assets that have been pledged to secure such Mortgage Loan. See
"Certain Characteristics of the Mortgage Loans." Consequently, payment on each
Mortgage Loan prior to maturity is dependent primarily on the income from, and
the value of, the related Mortgage Property. Balloon Loans and ARD Loans are
subject to additional risks described below in "--Risks Associated with Balloon
Payments and ARD Loans." We have not undertaken any evaluation of the
significance of the provisions of any of the Mortgage Loans that provide for
recourse against the related borrower or another person in the event of a
default. Accordingly, you should consider all of the Mortgage Loans to be
nonrecourse loans as to which recourse in the case of default will be limited
to the specific property and such other assets, if any, pledged to secure a
Mortgage Loan.
Repayment of the Mortgage Loans Depends on the Successful Operation of the
Mortgaged Properties. The Mortgaged Properties consist entirely of income
producing real estate. Lending on the security of commercial and multifamily
properties is generally viewed as riskier than lending on the
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security of single-family residential real estate. This is because commercial
and multifamily real estate lending typically involves larger loans than
single-family lending and because repayment is dependent on the successful
operation of the related real estate project.
The ability of a Mortgaged Property to generate sufficient net operating
income to pay debt service on the related Mortgage Loan may be adversely
affected by a number of factors, including:
o the age, design and construction quality of the property;
o perceptions regarding the safety, convenience and attractiveness of
the property;
o the proximity and attractiveness of competing properties;
o new construction in the same real estate market as the property;
o the adequacy of the property's management and maintenance;
o an increase in operating expenses for the property;
o an increase in the capital expenditures needed to maintain the
property or make improvements;
o a decline in the financial condition of a major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are renewed or replaced.
Other factors that may adversely affect the ability of a Mortgaged
Property to generate net cash flow are more general in nature, such as:
o national, regional or local economic conditions (including plant
closings, industry slowdowns and unemployment rates);
o local real estate conditions (such as an oversupply of retail space,
office space or multifamily housing);
o demographic factors;
o customer tastes and preferences; and
o retroactive changes in building codes.
The volatility of net cash flow generated by a Mortgaged Property will be
influenced by many of the foregoing factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o the rate at which new rentals occur;
o the percentage of total property expenses in relation to revenues; and
o the ratio of fixed operating expenses to those that vary with
revenues.
Mortgaged Properties with short-term or less creditworthy sources of
revenue and/or relatively high operating costs, such as health-care facilities
and hotel properties, can be expected to have more volatile cash flows than
Mortgaged Properties with longer-term leases from creditworthy tenants and/or
relatively low operating costs. A decline in the real estate market will tend
to have a more immediate effect on the net cash flow of such Mortgaged
Properties with short-term revenue sources than on Mortgaged Properties with
more stable sources of revenue and may lead to higher rates of delinquency or
defaults than would be experienced by such other properties.
Risks Associated with Balloon Loans and ARD Loans. 144 of the Mortgage
Loans, representing approximately 74.94% of the Initial Pool Balance, do not
fully amortize over their stated terms to maturity and will have substantial
payments of principal ("Balloon Payments") due on their Stated Maturity Dates
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unless they are prepaid before that date. In addition, seven of the Mortgage
Loans, representing in the aggregate approximately 15.04% of the Initial Pool
Balance, have Anticipated Repayment Dates and will have a substantial scheduled
principal balance as of such date.
If a loan requires the borrower to make a significant principal payment at
maturity (or on the Anticipated Repayment Date), the borrower will typically be
able to repay the loan only if it can refinance the loan or sell the related
Mortgage Property at a price sufficient to permit it to pay the Mortgage Loan
in full. The ability of a borrower to accomplish either of these goals will be
affected by all of the factors described herein affecting property value and
cash flow, as well as a number of other factors at the time of attempted sale
or refinancing, including:
o the level of available mortgage rates; and
o the availability of credit for properties of the applicable type
generally.
Management. Each Mortgaged Property (other than certain Credit Tenant
Properties) is managed by a property manager (which in many cases is an
affiliate of the borrower) or by the borrower itself. The successful operation
of a real estate project (other than a Credit Tenant Property) is largely
dependent on the performance and viability of the related property manager. The
property manager is responsible for responding to changes in the local market,
planning and implementing the rental structure, including establishing rental
rates, and advising the borrowers so that maintenance and capital improvements
can be carried out in a timely fashion.
We cannot give you any assurance regarding the performance of any property
manager or operator that is currently in place or that may be put in place upon
the expiration or termination of current management agreements or following any
default or foreclosure under a Mortgage Loan. In addition, the property
managers generally are operating companies and, unlike limited purpose
entities, may not be restricted from incurring debt and other liabilities in
the ordinary course of business or otherwise. We cannot assure you that the
property managers will always be in a financial condition to continue to
fulfill their management responsibilities under the related management
agreements throughout their respective terms.
Tenant Concentration Entails Risk. In those cases where a Mortgaged
Property is leased to a single tenant or is primarily leased to one or a small
number of major tenants, a deterioration in the financial condition or a change
in the plan of operations of such a tenant can have a significant effect on the
net cash flow generated by such Mortgaged Property. If any major tenant
defaults under or fails to renew its lease, the resulting adverse financial
effect on the operation of such Mortgaged Property will be substantially more
severe than would otherwise be the case with respect to a property occupied by
a larger number of tenants.
19 of the Mortgaged Properties (excluding Credit Tenant Loans),
representing security for approximately 6.98% of the Initial Pool Balance, are
each leased to a single tenant. 12 other Mortgaged Properties (excluding Credit
Tenant Properties), representing security for approximately 4.20% of the
Initial Pool Balance, each have at least one tenant that occupies 50% or more
of the net rentable area at the Mortgaged Property.
In addition, retail, office or industrial properties also may be adversely
affected if there is a concentration of tenants in a particular business or
industry at any such property and that particular business or industry
declines.
These adverse financial effects could result in insufficient cash flow
received by a borrower with respect to a Mortgaged Property which could, in
turn, result in the inability of such borrower to make required payments on its
Mortgage Loan.
Tenant Bankruptcy Entails Special Risks. The bankruptcy or insolvency of a
major tenant, or a number of smaller tenants, at any particular Mortgaged
Property may adversely affect the income produced by such property.
Under the federal Bankruptcy Code, a tenant has the option of assuming or
rejecting an unexpired lease. If the tenant rejects the lease, the landlord's
claim for breach of the lease would be a general
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unsecured claim against the tenant (absent collateral securing the claim). The
claim would be limited to the unpaid rent reserved under the lease for the
periods prior to the bankruptcy petition (or earlier surrender of the leased
premises) which are unrelated to the rejection, plus the greater of one year's
rent or 15% of the remaining reserved rent (but not more than three years'
rent).
Such a bankruptcy or insolvency of a tenant could result in a substantial
delay in receipt by the landlord of the amount of its claim, as well as a
substantial delay in the ability of the landlord to relet the tenant's space.
In addition, depending on the assets of the bankrupt tenant, the full amount of
the landlord's claim for breach of the lease may never be ultimately paid.
Certain Additional Risks Relating to Tenants. The Mortgaged Properties
will be affected by the expiration of leases and the ability of the respective
borrowers to renew such leases or relet the related space on comparable terms.
Most of the Mortgaged Properties are in whole or in part occupied under leases
that expire during the respective terms of the related Mortgage Loans.
Moreover, if a tenant at any Mortgaged Property defaults in its lease
obligations, or if a tenant attempts to use a foreclosure by a lender to avoid
paying above-market rental payments notwithstanding its obligation to attorn to
the lender, the borrower or a foreclosing lender may incur substantial costs
and experience significant delays associated with enforcing its rights and
protecting its investment, potentially including costs incurred in renovating
and reletting the property.
We cannot give you any assurance that tenants will renew leases upon
expiration (or, in the case of such renewal, whether the renewal rent will be
equal to the rent previously paid) or, in the case of a commercial tenant, that
it will continue to operate throughout the term of its lease. A borrower would
be adversely affected if its tenants were unable to pay rent or if the borrower
could not rent space on favorable terms or at all. We cannot give you any
assurances as to whether, or to what extent, economic, legal or social factors
will affect future rental or repayment patterns.
Certain Risks Relating to Ground Leases. One Mortgage Loan, representing
approximately 0.54% of the Initial Pool Balance, is secured by a leasehold
interest and not by the underlying fee estate in the related real property
(i.e. the borrower rents the related real property and does not own it).
Upon the bankruptcy of a landlord or a tenant under a ground lease, the
bankrupt entity has the right to assume (that is, continue) or reject (that is,
terminate) the ground lease. A tenant under a ground lease that has already
commenced and that has been rejected by the bankrupt ground lessor has the
right to remain in possession of its leased premises under the rent reserved in
the lease for the term (including renewals) of the ground lease and may retain
its rights under the lease that are appurtenant to the real property. However,
the tenant will generally not be entitled to enforce other rights, such as any
obligation of the ground lessor to provide services required under the ground
lease or to enter into a new ground lease.
If a bankrupt tenant under a ground lease rejects the ground lease, the
holder of a mortgage secured by the leasehold interest would have the right to
succeed to the ground lessee's position under the ground lease only if the
ground lessor had specifically granted such right to the ground lessee.
Pursuant to a tripartite agreement among the landlord, the ground lessee and
the original lender of the Mortgage Loan that is secured by a ground lease, the
mortgagee has been granted the right to succeed to the ground lessee's interest
upon such termination. In the event of concurrent bankruptcy proceedings
involving the ground lessor and the ground lessee, the Master Servicer or
Special Servicer may be unable to enforce the bankrupt ground lessee's
obligation to refuse to treat a ground lease rejected by a bankrupt ground
lessor as having been terminated. In such circumstances, the ground lease could
be terminated and the leasehold estate extinguished notwithstanding lender
protection provisions contained in the ground lease or in the mortgage.
Geographic Concentration Entails Risk. A concentration of Mortgaged
Properties in a particular state, region or locale increases the exposure of
the Mortgage Pool to adverse conditions in that state, region or locale that
may reduce the income and foreclosure value of such Mortgaged Properties. Such
adverse conditions may include:
o general economic or demographic conditions in the state, region or
locale;
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o adverse developments affecting an industry that is concentrated in the
state or region;
o real estate market conditions in the state or region;
o state or local government regulations;
o natural disasters, such as earthquakes, floods, tornadoes and
hurricanes, which may not be fully covered by insurance; and
o other factors that are beyond the control of the related borrower.
Certain states or geographic regions may be more severely affected by such
factors than other states or regions, and to the extent that there is a
concentration of Mortgaged Properties or borrowers in any state or region, the
impact on the Trust may be more significant than would be the case if the
Mortgaged Properties were more geographically diversified.
19 Mortgaged Properties, representing security for approximately 12.89% of
the Initial Pool Balance, are located in Texas. Six Mortgaged Properties,
representing security for approximately 11.85% of the Initial Pool Balance, are
located in Maryland. Fourteen Mortgaged Properties, representing security for
approximately 7.52% of the Initial Pool Balance, are located in New Jersey. 23
Mortgaged Properties, representing security for approximately 7.81% of the
Initial Pool Balance, are located in Florida. Thirteen Mortgaged Properties,
representing security for approximately 7.31% of the Initial Pool Balance, are
located in California. 14 Mortgaged Properties, representing security for
approximately 6.86% of the Initial Pool Balance, are located in New York. No
other state represents more than 3.99% of the Initial Pool Balance.
Loan Concentration Entails Risk. In general, the inclusion in a mortgage
pool of one or more loans with outstanding principal balances that are
substantially larger than the average principal balance of the mortgage loans
in that pool can result in more severe losses, relative to the size of the
pool, than would be the case if the aggregate balance of the mortgage loans in
the pool was more evenly distributed. Several of the Mortgage Loans have
Cut-off Date Balances that are substantially higher than the average Cut-off
Date Balance of the Mortgage Loans.
The largest Mortgage Loan has a Cut-off Date Balance of approximately
$33,176,730 and represents approximately 4.71% of the Initial Pool Balance. The
average Cut-off Date Balance of the Mortgage Loans is approximately $3,981,721.
The ten largest Mortgage Loans have an aggregate Cut-off Date Balance of
approximately $163,467,488 and represent, in the aggregate, approximately
23.19% of the Initial Pool Balance. See the table entitled "Ten Largest
Mortgage Loans" under "Description of the Mortgage Pool--Additional Mortgage
Loan Information" herein.
Equity Investments by Affiliates of PWRES. An affiliate of PWRES owns
approximately 66.70% of the equity in the borrower with respect to one Credit
Tenant Loan, with a Cut-off Date Balance of approximately $7,911,959,
representing approximately 1.12% of the Initial Pool Balance. Loans to
affiliates of the lender may generate conflicts of interest.
Risks Associated with Related Borrowers and Managers. Certain groups of
Mortgage Loans consist of non-cross-collateralized and non-cross-defaulted
Mortgage Loans that have been made to the same borrower or to separate
borrowers with common principals.
o One such group consists of three Mortgage Loans (the "Julio Group")
secured by office and mixed-use office/retail properties in Maryland
that have been made to borrowers with the same principals and that
have an aggregate Cut-off Date Balance of approximately $64,172,743,
representing approximately 9.11% of the Initial Pool Balance.
o Three such groups consist, in the aggregate, of ten Mortgage Loans
(collectively, the "Flagship Group") that have been made to borrowers
with three overlapping principals and represent, in the aggregate,
with an aggregate Cut-off Date Balance of approximately $58,297,174,
representing approximately 8.27% of the Initial Pool Balance.
o One such group consists of two Mortgage Loans (the "Gold Group"),with
an aggregate Cut-off
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Date Balance of approximately $32,840,000, representing approximately
4.66% of the Initial Pool Balance, which are secured by nursing homes
in northern New Jersey and have been made to borrowers with the same
principal.
o One such group consists of three Mortgage Loans (the "Associated
Group") secured by multifamily properties in Arizona, Michigan and
Ohio that have been made to borrowers with the same principal and that
have an aggregate Cut-off Date Balance of approximately $29,808,000,
representing approximately 4.23% of the Initial Pool Balance.
No other group of Mortgage Loans that has been made to the same borrower
or to related borrowers constitutes more than 3.00% of the Initial Pool
Balance.
If a mortgage pool has a high concentration of loans to related borrowers,
the financial difficulties of such a borrower could have a greater impact on
the mortgage pool than it would if the borrower and its affiliates represented
a smaller proportion of the mortgage pool.
Mortgaged Properties that are owned by a group of related borrowers are
likely to have common management. To the extent that Mortgaged Properties owned
by a group of related borrowers have common property management, any financial
or other difficulties experienced by the property manager would have a greater
impact on the Mortgaged Properties than would be the case if the properties did
not have common management.
In addition, a financial failure or bankruptcy filing involving an
affiliate of a group of affiliated borrowers, such as a common general partner
or the owner of a common general partner, would have a greater impact on the
Mortgage Pool than a financial failure or bankruptcy filing involving only one
of several borrowers without such an affiliation. Nonetheless, the filing of a
bankruptcy petition should not invalidate the first lien position held by the
Trustee on the related Mortgaged Property, and the Master Servicer is required
to make Advances through liquidation unless the Master Servicer determines that
such Advances will not be recoverable. See "Description of the
Certificates--Advances" herein.
Limitations on Enforceability of Cross-Collateralization Arrangements.
Three separate groups of Mortgage Loans (but not including the Julio Group,
the Gold Group, the Flagship Group or the Associated Group), with an aggregate
Cut-off Date Balance of approximately $11,186,137, representing approximately
1.59% of the Initial Pool Balance, provide for some form of
cross-collateralization between the Mortgage Loans in each such group (such
Mortgage Loans, collectively, the "Cross-Collateralized Mortgage Loans", and
each such group, a "Cross-Collateralized Group").
The purpose of cross-collateralization arrangements is to reduce the risk
of default or ultimate loss as a result of the inability of a Mortgaged
Property to generate sufficient net cash flow to pay debt service on the
related Mortgage Loan. However, cross-collateralization arrangements involving
more than one borrower could be challenged as a "fraudulent conveyance" by
creditors of an insolvent borrower (or by the bankruptcy trustee of an
insolvent borrower). Such a challenge could eliminate or reduce the benefits of
cross-collateralization with respect to one or more Cross-Collateralized
Groups.
In general, a pledge or transfer may be set aside as a "fraudulent
conveyance" if a court finds that the following circumstances exist:
o Insufficient Consideration. The pledgor or transferor did not receive
fair consideration or reasonably equivalent value in exchange for its
agreement to pledge its property for the equal benefit of the other
borrower; and
o Insolvency. The pledgor or transferor either (a) was insolvent at the
time of granting the lien on its property or (b) was rendered
insolvent as a result of granting the lien on its property or (c)
intended to, or believed that it would, incur debts that would be
beyond that person's ability to pay as such debts matured.
Other Financing and Additional Debt. Except as described in this
Prospectus Supplement, each Mortgage Loan generally prohibits the related
borrower from incurring additional indebtedness without the consent of the
lender. However, the Mortgage Loans generally permit the related borrowers to
incur a limited amount of unsecured trade debt in the ordinary course of
business. For a detailed discussion of
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additional debt that we summarize in this section, see "Description of the
Mortgage Loans--Certain Terms and Conditions of the Mortgage Loans--Additional
Debt."
Ten Mortgage Loans, representing approximately 7.66% of the Initial Pool
Balance, permit the related borrower to maintain subordinate secured or
unsecured financing. Certain of such subordinate debt is owed to affiliates of
the related borrower. Each lender of existing subordinate debt secured by the
Mortgaged Property has entered into a subordination and standstill agreement
pursuant to which, among other provisions, such lender has agreed to
subordinate all payments due under the related subordinate debt, including
assignments of leases and rents, to the payment obligations under the related
Mortgage Loan, and the subordinate lender has agreed that it will not take any
action to enforce its rights under the related subordinate mortgage until the
related Mortgage Loan has been paid in full, even if there is a default under
the subordinate debt. Notwithstanding the foregoing, in certain circumstances
the borrower may make payments on the subordinate debt while the Mortgage Loan
is outstanding.
Three Mortgage Loans, representing approximately 1.85% of the Initial Pool
Balance, permit the related borrower to incur future indebtedness secured by a
subordinate lien on the related Mortgaged Property. In the case of one such
Mortgage Loan, with a Cut-off Date Balance of approximately $1,225,052,
representing approximately 0.17% of the Initial Pool Balance, the subordinate
debt may be "hard", meaning that the subordinate lender has not contractually
waived its rights to enforce remedies against the borrower in the event of a
default on the subordinate indebtedness.
With respect to one Mortgage Loan, with an aggregate Cut-off Date Balance
of approximately $7,438,152, representing approximately 1.06% of the Initial
Pool Balance, the related borrower is permitted to sell accounts receivable, in
an aggregate amount of not more than $1,200,000, in connection with the
operation of its rehabilitation center. The Trustee on behalf of the
Certificateholders has a first priority perfected security interest in the
receivables that are sold and in the proceeds of such sale, but it has
contractually subordinated its rights with respect to the receivables that are
sold to the rights of the purchaser thereof. Payments received on the purchased
receivables are deposited in a lockbox account that is held by
European-American Bank, and funds on deposit in the lockbox are required to be
released to the purchaser of the purchased receivables at the borrower's
direction.
The existence of additional debt may increase the riskiness of a Mortgage
Loan for several reasons, including the following:
o Reduced Cash Flow. Additional debt service requirements may reduce
cash available for property maintenance, thereby potentially reducing
the value of the Mortgaged Property.
o Refinancing. A borrower with additional debt outstanding when a
Mortgage Loan matures may have more difficulty refinancing the
Mortgage Loan than it would if the borrower did not have such
additional debt outstanding, and if the Mortgage Loan requires the
borrower to make a significant payment of principal at maturity, the
borrower could be at risk of defaulting on that payment.
o Bankruptcy Risks. Additional debt increases the risk that the borrower
could become insolvent or subject to bankruptcy or similar proceedings
or might complicate bankruptcy proceedings delaying foreclosure on the
Mortgaged Property. In addition, if the holder of additional debt
becomes bankrupt or insolvent, the Trustee's ability to foreclose on
the related Mortgage Loan could be delayed. See "Certain Legal Aspects
of the Mortgage Loans--Due-on-Sale and Due-on-Encumbrance Provisions"
and "--Subordinate Financing" in the Prospectus.
Four Mortgage Loans, with an aggregate Cut-off Date Balance of
approximately $32,196,821, representing approximately 4.57% of the Initial Pool
Balance, permit the owners of the related borrowers to pledge their limited
partnership interests or other ownership interests in the borrower as security
for mezzanine debt that was in existence as of the date of origination of the
related Mortgage Loan. In addition, one Mortgage Loan, with an aggregate
Cut-off Date Balance of approximately $4,894,164, representing approximately
0.69% of the Initial Pool Balance, permits the owners of the related borrowers
to incur mezzanine debt in the future.
"Mezzanine debt" is debt that is incurred by the owner of equity in one or
more borrowers and is secured by a guaranty of the borrower or by a pledge of
the equity ownership interests in such borrowers.
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Because mezzanine debt is secured by the obligor's equity interest in the
related borrowers, such financing effectively reduces the obligor's economic
stake in the related Mortgaged Property. The existence of mezzanine debt may
reduce cash flow on the borrower's Mortgaged Property after the payment of debt
service and may increase the likelihood that the owner of a borrower will
permit the value or income producing potential of a Mortgaged Property to
suffer by not making capital infusions to support the Mortgaged Property and
may create a slightly greater risk that a borrower will default on a Mortgage
Loan secured by a Mortgaged Property whose value or income is relatively weak.
Upon a default under mezzanine debt, the holder of such mezzanine debt
would be entitled to foreclose upon the equity in the related mortgagor, which
has been pledged to secure payment of such mezzanine debt. Such transfer of
equity would not trigger the "due on sale" clause under the related Mortgage
Loan, as described in this Prospectus Supplement. An attempt to foreclose upon
such pledged equity may cause the obligor under such mezzanine debt to file for
bankruptcy, which could negatively affect the operation of the related
Mortgaged Property and such borrower's ability to pay the Mortgage Loan in a
timely manner.
MLMC, or an affiliate of MLMC, is the holder of the mezzanine debt to the
owners of the borrowers under three Mortgage Loans, representing approximately
2.25% of the Initial Pool Balance, and in certain cases the proceeds of such
Mortgage Loans were used to satisfy such pre-existing indebtedness. With
respect to two of such Mortgage Loans, representing approximately 1.77% of the
Initial Pool Balance, the related loan documents provided for a portion of such
Mortgage Loans to be funded subsequent to the initial funding (provided certain
conditions were met) with the proceeds of the subsequent funding of the
Mortgage Loan used by the borrower to repay a portion of the mezzanine debt.
Such subsequent funding may create a conflict of interest with respect to the
origination of such Mortgage Loans.
No holder of mezzanine debt has a lien on, or has the power to foreclose
on, any of the Mortgaged Properties or on any of the Escrow Accounts, Lockbox
Accounts or Cash Collateral Accounts established under the related Mortgage
Loans. The sole remedy available to the holder of mezzanine debt in the event
of non-payment is to foreclose upon the equity and separate cash collateral
accounts pledged to it and to terminate the related property manager.
Recently Constructed Properties Do Not Have Operating Histories. Ten of
the Mortgaged Properties (excluding Credit Tenant Properties), representing
approximately 6.41% of the Initial Pool Balance, were constructed after January
1998 and consequently do not have significant operating histories. There can be
no assurance that the businesses operated at such Mortgaged Properties will be
successful. There can be no assurances that current occupancy levels of such
Mortgaged Properties will be maintained or that full occupancy will be achieved
or maintained or that as yet undiscovered physical or design problems with the
recently constructed Mortgaged Properties will not adversely affect occupancy
levels of any such Mortgaged Property
Risks Particular to Multifamily Properties. 62 Mortgaged Properties, with
an aggregate Cut-off Date Balance of approximately $223,046,636, representing
approximately 31.65% of the Initial Pool Balance, are secured by mortgages on
multifamily properties. In the case of one such Mortgage Loan, representing
approximately 0.15% of the Initial Pool Balance, the Mortgaged Property is a
cooperative apartment building.
Generally, the successful operation of a multifamily property will depend
on a variety of factors, some of which are beyond the borrower's control. These
include:
o the property's reputation;
o the ability of management to provide adequate maintenance;
o the types of services it provides;
o the deterioration of the surrounding neighborhood;
o the development of competitive projects;
o the imposition of rent control; and
o changes in tax laws.
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All of these conditions and events may increase the possibility that a
borrower may be unable to meet its obligations under a Mortgage Loan.
Regulatory Considerations. Certain states strictly regulate the
relationship between landlords and tenants. Commonly, these laws require a
written lease, good cause for eviction and disclosure of fees, and prohibit
unreasonable rules and retaliatory evictions. Apartment building owners also
have been the subject of suits under state "Unfair and Deceptive Practices
Acts" and other general consumer protection statutes for coercive, abusive or
unconscionable leasing and sales practices. For example, some states limit the
basis on which a landlord may increase rents or on which a landlord may
terminate a tenancy.
Rent Control. In addition to state regulation of the landlord-tenant
relationship, numerous counties and municipalities impose rent control or rent
stabilization regulations on apartment buildings. These ordinances may limit
rent increases to fixed percentages which in turn may be linked to increases in
the consumer price index, schedules approved by a governmental agency, or to
increases determined through mediation or binding arbitration. In many cases,
rent control or rent stabilization laws do not permit vacancy decontrol or
destabilization, and therefore limit the projected future net cash flows and
market value of the affected multifamily properties. Any limitations on a
borrower's ability to raise property rents may impair such borrower's ability
to repay its Mortgage Loan from its net cash flow or from the proceeds of a
sale or refinancing of the related Mortgaged Property.
Cooperative Apartment Buildings. Lending to cooperative apartment building
corporations is generally similar to lending on other types of multifamily
properties. However, they present some additional risks as well, including the
following:
o Adverse economic conditions, either local, regional or national, may
adversely affect the ability of cooperative unit owners to make
required maintenance payments to cover operating expenses and debt
service, either because such adverse economic conditions have impaired
the individual financial conditions of such tenant-shareholders or
their ability to sublet the subject apartments; and
o To the extent that the sponsor of a conversion of an apartment
building from rental status to cooperative status holds the shares
allocated to a large number of the apartment units, any lender secured
by a mortgage on such building will be subject to a risk associated
with such sponsor's creditworthiness.
Section 8 Multifamily Properties. Two of the Mortgage Loans, representing
approximately 0.57% of the Initial Pool Balance, are secured by multifamily
properties in which the rent charged to a significant proportion of the tenants
is subsidized by housing assistance payments under the Section 8 Tenant-Based
Assistance Rental Voucher Program or the Section 8 Tenant-Based Assistance
Rental Certificate Program (collectively, the "Program") of the United States
Department of Housing and Urban Development ("HUD"). We can give you no
assurance that other Mortgage Loans are not secured by Mortgaged Properties
with any concentration of Section 8 tenants.
Rent subsidy payments are made pursuant to Housing Assistance Payments
Contracts ("HAP Contracts') between the borrower and a local housing authority
which receives Section 8 funds from HUD. The term of each HAP Contract is
limited to the term of the related tenant lease, generally one year, renewable
at the option of the tenant. Tenants may choose to move out of the Mortgaged
Properties and utilize their vouchers elsewhere, and we cannot assure you that
the units so vacated will be re-rented at rental rates equivalent to the
subsidized rent, which may be in excess of market rental rates. The HAP
Contracts impose certain management and maintenance obligations on the
borrowers, and housing assistance payments can be suspended, reduced or
terminated if HUD or the local housing authority determines that the borrowers
have breached the HAP Contracts. HUD may in the future elect, or be required by
Congress, to take actions that have the effect of limiting increases in rents
subsidized under Section 8, or reducing rent levels currently in effect. The
ability of the respective borrowers to pay their Mortgage Loans, and the value
of their Mortgaged Properties and consequent ability to refinance the Mortgage
Loans which are subject to HAP Contracts, could be adversely affected by some
or all of the risks that we have described above.
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We cannot give you any assurance that the Program will be continued in its
present form or that the level of assistance provided to tenants will be
sufficient to assure revenues sufficient for the borrower to meet its
obligations under the HAP Loans and to pay for necessary property operations.
For a further discussion of risks particular to multifamily properties
(including cooperative apartment buildings), see "Risk Factors--Risks
Associated With Certain Mortgage Loans and Mortgaged Properties--Risks
Particular to Multifamily Properties" in the Prospectus.
Risks Particular to Office Properties. 21 of the Mortgaged Properties
(other than Credit Tenant Loans), with an aggregate Cut-off Date Balance of
approximately $91,477,215, representing approximately 12.98% of the Initial
Pool Balance, are office properties.
Significant factors determining the value of office properties include the
following:
o the quality of the tenants in the building;
o the physical attributes of the building in relation to competing
buildings;
o the strength and stability of the market area as a desirable business
location; and
o tenant improvements and tenant build-out allowances.
Negative changes in the physical plant or surroundings with respect to
such features may have a significant impact on occupancy levels, tenant
turnover and lease or rental income with respect to such properties. The risk
of such an adverse effect is increased if revenue is dependent on a single
tenant or if there is a significant concentration of tenants in a particular
business or industry.
For a further discussion of risks particular to office properties, see
"Risk Factors--Risks Associated With Certain Mortgage Loans and Mortgaged
Properties--Risks Particular to Office Properties" in the Prospectus.
Risks Particular to Hotel Properties. 35 Mortgaged Properties, with an
aggregate Cut-off Date Balance of approximately $80,645,513, securing
approximately 11.44% of the Initial Pool Balance, are full service, limited
service and resort hotels. Certain of the hotel properties are associated with
national or regional franchise chains, while others are not affiliated with any
franchise chain but may have their own brand identity.
Various factors may adversely affect the economic performance of a hotel
including:
o adverse economic or social conditions, either local, regional or
national (which may limit the amount that can be charged for a room
and may lead to reduced occupancy levels);
o the construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated
useful lives (to satisfy such costs, the related Mortgage Loans
generally require the borrowers to fund reserves for furniture,
fixtures and equipment);
o a deterioration in the financial strength or managerial capabilities
of the owner and operator of a hotel; and
o changes in travel patterns caused by changes in access, energy prices,
labor strikes, relocation of highways, the construction of additional
highways or other factors.
In addition, because hotel rooms generally are rented for short periods of
time, such types of properties tend to respond more quickly to adverse economic
conditions and competition than do other commercial properties. To meet
competition in the hospitality industry and to maintain economic values,
continuing expenditures must be made for modernizing, refurbishing, and
maintaining existing facilities at higher levels than are applicable to many
other property types.
Certain hotel properties may be located in areas where the attraction is a
particular business or military base. The economic success of a hotel in such
an area may depend upon the continued existence of the particular business or
military base.
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The performance of a hotel property that is affiliated with a franchise or
hotel management company depends in part on:
o the continued existence and financial strength of the franchisor or
hotel management company;
o the public perception of the franchise or hotel chain service mark;
and
o the duration of the franchise licensing or management agreements.
Franchise agreements for certain of the hotel properties may terminate
prior to the maturity date specified for the related Mortgage Loan (the "Stated
Maturity Date"), and may terminate upon foreclosure of the related Mortgage
Loan in cases where the lender, the franchisor and the franchisee have not
entered into an agreement permitting the lender to assume the franchise upon
foreclosure of the related Mortgage Loan. Replacement franchises may require
significantly higher fees than the franchise being replaced and renovations may
be required to the related Mortgage Property in connection with such
replacement. The transferability of franchise license agreements is restricted.
Some states require that liquor licenses be held by a natural person
and/or prohibit the transfer of liquor licenses to any person without the prior
approval of the relevant licensing authority. In the event of a foreclosure of
a hotel or motel, it is unlikely that the Trustee (or the Special Servicer on
its behalf) or any other purchaser in the foreclosure sale would be entitled to
the rights under liquor license for such property. If such is the case, it is
possible that a new liquor license could not be obtained.
For a further discussion of risks particular to hotels, see "Risk
Factors--Risks Associated With Certain Mortgage Loans and Mortgaged
Properties--Risks Particular to Hotel and Motel Properties" in the Prospectus.
Risks Particular to Retail Properties. 30 Mortgaged Properties (excluding
Credit Tenant Loans), with an aggregate Cut-off Date Balance of approximately
$93,658,976, representing approximately 13.29% of the Initial Pool Balance, are
anchored or unanchored retail properties.
Dependence on Tenants' Operations. Mortgage Loans that are secured by
liens on retail properties typically depend on the quality and success of
tenants at the related property because rental payments are often linked to the
performance of tenants' businesses (for example, lease provisions may require
tenants to pay as rent a percentage of gross sales generated by the tenants'
businesses). Such arrangements may cause the value of such properties to
correlate to the performance of tenant businesses and may increase the risk
that a borrower will be unable to make payments on the related Mortgage Loan if
the tenants' businesses perform poorly. Therefore, the value of and successful
operations of retail properties are significantly impacted by the quality of
the tenants as well as fundamental aspects of real estate, such as location and
market demographics. The success of tenants at a retail property will be
affected by a variety of factors, including:
o competition from other retail properties;
o perceptions regarding the safety, convenience and attractiveness of
the property;
o demographics of the surrounding area;
o traffic patterns and access to major thoroughfares;
o availability of parking;
o customer tastes and preferences; and
o the drawing power of other tenants (some tenants may have clauses in
their leases that permit them to cease operations at the property if
certain other stores are not operated at the property).
A retail property generally must compete with comparable properties for
tenants. Such competition is generally based on:
o rent (the owner of a retail property may be required to offer a
potential tenant a "free rent" period);
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o tenant improvements (the owner of a retail property may at its own
expense significantly renovate and/or adapt space at the property to
meet a particular tenant's needs); and
o the age and location of the property.
Issues Involving Anchor Tenants. The presence or absence of an "anchor
tenant" in a mall or shopping center may also be an important determinant of
the success of such a property, because anchors play a key role in generating
customer traffic and making the mall or center desirable for other tenants. An
"anchor tenant" is a retail tenant whose space is substantially larger in size
than that of other tenants at the same retail mall or shopping center and whose
operation is vital in attracting customers to the property or whose
creditworthiness and lease term contribute to the strength of the underwriting
with respect to that Mortgage Loan. 22 Mortgaged Properties, representing
approximately 10.28% of the Initial Pool Balance, are "anchored" retail
properties (excluding Credit Tenant Loans).
The economic performance of an "anchored" retail property will be
adversely affected by various factors, including:
o an anchor tenant's failure to renew its lease;
o termination of an anchor tenant's lease;
o the bankruptcy or economic decline of an anchor tenant or a self-owned
anchor;
o the cessation of the business of a self-owned anchor or of an anchor
tenant (notwithstanding its continued payment of rent);
o whether other tenants are entitled to terminate their leases if the
anchor tenant ceases to operate at the property; or
o the loss or impairment of an anchor tenant's ability to attract
shoppers.
Emerging Competitive Pressures. Unlike office or hotel properties, retail
properties also face competition from alternative retail outlets, which are
typically located outside of the local real estate market and are often
characterized by lower operating costs than traditional retail properties. For
example, all of the following types of retailers compete with more traditional
retail properties for consumer dollars:
o catalogue retailers;
o home shopping networks;
o internet based "e-commerce";
o telemarketers; and
o multi-level marketers.
For a further discussion of risks particular to retail properties, see
"Risk Factors--Risks Associated With Certain Mortgage Loans and Mortgaged
Properties--Risks Particular to Retail Properties" in the Prospectus.
Certain Risks Associated with Industrial Properties. 18 Mortgaged
Properties (excluding Credit Tenant Loans), with an aggregate Cut-off Date
Balance of approximately $70,735,180, securing approximately 10.04% of the
Initial Pool Balance, are industrial properties. 11 of such Mortgaged
Properties, representing approximately 7.56% of the Initial Pool Balance, are
industrial/office properties.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment (for
example, a decline in defense spending), and a particular industrial property
that suited the needs of its original tenant may be difficult to re-let to
another tenant or may become functionally obsolete relative to newer
properties. For a further description of the risks particular to industrial
properties, see "Special Considerations--Risks Associated With Certain Mortgage
Loans and Mortgaged Properties--Risks Particular to Industrial Properties" in
the Prospectus.
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Certain Risks Associated with Credit Tenant Loans. Seven of the Mortgage
Loans (the "Credit Tenant Loans"), with an aggregate Cut-off Date Balance of
approximately $49,650,540, representing approximately 7.04% of the Initial Pool
Balance, are secured by Mortgages on Mortgaged Properties that are, in each
case, subject to a lease (a "Credit Lease") to a tenant (each a "Credit
Tenant") which possesses, or whose lease obligations are guaranteed by a
guarantor (each, a "Guarantor") that possesses, a rating or internal
classification of at least "BB-" or its equivalent by one or more rating
agencies.
Credit Quality of Credit Tenants and Guarantors. The payment of interest
and principal on Credit Tenant Loans is dependent primarily on the payment by
each Credit Tenant or related Guarantor, if any, of monthly rental payments and
other payments due under the terms of the Credit Lease, and such payments may
have little or no relation to market rents for such property. A downgrade in
the credit rating of a Credit Tenant and/or the related Guarantor may adversely
affect the rating of your Certificates. In addition, because the ability of the
owner of a Credit Tenant Property to service the related Credit Tenant Loan is
dependent on revenue from a single tenant, in the event of a default under a
Credit Lease or the associated guarantee, as the case may be, the related
borrower may not have the ability to make required payments on such Credit
Tenant Loan until the premises are re-let, and this may be at market rates that
are less than the rental rate under the defaulted credit lease. If a payment
default on a Credit Tenant Loan occurs, the Special Servicer may be entitled to
foreclosure upon or otherwise realize upon the related Credit Tenant Property
to recover amounts due under the Credit Tenant Loan, and will also be entitled
to pursue any available remedies against the defaulting Credit Tenant and any
Guarantor.
Factors Affecting Lease Enhancement Policy and Residual Value Policy
Proceeds. With respect to five Credit Tenant Loans, representing in the
aggregate approximately 3.74% of the Initial Pool Balance, which are not
secured by a Bond-Type Lease (defined in "Description of the Mortgage Pool"),
the Trustee generally is the beneficiary of one or more non-cancelable
insurance policies ("Lease Enhancement Policies") obtained to cover certain
lease termination and/or rent abatement events arising out of a casualty to, or
condemnation of, a Credit Tenant Property. Each Lease Enhancement Policy is
issued by either Chubb Custom Insurance Company ("Chubb") or Lexington
Insurance Company ("Lexington"), a wholly owned subsidiary of American
International Group, Inc. ("AIG"). As of the Cut-off Date, Chubb and Lexington
each had a financial strength rating of "AAA" from Standard & Poor's Ratings
Service. Each Lease Enhancement Policy provides that, in the event of a
permitted termination by a Credit Tenant under a Credit Lease occurring as a
result of a casualty or a condemnation, the related insurer will pay the Master
Servicer on behalf of the Trustee a payment of all outstanding principal plus,
subject to certain limitations, interest on the related Credit Tenant Loan. The
insurer generally is not required to pay any amount due under a Credit Tenant
Loan other than principal and, subject to the limitation above, accrued
interest, and therefore is not required to pay any Prepayment Premium or Yield
Maintenance Charge due pursuant to the related loan documents. One Credit
Tenant Loan not secured by a Bond-Type Lease, representing approximately 1.20%
of the Initial Pool Balance, does not have the benefit of a Lease Enhancement
Policy.
With respect to three Credit Tenant Loans, representing approximately
2.82% of the Initial Pool Balance (the "Fully Amortizing Credit Tenant Loans"),
the scheduled monthly rental payments from the related Credit Tenants are
generally sufficient to pay in full and on a timely basis all interest and
principal and other sums scheduled to be paid with respect to the related
Credit Tenant Loan. One Fully Amortizing Credit Tenant Loan, with a Cut-off
Date Balance of approximately $8,426,129, representing approximately 1.20% of
the Initial Pool Balance, will require a principal payment on its Stated
Maturity Date of approximately $570,000. This residual payment is not insured
by a Residual Value Policy. Four of the Credit Tenant Loans, representing
approximately 4.23% of the Initial Pool Balance (the "Balloon Payment Credit
Tenant Loans"), are not fully amortizing and require the payment of a large
amount at maturity (which coincides with the expiration of the primary term of
the related Credit Leases). Each of the Balloon Payment Credit Tenant Loans has
the benefit of residual value insurance policies (each a "Residual Value
Policy") from R.V.I. American Insurance Company ("RVI") or Financial Structures
Limited ("FSL"). The obligations of FSL are 100% reinsured by Royal Indemnity
Company and its pooled insurance affiliates ("Royal"). As of the Cut-off Date,
RVI had a financial strength rating of "A" from
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Standard & Poor's Ratings Services and a claims paying ability rating of "A"
from Fitch IBCA, Inc., and Royal had a financial strength rating of "AA-" from
Standard & Poor's Rating Services and an insurer financial strength rating of
"A1" from Moody's Investors Service, Inc. The Trustee is a named insured of
each Residual Value Policy.
You may be adversely affected by any failure by the insurer under a Lease
Enhancement Policy or Residual Value Policy to pay in accordance with the terms
of such policy, and any downgrade of the claims paying ability rating or
insurer financial strength rating of any such insurer may adversely affect the
ratings of the Certificates. See "Certain Characteristics of the Mortgage
Loans--Credit Tenant Loans."
Risks Particular to Nursing Homes and Other Health Care Facilities. Seven
Mortgaged Properties, representing approximately 8.03% of the Initial Pool
Balance, are nursing homes, senior housing facilities, assisted living
facilities, rehabilitation facilities and recreational/health facilities (any
of the foregoing, "health care-related properties").
Regulatory Considerations. Providers of long-term nursing care and other
medical services are subject to federal and state laws that relate to many
areas of operations of a facility, including:
o the adequacy of medical care;
o distribution of pharmaceuticals;
o rate setting;
o maintenance and use of equipment;
o personnel;
o operating policies and additions to facilities and services.
In addition, facilities where such care or other medical services are
provided are subject to periodic inspection by governmental authorities to
determine compliance with various standards necessary to continue licensing
under state law and continued participation in the Medicaid and Medicare
reimbursement programs. The failure of a borrower to maintain or renew any
required license or regulatory approval could prevent it from continuing
operations at the related health related facility or, if applicable, bar it
from participating in government reimbursement programs.
Assisted living facilities generally do not require licensing by state or
federal regulatory agencies and do not qualify for payments under the federal
Medicare program or state Medicaid programs (although they are required to
comply with applicable health department regulations). However, the operators
thereof may be required to be licensed by a state or municipal authority to
provide food service. The failure of a borrower under a Mortgage Loan secured
by an assisted living facility to renew any required license could impair its
ability to generate operating income
Insurance Reimbursement. Nursing home facilities may receive a substantial
portion of their revenues from government reimbursement programs, primarily
Medicaid and Medicare. Medicaid and Medicare revenues are subject to a variety
of risks including:
o statutory and regulatory changes;
o retroactive rate adjustments;
o administrative rulings;
o policy interpretations;
o delays by fiscal intermediaries;
o government funding restrictions; and
o cost-containment measures by government payors that limit payments to
health-care providers.
In addition, there are currently under consideration various proposals for
national health-care reform that could further limit payments by Medicare and
Medicaid. Accordingly, there can be no assurance that
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payments under governmental reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of caring for program beneficiaries. If
not, net operating income of the nursing home facilities that receive revenues
from those sources, and consequently the ability of the Mortgaged Property to
support debt service on the related Mortgage Loan, will be impaired. In
addition, the continued operation of a nursing home facility subsequent to a
foreclosure is dependent upon the proposed operator's satisfying all applicable
legal requirements, such as possessing the required license to operate such
facility and/or dispense required pharmaceuticals.
In addition, to the extent that such facilities serve patients whose fees
are reimbursed by private insurers, the operating income will be dependent on
the reimbursement policies of such insurers.
The operators of health-care related properties are likely to compete on a
local and regional basis with others that operate similar facilities. Some of
their competitors may be better capitalized, may offer services not offered by
such operators, or may be owned by non-profit organizations or government
agencies supported by endowments, charitable contributions, tax revenues and
other sources of financing not available to such operators. The successful
operation of a nursing home or congregate care facility will generally depend
upon the number of competing facilities in the local market, as well as upon
other factors such as its age, appearance, reputation and management, the types
of services it provides and, where applicable, the quality of care and the cost
of that care.
For a further discussion of risks particular to health-care related
properties, see "Risk Factors--Risks Associated With Certain Mortgage Loans and
Mortgaged Properties--Risks Particular to Health-Care-Related Properties" in
the Prospectus.
Certain Risks Associated with Self-Storage Properties. Two Mortgaged
Properties, representing approximately 0.37% of the Initial Pool Balance, are
secured by self-storage properties. Because of relatively low acquisition costs
and break-even occupancy rates, self-storage properties are considered
vulnerable to competition. Despite their relatively low acquisition costs, the
particular building characteristics of such properties would require
substantial capital investments in order to adapt them to alternative uses.
Limited adaptability to other uses may substantially reduce the liquidation
value of a self-storage property. In addition, factors that affect the success
of a self-storage property include:
o the location and visibility of the facility;
o its proximity to apartment complexes or commercial users;
o trends of apartment tenants in the area moving to single-family homes;
o services provided (such as security and accessibility);
o the age of improvements;
o the appearance of the improvements; and
o the quality of management.
For further description of the risks particular to self-storage
properties, see "Risk Factors--Risk Associated With Certain Mortgage Loans and
Mortgage Properties--Risk Particular to Warehouse, Mini-Warehouse and
Self-Storage Facilities" in the Prospectus.
Certain Risks Associated with Mobile Home Parks. Seven Mortgaged
Properties, representing approximately 1.79% of the Initial Pool Balance, are
secured by mobile home parks. The successful operation of a mobile home park or
recreational vehicle park will generally depend upon the number of competing
parks in the local market, as well as upon other factors such as:
o its age;
o its appearance;
o its reputation;
o its management; and
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o the type of facilities and services it provides.
Mobile home parks also compete against alternative forms of residential
housing, including multifamily rental properties, cooperatively-owned apartment
buildings, condominium complexes and single-family residential developments.
Recreational vehicle parks also compete against alternative forms of recreation
and short-term lodging (for example, staying at a seaside hotel).
For a further description of the risks particular to mobile home parks,
see "Risk Factors--Risks Associated With Certain Mortgage Loans and Mortgage
Properties--Risk Particular to Mobile Home Parks and Recreational Vehicle
Parks" in the Prospectus.
Seismic Risk. 13 Mortgaged Properties, representing approximately 7.85% of
the Initial Pool Balance, are located in areas classified as Class 3 or 4
seismic zones. Seismic studies have been completed for all of such Mortgaged
Properties with the exception of one Mortgaged Property that secures a Mortgage
Loan representing approximately 0.54% of the Initial Pool Balance.
No Mortgaged Property has a "probable maximum loss" estimate exceeding
20%. No Mortgaged Property is insured against earthquake damage.
Zoning Compliance. Due to changes in applicable building and zoning
ordinances and codes ("Zoning Laws") affecting certain of the Mortgaged
Properties which have come into effect after the construction of improvements
on such Mortgaged Properties and for other reasons, certain improvements may
not comply fully with current Zoning Laws, including density, use, parking and
setback requirements, but qualify as permitted non-conforming uses. Such
changes may limit the ability of the borrower to rebuild the premises "as is"
in the event of a substantial casualty loss with respect thereto and, to the
extent law and ordinance insurance coverage is not in place, may adversely
affect the ability of the borrower to meet its Mortgage Loan obligations from
cash flow.
Americans With Disabilities Act. Under the Americans with Disabilities Act
of 1990 (the "ADA"), public accommodations are required to meet certain federal
requirements related to access and use by disabled persons. If a Mortgaged
Property does not currently comply with the ADA, the related borrower may be
required to incur significant costs in order to bring the property into
compliance. In addition, noncompliance could result in the imposition of fines
by the federal government or an award or damages to private litigants. These
costs could have an adverse effect on a borrower's ability to pay debt service
on the related Mortgage Loan.
Litigation. There may be legal proceedings pending and, from time to time,
threatened against the borrowers and their affiliates relating to the business
of, or arising out of the ordinary course of business of, the borrowers and
their affiliates. We cannot assure you that such litigation will not have a
material adverse effect on the performance of the related Mortgaged Properties
and, thus, the distributions to Certificateholders.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The principal assets of the Trust will consist of conventional Mortgage
Loans secured primarily by 62 multifamily properties, 21 office properties, 30
retail properties, 35 hotel/motel properties, 7 credit tenant properties, 18
industrial properties, 7 mobile home parks, 2 self-storage properties and 11
properties consisting of mixed use, nursing homes, senior housing, health care
and other categories. The Initial Pool Balance is approximately $704,764,603.
Each Mortgage Loan is evidenced by one or more promissory notes (a "Mortgage
Note") obligating the borrower to repay a specified sum with interest and is
secured by one or more mortgages, deeds of trust or other similar security
instruments (a "Mortgage") that collectively create a first mortgage lien (i)
with respect to 176 Mortgage Loans, representing approximately 99.46% of the
Initial Pool Balance, on the fee simple interest of the borrower or another
person in one or more multifamily, retail, office, hospitality, industrial,
credit tenant, nursing home, mixed use, health care, mobile home park and self
storage properties and (ii) with respect to one Mortgage Loan, representing
approximately 0.54% of the Initial Pool Balance, on the leasehold interest of
the borrower in one mobile home park property (each property enumerated in
clause (i) and (ii) above, a "Mortgaged Property"). The term of the ground
lease securing the Mortgage Loan referred to in clause (ii) above extends at
least ten years beyond the Stated Maturity Date of such Mortgage Loan
(including options to extend). All percentages of the Mortgage Loans and
Mortgaged Properties, or of any specified group of Mortgage Loans and Mortgaged
Properties, referred to herein without further description are approximate
percentages of the Initial Pool Balance.
All information contained herein regarding the "Mortgage Loans as of the
Cut-off Date" is based on the assumption that there will be no changes to the
composition or characteristics of the Mortgage Pool prior to the Cut-off Date.
The "Cut-off Date" is June 1, 1999, except with respect to one Mortgage
Loan, representing approximately 2.11% of the Initial Pool Balance, as to which
the Cut-off Date is June 5, 1999. All payments on any Mortgage Loan that are
due on or before its Cut-off Date, whether or not received, are not included in
the Trust Assets.
The "Cut-off Date Balance" of any Mortgage Loan is the unpaid principal
balance thereof as of the Cut-off Date, after application of all payments due
on or before such date, whether or not received. The "Initial Pool Balance" is
the sum of the Cut-off Date Balances of all of the Mortgage Loans.
On or before June 7, 1999 (the "Closing Date"), the Depositor will
purchase the Mortgage Loans to be included in the Trust from the Mortgage Loan
Sellers pursuant to two Mortgage Loan Purchase Agreements (each a "Mortgage
Loan Purchase Agreement"), each to be dated as of June 1, 1999, and to be
between the respective Mortgage Loan Seller and the Depositor.
The Mortgage Loans were originated between November 1997 and May 1999. The
Mortgage Loans sold to the Depositor by PWRES were generally underwritten in
accordance with the underwriting criteria described under "--PWRES Underwriting
Standards" below, and the Mortgage Loans sold to the Depositor by MLMC were
generally underwritten in accordance with the underwriting criteria described
under "--MLMC Underwriting Standards" below.
The Mortgage Loans are not insured or guaranteed by the Depositor, either
Underwriter, either Mortgage Loan Seller, any governmental entity or private
mortgage insurer (except that lease enhancement insurance and/or residual value
insurance has been obtained with respect to certain Credit Tenant Loans). The
Depositor has not undertaken any evaluation of the significance of the
provisions of any of the Mortgage Loans that provide for recourse against the
related borrower or another person in the event of a default. Accordingly, you
should consider all of the Mortgage Loans to be nonrecourse loans (subject to
standard nonrecourse exceptions) as to which recourse in the case of default
will be limited to the specific property and such other assets, if any, pledged
to secure a Mortgage Loan.
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Cross-Collateralized Groups and Multi-Property Loans. The Mortgage Pool
includes three Cross-Collateralized Groups, each of which is comprised of two
or more separate mortgage loans that are cross-collateralized and
cross-defaulted with each other. The Mortgage Pool also includes six Multi-
Property Loans, each of which is made to a single borrower and is evidenced by
one note but which is secured by more than one Mortgaged Property and contains
provisions for the partial release of one or more of such Mortgaged Properties
or, in the case of one such Multi-Property Loans, does not provide for any
release of the related Mortgaged Properties but was underwritten on the basis
of a separate allocation of Underwritten Net Cash Flow among the related
Mortgaged Properties for purposes of determining compliance with debt service
coverage and other tests. The Mortgage Pool also includes one Multi-Property
Loan made to two borrowers and evidenced by one note that is secured by two
Mortgaged Properties. Certain Cross-Collateralized Groups and Multi-Property
Loans permit the release of one or more of the related Mortgaged Properties or,
in the case of a Cross-Collateralized Group, termination of the applicable
cross-collateralization, subject in each case to the fulfillment of one or both
of the following conditions:
o the satisfaction of certain performance criteria, such as maintenance
of a minimum DSCR or a maximum LTV Ratio, specified in the related
loan documents;
o the borrower's substitution for the Mortgaged Property of non-callable
U.S. Government Securities that provide for payments on or prior to
each Due Date and the Stated Maturity Date (or Anticipated Repayment
Date in the case of an ARD Loan) equal to 125% (and in the case of one
Cross-Collateralized Group, representing approximately 0.65% of the
Initial Pool Balance, 110%) of the amounts that are payable on each
such date under the terms of the related Mortgage Note (in the case of
a Mortgaged Property within a Cross-Collateralized Group or, in the
case of a partial defeasance of a Multi-Property Loan, of the amounts
payable that are allocated to the Mortgaged Property being released.)
One Mortgage Loan secured by multiple Mortgaged Properties, identified as
Loan No. ML-108 on Annex A-1, shows separate allocated loan amounts for each
such Mortgaged Property in Annex A-1 nothwithstanding that such Mortgage Loan
is not included in the definition of "Multi-Property Loan" owing to the absence
of provisions that permit the partial release of such Mortgaged Properties and
the absence of separate allocations of Net Underwritten Cash Flow to the
several Mortgaged Properties.
In this Prospectus Supplement we generally treat each Cross-Collateralized
Group as if it constitutes a single Mortgage Loan, notwithstanding that it
consists of separate notes secured by separate mortgages, except where the
context makes it clear that we are referring to the individual mortgage loans
within that group. One Cross-Collateralized Group, representing in the
aggregate 0.37% of the Initial Pool Balance (identified on the Mortgage Loan
Schedule as Loan No. ML-108 and ML-145, is comprised of separate Mortgage Loans
with substantially different terms.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. 176 Mortgage Loans, representing approximately 97.89% of the
Initial Pool Balance, provide for Monthly Payments to be due on the first day
of each month with a grace period no longer than ten days. One Mortgage Loan,
representing approximately 2.11% of the Initial Pool Balance, provides for
Monthly Payments to be due on the fifth day of the month with a three day grace
period.
Mortgage Rates; Calculations of Interest. Each Mortgage Loan bears
interest at a Mortgage Rate that is fixed for the remaining term of such
Mortgage Loan (or, in the case of the ARD Loans, until the Anticipated
Repayment Date). As described below, however, each ARD Loan will accrue
interest after its Anticipated Repayment Date at a rate that is no more than
two percentage points in excess of its Mortgage Rate prior to such Anticipated
Repayment Date (except in the case of one Mortgage Loan, representing
approximately 1.81% of the Initial Pool Balance, for which the Mortgage Loan
documents provide that interest will accrue after the Anticipated Repayment
Date at a rate equal to the greater of (i) 2% over the related Mortgage Rate
and (ii) 2% over the Treasury Rate; such provision has not been waived, but we
cannot give you any assurance that it may not be waived in the future). The
term "Mortgage Rate" does not include (i) the incremental increase in the rate
at which interest may accrue
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on any Mortgage Loan due to a default or a modification or (ii) interest on any
ARD Loan after its Anticipated Repayment Date at the difference between the
Initial Rate and the Revised Rate (each as defined below). See "Description of
the Certificates--Distribution--Priorities." As of the Cut-off Date, the
Mortgage Rates of the Mortgage Loans ranged from 6.260% per annum to 9.590% per
annum, and the weighted average Mortgage Rate of the Mortgage Loans was 7.402%
per annum.
No Mortgage Loan provides for negative amortization or for the deferral of
interest except for ARD Loans following their respective Anticipated Repayment
Dates to the extent of the deferral of Excess Interest.
Each Mortgage Loan will accrue interest on the basis of one of the
following conventions:
o Actual number of days elapsed during each one-month accrual period (an
"Actual/360 Basis"). Mortgage Loans that accrue interest on an
Actual/360 Basis are referred to in this Prospectus Supplement as
"Actual/360 Mortgage Loans."
o A 360-day year consisting of 12 30-day months (a "30/360 Basis").
Mortgage Loans that accrue interest on a 30/360 Basis are referred to
in this Prospectus Supplement as "30/360 Mortgage Loans."
Set forth below is the number of Mortgage Loans that accrue interest based
on each of the foregoing conventions and the percentage of the Initial Pool
Balance that such Mortgage Loans represent.
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE CUT- % OF INITIAL
ACCRUAL METHOD LOANS OFF DATE BALANCE POOL BALANCE
- ---------------- ----------- ------------------ -------------
<S> <C> <C> <C>
Actual/360 173 $669,422,818 94.99%
30/360 4 $ 35,341,785 5.01%
Totals 177 $704,764,603 100%
</TABLE>
Lockout Periods, Yield Maintenance Charges and Prepayment Premiums. Each
of the Mortgage Loans restricts voluntary prepayments in one or both of the
following ways: (i) by prohibiting voluntary prepayments for a specified amount
of time after origination (the "Lockout Period") and (ii)(a) allowing voluntary
prepayments only with the payment of an additional charge intended to
compensate the lender for foregone interest (the "Yield Maintenance Charge")
for a specified amount of time from origination or, in the case of a Mortgage
Loan that is also subject to a Lockout Period, after the expiration of the
related Lockout Period (the "Yield Maintenance Period") or (b) by imposing fees
or premiums, generally equal to a percentage of the principal balance of such
Mortgage Loan that is prepaid (a "Prepayment Premium") in connection with
voluntary full or partial principal prepayments for a specified period of time
after the expiration of the related Yield Maintenance Period or, in the case of
Mortgage Loans not subject to a Yield Maintenance Period, the related Lockout
Period.
o 113 Mortgage Loans, representing approximately 54.39% of the Initial
Pool Balance, contain provisions that prohibit all voluntary
prepayments;
o 50 Mortgage Loans representing in the aggregate approximately 36.52%
of the Initial Pool Balance, contain provisions that prohibit all
voluntary prepayments until a specified date (generally between four
and seven months prior to the Stated Maturity Date or Anticipated
Repayment Date of the related Mortgage Loan or, in the case of one
Mortgage Loan, representing approximately 0.17% of the Initial Pool
Balance, 61 months prior to the Stated Maturity Date) and without
restriction thereafter.
o Ten Mortgage Loans representing in the aggregate approximately 5.82%
of the Initial Pool Balance, contain provisions that prohibit
voluntary prepayment for a period of generally up to one to five years
after origination and permit voluntary prepayment at any time
thereafter with the payment of a Yield Maintenance Charge until
generally up to four months prior to the Stated Maturity Date or the
Anticipated Repayment Date and without restriction thereafter.
o Three Mortgage Loans representing in the aggregate approximately 2.94%
of the Initial Pool Balance, contain provisions that prohibit
voluntary prepayment for a period of generally up to
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two to eight years after origination and permit voluntary prepayment
thereafter with the payment of a Prepayment Premium until generally
between four and seven months prior to the Stated Maturity Date or
Anticipated Repayment Date and without restriction thereafter.
o One Mortgage Loan representing in the aggregate approximately 0.33% of
the Initial Pool Balance, contains provisions that permit voluntary
prepayment at any time with the payment of a Yield Maintenance Charge.
With respect to each Mortgage Loan sold to the Depositor by PWRES that
provides for the payment of a Yield Maintenance Charge, the "Yield Maintenance
Charge" will generally be equal to the greater of (A) 1% of the portion of the
principal balance of the Mortgage Loan being prepaid, and (B) the product of
(i) a fraction the numerator of which is an amount equal to the portion of the
principal balance of the Mortgage Loan being prepaid and denominator of which
is the outstanding principal balance of such Mortgage Loan on the date of such
prepayment, multiplied by (ii) an amount equal to the remainder obtained by
subtracting (x) an amount equal to the entire outstanding principal balance of
the Mortgage Loan as of the date of such prepayment, from (y) the present value
as of the date of such prepayment of the remaining scheduled payments of
principal and interest on the Mortgage Loan (including the Balloon Payment or
the prepayment expected to be made on the Anticipated Repayment Date, if
applicable) determined by discounting such payments at the applicable Discount
Rate.
With respect to each Mortgage Loan sold to the Depositor by MLMC that
provides for the payment of a Yield Maintenance Charge, the "Yield Maintenance
Charge" will generally be equal to the greater of (i) 1% of the principal
amount of the Mortgage Loan and (ii) the positive difference, if any, between
(x) the present value on the date of prepayment of all future installments
which the borrower would otherwise be required to pay under the terms of the
Mortgage Loan in the absence of such prepayment, including any Balloon Payment
or prepayment expected to be made on the Anticipated Repayment Date, if
applicable, discounted at the Discount Rate, and (y) the principal amount of
the Mortgage Loan on the date of prepayment.
The "Discount Rate" is a rate equal to (i) with respect to the Mortgage
Loans sold by PWRES to the Depositor, the per annum rate calculated by the
linear interpolation of the yields, as reported in "Federal Reserve Statistical
Release H.15-"Selected Interest Rates" under the heading U.S. Government
Securities/Treasury constant maturities for the week ending prior to the date
of prepayment, of the U.S. Treasury constant maturities with maturity dates
(one longer and one shorter) most nearly approximating the Stated Maturity Date
of the Mortgage Loan being prepaid (or such other comparable calculation based
on the United States Treasury Security set forth in such other publication),
with such rate converted to a monthly equivalent, and (ii) with respect to the
Mortgage Loans sold by MLMC to the Depositor, the per annum rate equal to the
yield to maturity (adjusted to a "mortgage equivalent basis" pursuant to the
standards and practices of the Securities Industry Association) on the date of
prepayment of the United States Treasury security having the term to maturity
closest to what otherwise would have been the remaining term of the related
Mortgage Loan absent such prepayment.
Please see "--Additional Mortgage Loan Information" for a more detailed
description of the prepayment protections and restrictions of the Mortgage
Loans.
The Mortgage Loan documents generally do not require the payment of a
Yield Maintenance Charge or Prepayment Premium in connection with an
involuntary prepayment owing to a casualty to or condemnation of the related
Mortgaged Property.
The Yield Maintenance Charge or Prepayment Premium provision of a Mortgage
Loan creates an economic disincentive for the borrower to prepay such Mortgage
Loan voluntarily and, accordingly, the related borrower may elect not to prepay
such Mortgage Loan. However, there can be no assurance that the imposition of a
Yield Maintenance Charge or Prepayment Premium will provide a sufficient
disincentive to prevent a voluntary principal prepayment. Unless a Mortgage
Loan is relatively near its Stated Maturity Date or unless the sale price or
the amount of the refinancing of the related Mortgaged Property is considerably
higher than the current outstanding principal balance of such Mortgage Loan
(due to an increase in the value of the Mortgaged Property or otherwise), the
Yield Maintenance Charge
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or Prepayment Premium may, even in a relatively low interest rate environment,
offset entirely or render insignificant any economic benefit to be received by
the borrower upon a refinancing or sale of the Mortgaged Property. You should
also note that the enforceability of provisions concerning prepayment premiums
and yield maintenance charges has been challenged in several states. If a
borrower were to successfully challenge the imposition of Prepayment Premiums
or Yield Maintenance Charges with respect to its prepayment of a Mortgage Loan,
the yield to maturity of your Certificates could be affected.
Notwithstanding the foregoing, as described under "General--ARD Loans"
below, each ARD Loan will be freely prepayable in whole or in part on and after
the related Anticipated Repayment Date.
Prepayment Premiums and Yield Maintenance Charges are distributable to
Certificateholders as described herein under "Description of the
Certificates--Distribution--Allocation of Prepayment Premiums and Yield
Maintenance Charges."
Additional Debt. Except as described below, each borrower was generally
required to satisfy all existing indebtedness encumbering the related Mortgaged
Property as a condition to the funding of the related Mortgage Loan and is
prohibited by the terms of the related loan documents from incurring additional
indebtedness without the consent of the lender. However, the Mortgage Loans
generally permit the related borrowers to incur a limited amount of unsecured
trade debt in the ordinary course of business.
However, in certain cases borrowers have been permitted to maintain
additional existing financing as follows:
o Three Mortgage Loans, with an aggregate Cut-off Date Balance of
approximately $5,358,190, representing approximately 0.76% of the
Initial Pool Balance, permit the related borrower to maintain
subordinate financing secured by a lien on an interest in the related
Mortgaged Property that was in existence on the date of origination of
the related Mortgage Loan. Each lender of such existing subordinate
debt that is secured by the related Mortgaged Property has entered
into a subordination and standstill agreement pursuant to which, among
other provisions, such lender has agreed to subordinate all payments
due under the related subordinate debt, including assignments of
leases and rents, to the payment obligations under the related
Mortgage Loan, and the subordinate lender has agreed that it will not
take any action to enforce its rights under the related subordinate
mortgage until the related Mortgage Loan has been paid in full, even
if there is a default under the subordinate debt.
o Two Mortgage Loans, with an aggregate Cut-off Date Balance of
approximately $8,960,514, representing approximately 1.27% of the
Initial Pool Balance, permit the related borrowers to maintain
subordinate financing that is not secured by the related Mortgaged
Property and that is in an amount not in excess of $500,000 in each
case. The subordinate debt is unconditionally subordinate to the
related Mortgage Loan until (i) one year after the Mortgage Loan has
been fully satisfied, in the case of one such Mortgage Loan,
representing approximately 0.70% of the Initial Pool Balance, or (ii)
the date on which the Mortgage Loan has been satisfied, in the case of
one Mortgage Loan, representing in the aggregate approximately 0.57%
of the Initial Pool Balance; provided, however, that in certain
limited circumstances the borrower is permitted to make payments on
the subordinate debt while the Mortgage Loan is outstanding. In the
case of one of such Mortgage Loan the lender of the additional debt is
an affiliate of the borrower.
o With respect to one Mortgage Loan, with an aggregate Cut-off Date
Balance of approximately $7,438,152, representing approximately 1.06%
of the Initial Pool Balance, the related borrower is permitted to sell
accounts receivable, in an aggregate amount of not more than
$1,200,000, in connection with the operation of its rehabilitation
center. The Trustee on behalf of the Certificateholders has a first
priority perfected security interest in the receivables that are sold
and in the proceeds of such sale, but it has contractually
subordinated its rights with respect to the receivables that are sold
to the rights of the purchaser thereof. Payments received on the
purchased receivables are deposited in a lockbox account that is held
by European-American Bank, and funds on deposit in the lockbox are
required to be released to the purchaser of the purchased receivables
at the borrower's direction.
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o Two Mortgage Loans, with an aggregate Cut-off Date Balance of
approximately $8,177,435, representing approximately 1.16% of the
Initial Pool Balance, permit the related borrowers to incur future
indebtedness secured by a subordinate lien on the related Mortgaged
Property. In the case of one such Mortgage Loan, with a Cut-off Date
Balance of approximately $1,225,052, representing approximately 0.17%
of the Initial Pool Balance, the subordinate debt may be "hard",
meaning that the subordinate lender has not contractually waived its
rights to enforce remedies against the borrower in the event of a
default on the subordinate indebtedness. In the case of one such
Mortgage Loan, representing approximately 0.99% of the Initial Pool
Balance, the subordinate debt will be subject to the terms of an
intercreditor and subordination agreement pursuant to which, among
other provisions, the subordinate lender will be required to
subordinate all payments due under the related subordinate debt to the
payment obligations under the related Mortgage Loan and will not be
entitled to take any action to enforce its rights under the related
subordinate mortgage until the related Mortgage Loan has been paid in
full, even if there is a default under the subordinate debt.
Except for the receivables financing described above, each lender of
existing subordinate secured and unsecured debt has entered into subordination
and standstill agreement pursuant to which, among other provisions, such lender
has agreed to subordinate all payments due under the related subordinate debt,
including assignments of leases and rents, to the payment obligations under the
related Mortgage Loan, and the subordinate lender has agreed that it will not
take any action to enforce its rights under the related subordinate mortgage
until the related Mortgage Loan has been paid in full, even if there is a
default under the subordinate debt. Notwithstanding the foregoing, in certain
circumstances the borrower may make payments on the subordinate debt while the
Mortgage Loan is outstanding.
Four Mortgage Loans, with an aggregate Cut-off Date Balance of
approximately $32,196,821, representing approximately 4.57% of the Initial Pool
Balance, permit the owners of the related borrowers to pledge their limited
partnership interests or other ownership interests in the borrower as security
for mezzanine debt that was in existence as of the date of origination of the
related Mortgage Loan. In addition, one Mortgage Loan, with an aggregate
Cut-off Date Balance of approximately $4,894,164, representing approximately
0.69% of the Initial Pool Balance, permits the owners of the related borrowers
to incur mezzanine debt in the future.
Loan Amortization. 144 Mortgage Loans, with an aggregate Cut-off Date
Balance of approximately $528,185,011, representing approximately 74.94% of the
Initial Pool Balance, are "Balloon Loans". 26 Mortgage Loans, with an aggregate
Cut-off Date Balance of approximately $70,595,799, representing approximately
10.02% of the Initial Pool Balance, are "Fully Amortizing Loans". Seven of the
Mortgage Loans with an aggregate Cut-off Date Balance of approximately
$105,983,793 (collectively, the "ARD Loans"), representing in the aggregate
approximately 15.04% of the Initial Pool Balance, are "ARD Loans." We describe
the characteristics of the ARD Loans, the Balloon Loans and the Fully
Amortizing Loans in the following paragraphs.
o ARD Loans. Each ARD Loan provides that if the related borrower has not
prepaid the related ARD Loan in full on or before a certain date (the
"Anticipated Repayment Date"), any principal outstanding on such date
shall accrue interest at an increased interest rate (the "Revised
Rate") rather than at the stated Mortgage Rate (the "Initial Rate").
Generally, each Anticipated Repayment Date is not more than 120 months
after the first Due Date for the related ARD Loan. The Revised Rate
for each ARD Loan will generally be equal to the sum of (x) the
Initial Rate plus (y) an additional rate (the "Excess Rate"), which is
generally 2% per annum; provided however, that in the case of one
Mortgage Loan, with a Cut-off Date Balance of approximately
$12,774,267, representing approximately 1.81% of the Initial Pool
Balance, the Revised Rate is the greater of (i) 2% above the Initial
Rate and (ii) 2% above the Treasury Rate. After the Anticipated
Repayment Date, each ARD Loan further requires that all cash flow
available from the related Mortgaged Property after payment of the
constant monthly payment required under the terms of the related loan
documents and after payment of all escrows and expenses required under
the related loan documents will be used to accelerate amortization of
principal on such ARD Loan. While interest at the Initial Rate
continues to accrue and be payable on a current
S-46
<PAGE>
basis on the ARD Loans after the Anticipated Repayment Date, the
payment of interest at the excess of the Revised Rate over the Initial
Rate for the ARD Loans ("Excess Interest") will be deferred and will
be paid only after the outstanding principal balance of the related
ARD Loan has been paid in full, and such deferred interest will accrue
interest. The foregoing features, to the extent applicable, are
designed to increase the likelihood that the ARD Loans will be repaid
by the related borrowers on their respective Anticipated Repayment
Dates. The failure of the related borrower to repay an ARD Loan on the
Anticipated Repayment Date will not be an event of default under the
terms of such Mortgage Loan.
o Balloon Loans. Each Balloon Loan provides for monthly payments based
on an amortization schedule that is significantly longer than the term
to maturity of the Balloon Loan. Consequently, a large principal
payment is due at the Stated Maturity Date of the Mortgage Loan.
Unlike the failure to prepay an ARD Loan at its Anticipated Repayment
Date, the failure to pay the Balloon Payment on the Stated Maturity
Date of a Balloon Loan is an event of default on the related Mortgage
Loan.
o Fully Amortizing Loans. Each Fully Amortizing Loan provides for
monthly payments based on an amortization schedule that is
approximately equal to the term to maturity of the Mortgage Loan, and
consequently no large payment of principal is due on the Stated
Maturity Date of such a Mortgage Loan. However, in certain
circumstances, a small additional payment of principal may be required
to be made on the Stated Maturity Date of a Fully Amortizing Loan that
accrues interest on an Actual/360 Basis.
Credit Tenant Loans. Seven Mortgage Loans with an aggregate Cut-off Date
Balance of approximately $49,650,549 representing in the aggregate
approximately 7.04% of the Initial Pool Balance ("Credit Tenant Loans") are
secured by Mortgaged Properties ("Credit Tenant Properties") that are, in each
case, subject to a net lease obligations (a "Credit Lease") of a tenant (a
"Credit Tenant") that possesses (or whose lease obligations are guaranteed by a
guarantor that possesses) a rating or internal classification of at least "BB-"
(or the equivalent) or higher by one or more nationally recognized statistical
rating organizations. See "Risk Factors--Risks Relating to the Mortgage
Loans--Credit Tenant Properties." For additional information regarding the
Credit Tenant Loans, please see Annex A-2 attached to this Prospectus
Supplement.
With respect to three Credit Tenant Loans, representing approximately
2.82% of the Initial Pool Balance (the "Fully Amortizing Credit Tenant Loan"),
the scheduled monthly rental payments from the related tenants are generally
sufficient to pay in full and on a timely basis all interest and principal and
other sums scheduled to be paid with respect to the related Credit Tenant Loan.
One Fully Amortizing Credit Tenant Loan, with a Cut-off Date Balance of
approximately $8,426,129, representing approximately 1.20% of the Initial Pool
Balance, will require a principal payment on its Stated Maturity Date of
approximately $570,000. This residual payment is not insured by a Residual
Value Policy. Four of the Credit Tenant Loans, representing approximately 4.23%
of the Initial Pool Balance (the "Balloon Payment Credit Tenant Loans"), are
not fully amortizing and require the payment of Balloon Payments at maturity
(which coincides with the expiration of the primary term of the related Credit
Lease). Each of the Balloon Payment Credit Tenant Loans has the benefit of a
residual value insurance policy (a "Residual Value Policy") from R.V. I.
American Insurance Company ("RVI") or Financial Structures Limited ("FSL"). The
obligations of FSL are 100% reinsured by Royal Indemnity Company and its pooled
insurance affiliates ("Royal"). As of the Cut-off Date RVI had a financial
strength rating of "A" from Standard & Poor's Rating Services and a claims
paying ability rating of "A" from Fitch IBCA, and Royal had a claims paying
ability rating of "AA-" from Standard & Poor's Rating Services and an insurer
financial strength rating of "A1" from Moody's. The Trustee is a named insured
of each Residual Value Policy.
Each Credit Tenant is obligated under the related Credit Lease to make all
Monthly Rental Payments except with respect to Balloon Payment Credit Tenant
Loans, with respect to which the Balloon Payment is covered by a residual value
insurance policy. The amount of the Monthly Rental Payments payable by each
Credit Tenant is generally equal to or greater than the scheduled payment of
all principal,
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<PAGE>
interest and other amounts due each month, on the related Credit Tenant Loan,
and it is expected that the monthly payments of the related borrowers will be
funded from such Monthly Rental Payments, except that any Balloon Payments are
to be paid by the Credit Tenants or from the proceeds of any Residual Value
Insurance Policies or from the proceeds of sale or refinancing of the Credit
Tenant Property. In the case of Credit Tenant Loans with debt service reserve
accounts, withdrawals of funds on deposit in the debt service reserve account
will be used to supplement Monthly Rental Payments in an amount necessary to
fully amortize such Mortgage Loans.
Notwithstanding the foregoing, the borrowers remain liable for all
obligations under the Credit Tenant Loans (subject to the non-recourse
provisions of the Credit Tenant Loans). Each mortgagor under a Credit Tenant
Loan has assigned to the mortgagee of the related Credit Tenant Loan (each, a
"Credit Lease Assignment"), as security for such mortgagor's obligations
thereunder, such mortgagor's rights under the related Credit Leases and its
rights to all income and profits to be derived from the operation and leasing
of the related property (each, a "Credit Tenant Property"), including, but not
limited to, an assignment of any guarantee of the Credit Tenant's obligations
under the related Credit Lease and an assignment of the right to receive all
Monthly Rental Payments due under the related Credit Leases.
Each Credit Lease generally provides that the related Credit Tenant must
pay all real property taxes and assessments levied or assessed against the
related Credit Tenant Property and, except in the case of five Credit Tenant
Loans representing approximately 3.74% of the Initial Pool Balance, all other
operating expenses incurred in connection with the operation of the related
Credit Tenant Property. Generally, each Credit Tenant Loan provides that if the
Credit Tenant defaults beyond applicable notice and grace periods in the
performance of any covenant or agreement of such Credit Lease (a "Credit Lease
Default"), the mortgagee may exercise rights under the related Credit Lease
Assignment or loan document to require the related mortgagor either (i) to
terminate such Credit Lease or (ii) not to terminate such Credit Lease and
exercise any of its rights thereunder. A default under a Credit Lease will
constitute a default under the related Credit Tenant Loan.
Lease termination rights and rent abatement rights, if any, in the Credit
Leases may generally be divided into three categories: (i) termination and
abatement rights directly arising from certain defined casualties or
condemnation ("Casualty or Condemnation Rights"), (ii) termination and
abatement rights arising from a borrower's default relating to its obligations
(other than the obligation to maintain a Lease Enhancement Policy) under the
related Credit Leases to perform required maintenance, repairs or replacements
with respect to the related Credit Tenant Property ("Maintenance Rights") and
(iii) termination and abatement rights arising from certain other borrower
defaults under the related Credit Lease, including but not limited to
remediating environmental conditions not caused by the Credit Tenant,
enforcement of restrictive covenants affecting property owned directly or
indirectly by the borrower in the area of the Credit Tenant Property and
complying with laws regulating such Credit Tenant Property or common areas
related to such Credit Tenant Property ("Additional Rights"). Certain Credit
Leases ("Bond-Type Leases" or "Bondable Leases") have neither Casualty nor
Condemnation Rights, Maintenance Rights nor Additional Rights, and the Credit
Tenants thereunder are required, at their sole expense, to maintain the related
Credit Tenant Property, in good order and repair. Other Credit Leases ("Triple
Net Leases") have Casualty or Condemnation Rights and may have Additional
Rights. The tenants under Triple Net Leases are required, at their own expense,
to maintain the related Credit Tenant Property, including the roof and
structure, in good order and repair. Additionally, certain of the Credit Leases
("Double Net Leases") have Casualty or Condemnation Rights and Maintenance
Rights, and may have Additional Rights. If the borrower were to default in the
performance of certain obligations under a Triple Net Lease or a Double Net
Lease and the Credit Tenant exercised its Additional Rights or Maintenance
Rights, there could be a disruption in the stream of Monthly Rental Payments
available to pay principal and interest to the Certificateholders to the extent
that reserves were insufficient to reimburse the Credit Tenant for certain
costs of curing the default. One of the Credit Tenant Loans, with a Cut-off
Date Balance of approximately $14,875,024, representing approximately 2.11% of
the Initial Pool Balance are Bond-Type Leases and five of the Credit Tenant
Loans with an aggregate Cut-off Date Balance of approximately $26,349,387,
representing approximately 3.74% of the Initial Pool Balance are Double Net
Leases. One Credit Tenant Loan, representing approximately 1.20% of the Initial
Pool Balance, does not have the benefit of a Lease Enhancement policy.
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<PAGE>
With respect to the Credit Tenant Loans secured by a non-Bond-Type Lease,
the Trustee generally is the beneficiary of one or more non-cancelable
insurance policies ("Lease Enhancement Policies") obtained to cover certain
lease termination and/or rent abatement events arising out of a casualty to, or
condemnation of, a Credit Tenant Property. Each Lease Enhancement Policy was
issued by either Chubb Custom Insurance Company ("Chubb") or Lexington
Insurance Company ("Lexington"). As of the Cut-off Date, Chubb and Lexington
had a financial strength rating of "AAA" from Standard and Poor's Ratings
Service. Each Lease Enhancement Policy provides that, in the event of a
permitted termination by a Credit Tenant under a Credit Lease occurring as a
result of a casualty or a condemnation, the related insurer will pay the Master
Servicer on behalf of the Trustee a payment of all outstanding principal plus,
subject to certain limitations, interest on the related Credit Tenant Loan. The
insurer generally is not required to pay any amount due under a Credit Tenant
Loan other than principal and, subject to the limitations described herein,
accrued interest, and therefore is not required to pay any Prepayment Premium
or Yield Maintenance Charge due thereunder or any amounts the related borrower
is obligated to pay thereunder to reimburse the Master Servicer or the Trustee
or Fiscal Agent for outstanding Servicing Advances.
At the end of the term of the Credit Lease, the related Credit Tenant is
generally obligated to surrender the Credit Tenant Property in good order and
in its original condition received by the Credit Tenant, except for ordinary
wear and tear and repairs required to be performed by the related borrower.
Certain of the Credit Leases give the related tenant the right to extend the
term of the Credit Lease by one or more renewal periods after the end of the
primary term of the Credit Lease
The related Mortgage Loan Seller's underwriting guidelines with respect to
the Credit Tenant Loans are described under "--PWRES' Underwriting Standards"
and "--MLMC's Underwriting Standards" herein.
Defeasance; Releases of Mortgaged Property. 163 Mortgage Loans with an
aggregate Cut-off Date Balance of approximately $640,734,145 of the Initial
Pool Balance, representing in the aggregate approximately 90.91% of the Initial
Pool Balance, grant the related borrower the option to obtain the release of
the lien of the Mortgage on all of the related Mortgaged Property at any time
commencing generally between two years and five years after the date of
origination (but in no event less than two years from the Closing Date), by
substituting for such Mortgaged Property, as collateral for the related
Mortgage Note, U.S. Treasury Securities which provide payments on or prior to
all successive scheduled payment dates after the proposed date of defeasance on
which interest and principal payments are required to be made under the terms
of the related Mortgage Loan (including the amount of any Balloon Payment, if
applicable, and assuming that any ARD Loan is prepaid in full on its
Anticipated Repayment Date) and in amounts no less than the scheduled payments
due on such dates under the terms of the related Mortgage Loan. No Yield
Maintenance Charge or Prepayment Premium will be due in connection with any
full or partial defeasance of a Mortgage Loan.
The partial release of Mortgaged Properties securing Multi-Property
Mortgage Loans and Cross-Collateralized Groups is permitted in certain
instances upon the substitution of U.S. Treasury Securities which provide for
payment in amount generally equal to 125% (and in the case of one Cross-
Collateralized Group representing approximately 0.63% of the Initial Pool
Balance, 110% and in the case of one Mortgage Loan, representing approximately
0.57% of the Initial Pool Balance, 100%) of the payments which would have been
due on the related mortgage in the case of a part of a Cross-Collateralized
Group or due on the amount allocated to the released Mortgaged Property in the
case of a Multi-Property Loan.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. Except for two Mortgage
Loans with an aggregate Cut-off Date Balance of approximately $21,827,406,
representing in the aggregate approximately 3.10% of the Initial Pool Balance,
the Mortgage Loans contain "due-on-sale" and "due-on-encumbrance" provisions
that in each case, with limited exceptions, permit the holder of the Mortgage
to accelerate the maturity of the related Mortgage Loan if the borrower sells
or otherwise transfers or encumbers the related Mortgaged Property without the
consent of the Master Servicer; provided, however
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<PAGE>
that, under the terms of certain of the Mortgage Loans such consent must be
granted if certain conditions are met. Certain Mortgage Loans permit transfers
of the Mortgaged Properties or of interests in the borrower to affiliated
persons or entities and/or for estate planning and other purposes.
Three Mortgage Loans, with an aggregate Cut-off Date Balance of
approximately $64,172,743, representing approximately 9.11% of the Initial Pool
Balance, permit the related borrower, on no more than one occasion, to transfer
the related Mortgaged Property to a publicly-traded "umbrella partnership real
estate investment trust" (an "Up-Reit"), provided that (a) the long term
unsecured debt obligations of the Up-Reit are rated "BBB" (or its equivalent)
or above by one or more rating agencies, (b) the assumption documents are in
all respects satisfactory to the Master Servicer, (c) the borrower and the
guarantor of the Mortgage Loan remain liable for their respective obligations
in respect of the Mortgage Loan and (d) such transfer does not result in the
downgrade or withdrawal of the ratings assigned to the Certificates by any
Rating Agency.
The Master Servicer (with respect to Mortgage Loans that are not Specially
Serviced Mortgage Loans) and the Special Servicer (with respect to any
Specially Serviced Mortgage Loan) will be required to exercise (or waive its
right to exercise) any right it may have with respect to a Mortgage Loan or
Specially Serviced Mortgage Loan, as applicable, containing a "due-on-sale" or
"due-on-encumbrance" clause (i) to accelerate the payments thereon, or (ii) to
withhold its consent to any such sale or creation of additional liens or other
encumbrances in a manner consistent with the Servicing Standard.
Notwithstanding the foregoing, the Master Servicer and Special Servicer, as
applicable will not be permitted to waive (i) a due-on-sale provision under a
Mortgage Loan with a scheduled principal balance greater than 2% of the
aggregate principal balance of the Mortgage Pool or (ii) any due-on-encumbrance
provision without first confirming that such waiver will not result in a
downgrade, withdrawal or qualification of the then current rating of any Class
of Certificates and the Master Servicer will not be permitted to waive a
due-on-encumbrance provision without the consent of the Special Servicer
(except that the Special Servicer will be deemed to have consented if it does
not respond to written notice requesting such consent within five business
days).
Waiver of any due-on-sale provision (or the allowance of any assumption of
a Mortgage Loan) will also require notice to the Special Servicer.
Lender/Borrower Relationships. The Mortgage Loan Sellers and their
respective affiliates may maintain relationships with certain borrowers or
their affiliates. Proceeds of the Mortgage Loans may, in certain limited cases,
be used to pay indebtedness owed to the Mortgage Loan Sellers or their
respective affiliates.
An affiliate of PWRES owns approximately 66.70% of the equity interests in
the borrower with respect to one Credit Tenant Loan, with a Cut-off Date
Balance of approximately $7,911,959, representing approximately 1.12% of the
Initial Pool Balance.
Mortgaged Property Lock Box Accounts. With respect to 17 Mortgage Loans
(the "Lock Box Loans") with an aggregate Cut-off Date Balance of approximately
$166,973,046, representing approximately 23.69% of the Initial Pool Balance,
one or more accounts (collectively, the "Lock Box Accounts") have been, or may
be, established in the name of the lender pursuant to the related loan
documents. With respect to 13 of such Lock Box Loans, with an aggregate Cut-off
Date Balance of approximately $144,167,984, representing approximately 20.46%
of the Initial Pool Balance, the tenants or the related property manager are
currently required to deposit rents directly into the related Lock Box Account.
The terms of four Lock Box Loans, representing approximately 3.23% of the
Initial Pool Balance, provide for the establishment of a Lock Box Account upon
the occurrence and continuation of certain events, generally relating to the
failure of certain major tenants to renew or extend their respective leases,
the failure of the related borrower to lease such premises to new tenants
acceptable to the lender, the failure of the Mortgaged Property to meet certain
DSCR requirements or (in the case of the ARD Loans) the failure of the borrower
to prepay the related Mortgage Loan in full on the related Anticipated
Repayment Date). Two of such "springing" lock boxes will require the related
borrower to deposit rents directly into the related Lock Box Account. The Lock
Box Accounts will not be assets of either REMIC.
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<PAGE>
ADDITIONAL MORTGAGE LOAN INFORMATION
The following tables set forth certain specified characteristics of the
Mortgage Loans. The sum in any column may not equal the indicated total due to
rounding. The descriptions in this Prospectus Supplement of the Mortgage Loans
and the Mortgaged Properties are based upon the Mortgage Pool as it is expected
to be constituted as of the close of business on the Cut-off Date, assuming
that (i) all scheduled principal and interest payments due on or before the
Cut-off Date will be made and (ii) there will be no principal prepayments on or
before the Cut-off Date. Mortgage Loans may be removed from the Mortgage Pool
(i.e. not sold by the applicable Mortgage Loan Seller to the Depositor) as a
result of prepayments, delinquencies, incomplete documentation or otherwise, if
the Depositor or the applicable Mortgage Loan Seller deems such removal
necessary, appropriate or desirable.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Closing Date and
will be filed, together with the Pooling and Servicing Agreement, with the
Securities and Exchange Commission within fifteen days after the initial
issuance of the Offered Certificates. In the event that Mortgage Loans are
removed from or added to the Mortgage Pool as set forth in the preceding
paragraph, such removal or addition will be noted in the Form 8-K.
As used in the following tables "LTV Ratio" for any Mortgage Loan, as of
any date of determination, is a fraction, expressed as a percentage, the
numerator of which is the scheduled principal balance of such Mortgage Loan as
of such date (assuming no defaults or prepayments on such Mortgage Loan prior
to such date), and the denominator of which is the appraised value of the
related Mortgaged Property or Mortgaged Properties as determined by an
appraisal thereof obtained in connection with the origination or acquisition,
as the case may be, of such Mortgage Loan. The LTV Ratio as of the Stated
Maturity Date or Anticipated Repayment Date of any Mortgage Loan, as the case
may be, described below was calculated based on the principal balance of the
related Mortgage Loan on the maturity date or Anticipated Repayment Date, as
the case may be, assuming all principal payments required to be made on or
prior to the Mortgage Loan's maturity date or Anticipated Repayment Date, as
the case may be (not including the balloon payment), are made. In addition,
because it is based on the value of a Mortgaged Property determined as of loan
origination or acquisition, as the case may be, the information set forth in
the tables below is not necessarily a reliable measure of the related
borrower's current equity in each Mortgaged Property. In a declining real
estate market, the appraised value of a Mortgaged Property could have decreased
from the appraised value determined at origination or acquisition, as the case
may be, and the current actual loan-to-value ratio of a Mortgage Loan may be
higher than its LTV Ratio at origination or acquisition, as the case may be,
even after taking into account amortization since origination or acquisition,
as the case may be.
As used in the following tables the "Debt Service Coverage Ratio" or
"DSCR" for any Mortgage Loan (other than a Credit Tenant Loan) is the ratio of
(i) Underwritten Net Cash Flow produced by the related Mortgaged Property or
Mortgaged Properties to (ii) the aggregate amount of the Monthly Payments due
for the 12-month period immediately following the Cut-off Date.
All amortization term statistics used in the following tables exclude five
Mortgage Loans, representing 3.74% of the Initial Pool Balance, that have
irregular amortization terms. All maturity and term statistics unless otherwise
noted assume that ARD Loans mature on their respective Anticipated Repayment
Dates.
All LTV Ratio statistics and DSCR statistics exclude Credit Tenant Loans.
All DSCR and LTV Ratio statistics treat Cross-Collateralized Groups and
Multi-Property Loans as single Mortgage Loans.
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<PAGE>
PROPERTY TYPES
<TABLE>
<CAPTION>
AGGREGATE % OF AVERAGE HIGHEST
NUMBER OF CUT-OFF INITIAL CUT-OFF CUT-OFF
MORTGAGED DATE POOL DATE DATE
PROPERTY TYPES PROPERTIES BALANCE BALANCE BALANCE BALANCE
------------------------- ------------ --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Multifamily ......... Cooperative 1 $ 1,091,891 0.15% $ 1,091,891 $ 1,091,891
Multifamily 61 221,954,745 31.49 3,638,602 16,337,265
------------------------- -- ------------ ------ ----------- -----------
SubTotal 62 223,046,636 31.65 3,597,526 16,337,265
Retail .............. Anchored Retail 22 72,456,652 10.28 3,293,484 12,774,267
Unanchored Retail 8 21,202,324 3.01 2,650,290 7,671,620
------------------------- -- ------------ ------ ----------- -----------
SubTotal 30 93,658,976 13.29 3,121,966 12,774,267
Office .............. Office 19 87,553,295 12.42 4,608,068 33,176,730
Office/Retail 1 3,068,825 0.44 3,068,825 3,068,825
Suburban Office 1 855,095 0.12 855,095 855,095
------------------------- -- ------------ ------ ----------- -----------
SubTotal 21 91,477,215 12.98 4,356,058 33,176,730
Hospitality ......... Full service 5 15,237,611 2.16 3,047,522 3,864,307
Limited Service 29 63,724,233 9.04 2,197,387 5,908,372
Resort 1 1,683,670 0.24 1,683,670 1,683,670
------------------------- -- ------------ ------ ----------- -----------
SubTotal 35 80,645,513 11.44 2,304,158 5,908,372
Industrial .......... Industrial 7 17,455,688 2.48 2,493,670 3,819,352
Industrial/Office 11 53,279,492 7.56 4,843,590 11,474,466
------------------------- -- ------------ ------ ----------- -----------
SubTotal 18 70,735,180 10.04 3,929,732 11,474,466
CTL ................. CTL - industrial 1 8,426,129 1.20 8,426,129 8,426,129
CTL - mixed Use 1 14,875,024 2.11 14,875,024 14,875,024
CTL - Office 1 4,742,905 0.67 4,742,905 4,742,905
CTL - retail 4 21,606,482 3.07 5,401,620 8,664,604
------------------------- -- ------------ ------ ----------- -----------
SubTotal 7 49,650,540 7.04 7,092,934 14,875,024
Nursing Home ........ Nursing Home 2 32,840,000 4.66 16,420,000 17,100,000
Mixed Use ........... Mixed Use 3 22,567,400 3.20 7,522,467 18,478,392
Mobile Home Mobile Home Park 7 12,605,248 1.79 1,800,750 3,823,400
Park ...............
Senior Housing ...... Senior Housing-Assisted 3 9,967,957 1.41 3,322,652 5,962,720
Living
Other ............... Other 1 1,185,820 0.17 1,185,820 1,185,820
Recreational / Health 1 6,336,877 0.90 6,336,877 6,336,877
-- ------------ ------ ----------- -----------
Facility
-------------------------
SubTotal 2 7,522,698 1.07 3,761,349 6,336,877
Health Care ......... Rehabilitation Facility 1 7,438,152 1.06 7,438,152 7,438,152
Self Storage ........ Self Storage 2 2,609,089 0.37 1,304,544 1,367,592
-- ------------ ------ ----------- -----------
TOTAL/WTD. AVG. 193 $704,764,603 100.00% $ 3,651,630 $33,176,730
=== ============ ====== =========== ===========
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------------------------------------
LOAN PER
STATED REMAINING CUT-OFF CUT-OFF SQ FT, UNIT,
MORTGAGE REMAINING AMORT. DATE DATE REPAYMENT OCCUPANCY BED, KEY,
RATE TERM(MO.) TERM(MO.) DSCR(A) LTV(A) LTV PERCENTAGE(B) OR ROOM
---------- ----------- ----------- --------- ----------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily ......... 6.800% 114 294 2.78x 40.44% 32.49% 100% $64,301
7.359 114 339 1.31x 75.49 64.41 96 32,566
----- --- --- ---- ----- ----- --- -------
7.356 114 338 1.32x 75.31 64.26 96 32,721
Retail .............. 7.532 129 327 1.36x 70.62 55.44 97 147
7.550 142 322 1.55x 68.67 47.57 95 72
----- --- --- ---- ----- ----- --- -------
7.536 132 326 1.40x 70.18 53.66 96 130
Office .............. 7.047 113 344 1.49x 69.76 59.80 95 73
7.400 111 291 1.20x 60.17 49.35 77 78
7.750 115 295 1.44x 68.41 55.53 100 58
----- --- --- ---- ----- ----- --- -------
7.065 113 342 1.48x 69.42 59.41 94 73
Hospitality ......... 7.462 159 262 1.63x 67.83 35.70 38 26,342
7.737 141 255 1.70x 67.19 38.58 68 29,842
7.660 111 291 3.07x 28.06 23.18 74 84,265
----- --- --- ---- ----- ----- --- -------
7.683 144 257 1.71x 66.50 37.71 62 30,317
Industrial .......... 7.739 110 313 1.41x 69.56 59.33 100 47
7.310 110 321 1.33x 72.16 60.71 96 70
----- --- --- ---- ----- ----- --- -------
7.416 110 319 1.35x 71.52 60.37 97 64
CTL ................. 6.716 235 235 NAP NAP NAP 100 34
7.260 228 283 NAP NAP NAP 100 91
6.610 107 NAP NAP NAP NAP 100 162
7.234 236 NAP NAP NAP NAP 100 128
----- --- --- -------- -------- --------- --- -------
7.094 221 265 NAP NAP NAP 100 104
Nursing Home ........ 8.375 120 264 1.66x 66.47 50.40 95 91,379
Mixed Use ........... 6.842 108 350 1.46x 70.88 62.03 97 108
Mobile Home 7.099 123 233 1.90x 55.79 33.36 96 11,293
Park ...............
Senior Housing ...... 6.951 114 330 1.60x 67.21 56.17 98 71,539
Other ............... 7.520 109 289 1.25x 75.53 62.32 100 30
7.420 113 293 1.57x 66.01 53.26 100 225
----- --- --- ------- --------- --------- --- -------
7.436 112 292 1.52x 67.51 54.69 100 195
Health Care ......... 8.500 115 235 2.27x 71.52 50.93 94 92,977
Self Storage ........ 7.760 115 323 1.44x 74.02 63.51 87 25
----- --- --- ------- --------- --------- --- -------
7.402% 127 316 1.46x 71.03% 56.62% 92% $20,324
===== === === ======= ========= ========= === =======
<CAPTION>
WEIGHTED
AVERAGES
---------
AVERAGE
PROPERTY
SIZE
---------
<S> <C>
Multifamily ......... 17
235
---
234
Retail .............. 77,729
62,646
------
74,314
Office .............. 249,909
39,419
14,800
-------
240,650
Hospitality ......... 121
91
20
-------
95
Industrial .......... 84,120
104,222
-------
99,261
CTL ................. 246,046
163,156
29,362
65,358
-------
121,884
Nursing Home ........ 180
Mixed Use ........... 169,961
Mobile Home 230
Park ...............
Senior Housing ...... 65
Other ............... 39,034
28,129
-------
29,848
Health Care ......... 80
Self Storage ........ 53,066
-------
65,718
=======
</TABLE>
- -------
(A) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
(B) Weighted average of the occupancy percentage for the corresponding
property type determined on the basis of the individual occupancy
percentages set forth on Annex A-1.
S-52
<PAGE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------
NUMBER OF AGGREGATE % OF CUT-OFF CUT-OFF
MORTGAGED CUT-OFF DATE INITIAL POOL DATE DATE REPAYMENT
STATE OR DISTRICT(A) PROPERTIES BALANCE BALANCE DSCR(B) LTV(B) LTV
- ------------------------------ ------------ -------------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Texas ........................ 19 $ 90,817,375 12.89% 1.31x 75.19% 66.45%
Maryland ..................... 6 83,501,308 11.85 1.46x 73.72 64.36
Florida ...................... 23 55,038,335 7.81 1.47x 68.76 53.90
New Jersey ................... 14 52,966,816 7.52 1.55x 66.71 46.76
California ................... 13 51,491,340 7.31 1.40x 69.81 53.34
New York ..................... 14 48,366,192 6.86 1.60x 67.16 53.55
Arizona ...................... 7 28,086,100 3.99 1.35x 75.71 64.56
Minnesota .................... 6 27,887,748 3.96 1.88x 53.74 20.52
Michigan ..................... 5 27,460,974 3.90 1.25x 75.51 65.98
North Carolina ............... 8 24,173,118 3.43 1.53x 71.55 52.53
South Carolina ............... 5 20,688,973 2.94 1.50x 71.39 49.65
Georgia ...................... 10 19,924,665 2.83 1.69x 69.32 46.24
Nevada ....................... 2 15,736,629 2.23 1.25x 67.86 59.51
Ohio ......................... 9 15,114,190 2.14 1.26x 74.07 57.54
Pennsylvania ................. 5 14,274,883 2.03 1.39x 73.71 61.30
New Hampshire ................ 2 13,387,211 1.90 1.20x 70.87 65.11
Illinois ..................... 8 11,968,978 1.70 1.40x 72.41 62.14
Washington ................... 2 11,047,648 1.57 169x 68.63 45.67
Virginia ..................... 2 9,944,159 1.41 1.65x 67.74 55.67
New Mexico ................... 1 9,170,484 1.30 1.22x 74.56 66.43
Massachusetts ................ 8 9,093,868 1.29 1.89x 59.20 39.89
Puerto Rico .................. 1 8,664,604 1.23 NAP NAP NAP
Wisconsin .................... 2 8,387,448 1.19 1.26x 77.81 68.91
Tennessee .................... 4 6,818,354 0.97 1.52x 65.61 37.82
Indiana ...................... 2 6,289,120 0.89 1.47x 77.36 67.48
Vermont ...................... 1 5,962,720 0.85 1.73x 63.70 54.92
Alabama ...................... 2 5,173,475 0.73 1.31x 79.35 67.29
Mississippi .................. 2 4,547,719 0.65 1.54x 67.91 47.51
Louisiana .................... 3 3,819,487 0.54 2.00x 60.73 34.97
District Of Columbia ......... 1 3,819,352 0.54 1.55x 69.44 59.40
Connecticut .................. 1 2,756,214 0.39 1.68x 72.53 3.48
Oklahoma ..................... 2 2,609,089 0.37 1.44x 74.02 63.51
South Dakota ................. 1 2,228,908 0.32 1.32x 68.58 48.24
Colorado ..................... 1 2,099,147 0.30 1.38x 71.16 58.45
Kansas ....................... 1 1,447,974 0.21 1.33x 74.26 51.70
-- ------------ ------ ---- --------- -----
TOTAL/WTD. AVG. .............. 193 $704,764,603 100.00% 1.46x 71.03% 56.62%
=== ============ ====== ==== ========= =====
</TABLE>
- ----------
(A) Total number of States is 33 plus Puerto Rico and the District of
Columbia.
(B) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
S-53
<PAGE>
YEARS BUILT
<TABLE>
<CAPTION>
CUMULATIVE
AGGREGATE % OF % OF
NUMBER OF CUT-OFF INITIAL INITIAL
RANGE OF MORTGAGED DATE POOL POOL
YEARS BUILT PROPERTIES BALANCE BALANCE BALANCE
- ---------------- ------------ --------------- ----------- -----------
<S> <C> <C> <C> <C>
1852 - 1899 .... 2 $ 3,535,937 0.50% 0.50%
1900 - 1929 .... 17 29,306,759 4.16 4.66
1930 - 1959 .... 11 33,625,337 4.77 9.43
1960 - 1969 .... 28 103,207,139 14.64 24.08
1970 - 1979 .... 50 159,674,445 22.66 46.73
1980 - 1989 .... 39 213,996,520 30.36 77.10
1990 - 1998 .... 46 161,418,465 22.90 100.00
-- ------------ ------ ------
TOTAL/WTD.
AVG. .......... 193 $704,764,603 100.00% 100.00%
=== ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------------------------------------
STATED REMAINING CUT-OFF CUT-OFF REPAYMENT
RANGE OF MORTGAGE REMAINING AMORTIZATION SEASONING DATE DATE MATURITY
YEARS BUILT RATE TERM(MO.) TERM(MO.) (MO.)(A) DSCR(B) LTV(B) LTV
- ---------------- ---------- ----------- -------------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1852 - 1899 .... 7.380% 112 292 8 1.23x 61.79% 50.50%
1900 - 1929 .... 7.142 129 321 9 1.48x 71.47 54.46
1930 - 1959 .... 7.443 127 289 6 1.86x 65.26 47.47
1960 - 1969 .... 7.100 116 323 8 1.50x 71.93 58.65
1970 - 1979 .... 7.511 134 304 8 1.47x 68.74 52.16
1980 - 1989 .... 7.432 120 337 6 1.38x 71.92 61.50
1990 - 1998 .... 7.489 137 300 6 1.42x 73.02 55.32
----- --- --- ----------- ---- ----- -----
TOTAL/WTD.
AVG. .......... 7.402% 127 316 7 1.46x 71.03% 56.62%
===== === === =========== ==== ===== =====
</TABLE>
- -------
(A) Number of months elapsed since the first Due Date following
origination.
(B) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
S-54
<PAGE>
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
CUMULATIVE
RANGE OF NUMBER OF AGGREGATE % OF % OF
DEBT SERVICE MORTGAGE CUT-OFF DATE INITIAL POOL INITIAL POOL
COVERAGE RATIO LOANS BALANCE BALANCE BALANCE
- --------------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CTL Loans ........... 7 $ 49,650,540 7.04% 7.04%
1.20 -- 1.29 ........ 48 248,306,677 35.23 42.28
1.30 -- 1.39 ........ 32 101,484,496 14.40 56.68
1.40 -- 1.49 ........ 24 77,535,692 11.00 67.68
1.50 -- 1.59 ........ 21 48,988,739 6.95 74.63
1.60 -- 1.69 ........ 20 94,028,863 13.34 87.97
1.70 -- 1.79 ........ 7 38,248,556 5.43 93.40
1.80 -- 1.89 ........ 5 10,999,640 1.56 94.96
1.90 -- 1.99 ........ 3 9,750,137 1.38 96.34
2.00 -- 2.49 ........ 5 15,122,557 2.15 98.49
2.50 -- 2.99 ........ 3 7,993,386 1.13 99.62
3.00 -- 3.49 ........ 1 1,683,670 0.24 99.86
4.00 -- 4.01 ........ 1 971,649 0.14 100.00
-- ------------ ------ ------
TOTAL/WTD.
AVG. ............... 177 $704,764,603 100.00% 100.00%
=== ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF CUT-OFF
DEBT SERVICE MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
COVERAGE RATIO RATE TERM(MO.) TERM(MO.) DSCR(A) LTV(A) LTV
- --------------------- ---------- ----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
CTL Loans ........... 7.094% 221 265 NAP NAP NAP
1.20 -- 1.29 ........ 7.482 115 338 1.24x 75.28% 63.43%
1.30 -- 1.39 ........ 7.325 113 327 1.34x 73.07 61.00
1.40 -- 1.49 ........ 7.304 124 322 1.44x 72.24 56.58
1.50 -- 1.59 ........ 7.500 123 285 1.55x 65.68 46.82
1.60 -- 1.69 ........ 7.378 130 302 1.63x 68.10 49.55
1.70 -- 1.79 ........ 7.571 119 300 1.73x 65.95 51.90
1.80 -- 1.89 ........ 7.344 130 258 1.84x 64.21 42.27
1.90 -- 1.99 ........ 7.464 152 323 1.94x 63.39 49.44
2.00 -- 2.49 ........ 7.807 119 253 2.25x 61.90 44.76
2.50 -- 2.99 ........ 6.872 147 223 2.68x 44.45 20.93
3.00 -- 3.49 ........ 7.660 111 291 3.07x 28.06 23.18
4.00 -- 4.01 ........ 7.050 171 171 4.01x 17.67 0.49
----- --- --- ------- --------- -----
TOTAL/WTD.
AVG. ............... 7.402% 127 316 1.46x 71.03% 56.62%
===== === === ======= ========= =====
</TABLE>
- ----------
(A) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
<PAGE>
RANGE OF CUT-OFF DATE LTV RATIOS
<TABLE>
<CAPTION>
% OF CUMULATIVE
RANGE OF NUMBER OF AGGREGATE INITIAL % OF
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL INITIAL POOL
LTV RATIOS LOANS BALANCE BALANCE BALANCE
- -------------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
CTL Loans .......... 7 $ 49,650,540 7.04% 7.04%
17.67 -- 50.00 ..... 13 23,268,528 3.30 10.35
50.01 -- 60.00 ..... 13 50,243,801 7.13 17.48
60.01 -- 70.00 ..... 38 112,969,622 16.03 33.51
70.01 -- 80.00 ..... 105 467,370,592 66.32 99.82
80.01 -- 80.10 ..... 1 1,261,519 0.18 100.00
--- ------------ ------ ------
TOTAL/WTD.
AVG. .............. 177 $704,764,603 100.00% 100.00%
=== ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF CUT-OFF
CUT-OFF DATE MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
LTV RATIOS RATE TERM(MO.) TERM(MO.) DSCR(A) LTV(A) LTV
- -------------------- ---------- ----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
CTL Loans .......... 7.094% 221 265 NAP NAP NAP
17.67 -- 50.00 ..... 7.402 139 226 2.18x 40.74% 19.35%
50.01 -- 60.00 ..... 7.698 138 288 1.70x 57.79 37.77
60.01 -- 70.00 ..... 7.528 124 296 1.49x 65.84 47.62
70.01 -- 80.00 ..... 7.372 116 331 1.39x 75.19 62.66
80.01 -- 80.10 ..... 7.800 118 298 1.27x 80.10 65.96
----- --- --- ------- --------- --------
TOTAL/WTD.
AVG. .............. 7.402% 127 316 1.46x 71.03% 56.62%
===== === === ======= ========= ========
</TABLE>
- ----------
(A) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
S-55
<PAGE>
BALLOON LTV RATIOS
<TABLE>
<CAPTION>
% OF CUMULATIVE
RANGE OF NUMBER OF AGGREGATE INITIAL % OF
REPAYMENT MORTGAGE CUT-OFF DATE POOL INITIAL POOL
LTV RATIOS LOANS BALANCE BALANCE BALANCE
- ---------------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
CTL Loans ............ 7 $ 49,650,540 7.04% 7.04%
Fully Amortizing ..... 23 50,735,134 7.20 14.24
.01 -- 50.00 ....... 26 73,005,481 10.36 24.60
50.01 -- 60.00 ....... 39 132,031,475 18.73 43.34
60.01 -- 70.00 ....... 69 343,874,964 48.79 92.13
70.01 -- 80.00 ....... 13 55,467,009 7.87 100.00
-- ------------ ------ ------
TOTAL/WTD.
AVG. ................ 177 $704,764,603 100.00% 100.00%
=== ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF CUT-OFF
REPAYMENT MORTGAGE REMAINING AMORT DATE DATE REPAYMENT
LTV RATIOS RATE TERM(MO.) TERM(MO.) DSCR LTV LTV
- ---------------------- ---------- ----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
CTL Loans ............ 7.094% 221 265 NAP NAP NAP
Fully Amortizing ..... 7.270 210 211 1.65x 61.29% 2.46%
.01 -- 50.00 ....... 7.753 120 272 1.73x 57.60 43.39
50.01 -- 60.00 ....... 7.629 113 300 1.56x 68.82 55.77
60.01 -- 70.00 ....... 7.279 113 345 1.36x 74.93 65.40
70.01 -- 80.00 ....... 7.562 98 350 1.27x 78.67 71.24
----- --- --- ------- --------- -----
TOTAL/WTD.
AVG. ................ 7.402% 127 316 1.46x 71.03% 56.62%
===== === === ======= ========= =====
</TABLE>
- ----------
(A) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
ORIGINAL TERMS
<TABLE>
<CAPTION>
% OF
NUMBER OF AGGREGATE INITIAL
ORIGINAL MORTGAGE CUT-OFF DATE POOL
TERM LOANS BALANCE BALANCE
- -------------------------- ----------- -------------- ----------
<S> <C> <C> <C>
5 Year Balloon ........... 2 $ 5,213,983 0.74%
6 to 9 Year Balloon ...... 10 43,935,988 6.23
10 Year Balloon .......... 125 426,988,192 60.59
10 Year Balloon ADR....... 5 91,984,474 13.05
11 to 14 Year Balloon..... 2 19,108,000 2.71
11 to 14 Year Balloon
ADR ..................... 1 12,774,267 1.81
15 Year Balloon .......... 2 7,891,879 1.12
16 to 20 Year Balloon..... 2 17,135,011 2.43
16 to 20 Year Balloon
ADR ..................... 1 1,225,052 0.17
21 to 25 Year Balloon..... 1 7,911,959 1.12
Fully Amortizing ......... 26 70,595,799 10.02
--- ------------ ------
TOTAL/WTD.
AVG. .................... 177 $704,764,603 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------------------------------------
STATED REMAINING CUT-OFF CUT-OFF
ORIGINAL MORTGAGE REMAINING AMORT. SEASONING DATE DATE REPAYMENT
TERM RATE TERM (MO.) TERM (MO.) (MO.)(A) DSCR(B) LTV(B) LTV
- -------------------------- ---------- ------------ ------------ ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
5 Year Balloon ........... 7.963% 52 308 8 1.28x 76.03% 71.79%
6 to 9 Year Balloon ...... 7.734 84 344 6 1.31x 69.66 64.10
10 Year Balloon .......... 7.509 113 317 7 1.46x 71.67 60.24
10 Year Balloon ADR....... 6.843 112 352 8 1.43x 73.66 64.51
11 to 14 Year Balloon..... 7.600 144 360 0 1.24x 77.73 66.22
11 to 14 Year Balloon
ADR ..................... 7.750 126 354 6 1.25x 70.97 61.14
15 Year Balloon .......... 7.214 173 331 7 1.98x 56.21 41.30
16 to 20 Year Balloon..... 7.232 226 283 11 NAP NAP NAP
16 to 20 Year Balloon
ADR ..................... 7.175 231 291 9 1.38x 74.25 30.33
21 to 25 Year Balloon..... 7.450 288 0 11 NAP NAP NAP
Fully Amortizing ......... 7.180 212 214 9 1.65x 61.29 2.46
----- --- --- -- ------- --------- -----
TOTAL/WTD.
AVG. .................... 7.402% 127 316 7 1.46x 71.03% 56.62%
===== === === == ======= ========= =====
</TABLE>
- ----------
(A) Number of months elapsed since the first Due Date following
origination.
(B) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
S-56
<PAGE>
MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE CUMULATIVE
NUMBER OF CUT-OFF % OF % OF
RANGE OF MORTGAGE DATE INITIAL POOL INITIAL POOL
MORTGAGE RATES LOANS BALANCE BALANCE BALANCE
- --------------------- ----------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
6.260--6.999......... 26 $149,262,158 21.18% 21.18%
7.000--7.124......... 22 67,695,557 9.61 30.78
7.125--7.249......... 14 61,700,696 8.75 39.54
7.250--7.374......... 19 77,216,986 10.96 50.50
7.375--7.499......... 17 60,088,429 8.53 59.02
7.500--7.624......... 23 78,620,238 11.16 70.18
7.625--7.749......... 11 28,739,009 4.08 74.26
7.750--7.874......... 16 75,800,966 10.76 85.01
7.875--7.999......... 4 11,602,986 1.65 86.66
8.000--8.124......... 6 17,317,632 2.46 89.11
8.125--8.249......... 5 11,384,420 1.62 90.73
8.250--8.374......... 5 7,406,210 1.05 91.78
8.375--8.499......... 4 40,583,067 5.76 97.54
8.500--8.624......... 2 8,162,895 1.16 98.70
8.750--8.874......... 1 1,896,954 0.27 98.97
9.125--9.249......... 1 3,819,352 0.54 99.51
9.500--9.590......... 1 3,467,048 0.49 100.00
-- ------------ ------ ------
TOTAL/WTD.
AVG. ............... 177 $704,764,603 100.00% 100.00%
=== ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------------------
STATED REMAINING CUT-OFF CUT-OFF REPAYMENT
RANGE OF MORTGAGE REMAINING AMORTIZATION DATE DATE MATURITY
MORTGAGE RATES RATE TERM (MO.) TERM (MO.) DSCR(A) LTV(A) LTV
- --------------------- ---------- ------------ -------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
6.260--6.999......... 6.694% 126 316 1.58x 69.36% 54.14%
7.000--7.124......... 7.062 119 321 1.47x 71.68 58.92
7.125--7.249......... 7.180 133 311 1.32x 74.80 59.15
7.250--7.374......... 7.297 138 318 1.38x 71.79 58.67
7.375--7.499......... 7.432 127 327 1.36x 71.86 61.72
7.500--7.624......... 7.564 126 321 1.37x 72.65 57.63
7.625--7.749......... 7.686 141 315 1.63x 68.92 48.53
7.750--7.874......... 7.783 128 331 1.32x 73.02 58.57
7.875--7.999......... 7.929 128 320 1.40x 74.63 55.02
8.000--8.124......... 8.069 99 308 1.38x 74.32 64.81
8.125--8.249......... 8.187 156 312 1.48x 63.21 41.09
8.250--8.374......... 8.318 115 319 1.44x 71.22 61.02
8.375--8.499......... 8.377 117 282 1.61x 65.80 51.68
8.500--8.624......... 8.509 115 246 2.19x 71.61 52.25
8.750--8.874......... 8.810 118 298 1.63x 54.20 45.89
9.125--9.249......... 9.200 118 298 1.55x 69.44 59.40
9.500--9.590......... 9.590 95 233 1.60x 43.89 35.52
----- --- --- ---- ----- -----
TOTAL/WTD.
AVG. ............... 7.402% 127 316 1.46x 71.03% 56.62%
===== === === ==== ===== =====
</TABLE>
- -------
(A) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
S-57
<PAGE>
REMAINING TERMS
<TABLE>
<CAPTION>
CUMULATIVE
RANGE OF NUMBER OF AGGREGATE % OF % OF
REMAINING MORTGAGE CUT-OFF DATE INITIAL POOL INITIAL POOL
TERMS (MO.) LOANS BALANCE BALANCE BALANCE
- ----------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
50- 72 ......... 4 $ 17,697,511 2.51% 2.51%
73- 84 ......... 5 12,324,330 1.75 4.26
85- 96 ......... 3 19,128,130 2.71 6.97
97-108 ......... 15 91,589,801 13.00 19.97
109-120 ......... 115 427,382,865 60.64 80.61
121-228 ......... 19 84,232,140 11.95 92.56
229-240 ......... 12 36,959,570 5.24 97.81
241-292 ......... 4 15,450,256 2.19 100.00
--- ------------ ------ ------
TOTAL/WTD.
AVG. ........... 177 $704,764,603 100.00% 100.00%
=== ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF CUT-OFF
REMAINING MORTGAGE REMAINING AMORTIZATION DATE DATE REPAYMENT
TERMS (MO.) RATE TERM (MO.) TERM (MO.) DSCR(A) LTV(A) LTV
- ----------------- ---------- ------------ -------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
50- 72 ......... 7.587% 65 335 1.26x 74.83% 69.92%
73- 84 ......... 7.939 83 359 1.42x 63.10 59.08
85- 96 ......... 7.800 93 334 1.28x 70.84 64.04
97-108 ......... 7.143 107 345 1.31x 76.48 67.00
109-120 ......... 7.445 114 319 1.49x 71.12 59.79
121-228 ......... 7.288 169 285 1.54x 65.13 37.55
229-240 ......... 7.241 232 235 1.49x 68.63 4.82
241-292 ......... 7.650 280 271 1.61x 64.07 3.06
----- --- --- ---- ----- -----
TOTAL/WTD.
AVG. ........... 7.402% 127 316 1.46x 71.03% 56.62%
===== === === ==== ===== =====
</TABLE>
- -------
(A) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
S-58
<PAGE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
CUMULATIVE
NUMBER OF AGGREGATE % OF % OF
CUT-OFF DATE MORTGAGE CUT-OFF DATE INITIAL POOL INITIAL POOL
BALANCE LOANS BALANCE BALANCE BALANCE
- ------------------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 724,743-$ 999,999 7 $ 6,017,310 0.85% 0.85%
$ 1,000,000-$ 1,999,999 59 85,625,753 12.15 13.00
$ 2,000,000-$ 2,999,999 44 109,637,566 15.56 28.56
$ 3,000,000-$ 3,999,999 14 49,076,658 6.96 35.52
$ 4,000,000-$ 4,999,999 12 54,918,113 7.79 43.32
$ 5,000,000-$ 5,999,999 6 33,519,039 4.76 48.07
$ 6,000,000-$ 6,999,999 7 45,012,827 6.39 54.46
$ 7,000,000-$ 7,999,999 6 45,790,222 6.50 60.96
$ 8,000,000-$ 8,999,999 5 42,227,187 5.99 66.95
$ 9,000,000-$ 9,999,999 5 47,815,723 6.78 73.73
$10,000,000-$14,999,999 7 84,291,816 11.96 85.69
$15,000,000-$19,999,999 4 67,655,657 9.60 95.29
$30,000,000-$33,176,730 1 33,176,730 4.71 100.00
-- ------------ ------ ------
TOTAL/WTD.
AVG. ................... 177 $704,764,603 100.00% 100.00%
=== ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------------------
STATED REMAINING CUT-OFF CUT-OFF
CUT-OFF DATE MORTGAGE REMAINING AMORTIZATION DATE DATE REPAYMENT
BALANCE RATE TERM (MO.) TERM (MO.) DSCR(A) LTV(A) LTV
- ------------------------- ---------- ------------ -------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 724,743-$ 999,999 7.632% 122 289 1.84x 63.47% 51.41%
$ 1,000,000-$ 1,999,999 7.478 130 280 1.57x 66.37 44.58
$ 2,000,000-$ 2,999,999 7.410 131 300 1.51x 69.04 49.45
$ 3,000,000-$ 3,999,999 7.718 113 306 1.47x 68.76 55.90
$ 4,000,000-$ 4,999,999 7.283 129 306 1.47x 68.41 48.14
$ 5,000,000-$ 5,999,999 7.270 110 320 1.45x 70.29 59.00
$ 6,000,000-$ 6,999,999 7.348 109 342 1.39x 71.48 62.45
$ 7,000,000-$ 7,999,999 7.601 144 330 1.54x 76.26 65.01
$ 8,000,000-$ 8,999,999 7.078 159 291 1.29x 77.39 63.35
$ 9,000,000-$ 9,999,999 7.445 123 353 1.26x 77.62 67.47
$10,000,000-$14,999,999 7.484 135 344 1.25x 73.77 65.28
$15,000,000-$19,999,999 7.577 115 308 1.50x 71.60 58.95
$30,000,000-$33,176,730 6.590 112 352 1.65x 70.97 61.74
----- --- --- ---- ----- -----
TOTAL/WTD.
AVG. ................... 7.402% 127 316 1.46x 71.03% 56.62%
===== === === ==== ===== =====
</TABLE>
- ----------
(A) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
<PAGE>
YEARS OF SCHEDULED MATURITY
OR ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
CUMULATIVE
SCHEDULED NUMBER OF AGGREGATE % OF % OF
MATURITY OR MORTGAGE CUT-OFF DATE INITIAL POOL INITIAL POOL
ARD YEAR LOANS BALANCE BALANCE BALANCE
- --------------- ----------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
2003 .......... 2 $ 5,213,983 0.74% 0.74%
2005 .......... 2 12,483,528 1.77 2.51
2006 .......... 6 17,285,411 2.45 4.96
2007 .......... 2 14,167,048 2.01 6.97
2008 .......... 95 356,307,383 50.56 57.53
2009 .......... 37 178,209,482 25.29 82.82
2011 .......... 2 19,108,000 2.71 85.53
2013 .......... 12 30,289,495 4.30 89.83
2017 .......... 1 2,259,987 0.32 90.15
2018 .......... 14 53,990,029 7.66 97.81
2019 .......... 1 3,376,028 0.48 98.29
2023 .......... 3 12,074,229 1.71 100.00
-- ------------ ----- ------
TOTAL/WTD.
AVG. ......... 177 $704,764,603 100.00% 100.00%
=== ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------------------
SCHEDULED STATED REMAINING CUT-OFF CUT-OFF
MATURITY OR MORTGAGE REMAINING AMORTIZATION DATE DATE REPAYMENT
ARD YEAR RATE TERM (MO.) TERM (MO.) DSCR(A) LTV(A) LTV
- --------------- ---------- ------------ -------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
2003 .......... 7.963% 52 308 1.28x 76.03% 71.79%
2005 .......... 7.430 70 346 1.25x 74.33 69.13
2006 .......... 7.744 84 356 1.36x 65.33 60.81
2007 .......... 7.989 96 329 1.31x 70.82 63.67
2008 .......... 7.119 110 323 1.48x 72.12 61.07
2009 .......... 7.951 119 326 1.40x 71.77 60.88
2011 .......... 7.600 144 360 1.24x 77.73 66.22
2013 .......... 6.933 171 213 1.87x 54.15 11.92
2017 .......... 7.050 215 NAP NAP NAP NAP
2018 .......... 7.273 230 250 1.47x 69.06 4.71
2019 .......... 8.230 246 246 1.68x 55.34 0.46
2023 .......... 7.488 289 292 1.55x 71.15 5.17
----- --- --- ---- --------- -----
TOTAL/WTD.
AVG. ......... 7.402% 127 316 1.46x 71.03% 56.62%
===== === === ==== ========= =====
</TABLE>
- ----------
(A) The Cut-off Date DSCR and the Cut-off Date LTV ratio shown above do
not reflect seven Credit Tenant Loans representing 7.04% of the
Initial Pool Balance, which typically have debt service coverage
ratios equal to or less than 1.00x and loan to value ratios of
approximately 100%.
S-59
<PAGE>
The following tables set forth (a) the categories of prepayment
restrictions/penalties and the percentage of the Mortgage Pool belonging to
each category, (b) prepayment restrictions/penalties grouped by original term
and (c) for each date indicated in the table, (i) the aggregate unpaid
principal balance and the percentage of the Initial Pool Balance expected to be
outstanding and (ii) the percentage of such amounts subject to a Lockout
Period, Yield Maintenance Charge or Prepayment Premium, in each case assuming
no prepayments, defaults or extensions and based also upon the assumptions set
forth preceding the tables appearing under "Yield and Maturity
Considerations--Weighted Average Life" herein.
PREPAYMENT LOCK-OUT/PREMIUM ANALYSIS
<TABLE>
<CAPTION>
CURRENT 12 MO. 24 MO. 36 MO. 48 MO. 60 MO. 72 MO. 84 MO.
PREPAYMENT JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE
RESTRICTION 1999 2000 2001 2002 2003 2004 2005 2006
- ----------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 99.7% 97.4% 97.4% 96.8% 92.1% 92.1% 93.8% 92.4%
Yield Maintenance 0.3 0.8 0.8 1.4 6.1 6.1 6.2 6.3
Percentage Premium
5.00% and greater 0.0 1.8 0.0 0.0 0.0 0.0 0.0 0.0
4.00 to 4.99% 0.0 0.0 1.8 0.0 0.0 0.0 0.0 0.0
3.00 to 3.99% 0.0 0.0 0.0 1.8 0.0 0.0 0.0 0.0
2.00 to 2.99% 0.0 0.0 0.0 0.0 1.8 0.0 0.0 0.0
1.00 to 1.99% 0.0 0.0 0.0 0.0 0.0 1.8 0.0 1.3
Open 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- ----------------------- ---- ---- ---- ---- ---- ---- ---- ----
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance ($ millions) $ 704.8 $ 695.4 $ 685.1 $ 674.0 $ 662.0 $ 644.3 $ 618.7 $ 592.3
% of Initial Pool
Balance 100.0% 98.7% 97.2% 95.6% 93.9% 91.4% 87.8% 84.0%
<CAPTION>
96 MO. 108 MO. 120 MO. 132 MO. 144 MO. 156 MO. 168 MO. 180 MO.
PREPAYMENT JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE
RESTRICTION 2007 2008 2009 2010 2011 2012 2013 2014
- ----------------------- ---------- ---------- ---------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 92.1% 89.1% 88.6% 100.0% 100.0% 100.0% 89.1% 97.9%
Yield Maintenance 6.6 1.6 0.0 0.0 0.0 0.0 0.0 0.0
Percentage Premium
5.00% and greater 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
4.00 to 4.99% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.00 to 3.99% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.00 to 2.99% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1.00 to 1.99% 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Open 0.0 9.3 11.4 0.0 0.0 0.0 10.9 2.1
- ----------------------- ---- ---- ---- ----- ----- ----- ---- ----
TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mortgage Pool
Balance ($ millions) $ 559.4 $ 465.4 $ 97.4 $ 80.8 $ 58.8 $ 53.1 $ 46.8 $ 36.0
% of Initial Pool
Balance 79.4% 66.0% 13.8% 11.5% 8.3% 7.5% 6.6% 5.1%
</TABLE>
S-60
<PAGE>
PREPAYMENT RESTRICTION BY ORIGINAL TERM
<TABLE>
<CAPTION>
AGGREGATE % OF
NUMBER OF CUT-OFF INITIAL
PREPAYMENT MORTGAGE DATE POOL
ORIGINAL TERM RESTRICTION (A) LOANS BALANCE BALANCE
- ------------------------ ------------------ ----------- --------------- ----------
<S> <C> <C> <C> <C>
5 Year Balloon ......... LO or LO, then D 1 $ 3,823,400 0.54%
LO, then YM 1 1,390,583 0.20
------------------ - ------------ ----
2 5,213,983 0.74
6 to 9 Year Balloon .... LO or LO, then D 8 31,452,460 4.46
LO, then PP 2 12,483,528 1.77
------------------ - ------------ ----
SubTotal 10 43,935,988 6.23
10 Year Balloon ........ LO or LO, then D 114 376,831,845 53.47
LO, then PP 1 8,244,785 1.17
LO, then YM 10 41,911,562 5.95
------------------ --- ------------ -----
SubTotal 125 426,988,192 60.59
10 Year Balloon ARD .... LO or LO, then D 5 91,984,474 13.05
11 to 14 Year Balloon .. LO or LO, then D 2 19,108,000 2.71
11 to 14 Year Balloon
ARD ................... LO or LO, then D 1 12,774,267 1.81
15 Year Balloon ........ LO or LO, then D 2 7,891,879 1.12
16 to 20 Year Balloon .. LO or LO, then D 2 17,135,011 2.43
16 to 20 Year Balloon
ARD ................... LO or LO, then D 1 1,225,052 0.17
21 to 25 Year Balloon .. LO or LO, then D 1 7,911,959 1.12
Fully Amortizing ....... LO or LO, then D 26 70,595,799 10.02
--- ------------ -----
TOTAL/WTD. AVG. 177 $704,764,603 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
REMAINING REMAINING
STATED MONTHS REMAINING REMAINING MONTHS OPEN
MORTGAGE REMAINING LOCKED MONTHS MONTHS PRIOR TO
ORIGINAL TERM RATE TERM (MO.) OUT YM PP MATURITY/ARD
- ------------------------ ---------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
5 Year Balloon ......... 8.120% 53 53 0 0 0
7.530 50 2 48 0 0
----- -- -- -- - -
7.963 52 39 13 0 0
6 to 9 Year Balloon .... 7.854 89 85 0 0 4
7.430 70 10 0 56 4
----- -- -- -- -- -
7.734 84 64 0 16 4
10 Year Balloon ........ 7.547 114 111 0 0 3
7.130 108 83 0 18 7
7.248 106 37 66 0 3
----- --- --- -- -- -
7.509 113 103 6 0 3
10 Year Balloon ARD .... 6.843 112 111 0 0 1
11 to 14 Year Balloon .. 7.600 144 140 0 0 4
11 to 14 Year Balloon
ARD ................... 7.750 126 119 0 0 7
15 Year Balloon ........ 7.214 173 167 0 0 6
16 to 20 Year Balloon .. 7.232 226 226 0 0 0
16 to 20 Year Balloon
ARD ................... 7.175 231 170 0 0 61
21 to 25 Year Balloon .. 7.450 288 288 0 0 0
Fully Amortizing ....... 7.180 212 213 0 0 0
----- --- --- -- -- --
7.402% 127 120 4 1 2
===== === === == == ==
</TABLE>
- -------
(A) LO=Locked Out, D=Defeasance, YM=Yield Maintenance, PP=Prepayment
Premium.
S-61
<PAGE>
PREPAYMENT PENALTY CATEGORIES
<TABLE>
<CAPTION>
LOCKOUT/DEFEASAN
NCE
TERM (MO.)/
WEIGHTED % OF WEIGHTED WEIGHTED
AGGREGATE % OF AVERAGE AVERAGE AVERAGE # OF
NUMBER OF CUT-OFF INITIAL STATED STATED REMAINING MONTHS OPEN TO
PREPAYMENT MORTGAGE DATE POOL REMAINING TERM PREPAYMENT PRIOR
RESTRICTION (A) LOANS BALANCE BALANCE TERM (MO.) OF LOCKOUT TO MATURITY/ARD
- --------------------------- ----------- --------------- ----------- ------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
LO, or LO, then D ......... 163 $640,734,144 90.91% 130 128 98.26% 2
LO, then PP ............... 3 20,728,314 2.94 85 39 45.86 5
LO, then YM ............... 11 43,302,145 6.14 104 36 34.43 3
--- ------------ ----- --- --- ----- -----------------
TOTAL/WTD. AVG. ........... 177 $704,764,603 100.00% 127 120 94.03% 2
=== ============ ====== === === ===== =================
</TABLE>
- ----------
(A) LO=Locked Out, D=Defeasance, YM=Yield Maintenance, PP=Prepayment
Premium.
TEN LARGEST MORTGAGE LOANS
Below is a brief summary of the ten largest Mortgage Loans in the Mortgage
Pool. The ten largest Mortgage Loans represent, in the aggregate, less than
23.19% of the Initial Pool Balance and no single Mortgage Loan represents more
than 4.71% of the Initial Pool Balance. The borrower (and, in the case of any
Mortgage Loan secured by an indemnity deed of trust on a Mortgaged Property,
the guarantor, under each of these Mortgage Loans is a single purpose entity.)
The Cut-off Date Balance of each of such Mortgage Loans is indicated in
parentheses following the name of the related Mortgaged Property.
Hunt Valley Executive Plaza (Approx. $33,176,730). This Mortgage Loan is
evidenced by a note made by the borrower and a guaranty by the parent of
the borrower, which guaranty is secured by an indemnity deed of trust
encumbering four office buildings totaling 517,724 net rentable square
feet. It was constructed between 1967 and 1977 and was renovated in 1998.
The property is located in Hunt Valley, Maryland. As of December 3, 1998,
the office complex was 95.8% leased. Major tenants include PDP Group
(82,716 net rentable square feet) and Eastern Savings Bank (20,830 net
rentable square feet). Other tenants include Blue Cross/Blue Shield and
Reynolds and Reynolds. As of May 8, 1998 the appraised value was
$46,750,000, indicating a Cut-off Date LTV of 71%. The Underwritten Net
Cash Flow is $4,211,009, indicating a DSCR of 1.65x.
The Galleria (Approx. $18,478,392). This Mortgage Loan is evidenced by a
note made by the borrower and a guaranty by the parent of the borrower,
which guaranty is secured by an indemnity deed of trust encumbering three
mixed use, office and retail buildings totaling 204,665 net rentable
square feet. The buildings were constructed in 1982. The property is
located in Lutherville, Maryland. As of December 3, 1998, the office
complex was 97.8% leased. Major tenants include Kaiser Permanente (28,888
net rentable square feet) and Essel Enterprises (23,534 net rentable
square feet). Other tenants include P.S.A. Financial and CIGNA. As of May
8, 1998 the appraised value was $25,000,000, indicating a Cut-off Date
LTV of 74%. The Underwritten Net Cash Flow was $2,084,063, indicating a
DSCR of 1.45x.
Castle Hill Health Care Center (Approx. $17,100,000). The Mortgaged
Property is located at 615 Twenty-third Street, Union City (Hudson
County), New Jersey. The Mortgaged Property is improved by a six-story,
180-bed skilled nursing home facility, with 79,841 net rentable square
feet and was built in 1992. Three area hospitals (Christ Hospital,
Palisades General, and Jersey City Medical Center) are all located in the
vicinity of the Mortgaged Property and refer their patients to the
facility. The Mortgaged Property is served by public transportation and
has easy access from the New Jersey Turnpike, the Holland Tunnel and
Route 1. Additionally, there are numerous local roads in the subject's
immediate area. As of March 1, 1999, the appraised value was $23,500,000,
indicating a Cut-off Date LTV of 73%. The Underwritten Net Cash Flow was
$2,758,102, indicating a DSCR of 1.60x. Historical occupancy for the
subject is 99%, 99%, 98% and 98% for 1995, 1996, 1997 and 1998,
respectively. The borrowing entity is Castle Hill Holding, LLC.,
affiliates of which also own Brookville Health Care Center, and as of the
date of
S-62
<PAGE>
origination, five other long-term and residential care healthcare
facilities in New Jersey and several retail and residential properties
in New York and Florida.
Forest Village (Approx. $16,337,265). The Mortgaged Property is located
at 4400 Rena Road in the city of Suitland, Prince Georges County,
Maryland. The Mortgaged Property is a 31.72 acre site, improved by a
410-unit garden apartment complex of three and four-story garden style
apartment buildings. Additional improvements include 620 parking spaces,
which provide a parking ratio of 1.5 spaces per unit. The Mortgaged
Property was constructed in 1961. Individual unit amenities include
frost-free refrigerators, disposals, picture windows and a patio/balcony.
Approximately 12.5 acres of the site consists of recreational park area.
Project amenities include an outdoor swimming pool, two tennis courts,
children's playground, a wooden picnic shelter and a gazebo. As of
December 31, 1998, the property was 95% leased. Prior to origination, the
appraised value was $20,600,000, indicating a Cut-off Date LTV of 79%.
The Underwritten Net Cash Flow was $1,588,354, indicating a DSCR of
1.21x.
Brookville Health Care Center (Approx. $15,740,000). The Mortgaged
Property is located at 155 Fortieth Street, Irvington (Essex County), New
Jersey. The Mortgaged Property is improved by a 180-bed nursing home
facility totaling 89,070 net rentable square feet. Five area hospitals
(Irvington General, Newark Beth Israel, E. Orange General, St. Barnabas
and St. James) are all located in the vicinity of the Mortgaged Property
and refer patients to the facility. The improvements were originally
built in 1980 as a single story building, and was gut renovated and
converted to a nursing home in 1992. Public transportation and access to
and from the facility is provided by an excellent network of NJ Transit
buses as well as Interstate 78, the Garden State Parkway and Route 124.
Additionally, there are numerous local roads in the subject's immediate
area. As of March 1, 1999, the appraised value was $26,400,000,
indicating a Cut-off Date LTV of 60%. The Underwritten Net Cash Flow was
$2,741,226, indicating a DSCR of 1.73x. As of April 21, 1999, the
property was 93% occupied. The borrowing entity is Brookville Holding,
LLC affiliates of which also own Castle Hill Health Care Center and five
other residential health care facilities.
Beckman-Coulter Buildings (Approx. $14,875,024). This Credit Tenant Loan
is secured by three single-tenant office/R&D buildings totaling
approximately 163,156 net rentable square feet and built in 1972, 1982
and 1989, respectively. The property is located in Chaska, Minnesota. The
property is leased to Beckman-Coulter, Inc. ("Beckman") under a bond-type
lease that expires on June 30, 2018. As of May 1, 1999, Beckman had a
long-term rating of "BB+" (stable) from Standard & Poor's, "Ba1"
(negative watch) from Moody's and "BBB-" (stable) from Duff & Phelps
Credit Rating Co. Beckman is engaged in the design, manufacture,
distribution and servicing of analytical systems used in the diagnostic
and bio-research markets.
Pursuant to a lease modification agreement between Beckman and the
borrower under this Credit Tenant Loan, Beckman is permitted to pay rent
in Japanese yen for so long as the related borrower is party to one or
more currency exchange swap agreements obligating one or more
counterparties that satisfy certain net worth and rating requirements to
pay to the lender the dollar-denominated Monthly Rental Payment on each
day on which it is due under the lease. First National Bank of Chicago
and Citibank, N.A are the counterparties on the currency exchange
agreement. At any time that a qualifying currency exchange agreement is
not then in effect, a notice of termination of any such agreement has
been given or any condition precedent to the payment by a swap financial
institution has not been satisfied or waived, the basic rent
automatically re-converts to dollar-denominated rent and the agreement to
permit Beckman to pay rent in yen becomes null and void. Beckman has
agreed to indemnify the related borrower and the lender for all losses,
damages and liabilities that it may incur under any currency swap
relating to the obligations under the lease.
Bay Plaza Expansion (Approx. $12,774,267). This Mortgage Loan is secured
by a shopping center that consists of two one-story buildings, with a
total of 56,200 net rentable square feet. The center was constructed in
1988 and is located in New York, New York. Anchor tenants are
S-63
<PAGE>
Staples (24,000 net rentable square feet) and Old Navy (22,200 net
rentable square feet). As of July 1, 1998, the property was 100% leased.
As of July 1, 1998, the appraised value was $18,000,000, indicating a
Cut-off Date LTV of 71%. The Underwritten Net Cash Flow is $1,391,919,
indicating a DSCR of 1.25x. The Bay Plaza Expansion is an expansion
parcel for a larger shopping center (not part of the collateral) that is
comprised of a total of 53 stores located on 71 acres and is anchored by
Big K, Pathmark and J.C. Penney. The complex is located in the Co-op
City section of the Bronx, New York City, an area bounded by Interstate
95 and the Hutchinson River Parkway.
Timonium Corporate Park (Approx. $12,517,620). This Mortgage Loan is
evidenced by a note made by the borrower and a guaranty by the parent of
the borrower, which guaranty is secured by an indemnity deed of trust
encumbering a ten-story elevator served office building located in
Timonium, Maryland. The property was constructed in 1986 and has a total
of 134,226 net rentable square feet. As of December 3, 1998, the office
complex was 95.6% leased. Major tenants include Medex Associates
Brooks-Shettle Matterhorne (23,059 net rentable square feet) and Clifton,
Gunderson LLC (20,179 net rentable square feet). Other tenants include
GBMC Agency Inc. and Metropolitan Insurance Company. As of May 8, 1998,
the appraised value was $16,750,000, indicating a Cut-off Date LTV of
75%. The Underwritten Net Cash Flow is $1,284,796, indicating a DSCR of
1.32x.
Kelsey Hayes (Approx. $11,474,466). This Mortgage Loan is secured by two
industrial/office buildings located in Livonia, Michigan. The property
was constructed in 1989 and has a total of 180,514 net rentable square
feet. As of March 12, 1999 the property was 100% leased to Kelsey Hayes
Company. As of March 25, 1999 the appraised value was $15,980,000,
indicating a Cut-off Date LTV of 72%. The Underwritten Net Cash Flow is
$1,216,481, indicating a DSCR of 1.23x.
Renaissance Office Park (Approx. $10,993,724). The Mortgaged Property is
located at the intersection of Eastern and Tropicana Avenues in the city
of Las Vegas, Nevada. This Mortgaged Property, between Interstate 15 and
U.S. Highway 95, is in an area located directly between the Las Vegas
International Airport and The Strip, in an area known for medical
services.
The 15.4-acre site is improved with 21 separate single-story buildings
totaling 139,651 square feet. The borrower developed the subject in two
phases, with improvements completed in 1980 and 1985 respectively. The
property includes 52 tenant spaces ranging from 500 to 1,800 square feet.
Amenities include two artistic water fountains, outdoor courtyards and
sitting areas, delivery and post office drop boxes, and desert-style
landscaping throughout the site. Major tenants include the First Security
Bank (17,947 net rentable square feet) and Executive Suites (10,463 net
rentable square feet). As of April, 1999 the office complex was at least
91% leased. As of March 1999, the appraised value was approximately
$16,200,000, including a Cut-off Date LTV of 67.9%. The Underwritten Net
Cash Flow is $1,198,867, indicating a DSCR of 1.25x.
UNDERWRITTEN NET CASH FLOW
The "Underwritten Net Cash Flow" for a Mortgaged Property other than a
Credit Tenant Property is the estimated stabilized annual revenue derived from
the use and operation of the Mortgaged Property, less the following: (i)
operating expenses such as utilities, administrative expenses, repairs and
maintenance, management fees, advertising; insurance and real estate taxes; and
(ii) capital expenditures for annual estimated replacement reserves, tenant
improvements and leasing commissions. In calculating Underwritten Net Cash Flow
certain non-operating items such as depreciation, amortization, partnership
distributions and financing fees were not included as expenses.
Revenue. In determining potential gross revenue for each Mortgaged
Property other than a Credit Tenant Property, the Mortgage Loan Seller
generally annualized the potential rent as presented in the latest available
rent rolls or occupancy reports (as applicable) supplied by the related
borrower in the case of multifamily, mixed use, retail, mobile home park,
health care, industrial, hospitality, office and self-storage properties (each,
a "Rental Property") or used the gross revenue received over the most recent
12-month period or used gross revenue reported for 1998. In determining other
income for each
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Mortgaged Property, the Mortgage Loan Seller generally relied on historical
operating statements, and the other income received over the most recent
12-month period ("Rolling 12 Months"). Operating statements were generally
supplied by and certified by the borrower but unaudited.
Vacancy. In determining the vacancy allowance for each Mortgaged Property
other than a Credit Tenant Property (and other than as described in the next
sentence), each Mortgage Loan Seller generally used the greatest of (i) the
actual vacancy rate, (ii) the vacancy rate in the related sub-market, and (iii)
a 5% vacancy rate except that (A) with respect to the vacancy allowance for
Mortgaged Properties secured by a hotel property, (1) each Mortgage Loan Seller
underwrote the lower of (a) the average occupancy for the most recent
historical operating period, as shown on borrower-supplied operating statements
or (b) the rolling 12-month operating statement and in each case further
imposed a cap on the underwritten occupancy of between 75% and 80%, and (B)
with respect to Mortgaged Properties secured by retail properties and single
tenant properties, the vacancy allowance for space occupied by anchor tenants
in certain anchored shopping centers and space occupied by single tenants in
certain single tenant properties may have been adjusted in performing the
vacancy calculation due to the length of the related leases or creditworthiness
of such tenants, in accordance with the applicable Mortgage Loan Seller's
underwriting standards.
Expenses. In determining expenses for each Mortgaged Property other than a
Credit Tenant Property, MLMC relied on either historical operating statements
for calendar year 1998 or the Rolling 12 Months and PWRES relied on either
historical operating statements or the most recent trailing twelve month
period; provided, however, that if real estate tax or insurance expense
information more current than that reflected in the financial statements was
available, the newer information was used. In cases where historical operating
statements did not, in the opinion of the Mortgage Loan Seller, reflect the
true stabilized level of an expense, other data such as prior year expense
levels or comparable property expenses were considered. Property management
fees were generally assumed to be as follows: between 4% and 5% (on a
loan-by-loan basis) of effective gross revenue. In the case of hotels, PWRES
generally assumed property management fees to be 3.5% of total underwritten
revenue in the case of full service hotels and 4.5% of total underwritten
revenue in the case of limited service hotels. As used herein, "effective gross
revenue" means underwritten rental and other income with respect to the related
Mortgaged Property.
Replacement Reserves. For commercial properties (other than Credit Tenant
Properties), an annual estimate of replacement reserves is calculated in
determining Underwritten Net Cash Flow. Replacement reserves were calculated in
accordance with the expected useful life of the components of the related
Mortgaged Property other than a Credit Tenant Property during the term of the
Mortgage Loan. The useful life and cost of replacements were based upon
estimates provided by professional engineers pursuant to building condition
reports completed for each Mortgaged Property, subject to certain minimum
underwritten replacement reserves which are described under the heading "Escrow
Requirements" set forth under "PWRES' Underwriting Standards" and "MLMC's
Underwriting Standards" below.
Tenant Improvements and Leasing Commissions. For retail, office and
industrial properties, an annual estimate of capital expenditures for the cost
of re-tenanting a property is calculated in determining Underwritten Net Cash
Flow. Such costs are commonly referred to as tenant improvements ("TIs"), which
generally include items such as repainting, wall covers, window treatments,
carpeting, party walls, ceiling tiles and lighting fixtures, and leasing
commissions ("LCs"), which are the gross commissions paid to real estate
leasing brokers for finding a new tenant (or re-signing an existing tenant to a
new lease) to occupy rentable space in such property. Depending on market
conditions, the amount and frequency of TIs and LCs will vary. In addition, the
lease expiration schedule of a particular commercial property will determine
when TIs and LCs, if any, will be required. The underwriter estimates the
annual expected capital expenditure for TIs and LCs based on the Mortgaged
Property's market rents, average term of lease, probability of renewal and the
market cost for new versus renewal TIs as well as market leasing commissions
for a new tenant lease versus a renewal of an existing tenant lease. The total
costs for TIs and LCs are calculated and then averaged over the term of the
loan to determine an annual estimated amount for such re-tenanting costs.
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Credit Tenant Loans. Notwithstanding the foregoing, each Monthly Payment
due under a Credit Tenant Loan will generally be paid entirely from the rent
due from the Credit Tenant at the related Credit Tenant Property. Generally,
when calculating the DSCR for Credit Tenant Loans, PWRES did not adjust the
rental income payments in the manner described herein with respect to the
calculation of Underwritten Net Cash Flow. In addition, PWRES did not require
the escrowing of amounts for taxes, insurance, capital items, tenant
improvements or leasing commissions for Bondable Leases. PWRES did require, in
many instances, the escrowing of amounts for capital reserves and insurance for
Double Net Leases and Triple Net Leases.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspection. Each Mortgaged Property sold to the Depositor was
inspected by either (a) a member of PWRES' professional staff or by a direct
agent of PWRES, in the case of a Mortgage Loan sold by PWRES, and (b), a member
of the originator's professional staff or by a third-party professional
retained for such purpose by the originator, in the case of a Mortgage Loan
sold by MLMC to assess the Mortgaged Property's general appearance and
characteristics of the surrounding neighborhood. Additionally, each Mortgage
Loan Seller has relied on inspections by third party engineers for assessments
of the maintenance and structural integrity of each Mortgaged Property as
described below under "--Property Condition Assessments." To the knowledge of
each Mortgage Loan Seller, based solely on such third party engineering
inspection, no inspection revealed any patent structural deficiency or any
deferred maintenance considered material and adverse to the interest of the
holders of the Offered Certificates or for which adequate reserves have not
been established.
Appraisals. All of the Mortgaged Properties were appraised in connection
with the origination of the related Mortgage Loans. Each such appraisal was in
compliance with the Code of Professional Ethics and Standards of Professional
Practice of the Appraisal Institute and the Uniform Standards of Professional
Appraisal Practice as adopted by the Appraisal Standards Board of the Appraisal
Foundation.
The purpose of each appraisal was to provide an opinion as to the fair
market value of the related Mortgaged Property. There can be no assurance that
another appraiser would have arrived at the same opinion of fair market value.
Property Condition Assessments. In connection with the origination of each
Mortgage Loan, a professional engineer, licensed architect or qualified
consultant inspected each related Mortgaged Property to assess the condition of
the structure, exterior walls, roofing, interior structure and mechanical and
electrical systems. The resulting reports indicated whether deferred
maintenance items on certain Mortgaged Properties was required and it
recommended certain capital improvements for which reserves were generally
established at origination. In addition, the property condition assessments
provided a projection of necessary replacements and repair of structural and
mechanical systems over the life of the related Mortgage Loan, which were used
to establish replacement reserve requirements.
Environmental Site Assessments. A "Phase I" environmental site assessment
was performed with respect to each Mortgaged Property in connection with the
origination of the related Mortgage Loan and "Phase II" environmental site
assessments were performed with respect to certain Mortgaged Properties. See
"--Representations and Warranties; Repurchases" below.
Seismic Reports. Seismic reports have been completed for each Mortgaged
Property located in areas classified as seismic zones 3 or 4 in order to
determine a "probable maximum loss" estimate. No Mortgaged Property has a
"probable maximum loss" estimate exceeding 20%. No Mortgaged Property is
insured against loss from earthquakes.
THE MORTGAGE LOAN SELLERS
The Mortgage Loan Sellers are Paine Webber Real Estate Securities Inc., a
Delaware corporation and Merrill Lynch Mortgage Capital Inc., a Delaware
corporation.
PWRES is a wholly-owned subsidiary of Paine Webber Group Inc. and an
affiliate of the Depositor and of PaineWebber Incorporated, one of the
Underwriters.
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MLMC is an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, one of the Underwriters.
On or prior to the Closing Date, the Depositor will acquire the Mortgage
Loans from the Mortgage Loan Sellers, as described above under "--General."
Each Mortgage Loan Seller originated or acquired the Mortgage Loans that it is
selling to the Depositor as described above under "--General."
PWRES' UNDERWRITING STANDARDS
General. 95 Mortgage Loans, representing approximately 48.33% of the
Initial Pool Balance, were originated by PW Real Estate Investments Inc
("PWREI") and 48 Mortgage Loans sold to the Depositor by PWRES, representing
approximately 18.02% of the Initial Pool Balance, were originated by eight
third-party originators, none of which is affiliated with PWRES. The Mortgage
Loans originated by PWREI and such third-party originators and sold by PWRES to
the Depositor were generally underwritten to PWRES guidelines as set forth
below; provided, however, that the underwriting standards for the Mortgage Loan
which is secured by cooperative apartments was originated utilizing prudent
underwriting practices for mortgage loans secured by similar mortgaged
properties and may differ from the standards described below. In some
instances, one or more provisions of the underwriting guidelines were waived or
modified where it was determined by PWRES not to adversely affect such Mortgage
Loans in any material respect.
PWRES' underwriting process for mortgage loans incorporates a property
financial analysis, a physical condition review, loan-to-value and debt service
coverage tests and escrow requirements.
Financial Analysis. In underwriting a mortgage loan, PWRES examines
borrower-provided property financial statements and rent rolls. Additionally,
property operating history, industry data regarding the local real estate
market and an independent appraisal are reviewed. The underwriting of certain
Mortgage Loans may vary from the PWRES underwriting guidelines, with respect to
items such as (i) debt service coverage ratios; (ii) property occupancy,
generally to the lesser of actual property occupancy and the occupancy rate of
comparable properties in the local market, but in either case not to exceed
95%, and in the case of hotel properties, a maximum occupancy of 75% to 80%;
(iii) replacement reserves, the general PWRES replacement reserve guidelines,
by property type, are as follows:
<TABLE>
<CAPTION>
PROPERTY TYPE UNDERWRITTEN REPLACEMENT RESERVES
- ---------------------------- --------------------------------------------------
<S> <C>
Multifamily ................ the greater of $250 per unit or the amount set
forth in the inspecting engineer's recommendation
Retail ..................... the greater of $0.15 per square foot or the
amount set forth in the inspecting engineer's
recommendation
Office ..................... the greater of $0.20 per square foot or the
amount set forth in the inspecting engineer's
recommendation
Mobile Home Parks .......... the greater of $50 per pad or the amount set
forth in the inspecting engineer's recommendation
Hotels ..................... the greater of 3% - 5% of underwritten total
departmental revenue or the amount set forth in
the inspecting engineer's recommendation
Industrial ................. the greater of $0.20 per square foot or the
amount set forth in the inspecting engineer's
recommendation
Self-Storage ............... the greater of $0.20 per square foot or the
amount set forth in the inspecting engineer's
recommendation
</TABLE>
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<PAGE>
(iv) management fees, the general PWRES guidelines being as follows, by
property type (provided, however, that for properties occupied by a single
tenant, underwritten management fees may be less than what is listed below):
<TABLE>
<CAPTION>
PROPERTY TYPE UNDERWRITTEN MANAGEMENT FEES
- ------------- ----------------------------
<S> <C>
Multifamily ..................... 5% of underwritten effective gross income
Retail .......................... 5% of underwritten effective gross income
Office .......................... 5% of underwritten effective gross income
Mobile Home Parks ............... 4% of underwritten effective gross income
Limited Service Hotels .......... 4.5% of underwritten total departmental revenue
Full Service Hotels ............. 3.5% of underwritten total departmental revenue
Industrial ...................... 5% of underwritten effective gross income
Self-Storage .................... 5% of underwritten effective gross income
</TABLE>
and (v) operating expenses, assuming that operating expenses with respect to
the Mortgaged Property are derived from actual historical operating expenses
disclosed by the borrower and expense levels based upon published industry
statistics for comparable properties.
Physical Condition Review. An engineering study and an environmental
review are prepared by qualified consultants as described in "--Property
Condition Assessments" above.
Loan-to-Value and Debt Service Coverage Tests. PWRES' financial
underwriting parameters for mortgage loans are generally as follows:
<TABLE>
<CAPTION>
MAXIMUM MINIMUM
PROPERTY TYPE LTV RATIO(1) DSCR(1)
- ------------- ------------ -------
<S> <C> <C>
Multifamily ............... 80% 1.20x
Retail .................... 75%-80% 1.20x-1.25x
Office .................... 75%-80% 1.20x-1.25x
Industrial ................ 75%-80% 1.20x-1.25x
Self-Storage .............. 75% 1.25x
Mobile Home Parks ......... 80% 1.20x
Hotels .................... 75% 1.40x
Bond-Type Leases .......... 100% 1.00x
Triple Net Leases ......... 100% 1.02x
Double Net Leases ......... 100% 1.05x
</TABLE>
(1) The "LTV Ratio" and "DSCR" presented above are those calculated through
PWRES' underwriting process and therefore may vary from LTV Ratios and
DSCRs presented elsewhere in this Prospectus Supplement.
Escrow Requirements. For substantially all mortgage loans sold by PWRES to
the Depositor, the related borrowers are required to fund various escrows for
taxes, insurance, capital reserves and replacement reserves. Generally, the
required escrows are as follows:
o TAXES -- typically an initial deposit at closing and monthly escrow
deposits equal to 1/12th of annual amount due are required.
o INSURANCE -- typically an initial deposit at closing and monthly escrow
deposits equal to 1/12th of annual amounts due are required.
o CAPITAL RESERVES -- Capital reserves for deferred maintenance and
environmental matters are typically based on third party reports and are
generally deposited upon the funding of the mortgage loan in an amount
equal to at least 125% of the estimated cost of identified required
repairs or replacements.
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<PAGE>
o REPLACEMENT RESERVES -- These accounts, which are generally required,
are typically established at the amounts determined by an independent
third-party engineer, based upon an on-site analysis, but generally at no
less than the following amounts by property type:
<TABLE>
<CAPTION>
PROPERTY TYPE REPLACEMENT RESERVES
- ------------- --------------------
<S> <C>
Multifamily ................ $250 per unit
Retail ..................... $0.15 per square foot
Industrial ................. $0.20 per square foot
Self-Storage ............... $0.20 per square foot
Office ..................... $0.20 per square foot
Mobile Home Parks .......... $50 per pad
Hotels ..................... 3% to 5% of underwritten total departmental revenue
</TABLE>
The replacement reserve escrow agreement generally requires monthly
deposits equal to one twelfth of the annual amount.
Credit Tenant Loans. Generally each Monthly Payment due under a Credit
Tenant Loan will be paid entirely from the rent due from the Credit Tenant at
the related Credit Tenant Property.
Generally, when calculating the DSCR guidelines set forth above for Credit
Tenant Loans, PWRES did not adjust the rental income payments in the manner
described herein with respect to the calculation of Net Cash Flow. In addition,
PWRES did not require the escrowing of amounts for taxes, insurance, capital
items, tenant improvements or leasing commissions for Bondable Leases. PWRES
did require, in many instances, the escrowing of amounts for capital reserves
and insurance for Double Net Leases and Triple Net Leases. The actual DSCR and
Loan to Value Ratios (both "leased value" and "dark value") for the Credit
Tenant Loans is set forth on Annex A-2 hereto.
MLMC'S UNDERWRITING STANDARDS
General. 26 Mortgage Loans, representing approximately 23.00% of the
Initial Pool Balance, were originated by MLMC directly, five Mortgage Loans,
representing approximately 6.42% of the Initial Pool Balance, were originated
or purchased by WMF Capital Corp. ("WMF"), a third-party originator not
affiliated with MLMC, and subsequently purchased by MLMC, and three Mortgage
Loans, representing approximately 4.23% of the Initial Pool Balance, were
originated by The Chase Manhattan Bank ("Chase"). The Mortgage Loans originated
by MLMC were generally underwritten to MLMC guidelines. In addition, MLMC
applied its general guidelines to its acquisition of the WMF Loans and Chase
Loans; provided, however, that MLMC generally relied on information provided to
it by WMF or Chase, as applicable, without independent investigation; and
further provided, that for its acquisition of such Mortgage Loans which are
secured by Credit Tenant Loans, it utilizes prudent underwriting practices for
mortgage loans secured by similar mortgaged properties. In some instances, one
or more provisions of the guidelines were waived or modified where it was
determined by MLMC not to adversely affect the value of such Mortgage Loans in
any material respect.
Cash Flow Analysis. MLMC reviews operating statements provided by the
borrower and makes adjustments in order to determine the DSCR. DSCRs are used
by MLMC to measure the ratio of (a) cash currently generated by a property that
is available for debt service (that is, cash that remains after payment of
non-capital expenses of operation, tenant improvements, leasing commissions and
replacement reserves during the term of the mortgage loan) to (b) required debt
service payments. However, DSCRs only measure the current, or recent, ability
of a property to service mortgage debt. See "--Underwritten Net Cash Flow"
above.
Appraisal and Loan-to-Value Ratio. For each mortgaged property, MLMC
obtains a current narrative appraisal. See "--Assessments of Property
Condition--Appraisals" above. MLMC determines the loan-to-value ratio of the
mortgage loan at the date of origination based on the value set forth in the
appraisal.
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<PAGE>
DSCR and LTV Ratio. MLMC's underwriting standards generally require, for
all mortgage loans, minimum DSCR and maximum LTV ratios for various indicated
property types. MLMC's DSCR guidelines are calculated based on the Underwritten
Net Cash Flow at the time of origination and MLMC's LTV Ratio guidelines are
based upon appraisals obtained in connection with the origination of the
related mortgage loan. Therefore, the DSCR and LTV Ratio for each Mortgage Loan
as reported elsewhere in this Prospectus Supplement may differ from the ratios
calculated at the time of origination. Certain Mortgage Loans, as indicated on
Annex A-1 hereto, may deviate from MLMC's guidelines.
Evaluation of Borrower. MLMC evaluates the borrower and its principals
with respect to credit history and prior experience as an owner and operator of
commercial real estate properties. The evaluation generally includes obtaining
and reviewing a credit report or other reliable indication of the borrower's
financial capacity; obtaining and verifying credit references and/or business
and trade references; and obtaining and reviewing certifications provided by
the borrower as to prior real estate experience and current contingent
liabilities. In addition, in general, each borrower for mortgage loans above a
minimum loan amount is required to be organized as a single-purpose,
bankruptcy-remote entity, and MLMC reviews the organizational documents of the
borrower to verify compliance with this requirement. Finally, although mortgage
loans generally are non-recourse in nature, in the case of certain mortgage
loans, the borrower and certain principals thereof may be required to assume
legal responsibility for liabilities relating to fraud, misrepresentation,
misappropriation of funds, breach of environmental or hazardous materials
requirements and unauthorized transfer of title to the property.
Property Inspection. MLMC causes a site inspection to be performed on each
Mortgaged Property in connection with the origination of the related mortgage
loan to assess its general condition. See "--Assessments of Property
Condition--Property Inspection" above.
Environmental Assessments. MLMC generally obtains a "Phase I"
environmental site assessment with respect to each Mortgaged Property in
connection with the origination of the related Mortgage Loan. In certain cases,
additional environmental testing, as recommended by such "Phase I" assessment,
was performed. In each case where environmental assessments recommended further
action, MLMC determines whether the necessary remediation or testing was being
undertaken in a satisfactory manner or that such remediation or testing would
be adequately addressed post-closing. In some instances, MLMC requires that
reserves be established to cover the estimated cost of such remediation.
Generally, with respect to such mortgaged properties, the related borrowers
would be required to deposit with the lender or its designee at the origination
of the related mortgage loans an amount equal to approximately 125% of the
licensed inspector's estimated cost of the recommended action. See "Assessments
of Property Condition--Environmental Site Assessments" above.
Engineering Assessments. MLMC causes a licensed engineer or architect to
inspect the related mortgaged property to assess the structure, exterior walls,
roofing, interior structure and mechanical and electrical systems. Certain of
the resulting reports indicated certain deferred maintenance items and/or
recommended capital improvements with respect to certain of the related
properties. The related borrowers generally deposited with the lender or its
designee at the origination of the related mortgage loans an amount equal to
approximately 125% of the licensed engineer's or architect's estimated cost of
any material recommended repairs, corrections or replacements not completed by
closing, to assure their completion. See "Assessment of Property
Condition--Property Condition Assessments" above.
Escrow Requirements. MLMC requires substantially all borrowers to fund
various escrows for taxes and insurance, replacement reserves, and (if
necessary) environmental remediation and capital expenditures in excess of
available cash flow.
Title Insurance Policy. The borrower is required to provide, and MLMC or
its counsel reviews, a title insurance policy for each mortgaged property. The
title insurance policy must meet the following requirements: (a) the policy
must be written by a title insurer licensed to do business in the jurisdiction
where the mortgaged property is located, (b) the policy must be in an amount
equal to the original principal balance of the mortgage loan, (c) the
protection and benefits must run to the mortgagee and its successors and
assigns, (d) the policy should be written on a standard policy form of the
American Land
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Title Association ("ALTA") or equivalent policy promulgated in the jurisdiction
where the mortgaged property is located and (e) the legal description of the
mortgaged property in the title policy must conform to that shown on the survey
of the mortgaged property in cases where a survey has been required.
Property Insurance. The borrower is required to provide, and MLMC reviews,
certificates of required insurance with respect to the mortgaged property. Such
insurance generally may include: (1) commercial general liability insurance for
bodily injury or death and property damage; (2) an "All Risk of Physical Loss"
policy; (3) if applicable, boiler and machinery coverage; (4) if the mortgaged
property is located in a special flood hazard area where mandatory flood
insurance requirements apply, flood insurance; and (5) such other coverage as
MLMC may require based on the specific characteristics of the mortgaged
property.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Pursuant to each Mortgage Loan Purchase and Sale Agreement the applicable
Mortgage Loan Seller will make certain representations and warranties to the
Depositor. Each Mortgage Loan Purchase and Sale Agreement shall obligate the
related Mortgage Loan Seller to cure any breach of its representations and
warranties or to repurchase any Mortgage Loan sold by it as to which there
exists a breach of any such representation or warranty (or a missing or
defective document in the Mortgage File) that materially and adversely affects
the interests of the Trust in such Mortgage Loan. Pursuant to the Pooling and
Servicing Agreement, the Depositor will assign the Mortgage Loans to the
Trustee for the benefit of the Certificateholders, together with the
Depositor's rights and remedies against each Mortgage Loan Seller under the
related Mortgage Loan Purchase Agreement in respect of breaches of
representations or warranties or missing or defective document in the Mortgage
File regarding the related Mortgage Loans. The Depositor will make no
representations or warranties with respect to the Mortgage Loans and will have
no obligation to repurchase or substitute for defective Mortgage Loans. Each
Mortgage Loan Seller is selling the Mortgage Loans sold by it without recourse,
and, accordingly, will have no obligations with respect to the Certificates
other than pursuant to the limited representations, warranties and covenants
made by it to the Depositor and assigned by the Depositor to the Trustee for
the benefit of the Certificateholders.
EACH MORTGAGE LOAN SELLER WILL MAKE REPRESENTATIONS AND WARRANTIES ONLY
WITH RESPECT TO THE MORTGAGE LOANS THAT IT HAS SOLD TO THE DEPOSITOR AND SHALL
HAVE NO LIABILITY FOR ANY BREACHES OF REPRESENTATIONS AND WARRANTIES BY THE
OTHER MORTGAGE LOAN SELLER AND WILL HAVE NO OBLIGATION TO CURE BREACHES OF
REPRESENTATIONS AND WARRANTIES MADE BY THE OTHER MORTGAGE LOAN SELLER OR TO
REPURCHASE ANY MORTGAGE LOAN NOT SOLD BY IT TO THE DEPOSITOR.
In each Mortgage Loan Purchase Agreement, the applicable Mortgage Loan
Seller will represent and warrant with respect to each Mortgage Loan sold by
such Mortgage Loan Seller, as of the Cut-off Date, or as of such other date
specifically provided in the representation and warranty, among other things,
subject to exceptions disclosed in the applicable Mortgage Loan Purchase
Agreement, that:
(1) immediately prior to the sale of the Mortgage Loan to the Depositor,
the Mortgage Loan Seller had good and marketable title to and was the
sole owner and holder of each Mortgage Loan, and the assignment validly
transferred its ownership of the Mortgage Loan, free and clear of any
and all liens, pledges and other encumbrances (other than the Mortgage
Loan Seller's obligation to repurchase defective Mortgage Loans),
subject to certain permitted exceptions set forth in the applicable
Mortgage Loan Purchase Agreement;
(2) no monthly payment of principal of or interest on any Mortgage Loan has
been more than 30 days delinquent since origination and as of the
Cut-off Date for such Mortgage Loan, no monthly payment of principal of
or interest on such Mortgage Loan is 30 or more days delinquent;
(3) there is no material default, breach, violation or event of
acceleration existing under the related Mortgage or Mortgage Note, and
to the Mortgage Loan Seller's knowledge, there is no event (other than
payments due but not yet delinquent) which, with the passage of time or
with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration;
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<PAGE>
(4) since origination, such Mortgage Loan has not been modified, altered,
satisfied, canceled, subordinated or rescinded, with the exception of
any modification, alteration, satisfaction, cancellation, subordination
or recission specifically disclosed in a written instrument that (a)
was entered into prior to the Cut-off Date, (b) is being or has been
recorded in the applicable public recording office if necessary to
maintain the priority of the lien of the related Mortgage and related
security agreements, if any, and (c) is being delivered to the Trustee
or Custodian as part of the related mortgage file. No material portion
of the related Mortgaged Property has been released from the lien of
the related Mortgage, in each case, in any manner which materially and
adversely affects the value of the Mortgage Loan or materially
interferes with the security intended to be provided by such Mortgage;
and none of the related Mortgages contains terms which provide for or
require release of any portion of the Mortgaged Property from the lien
of the Mortgage in any manner which materially and adversely affects
the adequacy of the security provided by the Mortgaged Property;
(5) each Mortgage Loan constitutes a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code (but without regard to the
rule in Treasury Regulation Section 1.860G-2(f)(2) that treats a
defective obligation as a qualified Mortgage or any substantially
similar successor provision) and any and all Prepayment Premiums and
Yield Maintenance Charges constitute "customary prepayment penalties"
within the meaning of Treasury Regulation Section 1.860G-1(b)(2);
(6) each Mortgage Loan requires the borrower to provide annual operating
statements, rent rolls, and other information that the holder of the
Mortgage Loan may reasonably request in connection with the related
borrower and the related Mortgaged Property;
(7) the proceeds of each Mortgage Loan have been fully disbursed and there
is no requirement for future advances thereunder and the Mortgage Loan
Seller covenants that it will not make any future advances under the
Mortgage Loan to the related borrower;
(8) other than the ARD Loans, which may have negative amortization from and
after their respective Anticipated Repayment Dates, no Mortgage Loan
provides for a shared appreciation or equity participation feature, any
other contingent or additional interest feature or the negative
amortization of interest;
(9) each Mortgage Loan is a whole loan. Neither Mortgage Loan Seller nor
any affiliate thereof has any obligation to make any capital
contributions to any borrower under a Mortgage Loan other than
contributions made on or prior to the closing date;
(10) each related Mortgage Note, Mortgage, assignment of leases (if any)
and other agreement executed in connection with each Mortgage Loan is
the legal, valid and binding obligation of the related borrower,
enforceable in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, receivership,
reorganization, moratorium, redemption or other laws affecting the
enforcement of creditors' rights generally or by general principles of
equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(11) unless the related Mortgaged Property is owner occupied, the mortgage
file for such Mortgage Loan contains an assignment of leases, either
as a separate instrument or incorporated into the related Mortgage,
which creates in favor of the holder thereof a valid, collateral or
first priority assignment of, or a valid first priority security
interest in, certain rights under the related lease, subject only to a
license granted to the related borrower to exercise certain rights and
to perform certain obligations of the lessor under such leases,
including the right to operate the related Mortgaged Property. Each
related assignment of Mortgage from the Mortgage Loan Seller to the
Trustee and any related reassignment of assignment of leases, if any,
or assignment of any other agreement executed in connection with each
Mortgage Loan, from the Mortgage Loan Seller to the Trustee
constitutes the legal, valid, binding and enforceable assignment from
the Mortgage Loan Seller to the Trustee except as such enforcement may
be limited by
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<PAGE>
bankruptcy, insolvency, receivership, reorganization, moratorium,
redemption or other laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law);
(12) each Mortgage is a valid and enforceable first lien on the related
Mortgaged Property subject only to certain permitted liens as
described in the applicable Mortgage Loan Purchase Agreement;
(13) each related Mortgage contains customary and enforceable (subject to
bankruptcy, insolvency, moratorium, redemption or other similar laws
affecting creditors' rights generally or by general principles of
equity) provisions so as to render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security, including realization by
judicial or, if applicable, non-judicial foreclosure, and there is no
exemption available to the borrower which would interfere with such
right to foreclose (except as may be imposed by bankruptcy,
insolvency, moratorium, redemption or other similar laws affecting
creditors' rights generally or by general principles of equity);
(14) as of the date of origination of each Mortgage Loan, and, to the
Mortgage Loan Seller's knowledge, as of the Cut-off Date, each of the
related borrowers was in possession of all material licenses, permits
and other authorizations necessary and required by all applicable laws
for the conduct of its business and all such licenses, permits and
authorizations were valid and in full force and effect;
(15) the Mortgage Rate (exclusive of any excess interest on an ARD Loan
after the related Anticipated Repayment Date, any default interest,
late charges, prepayment premiums and yield maintenance charges) of
each Mortgage Loan complied as of the date of origination with, or is
exempt from, applicable state or federal laws, regulations and other
requirements pertaining to usury; and any and all other requirements
of any federal, state or local laws, including, without limitation,
truth-in-lending, real estate settlement procedures, equal credit
opportunity or disclosure laws, applicable to each Mortgage Loan have
been complied with as of the date of origination of each Mortgage
Loan;
(16) each related Mortgage or loan agreement contains provisions for the
acceleration of the payment of the unpaid principal balance of such
Mortgage Loan if, without complying with the requirements of the
Mortgage or loan agreement, the related Mortgaged Property, or any
controlling interest therein, is directly or indirectly transferred or
sold (other than transfers for estate planning purposes or other
purposes where no change of control occurs) or encumbered in
connection with subordinate financing (other than certain indebtedness
described in the applicable Mortgage Loan Purchase Agreement) and each
related Mortgage or loan agreement prohibits the pledge or encumbrance
of the Mortgaged Property without the consent of the holder of the
Mortgage Loan;
(17) all amounts required to have been deposited by each borrower under the
Mortgage Loan documents have been deposited. All of the Mortgage Loan
Seller's interest in these amounts will be conveyed to the trust. All
requirements for escrows are memorialized in one or more written
agreements that are contained within the Mortgage File for such
Mortgage Loan;
(18) to the Mortgage Loan Seller's knowledge, based upon a site inspection
conducted in connection with the origination of the Mortgage Loan and
a review of the related engineering report, each related Mortgaged
Property is free and clear of any material damage that would affect
materially and adversely the value of such Mortgaged Property as
security for the Mortgage Loan; the Mortgage Loan Seller has received
no actual notice of (i) any proceeding pending for the total or
partial condemnation of such Mortgaged Property or (ii) any damage to
such Mortgaged Property that materially and adversely affects the
value of such Mortgaged Property;
(19) there are no delinquent taxes, ground rents, insurance premiums or
assessments (including, without limitation, assessments payable in
future installments or other similar outstanding
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charges, water charges or sewer rents) affecting any Mortgaged
Property, or such amounts, if existing and in dispute, have been
escrowed or covered by a letter of credit. For purposes of this
representation, an obligation shall become "delinquent" on the date on
which both of the following conditions are satisfied: (i) interest
and/or penalties are due with respect to the unpaid amount and (ii)
enforcement action can be taken by the related taxing authorities;
(20) the improvements located on or forming part of each Mortgaged Property
materially comply with applicable zoning and building laws, ordinances
and regulations, or constitute a legal non-conforming use or structure
or, if any such improvement does not so comply, such non-compliance
does not materially and adversely affect the value of the related
Mortgaged Property;
(21) the Mortgage Loan Seller has inspected or caused to be inspected each
related Mortgaged Property within the past twelve months;
(22) the lien of each related Mortgage is a first priority lien on the fee
or leasehold interest of its related borrower in the original
principal amount of the related Mortgage Loan or allocated loan amount
of the portions of the Mortgaged Property covered thereby (as set
forth in the related Mortgage) and is insured by an ALTA lender's
title insurance policy or its equivalent (or a binding commitment
therefor), insuring the Mortgage Loan Seller, its successors and
assigns in the original principal amount of the Mortgage Loan after
all advances of principal have been paid, subject only to (i) the lien
of current real property taxes, ground rents, water charges, sewer
rents and assessments not yet due and payable, (ii) covenants,
conditions and restrictions, rights of way, easements and other
matters of public record, none of which, individually or in the
aggregate, materially interferes with the current use of the Mortgaged
Property or the security intended to be provided by such Mortgage or
with the borrower's ability to pay its obligations when they become
due or the value of the Mortgaged Property and (iii) the exclusions
and exceptions (general and specific) set forth in such policy, none
of which, individually or in the aggregate, materially interferes with
the current use of the Mortgaged Property or materially interferes
with the security intended to be provided by such Mortgage or with the
borrower's ability to pay its obligations when they become due or the
value of the Mortgaged Property. The premium for such policy was paid
in full; such policy was issued by a title insurance company licensed
to issue policies in the state in which the related Mortgaged Property
is located and is assignable to the Depositor and the Trustee without
the consent of or any notification to the insurer, and is in full
force and effect upon the consummation of the transactions
contemplated by this Agreement; no claims have been made under such
policy and the Mortgage Loan Seller has not undertaken any action or
omitted to take any action, and has no knowledge of any such act or
omission, which would impair or diminish the coverage of such policy;
(23) a Phase I Environmental Report and with respect to certain Mortgage
Loans, a Phase II Environmental Report, was conducted by a reputable
environmental engineer in connection with such Mortgage Loan, which
report did not indicate any material non-compliance or material
existence of hazardous material or, if any material non-compliance or
material existence of hazardous materials was indicated in any such
report, the remedial action recommended to be taken in the report has
been taken, funds sufficient to cover any recommended remedial action
have been escrowed by the related borrower and held by the Mortgage
Loan Seller under the related Mortgage or the lessee under a Credit
Tenant Loan has the obligation to remedy such condition or
circumstance. To the best of the Mortgage Loan Seller's knowledge, in
reliance on such environmental reports, each Mortgaged Property is in
material compliance with all applicable federal, state and local laws
pertaining to environmental hazards other than as disclosed in such
environmental reports, and to the best of the Mortgage Loan Seller's
knowledge, no notice of violation of such laws has been issued by any
governmental agency or authority, except as indicated in certain
environmental reports or other documents previously provided to the
Rating Agencies; the Mortgage Loan Seller has not taken any action
which would cause the Mortgaged Property not to be in compliance with
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all federal, state and local laws pertaining to environmental hazards.
Each borrower represents and warrants that except as set forth in
certain environmental reports and to the best of its knowledge it has
not used, caused or permitted to exist and will not use, cause or
permit to exist on the related Mortgaged Property any hazardous
materials in any manner which violates federal, state or local laws,
ordinances, regulations, orders, directives or policies governing the
use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of hazardous materials. Each borrower
(or an affiliate thereof) has agreed to indemnify, defend and hold the
Mortgage Loan Seller and its successors and assigns harmless from and
against any and all losses, liabilities, damages, injuries, penalties,
fines, expenses, and claims of any kind whatsoever (including
attorney's fees and costs) paid, incurred or suffered by, or asserted
against, any such party resulting from a breach of environmental
representations, warranties or covenants given by the borrower in
connection with such Mortgage Loan;
(24) each Mortgage Loan requires that the Mortgaged Property be covered by
the following insurance policies naming the Mortgagee and its
successors and assigns as additional insured, in an amount at least
equal to the lesser of the value of the replacement cost of the
mortgaged property or the principal balance of the mortgage loan, and
sufficient to avoid the operation of any co-insurance provisions: (i)
fire and extended perils, (ii) business interruption and (iii)
comprehensive general liability insurance. All premiums on such
insurance policies required to be paid as of the Cut-off Date have
been paid; such insurance policies may not be terminated or cancelled
without 30 days prior written notice to the insured. Each related
mortgage loan obligates the related borrower to maintain all such
insurance and, at such borrower's failure to do so, authorizes the
mortgagee to maintain such insurance at the borrower's cost and
expense and to seek reimbursement therefor from such borrower;
(25) the Mortgage Loan is directly secured by a Mortgage on a commercial,
industrial, self-storage, health-care related, hospitality, mobile
home park or multifamily residential property, and either (i)
substantially all of the proceeds of the Mortgage Loan were used to
acquire, improve or protect an interest in such real property which,
as of the origination date, was the sole security for such Mortgage
Loan (unless the Mortgage Loan has been modified in a manner that
constituted a deemed exchange under Section 1001 of the Code at a time
when the Mortgage Loan was not in default or default with respect
thereto was not reasonably foreseeable) or (ii) the fair market value
of such real property was at least equal to 80% of the principal
amount of the Mortgage Loan (a) at origination (or if the Mortgage
Loan has been modified in a manner that constituted a deemed exchange
under Section 1001 of the Code at a time when the Mortgage Loan was
not in default or default with respect thereto was not reasonably
foreseeable, the date of the last such modification) or (b) at the
Closing Date; provided that the fair market value of the real property
interest must first be reduced by (A) the amount of any lien on the
real property interest that is senior to the Mortgage Loan (unless
such senior lien also secures a Mortgage Loan, in which event the
computation described in clauses (a) and (b) shall be made on an
aggregate basis) and (B) a proportionate amount of any lien that is in
parity with the Mortgage Loan (unless such other lien secures a
Mortgage Loan that is cross-collateralized with such Mortgage Loan, in
which event the computation described in clauses (ii)(a) and (ii)(b)
shall be made on an aggregate basis; and
(26) the mortgage file contains an appraisal of the related Mortgaged
Property which appraisal is signed by a qualified appraiser, who, to
the best of the Mortgage Loan Seller's knowledge, had no interest,
direct or indirect, in the Mortgaged Property or the borrower in any
loan made on the security thereof, and whose compensation is not
affected by the approval or disapproval of the Mortgage Loan, the
appraisal and appraiser both satisfy the requirements of the Uniform
Standards of Professional Appraisal Practice as adopted by the
Appraisal Standards Board of the Appraisal Foundation, all as in
effect on the date the Mortgage Loan was originated.
If the applicable Mortgage Loan Seller has been notified of a material
breach of any of the foregoing representations and warranties which materially
and adversely affects the Certificateholders and if such Mortgage Loan Seller
cannot cure such breach within a period of 90 days following the earlier of its
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receipt of such notice or its discovery of the breach, then the Mortgage Loan
Seller will be obligated pursuant to the related Mortgage Loan Purchase and
Sale Agreement (the relevant rights under which will be assigned, together with
its interests in the Mortgage Loans, by the Depositor to the Trustee) to
repurchase the affected Mortgage Loan, within such 90-day period at a price
(the "Purchase Price") equal to the sum of (i) the outstanding principal
balance of such Mortgage Loan as of the date of purchase, (ii) all accrued and
unpaid interest on such Mortgage Loan at the related Mortgage Rate to but not
including the Due Date in the Due Period of purchase, (iii) all related
unreimbursed Servicing Advances plus accrued and unpaid interest on related
Advances at the Reimbursement Rate, and unpaid Special Servicing Fees allocable
to such Mortgage Loan and (iv) all reasonable out-of-pocket expenses reasonably
incurred or to be incurred by the Master Servicer, the Special Servicer, the
Depositor and the Trustee in respect of the breach giving rise to the
repurchase obligation, including any expenses arising out of the enforcement of
the repurchase obligation.
The foregoing repurchase obligation will constitute the sole remedy
available to the Certificateholders and the Trustee for any breach of the
Mortgage Loan Seller's representations and warranties regarding the Mortgage
Loans. Each Mortgage Loan Seller will be the sole warranting party in respect
of the Mortgage Loans sold by such Mortgage Loan Seller to the Depositor, and
none of the Depositor, the Master Servicer, the Special Servicer, the Trustee,
the Fiscal Agent, either Underwriter or any of its affiliates (other than the
applicable Mortgage Loan Seller) will be obligated to repurchase any affected
Mortgage Loan in connection with a breach of the Mortgage Loan Seller's
representations and warranties if the Mortgage Loan Seller defaults on its
obligation to do so. However, the Depositor will not include any Mortgage Loan
in the Mortgage Pool if anything has come to the Depositor's attention prior to
the Closing Date that causes it to believe that the representations and
warranties made by the Mortgage Loan Seller regarding such Mortgage Loan will
not be correct in all material respects when made. See "Description of the
Agreements--Representations and Warranties; Repurchases" in the Prospectus.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Depositor's Commercial Mortgage Pass-Through Certificates, Series
1999-C1 (the "Certificates") will be issued pursuant to the Pooling and
Servicing Agreement and will represent in the aggregate the entire beneficial
ownership interest in the Trust consisting of: (i) the Mortgage Loans and all
payments under and proceeds of the Mortgage Loans received after the Cut-off
Date (exclusive of payments of principal and interest due on or before the
Cut-off Date); (ii) any REO Property; (iii) such funds or assets as from time
to time are deposited in the Certificate Account, the Upper-Tier Distribution
Account, the Lower-Tier Distribution Account, the Interest Reserve Account and
the REO Account, if established; (iv) the rights of the mortgagee under all
insurance policies with respect to the Mortgage Loans; and (v) certain rights
of the Depositor under the Mortgage Loan Purchase and Sale Agreements relating
to Mortgage Loan document delivery requirements and the representations and
warranties of the applicable Mortgage Loan Seller regarding the Mortgage Loans.
The Certificates will consist of the following Classes (each, a "Class"): the
Class A-1 and Class A-2 Certificates (collectively, the "Class A
Certificates"), the Class X, Class B, Class C, Class D, Class E, Class F, Class
G, Class H, Class I, Class R and Class LR Certificates. The Class A
Certificates and the Class X Certificates are referred to collectively herein
as the "Senior Certificates." The Class B, Class C, Class D, Class E, Class F,
Class G, Class H and Class I Certificates are referred to collectively herein
as the "Subordinate Certificates." The Class B, Class C and Class D
Certificates are referred to collectively herein as the "Subordinate Offered
Certificates." The Class R and Class LR Certificates are referred to
collectively herein as the "Residual Certificates."
Only the Class A, Class X, Class B, Class C and Class D Certificates are
offered hereby (collectively, the "Offered Certificates"). The Class E, Class
F, Class G, Class H, Class I, Class R and Class LR Certificates (collectively,
the "Private Certificates") have not been registered under the Securities Act
of 1933 and are not offered hereby.
The "Pass-Through Rate" of each Class of Certificates (other than the
Residual Certificates) is a per annum rate that has been assigned to such Class
of Certificates for purposes of calculating the maximum amount of distributions
allocable to interest that the holders of such Class of Certificates are
entitled to receive from the cash flow on the Mortgage Loans and the other
assets in the Trust; provided, however, that in the case of the Subordinate
Certificates the Pass-Through Rate may not exceed the Weighted Average Net
Mortgage Rate. Accordingly, on each Distribution Date each Class of
Certificates (other than the Residual Certificates) shall be entitled to
receive distributions of interest accrued as described herein at the
Pass-Through Rate of such Class on the Certificate Balance or, in the case of
the Class X Certificates, the Notional Amount thereof (as described below), in
each case subject to available funds. See "--Distributions--Pass-Through
Rates."
The "Certificate Balance" of any Class of Certificates (other than the
Class X and Residual Certificates) outstanding at any time represents the
maximum amount that the holders thereof are entitled to receive as
distributions allocable to principal from the cash flow on the Mortgage Loans
and the other assets in the Trust. On each Distribution Date, the Certificate
Balance of each Class of Certificates (other than the Class X and Residual
Certificates) will be reduced by any distributions of principal actually made
on, and any Collateral Support Deficit actually allocated to, such Class of
Certificates on such Distribution Date. The Initial Certificate Balance of each
Class of Offered Certificates is expected to be the balance set forth on the
cover of this Prospectus Supplement, subject to a variance of (plus or minus)
5%. The Class X Certificates will not have a Certificate Balance and will not
entitle their holders to receive distributions of principal.
The Class X Certificates will, however, be assigned a notional amount (the
"Notional Amount") which, with respect to any date of determination will equal
the aggregate Stated Principal Balance of the Mortgage Loans as of the
preceding Distribution Date (after giving effect to the distribution of
principal on such Distribution Date) or, prior to the first Distribution Date,
as of the Cut-off Date for each Mortgage Loan. The Notional Amount of the Class
X Certificates is used solely for purposes of describing the amounts of
interest payable on the Class X Certificates and for determining the Percentage
Interest of any holder of the Class X Certificates, and does not represent a
right to receive any distribution allocable to principal.
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The Offered Certificates will be maintained and transferred on the
book-entry records of DTC and its Participants (defined below) and issued in
denominations of $25,000 initial Certificate Balance (or Notional Amount, as
applicable) and integral multiples of $1,000 in excess thereof, with one
Certificate of each Class evidencing an additional amount equal to the
remainder of the Certificate Balance of each Class. The "Percentage Interest"
evidenced by any Certificate (other than the Residual Certificates) is equal to
the initial denomination thereof as of the Closing Date, divided by the initial
Certificate Balance or Notional Amount of the Class to which it belongs.
The Offered Certificates will initially be represented by one or more
global Certificates registered in the name of the nominee of DTC. The Depositor
has been informed by DTC that DTC's nominee will be Cede & Co. No Certificate
Owner will be entitled to receive a Definitive Certificate representing its
interest in such Class, except as set forth below under "--Book-Entry
Registration and Definitive Certificates." Unless and until Definitive
Certificates are issued, all references to actions by holders of the Offered
Certificates will refer to actions taken by DTC upon instructions received from
Certificate Owners through DTC's Participants, and all references herein to
payments, notices, reports and statements to holders of the Offered
Certificates will refer to payments, notices, reports and statements to DTC or
Cede & Co., as the registered holder of the Offered Certificates, for
distribution to Certificate Owners through its Participants in accordance with
DTC's procedures. See "Description of the Certificates--Book-Entry Registration
and Definitive Certificates" in the Prospectus.
Until Definitive Certificates are issued, interests in any Class of
Offered Certificates will be transferred on the book-entry records of DTC and
its Participants.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
General. Certificate Owners that are not direct or indirect participants
of DTC ("Participants") but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, the Offered Certificates may do so only
through direct and indirect Participants. In addition, Certificate Owners will
receive all distributions of principal of and interest on the Offered
Certificates from the Paying Agent through DTC and its direct and indirect
Participants. Accordingly, Certificate Owners may experience delays in their
receipt of payments. Unless and until Definitive Certificates are issued, it is
anticipated that the only registered Certificateholder of the Offered
Certificates will be Cede & Co., as nominee of DTC. Except as otherwise
provided under "--Reports to Certificateholders; Certain Available Information"
below, Certificate Owners will not be recognized by the Paying Agent, the
Certificate Registrar, the Trustee, the Fiscal Agent, the Master Servicer or
the Special Servicer as Certificateholders, as such term is used in the Pooling
and Servicing Agreement, and Certificate Owners will be permitted to receive
information furnished to Certificateholders and to exercise the rights of
Certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Offered Certificates among Participants and to receive, and transmit to
Participants distributions of principal of, and interest on, the Offered
Certificates. Direct and indirect Participants with which Certificate Owners
have accounts with respect to the Offered Certificates similarly are required
to make book-entry transfers and receive and transmit such distributions on
behalf of their respective Certificate Owners. Accordingly, although
Certificate Owners will not possess physical Certificates evidencing their
interests in the Offered Certificates, the Rules provide a mechanism by which
Certificate Owners, through their direct and indirect Participants, will
receive distributions and will be able to transfer their interests in the
Offered Certificates.
None of the Depositor, the Master Servicer, the Paying Agent, the
Certificate Registrar, the Underwriters, the Special Servicer, the Trustee or
the Fiscal Agent will have any liability for any actions taken by DTC or its
nominee, including, without limitation, actions with respect to payments made
by DTC to its Participants on account of beneficial ownership interests in the
Offered Certificates held by Cede & Co., as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
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Definitive Certificates. Definitive Certificates will be issued to
Certificate Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the Prospectus under
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates."
Upon the occurrence of an event described in the Prospectus in the last
paragraph under "Description of the Certificates--Book-Entry Registration and
Definitive Certificates," the Paying Agent is required to notify, through DTC,
direct Participants of DTC who have ownership of Offered Certificates as
indicated on the records of DTC of the availability of definitive Certificates.
Upon surrender by DTC of the definitive Certificates representing the Offered
Certificates and upon receipt of instructions from DTC for re-registration, the
Certificate Registrar and the Authenticating Agent will reissue the Offered
Certificates as definitive Certificates issued in the respective Certificate
Balances or Notional Amounts, as applicable, owned by individual Certificate
Owners, and thereafter the Paying Agent, the Certificate Registrar, the
Trustee, the Fiscal Agent, the Special Servicer and the Master Servicer will
recognize the holders of such definitive Certificates as Certificateholders
under the Pooling and Servicing Agreement.
For additional information regarding DTC and Certificates maintained on
the book-entry records thereof, See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
Prospectus.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be made
by the Trustee, to the extent of available funds, on the 15th day of each month
or, if any such 15th day is not a business day, then on the next succeeding
business day, commencing in July 1999 (each, a "Distribution Date"). All such
distributions (other than the final distribution on any Certificate) will be
made to the Certificateholders in whose names the Certificates are registered
at the close of business on each Record Date. With respect to any Distribution
Date, the "Record Date" will be the last business day of the month preceding
the month in which such Distribution Date occurs. Each such distribution will
be made by wire transfer in immediately available funds to the account
specified by the Certificateholder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder has provided the Trustee with
written wiring instructions no less than five business days prior to the
related Record Date (which wiring instructions may be in the form of a standing
order applicable to all subsequent distributions), or otherwise by check mailed
to such Certificateholder. The final distribution on any Certificate will be
made in like manner, but only upon presentation and surrender of such
Certificate at the location that will be specified in a notice of the pendency
of such final distribution. All distributions made with respect to a Class of
Certificates will be allocated pro rata among the outstanding Certificates of
such Class based on their respective Percentage Interests.
The Master Servicer shall establish and maintain, or cause to be
established and maintained, one or more segregated accounts (or subaccounts)
(collectively, the "Certificate Account"), into which the Master Servicer is
required to deposit, on a daily basis (and in no event later than the business
day following receipt of immediately available funds) all payments and
collections due after the Cut-off Date and other amounts received or advanced
with respect to the Mortgage Loans (including, without limitation, Insurance
and Condemnation Proceeds and Liquidation Proceeds), and from which the Master
Servicer will be permitted to make withdrawals to pay certain fees and expenses
of the Trust, including, without limitation, the Servicing Fee, the Special
Servicer's Fee and indemnities to the Master Servicer, the Special Servicer,
the Trustee, the Fiscal Agent and the Depositor. See "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses" and "--Certain
Matters Regarding the Master Servicer, the Special Servicer and the
Depositor").
The Trustee will establish and maintain an account or subaccount (the
"Lower-Tier Distribution Account"), and a second account or subaccount (the
"Upper-Tier Distribution Account" and, together with the Lower-Tier
Distribution Account, the "Distribution Accounts") for the benefit of the
Certificateholders. On each Distribution Date, the Trustee will apply amounts
on deposit in the Upper-Tier Distribution Account (which will include all funds
that were remitted by the Master Servicer from the Certificate Account plus,
among other things, any P&I Advances, less amounts, if any,
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distributable to the Class LR Certificates as set forth in the Pooling and
Servicing Agreement, (which amounts may include Excess Interest to the extent
not applied to payment of any other Class in accordance with the Pooling and
Servicing Agreement) generally to make distributions of interest on and
principal of the Certificates to the extent of the Available Distribution
Amount as described herein.
The Trustee will establish and maintain an "Interest Reserve Account" for
the benefit of the holders of the Certificates. On each Servicer Remittance
Date occurring in February and on any Servicer Remittance Date occurring in any
January which occurs in a year that is not a leap year, the Trustee will be
required to deposit (to the extent it receives such amounts from the Master
Servicer) in respect of certain of the Mortgage Loans that accrue on the basis
of actual days and a year of 360 days that are identified on the schedule of
Mortgage Loans attached hereto as Annex C (collectively, the "Interest Reserve
Loans"), an amount equal to one day's interest at the related Mortgage Rate on
the respective Stated Principal Balance of each such Mortgage Loan, as of the
Distribution Date in the month preceding the month in which such Servicer
Remittance Date occurs, to the extent a Monthly Payment or P&I Advance is made
in respect thereof (all amounts so deposited in any consecutive January (if
applicable) and February, "Withheld Amounts"). On each Servicer Remittance Date
occurring in March, the Trustee will be required to withdraw from the Interest
Reserve Account an amount equal to the Withheld Amounts from the preceding
January (if applicable) and February, if any, and deposit such amount into the
Lower-Tier Distribution Account. Funds held in the Interest Reserve Account
will be held uninvested.
Available Distribution Amount. The aggregate amount available for
distribution to Certificate-holders on each Distribution Date (the "Available
Distribution Amount") will, in general, equal the sum of the following amounts:
(a) the total amount of all cash received on the Mortgage Loans and any REO
Properties that is on deposit in the Certificate Account and the
Lower-Tier Distribution Account as of the business day preceding the
related Servicer Remittance Date, exclusive of (without duplication):
(i) all Monthly Payments collected but due on a Due Date subsequent to
the related Due Period;
(ii) all principal prepayments, Balloon Payments, Liquidation Proceeds,
Insurance and Condemnation Proceeds, in each case together with any
accompanying payments of interest, and all other unscheduled
recoveries, in each case received subsequent to the related Due
Period;
(iii) all amounts in the Certificate Account and the Lower-Tier
Distribution Account that are due or reimbursable to any person other
than the Certificateholders (including without limitation the
Servicing Fee, the Special Servicer's Fee, any other amounts payable
as compensation to the Master Servicer, the Special Servicer, the
Trustee or the Fiscal Agent, indemnities to the Master Servicer, the
Special Servicer, the Trustee, the Fiscal Agent and the Depositor and
certain expenses of the Trust. See "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses" and
"--Certain Matters Regarding the Master Servicer, the Special
Servicer and the Depositor");
(iv) all Yield Maintenance Charges and Prepayment Premiums;
(v) with respect to each Interest Reserve Loan and any Distribution Date
occurring in (1) each February or (2) any January in a year which is
not a leap year, an amount equal to the related Withheld Amount to
the extent such amount is on deposit in the Certificate Account or
the Lower-Tier Distribution Account;
(vi) all amounts deposited in the Certificate Account and Lower-Tier
Distribution Account in error;
(b) if and to the extent not already included in clause (a) hereof, the
total amount of all cash transferred from the REO Account to the
Certificate Account for such Distribution Date, less all amounts
payable or reimbursable to any Person from the Certificate Account
pursuant to the Pooling and Servicing Agreement;
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(c) all P&I Advances made by the Master Servicer, the Trustee or the Fiscal
Agent, as applicable, with respect to such Distribution Date. See
"Description of the Agreements--Certificate Account" in the Prospectus;
and
(d) for the Distribution Date occurring in each March, the related Withheld
Amounts required to be deposited in the Lower-Tier Distribution Account
on the related Servicer Remittance Date.
The "Due Period" for each Distribution Date and each Mortgage Loan, will
generally be the period commencing on the second day of the month preceding the
month in which such Distribution Date occurs and ending on the first day of the
month in which such Distribution Date occurs; provided, however, that with
respect to one Mortgage Loan, representing approximately 2.03% of the Initial
Pool Balance, the Due Period will be the period commencing on the sixth day of
the month preceding the month in which such Distribution Date occurs and ending
on the fifth day of the month in which such Distribution Date occurs.
Notwithstanding the foregoing, in the event that the last day of a Due Period
is not a business day, any payments received with respect to the Mortgage Loans
relating to such Due Period on the business day immediately following such day
shall be deemed to have been received during such Due Period and not during any
other Due Period. For purposes of the discussion in the Prospectus, the Due
Period is also the Prepayment Period (as defined in the Prospectus).
Priority. On each Distribution Date, the Trustee will apply amounts on
deposit in the Upper-Tier Distribution Account, to the extent of the Available
Distribution Amount in the following order of priority:
first, to the Class A-1, Class A-2 and Class X Certificates, pro rata
(based upon their respective entitlements to interest for such Distribution
Date), in respect of interest, up to an amount equal to the aggregate Interest
Distribution Amount for such Classes;
second, (i) to the Class A-1 Certificates, in reduction of the Certificate
Balance thereof, an amount equal to the Principal Distribution Amount until the
Certificate Balance of such Class is reduced to zero, and (ii) following
reduction of the Certificate Balance of the Class A-1 Certificates to zero, to
the Class A-2 Certificates, in reduction of the Certificate Balance thereof, an
amount equal to the Principal Distribution Amount (or portion thereof remaining
after distributions on the Class A-1 Certificates on such Distribution Date)
until the Certificate Balance of such Class is reduced to zero;
third, to the Class A-1 and Class A-2 Certificates, pro rata (based upon
the aggregate unreimbursed Collateral Support Deficit allocated to each such
Class), until all amounts of Collateral Support Deficit previously allocated to
such Classes, but not previously reimbursed, have been reimbursed in full;
fourth, to the Class B Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for such Class;
fifth, following reduction of the Certificate Balances of the Class A
Certificates to zero, to the Class B Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount (or portion thereof remaining after distributions on the Class A
Certificates on such Distribution Date), until the Certificate Balance of such
Class is reduced to zero;
sixth, to the Class B Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class B Certificates, but not
previously reimbursed, have been reimbursed in full;
seventh, to the Class C Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for such Class;
eighth, following reduction of the Certificate Balances of the Class A and
Class B Certificates to zero, to the Class C Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount (or portion thereof remaining after distributions on the Class A and
Class B Certificates on such Distribution Date), until the Certificate Balance
of such Class is reduced to zero;
ninth, to the Class C Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class C Certificates, but not
previously reimbursed, have been reimbursed in full;
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tenth, to the Class D Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for such Class;
eleventh, following reduction of the Certificate Balances of the Class A,
Class B, and Class C Certificates to zero, to the Class D Certificates, in
reduction of the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount (or portion thereof remaining after distributions on the
Class A, Class B and Class C Certificates on such Distribution Date), until the
Certificate Balance of such Class is reduced to zero;
twelfth, to the Class D Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class D Certificates, but not
previously reimbursed, have been reimbursed in full;
thirteenth, to the Class E Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for such Class;
fourteenth, following reduction of the Certificate Balances of the Class
A, Class B, Class C and Class D Certificates to zero, to the Class E
Certificates, in reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount (or portion thereof remaining after
distributions on the Class A, Class B, Class C and Class D Certificates on such
Distribution Date), until the Certificate Balance of such Class is reduced to
zero;
fifteenth, to the Class E Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class E Certificates, but not
previously reimbursed, have been reimbursed in full;
sixteenth, to the Class F Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for such Class;
seventeenth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D and Class E Certificates to zero, to the Class F
Certificates, in reduction of the Certificate Balance thereof, an amount equal
to the Principal Distribution Amount (or portion thereof remaining after
distributions on the Class A, Class B, Class C, Class D and Class E
Certificates on such Distribution Date), until the Certificate Balance of such
Class is reduced to zero;
eighteenth, to the Class F Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class F Certificates, but not
previously reimbursed, have been reimbursed in full;
nineteenth, to the Class G Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for such Class;
twentieth, following reduction of the Certificate Balances of the Class A,
Class B, Class C, Class D, Class E and Class F Certificates to zero, to the
Class G Certificates, in reduction of the Certificate Balance thereof, an
amount equal to the Principal Distribution Amount (or portion thereof remaining
after distributions on the Class A, Class B, Class C, Class D, Class E and
Class F Certificates on such Distribution Date), until the Certificate Balance
of such Class is reduced to zero;
twenty-first, to the Class G Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class G Certificates, but not
previously reimbursed, have been reimbursed in full;
twenty-second, to the Class H Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for such Class;
twenty-third, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F and Class G Certificates to
zero, to the Class H Certificates, in reduction of the Certificate Balance
thereof, an amount equal to the Principal Distribution Amount (or portion
thereof remaining after distributions on the Class A, Class B, Class C, Class
D, Class E, Class F and Class G Certificates on such Distribution Date), until
the Certificate Balance of such Class is reduced to zero;
twenty-fourth, to the Class H Certificates, until all amounts of
Collateral Support Deficit previously allocated to the Class H Certificates,
but not previously reimbursed, have been reimbursed in full;
twenty-fifth, to the Class I Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for such Class;
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twenty-sixth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G and Class H
Certificates to zero, to the Class I Certificates, in reduction of the
Certificate Balance thereof, an amount equal to the Principal Distribution
Amount (or portion thereof remaining after distributions on the Class A, Class
B, Class C, Class D, Class E, Class F, Class G and Class H Certificates on such
Distribution Date), until the Certificate Balance of such Class is reduced to
zero;
twenty-seventh, to the Class I Certificates, until all amounts of
Collateral Support Deficit previously allocated to the Class I Certificates,
but not previously reimbursed, have been reimbursed in full; and
twenty-eighth, to the Class R Certificates, the amount, if any, of the
Available Distribution Amount remaining in the Upper-Tier Distribution Account
with respect to such Distribution Date.
Reimbursement of previously allocated Collateral Support Deficit will not
constitute distributions of principal for any purpose and will not result in an
additional reduction in the Certificate Balance of the Class of Certificates in
respect of which any such reimbursement is made.
Notwithstanding the distribution priority set forth above, on and after
the Distribution Date on which the Certificate Balances of the Subordinate
Certificates have all been reduced to zero (such date, the "Cross-Over Date"),
the Principal Distribution Amount will be distributed, pro rata to the Class
A-1 Certificates and the Class A-2 Certificates (based upon their respective
Certificate Balances) without regard to the priorities set forth above.
Pass-Through Rates. During each Interest Accrual Period, interest will
accrue on the Certificate Balance (or, in the case of the Class X Certificates,
on the Notional Amount) of each Class (other than the Residual Certificates),
calculated as of the close of business on the Distribution Date during such
Interest Accrual Period (or, in the case of the first Distribution Date, as of
the Closing Date), at the Pass-Through Rate of such Class. The Pass-Through
Rate applicable to each Class of Certificates for any Distribution Date will
equal the rate per annum specified on the cover of this Prospectus Supplement;
provided, however, that in no event will the Pass-Through Rate of any such
Class (other than Class A-1 or Class A-2) exceed the weighted average of the
Net Mortgage Rates of the Mortgage Loans, weighted on the basis of their
respective Stated Principal Balances as of the preceding Distribution Date
after giving effect to distributions on such prior Distribution Date (such
weighted average rate, the "Weighted Average Net Mortgage Rate").
The Pass-Through Rate for the Class X Certificates (the "Class X
Pass-Through Rate") for any Distribution Date will equal the excess, if any, of
(a) the weighted average of the applicable Net Mortgage Rates for the Mortgage
Loans, weighted on the basis of their respective Stated Principal Balances as
of the preceding Distribution Date (after giving effect to the distribution of
principal on such Distribution Date) or, in the case of the first Distribution
Date, the respective Cut-off Dates for such Mortgage Loans, over (b) the
weighted average of the Pass-Through Rates on all of the other Certificates
(other than the Residual Certificates), weighted on the basis of their
respective Certificate Balances immediately prior to such Distribution Date.
The Class X Pass-Through Rate for the first Distribution Date is expected to be
approximately % per annum.
The "Net Mortgage Rate" for each Mortgage Loan is equal to the related
Mortgage Rate less the related Servicing Fee Rate.
The "Mortgage Rate" with respect to any Mortgage Loan is the per annum
rate at which interest accrues on such Mortgage Loan as stated in the related
Mortgage Note as of the Cut-off Date, without giving effect to any default rate
or the Excess Rate applicable to the ARD Loans. Notwithstanding the foregoing,
if any Mortgage Loan does not accrue interest on the basis of a 360-day year
consisting of twelve 30-day months, then, solely for purposes of calculating
the Class X Pass-Through Rate and the limit on the Pass-Through Rate for the
other Classes of Certificates (other than the Class A Certificates), the
Mortgage Rate of such Mortgage Loan for any one-month period preceding a
related Due Date will be the annualized rate at which interest would have to
accrue in respect of such Mortgage Loan on the basis of a 360-day year
consisting of twelve 30-day months in order to produce the aggregate amount of
interest actually accrued (exclusive of any Default Interest or Excess Interest
or any other modification to the interest rate of the Mortgage Loan subsequent
to the Cut-off Date) in respect of such Mortgage
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Loan during such one-month period at the related Mortgage Rate; provided,
however, that with respect to each Interest Reserve Loan, the Mortgage Rate for
the one month period (i) preceding the Due Dates in January and February in any
year which is not a leap year or in February in any year which is a leap year,
and (ii) preceding the Due Date in March, will be the per annum rate stated in
the related Mortgage Note as of the Cut-off Date.
Interest Distribution Amount. The "Interest Distribution Amount" for any
Class of Certificates (other than the Residual Certificates) for any
Distribution Date is an amount equal to all Distributable Certificate Interest
in respect of such Class for such Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates.
The "Distributable Certificate Interest" in respect of each Class of
Certificates (other than the Residual Certificates) for each Distribution Date
is equal to one month's interest at the Pass-Through Rate applicable to such
Class of Certificates for such Distribution Date accrued for the related
Interest Accrual Period on the related Certificate Balance or Notional Amount,
as the case may be, outstanding immediately prior to such Distribution Date,
provided, however, that the Distributable Certificate Interest shall be reduced
by such Class' pro rata share (based on accrued interest on each such Class of
Certificates) of any Prepayment Interest Shortfall not covered by the Servicing
Fee, as and to the extent described herein. Distributable Certificate Interest
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
The "Prepayment Interest Shortfall", with respect to any Distribution Date
and any Mortgage Loan as to which the related borrower has made a principal
prepayment during the related Due Period (but not on a Due Date), is an amount
equal to the positive difference, if any, between (a) the interest that would
have been payable on such Mortgage Loan at the Net Mortgage Rate on the Due
Date following the principal prepayment had such principal prepayment not been
made and (b) the interest actually paid by the related borrower on such
Mortgage Loan during the Due Period in which such principal prepayment
occurred. Such shortfall may result because interest on a principal prepayment
is paid by the related borrower only to the date of prepayment. Prepayment
Interest Shortfalls with respect to each Distribution Date to the extent not
offset by the portion of the Servicing Fee not applied to pay the Trustee Fee
will be allocated to each Class of Certificates pro rata based on such Class'
accrued interest (without taking into account the amount of Prepayment Interest
Shortfalls allocated to such Class on such Distribution Date) for such
Distribution Date. The amount of any Prepayment Interest Shortfall with respect
to any Distribution Date shall be offset by the Master Servicer up to an amount
equal to the aggregate Servicing Fees (net of that portion of the Servicing
Fees that represent compensation to the Trustee) to which the Master Servicer
would otherwise be entitled on such Distribution Date.
Prepayment Interest Shortfalls shall be calculated without giving effect
to any Prepayment Premiums or Yield Maintenance Charges collected from the
related borrower. Any amount of Servicing Fee used to cover Prepayment Interest
Shortfalls will not be reimbursable to the Master Servicer and will not be
considered to be an Advance.
Principal Distribution Amount. The "Principal Distribution Amount" for any
Distribution Date is an amount equal to the sum of (a) the Scheduled Principal
Distribution Amount for such Distribution Date, (b) the Unscheduled Principal
Distribution Amount for such Distribution Date and (c) the Principal Shortfall
for such Distribution Date.
The "Scheduled Principal Distribution Amount" for each Distribution Date
will equal the aggregate of the principal portions of (a) all Monthly Payments
(excluding Balloon Payments) due during or, if and to the extent not previously
received or advanced and distributed to Certificateholders on a preceding
Distribution Date, prior to the related Due Period and all Assumed Scheduled
Payments for the related Due Period, in each case to the extent paid by the
related borrower as of the business day preceding the related Servicer
Remittance Date or advanced by the Master Servicer, the Trustee, or the Fiscal
Agent, as applicable, and (b) all Balloon Payments to the extent received
during the related Due Period, and to the extent not included in clause (a)
above. The Scheduled Principal Distribution Amount from time to time will
include all late payments of principal made by a borrower, including late
payments in respect of a delinquent Balloon Payment, regardless of the timing
of such late payments, except to the extent such late payments are otherwise
reimbursable to the Master Servicer, the Trustee or the Fiscal Agent, as the
case may be, for prior Advances.
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The "Unscheduled Principal Distribution Amount" for each Distribution Date
will equal the aggregate of: (a) all voluntary prepayments of principal
received on the Mortgage Loans during the related Due Period; and (b) the
principal portion of any other collections (exclusive of payments by borrowers)
received on the Mortgage Loans and any REO Properties during the related Due
Period, whether in the form of Liquidation Proceeds, Insurance and Condemnation
Proceeds, net income, rents, and profits from REO Property or otherwise, to the
extent that such principal portion has been identified and applied by the
Master Servicer as recoveries of previously unadvanced principal of the related
Mortgage Loan.
The "Assumed Scheduled Payment" for any Due Period and with respect to any
Mortgage Loan that is delinquent in respect of its Balloon Payment (including
any REO Loan as to which the Balloon Payment would have been past due) is an
amount equal to the sum of (a) the principal portion of the Monthly Payment
that would have been due on such Mortgage Loan on the related Due Date based on
the constant payment required by the related Mortgage Note or the original
amortization schedule thereof (as calculated with interest at the related
Mortgage Rate), if applicable, assuming such Balloon Payment has not become due
and giving effect to any modification of the related Mortgage Loan, and (b)
interest on the Stated Principal Balance of such Mortgage Loan at the
applicable Mortgage Rate (net of the applicable rate at which the Servicing Fee
is calculated).
For purposes of the foregoing definitions of Principal Distribution
Amount, the term "Principal Shortfall" for any Distribution Date means the
amount, if any, by which (i) the Principal Distribution Amount for the
preceding Distribution Date exceeds (ii) the aggregate amount distributed in
respect of principal of the Class A, Class B, Class C, Class D, Class E, Class
F, Class G, Class H and Class I Certificates on such preceding Distribution
Date. There will be no Principal Shortfall on the first Distribution Date.
Certain Calculations with Respect to Individual Mortgage Loans. The Stated
Principal Balance of each Mortgage Loan outstanding at any time represents the
principal balance of such Mortgage Loan ultimately due and payable to the
Certificateholders, as increased by Mortgage Deferred Interest added to the
principal balance of such Mortgage Loan on or before the end of the Due Period
immediately preceding such date of determination. The "Stated Principal
Balance" of each Mortgage Loan will initially equal the Cut-off Date Balance
thereof and, on each Distribution Date, will be reduced by the portion of the
Principal Distribution Amount (other than the Principal Shortfall Amount) for
such date that is attributable to such Mortgage Loan. The Stated Principal
Balance of a Mortgage Loan may also be reduced in connection with any forced
reduction of the actual unpaid principal balance thereof imposed by a
bankruptcy proceeding in which the related borrower is the debtor. See "Certain
Legal Aspects of Mortgage Loans--Bankruptcy Laws" in the Prospectus. If any
Mortgage Loan is paid in full or such Mortgage Loan (or any Mortgaged Property
acquired in respect thereof) is otherwise liquidated, then, the Stated
Principal Balance of such Mortgage Loan shall be zero from and after the first
Distribution Date that follows the end of the Due Period in which such payment
in full or liquidation occurred (and notwithstanding that a loss may have
occurred in connection with any such liquidation).
For purposes of calculating distributions on, and allocations of
Collateral Support Deficit to, the Certificates, as well as for purposes of
calculating the Servicing Fee payable each month, each REO Property will be
treated as if there exists with respect thereto an outstanding mortgage loan
(an "REO Loan"), and all references to "Mortgage Loan", "Mortgage Loans" and
"Mortgage Pool" herein and in the Prospectus, when used in such context, will
be deemed to also be references to or to also include, as the case may be, any
REO Loans. Each REO Loan will generally be deemed to have the same
characteristics as its actual predecessor Mortgage Loan, including the same
fixed Mortgage Rate (and, accordingly, the same Net Mortgage Rate) and the same
unpaid principal balance and Stated Principal Balance. Amounts due on such
predecessor Mortgage Loan, including any portion thereof payable or
reimbursable to the Master Servicer, will continue to be "due" in respect of
the REO Loan; and amounts received in respect of the related REO Property, net
of payments to be made, or reimbursement to the Special Servicer, in connection
with the operation and management of such property, generally will be applied
by the Master Servicer or the Special Servicer as if received on the
predecessor Mortgage Loan.
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ALLOCATION OF PREPAYMENT PREMIUMS AND YIELD MAINTENANCE CHARGES.
On any Distribution Date, Prepayment Premiums collected during the related
Due Period will be distributed by the Paying Agent to the holders of the Class
A, Class B, Class C, Class D, Class E and Class X Certificates as follows: to
each of the Class A, Class B, Class C, Class D and Class E Certificates, for
each such Class an amount equal to the product of (a) a fraction, the numerator
of which is the amount distributed as principal to such Class on such
Distribution Date, and the denominator of which is the total amount distributed
as principal to all Classes of Certificates on such Distribution Date, (b) 25%
and (c) the total amount of Prepayment Premiums collected during the related
Due Period. Any Prepayment Premiums collected during the related Due Period
remaining after such distributions will be distributed to the holders of the
Class X Certificates.
On any Distribution Date, Yield Maintenance Charges collected during the
related Due Period will be distributed by the Paying Agent to the Class A,
Class B, Class C, Class D, Class E and Class X Certificates as follows: to each
of the Class A, Class B, Class C, Class D and Class E Certificates, for each
such Class an amount equal to the product of (a) a fraction, the numerator of
which is the amount distributed as principal to such Class on such Distribution
Date, and the denominator of which is the total amount distributed as principal
to all Classes of Certificates on such Distribution Date, (b) the Base Interest
Fraction for the related principal prepayment and such Class of Offered
Certificates and (c) the aggregate amount of Yield Maintenance Charges
collected on such principal prepayment during the related Due Period. Any Yield
Maintenance Charges collected during the related Due Period remaining after
such distributions will be distributed to the holders of the Class X
Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any Class A, Class B, Class C, Class D or
Class E Certificate is a fraction (A) whose numerator is the greater of (x)
zero and (y) the difference between (i) the Pass-Through Rate on such Class of
Certificates and (ii) the Discount Rate used in calculating the Yield
Maintenance Charge with respect to such principal prepayment and (B) whose
denominator is the difference between (i) the Mortgage Rate on the related
Mortgage Loan and (ii) the Discount Rate used in calculating the Yield
Maintenance Charge with respect to such principal prepayment; provided,
however, that under no circumstances shall the Base Interest Fraction be
greater than one. If such Discount Rate is greater than the Mortgage Rate on
the related Mortgage Loan, then the Base Interest Fraction shall equal zero.
No Prepayment Premiums and Yield Maintenance Charges will be distributed
to holders of the Class F, Class G, Class H and Class I or Residual
Certificates; instead, after the Certificate Principal Balances of the Class A,
Class B, Class C, Class D and Class E Certificates have been reduced to zero,
all Prepayment Premiums and Yield Maintenance Charges will be distributed to
holders of the Class X Certificates.
For a description of Prepayment Premiums and Yield Maintenance Charges,
see "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans--Prepayment Provisions" herein. See also "Certain Legal Aspects
of the Mortgage Loans--Default Interest and Limitations on Prepayments" in the
Prospectus regarding the enforceability of Prepayment Premiums and Yield
Maintenance Charges.
Assumed Final Distribution Date; Rated Final Distribution Date. The
"Assumed Final Distribution Date" with respect to any Class of Offered
Certificates is the Distribution Date on which the aggregate Certificate
Balance or Notional Amount, as the case may be, of such Class of Certificates
would be reduced to zero based on the assumptions set forth below. Such
Distribution Date shall in each case be as follows:
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<TABLE>
<CAPTION>
CLASS DESIGNATION ASSUMED FINAL DISTRIBUTION DATE
- ------------------------------ ---------------------------------
<S> <C>
Class A-1 .................. December 15, 2007
Class A-2 .................. April 15, 2009
Class X .................... October 15, 2023
Class B .................... May 15, 2009
Class C .................... June 15, 2009
Class D .................... December 15, 2009
</TABLE>
The Assumed Final Distribution Dates set forth above were calculated
without regard to any delays in the collection of Balloon Payments, without
regard to a reasonable liquidation time with respect to any Mortgage Loans that
may become delinquent and assuming each ARD Loan is prepaid on the Anticipated
Repayment Date. Accordingly, in the event of defaults on the Mortgage Loans (or
in the event each ARD Loan is not prepaid on its respective Anticipated
Repayment Date), the actual final Distribution Date for one or more Classes of
the Offered Certificates may be later, and could be substantially later, than
the related Assumed Final Distribution Date(s).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR; provided, however, that it is assumed that
each ARD Loan prepays on its Anticipated Repayment Date. Since the rate of
payment (including prepayments) of the Mortgage Loans may exceed the scheduled
rate of payments, and could exceed such scheduled rate by a substantial amount,
the actual final Distribution Date for one or more Classes of the Offered
Certificates may be earlier, and could be substantially earlier, than the
related Assumed Final Distribution Date(s). The rate of payments (including
prepayments) on the Mortgage Loans will depend on the characteristics of the
Mortgage Loans, as well as on the prevailing level of interest rates and other
economic factors, and no assurance can be given as to actual payment
experience. Finally, the Assumed Distribution Dates were calculated assuming
that there would not be an early termination of the Trust and that no losses
were experienced as a result of a default on any of the Mortgage Loans.
The "Rated Final Distribution Date" for each Class of Offered Certificates
will be June 15, 2032 the first Distribution Date after the 36th month
following the end of the amortization term for the Mortgage Loan that, as of
the Cut-off Date, has the longest remaining amortization term.
SUBORDINATION; ALLOCATION OF COLLATERAL SUPPORT DEFICIT
Generally, distributions in respect of interest and principal will be made
to each Class of Certificates sequentially, based on the alphabetical
designations of each Class (e.g., Class C will receive all distributions to be
made to it before Class D receives any distribution); provided, however, that
the Class X Certificates are pari passu with the Class A Certificates with
respect to interest. This is referred to as "sequential payment." On any
Distribution Date, after all required distributions on the Certificates have
been made, the aggregate of the principal balances of the Certificates may
exceed the aggregate of the Stated Principal Balances of the Mortgage Loans (we
call this excess a "Collateral Support Deficit"). On any such Distribution
Date, the aggregate of the Certificate balances of the Certificates will be
reduced until it equals the aggregate of the Stated Principal Balances of the
Mortgage Loans on such date. Any such reduction will be allocated to the
Classes of Certificates with Certificate Balances in reverse sequential order,
based on the alphabetical designation of each Class (e.g., no such reduction
will be made to the Certificate Balance of any Class of Certificates until the
Certificate Balances of each Class of Certificates with later alphabetical
designations are reduced to zero). These features are referred to as
"subordination."
Subordination is intended to enhance the likelihood of timely receipt by
the holders of senior Certificates of the full amount of all interest payable
in respect thereof on each Distribution Date, and the ultimate receipt by the
holders thereof of principal in an amount equal to, in each case, the entire
Certificate Balance of such Class of Certificates. No other form of credit
support will be available for the benefit of the holders of the Offered
Certificates.
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Allocation of the entire Principal Distribution Amount for each
Distribution Date to the Class A Certificates for so long as they are
outstanding will have the effect of reducing the aggregate Certificate Balance
of the Class A Certificates at a proportionately faster rate than the rate at
which the aggregate Stated Principal Balance of the Mortgage Pool will be
reduced (prior to the Cross-Over Date such allocation will be applied first to
the Class A-1 Certificates until their respective Certificate Balances are
reduced to zero and then to the Class A-2 Certificates). Thus, as principal is
distributed to the holders of such Class A Certificates, the percentage
interest in the Trust evidenced by such Class A Certificates will be decreased
(with a corresponding increase in the percentage interest in the Trust
evidenced by the Subordinate Certificates), thereby increasing, relative to
their respective Certificate Balances, the subordination afforded such Class A
Certificates by the Subordinate Certificates.
Following retirement of the Class A Certificates, the successive
allocation on each Distribution Date of the Principal Distribution Amount to
the Class B Certificates, the Class C Certificates and Class D Certificates, in
that order, in each case for so long as they are outstanding, will provide a
similar benefit to each such Class of Certificates as to the relative amount of
subordination afforded by the outstanding Classes of Certificates (other than
the Class X and the Residual Certificates) with later alphabetical Class
designations.
On each Distribution Date, immediately following the distributions to be
made to the Certificateholders on such date, the Trustee is required to
calculate the amount, if any, by which (i) the aggregate Stated Principal
Balance of the Mortgage Loans expected to be outstanding immediately following
such Distribution Date is less than (ii) the aggregate Certificate Balance of
the Certificates (other than the Class X Certificates) after giving effect to
distributions of principal on such Distribution Date (any such deficit, a
"Collateral Support Deficit"). The Trustee will be required to allocate any
such Collateral Support Deficit among the respective Classes of Certificates as
follows: to the Class I, Class H, Class G, Class F, Class E, Class D, Class C
and Class B Certificates in that order, and in each case in respect of and
until the remaining Certificate Balance of such Class has been reduced to zero.
Following the reduction of the Certificate Balances of all such Classes to
zero, the Trustee will be required to allocate any such Collateral Support
Deficit among the Class A Certificates, pro rata (based upon their respective
Certificate Balances), until the remaining Certificate Balances of such Classes
have been reduced to zero. Any Collateral Support Deficit allocated to a Class
of Certificates will be allocated among respective Certificates of such Class
in proportion to the Percentage Interests evidenced thereby. Because the
Notional Amount of the Class X Certificates as of any date of determination is
equal to the Stated Principal Balance of the Mortgage Loans as of the
immediately preceding Distribution Date, such Notional Amount will
automatically be reduced by the amount of any losses realized with respect to
the Mortgage Loans.
In general, Collateral Support Deficits could result from the occurrence
of: (i) losses and other shortfalls on or in respect of the Mortgage Loans,
including as a result of defaults and delinquencies thereon, Nonrecoverable
Advances made in respect thereof, the payment to the Special Servicer of any
compensation as described in "Servicing of the Mortgage Loans--Servicing and
Other Compensation and Payment of Expenses" herein, and the payment of interest
on Advances and certain servicing expenses; and (ii) certain unanticipated,
non-Mortgage Loan specific expenses of the Trust, including certain
reimbursements to the Trustee as described under "Description of the
Agreements--Certain Matters Regarding the Trustee" in the Prospectus, certain
reimbursements to the Master Servicer and the Depositor as described under
"Description of the Agreements--Certain Matters Regarding a Master Servicer and
the Depositor" in the Prospectus, and certain federal, state and local taxes,
and certain tax-related expenses, payable out of the Trust as described under
"Certain Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Certificates" and "--Taxes That May Be Imposed on the REMIC Pool" in the
Prospectus. Accordingly, the allocation of Collateral Support Deficit as
described above will constitute an allocation of losses and other shortfalls
experienced by the Trust.
A Class of Offered Certificates will be considered outstanding until its
Certificate Balance or Notional Amount, as applicable, is reduced to zero;
provided, however, that reimbursement of any previously allocated Collateral
Support Deficit may be made to a Class notwithstanding that its Certificate
Balance has been reduced to zero.
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ADVANCES
On the business day immediately preceding each Distribution Date (the
"Servicer Remittance Date"), the Master Servicer will be obligated, subject to
the recoverability determination described below, to make an advance (a "P&I
Advance") out of its own funds or, subject to the replacement thereof as
provided in the Pooling and Servicing Agreement, certain funds held in the
Certificate Account that are not required to be part of the Available
Distribution Amount for such Distribution Date, in an amount equal to (but
subject to reduction as described in the following paragraph) the aggregate of:
(i) all Monthly Payments (net of the Servicing Fee), other than Balloon
Payments, which were due on the Mortgage Loans during the related Due Period
and delinquent as of the business day preceding such Servicer Remittance Date;
and (ii) in the case of each Mortgage Loan delinquent in respect of its Balloon
Payment as of the end of the related Due Period (including any REO Loan as to
which the Balloon Payment would have been past due), an amount equal to the
Assumed Scheduled Payment. The Master Servicer's obligations to make P&I
Advances in respect of any Mortgage Loan or REO Property will continue through
liquidation of such Mortgage Loan or disposition of such REO Property, as the
case may be. To the extent that the Master Servicer fails to make a P&I Advance
that it is required to make under the Pooling and Servicing Agreement, the
Trustee will make such required P&I Advance pursuant to the Pooling and
Servicing Agreement. To the extent that the Trustee fails to make a P&I Advance
that it is required to make under the Pooling and Servicing Agreement, the
Fiscal Agent will make such required P&I Advance pursuant to the Pooling and
Servicing Agreement. All P&I Advances shall be made net of the Servicing Fee.
The amount required to be advanced in respect of delinquent Monthly
Payments or Assumed Scheduled Payments with respect to any Distribution Date on
a Mortgage Loan that has been subject to an Appraisal Reduction Event will
equal the amount that would be required to be advanced by the Master Servicer
without giving effect to the Appraisal Reduction less any Appraisal Reduction
Amount allocable with respect to such Mortgage Loan for such Distribution Date.
Neither the Master Servicer, the Trustee nor the Fiscal Agent will be required
to make a P&I Advance for Default Interest, Yield Maintenance Charges,
Prepayment Premiums, Excess Interest or the portion of any Prepayment Interest
Shortfalls not offset by the portion of the Servicing Fee that represents
compensation to the Master Servicer.
In addition to P&I Advances, the Master Servicer will also be obligated
(subject to the limitations described herein) to make advances ("Servicing
Advances" and, collectively with P&I Advances, "Advances") in connection with
the servicing and administration of any Mortgage Loan in respect of which a
default, delinquency or other unanticipated event has occurred or is reasonably
foreseeable or in connection with the servicing and administration of any
Mortgaged Property or REO Property, to pay delinquent real estate taxes,
assessments and hazard insurance premiums and to cover other similar costs and
expenses necessary to preserve the priority of the related Mortgage or enforce
the related Mortgage Loan documents or to protect, lease, manage and maintain
the related Mortgaged Property. To the extent that the Master Servicer fails to
make a Servicing Advance that it is required to make under the Pooling and
Servicing Agreement and the Trustee has notice of such failure, the Trustee
will make such required Servicing Advance pursuant to the Pooling and Servicing
Agreement. To the extent that the Trustee fails to make a Servicing Advance
that it is required to make under the Pooling and Servicing Agreement, the
Fiscal Agent will make such required Servicing Advance pursuant to the Pooling
and Servicing Agreement.
The Master Servicer, the Trustee or the Fiscal Agent, as the case may be,
will be entitled to recover any Advance made out of its own funds from any
amounts collected in respect of the Mortgage Loan as to which such Advance was
made, whether in the form of late payments, Insurance and Condemnation
Proceeds, Liquidation Proceeds or otherwise from the Mortgage Loan ("Related
Proceeds"). Notwithstanding the foregoing, neither the Master Servicer, the
Trustee nor the Fiscal Agent will be obligated to make any Advance that it
determines in its reasonable good faith judgment would, if made, not be
recoverable (including interest thereon) out of Related Proceeds (a
"Nonrecoverable Advance"), and the Master Servicer, the Trustee or the Fiscal
Agent, as applicable, will be entitled to recover any Advance that it so
determines to be a Nonrecoverable Advance out of general funds on deposit in
the Certificate
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Account. The Trustee and the Fiscal Agent will each be entitled to rely
conclusively on any nonrecoverability determination of the Master Servicer.
Nonrecoverable Advances will represent a portion of the losses to be borne by
the Certificateholders. See "Description of the Certificates--Advances in
Respect of Delinquencies" and "Description of the Agreements--Certificate
Account" in the Prospectus.
In connection with its recovery of any Advance, each of the Master
Servicer, the Trustee and the Fiscal Agent, as appropriate, will be entitled to
be paid first out of Default Interest and other Penalty Charges for the related
Mortgage Loan and then out of any amounts then on deposit in the Certificate
Account, interest at the Prime Rate as of each related Determination Date (the
"Reimbursement Rate") accrued on the amount of such Advance from the date made
to but not including the date of reimbursement (compounded monthly). The "Prime
Rate" shall be the rate, for any day, set forth as such in The Wall Street
Journal, New York edition.
Each Distribution Date Statement delivered by the Trustee to the
Certificateholders will contain information relating to the amounts of Advances
made with respect to the related Distribution Date. See "Description of the
Certificates--Reports to Certificateholders; Certain Available Information"
herein and "Description of Certificates--Reports to Certificateholders" in the
Prospectus.
APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred, an Appraisal Reduction
will be calculated. As a result of calculating one or more Appraisal
Reductions, the amount of any required P&I Advance will be reduced by an amount
equal to the Appraisal Reduction Amount (defined below), which will have the
effect of reducing the amount of interest available to the most subordinate
Class or Classes of Certificates then outstanding (i.e., first to the Class I
Certificates, then to the Class H Certificates, then to the Class G
Certificates, then to the Class F Certificates, then to the Class E
Certificates, then to the Class D Certificates, then to the Class C
Certificates and then to the Class B Certificates). See "--Advances" above.
An "Appraisal Reduction Event" will occur on the earliest of (i) the third
anniversary of the date on which an extension of the Stated Maturity Date of a
Mortgage Loan becomes effective as a result of a modification of such Mortgage
Loan by the Special Servicer, which extension does not change the amount of
Monthly Payments on the Mortgage Loan, (ii) 90 days after an uncured
delinquency occurs in respect of a Mortgage Loan, (iii) thirty days after the
uncured failure of the borrower with respect to any Balloon Loan to make the
Balloon Payment thereon, (iv) the date on which a reduction in the amount of
Monthly Payments on a Mortgage Loan, or a change in any other material economic
term of the Mortgage Loan (other than an extension that is the result of a
modification of such Mortgage Loan by the Special Servicer) occurs as a result
of a modification of the Mortgage Loan by the Special Servicer, (v) the date on
which a receiver has been appointed, (vi) the date on which a borrower declares
bankruptcy and (vii) immediately after a Mortgage Loan becomes an REO Loan;
provided, however, that an Appraisal Reduction Event shall not occur at any
time when the aggregate Certificate Balances of all Classes of Certificates
(other than the Class A Certificates) has been reduced to zero.
The "Appraisal Reduction" for any Distribution Date and for any Mortgage
Loan as to which any Appraisal Reduction Event has occurred will be an amount
equal to the excess of (a) the outstanding Stated Principal Balance of such
Mortgage Loan over (b) the excess of (i) 90% of the appraised value of the
related Mortgaged Property as determined (A) by one or more independent
Appraisals with respect to any Mortgage Loan, with an outstanding principal
balance equal to or in excess of $2,000,000 (the costs of such appraisal shall
be paid by the Master Servicer as an Advance), and (B) by an internal valuation
performed by the Special Servicer with respect to any Mortgage Loan, with an
outstanding principal balance less than $2,000,000, over (ii) the sum as of the
Due Date occurring in the month of such Distribution Date of (A) to the extent
not previously advanced by the Master Servicer, the Trustee or the Fiscal
Agent, as applicable, all unpaid interest on such Mortgage Loan at a per annum
rate equal to the Mortgage Rate, (B) all unreimbursed Advances and interest
thereon at the Reimbursement Rate in respect of such Mortgage Loan and (C) all
currently due and unpaid real estate taxes and assessments, insurance premiums
and ground rents and all other amounts due and unpaid under the Mortgage Loan
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(which tax, premiums, ground rents and other amounts have not been the subject
of an Advance by the Master Servicer, the Trustee or the Fiscal Agent and/or
for which funds have not been escrowed).
The "Appraisal Reduction Amount" for any Distribution Date shall equal the
product of (i) the applicable per annum Pass-Through Rate (i.e., for any month,
one twelfth of the Pass-Through Rate) on the Class of Certificates to which the
Appraisal Reduction is allocated, and (ii) the sum of all Appraisal Reductions
with respect to such Distribution Date.
The Special Servicer will be required to receive an MAI appraisal (an
"Appraisal") within 90 days after the Appraisal Reduction Event; provided,
however, that with respect to an Appraisal Reduction Event as set forth in
clause (ii) of the definition of Appraisal Reduction Event the Special Servicer
shall be required to make a determination as to whether to order such Appraisal
on or before the 90th day after an uncured delinquency occurs in respect to a
Mortgage Loan (the "Clause (ii) Appraisal Trigger Date') and shall be required
to obtain any such appraisal that it has determined to order no later than the
60th day after the Clause (ii) Appraisal Trigger Date. The Appraisal shall be
required to be delivered by the Special Servicer to the Master Servicer and the
Trustee, and the Trustee shall deliver such Appraisal to the Paying Agent and
each Holder of a Class E, Class F, Class G, Class H and Class I Certificate
within 15 days of receipt by the Trustee of such Appraisal from the Special
Servicer. On the first Determination Date occurring on or after the delivery of
such Appraisal, the Special Servicer will be required to calculate and report
to the Master Servicer, and the Master Servicer will report to the Trustee, the
Appraisal Reduction to take into account such appraisal. In the event that the
Special Servicer has not received such Appraisal within the timeframe described
above, the amount of the Appraisal Reduction will be deemed to be an amount
equal to 35% of the current Stated Principal Balance of the related Mortgage
Loan until such Appraisal is received. The "Determination Date" with respect to
each Distribution Date shall be the fifth Business Day preceding such
Distribution Date.
With respect to each Mortgage Loan as to which an Appraisal Reduction has
occurred (unless such Mortgage Loan has become a Corrected Mortgage Loan and
has remained current for twelve consecutive Monthly Payments, and with respect
to which no other Appraisal Reduction Event has occurred with respect thereto
during the preceding twelve months), the Special Servicer is required, within
30 days of each anniversary of the related Appraisal Reduction Event or sooner
if a material event has occurred that the Special Servicer reasonably believes
will positively or negatively affect the valuation of the Mortgaged Property,
to order a new appraisal, the cost of which shall be a Servicing Advance. Based
upon such appraisal, the Special Servicer shall redetermine and report to the
Trustee the amount of the Appraisal Reduction with respect to such Mortgage
Loan. Notwithstanding the foregoing, the Special Servicer will not be required
to obtain an appraisal with respect to a Mortgage Loan which is the subject of
an Appraisal Reduction Event to the extent the Special Servicer has obtained an
appraisal with respect to the related Mortgaged Property within the 12-month
period prior to the occurrence of such Appraisal Reduction Event unless any
event has occurred or circumstances arisen that could materially affect the
market value of such Mortgaged Property. Instead, the Special Servicer may use
such prior appraisal in calculating any Appraisal Reduction with respect to
such Mortgage Loan.
With respect to each Mortgage Loan as to which an Appraisal Reduction has
occurred and which has become current and has remained current for twelve
consecutive Monthly Payments, and with respect to which no other Appraisal
Reduction Event has occurred and is continuing, the Special Servicer shall
redetermine the amount of the Appraisal Reduction, and if appropriate under the
Pooling and Servicing Agreement in accordance with the Servicing Standards, the
Master Servicer, or the Trustee or Fiscal Agent shall be required to return to
making Advances, on the basis of a new Appraisal and the provisions of such
Mortgage Loan.
REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
Trustee Reports. Based on information provided in monthly reports prepared
by the Master Servicer and the Special Servicer and delivered to the Trustee,
the Trustee will prepare and forward on each Distribution Date, to each
Certificateholder, the Depositor, the Master Servicer, the Special Servicer,
each Underwriter, each Rating Agency and certain financial market publishers,
which are initially expected to be Bloomberg, L.P. and Charter Research
Corporation and, if requested, any potential investors in the Certificates:
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1. A statement (a "Distribution Date Statement") setting forth, among
other things: (i) the amount of distributions, if any, made on such
Distribution Date to the holders of each Class of Certificates applied to
reduce the respective Certificate Balances thereof; (ii) the amount of
distributions, if any, made on such Distribution Date to holders of each Class
of Certificates allocable to (A) Distributable Certificate Interest and (B)
Yield Maintenance Charges and/or Prepayment Premiums; (iii) the number of
outstanding Mortgage Loans, the aggregate unpaid principal balance of the
Mortgage Loans at the close of business on the related Determination Date; (iv)
the number and aggregate unpaid principal balance of Mortgage Loans (A)
delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent 90 days or
more, (D) that are Specially Serviced Mortgage Loans that are not delinquent,
or (E) as to which foreclosure proceedings have been commenced; (v) with
respect to any Mortgage Loan as to which the related Mortgaged Property become
an REO Property during the preceding Due Period, the Stated Principal Balance
and unpaid principal balance of such Mortgage Loan as of the date such
Mortgaged Property became an REO Property; (vi) as to any Mortgage Loan
repurchased by the Mortgage Loan Seller or otherwise liquidated or disposed of
during the related Due Period (or that were prepaid during the Related Due
Period), the Loan Number thereof and the amount of proceeds of any repurchase
of a Mortgage Loan, Liquidation Proceeds and/or other amounts, if any, received
thereon during the related Due Period and the portion thereof included in the
Available Distribution Amount for such Distribution Date; (vii) with respect to
any REO Property included in the Trust Assets as of the end of the related Due
Period, the loan number of the related Mortgage Loan, the value of such REO
Property based on the most recent Appraisal or valuation and the amount of any
other income collected with respect to any REO Property net of related expenses
and other amounts, if any, received on such REO Property during the related Due
Period and the portion thereof included in the Available Distribution Amount
for such Distribution Date; (viii) with respect to any REO Property sold or
otherwise disposed of during the related Due Period, (A) the loan number of the
related Mortgage Loan and the amount of sale proceeds and other amounts, if
any, received in respect of such REO Property sold or otherwise disposed of
during the Due Related and the portion thereof included in the Available
Distribution Amount for such Distribution Date and (B) the date of the related
determination by the Special Servicer that it has recovered all payments which
it expects to be finally recoverable (the "Final Recovery Determination"); (ix)
the aggregate Certificate Balance or Notional Amount of each Class of
Certificates before and after giving effect to the distributions made on such
Distribution Date, separately identifying any reduction in the aggregate
Certificate Balance of each such Class due to Collateral Support Deficits and
Certificate Deferred Interest; (x) the aggregate amount of Unscheduled
Principal Distribution Amount received during the related Due Period; (xi) the
Pass-Through Rate applicable to each Class of Certificates for such
Distribution Date and for the next Distribution Date; (xii) the aggregate
amount of the Servicing Fee, Special Servicing Fee, Workout Fee, Liquidation
Fee and any other servicing or special servicing compensation retained by or
paid to the Master Servicer, or the Special Servicer for the related Due
Period; (xiii) the amount of Collateral Support Deficit, if any, incurred with
respect to such Distribution Date and in the aggregate incurred with respect to
all Distribution Dates (except to the extent reimbursed or paid); (xiv) the
aggregate amount of Servicing Advances and P&I Advances outstanding which have
been made by the Master Servicer, the Special Servicer, the Trustee and the
Fiscal Agent and the amount of interest accrued thereon; (xv) the amount of any
Appraisal Reduction allocable to the related Due Period on a loan-by-loan basis
and the total Appraisal Reduction Amount as of such Distribution Date; (xvi) a
listing of all Mortgage Loans that have been defeased from issuance until the
related Distribution Date, with the respective dates of defeasance; (xvii) all
deposits and withdrawals from the Interest Reserve Account on the Master
Servicer Remittance Date immediately preceding such Distribution Date; and
(xviii) the aggregate amount of all Class Unpaid Interest Shortfalls for each
Class; (xix) the total amount of Prepayment Interest Shortfalls, and the amount
of Prepayment Interest Shortfalls allocated to each Class that are not offset
by the portion of the Servicing Fee that represents compensation of the Master
Servicer. In the case of information furnished pursuant to subclauses (i), (ii)
and (ix) above, the amounts shall be expressed as a dollar amount in the
aggregate for all Certificates of each applicable Class and per single
Certificate of a specified minimum denomination.
2. A report containing information regarding the Mortgage Loans as of the
end of the related Due Period, which report shall contain substantially the
categories of information regarding the Mortgage
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Loans set forth in this Prospectus Supplement in the tables under the caption
"Description of the Mortgage Pool--Additional Mortgage Loan Information"
(calculated, where applicable, on the basis of the most recent relevant
information provided by the borrowers to the Master Servicer or the Special
Servicer and by the Master Servicer or the Special Servicer, as the case may
be, to the Trustee) and such information shall be presented in a tabular format
substantially similar to the format utilized in this Prospectus Supplement
under such caption and a loan-by loan listing (in descending balance order)
showing loan number, property type, location, unpaid principal balance,
Mortgage Rate, paid through date, Maturity Date, net interest portion of the
Monthly Payment, principal portion of the Monthly Payment and any Prepayment
Premiums or Yield Maintenance Charges received. Such loan-by-loan listing is
required to be made available electronically; provided, however, that the
Trustee is required to provided Certificateholders with a written copy of such
report upon request.
Certain information made available in the Distribution Date Statements
referred to in item (1) above may be obtained by calling LaSalle Bank National
Association's ASAP System at (714) 282-5518 and requesting statement number
411. Additionally, certain information regarding the Mortgage Loans will be
made accessible at the website maintained by LaSalle Bank National Association
at www.lnbabs.com or their electronic bulletin board service at 714-282-3990 or
such other mechanism as the Trustee may have in place from time-to-time.
Servicer Reports. Commencing in August, 1999, the Master Servicer is
required to deliver to the Trustee, the Rating Agencies and the Depositor prior
to each Distribution Date, and the Trustee is to make available to each
Certificateholder, each Underwriter and, if requested, any potential investor
in the Certificates, on each Distribution Date:
(i) The following two Commercial Real Estate Secondary Market and
Securitization Association ("CSSA") data files:
(a) the "CSSA Loan Periodic Update File"; and
(b) to the extent received from the Master Servicer, the "CSSA Property
Data File"; and
(ii) The following six reports:
(a) A "Comparative Financial Status Report" setting forth, to the extent
such information is provided by the related borrowers, among other
things, the occupancy, revenue, underwritten cash flow and DSCR for
the Mortgage Loans as of the current Determination Date for each of
the following three periods; (i) the most current available
year-to-date or trailing 12 months, (ii) the previous two full fiscal
years (if made available to the Master Servicer), and (iii) the "base
year" (representing the original underwriting information used as of
the Cut-off Date).
(b) "Delinquent Loan Status Report" setting forth, among other things,
those Mortgage Loans which, as of the close of business on the
Determination Date immediately preceding the respective Distribution
Date, were delinquent 30-59 days, delinquent 60-89 days, 90 days or
more, current but specially serviced, or in foreclosure but not REO
Property.
(c) An "Historical Loan Modification Report" setting forth, among other
things, those Mortgage Loans which, as of the close of business on
the Determination Date immediately preceding the respective
Distribution Date, have been modified pursuant to the Pooling and
Servicing Agreement (i) during the related Due Period and (ii) since
the Cut-off Date, showing the original and the revised terms thereof.
(d) An "Historical Loss Report" setting forth, among other things, as of
the close of business on the Determination Date immediately preceding
the respective Distribution Date, (i) the aggregate amount of
liquidation proceeds and liquidation expenses, both for the related
Due Period, historically, and (ii) the amount of Collateral Support
Deficits occurring during the related Due Period, set forth on a
Mortgage Loan-by-Mortgage Loan basis.
(e) An "REO Status Report" setting forth, among other things, with
respect to each REO Property that was included in the Trust Assets as
of the close of business on the
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Determination Date immediately preceding the respective Distribution
Date (but which became an REO Property during or prior to the related
Due Period), (i) the acquisition date of such REO Property, (ii) the
amount of income collected with respect to any REO Property net of
related expenses and other amounts, if any, received on such REO
Property during the related Due Period and (iii) the value of the REO
Property based on the most recent appraisal or other valuation
thereof available to the Master Servicer as of such determination
(including any prepared internally by the Special Servicer).
(f) A "Watch List" as of the close of business on the Determination Date
immediately preceding the respective Distribution Date setting forth,
among other things, any Mortgage Loan that is in jeopardy of becoming
a Specially Serviced Mortgage Loan.
Commencing in August, 1999, subject to the receipt of necessary
information from any subservicer, such loan-by-loan listing will be made
available electronically in the form of the standard CSSA Reports; provided,
however, the Trustee will provide Certificateholders with a written copy of
such report upon request. See "Annex B" to this Prospectus Supplement or the
forms of Servicing Reports.
The Master Servicer is also required to deliver to the Trustee and Special
Servicer the following materials:
(a) Annually, on or before October 30, 1999 and thereafter annually by June
30 of each year, with respect to each Mortgaged Property and REO
Property, an "Operating Statement Analysis Report" together with copies
of the operating statements and rent rolls (but only to the extent the
related borrower is required by the Mortgage to deliver or otherwise
agrees to provide such information and has in fact delivered such items)
for such Mortgaged Property or REO Property as of the end of the
preceding calendar year; provided, however, that if and to the extent
that the terms of any Mortgage Loan require the related borrower to
provide operating information and rent rolls more frequently than on an
annual basis, the Master Servicer (or the Special Servicer in the case
of a Specially Serviced Mortgage Loan and an REO Property) is required
to use its reasonable best efforts to obtain such information in
accordance with the terms of the related loan documents and to forward
them to Certificateholders promptly on request (and in no event later
than the Distribution Date following receipt). The Master Servicer (or
the Special Servicer in the case of Specially Serviced Mortgage Loans
and REO Properties) is required to use its reasonable best efforts
consistent with the Servicing Standard to obtain said annual (or other
periodic) operating statements and rent rolls.
(b) Promptly upon receipt by the Master Servicer (or within twenty days of
receipt by the Special Servicer with respect to any Specially Serviced
Mortgage Loan or REO Property) of annual operating statements, if any,
with respect to any Mortgaged Property or REO Property, and "NOI
Adjustment Worksheet" for such Mortgaged Property (with annual operating
statements attached thereto as an exhibit), presenting the computations
made in accordance with the methodology described in the Pooling and
Servicing Agreement to "normalize" the full fiscal year net operating
income and debt service coverage numbers used by the Master Servicer in
the other reports referenced above.
The Trustee is required to deliver a copy of each Operating Statement
Analysis Report and NOI Adjustment Worksheet that it receives from the Master
Servicer to the Depositor and each Underwriter promptly after its receipt
thereof. Upon request, the Trustee will make such reports available to the
Certificateholders, the Special Servicer, each Rating Agency and any potential
investor in the Certificates.
The Trustee, the Master Servicer and the Special Servicer will be
indemnified by the Trust against any loss, liability or expense incurred in
connection with any legal action relating to any statement or omission based
upon information supplied by a borrower or third party under a Mortgage Loan
and reasonably relied upon by such party. None of the above reports will
include any information that the Master Servicer deems to be confidential. The
information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Master Servicer no later than at least
one business day after the related Determination
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Date. Absent manifest error, none of the Master Servicer, the Special Servicer
or the Trustee will be responsible for the accuracy or completeness of any
information supplied to it by a borrower or other third party that it included
in any reports, statements, materials or information prepared or provided by
the Master Servicer, the Special Servicer or the Trustee, as applicable. See
"Annex B" attached to this Prospectus Supplement for the forms of Servicing
Reports.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each person or entity who at any
time during the calendar year was a holder of a Certificate, a statement
containing the information set forth in clauses (1)(i), (ii) and (ix) and, to
the extent necessary to fulfill its tax reporting obligations, (xiii) above as
to the applicable Class, aggregated for such calendar year or applicable
portion thereof during which such person was a Certificateholder, together with
such other information as the Trustee deems necessary or desirable, or that a
Certificateholder or Certificate Owner reasonably requests, to enable
Certificateholders to prepare their tax returns for such calendar year. Such
obligation of the Trustee shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Trustee
pursuant to any requirements of the Code as from time to time are in force.
The Pooling and Servicing Agreement will require that the Trustee make
available at its offices primarily responsible for administering the Trust,
during normal business hours, for review by any holder of an Offered
Certificate, originals or copies of, among other things, the following items:
(a) the Pooling and Servicing Agreement and any amendments thereto, (b) all
Distribution Date Statements delivered to holders of the relevant Class of
Offered Certificates since the Closing Date, (c) all officer's Certificates
delivered to the Trustee since the Closing Date as described under "Description
of the Agreements--Evidence as to Compliance" in the Prospectus, (d) all
accountants' reports delivered to the Trustee since the Closing Date as
described under "Description of the Agreements--Evidence as to Compliance" in
the Prospectus, (e) the most recent property inspection report prepared by or
on behalf of the Master Servicer in respect of each Mortgaged Property and
delivered to the Trustee, (f) any and all statements and reports delivered to,
or collected by, the Master Servicer or the Special Servicer, from the
borrowers, including the most recent annual property operating statements, rent
rolls and borrower financial statements, but only to the extent such statements
and reports have been delivered to the Trustee, and (g) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Master Servicer and delivered to the Trustee. Copies of any and all
of the foregoing items will be available from the Master Servicer upon request.
Pursuant to the Pooling and Servicing Agreement, the Master Servicer will
be responsible for enforcing all provisions of the Mortgage Loan documents
relating to the submission of financial and property information.
The Pooling and Servicing Agreement will require the Trustee, subject to
certain restrictions set forth therein, to provide the reports available to
Certificateholders set forth above, as well as certain other information
received by the Trustee, to any Certificateholder, each Underwriter, any
Certificate Owner or any prospective investor identified as such by a
Certificate Owner or either Underwriter, that requests such reports or
information; provided, however, that the Trustee will be permitted to require
payment of a sum sufficient to cover the reasonable costs and expenses of
providing copies of such reports or information.
Except as otherwise set forth herein, until such time as Definitive
Certificates are issued, the foregoing information will be available to
Certificate Owners only to the extent it is forwarded by or otherwise available
through DTC and its Participants. Conveyance of notices and other
communications by DTC to Participants, and by Participants to Certificate
Owners, will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time. Except as
otherwise set forth herein, the Master Servicer, the Trustee, the Fiscal Agent,
the Depositor, the Paying Agent and the Certificate Registrar are required to
recognize as Certificateholders only those persons in whose names the
Certificates are registered on the books and records of the Certificate
Registrar. The initial registered holder of the Offered Certificates will be
Cede & Co. as nominee for DTC.
S-95
<PAGE>
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, the
voting rights for the Certificates (the "Voting Rights") shall be allocated
among the respective Classes of Certificateholders as follows: (i) 4% in the
case of the Class X Certificates, and (ii) in the case of any other Class of
Certificates (other than the Residual Certificates), a percentage equal to the
product of 96% and a fraction, the numerator of which is equal to the aggregate
Certificate Balance of such Class, in each case, determined as of the
Distribution Date immediately preceding such time, and the denominator of which
is equal to the aggregate Certificate Balance of all Classes of Certificates
with Certificate Balances, each determined as of the Distribution Date
immediately preceding such time. Neither the Class R nor the Class LR
Certificates will be entitled to any Voting Rights. For purposes of determining
Voting Rights, the Certificate Balance of any Class will be deemed to be
reduced by the amount of any Appraisal Reductions allocated to such Class.
Voting Rights allocated to a Class of Certificateholders shall be allocated
among such Certificateholders in proportion to the Percentage Interests
evidenced by their respective Certificates. Solely for purposes of giving any
consent, approval or waiver pursuant to the Pooling and Servicing Agreement,
neither the Master Servicer, the Special Servicer nor the Depositor will be
entitled to exercise any Voting Rights with respect to any Certificates
registered in its name, if such consent, approval or waiver would in any way
increase its compensation or limit its obligations in such capacity under the
Pooling and Servicing Agreement; provided, however, that such restrictions will
not apply to any other exercise of the rights of the Controlling Class
Certificateholders or the Directing Certificateholder, whether or not such a
Certificateholder is an affiliate of the Master Servicer or Special Servicer.
TERMINATION; RETIREMENT OF CERTIFICATES
The obligations created by the Pooling and Servicing Agreement will
terminate upon payment (or provision for payment) to all Certificateholders of
all amounts held by or on behalf of the Trustee and required to be paid
following the earlier of (i) the final payment (or advance in respect thereof)
or other liquidation of the last Mortgage Loan or REO Property subject thereto
or (ii) the purchase of all of the assets of the Trust by the Master Servicer,
the Special Servicer, the Controlling Class Certificateholder holding the
largest Certificate Balance of the Controlling Class or the holders of the
Class LR Certificates. Written notice of termination of the Pooling and
Servicing Agreement will be given to each Certificateholder, and the final
distribution will be made only upon surrender and cancellation of the
Certificates at the office of the Certificate Registrar or other location
specified in such notice of termination.
At its option, on any Distribution Date on which the remaining aggregate
Stated Principal Balance of the Mortgage Pool is less than 1% of the Initial
Pool Balance, the Master Servicer may purchase all, but not less than all, of
the Mortgage Loans and REO Properties in the Trust, and thereby effect
termination of the Trust and early retirement of the then outstanding
Certificates. If the Master Servicer does not exercise such purchase option,
then the Special Servicer, the Controlling Class Certificateholder holding the
largest Certificate Balance of the Controlling Class, and the holder of the
majority interest of the Class LR Certificates, in that order, may purchase all
of the Mortgage Loans and REO Properties. Any such purchase of Mortgage Loans,
Specially Serviced Mortgage Loans or REO Properties is required to be made at a
price equal to aggregate Purchase Price of all of the Mortgage Loans, Specially
Serviced Mortgaged Loans (exclusive or REO Loans) or REO Properties being
purchased; provided, however, that if the Master Servicer or the Special
Servicer is purchasing the Mortgage Loans the Purchase Price shall not include
unreimbursed Servicing Advances or Special Servicing Advances, as the case may
be. The "Purchase Price" for any REO Property is the fair market value of such
REO Property (which fair market value for any REO Property may be less than the
Purchase Price for the corresponding REO Loan).
On the final Distribution Date, the aggregate amount paid by the holders
of the Controlling Class, the Special Servicer, the Master Servicer or the
holders of the Class LR Certificates, as the case may be, for the Mortgage
Loans and other assets in the Trust (if the Trust is to be terminated as a
result of the purchase described in the preceding paragraph), together with all
other amounts on deposit in the Certificate Account and not otherwise payable
to a person other than the Certificateholders (see "Description of the
Agreements--Certificate Account" in the Prospectus), will be applied generally
as described above under "Distributions--Priority."
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Any optional termination by such Certificateholder, the Master Servicer,
the Special Servicer, or the holders of the Class LR Certificates would result
in prepayment in full of the Certificates and would have an adverse effect on
the yield of the Class X Certificates because a termination would have an
effect similar to a principal prepayment in full of the Mortgage Loans
(without, however, the payment of any Prepayment Premiums or Yield Maintenance
Charges) and, as a result, investors in the Class X Certificates and any other
Certificates purchased at premium might not fully recoup their initial
investment. See "Yield and Maturity Considerations" herein.
THE TRUSTEE
LaSalle Bank National Association, a national banking association, will
act as trustee (the "Trustee") on behalf of the Certificateholders and will be
obligated to make any Advance required to be made, but not made, by the Master
Servicer under the Pooling and Servicing Agreement; provided, however, that the
Trustee will not be obligated to make any Advance that it deems to be a
Nonrecoverable Advance. The Trustee will be entitled (but not obligated) to
rely conclusively on any determination by the Master Servicer that an Advance,
if made, would be a Nonrecoverable Advance. The Trustee will be entitled to
reimbursement for each Advance made by it in the same manner and to the same
extent as, but prior to, the Master Servicer. The Trustee is a subsidiary of
LaSalle National Corporation, which is a subsidiary of the Fiscal Agent. The
Trustee is at all times required to be, and will be required to resign if it
fails to be, (i) a corporation, bank or banking association, organized and
doing business under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by federal or state authority and (ii) an
institution (a) whose long-term senior unsecured debt (or that of its fiscal
agent) is rated not less than "Aa2" by Moody's and (or such lower rating as
would not result, as confirmed in writing by Moody's, in a qualification,
downgrade or withdrawal of any of the then current ratings assigned by Moody's
to the Certificates) and (b) whose structured finance rating (or that of its
fiscal agent) or whose long-term senior unsecured debt rating (or that of its
fiscal agent) is rated not less than "AA" or its equivalent by Fitch IBCA (or
such lower rating as would not result, as confirmed in writing by Fitch IBCA,
in a qualification, downgrade or withdrawal of any of the then current ratings
assigned by Fitch IBCA to the Certificates). The corporate trust office of the
Trustee responsible for administration of the Trust Fund (the "Corporate Trust
Office") is located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois
60674, Attention: Asset Backed Securities Trust Services Group--PaineWebber
Mortgage Acceptance Corporation V, Series 1999-C1.
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to receive a monthly fee from the Master Servicer out of the Servicing
Fee. The Trustee will be entitled to recover from the Trust all reasonable
unanticipated expenses and disbursements incurred or made by the Trustee in
accordance with any of the provisions of the Pooling and Servicing Agreement,
but not including expenses incurred in the ordinary course of performing its
duties as Trustee under the Pooling and Servicing Agreement, and not including
any such expense, disbursement or advance as may arise from its willful
misconduct, negligence or bad faith. See "Description of the Agreements--the
Trustee", "--Duties of the Trustee", "--Certain Matters Regarding the Trustee"
and "--Resignation and Removal of the Trustee" in the Prospectus.
The Trustee will also have certain duties with respect to REMIC
administration (in such capacity the "REMIC Administrator"). See "Certain
Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates" and "--Administrative Matters" in the Prospectus.
The Trustee has represented in the Pooling and Servicing Agreement that it
will use reasonable commercial efforts to cure (by August 1999) any
deficiencies with regards to the manipulation or calculation of dates beyond
December 31, 1999 in the internally maintained computer software systems used
by the Trustee in the conduct of its trust business which would materially and
adversely affect its ability to perform its obligations under the Pooling and
Servicing Agreement. The Trustee has further represented that it will use
reasonable commercial efforts to obtain reasonable assurances from each third
party vendor of licensed computer software systems used by the Trustee in the
conduct of its trust business that such vendor shall use reasonable commercial
efforts to cure any deficiencies with regards to the
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<PAGE>
manipulation or calculation of dates beyond December 31,1999 in such systems
which would materially and adversely affect the ability of the Trustee to
perform its obligations under the Pooling and Servicing Agreement. However,
neither the Depositor nor any affiliate of the Depositor has made any
independent investigation of the computer systems of the Trustee.
FISCAL AGENT
ABN AMRO Bank N.V., a Netherlands banking corporation, will act as Fiscal
Agent on behalf of the Certificateholders and will be obligated to make any
Advance required to be made, but not made, by the Master Servicer and the
Trustee under the Pooling and Servicing Agreement; provided, however, that the
Fiscal Agent will not be obligated to make any Advance that it deems to be a
Nonrecoverable Advance. The Fiscal Agent will be entitled (but not obligated)
to rely conclusively on any determination by the Master Servicer or the Trustee
that an Advance, if made, would be a Nonrecoverable Advance. The Fiscal Agent
will be entitled to reimbursement for each Advance made by it in the same
manner and to the same extent as, but prior to, the Master Servicer and the
Trustee. See "--Advances" above. The Fiscal Agent will be entitled to various
rights, protections and indemnities similar to those afforded the Trustee. The
Trustee will be responsible for payment of the compensation of the Fiscal
Agent. As of December 31, 1998, the Fiscal Agent had assets of approximately
$504 billion. In the event that LaSalle National Bank shall for any reason
cease to act as Trustee under the Pooling and Servicing Agreement, ABN AMRO
Bank N.V. likewise shall no longer serve in the capacity of Fiscal Agent
thereunder.
PAYING AGENT, CERTIFICATE REGISTRAR AND AUTHENTICATING AGENT
The Trustee will act as initial paying agent (in such capacity, the
"Paying Agent"), as initial registrar (in such capacity, the "Certificate
Registrar") for purposes of recording and otherwise providing for the
registration of the Offered Certificates and of transfers and exchanges of
definitive Certificates, if issued, and as initial authenticating agent of the
Certificates (in such capacity, the "Authenticating Agent").
[Remainder of Page Intentionally Left Blank]
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on: (i) the
Pass-Through Rate for such Certificate; (ii) the price paid for such
Certificate and, if the price was other than par, the rate and timing of
payments of principal on such Certificate; (iii) the aggregate amount of
distributions on such Certificate; and (iv) the aggregate amount of Collateral
Support Deficit amounts allocated to the Class of Offered Certificates.
Pass-Through Rate. The Pass-Through Rate applicable to each Class of
Offered Certificates for any Distribution Date will equal the rate set forth on
the cover of this Prospectus Supplement; provided, however, that in no event
will the Pass-Through Rate of any such Class (other than Class A-1 or Class
A-2) exceed the weighted average of the Net Mortgage Rates of the Mortgage
Loans (such Net Mortgage Rates determined without taking into account any
changes thereto resulting from modifications of the Mortgage Loans or otherwise
following the Cut-off Date). Certain of the Mortgage Loans have a Net Mortgage
Rate which may be less than the Pass-Through Rate of a Class of Certificates.
However, the shortfall between the Net Mortgage Rate of such Mortgage Loans and
the Pass-Through Rates of the Certificates is expected to be covered at all
times during the life of the Offered Certificates by the amount of interest
payments on the higher rate Mortgage Loans in the Mortgage Pool, which bear
interest at Mortgage Rates (and with corresponding Net Mortgage Rates) greater
than the Mortgage Rate for such Mortgage Loans. However, in the very unlikely
event that substantially all of the higher rate Mortgage Loans pay off or are
otherwise liquidated before the Certificates are retired, it is possible that
the Pass-Through Rate could be adjusted downward to avoid a mismatch between
such rate and the Net Mortgage Rate of such Mortgage Loans.
Rate and Timing of Principal Payments. The yield to holders of Offered
Certificates that are purchased at a discount or premium will be affected by
the rate and timing of principal payments on the Mortgage Loans (including
principal prepayments on the Mortgage Loans resulting from both voluntary
prepayments by the mortgagors and involuntary liquidations). The rate and
timing of principal payments on the Mortgage Loans will in turn be affected by
the amortization schedules thereof, the dates on which Balloon Payments are
due, any extensions of Maturity Dates by the Special Servicer and the rate and
timing of principal prepayments and other unscheduled collections thereon
(including for this purpose, collections made in connection with liquidations
of Mortgage Loans due to defaults, casualties or condemnations affecting the
Mortgaged Properties, or purchases of Mortgage Loans out of the Trust). In
addition, although the borrower under an ARD Loan may have certain incentives
to prepay the Mortgage Loan on the related Anticipated Repayment Date, there
can be no assurance that the borrower under an ARD Loan will be able to prepay
such Mortgage Loan on the related Anticipated Repayment Date. The failure of
the related borrower to prepay its ARD Loan on the related Anticipated
Repayment Date will not be an event of default under the terms of such Mortgage
Loan. See "Risk Factors--Risks Associated with Balloon Payments and ARD Loans"
herein.
Prepayments and, assuming the respective Maturity Dates therefor have not
occurred, liquidations and purchases of the Mortgage Loans, will result in
distributions on the Offered Certificates of amounts that would otherwise be
distributed over the remaining terms of the Mortgage Loans. Defaults on the
Mortgage Loans, particularly at or near their Stated Maturity Dates, may result
in significant delays in payments of principal on the Mortgage Loans (and,
accordingly, on the Offered Certificates) while work-outs are negotiated or
foreclosures are completed. See "Servicing of the Mortgage Loans--
Modifications, Waiver and Amendments" and "--Realization Upon Defaulted
Mortgage Loans" herein and "Certain Legal Aspects of Mortgage
Loans--Foreclosure" in the Prospectus. Because the rate of principal payments
on the Mortgage Loans will depend on future events and a variety of factors (as
described below), no assurance can be given as to such rate or the rate of
principal prepayments in particular. The Depositor is not aware of any relevant
publicly available or authoritative statistics with respect to the historical
prepayment experience of a large group of mortgage loans comparable to the
Mortgage Loans.
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<PAGE>
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans are in turn
distributed on such Certificates. If you bought your Certificates at a
discount, you should consider the risk that a slower than anticipated rate of
principal payments on the Mortgage Loans will result in an actual yield to you
that is lower than the anticipated yield and, if you bought your Certificates
at a premium you should consider the risk that a faster than anticipated rate
of principal payments on the Mortgage Loans will result in an actual yield to
you that is lower than the anticipated yield. In general, the earlier a payment
of principal is distributed on an Offered Certificate purchased at a discount
or premium, the greater will be the effect on your yield to maturity. As a
result, the effect on your yield of principal payments distributed on your
Offered Certificates occurring at a rate higher (or lower) than the rate
anticipated by you during any particular period would not be fully offset by a
subsequent like reduction (or increase) in the rate of principal payments.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans or shortfalls or
losses otherwise resulting in the reduction of the assets of the Trust. Losses
and other shortfalls on the Mortgage Loans will generally be borne by the
holders of the Class I, Class H, Class G, Class F, Class E, Class D, Class C
and Class B Certificates, in that order, and in each case to the extent of
amounts otherwise distributable in respect of such Class of Certificates. In
the event of the reduction of the Certificate Balances of all such Classes of
Certificates to zero, such losses and shortfalls will then be borne, pro rata,
by the Class A-1 and Class A-2 Certificates (and Class X Certificates with
respect to shortfalls of interest).
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on the Mortgage Loans may be affected by a
number of factors, including, without limitation, prevailing interest rates,
the terms of the Mortgage Loans (for example, due-on-sale clauses, Lockout
Periods, Prepayment Premiums or Yield Maintenance Charges and amortization
terms that require Balloon Payments), the demographics and relative economic
vitality of the areas in which the Mortgaged Properties are located and the
general supply and demand for rental properties in such areas, the quality of
management of the Mortgaged Properties, the servicing of the Mortgage Loans,
possible changes in tax laws and other opportunities for investment. See "Risk
Factors" and "Description of the Mortgage Pool" herein and "Risk Factors" and
"Yield Considerations" in the Prospectus. The rate of prepayment on the
Mortgage Pool is likely to be affected by prevailing market interest rates for
mortgage loans of a comparable type, term and risk level as the Mortgage Loans.
When the prevailing market interest rate is below a mortgage coupon, a borrower
may have an increased incentive to refinance its mortgage loan. However, under
all of the Mortgage Loans voluntary prepayments are subject to Lockout Periods
and/or Yield Maintenance Periods or Prepayment Premium Periods, although the
enforceability of such provisions is, in many states, subject to certain
equitable principles even outside of the bankruptcy context. See "Description
of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans--Prepayment Provisions" herein.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash
flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of such factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to which
a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
Delay in Payment of Distributions. Because each monthly distribution is
made on each Distribution Date, which is at least 15 days after the end of the
related Interest Accrual Period, the effective yield to the holders of the
Offered Certificates will be lower than the yield that would otherwise be
produced by the applicable Pass-Through Rates and purchase prices.
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<PAGE>
Unpaid Distributable Certificate Interest. As described under "Description
of the Certificates-- Distributions--Priority" herein, if the portion of the
Available Distribution Amount distributable in respect of interest on any Class
of Offered Certificates on any Distribution Date is less than the Distributable
Certificate Interest then payable for such Class, the shortfall will be
distributable to holders of such Class of Certificates on subsequent
Distribution Dates, to the extent of available funds. Any such shortfall will
not bear interest, however, and will therefore negatively affect the yield to
maturity of such Class of Certificates for so long as it is outstanding.
WEIGHTED AVERAGE LIFE
The weighted average life of an Offered Certificate refers to the average
amount of time that will elapse from the date of its issuance until each dollar
allocable to principal of such Certificate is distributed to the investor. The
weighted average life of such an Offered Certificate will be influenced by,
among other things, the rate at which principal on the Mortgage Loans is paid
or otherwise collected, which may be in the form of scheduled amortization,
voluntary prepayments, Insurance and Condemnation Proceeds and Liquidation
Proceeds.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the
then-scheduled principal balance of the pool of mortgage loans. As used in each
of the following tables, the column headed "0% CPR" assumes that none of the
Mortgage Loans is prepaid before the Stated Maturity Date or Anticipated
Repayment Date of the Mortgage Loan. The columns headed "3% CPR", "6% CPR", "9%
CPR" and "12% CPR" assume that prepayments on the Mortgage Loans are made at
those levels of CPR following the expiration of any Lockout Period and/or Yield
Maintenance Period. There is no assurance, however, that prepayments of the
Mortgage Loans will conform to any level of CPR, and no representation is made
that the Mortgage Loans will prepay at the levels of CPR shown or at any other
prepayment rate.
The following tables have been prepared on the basis of the following
assumptions, among others: (i) scheduled monthly payments of principal and/or
interest on the Mortgage Loans, in each case prior to any prepayment of the
Mortgage Loan, will be timely received (with no defaults) and will be
distributed on the 15th day of each month commencing in July, 1999; (ii) the
Mortgage Rate in effect for each Mortgage Loan as of the Cut-off Date will
remain in effect to the Stated Maturity Date of such Mortgage Loan; (iii)
except with respect to certain Mortgage Loans, for which the scheduled debt
service changes from time to time, the monthly principal and interest payment
due for each Mortgage Loan on the first Due Date following the related Cut-off
Date will continue to be due on each Due Date until the Stated Maturity Date or
Anticipated Maturity Date of such Mortgage Loan; (iv) any principal prepayments
on the Mortgage Loans will be received on their respective Due Dates after the
expiration of any applicable Lockout and/or Yield Maintenance Period at the
respective levels of CPR set forth in the tables; (v) the Mortgage Loan Seller
will not be required to repurchase any Mortgage Loan, and none of the Master
Servicer, the Special Servicer, the holders of the Controlling Class or the
holders of the Class LR Certificates will exercise its option to purchase all
the Mortgage Loans and thereby cause an early termination of the Trust; (vi) no
Yield Maintenance Charges or Prepayment Premiums are included in any
allocations or calculations; (vii) any principal prepayments received on the
Mortgage Loans are prepayments in full; (viii) the Closing Date is June 7,
1999; and (ix) each ARD Loan prepays on its Anticipated Repayment Date. To the
extent that the Mortgage Loans have characteristics that differ from those
assumed in preparing the tables set forth below, the Offered Certificates may
mature earlier or later than the Assumed Final Distribution Date. It is highly
unlikely that the Mortgage Loans will prepay at any constant rate until
maturity or that all the Mortgage Loans will prepay at the same rate. Investors
are urged to conduct their own analyses of the rates at which the Mortgage
Loans may be expected to prepay. Based on these assumptions, the following
tables indicate the resulting weighted average lives of each Class of Offered
Certificates (other than the Class X Certificates) and set forth the percentage
of the initial Certificate Balance of each such Class of Offered Certificates
that would be outstanding after each of the dates shown at the indicated CPRs.
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<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE OF THE CLASS A-1 CERTIFICATES AT THE
RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ....................... 100 100 100 100 100
June 15, 2000 ........................... 94 94 94 94 94
June 15, 2001 ........................... 87 87 87 86 86
June 15, 2002 ........................... 80 79 79 78 78
June 15, 2003 ........................... 72 71 71 70 70
June 15, 2004 ........................... 61 60 59 58 57
June 15, 2005 ........................... 44 44 44 44 44
June 15, 2006 ........................... 27 27 27 27 27
June 15, 2007 ........................... 5 5 5 5 5
June 15, 2008 ........................... 0 0 0 0 0
June 15, 2009 ........................... 0 0 0 0 0
June 15, 2010 ........................... 0 0 0 0 0
Weighted Average Life (Years)(A) ......... 5.32 5.29 5.26 5.24 5.21
Estimated First Principal ................ 7/15/99 7/15/99 7/15/99 7/15/99 7/15/99
Estimated Maturity ....................... 12/15/07 12/15/07 12/15/07 12/15/07 11/15/07
</TABLE>
- ----------
(A) The weighted average life of the Class A-1 Certificates is determined by
(i) multiplying the amount of each principal distribution thereon by the
number of years from the date of issuance of the Class A-1 Certificates to
the related Distribution Date, (ii) summing the results and (iii) dividing
the sum by the aggregate amount of the reductions in the principal balance
of such Class A-1 Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE OF THE CLASS A-2 CERTIFICATES AT THE
RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ....................... 100 100 100 100 100
June 15, 2000 ........................... 100 100 100 100 100
June 15, 2001 ........................... 100 100 100 100 100
June 15, 2002 ........................... 100 100 100 100 100
June 15, 2003 ........................... 100 100 100 100 100
June 15, 2004 ........................... 100 100 100 100 100
June 15, 2005 ........................... 100 100 100 100 100
June 15, 2006 ........................... 100 100 100 100 100
June 15, 2007 ........................... 100 100 100 100 100
June 15, 2008 ........................... 76 76 76 76 76
June 15, 2009 ........................... 0 0 0 0 0
June 15, 2010 ........................... 0 0 0 0 0
Weighted Average Life (Years)(A) ......... 9.27 9.27 9.26 9.26 9.26
Estimated First Principal ................ 12/15/07 12/15/07 12/15/07 12/15/07 11/15/07
Estimated Maturity ....................... 4/15/09 4/15/09 4/15/09 4/15/09 4/15/09
</TABLE>
- ----------
(A) The weighted average life of the Class A-2 Certificates is determined by
(i) multiplying the amount of each principal distribution thereon by the
number of years from the date of issuance of the Class A-2 Certificates to
the related Distribution Date, (ii) summing the results and (iii) dividing
the sum by the aggregate amount of the reductions in the principal balance
of such Class A-2 Certificates.
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<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE OF THE CLASS B CERTIFICATES AT THE
RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ....................... 100 100 100 100 100
June 15, 2000 ........................... 100 100 100 100 100
June 15, 2001 ........................... 100 100 100 100 100
June 15, 2002 ........................... 100 100 100 100 100
June 15, 2003 ........................... 100 100 100 100 100
June 15, 2004 ........................... 100 100 100 100 100
June 15, 2005 ........................... 100 100 100 100 100
June 15, 2006 ........................... 100 100 100 100 100
June 15, 2007 ........................... 100 100 100 100 100
June 15, 2008 ........................... 100 100 100 100 100
June 15, 2009 ........................... 0 0 0 0 0
June 15, 2010 ........................... 0 0 0 0 0
Weighted Average Life (Years)(A) ......... 9.86 9.86 9.86 9.86 9.86
Estimated First Principal ................ 4/15/09 4/15/09 4/15/09 4/15/09 4/15/09
Estimated Maturity ....................... 5/15/09 5/15/09 4/15/09 4/15/09 4/15/09
</TABLE>
- ----------
(A) The weighted average life of the Class B Certificates is determined by (i)
multiplying the amount of each principal distribution thereon by the
number of years from the date of issuance of the Class B Certificates to
the related Distribution Date, (ii) summing the results and (iii) dividing
the sum by the aggregate amount of the reductions in the principal balance
of such Class B Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE OF THE CLASS C CERTIFICATES AT THE
RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ....................... 100 100 100 100 100
June 15, 2000 ........................... 100 100 100 100 100
June 15, 2001 ........................... 100 100 100 100 100
June 15, 2002 ........................... 100 100 100 100 100
June 15, 2003 ........................... 100 100 100 100 100
June 15, 2004 ........................... 100 100 100 100 100
June 15, 2005 ........................... 100 100 100 100 100
June 15, 2006 ........................... 100 100 100 100 100
June 15, 2007 ........................... 100 100 100 100 100
June 15, 2008 ........................... 100 100 100 100 100
June 15, 2009 ........................... 0 0 0 0 0
June 15, 2010 ........................... 0 0 0 0 0
Weighted Average Life (Years)(A) ......... 9.94 9.94 9.94 9.94 9.94
Estimated First Principal ................ 5/15/09 5/15/09 4/15/09 4/15/09 4/15/09
Estimated Maturity ....................... 6/15/09 6/15/09 6/15/09 6/15/09 5/15/09
</TABLE>
- ----------
(A) The weighted average life of the Class C Certificates is determined by (i)
multiplying the amount of each principal distribution thereon by the
number of years from the date of issuance of the Class C Certificates to
the related Distribution Date, (ii) summing the results and (iii) dividing
the sum by the aggregate amount of the reductions in the principal balance
of such Class C Certificates.
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<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE OF THE CLASS D CERTIFICATES AT THE
RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ....................... 100 100 100 100 100
June 15, 2000 ........................... 100 100 100 100 100
June 15, 2001 ........................... 100 100 100 100 100
June 15, 2002 ........................... 100 100 100 100 100
June 15, 2003 ........................... 100 100 100 100 100
June 15, 2004 ........................... 100 100 100 100 100
June 15, 2005 ........................... 100 100 100 100 100
June 15, 2006 ........................... 100 100 100 100 100
June 15, 2007 ........................... 100 100 100 100 100
June 15, 2008 ........................... 100 100 100 100 100
June 15, 2009 ........................... 28 28 28 28 28
June 15, 2010 ........................... 0 0 0 0 0
Weighted Average Life (Years)(A) ......... 10.14 10.14 10.14 10.14 10.14
Estimated First Principal ................ 6/15/09 6/15/09 6/15/09 6/15/09 6/15/09
Estimated Maturity ....................... 12/15/09 12/15/09 12/15/09 12/15/09 12/15/09
</TABLE>
- ----------
(A) The weighted average life of the Class D Certificates is determined by (i)
multiplying the amount of each principal distribution thereon by the
number of years from the date of issuance of the Class D Certificates to
the related Distribution Date, (ii) summing the results and (iii) dividing
the sum by the aggregate amount of the reductions in the principal balance
of such Class D Certificates.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
SERVICING OF THE MORTGAGE LOANS
GENERAL
The servicing of the Mortgage Loans and any REO Properties will be
governed by the Pooling and Servicing Agreement. The following summaries
describe certain provisions of the Pooling and Servicing Agreement relating to
the servicing and administration of the Mortgage Loans and any REO Properties.
The summaries do not purport to be complete and are subject, and qualified in
their entirety by reference, to the provisions of the Pooling and Servicing
Agreement. Reference is made to the Prospectus for additional information
regarding the terms of the Pooling and Servicing Agreement relating to the
servicing and administration of the Mortgage Loans and any REO Properties,
provided that the information herein supersedes any contrary information set
forth in the Prospectus. See "Description of the Agreements" in the Prospectus.
Each of the Master Servicer and the Special Servicer will be required to
service and administer the Mortgage Loans for which it is responsible. The
Master Servicer will initially perform primary servicing for all of the
Mortgage Loans except for three of the Mortgage Loans to be sold by MLMC to the
Depositor, with an aggregate Cut-off Date Balance of approximately $29,808,000,
representing approximately 4.23% of the Initial Pool Balance, for which Chase
will be the primary servicer.
Each of the Master Servicer and the Special Servicer will diligently
service and administer the respective Mortgage Loans for which each is
responsible on behalf of the Trustee for the benefit of the Certificateholders
(as determined by the Master Servicer or the Special Servicer, as the case may
be, in its good faith and reasonable business judgment), in accordance with
applicable law, the terms of the Pooling and Servicing Agreement, the terms of
the respective Mortgage Loans and, to the extent consistent with the foregoing,
with the same care, skill, prudence and diligence with which the Master
Servicer or the Special Servicer, as the case may be, (i) services and
administers similar mortgage loans for other third-party portfolios, giving due
consideration to the customary and usual standards of practice of prudent
institutional, commercial, and multifamily mortgage lenders servicing their own
mortgage loans or (ii) services and administers commercial, multifamily and
manufactured housing mortgage loans owned by the Master Servicer or the Special
Servicer, as the case may be, whichever standard is higher, and with a view to
the maximization of timely recovery of principal and interest on the Mortgage
Loans or Specially Serviced Mortgage Loans, as applicable, and the best
interests of the Trust and the Certificateholders, as determined by the Master
Servicer or the Special Servicer, as the case may be, in its reasonable
judgment, notwithstanding: (A) any relationship that the Master Servicer or the
Special Servicer, as the case may be, or any affiliate thereof, may have with
the related borrower or any other party to the Pooling and Servicing Agreement;
(B) the ownership of any Certificate by the Master Servicer or the Special
Servicer, as the case may be, or any affiliate thereof; (C) the Master
Servicer's obligation to make Advances; (D) the Master Servicer's or the
Special Servicer's, as the case may be, right to receive compensation for its
services under the Pooling and Servicing Agreement or with respect to any
particular transaction and (E) owning or managing any other mortgage loans or
mortgaged properties for third parties (the foregoing, collectively referred to
as the "Servicing Standard"). Each of the Master Servicer and Special Servicer
has full power and authority, acting alone, to do or cause to be done any and
all things in connection with the servicing and administration of the Mortgage
Loans which it may deem necessary or desirable, subject only to the Servicing
Standard and the terms of the Pooling and Servicing Agreement and the
respective Mortgage Loans.
Except as otherwise described under "--Inspections; Collection of
Operating Information" below, the Master Servicer initially will be responsible
for the servicing of the entire Mortgage Pool. With respect to any Mortgage
Loan (each a "Specially Serviced Mortgage Loan"):
(i) as to which a payment default has occurred at its Maturity Date (or,
with respect to a Monthly Payment which is a Balloon Payment, as to which
the Balloon Payment is over 30 days past due), or, if the Stated Maturity
Date has been extended, at its extended maturity,
(ii) as to which any Monthly Payment (other than a Balloon Payment) is
more than 60 days delinquent,
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<PAGE>
(iii) as to which the Master Servicer determines that a payment default
has occurred or is imminent and is not likely to be cured by the related
borrower within 60 days,
(iv) as to which the borrower has entered into or consented to
bankruptcy, appointment of a receiver or conservator or a similar
insolvency proceeding, or the borrower has become the subject of a decree
or order for such a proceeding (provided that if such appointment, decree
or order is stayed or discharged, or such consent revoked within 60 days
such Mortgage Loan shall not be considered a Specially Serviced Mortgage
Loan during such period), or the related borrower has admitted in writing
its inability to pay its debts generally as they become due,
(v) as to which the Master Servicer shall have received actual notice of
the foreclosure or proposed foreclosure of any other lien on the Mortgaged
Property, or
(vi) as to which a default has occurred, of which the Master Servicer has
actual notice (other than a failure by the related borrower to pay
principal or interest), which materially and adversely affects the
interests of the Certificateholders and which remains unremediated for the
applicable grace period specified in such Mortgage Loan (or if no grace
period is specified, 60 days),
the Master Servicer will transfer its servicing responsibilities to the Special
Servicer, but will continue to receive payments on such Mortgage Loan
(including amounts collected by the Special Servicer), to make certain
calculations with respect to such Mortgage Loan and to make remittances and
prepare certain reports to the Certificateholders with respect to such Mortgage
Loan. If the related Mortgaged Property is acquired in respect of any such
Mortgage Loan (upon acquisition, an "REO Property") whether through
foreclosure, deed-in-lieu of foreclosure or otherwise, the Special Servicer
will continue to be responsible for the operation and management thereof. The
Mortgage Loans serviced by the Special Servicer and any Mortgage Loans that
have become REO Properties are referred to herein as the "Specially Serviced
Mortgage Loans". The Master Servicer shall have no responsibility for the
performance by the Special Servicer of its duties under the Pooling and
Servicing Agreement.
If any Specially Serviced Mortgage Loan, in accordance with its original
terms or as modified in accordance with the Pooling and Servicing Agreement,
becomes current and remains current for three consecutive monthly payments
(provided no additional event of default is foreseeable in the reasonable
judgment of the Special Servicer), the Special Servicer will return servicing
of such Mortgage Loan (a "Corrected Mortgage Loan") to the Master Servicer.
The Special Servicer will prepare a report (an "Asset Status Report") for
each Mortgage Loan which becomes a Specially Serviced Mortgage Loan not later
than 30 days after the servicing of such Mortgage Loan is transferred to the
Special Servicer. Each Asset Status Report will be delivered to the Directing
Certificateholder (as defined below) and the Rating Agencies. If the Directing
Certificateholder does not disapprove an Asset Status Report within 10 business
days, the Special Servicer shall implement the recommended action as outlined
in such Asset Status Report. The Directing Certificateholder may object to any
Asset Status Report within 10 business days of receipt; provided, however, that
the Special Servicer shall implement the recommended action as outlined in such
Asset Status Report if it makes an affirmative determination that such
objection is not in the best interest of the all of the Certificateholders. If
the Directing Certificateholder disapproves such Asset Status Report and the
Special Servicer has not made the affirmative determination described above,
the Special Servicer will revise such Asset Status Report as soon as
practicable thereafter, but in no event later than 30 days after such
disapproval. The Special Servicer will revise such Asset Status Report until
the Directing Certificateholder fails to disapprove such revised Asset Status
Report as described above or until the Special Servicer makes a determination
that such objection is not in the best interests of the all of the
Certificateholders.
The "Directing Certificateholder" will be Controlling Class
Certificateholder selected by more than 50% of the Controlling Class
Certificateholders, by Certificate Balance, as certified by the Trustee from
time to time; provided, however, that (i) absent such selection, or (ii) until
a Directing Certificateholder is so selected or (iii) upon receipt of a notice
from a majority of the Controlling Class Certificateholders, by Certificate
Balance, that a Directing Certificateholder is no longer designated, the
Controlling Class
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<PAGE>
Certificateholder that owns the largest aggregate Certificate Balance of the
Controlling Class will be the Directing Certificateholder. A "Controlling Class
Certificateholder" is each holder (or Certificate Owner, if applicable) of a
Certificate of the Controlling Class as certified to the Trustee from time to
time by such holder (or Certificate Owner).
The "Controlling Class" will be as of any time of determination the most
subordinate Class of Certificates then outstanding (other than the Residual
Certificates) that has a Certificate Balance at least equal to the lesser of
(a) 1% of the Initial Pool Balance and (b) 25% of the initial Certificate
Balance of such Class. For purposes of determining the identity of the
Controlling Class, the Certificate Balance of any Class other than Classes E,
F, G, H and I shall be deemed to be reduced by the amount of any Appraisal
Reductions allocated to such Class.
The Controlling Class as of the Closing Date will be the Class I
Certificates.
The Special Servicer will not be required to take or refrain from taking
any action pursuant to instructions from the Directing Certificateholder that
would (a) require or cause it to violate the terms of a Specially Serviced
Mortgage Loan, applicable law or any provision of the Pooling and Servicing
Agreement, including its obligation to maintain the REMIC status of each of the
Lower-Tier REMIC and the Upper-Tier REMIC, or (b) result in the imposition of a
"prohibited transaction" or "prohibited contribution" tax under the REMIC
Provisions, or (c) expose it, the Master Servicer, the Depositor, the Mortgage
Loan Sellers, the Trust, the Trustee, the Fiscal Agent or their officers,
members, managers, directors, employees or agents to any claim, suit or
liability or (d) materially expand the scope of its or the Master Servicer's
responsibilities under the Pooling and Servicing Agreement or cause or direct
it to act in a manner contrary to the Servicing Standard.
THE MASTER SERVICER
Banc One Mortgage Capital Markets, LLC ("BOMCM") or an affiliate thereof
will act as the master servicer (the "Master Servicer") pursuant to the Pooling
and Servicing Agreement. BOMCM is a Delaware limited liability company. BOMCM
manages a servicing portfolio of commercial and multifamily loans with an
aggregate principal balance, as of March 31, 1999, of approximately $26.8
billion, the collateral for which is located in 49 states, Puerto Rico, the
District of Columbia, Mexico and the Caribbean. BOMCM's servicing operations
are located at 1717 Main Street, Dallas, Texas 75201. The Master Servicer will
be responsible for servicing the Mortgage Loans (other than Specially Serviced
Mortgage Loans and REO Properties). Although the Master Servicer is authorized
to employ agents to directly service certain of the Mortgage Loans as long as
they are not Specially Serviced Mortgage Loans, as described above under
"--General", the Master Servicer will remain liable for its servicing
obligations under the Pooling and Servicing Agreement. The Master Servicer's
principal offices are located at 1717 Main Street, Dallas, Texas 75201.
The information concerning the Master Servicer set forth herein has been
provided by the Master Servicer, and none of the Mortgage Loan Sellers, the
Depositor, the Trustee, the Fiscal Agent or either Underwriter makes any
representation or warranty as to the accuracy thereof.
THE SPECIAL SERVICER
BOMCM or an affiliate thereof will act as the special servicer (the
"Special Servicer") pursuant to the Pooling and Servicing Agreement. As of
March 31, 1999, BOMCM served as the named Special Servicer on 63 securitized
transactions encompassing 14,853 loans, with an aggregate principal balance of
approximately $41 billion. For further information about BOMCM, please see
"--The Master Servicer" above.
The information concerning the Special Servicer set forth herein has been
provided by the Special Servicer, and none of the Mortgage Loan Sellers, the
Depositor, the Trustee, the Fiscal Agent or either Underwriter makes any
representation or warranty as to the accuracy thereof.
The Special Servicer may be removed, and a successor Special Servicer
appointed, at any time by the holders of Certificates representing more than
50% of the aggregate Certificate Balance of the Controlling
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<PAGE>
Class, provided that each Rating Agency confirms in writing that such
replacement of the Special Servicer, in and of itself, will not cause a
qualification, withdrawal or downgrading of the then-current ratings assigned
to any Class of Certificates.
We expect that the Special Servicer or its affiliates will purchase all of
the Class E, Class F, Class G, Class H and Class I Certificates.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The fee of the Master Servicer (the "Servicing Fee") will be payable
monthly on a loan-by-loan basis with respect to the Mortgage Loans, from
amounts received in respect of interest on each Mortgage Loan, and will accrue
at a rate (the "Servicing Fee Rate"), calculated on a basis of a 360-day year
consisting of twelve 30-day months equal to 0.1085% per annum (or 0.0685% per
annum with respect to the Mortgage Loans identified on Annex A-1 as ML-146,
ML-147 and ML-148) computed on the basis of the Stated Principal Balance of the
related Mortgage Loan, reduced by amounts required to be used to cover
Prepayment Interest Shortfalls as described above in "Description of the
Certificates--Distributions". The Master Servicer will be responsible for
paying the Trustee Fee from the Servicing Fee. A portion of the Servicing Fee,
in an amount equal to % per annum of the Stated Principal Balance of the
Mortgage Loans from time to time, may be irrevocably assigned to BOMCM. BOMCM
may be entitled to retain such assigned portion of the Servicing Fee during the
entire period that it acts as Master Servicer and following its resignation or
termination as Master Servicer for any reason.
In addition to the Servicing Fee, the Master Servicer will be entitled to
retain, as additional servicing compensation, (i) all assumption fees,
modification fees and processing fees paid by the borrowers on Mortgage Loans
that are not Specially Serviced Mortgage Loans, and (ii) late payment charges
and Default Interest paid by the borrowers (other than on Specially Serviced
Mortgage Loans), but only to the extent the amounts in clause (ii) are not
needed to pay interest on Advances. The Master Servicer also is entitled to
retain any interest earned on any servicing escrow account or reserve account
to the extent such interest is not required to be paid to the related
borrowers.
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the Special Servicing Fee, the
Workout Fee and the Liquidation Fee. The "Special Servicing Fee" will accrue
with respect to each Specially Serviced Mortgage Loan at a rate equal to 0.25%
per annum (the "Special Servicing Fee Rate") calculated on the basis of the
Stated Principal Balance of the related Specially Serviced Mortgage Loans and
on the basis of a 360-day year consisting of twelve 30-day months, and will be
payable monthly from the Certificate Account.
A "Workout Fee" will in general be payable with respect to each Corrected
Mortgage Loan. As to each Corrected Mortgage Loan, the Workout Fee will be
payable out of, and will be calculated by application of a "Workout Fee Rate"
of 1% to each collection of interest and principal (including scheduled
payments, prepayments, Balloon Payments, and payments at maturity) received on
such Mortgage Loan for so long as it remains a Corrected Mortgage Loan. The
Workout Fee with respect to any Corrected Mortgage Loan will cease to be
payable if such Corrected Mortgage Loan again becomes a Specially Serviced
Mortgage Loan; provided that a new Workout Fee will become payable if and when
such Mortgage Loan again becomes a Corrected Mortgage Loan. If the Special
Servicer is terminated by the Directing Certificateholder (other than for
cause, and only if such Directing Certificateholder is not an affiliate of the
Master Servicer), it shall retain the right to receive any and all Workout Fees
payable with respect to Mortgage Loans that became Corrected Mortgage Loans
during the period that it acted as Special Servicer and were still such at the
time of such termination or resignation (and the successor Special Servicer
shall not be entitled to any portion of such Workout Fees), in each case until
the Workout Fee for any such loan ceases to be payable in accordance with the
preceding sentence.
A "Liquidation Fee" will be payable with respect to each Specially
Serviced Mortgage Loan as to which the Special Servicer obtains a full or
partial payoff with respect thereto from the related borrower and, except as
otherwise described below, with respect to any Specially Serviced Mortgage Loan
or REO Property as to which the Special Servicer receives any Liquidation
Proceeds. As to each such Specially Serviced Mortgage Loan, the Liquidation Fee
will be payable from, and will be calculated by application
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<PAGE>
of a "Liquidation Fee Rate" of 1% to the Liquidation Proceeds (defined below).
Notwithstanding anything to the contrary described above, no Liquidation Fee
will be payable based on, or out of, Liquidation Proceeds (defined below)
received in connection with the repurchase of any Mortgage Loan by a Mortgage
Loan Seller for a breach of representation or warranty or for defective or
deficient Mortgage Loan documentation, the purchase of any Specially Serviced
Mortgage Loan by the Master Servicer or the Special Servicer or the purchase of
all of the Mortgage Loans and REO Properties in connection with an optional
termination of the Trust. If, however, Liquidation Proceeds are received with
respect to any Corrected Mortgage Loan and the Special Servicer is properly
entitled to a Workout Fee, such Workout Fee will be payable based on and out of
the portion of such Liquidation Proceeds that constitutes principal and/or
interest. The Special Servicer will be entitled to additional servicing
compensation in the form of all assumption fees, modification fees and
extension fees on or with respect to Specially Serviced Mortgage Loans. The
Special Servicer will also be entitled to late payment charges and Default
Interest paid by the borrowers on Specially Serviced Mortgage Loans, but only
to the extent such amounts are not needed to pay interest on Advances.
"Liquidation Proceeds" means cash (other than insurance and condemnation
proceeds and revenues from REO Properties) received or paid by the Master
Servicer in connection with (i) the full or partial liquidation of a Mortgage
Loan, Mortgaged Property or other collateral constituting security for a
defaulted Mortgage Loan, (ii) the realization upon any deficiency judgment
obtained against a borrower; and (iii) any sale of a defaulted Mortgage Loan or
REO Property less related expenses. Neither the Master Servicer or the Special
Servicer shall be entitled to receive Excess Interest with respect to any ARD
Loan.
Although the Master Servicer and the Special Servicer are each required to
service and administer the Mortgage Pool in accordance with the Servicing
Standard above and, accordingly, without regard to its right to receive
compensation under the Pooling and Servicing Agreement, additional servicing
compensation in the nature of assumption and modification fees may under
certain circumstances provide the Master Servicer or the Special Servicer, as
the case may be, with an economic disincentive to comply with such standard.
As and to the extent described herein under "Description of the
Certificates--Advances," the Master Servicer will be entitled to receive
interest on Advances, such interest to be paid contemporaneously with the
reimbursement of the related Advance.
Each of the Master Servicer and the Special Servicer generally will be
required to pay all expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement and will not be entitled
to reimbursement therefor except as expressly provided in the Pooling and
Servicing Agreement. In connection therewith, the Master Servicer will be
responsible for all fees of any of its primary servicers. See "Description of
the Certificates--Distributions--Method, Timing and Amount" herein and
"Description of the Agreements--Certificate Account" and "--Servicing
Compensation and Payment of Expenses" in the Prospectus.
MAINTENANCE OF INSURANCE
The Master Servicer will use its reasonable best efforts consistent with
the Servicing Standard to cause each borrower to maintain, to the extent
required by the terms of the related Mortgage Note, all insurance coverage
required under the related Mortgage (to the extent that the Trustee has an
insurable interest), or, if the related borrower does not maintain such
coverage and such insurance coverage is available at commercially reasonable
rates, consistent with the Servicing Standard, the Master Servicer will
maintain the insurance coverage, provided, however, that if the Master Servicer
obtains such insurance coverage, the related insurance policy will include a
replacement cost endorsement providing for no deduction for depreciation but,
in any event, in an amount sufficient to avoid the application of any
co-insurance clause unless otherwise permitted in the related Mortgage Loan
documents. During all such times as the Mortgaged Property is located in an
area identified as a federally designated special flood hazard area (and such
flood insurance has been made available), the Master Servicer will use its
reasonable best efforts consistent with the Servicing Standard to cause each
borrower to maintain (to the extent required by the related Mortgage Loan), and
if the borrower does not so maintain, shall itself maintain to the extent
available at commercially reasonable rates (as determined by the Master
Servicer
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<PAGE>
in accordance with the Servicing Standard), a flood insurance policy in an
amount representing coverage not less than the lesser of (i) the outstanding
principal balance of the related Mortgage Loan and (ii) the maximum amount of
insurance which is available under the Flood Disaster Protection Act of 1973,
as amended, but only to the extent that the related Mortgage Loan permits the
lender to require such coverage and maintaining such coverage is consistent
with the Servicing Standard.
The Special Servicer will be required to maintain (or cause to be
maintained), fire and hazard insurance on each REO Property, to the extent
obtainable, in an amount which is at least equal to the lesser of (i) an amount
necessary to avoid the application of any co-insurance clause and (ii) the full
replacement cost of the improvements on such REO Property. In addition, during
all such times as the REO Property is located in an area identified as a
federally designated special flood hazard area, the Special Servicer will cause
to be maintained, to the extent available at commercially reasonable rates (as
determined by the Special Servicer in accordance with the Servicing Standard),
a flood insurance policy meeting the requirements of the current guidelines of
the Federal Insurance Administration in an amount representing coverage not
less than the maximum amount of insurance which is available under the Flood
Disaster Protection Act of 1973, as amended.
The Pooling and Servicing Agreement provides that the Master Servicer and
the Special Servicer may satisfy their respective obligations to cause each
borrower to maintain a hazard insurance policy by maintaining a blanket policy
insuring against hazard losses on the Mortgage Loans and REO Properties. Any
losses incurred with respect to Mortgage Loans or REO Properties due to
uninsured risks (including earthquakes, mudflows and floods) or insufficient
hazard insurance proceeds may adversely affect payments to Certificateholders.
Any cost incurred by the Master Servicer in maintaining any such insurance
policy if the borrower defaults on its obligation to do so shall be advanced by
the Master Servicer as a Servicing Advance and will be charged to the related
borrower. Generally, no borrower is required by the Mortgage Loan documents to
maintain earthquake insurance on any Mortgaged Property and the Special
Servicer will not be required to maintain earthquake insurance on any REO
Properties. With respect to any Mortgage Loan documents that require or permit
that earthquake insurance be maintained, the Directing Certificateholder may
request that earthquake insurance be secured for one or more Mortgaged
Properties and, upon such request, the Master Servicer or Special Servicer, as
applicable, will use its reasonable best efforts consistent with the Servicing
Standard to enforce such obligations consistent with the terms of the related
Loan Documents; provided, however, that the Directing Certificateholder may not
make such request with respect to Mortgaged Properties with respect to which
earthquake insurance was not maintained at origination unless there is a
material adverse change in the facts and circumstances relating to the
Mortgaged Property. A decrease in the NOI or Appraised Value of the related
Mortgaged Property in excess of 10% since the Cut-off Date shall constitute
such a material adverse change. With respect to any Mortgage Loan (i) that does
not require or permit the related lender to require that earthquake insurance
be maintained or (ii) that the Master Servicer or Special Servicer, as
applicable, has been unable to enforce the provisions of the preceding
sentence, the Directing Certificateholder may request that earthquake insurance
be secured by the Master Servicer or Special Servicer, as applicable, at the
expense of the Directing Certificateholder. Any cost of maintaining any such
required insurance or other earthquake insurance obtained by the Special
Servicer shall be paid out of a segregated custodial account (or subaccount)
created and maintained by the Special Servicer on behalf of the Trustee in
trust for the Certificateholders (the "REO Account") or advanced by the Master
Servicer as a Servicing Advance.
Such costs may be recovered by the Master Servicer from reimbursements
received from the borrower or, if the borrower does not pay such amounts, as
Servicing Advances as set forth in the Pooling and Servicing Agreement.
No pool insurance policy, special hazard insurance policy, bankruptcy
bond, repurchase bond or certificate guarantee insurance will be maintained
with respect to the Mortgage Loans, nor will any Mortgage Loan be subject to
FHA insurance.
MODIFICATIONS, WAIVER AND AMENDMENTS
The Special Servicer may agree to extend the Stated Maturity Date of a
Mortgage Loan that is not a Specially Serviced Mortgage Loan; provided,
however, that, no such extension entered into by the
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Special Servicer shall extend the Stated Maturity Date beyond the earlier of
(i) two years prior to the Rated Final Distribution Date and (ii) in the case
of a Mortgage Loan secured by a leasehold estate, the date ten years prior to
the expiration of such leasehold estate; and provided further that, if such
extension would extend the Stated Maturity Date of a Mortgage Loan for more
than twelve months from and after the original Maturity Date of such Mortgage
Loan, the Special Servicer may only enter into such extension if it provides
the Trustee with the opinion of counsel described in the next sentence. Except
as otherwise set forth in this paragraph, the Special Servicer (or in certain
circumstances the Master Servicer) may not waive, modify or amend any provision
of a Mortgage Loan which is not in default or as to which default is not
reasonably foreseeable except for (i) the waiver of any due-on-sale clause or
due-on-encumbrance clause to the extent permitted in the Pooling and Servicing
Agreement, and (ii) any waiver, modification or amendment that would not be a
"significant modification" of the Mortgage Loan, within the meaning of Treasury
Regulations Section 1.860G-2(b) and as to which the Special Servicer has
provided the Trustee with an opinion of counsel that such waiver, modification
or amendment will not constitute such a "significant modification."
If, but only if, the Special Servicer determines that a modification,
waiver or amendment (including the forgiveness or deferral of interest or
principal or the substitution or release of collateral or the pledge of
additional collateral) of the terms of a Specially Serviced Mortgage Loan, with
respect to which a payment default or other material default has occurred or a
payment default or other material default is, in the Special Servicer's
judgment, reasonably foreseeable, is reasonably likely to produce a greater
recovery on a net present value basis (the relevant discounting to be performed
at the related Mortgage Rate) than liquidation of such Specially Serviced
Mortgage Loan, then the Special Servicer may agree to a modification, waiver or
amendment of such Specially Serviced Mortgage Loan, subject to the restrictions
and limitations described below. The Special Servicer will use its reasonable
best efforts consistent with the servicing standard set forth in the Pooling
and Servicing Agreement to the extent possible to fully amortize a modified
Mortgage Loan prior to the Rated Final Distribution Date.
The Special Servicer may not agree to a modification, waiver or amendment
of any term of any Specially Serviced Mortgage Loan if such modification,
waiver or amendment would:
(i) extend the Stated Maturity Date of any such Specially Serviced
Mortgage Loan to a date occurring later than the earlier of (A) two years
prior to the Rated Final Distribution Date and (B) if such Specially
Serviced Mortgage Loan is secured by a leasehold estate, the date ten years
prior to the expiration of such leasehold;
(ii) reduce the related Net Mortgage Rate to less than the lesser of (A)
the original Net Mortgage Rate and (B) the highest Pass-Through Rate on any
Class of Certificates (other than the Class X Certificates); or
(iii) provide for the deferral of interest unless (A) interest accrues
thereon, generally, at the related Mortgage Rate and (B) the aggregate
amount of such deferred interest does not exceed 10% of the unpaid
principal balance of such Specially Serviced Mortgage Loan.
In the event of a modification which creates a deferral of interest, the
Pooling and Servicing Agreement will provide that the amount of deferred
interest will be allocated to reduce the Distributable Certificate Interest of
the Class or Classes (other than the Class X Certificates) with the latest
alphabetical designation then outstanding, and to the extent so allocated,
shall be added to the Certificate Balance of such Class or Classes (such
deferred interest, "Mortgage Deferred Interest").
The Master Servicer may, consistent with the Servicing Standards, modify
or amend the terms of any Mortgage Loan, without the consent of the Special
Servicer in order to (i) cure any ambiguity therein, (ii) correct or supplement
any provisions therein which may be inconsistent with any other provisions
therein or correct any error (iii) waive defaults with respect to minor
covenants (other than financial covenants), including with respect to late
financial statements, to the extent such waiver will not have any material
adverse effect on the rights or interests of the Certificateholder or any
Class, (iv) release parcels of a Mortgaged Property to the extent that any such
release will not have any material adverse affect on the rights or interests of
the Certificateholders of any Class, if each Rating Agency has been notified by
the
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Master Servicer of its intent to permit such release and each Rating Agency has
provided written notice that such release will not result in the withdrawal,
qualification or downgrade of its then current rating of any Class of
Certificates (provided that releases as to which Mortgage Loan documents
expressly require the borrower thereunder to make such releases upon the
satisfaction of certain conditions shall be made as required in the Mortgage
Loan documents), (v) make any other modifications, waivers or amendments which
the Master Servicer determined, in accordance with the Servicing Standards, are
of routine nature and will not have a material adverse affect on the rights or
interests of the Certificateholders of any Class, and provided that such
modification or amendment would not be a "significant modification" of the
Mortgage Loan, within the meaning of Treasury Regulations Section 1.860G-2(b),
and provided further that the proposed modification or amendment will not cause
(x) either the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a
REMIC for purposes of the Code or (y) either the Upper-Tier REMIC or the
Lower-Tier REMIC to be subject to any tax under the REMIC Provisions.
Notwithstanding anything to the contrary herein, with respect to any
Mortgage Loan the outstanding principal balance of which exceeds the lesser of
$15,000,000 or 5% of the outstanding aggregate balance of all Mortgage Loans in
the Trust, to the extent the related Loan Documents require the related
borrower to obtain the consent or approval of the related mortgagee, the Master
Servicer or the Special Servicer, as applicable, will not (a) consent to the
removal or replacement of any property manager or (b) consent to or approve of
any transfer of equity of (or equivalent ownership interests in) the related
borrower or of any equity owner of the borrower that is itself required to be a
special purpose entity if, during the term of such Mortgage Loan, in excess of
49% of such equity (or equivalent) will have been transferred to any other
party, in either case unless notice thereof shall have been given to each
Rating Agency and each Rating Agency shall have confirmed in writing that such
action will not, by itself, result in the downgrade, withdrawal or reduction of
its then-current rating of any outstanding Class of Certificates.
The Special Servicer or the Master Servicer, as the case may be, will
notify each other, the Rating Agencies, the Trustee and the Directing
Certificateholder of any modification, waiver or amendment of any term of any
Mortgage Loan and must deliver to the Trustee for deposit in the related
mortgage file, an original counterpart of the agreement related to such
modification, waiver or amendment, promptly following the execution thereof.
Copies of each agreement whereby any such modification, waiver or amendment of
any term of any Mortgage Loan is effected are to be available for review during
normal business hours at the offices of the Trustee. See "Description of the
Certificates--Reports to Certificateholders; Certain Available Information"
herein.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
Pursuant to the Pooling and Servicing Agreement, if a default on a
Mortgage Loan has occurred or, in the Special Servicer's judgment, a payment
default is imminent, the Special Servicer, on behalf of the Trustee may at any
time, consistent with the Servicing Standard, institute foreclosure
proceedings, exercise any power of sale contained in the related Mortgage,
obtain a deed in lieu of foreclosure or otherwise acquire title to the related
Mortgaged Property. The Special Servicer may not, however, acquire title to any
Mortgaged Property or take any other action with respect to any Mortgaged
Property that would cause the Trustee, for the benefit of the
Certificateholders, or any other specified person to be considered to hold
title to, to be a "mortgagee-in-possession" of or to be an "owner" or an
"operator" of such Mortgaged Property within the meaning of certain federal
environmental laws, unless the Special Servicer has previously received a
report prepared by a person who regularly conducts environmental audits (which
report will be paid by the Master Servicer as a Servicing Advance) and either:
(i) such report indicates that (a) the Mortgaged Property is in material
compliance with applicable environmental laws and regulations and (b) there
are no circumstances or conditions present at the Mortgaged Property that
have resulted in any contamination for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under
any applicable environmental laws and regulations; or
(ii) the Special Servicer, based solely (as to environmental matters and
related costs) on the information set forth in such report, determines that
taking such actions as are necessary to bring the
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Mortgaged Property into compliance with applicable environmental laws and
regulations and/or taking the actions contemplated by clause (i)(b) above,
is reasonably likely to produce a greater recovery, taking into account the
time value of money, than not taking such actions. See "Certain Legal
Aspects of Mortgage Loans--Environmental Risks" in the Prospectus.
The Pooling and Servicing Agreement grants to the Master Servicer and the
Special Servicer a right of first refusal to purchase from the Trust at the
Purchase Price any defaulted Mortgage Loan as provided in the Pooling and
Servicing Agreement. In addition, the Special Servicer may offer to sell any
such defaulted Mortgage Loan if and when the Special Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a
greater recovery, taking into account the time value of money, than would
liquidation of the related Mortgaged Property. In the absence of any such sale,
the Special Servicer will generally be required to proceed against the related
Mortgaged Property, subject to the discussion above.
If title to any Mortgaged Property is acquired by the Trust, the Special
Servicer, on behalf of the Trust, will be required to sell the Mortgaged
Property prior to the close of the third calendar year following the year of
acquisition, unless (i) the Internal Revenue Service (the "IRS") grants an
extension of time to sell such property or (ii) the Trustee receives an opinion
of independent counsel to the effect that the holding of the property by the
Trust longer than such period will not result in the imposition of a tax on
either the Upper-Tier REMIC or the Lower-Tier REMIC or cause the Trust (or
either the Upper-Tier REMIC or the Lower-Tier REMIC) to fail to qualify as a
REMIC under the Code at any time that any Certificate is outstanding. Subject
to the foregoing and any other tax-related limitations, pursuant to the Pooling
and Servicing Agreement, the Special Servicer will generally be required to
attempt to sell any Mortgaged Property so acquired on the same terms and
conditions it would if it were the owner. The Special Servicer will also be
required to ensure that any Mortgaged Property acquired by the Trust is
administered so that it constitutes "foreclosure property" within the meaning
of Code Section 860G(a)(8) at all times, that the sale of such property does
not result in the receipt by the Trust of any income from nonpermitted assets
as described in Code Section 860F(a)(2)(B). If the Trust acquires title to any
Mortgaged Property, the Special Servicer, on behalf of the Trust, will retain,
at the expense of the Trust, an independent contractor to manage and operate
such property. The retention of an independent contractor, however, will not
relieve the Special Servicer of its obligation to manage such Mortgaged
Property as required under the Pooling and Servicing Agreement.
Generally, neither the Upper-Tier REMIC nor the Lower-Tier REMIC will be
taxable on income received with respect to a Mortgaged Property acquired by the
Trust to the extent that it constitutes "rents from real property," within the
meaning of Code Section 856(c)(3)(A) and Treasury regulations thereunder.
"Rents from real property" include fixed rents and rents based on the receipts
or sales of a tenant but do not include the portion of any rental based on the
net income or profit of any tenant or sub-tenant. No determination has been
made whether rent on any of the Mortgaged Properties meets this requirement.
"Rents from real property" include charges for services customarily furnished
or rendered in connection with the rental of real property, whether or not the
charges are separately stated. Services furnished to the tenants of a
particular building will be considered as customary if, in the geographic
market in which the building is located, tenants in buildings which are of
similar class are customarily provided with the service. No determination has
been made whether the services furnished to the tenants of the Mortgaged
Properties are "customary" within the meaning of applicable regulations. It is
therefore possible that a portion of the rental income with respect to a
Mortgaged Property owned by the Trust, presumably allocated based on the value
of any non-qualifying services, would not constitute "rents from real
property." Any of the foregoing types of income may instead constitute "net
income from foreclosure property," which would be taxable to the Lower-Tier
REMIC at the highest marginal federal corporate rate (currently 35%) and may
also be subject to state or local taxes. Because these sources of income, if
they exist, are already in place with respect to the Mortgaged Properties, it
is generally viewed as beneficial to Certificateholders to permit the Trust to
continue to earn them if it acquires a Mortgaged Property, even at the cost of
this tax. Any such taxes would be chargeable against the related income for
purposes of determining the proceeds available for distribution to holders of
Certificates. See "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates" and "--Taxes That May Be Imposed on the
REMIC Pool--Net Income from Foreclosure Property" in the Prospectus.
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To the extent that Liquidation Proceeds collected with respect to any
Mortgage Loan are less than the sum of (i) the outstanding principal balance of
such Mortgage Loan, (ii) interest accrued thereon and (iii) the aggregate
amount of outstanding reimbursable expenses (including any unreimbursed
Servicing Advances and unpaid and accrued interest thereon) incurred with
respect to such Mortgage Loan, then the Trust will realize a loss in the amount
of such shortfall. The Trustee, the Master Servicer and/or the Special Servicer
will be entitled to reimbursement out of the Liquidation Proceeds recovered on
any Mortgage Loan, prior to the distribution of such Liquidation Proceeds to
Certificateholders, of any and all amounts that represent unpaid servicing
compensation in respect of such Mortgage Loan, certain unreimbursed expenses
incurred with respect to such Mortgage Loan and any unreimbursed Advances made
with respect to such Mortgage Loan. In addition, amounts otherwise
distributable on the Certificates will be further reduced by interest payable
to the Master Servicer or Trustee on any such Advances.
If any Mortgaged Property suffers damage such that the proceeds, if any,
of the related hazard insurance policy are insufficient to restore fully the
damaged property, the Master Servicer will not be required to make a Servicing
Advance of its own funds to effect such restoration unless (i) the Special
Servicer determines that such restoration will increase the proceeds to
Certificateholders on liquidation of the Mortgage Loan after reimbursement of
the Special Servicer or the Master Servicer, as the case may be, for its
expenses and (ii) the Master Servicer determines that such Servicing Advance,
together with interest accrued thereon at the Advance Rate, will be recoverable
by it from related Insurance and Condemnation Proceeds and Liquidation
Proceeds.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Master Servicer will perform (at its own expense), or will cause to be
performed (at its own expense), physical inspections of each Mortgaged Property
at such times and in such manner as are consistent with the Servicing Standard,
but in any event shall inspect each Mortgaged Property securing a Mortgage Note
with a scheduled principal balance of (A) $2,000,000 or more at least once
every 12 months and (B) less than $2,000,000 at least once every 24 months, in
each case commencing in the calendar year 2000; provided, however, that if the
Master Servicer has a reasonable basis to believe that (i) the DSCR with
respect to any Mortgage Loan has decreased by 25% or more from the DSCR as of
the Cut-off Date or (ii) the DSCR with respect to any Mortgaged Property (other
than a Mortgaged Property securing a Credit Tenant Loan) has decreased to 1.05x
or less, the Master Servicer shall inspect the related Mortgaged Property as
soon as practicable thereafter (the reasonable cost of which inspection shall
be at the expense of the Trust); provided, further, however, that if any
scheduled payment becomes more than 60 days delinquent on the related Mortgage
Loan, the Special Servicer shall inspect the related Mortgaged Property as soon
as practicable thereafter (the reasonable cost of which inspection shall be at
the expense of the Trust). The Special Servicer or the Master Servicer, as
applicable, will prepare a written report of each such inspection describing
the condition of and any damage to the Mortgaged Property and specifying the
existence of any material vacancies in the Mortgaged Property, of any sale,
transfer or abandonment of the Mortgaged Property, of any material change in
the condition of the Mortgaged Property, or of any waste committed thereon. The
Master Servicer and the Special Servicer will deliver a copy of each such
report prepared by the Master Servicer and Special Servicer to each other, each
Rating Agency and the Trustee. The Special Servicer will have the right to
inspect or cause to be inspected (at its own expense) every calendar year any
Mortgaged Property related to a loan that is not a Specially Serviced Mortgage
Loan, provided that the Special Servicer notifies the Master Servicer prior to
such inspection, and provides a copy of such inspection to the Master Servicer.
The Special Servicer may, upon notice to the Master Servicer, perform or cause
to be performed (at its own expense) the inspections otherwise required to be
performed by the Master Servicer under certain circumstances specified in the
Pooling and Servicing Agreement.
With respect to each Mortgage Loan that requires the borrower to deliver
such statements, the Special Servicer or the Master Servicer, as applicable, is
also required to collect and review the annual operating statements of the
related Mortgaged Property. Most of the Mortgages obligate the related
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borrower to deliver annual property operating statements. However, there can be
no assurance that any operating statements required to be delivered will in
fact be delivered, nor is the Special Servicer or the Master Servicer likely to
have any practical means of compelling such delivery in the case of an
otherwise performing Mortgage Loan.
Copies of the inspection reports and operating statements referred to
above are to be available for review by Certificateholders during normal
business hours at the offices of the Trustee. See "Description of the
Certificates--Reports to Certificateholders; Certain Available Information"
herein.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER AND THE
DEPOSITOR
The Pooling and Servicing Agreement permits the Master Servicer and the
Special Servicer to resign from their respective obligations thereunder only
upon (a) in the case of the Master Servicer or the Special Servicer, the
appointment of, and the acceptance of such appointment by, a successor thereto
and receipt by the Trustee of written confirmation from each applicable Rating
Agency that such resignation and appointment will, in and of itself, not cause
a downgrade, withdrawal or qualification of the rating assigned by such Rating
Agency to any Class of Certificates or (b) a determination that such
obligations are no longer permissible with respect to the Master Servicer or
the Special Servicer, as the case may be, under applicable law or are in
material conflict by reason of applicable law with any of its other activities.
No such resignation will become effective until the Trustee or other successor
has assumed the obligations and duties of the resigning Servicer or Special
Servicer, as the case may be, under the Pooling and Servicing Agreement, and
each Rating Agency has affirmed that the succession of such successor as Master
Servicer or Special Servicer will not result in the downgrade, qualification or
withdrawal of the rating assigned by either Rating Agency to any Class of
Certificates.
The Pooling and Servicing Agreement will provide that none of the Master
Servicer, the Special Servicer, the Depositor or any director, officer, member,
manager, employee or agent of any of them will be under any liability to the
Trust or the Certificateholders for any action taken, or not taken, in good
faith pursuant to the Pooling and Servicing Agreement or for errors in
judgment; provided, however, that none of the Master Servicer, the Special
Servicer, the Depositor or any such person will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of obligations or duties thereunder or
by reason of reckless disregard of such obligations and duties. The Pooling and
Servicing Agreement will also provide that the Master Servicer, the Special
Servicer, the Depositor and any director, officer, member, manager, employee or
agent of any of them will be entitled to indemnification by the related Trust
against any loss, liability or expense incurred in connection with any legal
action that relates to the Pooling and Servicing Agreement or the Certificates;
provided, however, that such indemnification will not extend to any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of obligations or duties under the Pooling and
Servicing Agreement, by reason of reckless disregard of such obligations or
duties, or in the case of the Depositor and any of its directors, officers,
employees and agents, any violation by any of them of any state or federal
securities law.
In addition, the Pooling and Servicing Agreement will provide that none of
the Master Servicer, the Special Servicer or the Depositor will be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its respective responsibilities under the Pooling and Servicing
Agreement and that in its opinion may involve it in any expense or liability.
However, each of the Master Servicer, the Special Servicer and the Depositor
will be permitted, in the exercise of its discretion, to undertake any such
action that it may deem necessary or desirable with respect to the enforcement
and/or protection of the rights and duties of the parties to the Pooling and
Servicing Agreement and the interests of the Certificateholders thereunder. In
such event, the legal expenses and costs of such action, and any liability
resulting therefrom, will be expenses, costs and liabilities of the
Certificateholders, and the Master Servicer, the Special Servicer or the
Depositor, as the case may be, will be entitled to charge the Certificate
Account therefor.
Pursuant to the Pooling and Servicing Agreement, the Master Servicer and
Special Servicer will each be required to maintain a fidelity bond and errors
and omissions policy or their equivalent that provides coverage against losses
that may be sustained as a result of an officer's or employee's
misappropriation of
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funds or errors and omissions, subject to certain limitations as to amount of
coverage, deductible amounts, conditions, exclusions and exceptions permitted
by the Pooling and Servicing Agreement. Notwithstanding the foregoing, the
Master Servicer will be allowed to self-insure with respect to a fidelity bond
or errors and omissions policy (or their equivalent) so long as certain
conditions set forth in the Pooling and Servicing Agreement are met.
Any person into which the Master Servicer, the Special Servicer or the
Depositor may be merged or consolidated, or any person resulting from any
merger or consolidation to which the Master Servicer, the Special Servicer or
the Depositor is a party, or any person succeeding to the business of the
Master Servicer, the Special Servicer or the Depositor, will be the successor
of the Master Servicer, the Special Servicer or the Depositor, as the case may
be, under the Pooling and Servicing Agreement. The Master Servicer and the
Special Servicer may have other normal business relationships with the
Depositor or the Depositor's affiliates.
The Master Servicer and the Special Servicer have represented that, with
respect to those computer systems identified as being mission critical for the
performance of the servicing functions described herein, they are committed to
modifying their respective existing systems to the extent required to cause
them, when used for the purpose for which it was intended, to be capable of
accurately processing, proving and receiving date data from, into and between
the twentieth and twenty-first centuries, and will correctly create, store,
process and output information related to or including dates on or after
December 31, 1999 as a result of the changing of the date from 1999 to 2000,
including leap year calculations, assuming that all other products, including
hardware and software, when used in combination with the product or service in
question, properly exchange date data. However, neither the Depositor nor any
affiliate of the Depositor has made any independent investigation of the
computer systems of the Master Servicer and the Special Servicer.
EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreement with respect
to the Master Servicer or the Special Servicer, as the case may be, will
include, without limitation, (i) any failure by the Master Servicer to make any
remittance required to be made by the Master Servicer on the day and by the
time such remittance is required to be made under the terms of the Pooling and
Servicing Agreement; (ii) any failure by the Special Servicer to deposit into
the REO Account within one business day of the day such deposit is required to
be made, or to remit to the Master Servicer for deposit in the Certificate
Account any such remittance required to be made by the Special Servicer on the
day such remittance is required to be made under the Pooling and Servicing
Agreement; (iii) any failure by the Master Servicer or the Special Servicer
duly to observe or perform in any material respect any of its other covenants
or obligations under the Pooling and Servicing Agreement, which failure
continues unremedied for thirty days (15 days in the case of a failure to pay
the premium for any insurance policy required to be maintained) after written
notice thereof has been given to the Master Servicer or the Special Servicer,
as the case may be, by any other party to the Pooling and Servicing Agreement,
or to the Master Servicer, the Special Servicer, the Depositor and the Trustee,
by Certificateholders of any Class, evidencing, as to such Class, Percentage
Interests aggregating not less than 25%; provided however, that the Master
Servicer shall pay interest on any amount not timely remitted; (iv) certain
events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings in respect of or relating to the Master
Servicer or the Special Servicer, and certain actions by or on behalf of the
Master Servicer or the Special Servicer indicating its insolvency or inability
to pay its obligations; and (vi) the Trustee shall have received notice from
either Rating Agency that the continuation of the Master Servicer or Special
Servicer in such respective capacity, as the case may be, has resulted, or
would result, in and of itself, in a downgrading, qualification (it being
understood that the possible downgrading of any Class or the placing of any
Class on "negative" credit watch shall constitute a qualification) or
withdrawal of the then-current rating on any Class of Certificates that are
rated by such Rating Agency if the Master Servicer or Special Servicer, as the
case may be, is not replaced, or the Trustee has knowledge that the Master
Servicer or Special Servicer, as the case may be, has been removed from either
Rating Agency's list of approved servicers.
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RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Master Servicer or the
Special Servicer under the Pooling and Servicing Agreement, then, in each and
every such case, so long as the Event of Default remains unremedied, the
Depositor or the Trustee will be authorized, and at the direction of
Certificateholders entitled to not less than 51% of the Voting Rights, the
Trustee will be required, to terminate all of the rights and obligations of the
defaulting party as Master Servicer or Special Servicer except as described
below, as applicable, under the Pooling and Servicing Agreement, whereupon the
Trustee will succeed to all of the responsibilities, duties and liabilities of
the defaulting party as Master Servicer or Special Servicer, as applicable,
under the Pooling and Servicing Agreement and will be entitled to similar
compensation arrangements except that (a) any successor Master Servicer shall
not be entitled to receive the portion of the Servicing Fee that has been
irrevocably assigned to BOMCM as described above and (b) BOMCM shall be
entitled to retain that assigned portion of the Servicing Fee. If the Trustee
is unwilling or unable so to act, it may (or, at the written request of
Certificateholders entitled to not less than 51% of the Voting Rights, it will
be required to) appoint, or petition a court of competent jurisdiction to
appoint, a loan servicing or other entity that would not result in the
downgrading, qualification or withdrawal of the ratings assigned to any Class
of Certificates by any Rating Agency to act as successor to the Master Servicer
or Special Servicer, as the case may be, under the Pooling and Servicing
Agreement.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Certificates or the
Pooling and Servicing Agreement unless such holder previously has given to the
Trustee written notice of default and the continuance thereof and unless the
holders of Certificates of any Class evidencing not less than 25% of the
aggregate Percentage Interests constituting such Class have made written
request upon the Trustee to institute such proceeding in its own name (as
Trustee thereunder) and have offered to the Trustee reasonable indemnity, and
the Trustee for 60 days after receipt of such request and indemnity has
neglected or refused to institute any such proceeding. However, the Trustee
will be under no obligation to exercise any of the trusts or powers vested in
it by the Pooling and Servicing Agreement or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders, unless such Certificateholders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the parties thereto,
without the consent of any of the holders of Certificates:
(i) to cure any ambiguity;
(ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein or to correct any error;
(iii) to change the timing and/or nature of deposits in the Certificate
Account, the Distribution Accounts or the REO Account, provided that (A)
such change would not adversely affect in any material respect the
interests of any Certificateholder, as evidenced by an opinion of counsel
(at the expense of the party requesting the amendment) and (B) such change
would not result in the downgrading, qualification or withdrawal of the
ratings assigned to any Class of Certificates by any Rating Agency, as
evidenced by a letter from each Rating Agency;
(iv) to modify, eliminate or add to any of its provisions to such extent
as shall be necessary to maintain the qualification of the Trust (or either
the Upper-Tier REMIC or Lower-Tier REMIC) as a REMIC or to avoid or
minimize the risk of imposition of any tax on the Trust, provided that the
Trustee has received a satisfactory opinion of counsel (at the expense of
the party requesting the amendment) to the effect that (1) such action is
necessary or desirable to maintain such qualification or to avoid or
minimize such risk and (2) such action will not adversely affect in any
material respect the interests of any holder of the Certificates and (3)
such change shall not result in the withdrawal, downgrade or qualification
of the then-current rating assigned to any Class of Certificates, as
evidenced in writing from each Rating Agency;
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(v) to modify, eliminate or add to any of its provisions to restrict the
transfer of the Residual Certificates, provided that the Depositor has
determined that the then-current ratings of any Class of the Certificates
will not be downgraded, qualified or withdrawn, as evidenced by a letter
from each Rating Agency, and that any such amendment will not give rise to
any tax with respect to the transfer of the Residual Certificates to a
non-permitted transferee, as evidenced by a satisfactory opinion of counsel
(at the expense of the party requesting the amendment) (see "Certain
Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Residual Certificates--Tax-Related Restrictions
on Transfer of Residual Certificates" in the Prospectus);
(vi) to make any other provisions with respect to matters or questions
arising under the Pooling and Servicing Agreement or any other change,
provided that such action will not adversely affect in any material respect
the interests of any Certificateholder; and
(vii) to amend or supplement any provision of the Pooling and Servicing
Agreement to the extent necessary to maintain the ratings assigned to each
Class of Certificates by each Rating Agency provided that such amendment
does not adversely impact any of the Certificateholders.
The Pooling and Servicing Agreement may also be amended by the parties
thereto with the consent of the holders of Certificates of each Class affected
thereby evidencing, in each case, not less than 66 2/3% of the aggregate
Percentage Interests constituting such Class for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Pooling and Servicing Agreement or of modifying in any manner the rights of
the holders of the Certificates, except that no such amendment may:
(i) reduce in any manner the amount of, or delay the timing of, payments
received on the Mortgage Loans which are required to be distributed to a
Certificate of any Class without the consent of the Holder of such
Certificate,
(ii) reduce the aforesaid percentage of Certificates of any Class the
Holders of which are required to consent to any such amendment, in any such
case without the consent of the Holders of all Certificates of such Class
then outstanding;
(iii) adversely affect the Voting Rights of any Class of Certificates
without the consent of the holders of all Certificates of such Class then
outstanding,
(iv) amend the amendment provisions of the Pooling and Servicing Agreement;
or
(v) amend the definition of Servicing Standard.
Notwithstanding the foregoing, the Trustee will not be required to consent
to any amendment to the Pooling and Servicing Agreement without having first
received an opinion of counsel (at the expense of the parties requesting the
amendment) to the effect that such amendment or the exercise of any power
granted to the Master Servicer, the Special Servicer, the Depositor, the
Trustee or any other specified person in accordance with such amendment, is
permitted pursuant to the terms of the Pooling and Servicing Agreement and will
not result in the imposition of a tax on the REMIC constituted by the Trust or
cause the Trust (or either the Upper-Tier REMIC or Lower-Tier REMIC) to fail to
qualify as a REMIC.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Certificates, O'Melveny & Myers LLP, counsel to
the Depositor, will deliver its opinion that, assuming (i) the making of
appropriate elections, (ii) compliance with the provisions of the Pooling and
Servicing Agreement and (iii) compliance with applicable changes in the Code,
including the REMIC Provisions, for federal income tax purposes, the Trust will
qualify as two separate real estate mortgage investment conduits (the
"Upper-Tier REMIC" and the "Lower-Tier REMIC," respectively, and each a
"REMIC") within the meaning of Sections 860A through 860G (the "REMIC
Provisions") of the Code, and (i) the Class A-1, Class A-2, Class X, Class B,
Class C, Class D, Class E, Class F, Class G, Class H and Class I Certificates
will evidence the "regular interests" in the Upper-Tier REMIC and (ii) the
Class R and Class LR Certificates will be the sole Classes of "residual
interests" in the Upper-Tier
S-118
<PAGE>
REMIC and Lower-Tier REMIC, respectively, within the meaning of the REMIC
Provisions in effect on the date hereof. The Offered Certificates are "Regular
Certificates" as defined in the Prospectus.
Because they represent regular interests, each Class of Offered
Certificates generally will be treated as newly originated debt instruments for
federal income tax purposes. Holders of such Classes of Certificates will be
required to include in income all interest on such Certificates in accordance
with the accrual method of accounting, regardless of a Certificateholder's
usual method of accounting. It is anticipated that the Class Certificates
will be issued with OID for federal income tax purposes in an amount equal to
the excess of the initial Certificate Balances thereof over their respective
issue prices (including accrued interest). It is also anticipated that the
Class Certificates will be issued at a premium and that the Class
Certificates will be issued with de minimus OID for federal income tax
purposes. The prepayment assumption that will be used in determining the rate
of accrual of OID and that may be used to amortize premium, if any, for federal
income tax purposes will be based on the assumption that subsequent to the date
of any determination the Mortgage Loans will prepay at a rate equal to a CPR of
0%; provided, however, that it is further assumed that each ARD Loan prepays on
its Anticipated Repayment Date (the "Prepayment Assumption"). No representation
is made that the Mortgage Loans will prepay at that rate or at any other rate.
See "Certain Federal Income Tax Consequences--Federal Income Tax Consequences
for REMIC Certificates--Taxation of Regular Certificates--Original Issue
Discount" and "--Premium" in the Prospectus.
Prepayment Premiums and Yield Maintenance Charges actually collected will
be distributed among the holders of the respective Classes of Certificates as
described herein under "Description of the Certificates--Allocation of
Prepayment Premiums and Yield Maintenance Charges." It is not entirely clear
under the Code when the amount of Prepayment Premiums or Yield Maintenance
Charges so allocated should be taxed to the holder of an Offered Certificate,
but it is not expected, for federal income tax reporting purposes, that
Prepayment Premiums and Yield Maintenance Charges will be treated as giving
rise to any income to the holder of an Offered Certificate prior to the Master
Servicer's actual receipt of the related amounts. It appears that Prepayment
Premiums and Yield Maintenance Charges, if any, will be treated as ordinary
income rather than capital gain. However, that result is not entirely clear and
Certificateholders should consult their own tax advisers concerning the
treatment of Prepayment Premiums or Yield Maintenance Charges.
The Offered Certificates will be treated as "real estate assets" within
the meaning of Section 856(c)(5)(B) of the Code, and interest (including OID,
if any) on the Offered Certificates will be interest described in Section
856(c)(3)(B) of the Code. Moreover, the Offered Certificates will be "qualified
mortgages" within the meaning of Section 860G(a)(3) of the Code. For purposes
of Section 7701(a)(19)(C) of the Code, the Certificates will be treated as
"loans . . . secured by an interest in real property which is . . . residential
real property" to the extent the Mortgage Loans are secured by multifamily
properties and manufactured housing communities, respectively, or "loans
secured by an interest in . . . health . . . institutions or facilities,
including structures designed or used primarily for residential purposes for
. . . persons under care" to the extent that the Mortgage Loans are secured by
congregate care facilities. Mortgage Loans secured by multifamily properties
and manufactured housing communities represented approximately 33.44% of the
Initial Pool Balance and Mortgage Loans secured by health-care facilities
represented approximately 5.72% of the Initial Pool Balance. See "Certain
Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Status of REMIC Certificates" in the Prospectus.
Although unclear for federal income tax purposes, it is anticipated that
the Class X Certificates will be considered to be issued with OID in an amount
equal to the excess of all distributions of interest expected to be received
thereon (assuming the weighted average of the Pass-Through Rates changes in
accordance with the Prepayment Assumption) over their issue price (including
accrued interest). Any "negative" amounts of OID on the Class X Certificates
attributable to rapid prepayments with respect to the Mortgage Loans will not
be deductible currently, but may be offset against future positive accruals of
OID, if any. Finally, a holder of a Class X Certificate may be entitled to a
loss deduction to the extent it becomes certain that such holder will not
recover a portion of its basis in such Certificate, assuming no further
prepayments. In the alternative, it is possible that rules similar to the
"noncontingent bond method" of the contingent interest rules in the OID
Regulations, as amended on June 12, 1996, may be
S-119
<PAGE>
promulgated with respect to the Class X Certificates. See "Certain Federal
Income Tax Consequences--Federal Income Tax Consequences for REMIC" in the
Prospectus. Under the noncontingent bond method, if the interest payable for
any period is greater or less than the amount projected, the amount of income
included for that period would be either increased or decrease accordingly. Any
net reduction in the income accrual for the taxable year below zero (a
"Negative Adjustment") would be treated by a Certificateholder as ordinary loss
to the extent of prior income accruals and, to the extent such negative
adjustment exceeds prior income accruals, would be carried forward to offset
future interest accruals. At maturity, any remaining Negative Adjustment would
be treated as a loss on retirement of the Certificate. The legislative history
of relevant Code provisions indicates, however, that negative amounts of OID on
an instrument such as a REMIC regular interest may not give rise to taxable
losses in any accrual period prior to the instrument's disposition or
retirement. Thus, it is not clear whether any losses resulting from a Negative
Adjustment would be recognized currently or be carried forward until
disposition or retirement of the debt obligation.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, See "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement, dated as of the date hereof (the "Underwriting Agreement"), among
PaineWebber Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated
(collectively, the "Underwriters") and the Depositor, the Depositor has agree
to sell to the Underwriters, and each Underwriter has severally but not jointly
agreed to purchase from the Depositor the respective Certificate Balances or
Notional Amounts, as applicable, of each Class of the Offered Certificates as
set forth below, subject in each case to a variance of (plus or minus) 5%.
<TABLE>
<CAPTION>
MERRILL LYNCH, PIERCE,
CLASS PAINEWEBBER INCORPORATED FENNER & SMITH INCORPORATED
- ------------------------ -------------------------- ----------------------------
<S> <C> <C>
Class A-1 .........
Class A-2 .........
Class X ...........
Class B ...........
Class C ...........
Class D ...........
</TABLE>
The Depositor has been advised by the Underwriters that they propose to
offer the Offered Certificates to the public from time to time in one or more
negotiated transactions, or otherwise, at varying prices to be determined at
the time of sale. Proceeds to the Depositor from the sale of Offered
Certificates, before deducting expenses payable by the Depositor, estimated to
be approximately $ , will be % of the initial aggregate
Certificate Balance of the Offered Certificates, plus accrued interest on the
Offered Certificates from the Cut-off Date. The Underwriters may effect such
transactions by selling Offered Certificates to or through dealers, and such
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriters. In connection with the
purchase and sale of the Offered Certificates offered hereby, the Underwriters
may be deemed to have received compensation from the Depositors in the form of
underwriting discounts.
PaineWebber Incorporated is an affiliate of PWRES, one of the Mortgage
Loan Sellers, and of the Depositor.
Merrill Lynch, Pierce, Fenner & Smith Incorporated is an affiliate of
MLMC, one of the Mortgage Loan Sellers.
There can be no assurance that a secondary market for the Offered
Certificates will develop or, if it does develop, that it will continue. The
Underwriters expect to make, but are not obligated to make, a secondary market
in the Offered Certificates. The primary source of ongoing information
available to investors concerning the Offered Certificates will be the monthly
statements discussed in the Prospectus
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<PAGE>
under "Description of the Certificates--Reports to Certificateholders," which
will include information as to the outstanding principal balance of the Offered
Certificates and the status of the applicable form of credit enhancement.
Except as described herein under "Description of the Certificates--Reports to
Certificateholders; Certain Available Information," there can be no assurance
that any additional information regarding the Offered Certificates will be
available through any other source. In addition, the Depositor is not aware of
any source through which price information about the Offered Certificates will
be generally available on an ongoing basis. The limited nature of such
information regarding the Offered Certificates may adversely affect the
liquidity of the Offered Certificates, even if a secondary market for the
Offered Certificates becomes available.
If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will be used by PaineWebber
Incorporated in connection with offers and sales related to market-making
transactions in the Offered Certificates with respect to which PaineWebber
Incorporated acts as principal. PaineWebber Incorporated may also act as agent
in such transactions. Sales may be made at negotiated prices determined at the
time of sale.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by O'Melveny &
Myers LLP, New York, New York and for the Underwriters by Willkie Farr &
Gallagher, New York, New York. In addition, certain federal income tax matters
will be passed on for the Depositor by O'Melveny & Myers LLP.
RATINGS
It is a condition to issuance that the Offered Certificates be rated not
lower than the following ratings by the Rating Agencies:
<TABLE>
<CAPTION>
CLASS MOODY'S FITCH IBCA
- ------------------------------ --------- -----------
<S> <C> <C>
Class A-1 .................. Aaa AAA
Class A-2 .................. Aaa AAA
Class X .................... Aaa AAA
Class B .................... Aa2 AA
Class C .................... A2 A
Class D .................... Baa2 BBB
</TABLE>
A securities rating on mortgage pass-through Certificates addresses the
likelihood of the timely payment of interest on the Certificates and ultimate
payment of principal thereof by the Rated Final Distribution Date. The rating
takes into consideration the credit quality of the mortgage pool, structural
and legal aspects associated with the Certificates, and the extent to which the
payment stream from the mortgage pool is adequate to make payments required
under the Certificates. The ratings on the Offered Certificates do not,
however, constitute a statement regarding the likelihood or frequency of
prepayments (whether voluntary or involuntary) on the Mortgage Loans. In
addition, a rating does not address the likelihood or frequency of voluntary or
mandatory prepayments of Mortgage Loans, payment of Excess Interest, or whether
and to what extent payments of Prepayment Premiums or Yield Maintenance Charges
will be received or the corresponding effect on yield to investors.
Fitch IBCA's rating of the Class X Certificates does not address the
possibility that you might suffer a lower than anticipated yield or that if
there is a rapid rate of principal payments (including voluntary and
involuntary prepayments) or principal losses on the Mortgage Loans, you could
fail to recover your initial investment.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating to any Class
thereof and, if so, what such rating would be. A rating assigned to any Class
of Offered Certificates by a rating agency that has not been requested by the
Depositor to do so may be lower than the rating assigned thereto by Moody's or
Fitch IBCA.
S-121
<PAGE>
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
LEGAL INVESTMENT CONSIDERATIONS
The Offered Certificates will not constitute "mortgage related securities"
within the meaning of the Secondary Mortgage Market Enhancement Act of 1984
("SMMEA").
The Depositor makes no representation as to the proper characterization of
any Class of Offered Certificates for legal investment or other purposes, or as
to the ability of particular investors to purchase the Offered Certificates
under applicable legal investment or other restrictions. All institutions whose
investment activities are subject to legal investment laws and regulations,
regulatory capital requirements or review by regulatory authorities should
consult with their own legal advisors in determining whether and to what extent
the Offered Certificates constitute legal investments for them or are subject
to investment, capital or other restrictions. See "Legal Investment" in the
Prospectus.
ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts and annuities and Keogh
plans, and of collective investment funds and insurance company separate
accounts and general accounts in which such plans, annuities, accounts or
arrangements are invested that is subject to the fiduciary responsibility rules
of ERISA, or Section 4975 of the Code (an "ERISA Plan") or which is a
governmental plan, as defined in Section 3(32) of ERISA, that is subject to any
federal, state or local law ("Similar Law") which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code (collectively with an
ERISA Plan, a "Plan") should review with its legal advisors whether the
purchase or holding of Offered Certificates could give rise to a transaction
that is prohibited or is not otherwise permitted either under ERISA, the Code
or Similar Law and whether there exists any statutory or administrative
exemption applicable thereto. Moreover, each Plan fiduciary should determine
whether an investment in the Offered Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
The U.S. Department of Labor has issued to PaineWebber Incorporated and
Merrill Lynch & Co. (collectively, the "Underwriters") individual prohibited
transaction exemptions, PTE 90-36, 55 Fed. Reg. 25,903 (June 25, 1990) and PTE
90-29, 55 Fed. Reg. 21,459 (May 24, 1990), respectively, each as amended by PTE
97-34, 62 Fed. Reg. 39,021 (July 21, 1998) (collectively the "Underwriter
Exemption"), which generally exempt from the application of certain of the
prohibited transaction provisions of Section 406 of ERISA and the excise taxes
imposed on such prohibited transactions by Sections 4975(a) and (b) of the
Code, transactions relating to the purchase, sale and holding of pass-through
Certificates underwritten by the Underwriters and the servicing and operation
of related asset pools, provided that certain conditions are met.
The Underwriter Exemption sets forth six general conditions that must be
satisfied for a transaction involving the purchase, sale and holding of the
Class A Certificates and the Class X Certificates (the "Senior Certificates")
to be eligible for exemptive relief thereunder. First, the acquisition of the
Senior Certificates by a Plan must be on terms that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an unrelated
party. Second, the rights and interests evidenced by the Senior Certificates
must not be subordinated to the rights and interests evidenced by the other
Certificates of the same trust. Third, the Senior Certificates at the time of
acquisition by the Plan must be rated in one of the three highest generic
rating categories by at least one of Moody's, S&P, Fitch IBCA or Duff & Phelps
Credit Rating Company. Fourth, the Trustee cannot be an affiliate of any other
member of the "Restricted Group", which consists of the Underwriters, the
Depositor, the Trustee, the Master Servicer, the Special Servicer and any
mortgagor with respect to Mortgage Loans constituting more than 5% of the
aggregate unamortized principal balance of the Mortgage Loans as of the date of
initial issuance of the Senior Certificates and any affiliate of any such
member. Fifth, the sum of all payments made to and retained by
S-122
<PAGE>
each Underwriter must represent not more than reasonable compensation for
underwriting the Senior Certificates, the sum of all payments made to and
retained by the Depositor pursuant to the assignment of the Mortgage Loans to
the Trust must represent not more than the fair market value of such
obligations and the sum of all payments made to and retained by the Master
Servicer, the Special Servicer and any sub-servicer must represent not more
than reasonable compensation for such person's services under the Pooling and
Servicing Agreement and reimbursement of such person's reasonable expenses in
connection therewith. Sixth, the investing Plan must be an accredited investor
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
Because the Senior Certificates are not subordinated to any other Class of
Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of the issuance of the Senior
Certificates that they be rated not lower than "Aaa" by Moody's and "AAA" by
Fitch IBCA, thus satisfying the third general condition at that time. As of the
Closing Date, the fourth general condition set forth above will be satisfied
with respect to the Senior Certificates. A fiduciary of a Plan contemplating
purchasing a Senior Certificate in the secondary market must make its own
determination that, at the time of such purchase the Senior Certificates
continue to satisfy the third and fourth general conditions set forth above. A
fiduciary of a Plan contemplating purchasing a Senior Certificate, whether in
the initial issuance of such Certificates or in the secondary market, must make
its own determination that the first, fifth and sixth general conditions set
forth above will be satisfied with respect to such Senior Certificate.
The Underwriter Exemption also requires that the Trust meet the following
requirements: (i) the Trust must consist solely of assets of the type that have
been included in other investment pools; (ii) Certificates in such other
investment pools must have been rated in one of the three highest categories of
S&P, Moody's, Fitch IBCA or DCR for at least one year prior to the Plan's
acquisition of Senior Certificates; and (iii) Certificates in such other
investment pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of Senior Certificates.
If the general conditions of the Underwriter Exemption are satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(a) and 407(a) of ERISA (as well as the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of
the Code) in connection with (i) the direct or indirect sale, exchange or
transfer of Senior Certificates in the initial issuance of Certificates between
the Depositor or an Underwriter and a Plan when the Depositor, an Underwriter,
the Trustee, the Master Servicer, the Special Servicer, a sub-servicer or a
borrower is a Party in Interest with respect to the investing Plan, (ii) the
direct or indirect acquisition or disposition in the secondary market of the
Senior Certificates by a Plan and (iii) the holding of Senior Certificates by a
Plan. However, no exemption is provided from the restrictions of Sections
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
Senior Certificate on behalf of an "Excluded Plan" or any person who has
discretionary authority or renders investment advice with respect to the assets
of such Excluded Plan. For purposes hereof, an Excluded Plan is a Plan
sponsored by any member of the Restricted Group.
If certain specific conditions of the Underwriter Exemption are also
satisfied, it may provide an exemption from the restrictions imposed by
Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section
4975(c)(1)(E) of the Code in connection with (1) the direct or indirect sale,
exchange or transfer of Senior Certificates in the initial issuance of
Certificates between the Depositor or an Underwriter and a Plan when the person
who has discretionary authority or renders investment advice with respect to
the investment of Plan assets in such Certificates is (a) a borrower with
respect to 5% or less of the fair market value of the Mortgage Loans or (b) an
affiliate of such a person, (2) the direct or indirect acquisition or
disposition in the secondary market of Senior Certificates by a Plan and (3)
the holding of Senior Certificates by a Plan.
Further, if certain specific conditions of the Underwriter Exemption are
satisfied, it may provide an exemption from the restrictions imposed by
Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c) of the Code for
transactions in connection with the servicing, management and operation of the
Mortgage Pool.
S-123
<PAGE>
Before purchasing a Senior Certificate, a fiduciary of a Plan should
itself confirm that (i) the Class A Certificates or Class X Certificates
constitute "Certificates" for purposes of the Underwriter Exemption and (ii)
the specific and general conditions and the other requirements set forth in the
Underwriter Exemption would be satisfied. In addition to making its own
determination as to the availability of the exemptive relief provided in the
Underwriter Exemption, the Plan fiduciary should consider the availability of
any other prohibited transaction exemption, including with respect to
governmental plans, any exemptive relief afforded under Similar Laws. See
"ERISA Considerations" in the Prospectus. A purchaser of a Senior Certificate
should be aware, however, that even if the conditions specified in one or more
exemptions are satisfied, the scope of relief provided by an exemption may not
cover all acts which might be construed as prohibited transactions.
Because the characteristics of the Subordinate Offered Certificates do not
meet the requirements of the Underwriter Exemption, the purchase or holding of
such Certificates by a Plan may result in prohibited transactions or the
imposition of excise taxes or civil penalties. In no event may any transfer of
a Subordinate Offered Certificate or any interest therein be made to a Plan or
to any person who is directly or indirectly purchasing such Certificate or
interest therein on behalf of, as named fiduciary of, as trustee of, or with
assets of a Plan, unless the purchase and holding of such Certificate or
interest therein is exempt from the prohibited transaction provisions of
Section 406 of ERISA and the related excise tax provisions of Section 4975 of
the Code under Prohibited Transaction Class Exemption 95-60, which provides an
exemption from the prohibited transaction rules for certain transactions
involving an insurance company general account. Any such Plan or person to whom
a transfer of any such Certificate or interest therein is made shall be deemed
to have represented to the Depositor, the Master Servicer, the Special
Servicer, the Trustee, each Underwriter, any sub-servicer and any borrower with
respect to the Mortgage Loans that the purchase and holding of such Certificate
or interest therein is so exempt on the basis of Prohibited Transaction Class
Exemption 95-60. See "ERISA Considerations" in the Prospectus.
Any Plan fiduciary considering whether to purchase an Offered Certificate
on behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA
and the Code to such investment.
The sale of Certificates to a Plan is in no respect a representation by
the Depositor or the Underwriters that this investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular
Plan, or that this investment is appropriate for Plans generally or any
particular Plan.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
S-124
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
30/360 Basis ................................ S-43
30/360 Mortgage Loans ....................... S-43
A
Actual/360 Basis ............................ S-43
ADA ......................................... S-40
Additional Rights ........................... S-48
Advances .................................... S-89
AIG ......................................... S-37
anchor tenant ............................... S-36
Anticipated Repayment Date .................. S-16, S-46
Appraisal ................................... S-91
Appraisal Reduction ......................... S-90
Appraisal Reduction Amount .................. S-91
Appraisal Reduction Event ................... S-90
ARD Loans ................................... S-16, S-46
Asset Status Report ......................... S-106
Associated Group ............................ S-30
Assumed Final Distribution Date ............. S-86
Assumed Final Distribution Dates ............ S-7
Assumed Scheduled Payment ................... S-85
Authenticating Agent ........................ S-98
Available Distribution Amount ............... S-10, S-80
B
Balloon Payment Credit Tenant Loans ......... S-37, S-47
Balloon Payments ............................ S-26
Base Interest Fraction ...................... S-86
Beckman ..................................... S-63
BOMCM ....................................... S-107
Bondable Leases ............................. S-48
Bond-Type Leases ............................ S-48
C
Casualty or Condemnation Rights ............. S-48
Certificate Account ......................... S-79
Certificate Balance ......................... S-77
Certificate Registrar ....................... S-98
Certificates ................................ S-8, S-77, S-124
Chase ....................................... S-69
Chubb ....................................... S-37, S-49
Class ....................................... S-77
Class A Certificates ........................ S-77
Class X Pass-Through Rate ................... S-83
Clause (ii) Appraisal Trigger Date .......... S-91
Closing Date ................................ S-7, S-41
Collateral Support Deficit .................. S-87, S-88
Comparative Financial Status Report ......... S-93
Controlling Class ........................... S-107
Controlling Class Certificateholder ......... S-107
Corporate Trust Office ...................... S-97
Corrected Mortgage Loan ..................... S-106
</TABLE>
S-125
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CPR .......................................... S-20, S-101
Credit Lease ................................. S-37, S-47
Credit Lease Assignment ...................... S-48
Credit Lease Default ......................... S-48
Credit Tenant ................................ S-37, S-47
Credit Tenant Loans .......................... S-37, S-47
Credit Tenant Properties ..................... S-47
Credit Tenant Property ....................... S-48
Cross-Over Date .............................. S-83
CSSA ......................................... S-93
Cut-off Date ................................. S-7, S-41
Cut-off Date Balance ......................... S-41
D
Debt Service Coverage Ratio .................. S-51
Delinquent Loan Status Report ................ S-93
Depositor .................................... S-2, S-6
Determination Date ........................... S-91
Directing Certificateholder .................. S-106
Discount Rate ................................ S-44
Distributable Certificate Interest ........... S-84
Distribution Accounts ........................ S-79
Distribution Date ............................ S-7, S-79
Distribution Date Statement .................. S-92
Double Net Leases ............................ S-48
DSCR ......................................... S-51
DTC .......................................... S-19
Due Period ................................... S-11, S-81
E
ERISA Plan ................................... S-122
Events of Default ............................ S-116
Excess Interest .............................. S-47
Excess Rate .................................. S-46
Excluded Plan ................................ S-123
F
Final Recovery Determination ................. S-92
Fitch IBCA ................................... S-2, S-4
Flagship Group ............................... S-29
Form 8-K ..................................... S-51
FSL .......................................... S-37, S-47
Fully Amortizing Credit Tenant Loans ......... S-37
Fully Amortizing Loans ....................... S-46
G
Gold Group ................................... S-29
Guarantor .................................... S-37
H
HAP Contracts ................................ S-33
Historical Loan Modification Report .......... S-93
Historical Loss Report ....................... S-93
HUD .......................................... S-33
I
Initial Pool Balance ......................... S-41
</TABLE>
S-126
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Initial Rate ................................ S-46
Interest Accrual Period ..................... S-7
Interest Distribution Amount ................ S-84
Interest Reserve Account .................... S-80
Interest Reserve Loans ...................... S-80
IRS ......................................... S-113
J
Julio Group ................................. S-29
L
LCs ......................................... S-65
Lease Enhancement Policies .................. S-37, S-49
Lexington ................................... S-37, S-49
Liquidation Fee ............................. S-108
Liquidation Fee Rate ........................ S-109
Liquidation Proceeds ........................ S-109
Lock Box Accounts ........................... S-50
Lock Box Loans .............................. S-50
Lockout Period .............................. S-23, S-43
Lower-Tier Distribution Account ............. S-79
Lower-Tier REMIC ............................ S-118
LTV Ratio ................................... S-51
M
Maintenance Rights .......................... S-48
Master Servicer ............................. S-107
Mezzanine debt .............................. S-31
MLMC ........................................ S-6
Moody's ..................................... S-2, S-4
Mortgage .................................... S-41
Mortgage Deferred Interest .................. S-111
Mortgage Loan Purchase Agreement ............ S-41
Mortgage Loan Sellers ....................... S-6
Mortgage Note ............................... S-41
Mortgage Rate ............................... S-42, S-83
Mortgaged Property .......................... S-41
N
Negative Adjustment ......................... S-120
Net Mortgage Rate ........................... S-83
Nonrecoverable Advance ...................... S-89
Notional Amount ............................. S-2, S-4, S-77
O
Offered Certificates ........................ S-8, S-77
OID ......................................... S-20
Operating Statement Analysis Report ......... S-94
P
Participants ................................ S-78
Pass-Through Rate ........................... S-9, S-77
Paying Agent ................................ S-98
Percentage Interest ......................... S-78
P&I Advance ................................. S-12, S-89
Plan ........................................ S-122
Prepayment Assumption ....................... S-119
</TABLE>
S-127
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Prepayment Interest Shortfall ................... S-11, S-84
Prepayment Premium .............................. S-23, S-43
Principal Distribution Amount ................... S-84
Principal Shortfall ............................. S-85
Private Certificates ............................ S-1, S-8, S-77
Purchase Price .................................. S-76, S-96
PWREI ........................................... S-67
PWRES ........................................... S-6, S-65
R
Rated Final Distribution Date ................... S-8, S-87
Record Date ..................................... S-79
Reimbursement Rate .............................. S-90
Related Proceeds ................................ S-89
REMIC ........................................... S-118
REMIC Administrator ............................. S-97
REMIC Provisions ................................ S-118
Rental Property ................................. S-64
REO Account ..................................... S-110
REO Loan ........................................ S-85
REO Property .................................... S-106
REO Status Report ............................... S-93
Residual Certificates ........................... S-8, S-77
Residual Value Policy ........................... S-37, S-47
Restricted Group ................................ S-122
Rolling 12 Months ............................... S-65
Royal ........................................... S-37, S-47
Rules ........................................... S-78
RVI ............................................. S-37, S-47
S
Scheduled Principal Distribution Amount ......... S-84
Senior Certificates ............................. S-77, S-122
Series 1999-C1 Certificates ..................... S-8
Servicer Remittance Date ........................ S-89
Servicing Advances .............................. S-89
Servicing Fee ................................... S-108
Servicing Fee Rate .............................. S-108
Servicing Standard .............................. S-105
Similar Law ..................................... S-122
SMMEA ........................................... S-20, S-122
Special Servicer ................................ S-107
Special Servicing Fee ........................... S-108
Special Servicing Fee Rate ...................... S-108
Specially Serviced Mortgage Loan ................ S-105
Stated Maturity Date ............................ S-35
Stated Principal Balance ........................ S-85
Subordinate Certificates ........................ S-77
Subordinate Offered Certificates ................ S-77
T
TIs ............................................. S-65
Triple Net Leases ............................... S-48
Trust ........................................... S-6
</TABLE>
S-128
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Trust Assets ...................................... S-6
Trustee ........................................... S-97
U
Underwriter Exemption ............................. S-122
Underwriters ...................................... S-1, S-120, S-122
Underwriting Agreement ............................ S-120
Underwritten Net Cash Flow ........................ S-64
Unscheduled Principal Distribution Amount ......... S-85
Upper-Tier Distribution Account ................... S-79
Upper-Tier REMIC .................................. S-118
Up-Reit ........................................... S-50
V
Voting Rights ..................................... S-96
W
Watch List ........................................ S-94
Weighted Average Net Mortgage Rate ................ S-9, S-83
Withheld Amounts .................................. S-80
WMF ............................................... S-69
Workout Fee ....................................... S-108
Workout Fee Rate .................................. S-108
Y
S-11, S-23, S-43,
Yield Maintenance Charge .......................... S-44
Yield Maintenance Period .......................... S-43
Z
Zoning Laws ....................................... S-40
</TABLE>
S-129
<PAGE>
<TABLE>
<CAPTION>
CONTROL
NO. PROPERTY NAME ADDRESS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PW - 4817 Hunt Valley Executive Plaza 11350 McCormick Rd.
PW - 4818 The Galleria 1407-1447 York Road
ML-133 Castle Hill Health Care Center 615 23rd Street
ML-129 Forest Village 4400 Rena Road
ML-134 Brookville Health Care Center 155 40th Street
PW - 3825 Beckman Coulter, Inc. 317 and 1000 Lake Hazeltine Drive
ML-100 Bay Plaza Expansion 2100 Bartow Avenue
PW - 4819 Timonium Corporate Center 9515 Deereco Road
PW - 7371 Kelsey Hayes 12000 and 12025 Tech Center Drive
ML-144 Renaissance Office Park 2215-2295 & 2301-2389 Renaissance Drive
PW - 6093 Concourse I & II Shopping Center 820 & 827 Rector Drive
ML-146 20th & Campbell 2025 East Campbell Ave.
ML-127 Riverbend Apartments 100 River Bend Drive
ML-148 Heathermoor 2645 Hard Road
ML-113 Windsor Station Apartments 3501 N Buckner Blvd.
ML-147 Clinton Place 42566 Clinton Place Dr.
PW - 7215 Market Center East 11130 Lomas Blvd.
PW - 1696 Kmart - Ponce Road 591 & State Rd. #2
ML-120 Heritage Park Apartments 1800 West Badillo Street
ML-121 Delta Education Torstar 80 Northwest Boulevard
PW - 3346 INS Regional Office 2411 Boswell Road
ML-130 Amber Crest Apartments 25350 US Highway 19 North
PW - 3879 Regal Cinemas, Inc. 3301 Plank Road
PW - 7009 The Patriots Apartments 1272 South Union Road
PW - 3000 Peace Arch Factory Interstate 5 & Birch Bay- Linden Road
PW - 6542 Rockport Apartments 8500 Nairn
ML-141 FLAG-Carriage Place Apartment 505 Wells Fargo
ML-109 Seafield Center 7 Seafield Lane
PW - 4035 Hartford Plaza Shopping Center 1201-1275 Bell Avenue
PW - 2034 330-348 East Fordham Road 340-348 East Fordham Road
ML-139 FLAG-Wintergreen Place Apartments 320 E. Wintergreen Road
ML-105 Harbor Bay Club 200 Packet Landing Rd
PW - 6543 Heatherwood Apartments 9001 S. Braeswood
ML-125 RCA - Landing @ Westchase 9797 Meadowglen
ML-124 RCA-Eastchase Terrace Apartments 9001 Meadowbrook
ML-102 Equinox Terrace 324 Equinox Terrace Rd
PW - 5651 Best Western Hershey NE Corner of Rt. 422 & Sipe Ave
ML-112 Summit Apartments 444 East 4th Avenue
PW - 4747 Larpenteur Estates 1260-1280 W. Larpenteur Avenue
ML-142 FLAG-Citation North Apt 411 Highland Cross Drive
PW - 2365 Bancroft Plaza Bancroft between 5th and 6th Streets
PW - 4139 Rockford Portfolio 2076-2082 East University Drive; 503-519 and 605-653 South
Rockford Drive; 620-648 South River Road
PW - 4149 Manor Parkway 10, 12A & 12B Manor Pkwy.
PW - 3766 Park Greenwood Apartments SWQ of US 31 & Fry Road
ML-131 Mercer Mall Outparcel US Route One
PW - 2804 Laidlaw Transit, Inc. 1200 S. Martin L. King Blvd.
PW - 6545 Cedar Branch Apartments 1217 Blalock
PW - 4151A Emerald Hills Village MHP 8555 Bacardi Avenue
PW - 4151B Beaver Lake Estates MHP 2423 East Maryland Avenue
--------------------------------------------------------------------------------------------------------------------
PW - 4151 Emerald Hills / Beaver Lake Estates MHP
PW - 1890 70 Jackson Drive 70 Jackson Drive
PW - 2005 Evans Corporate Park 8350 East Evans Road
PW - 4370 Hampton Inn Columbia 1551 Barbara Drive
PW - 2982A Summit Bank-Collingswood 836-46 Haddon Avenue
PW - 2982B Summit Bank-Madison 16 Waverly Place
PW - 2982C Summit Bank-Springfield 175 Morris Avenue
PW - 2982D Summit Bank-Edison 46 Parsonage Road
PW - 2982E Summit Bank-Plainfield 335-345 East Front Street
PW - 2982F Summit Bank-Westfield 173 Elm Street
--------------------------------------------------------------------------------------------------------------------
PW - 2982 Summit Bank Portfolio
ML-103a GEN-Devonhouse Allentown 1930 Bevin Drive
ML-103b GEN-Devonhouse Catasauqua 2 Front Street
--------------------------------------------------------------------------------------------------------------------
ML-103 GEN-Devonhouse Allentown & Catasauqua
PW - 4923 Howard Johnson Oceanfront 2560 North Atlantic Avenue
PW - 3441 Loft Building 516-530 West 25th Street
PW - 4975 Napa Olympia Mobilodge 244 American Canyon Road
PW - 6460 D.C. Farmers' Market 1309& 1325 5th Street
ML-140 FLAG-Rock Springs Apartment 9000 Townpark
PW - 3471 Grand Place Commons 40020-40028 Grand River
ML-111 Sedgefield Square Apartments 4215 Bernau Avenue
PW - 2550 Days Inn Eastgate 5245 West Irlo Bronson Memorial Hwy
ML-110 Olympia Ramada Inn 621 S. Capitol Way
PW - 3397 Executive Square Office Park 4277-4329 Memorial Drive
PW - 3086 Comfort Inn & Suites - Orangeburg 3671 St. Matthews Road
PW - 6024 Cleveland Clinic 2950 Cypress Creek Road
PW - 6544 Creekbend Apartments 7600 Creekbend
PW - 4047 Horton Court 901-933 4th Avenue
PW - 2348 Best Western University Inn 1310 Highway 54 East
ML-106 Holiday Inn - Waveland 404 Highway 90
PW - 3189 Collegiate Apartments 485 Taylor Road
PW - 6023 29 East 61st Street 29 East 61st Street
PW - 4479 Airport Parkway Quality Inn 2400 Wilkinson Boulevard
PW - 4319 Best Western La Sammana 817-A Ward Blvd. South
PW - 6025 Pill Box Plaza 1700 NW 122nd Terrace
PW - 2358 Post Haste Plaza 4401-4575 Sheridan Street
PW - 2064 Liberty Square Shopping Center 6214 US Highway 98N
PW - 6329 Spring Creek Plaza SWC Pershing Rd. and Monroe St.
PW - 4709 Hampton Inn- Clarksville 190 Holiday Road
PW - 4625 Fountain Court 8250-8300 College Parkway
PW - 3886 Mako Marine 4355 NW 128th Street
PW - 3268 Tandy - East Hanover 301 Route 10
PW - 4355 Best Western Regent Inn 123 Storrs Road
PW - 6265 Executive Resort Apartments 1200 Holden Avenue
ML-143 FLAG-Greyfield Apartments 10111 Bissonnet
PW - 3265A Comfort Inn N.C. Highway 24/27
PW - 3265B Rodeway Inn 200 Henson Street
--------------------------------------------------------------------------------------------------------------------
PW - 3265 Comfort Inn/Rodeway Inn
PW - 1481 Golden State Warehouse 41 Cook Drive
PW - 4345 Richmond Oaks Apartments 1768 Richmond Circle
ML-122 Plaza Village 498 Plaza Boulevard
PW - 3146 Econolodge - Pooler 500 East Highway 80
PW - 3821 Econo Lodge West 2355 South Beulah Boulevard
PW - 3322 216 East 49th Street 216 East 49th Street
PW - 4629 South Wabash 1130 South Wabash Avenue
PW - 2969 163 First Avenue 163 First Avenue
PW - 3615 Cambridge Court Apartments 3700 Buford Highway
PW - 7098 Washington Grandview 12211 W. Washington Blvd.
PW - 4467 Hallmark Motor Inn 4500 Central Texas Expressway
PW - 2346 Mountainside Crossing 4221 E. Chandler Boulevard
PW - 4048 Hard Rock Cafe 801-825 Fourth Avenue
PW - 3185 Eckerd - Palm Beach 7030 Jog Road
PW - 3736 University Commons Apartments 250 University Avenue
PW - 2233 Century Resources 1450 Concourse Drive
PW - 3714 Super 8 Phoenix 4021 North 27th Avenue
PW - 5668 9000 Professional Centre 9000 Southwest 87th Court
PW - 3035 Ramada Inn South 5624 Cagle Road
PW - 5994A Crestmont Estates 3555-3575 Babbs Road
PW - 5994B Independence Townhomes 1929-1939 Independence Boulevard
PW - 5994C Residences at Independence 1899-1907 Independence Boulevard
--------------------------------------------------------------------------------------------------------------------
PW - 5994 Morgan Mitchell Properties
PW - 1623 Washington Place Apartments 21-25 Howe St/7-11 Washington St.
PW - 3329 Building 210 210 Aspen Airport Business Center
PW - 6314 Gardens Of Sunrise 3550 NW 91 Lane
PW - 4008 Days Inn South 4220 South I-35
PW - 4112 Heritage Apartments 27662 Nicole Drive
PW - 4762 Comfort Inn Alexandria 7212 Richmond Highway
PW - 4674 1417-39 Sherwin Avenue 1417-39 Sherwin Avenue
PW - 3463 Superpetz Shopping Center 1610 Sam Rittenburg Boulevard
PW - 6021 Mercede Americana Plaza 3842 North University Drive
PW - 4896 School House Terrace 437 E. Belvidere Street
PW - 3666 Comfort Inn- Byron 607 Chapman Road
PW - 6022 Wearnes Hollingsworth 1601 North Powerline Road
PW - 3901 Wheat First Union Building 29-37 South Market Street
PW - 3563A Vezelay Apartments (Westwood) 2520-32 Harrison Avenue
PW - 3563B Vezelay Apartments (Harrison) 2215-17 Harrison Avenue
PW - 3563C Vezelay Apartments (McHenry) 3344-46 McHenry Avenue
PW - 3563D Vezelay Apartments (Amberwoods) 7803-7821 Dawn Road
--------------------------------------------------------------------------------------------------------------------
PW - 3563 Vezelay Apartments
PW - 3709 Knight's Inn 2942 Lawrenceville Highway
PW - 4553 Comfort Inn Vidalia 1509 East First Street
PW - 7313 Woodlen Glen Apartments 8405 Broadway Blvd.
PW - 1586 Tuckahoe Apartments 88 Lake Avenue
PW - 3466 Adobe Inn Dolores & 8th Street
PW - 1596 Junction Blvd. 37-21 Junction Blvd.
PW - 4153 Colonial Village MHP 2075 Rustad Lane
PW - 5025 Comfort Inn Clinton 103 Clinton Center Drive
PW - 3286 Blue Coral Building 1215 Valley Belt Road
PW - 1777 Villager Lodge-Charlotte 2401 Wilkinson Blvd.
PW - 6112 Hollywood 95 2700-2750 North 29th Avenue
PW - 6414 Harbour Oaks Apartments 1565 Crider Road
PW - 3686 Super 8-Baton Rouge 11444 Reulet Ave.
ML-108a Park Ridge MHP 1751 N. Grand Ave.
ML-108b Northbrook MHP 3430 N.Peoria Rd.
--------------------------------------------------------------------------------------------------------------------
ML-108 Park Ridge & Northbrook MHP - multiple prop loan
PW - 2526 New Exchange 1307 West 6th Street
PW - 3076 Travelodge South 1274 Murfreesboro Pike
PW - 5083 Route 34 Industrial 1709 Route 34
PW - 4678 3501 McKinney 3501 McKinney
PW - 3426 Comfort Inn Abilene 1758 East Interstate 20
PW - 3893 Super 8 Fortuna 1805 Alamar Way
PW - 2443 Park 95 Offices 13540-13632 West 95th Street
PW - 4991 Mayfair Apartments 1010 Mayfair Avenue
PW - 3545A 289-291 Devonshire Street 289-291 Devonshire Street
PW - 3545B Shell Pointe Apartments 56 Longwood Avenue
--------------------------------------------------------------------------------------------------------------------
PW - 3545 Devonshire/Longwood
PW - 3616 Exeter House Apartments 315 Charger Street
PW - 3968 Langtree Townhomes 505-659 Baylor Drive
PW - 2509 TDC Filter 1331 South 55th Court
PW - 3807 Burnett Highland Building 1991 Ford Parkway
PW - 6377 May Avenue Self-Storage 2828 N.W. 62nd St.
PW - 3970 Millertown Center Loves Creek Road & Millertown Pike
PW - 3093 77 Pennington Avenue 77 Pennington Avenue
PW - 3031 Corporate Square East 2511 East 46 Street
PW - 3687 Super 8 Hammond 200 Westin Oak Drive
PW - 2799 The Shops of Greenbriar 2925 Headland Drive
PW - 7134A Greentree Apartments 1755 NE 164 Street
PW - 7134B Keystone Apartments 1801 Northeast 124th Street
--------------------------------------------------------------------------------------------------------------------
PW - 7134 GreenTree & Keystone Apartments
PW - 7133 Villa Joyosa 13150 Memorial Highway
PW - 3570 Super 8 Liverpool 7360 Oswego Road (Route 57)
PW - 3176 Quail Creek Self Storage 3030 West Memorial Road
ML-123 Daly Plaza 1883 Daly Street
PW - 4546 Cresap Knoll & Yonkers Apartments 12914-12918 Cresap Knoll Avenue
PW - 7021 Elegante Apartments 1821-1851 NE 168th Street
PW - 3214 Hanna Place Office Park 8858 Cedar Springs Lane
PW - 4426 150 Spring Street 150 Spring Street
PW - 4897 Days Inn Ladson 119 Gateway Drive
PW - 2903 Rockland & Whitman 346 Union St./458 South Ave.
PW - 2495 Metro Plaza Retail Center 2601 West Dunlap Avenue
PW - 3618 Barker House Apartments 261-273 Barker Street
PW - 1445 Ethan Allen Building 164 Highway 35 South
PW - 4309 Hearth House 50 Avenue A
ML-145 Fremont Park MHP 3501 Ridgely
PW - 4038 3680 Cascade Road 3680 Cascade Road
PW - 4614 Days Inn Jennings 2002 Port Drive
PW - 3619 Carlyle House Apartments 135-145 Ward Street
PW - 4371 Riverside Village Apartments 650 Dixon Boulevard
PW - 5254 Villa Verde I 1300/1308 Pennsylvania Avenue
ML-114 1383 Woodward Office Bldg 1383 Woodward
PW - 3515 Hollywood Video 23 West 127 Army Trail Road
PW - 1663 122-128 Cambridge Street 122-128 Cambridge Street
PW - 5947 Tudor House Apartments 1 Campus Road
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ZIP ORIGINAL
CITY STATE CODE PROPERTY TYPE BALANCE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hunt Valley MD 21031 Office $33,400,000
Lutherville MD 21093 Mixed 18,600,000
Union City NJ 07087 Nursing Home 17,100,000
Suitland MD 20746 Multifamily 16,489,000
Irvington NJ 07111 Nursing Home 15,740,000
Chaska MN 55318 CTL 15,087,308
Bronx NY 10475 Retail 12,830,000
Timonium MD 21093 Office 12,600,000
Livonia MI 48150 Industrial 11,480,000
Las Vegas NV 89119 Office 11,000,000
San Antonio TX 78216 Retail 10,962,000
Phoenix AZ 85016 Multifamily 10,700,000
West Columbia SC 29169 Multifamily 9,600,000
Columbus OH 43235 Multifamily 9,608,000
Dallas TX 75228 Multifamily 8,600,000
Clinton Township MI 48038 Multifamily 9,500,000
Albuquerque NM 87112 Retail 9,175,000
Ponce PR 00731 CTL 8,820,982
West Covina CA 91790 Multifamily 8,600,000
Nashua NH 03063 CTL 8,461,733
Chula Vista CA 91914 Industrial 8,500,000
Clearwater FL 34623 Multifamily 7,700,000
Fredericksburg VA 22407 CTL 7,911,959
Gastonia NC 28054 Multifamily 7,700,000
Blaine WA 98240 Retail 7,725,000
Houston TX 77074 Multifamily 7,595,000
Houston TX 77090 Multifamily 5,995,000
Westhampton Beach NY 11978 Health Care 7,500,000
Hartford WI 53027 Retail 7,000,000
Bronx NY 10458 Retail 6,500,000
DeSoto TX 75134 Multifamily 5,500,000
Alameda CA 94502 Other 6,390,000
Houston TX 77074 Multifamily 6,321,000
Houston TX 77042 Multifamily 5,840,000
Ft. Worth TX 76120 Multifamily 5,840,000
Manchester Center VT 05255 Senior Housing-Assisted Living 6,000,000
Hershey PA 17033 Hospitality 5,950,000
Escondido CA 92025 Multifamily 5,000,000
St. Paul MN 55108 Multifamily 5,500,000
Houston TX 77073 Multifamily 3,690,000
Berkeley CA 94710 Industrial 5,100,000
Tempe AZ 85281 Industrial 5,000,000
Salem NH 03079 Industrial 5,000,000
Greenwood IN 46142 Multifamily 5,000,000
Lawrence NJ 08648 Retail 4,900,000
Las Vegas NV 89102 CTL 4,900,000
Houston TX 77055 Multifamily 4,645,000
Inver Grove Heights MN 55075 Mobile Home Park 2,775,000
Maplewood MN 55119 Mobile Home Park 1,970,000
- --------------------------------------------------------------------------------------------------------
4,745,000
Cranford NJ 07016 Industrial 4,400,000
Scottsdale AZ 85260 Industrial 4,350,000
Columbia SC 29223 Hospitality 4,350,000
Collingswood NJ 08108 Retail 432,000
Madison NJ 07940 Retail 289,000
Springfield NJ 07081 Retail 420,000
Edison NJ 08837 Retail 680,000
Plainfield NJ 07060 Retail 129,000
Westfield NJ 07090 Retail 2,300,000
- --------------------------------------------------------------------------------------------------------
4,250,000
Allentown PA 18103 Senior Housing-Assisted Living 3,560,000
Catasauqua PA 18032 Senior Housing-Assisted Living 470,000
- --------------------------------------------------------------------------------------------------------
4,030,000
Daytona Beach FL 32118 Hospitality 3,900,000
New York NY 10001 Industrial 3,900,000
American Canyon CA 94589 Mobile Home Park 3,850,000
Washington D.C. DC 20002 Industrial 3,825,000
Houston TX 77036 Multifamily 3,200,000
Novi MI 48375 Industrial 3,615,000
Greensboro NC 27407 Multifamily 3,200,000
Kissimmee FL 34746 Hospitality 3,500,000
Olympia WA 98501 Hospitality 3,470,000
Decatur GA 30032 Office 3,400,000
Orangeburg SC 29118 Hospitality 3,300,000
Fort Lauderdale FL 33309 Office 3,170,000
Houston TX 77071 Multifamily 3,148,000
San Diego CA 92101 Office 3,100,000
Chapel Hill NC 27514 Hospitality 3,025,000
Waveland MS 39576 Hospitality 3,000,000
Montgomery AL 36117 Multifamily 2,936,000
New York NY 10021 Mixed 2,900,000
Charlotte NC 28208 Hospitality 2,900,000
Wilson NC 27893 Hospitality 2,900,000
Pembroke Pines FL 33026 Retail 2,850,000
Hollywood FL 33021 Retail 2,850,000
Lakeland FL 33809 Retail 2,850,000
Decatur IL 62526 Retail 2,800,000
Clarksville TN 37040 Hospitality 2,850,000
Fort Myers FL 33907 Office 2,800,000
Opa Locka FL 33054 Industrial 2,800,000
East Hanover NJ 07936 CTL 2,904,245
Mansfield Center CT 06250 Hospitality 2,800,000
Orlando FL 32939 Multifamily 2,700,000
Houston TX 77036 Multifamily 1,980,000
Albemarle NC 28001 Hospitality 1,900,000
Albemarle NC 28001 Hospitality 825,000
- --------------------------------------------------------------------------------------------------------
2,725,000
Henrietta NY 14623 Industrial 2,560,000
Atlanta GA 30315 Multifamily 2,500,000
Morrisville PA 19067 Multifamily 2,485,000
Pooler GA 31322 Hospitality 2,500,000
Flagstaff AZ 86001 Hospitality 2,450,000
New York NY 10017 Office 2,425,000
Chicago IL 60605 Office 2,400,000
New York NY 10003 Multifamily 2,400,000
Atlanta GA 30329 Multifamily $2,400,000
Culver City CA 90066 Office 2,300,000
Killeen TX 76541 Hospitality 2,315,000
Phoenix AZ 85044 Retail 2,300,000
San Diego CA 92101 Retail 2,300,000
Palm Beach FL 33406 CTL 2,294,655
Troy AL 36081 Multifamily 2,280,000
Rapid City SD 57701 Industrial 2,275,000
Phoenix AZ 85017 Hospitality 2,225,000
Kendall FL 33176 Office 2,175,000
Jacksonville FL 32216 Hospitality 2,200,000
Zanesville OH 43701 Multifamily 412,568
Lancaster OH 43130 Multifamily 737,862
Lancaster OH 43130 Multifamily 999,570
- --------------------------------------------------------------------------------------------------------
2,150,000
Methuen MA 01844 Multifamily 2,150,000
Aspen CO 81611 Industrial 2,125,000
Sunrise FL 33351 Multifamily 2,100,000
Austin TX 78745 Hospitality 2,100,000
Harrison Township MI 48045 Multifamily 2,050,000
Alexandria VA 22306 Hospitality 2,050,000
Chicago IL 60626 Multifamily 2,000,000
Charleston SC 29407 Retail 2,000,000
Sunrise FL 33321 Retail 1,900,000
Nazareth PA 18064 Multifamily 1,900,000
Byron GA 31008 Hospitality 1,900,000
Pompano Beach FL 33069 Industrial 1,860,000
Frederick MD 21701 Office 1,810,000
Cincinnati OH 45211 Multifamily 311,000
Cincinnati OH 45211 Multifamily 403,000
Cincinnati OH 45225 Multifamily 182,000
Cincinnati OH 45237 Multifamily 929,000
- --------------------------------------------------------------------------------------------------------
Multifamily 1,825,000
Tucker GA 30084 Hospitality 1,800,000
Vidalia GA 30474 Hospitality 1,770,000
Houston TX 77065 Multifamily 1,725,000
Tuckahoe NY 10707 Multifamily 1,700,000
Carmel CA 93921 Hospitality 1,700,000
Queens NY 11368 Retail 1,700,000
Mounds View MN 55112 Mobile Home Park 1,650,000
Clinton MS 39056 Hospitality 1,600,000
Brooklyn Heights OH 44131 Industrial 1,600,000
Charlotte NC 28208 Hospitality 1,600,000
Hollywood FL 33020 Office 1,550,000
Marietta GA 30060 Multifamily 1,550,000
Baton Rouge LA 70816 Hospitality 1,552,000
Springfield IL 62704 Mobile Home Park 1,029,180
Springfield IL 62702 Mobile Home Park 510,819
- --------------------------------------------------------------------------------------------------------
1,540,000
Corona CA 92720 Office 1,525,000
Nashville TN 37217 Hospitality 1,520,000
Wall Township NJ 07719 Industrial 1,500,000
Dallas TX 75204 Retail 1,500,000
Abilene TX 79601 Hospitality 1,500,000
Fortuna CA 95540 Hospitality 1,500,000
Lenexa KS 66215 Office 1,470,000
Madison WI 53714 Multifamily 1,440,000
Boston MA 02110 Office 1,050,000
Wareham MA 02558 Multifamily 400,000
- --------------------------------------------------------------------------------------------------------
MA 1,450,000
Revere MA 02151 Multifamily 1,450,000
Longview TX 75601 Multifamily 1,400,000
Cicero IL 60804 Industrial 1,400,000
St. Paul MN 55116 Office 1,400,000
Oklahoma City OK 73112 Self Storage 1,370,000
Knoxville TN 37919 Retail 1,350,000
Passaic NJ 07055 Multifamily 1,350,000
Indianapolis IN 46205 Office 1,350,000
Hammond LA 70816 Hospitality 1,300,000
Atlanta GA 30344 Retail 1,300,000
North Miami FL 33162 Multifamily 822,000
North Miami FL 33162 Multifamily 455,000
- --------------------------------------------------------------------------------------------------------
1,277,000
North Miami FL 33161 Multifamily 1,264,000
Liverpool NY 13090 Hospitality 1,275,000
Oklahoma City OK 73134 Self Storage 1,250,000
Los Angeles CA 90031 Retail 1,238,000
Cumberland MD 21502 Multifamily 1,200,000
North Miami Beach FL 33162 Multifamily 1,195,000
Knoxville TN 37923 Office 1,200,000
New York NY 10012 Mixed 1,200,000
Ladson SC 29456 Hospitality 1,200,000
Rockland/Whitman MA 02370 Other 1,200,000
Phoenix AZ 85021 Retail 1,200,000
Lowell MA 01850 Multifamily 1,200,000
Eatontown NJ 07724 Retail 1,150,000
New York NY 10009 Multifamily 1,100,000
Springfield IL 62702 Mobile Home Park 1,060,000
Atlanta GA 30331 Office 1,050,000
Jennings LA 70546 Hospitality 1,012,500
Revere MA 02151 Multifamily 1,000,000
Cocoa FL 32922 Multifamily 950,000
Miami Beach FL 33139 Multifamily 900,000
Bloomfield Twp MI 48302 Office 860,000
Glendale Heights IL 60139 Retail 850,000
Boston MA 02114 Retail 800,000
Peekskill NY 10566 Multifamily 725,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE % OF
CUT-OFF DATE % OF INITIAL INITIAL POOL
BALANCE POOL BALANCE BALANCE
- ----------------------------------------------------------------------
<S> <C> <C> <C>
$33,176,730 4.71% 4.71%
18,478,392 2.62% 7.33%
17,100,000 2.43% 9.76%
16,337,265 2.32% 12.07%
15,740,000 2.23% 14.31%
14,875,024 2.11% 16.42%
12,774,267 1.81% 18.23%
12,517,620 1.78% 20.01%
11,474,466 1.63% 21.63%
10,993,724 1.56% 23.19%
10,956,716 1.55% 24.75%
10,700,000 1.52% 26.27%
9,960,221 1.41% 27.68%
9,608,000 1.36% 29.04%
9,577,018 1.36% 30.40%
9,500,000 1.35% 31.75%
9,170,484 1.30% 33.05%
8,664,604 1.23% 34.28%
8,549,334 1.21% 35.49%
8,426,129 1.20% 36.69%
8,342,334 1.18% 37.87%
8,244,785 1.17% 39.04%
7,911,959 1.12% 40.17%
7,690,800 1.09% 41.26%
7,671,620 1.09% 42.35%
7,585,297 1.08% 43.42%
7,492,394 1.06% 44.49%
7,438,152 1.06% 45.54%
6,952,383 0.99% 46.53%
6,466,506 0.92% 47.45%
6,460,384 0.92% 48.36%
6,336,877 0.90% 49.26%
6,313,149 0.90% 50.16%
6,276,740 0.89% 51.05%
6,206,788 0.88% 51.93%
5,962,720 0.85% 52.77%
5,908,372 0.84% 53.61%
5,847,324 0.83% 54.44%
5,431,644 0.77% 55.21%
5,303,071 0.75% 55.97%
5,065,908 0.72% 56.68%
4,994,257 0.71% 57.39%
4,961,082 0.70% 58.10%
4,955,277 0.70% 58.80%
4,894,164 0.69% 59.49%
4,742,905 0.67% 60.17%
4,639,231 0.66% 60.83%
2,692,505
1,911,436
- ----------------------------------------------------------------------
4,603,940 0.65% 61.48%
4,366,567 0.62% 62.10%
4,317,700 0.61% 62.71%
4,298,205 0.61% 63.32%
420,773
281,489
409,085
662,328
125,647
2,240,226
- ----------------------------------------------------------------------
4,139,548 0.59% 63.91%
3,538,124
467,112
- ----------------------------------------------------------------------
4,005,236 0.57% 64.48%
3,864,307 0.55% 65.02%
3,849,159 0.55% 65.57%
3,823,400 0.54% 66.11%
3,819,352 0.54% 66.66%
3,718,448 0.53% 67.18%
3,594,905 0.51% 67.69%
3,553,408 0.50% 68.20%
3,467,048 0.49% 68.69%
3,376,028 0.48% 69.17%
3,363,037 0.48% 69.65%
3,266,101 0.46% 70.11%
3,168,551 0.45% 70.56%
3,144,090 0.45% 71.00%
3,068,825 0.44% 71.44%
2,996,108 0.43% 71.87%
2,967,020 0.42% 72.29%
2,916,251 0.41% 72.70%
2,898,503 0.41% 73.11%
2,874,821 0.41% 73.52%
2,871,394 0.41% 73.93%
2,848,903 0.40% 74.33%
2,825,870 0.40% 74.73%
2,814,502 0.40% 75.13%
2,798,812 0.40% 75.53%
2,783,596 0.39% 75.92%
2,779,883 0.39% 76.32%
2,775,250 0.39% 76.71%
2,769,932 0.39% 77.10%
2,756,214 0.39% 77.50%
2,694,952 0.38% 77.88%
2,684,394 0.38% 78.26%
1,837,076
797,678
- ----------------------------------------------------------------------
2,634,753 0.37% 78.63%
2,532,971 0.36% 78.99%
2,476,903 0.35% 79.34%
2,476,179 0.35% 79.69%
2,472,003 0.35% 80.05%
2,418,545 0.34% 80.39%
2,411,233 0.34% 80.73%
2,387,276 0.34% 81.07%
2,382,589 0.34% 81.41%
$2,354,142 0.33% 81.74%
2,299,035 0.33% 82.07%
2,297,554 0.33% 82.39%
2,284,081 0.32% 82.72%
2,261,678 0.32% 83.04%
2,259,987 0.32% 83.36%
2,257,223 0.32% 83.68%
2,228,908 0.32% 84.00%
2,204,909 0.31% 84.31%
2,171,862 0.31% 84.62%
2,155,435 0.31% 84.92%
412,110
737,043
998,461
- ----------------------------------------------------------------------
2,147,615 0.30% 85.23%
2,124,779 0.30% 85.53%
2,099,147 0.30% 85.83%
2,097,385 0.30% 86.12%
2,076,262 0.29% 86.42%
2,036,507 0.29% 86.71%
2,032,201 0.29% 87.00%
1,985,134 0.28% 87.28%
1,978,183 0.28% 87.56%
1,896,954 0.27% 87.83%
1,885,096 0.27% 88.10%
1,864,455 0.26% 88.36%
1,859,056 0.26% 88.62%
1,797,323 0.26% 88.88%
303,095
392,757
177,374
905,387
- ----------------------------------------------------------------------
1,778,612 0.25% 89.13%
1,769,508 0.25% 89.38%
1,748,931 0.25% 89.63%
1,724,282 0.24% 89.88%
1,686,221 0.24% 90.11%
1,683,670 0.24% 90.35%
1,664,785 0.24% 90.59%
1,600,949 0.23% 90.82%
1,580,699 0.22% 91.04%
1,579,963 0.22% 91.27%
1,551,833 0.22% 91.49%
1,549,317 0.22% 91.71%
1,549,213 0.22% 91.93%
1,534,699 0.22% 92.14%
1,020,060
506,293
- ----------------------------------------------------------------------
1,526,353 0.22% 92.36%
1,509,717 0.21% 92.57%
1,502,658 0.21% 92.79%
1,493,109 0.21% 93.00%
1,486,695 0.21% 93.21%
1,484,278 0.21% 93.42%
1,478,185 0.21% 93.63%
1,447,974 0.21% 93.84%
1,435,065 0.20% 94.04%
1,035,276
394,391
- ----------------------------------------------------------------------
1,429,667 0.20% 94.24%
1,425,373 0.20% 94.44%
1,390,583 0.20% 94.64%
1,381,045 0.20% 94.84%
1,376,191 0.20% 95.03%
1,367,592 0.19% 95.23%
1,340,634 0.19% 95.42%
1,336,400 0.19% 95.61%
1,333,842 0.19% 95.80%
1,284,742 0.18% 95.98%
1,283,238 0.18% 96.16%
820,386
454,107
- ----------------------------------------------------------------------
1,274,493 0.18% 96.34%
1,261,519 0.18% 96.52%
1,254,668 0.18% 96.70%
1,241,497 0.18% 96.87%
1,225,052 0.17% 97.05%
1,193,977 0.17% 97.22%
1,192,654 0.17% 97.39%
1,191,466 0.17% 97.56%
1,190,505 0.17% 97.72%
1,186,264 0.17% 97.89%
1,185,820 0.17% 98.06%
1,166,607 0.17% 98.23%
1,166,129 0.17% 98.39%
1,127,096 0.16% 98.55%
1,091,891 0.15% 98.71%
1,050,607 0.15% 98.86%
1,043,235 0.15% 99.00%
1,000,046 0.14% 99.15%
971,649 0.14% 99.28%
938,630 0.13% 99.42%
896,991 0.13% 99.54%
855,095 0.12% 99.67%
839,752 0.12% 99.79%
790,450 0.11% 99.90%
724,743 0.10% 100.00%
704,764,603
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BORROWER
AFFILIATED CROSSED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PW - 4818, PW - 4819
PW - 4817, PW - 4819
ML - 134
ML - 133
PW - 4817, PW - 4818
ML - 140, ML - 141, ML - 142, ML - 143, PW - 6542, PW - 6543, PW 6544, PW - 6545
ML-147, ML-148
ML-146, ML-147
ML - 112, ML - 111
ML-146, ML-148
PW - 1481
PW - 3265A, PW - 3265B
ML - 140, ML - 141, ML - 142, ML - 143, PW - 6543, PW 6544, PW - 6545, PW - 6093
ML - 139, ML - 140, ML - 142, ML - 143, PW - 6542, PW - 6543, PW 6544, PW - 6545, PW - 6093
ML - 140, ML - 141, ML - 142, ML - 143, PW - 6542, PW - 6543, PW 6544, PW - 6545, PW - 6093
ML - 140, ML - 141, ML - 142, ML - 143, PW - 6542, PW 6544, PW - 6545, PW - 6093
ML - 124
ML - 125
ML - 113, ML - 111
ML - 139, ML - 140, ML - 141, ML - 143, PW - 6542, PW - 6543, PW 6544, PW - 6545, PW - 6093
PW - 2005
ML - 140, ML - 141, ML - 142, ML - 143, PW - 6542, PW - 6543, PW 6544, PW - 6093
PW - 4151B, PW - 4153 PW - 4151B
PW - 4151A, PW - 4153 PW - 4151A
- ----------------------------------------------------------------------------------------------------------------------------------
PW - 4139
PW - 2982B, PW - 2982C, PW - 2982D, PW - 2982E, PW - 2982F
PW - 2982A, PW - 2982C, PW - 2982D, PW - 2982E, PW - 2982F
PW - 2982A, PW - 2982B, PW - 2982D, PW - 2982E, PW - 2982F
PW - 2982A, PW - 2982B, PW - 2982C, PW - 2982E, PW - 2982F
PW - 2982A, PW - 2982B, PW - 2982C, PW - 2982D, PW - 2982F
PW - 2982A, PW - 2982B, PW - 2982C, PW - 2982D, PW - 2982E,
- ----------------------------------------------------------------------------------------------------------------------------------
ML - 103b ML - 103b
ML - 103a ML - 103a
- ----------------------------------------------------------------------------------------------------------------------------------
ML - 139, ML - 141, ML - 142, ML - 143, PW - 6542, PW - 6543, PW 6544, PW - 6545, PW - 6093
ML - 113, ML - 112
PW - 6022, PW - 6023, PW - 6025, PW - 6112
ML - 140, ML - 141, ML - 142, ML - 143, PW - 6542, PW - 6543, PW - 6545, PW - 6093
PW - 4048
PW - 6022, PW 6024, PW - 6025, PW - 6112
PW - 6022, PW - 6023, PW 6024, PW - 6112
ML - 139, ML - 140, ML - 141, ML - 142, PW - 6542, PW - 6543, PW 6544, PW - 6545, PW - 6093
PW - 3265B, PW - 7009
PW - 3265A, PW - 7009
- ----------------------------------------------------------------------------------------------------------------------------------
PW - 1696
PW - 4047
PW - 5994B, PW - 5994C
PW - 5994A, PW - 5994C
PW - 5994A, PW - 5994B
- ----------------------------------------------------------------------------------------------------------------------------------
PW - 1663
PW - 6023, PW 6024, PW - 6025, PW - 6112
PW - 3563B, PW- 3563C, PW - 3563D
PW - 3563A, PW- 3563C, PW - 3563D
PW - 3563A, PW - 3563B, PW - 3563D
PW - 3563A, PW - 3563B, PW- 3563C
- ----------------------------------------------------------------------------------------------------------------------------------
PW - 4151A, PW - 4151B
PW - 6022, PW - 6023, PW 6024, PW - 6025, PW - 6112
PW - 3687
- ----------------------------------------------------------------------------------------------------------------------------------
ML - 145 ML - 145
PW - 3545B
PW - 3545A
- ----------------------------------------------------------------------------------------------------------------------------------
PW - 3618, PW - 3619
PW - 3176
PW - 3686
PW - 7134B, PW - 7021, PW - 7133
PW - 7134A, PW - 7021, PW - 7133
- ----------------------------------------------------------------------------------------------------------------------------------
PW - 7021, PW - 7134A, PW - 7134B
PW - 6377
PW - 7133, PW - 7134A, PW - 7134B
PW - 3616, PW - 3619
ML - 108a, ML - 108b ML - 108a, ML - 108b
PW - 3616, PW - 3618
PW - 1623
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REM
ORIG REM AMORT AMORT
INTEREST ACCRUAL MORTGAGE SERVICING FEE TERM TERM TERM TERM ORIGINATION
METHOD RATE RATE(1) (MOS.) (MOS.) (MOS.) (MOS.) DATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Actual/360 6.590% 0.10850% 120 112 360 352 9/18/98
Actual/360 6.690 0.10850 120 112 360 352 9/18/98
Actual/360 8.375 0.10850 120 120 264 264 5/5/99
Actual/360 6.977 0.10850 120 108 360 348 5/15/98
Actual/360 8.375 0.10850 120 120 264 264 5/5/99
30/360 7.260 0.10850 239 228 294 283 6/25/98
Actual/360 7.750 0.10850 132 126 360 354 11/6/98
Actual/360 6.690 0.10850 120 112 360 352 9/18/98
Actual/360 7.800 0.10850 119 118 360 359 4/1/99
Actual/360 7.750 0.10850 120 119 360 359 4/21/99
Actual/360 7.800 0.10850 120 119 360 359 4/15/99
Actual/360 7.470 0.06850 96 96 360 360 5/10/99
Actual/360 7.025 0.10850 120 105 360 345 2/26/98
Actual/360 7.590 0.06850 144 144 360 360 5/10/99
Actual/360 7.290 0.10850 120 103 360 343 12/5/97
Actual/360 7.610 0.06850 144 144 360 360 5/10/99
Actual/360 7.740 0.10850 120 119 360 359 4/9/99
30/360 7.240 0.10850 238 229 NAP NAP 8/12/98
Actual/360 7.150 0.10850 120 112 360 352 9/18/98
30/360 6.716 0.10850 246 235 240 235 6/4/98
Actual/360 7.150 0.10850 120 110 240 230 7/13/98
Actual/360 7.130 0.10850 120 108 360 348 5/8/98
Actual/360 7.450 0.10850 299 288 NAP NAP 3/4/99
Actual/360 7.770 0.10850 120 118 360 358 3/8/99
Actual/360 7.030 0.10850 120 111 360 351 8/24/98
Actual/360 7.510 0.10850 120 118 360 358 3/22/99
Actual/360 7.370 0.10850 120 108 360 348 5/1/98
Actual/360 8.500 0.10850 120 115 240 235 12/30/98
Actual/360 7.100 0.10850 120 111 360 351 8/21/98
Actual/360 7.250 0.10850 180 173 360 353 10/2/98
Actual/360 7.220 0.10850 120 108 360 348 5/8/98
Actual/360 7.420 0.10850 120 113 300 293 10/14/98
Actual/360 7.620 0.10850 120 118 360 358 3/22/99
Actual/360 7.430 0.10850 84 70 360 346 3/25/98
Actual/360 7.430 0.10850 84 70 360 346 3/25/98
Actual/360 6.750 0.10850 120 113 360 353 10/20/98
Actual/360 8.050 0.10850 120 113 300 293 10/2/98
Actual/360 7.280 0.10850 120 103 360 343 12/12/97
Actual/360 7.520 0.10850 120 113 240 233 10/19/98
Actual/360 7.370 0.10850 120 108 360 348 5/1/98
Actual/360 6.590 0.10850 120 112 360 352 9/17/98
Actual/360 7.920 0.10850 120 118 360 358 3/24/99
Actual/360 7.260 0.10850 96 85 360 349 6/19/98
Actual/360 7.100 0.10850 120 108 360 348 5/29/98
Actual/360 8.375 0.10850 120 118 360 358 3/30/99
Actual/360 6.610 0.10850 116 107 NAP NAP 9/8/98
Actual/360 7.620 0.10850 120 118 360 358 3/22/99
0.10850
0.10850
- ---------------------------------------------------------------------------------------------------------------------------
Actual/360 6.510 180 171 180 171 8/21/98
Actual/360 7.010 0.10850 120 110 360 350 7/1/98
Actual/360 7.110 0.10850 120 110 360 350 7/31/98
Actual/360 7.850 0.10850 240 233 240 233 10/29/98
- ---------------------------------------------------------------------------------------------------------------------------
Actual/360 6.640 0.10850 179 171 180 172 9/2/98
Actual/360 0.10850
Actual/360 0.10850
- ---------------------------------------------------------------------------------------------------------------------------
7.250 120 115 300 295 12/17/98
Actual/360 6.490 0.10850 120 113 300 293 10/5/98
Actual/360 7.070 0.10850 120 112 300 292 9/18/98
Actual/360 8.120 0.10850 60 53 300 293 10/29/98
Actual/360 9.200 0.10850 120 118 300 298 2/26/99
Actual/360 7.094 0.10850 120 108 360 348 5/1/98
Actual/360 7.400 0.10850 120 112 360 352 9/25/98
Actual/360 7.190 0.10850 120 103 360 343 12/19/97
Actual/360 9.590 0.10850 102 95 240 233 10/2/98
30/360 8.230 0.10850 264 246 264 246 11/25/97
Actual/360 6.950 0.10850 120 111 300 291 8/31/98
Actual/360 7.810 0.10850 120 110 300 290 7/31/98
Actual/360 7.950 0.10850 84 83 360 359 4/14/99
Actual/360 7.620 0.10850 120 118 360 358 3/22/99
Actual/360 7.400 0.10850 120 111 300 291 8/7/98
Actual/360 6.960 0.10850 120 112 300 292 9/1/98
Actual/360 7.500 0.10850 120 114 240 234 11/23/98
Actual/360 7.150 0.10850 120 111 360 351 9/1/98
Actual/360 7.600 0.10850 84 83 360 359 4/14/99
Actual/360 7.500 0.10850 120 112 300 292 9/29/98
Actual/360 7.510 0.10850 120 111 300 291 7/31/98
Actual/360 8.400 0.10850 84 83 360 359 4/14/99
Actual/360 7.640 0.10850 300 292 300 292 9/16/98
Actual/360 7.230 0.10850 120 109 300 289 6/12/98
Actual/360 8.150 0.10850 120 119 360 359 4/14/99
Actual/360 6.390 0.10850 180 173 180 173 10/2/98
Actual/360 6.260 0.10850 120 112 360 352 9/15/98
Actual/360 7.400 0.10850 120 112 300 292 9/28/98
Actual/360 6.750 0.10850 135 125 NAP NAP 7/27/98
Actual/360 7.690 0.10850 240 231 240 231 8/19/98
Actual/360 8.050 0.10850 120 118 300 298 4/1/99
Actual/360 7.370 0.10850 120 108 360 348 5/1/98
- ---------------------------------------------------------------------------------------------------------------------------
Actual/360 7.530 0.10850 180 169 180 169 6/8/98
Actual/360 7.120 0.10850 120 111 300 291 8/21/98
Actual/360 7.150 0.10850 120 112 300 292 9/25/98
Actual/360 7.500 0.10850 120 115 360 355 12/29/98
Actual/360 7.810 0.10850 120 109 300 289 6/1/98
Actual/360 7.660 0.10850 120 110 276 266 7/6/98
Actual/360 7.310 0.10850 120 112 360 352 9/14/98
Actual/360 7.600 0.10850 120 112 360 352 9/18/98
Actual/360 7.210 0.10850 120 110 360 350 7/23/98
Actual/360 6.920% 0.10850% 240 230 240 230 7/27/98
Actual/360 8.180 0.10850 120 119 360 359 4/12/99
Actual/360 7.630 0.10850 120 113 300 293 10/14/98
Actual/360 7.410 0.10850 120 110 360 350 7/27/98
Actual/360 7.200 0.10850 240 231 240 231 8/4/98
Actual/360 7.050 0.10850 226 215 NAP NAP 6/9/98
Actual/360 6.700 0.10850 120 112 300 292 9/4/98
Actual/360 7.180 0.10850 120 109 240 229 6/15/98
Actual/360 7.280 0.10850 120 112 300 292 9/22/98
Actual/360 8.300 0.10850 120 117 360 357 2/3/99
Actual/360 7.900 0.10850 240 228 240 228 5/22/98
- ---------------------------------------------------------------------------------------------------------------------------
Actual/360 8.050 0.10850 120 118 360 358 3/5/99
Actual/360 7.070 0.10850 120 110 300 290 7/6/98
Actual/360 7.360 0.10850 120 109 300 289 6/29/98
Actual/360 7.610 0.10850 120 118 360 358 3/22/99
Actual/360 7.760 0.10850 120 109 300 289 6/3/98
Actual/360 6.660 0.10850 120 112 360 352 9/14/98
Actual/360 7.500 0.10850 120 112 300 292 9/1/98
Actual/360 6.700 0.10850 120 111 360 351 8/27/98
Actual/360 6.930 0.10850 120 111 300 291 8/20/98
Actual/360 8.810 0.10850 120 118 300 298 3/12/99
Actual/360 7.400 0.10850 120 113 300 293 10/30/98
Actual/360 7.780 0.10850 240 229 240 229 6/19/98
Actual/360 7.650 0.10850 84 83 360 359 4/14/99
Actual/360 7.360 0.10850 120 110 360 350 7/31/98
- ---------------------------------------------------------------------------------------------------------------------------
Actual/360 6.890 0.10850 180 172 180 172 9/25/98
Actual/360 7.840 0.10850 120 110 240 230 7/15/98
Actual/360 7.480 0.10850 120 109 300 289 6/30/98
Actual/360 8.200 0.10850 120 119 360 359 4/13/99
Actual/360 7.090 0.10850 120 109 360 349 6/11/98
Actual/360 7.660 0.10850 120 111 300 291 8/3/98
Actual/360 7.010 0.10850 120 109 240 229 6/19/98
Actual/360 6.510 0.10850 180 171 180 171 8/21/98
Actual/360 7.750 0.10850 120 113 240 233 10/30/98
Actual/360 7.200 0.10850 120 109 300 289 6/10/98
Actual/360 7.540 0.10850 180 170 180 170 7/7/98
Actual/360 8.050 0.10850 84 83 360 359 4/14/99
Actual/360 7.650 0.10850 120 119 360 359 4/14/99
Actual/360 8.350 0.10850 120 113 240 233 10/14/98
- ---------------------------------------------------------------------------------------------------------------------------
Actual/360 7.000 0.10850 120 113 300 293 10/21/98
Actual/360 7.420 0.10850 120 111 300 291 8/13/98
Actual/360 7.710 0.10850 120 109 300 289 6/24/98
Actual/360 7.520 0.10850 120 116 300 296 1/29/99
Actual/360 7.300 0.10850 120 117 180 177 2/16/99
Actual/360 7.700 0.10850 120 110 300 290 7/23/98
Actual/360 7.280 0.10850 240 232 240 232 9/1/98
Actual/360 7.050 0.10850 120 112 240 232 9/18/98
Actual/360 8.250 0.10850 120 114 360 354 11/9/98
- ---------------------------------------------------------------------------------------------------------------------------
Actual/360 7.110 0.10850 120 108 300 288 5/21/98
Actual/360 7.050 0.10850 180 171 240 231 8/5/98
Actual/360 7.530 0.10850 60 50 360 350 7/17/98
Actual/360 6.760 0.10850 120 109 300 289 6/30/98
Actual/360 7.040 0.10850 240 231 240 231 8/28/98
Actual/360 8.360 0.10850 120 118 300 298 3/4/99
Actual/360 7.400 0.10850 120 110 360 350 7/23/98
Actual/360 7.390 0.10850 300 291 300 291 8/21/98
Actual/360 7.450 0.10850 120 109 300 289 6/23/98
Actual/360 7.960 0.10850 120 113 240 233 10/9/98
Actual/360 7.580 0.10850 120 108 300 288 5/29/98
- ---------------------------------------------------------------------------------------------------------------------------
Actual/360 7.800 0.10850 120 118 300 298 3/31/99
Actual/360 7.800 0.10850 120 118 300 298 3/31/99
Actual/360 7.540 0.10850 240 231 240 231 8/27/98
Actual/360 7.100 0.10850 120 111 360 351 8/26/98
Actual/360 7.175 0.10850 240 231 300 291 8/21/98
Actual/360 8.100 0.10850 120 115 300 295 12/29/98
Actual/360 7.800 0.10850 120 118 300 298 3/31/99
Actual/360 7.630 0.10850 120 109 360 349 6/2/98
Actual/360 7.350 0.10850 120 113 300 293 10/5/98
Actual/360 8.150 0.10850 120 113 240 233 10/16/98
Actual/360 7.520 0.10850 120 109 300 289 6/26/98
Actual/360 7.260 0.10850 180 171 180 171 8/25/98
Actual/360 7.100 0.10850 180 171 180 171 8/5/98
Actual/360 7.310 0.10850 120 109 240 229 6/8/98
Actual/360 6.800 0.10850 120 114 300 294 10/30/98
Actual/360 7.000 0.10850 120 113 300 293 10/21/98
Actual/360 7.340 0.10850 120 111 360 351 8/24/98
Actual/360 7.600 0.10850 240 233 240 233 10/9/98
Actual/360 7.050 0.10850 180 171 180 171 8/5/98
Actual/360 7.450 0.10850 120 109 300 289 6/30/98
Actual/360 8.350 0.10850 120 114 360 354 11/6/98
Actual/360 7.750 0.10850 120 115 300 295 12/28/98
Actual/360 7.410 0.10850 120 109 300 289 6/23/98
Actual/360 6.970 0.10850 120 110 300 290 7/6/98
Actual/360 8.600 0.10850 120 119 360 359 4/5/99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORIGINATION FIRST PAYMENT REPAYMENT BALLOON/REPAYMENT
DATE DATE DATE BALANCE AMORTIZATION
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9/18/98 11/1/98 10/1/08 $28,865,223 Hyperam
9/18/98 11/1/98 10/1/08 16,118,563 Hyperam
5/5/99 7/1/99 6/1/09 12,965,703 Balloon
5/15/98 7/1/98 6/1/08 14,397,315 Hyperam
5/5/99 7/1/99 6/1/09 11,934,512 Balloon
6/25/98 8/5/98 6/5/18 5,178,669 Balloon
11/6/98 1/1/99 12/1/09 11,004,389 Hyperam
9/18/98 11/1/98 10/1/08 10,919,027 Hyperam
4/1/99 6/1/99 4/1/09 10,252,514 Hyperam
4/21/99 6/1/99 5/1/09 9,640,741 Balloon
4/15/99 6/1/99 5/1/09 9,776,744 Balloon
5/10/99 7/1/99 6/1/07 9,790,462 Balloon
2/26/98 4/1/98 3/1/08 8,700,203 Balloon
5/10/99 7/1/99 6/1/11 8,183,003 Balloon
12/5/97 2/1/98 1/1/08 8,422,965 Balloon
5/10/99 7/1/99 6/1/11 8,096,110 Balloon
4/9/99 6/1/99 5/1/09 8,171,044 Balloon
8/12/98 10/1/98 7/1/18 69,035 Fully Amortizing
9/18/98 11/1/98 10/1/08 7,544,032 Balloon
6/4/98 2/1/99 12/31/18 577,964 Fully Amortizing
7/13/98 9/1/98 8/1/08 5,849,039 Balloon
5/8/98 7/1/98 6/1/08 7,196,672 Balloon
3/4/99 8/1/98 6/1/23 2,461,730 Balloon
3/8/99 5/1/99 4/1/09 6,860,020 Balloon
8/24/98 10/1/98 9/1/08 6,753,275 Balloon
3/22/99 5/1/99 4/1/09 6,723,400 Balloon
5/1/98 7/1/98 6/1/08 6,572,575 Balloon
12/30/98 2/1/99 1/1/09 5,296,379 Balloon
8/21/98 10/1/98 9/1/08 6,130,629 Balloon
10/2/98 12/1/98 11/1/13 5,041,176 Balloon
5/8/98 7/1/98 6/1/08 5,649,823 Balloon
10/14/98 12/1/98 11/1/08 5,112,960 Balloon
3/22/99 5/1/99 4/1/09 5,610,863 Balloon
3/25/98 5/1/98 4/1/05 5,837,663 Balloon
3/25/98 5/1/98 4/1/05 5,772,605 Balloon
10/20/98 12/1/98 11/1/08 5,140,133 Balloon
10/2/98 12/1/98 11/1/08 4,923,155 Balloon
12/12/97 2/1/98 1/1/08 5,141,692 Balloon
10/19/98 12/1/98 11/1/08 3,833,547 Balloon
5/1/98 7/1/98 6/1/08 4,652,030 Balloon
9/17/98 11/1/98 10/1/08 4,407,564 Balloon
3/24/99 5/1/99 4/1/09 4,470,649 Balloon
6/19/98 8/1/98 7/1/06 4,557,745 Balloon
5/29/98 7/1/98 6/1/08 4,379,795 Balloon
3/30/99 5/1/99 4/1/09 4,348,107 Balloon
9/8/98 10/1/98 5/1/08 1,546,889 Balloon
3/22/99 5/1/99 4/1/09 4,123,155 Balloon
67,817
48,144
- ------------------------------------------------------------------------------------------------------
8/21/98 10/1/98 9/1/13 115,961 Fully Amortizing
7/1/98 9/1/98 8/1/08 3,845,065 Balloon
7/31/98 9/1/98 8/1/08 3,811,297 Balloon
10/29/98 12/1/98 11/1/18 213,590 Fully Amortizing
14,643
9,796
14,236
23,049
4,373
77,959
- ------------------------------------------------------------------------------------------------------
9/2/98 11/1/98 9/1/13 144,055 Fully Amortizing
2,835,500
374,350
- ------------------------------------------------------------------------------------------------------
12/17/98 2/1/99 1/1/09 3,209,850 Balloon
10/5/98 12/1/98 11/1/08 3,078,542 Balloon
9/18/98 11/1/98 10/1/08 3,108,483 Balloon
10/29/98 12/1/98 11/1/03 3,589,039 Balloon
2/26/99 5/1/99 4/1/09 3,266,932 Balloon
5/1/98 7/1/98 6/1/08 3,243,271 Balloon
9/25/98 11/1/98 10/1/08 3,191,412 Balloon
12/19/97 2/1/98 1/1/08 3,119,006 Balloon
10/2/98 12/1/98 5/1/07 2,806,358 Balloon
11/25/97 1/1/98 12/1/19 28,256 Fully Amortizing
8/31/98 10/1/98 9/1/08 2,723,146 Balloon
7/31/98 9/1/98 8/1/08 2,712,475 Balloon
4/14/99 6/1/99 5/1/06 2,967,261 Balloon
3/22/99 5/1/99 4/1/09 2,794,336 Balloon
8/7/98 10/1/98 9/1/08 2,517,069 Balloon
9/1/98 11/1/98 10/1/08 2,424,326 Balloon
11/23/98 1/1/99 12/1/08 2,054,837 Balloon
9/1/98 10/1/98 9/1/08 2,574,688 Balloon
4/14/99 6/1/99 5/1/06 2,699,839 Balloon
9/29/98 11/1/98 10/1/08 2,362,528 Balloon
7/31/98 10/1/98 9/1/08 2,362,390 Balloon
4/14/99 6/1/99 5/1/06 2,685,507 Balloon
9/16/98 11/1/98 10/1/23 210,440 Fully Amortizing
6/12/98 8/1/98 7/1/08 2,303,548 Balloon
4/14/99 6/1/99 5/1/09 2,518,121 Balloon
10/2/98 12/1/98 11/1/13 67,840 Fully Amortizing
9/15/98 11/1/98 10/1/08 2,397,652 Balloon
9/28/98 11/1/98 10/1/08 2,274,272 Balloon
7/27/98 9/1/98 11/1/09 33,055 Fully Amortizing
8/19/98 10/1/98 9/1/18 132,403 Fully Amortizing
4/1/99 5/1/99 4/1/09 2,235,062 Balloon
5/1/98 7/1/98 6/1/08 2,354,837 Balloon
58,109
25,232
- ------------------------------------------------------------------------------------------------------
6/8/98 8/1/98 7/1/13 83,341 Fully Amortizing
8/21/98 10/1/98 9/1/08 2,061,112 Balloon
9/25/98 11/1/98 10/1/08 2,015,317 Balloon
12/29/98 2/1/99 1/1/09 2,198,425 Balloon
6/1/98 8/1/98 7/1/08 2,055,760 Balloon
7/6/98 9/1/98 8/1/08 1,908,153 Balloon
9/14/98 11/1/98 10/1/08 2,135,982 Balloon
9/18/98 11/1/98 10/1/08 2,129,361 Balloon
7/23/98 9/1/98 8/1/08 2,108,217 Balloon
7/27/98 9/1/98 8/1/18 94,199 Fully Amortizing
4/12/99 6/1/99 5/1/09 2,069,904 Balloon
10/14/98 12/1/98 11/1/08 1,892,437 Balloon
7/27/98 9/1/98 8/1/08 2,030,662 Balloon
8/4/98 10/1/98 9/1/18 95,985 Fully Amortizing
6/9/98 8/1/98 5/1/17 614,398 Balloon
9/4/98 11/1/98 10/1/08 1,812,446 Balloon
6/15/98 8/1/98 7/1/08 1,567,817 Balloon
9/22/98 11/1/98 10/1/08 1,800,726 Balloon
2/3/99 4/1/99 3/1/09 1,963,823 Balloon
5/22/98 7/1/98 6/1/18 111,279 Fully Amortizing
370,027
661,779
896,502
- ------------------------------------------------------------------------------------------------------
3/5/99 5/1/99 4/1/09 1,928,308 Balloon
7/6/98 9/1/98 8/1/08 1,728,656 Balloon
6/29/98 8/1/98 7/1/08 1,724,321 Balloon
3/22/99 5/1/99 4/1/09 1,863,614 Balloon
6/3/98 8/1/98 7/1/08 1,724,331 Balloon
9/14/98 11/1/98 10/1/08 1,775,060 Balloon
9/1/98 11/1/98 10/1/08 1,670,062 Balloon
8/27/98 10/1/98 9/1/08 1,733,149 Balloon
8/20/98 10/1/98 9/1/08 1,600,858 Balloon
3/12/99 5/1/99 4/1/09 1,606,173 Balloon
10/30/98 12/1/98 11/1/08 1,542,658 Balloon
6/19/98 8/1/98 7/1/18 94,110 Fully Amortizing
4/14/99 6/1/99 5/1/06 1,732,989 Balloon
7/31/98 9/1/98 8/1/08 1,596,032 Balloon
8,269
10,715
4,839
24,700
- ------------------------------------------------------------------------------------------------------
9/25/98 11/1/98 10/1/13 48,523 Fully Amortizing
7/15/98 9/1/98 8/1/08 1,269,041 Balloon
6/30/98 8/1/98 7/1/08 1,441,425 Balloon
4/13/99 6/1/99 5/1/09 1,553,151 Balloon
6/11/98 8/1/98 7/1/08 1,489,208 Balloon
8/3/98 10/1/98 9/1/08 1,390,973 Balloon
6/19/98 8/1/98 7/1/08 1,164,405 Balloon
8/21/98 10/1/98 9/1/13 40,325 Fully Amortizing
10/30/98 12/1/98 11/1/08 1,124,183 Balloon
6/10/98 8/1/98 7/1/08 1,292,041 Balloon
7/7/98 9/1/98 8/1/13 48,441 Fully Amortizing
4/14/99 6/1/99 5/1/06 1,453,059 Balloon
4/14/99 6/1/99 5/1/09 1,377,356 Balloon
10/14/98 12/1/98 11/1/08 1,112,966 Balloon
814,099
404,067
- ------------------------------------------------------------------------------------------------------
10/21/98 12/1/98 11/1/08 1,218,167 Balloon
8/13/98 10/1/98 9/1/08 1,238,974 Balloon
6/24/98 8/1/98 7/1/08 1,246,266 Balloon
1/29/99 3/1/99 2/1/09 1,221,953 Balloon
2/16/99 4/1/99 3/1/09 717,852 Balloon
7/23/98 9/1/98 8/1/08 1,229,006 Balloon
9/1/98 11/1/98 10/1/18 64,478 Fully Amortizing
9/18/98 11/1/98 10/1/08 1,008,063 Balloon
11/9/98 1/1/99 12/1/08 1,297,492 Balloon
845,293
322,016
- ------------------------------------------------------------------------------------------------------
5/21/98 7/1/98 6/1/08 1,167,309 Balloon
8/5/98 10/1/98 9/1/13 608,624 Balloon
7/17/98 9/1/98 8/1/03 1,335,267 Balloon
6/30/98 8/1/98 7/1/08 1,115,225 Balloon
8/28/98 10/1/98 9/1/18 56,064 Fully Amortizing
3/4/99 5/1/99 4/1/09 1,144,009 Balloon
7/23/98 9/1/98 8/1/08 1,191,611 Balloon
8/21/98 10/1/98 9/1/23 91,508 Fully Amortizing
6/23/98 8/1/98 7/1/08 1,098,408 Balloon
10/9/98 12/1/98 11/1/08 920,024 Balloon
5/29/98 7/1/98 6/1/08 1,061,437 Balloon
675,583
373,954
- ------------------------------------------------------------------------------------------------------
3/31/99 5/1/99 4/1/09 1,049,536 Balloon
3/31/99 5/1/99 4/1/09 1,038,852 Balloon
8/27/98 10/1/98 9/1/18 58,041 Fully Amortizing
8/26/98 10/1/98 9/1/08 1,094,755 Balloon
8/21/98 10/1/98 9/1/18 500,517 Hyperam
12/29/98 2/1/99 1/1/09 994,262 Balloon
3/31/99 5/1/99 4/1/09 982,144 Balloon
6/2/98 8/1/98 7/1/08 1,065,685 Balloon
10/5/98 12/1/98 11/1/08 972,855 Balloon
10/16/98 12/1/98 11/1/08 854,764 Balloon
6/26/98 8/1/98 7/1/08 978,401 Balloon
8/25/98 10/1/98 9/1/13 33,995 Fully Amortizing
8/5/98 10/1/98 9/1/13 32,949 Fully Amortizing
6/8/98 8/1/98 7/1/08 796,211 Balloon
10/30/98 1/1/99 12/1/08 877,156 Balloon
10/21/98 12/1/98 11/1/08 838,478 Balloon
8/24/98 10/1/98 9/1/08 925,261 Balloon
10/9/98 12/1/98 11/1/18 46,677 Fully Amortizing
8/5/98 10/1/98 9/1/13 27,190 Fully Amortizing
6/30/98 8/1/98 7/1/08 772,954 Balloon
11/6/98 1/1/99 12/1/08 812,790 Balloon
12/28/98 2/1/99 1/1/09 694,133 Balloon
6/23/98 8/1/98 7/1/08 690,764 Balloon
7/6/98 9/1/98 8/1/08 641,242 Balloon
4/5/99 6/1/99 5/1/09 658,740 Balloon
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNUAL UNDERWRITING
DEBT 1996 1997 TOTAL
PREPAYMENT RESTRICTIONS(2) SERVICE NCF NCF REVENUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
L(120),O(0) $2,557,098 $5,092,869 $5,300,866 8,269,297
L(120),O(0) 1,438,780 2,080,329 2,401,209 3,445,773
L(113),O(7) 1,720,272 2,678,027 2,873,644 (1998) 9,547,523
L(116),O(4) 1,313,366 1,650,389 1,710,874 3,211,111
L(113),O(7) 1,583,455 2,414,037 2,179,558 (1998) 9,182,629
L(239),O(0) 1,320,000 1,320,000
L(125),O(7) 1,115,031 1,569,699
L(120),O(0) 974,658 1,495,130 1,930,959 2,513,143
L(119),O(0) 991,694 1,446,632
L(116),O(4) 956,234 1,351,227 (1997) 1,436,838 (1998) 2,432,335
L(120),O(0) 946,946 280,890 669,893 1,648,220
L(92),O(4) 895,155 1,118,439 (1998) 1,820,982
L(59),YM(57),O(4) 815,712 1,031,805 (1997) 1,030,541 (1998) 2,217,414
L(140),O(4) 813,284 1,189,515 1,082,326 (1998) 1,770,082
L(59),YM(57),O(4) 806,437 1,019,847 1,071,674 2,229,975
L(140),O(4) 805,709 959,378 993,705 (1998) 1,609,823
L(120),O(0) 788,009 62,453 501,853 1,407,244
L(238),O(0) 842,161 939,841
L(113),O(7) 697,020 740,646 810,579 1,216,968
L(246),O(0) 652,788 652,788
L(113),O(7) 800,015 1,342,966
L(95),1(18),O(7) 680,552 797,671 (1997) 1,079,176 (1998) 2,137,787
L(299),O(0) 609,089 644,482
L(120),O(0) 663,242 1,266,214
L(120),O(0) 618,604 1,405,416 1,257,253 1,874,060
L(120),O(0) 637,888 784,327 782,067 2,166,112
L(113),O(7) 633,210 742,248 (1997) 822,724 (1998) 1,652,938
L(116),O(4) 788,007 2,153,758 1,646,944 8,369,652
L(120),O(0) 564,507 777,791 787,478 969,504
L(173),O(7) 532,098 455,219 1,334,358 1,366,344
L(113),O(7) 538,016 683,702 (1997) 690,895 (1998) 1,561,694
L(116),O(4) 568,012 815,377 954,802 2,675,303
L(120),O(0) 536,615 381,573 513,350 1,540,532
L(24),5(12),4(12),3(12),2(12),1(8),O(4) 534,442 692,264 (1997) 768,463 (1998) 1,661,980
L(24),5(12),4(12),3(12),2(12),1(8),O(4) 528,485 715,770 (1997) 819,116 (1998) 1,515,113
L(116),O(4) 471,671 810,747 879,521 2,179,150
L(113),O(7) 553,444 1,025,679 1,005,160 2,583,320
L(59),YM(57),O(4) 491,897 499,781 568,968 1,058,783
L(116),O(4) 532,499 735,073 704,525 1,640,431
L(113),O(7) 448,182 437,607 (1997) 975,355 (1998) 1,327,624
L(120),O(0) 390,455 589,716 672,278 923,175
L(120),O(0) 436,917 162,956 375,111 958,851
L(96),O(0) 409,713 387,264 399,719 901,995
L(113),O(7) 403,219 559,046 554,143 1,192,793
L(116),O(4) 452,078 695,978 (1997) 795,770 (1998) 855,452
L(116),O(0) 523,739 529,710
L(120),O(0) 394,332 336,864 440,480 1,183,728
290,262 805,433 855,123 1,359,083
206,060 509,994 543,874 855,894
- ---------------------------------------------------------------------------------------------------------------------------
L(180),O(0) 496,322 1,315,427 1,398,997 2,214,977
L(116),O(4) 351,634 556,862 567,325 1,014,024
L(120),O(0) 351,153 27,120 369,536 762,197
L(240),O(0) 431,761 610,990 1,723,424
45,558 64,617
30,478 43,157
44,293 62,140
71,712 101,990
13,604 20,724
242,555 338,660
- ---------------------------------------------------------------------------------------------------------------------------
L(179),O(0) 448,199 606,903 618,958 631,249
311,662 495,253 532,990 1,422,147
41,146 65,746 131,757 473,193
- ---------------------------------------------------------------------------------------------------------------------------
L(116),O(4) 352,808 560,999 664,747 1,895,341
L(120),O(0) 315,705 699,035 840,479 2,252,847
L(120),O(0) 332,865 450,085 466,366 893,975
L(60),O(0) 360,259 490,707 477,595 973,807
L(120),O(0) 391,497 314,513 492,286 1,098,067
L(59),YM(57),O(4) 305,841 266,518 (1997) 399,761 (1998) 1,179,543
L(113),O(7) 300,354 544,397
L(59),YM(57),O(4) 296,310 418,386 409,747 777,489
L(95),O(7) 393,967 751,639 2,148,093
L(260),O(4) 341,384 622,492 581,068 2,164,458
L(120),O(0) 287,066 120,274 359,954 1,399,329
L(120),O(0) 300,672 429,916 442,954 1,362,022
L(80),O(4) 277,799 459,972 338,885 587,238
L(120),O(0) 267,246 185,609 202,158 932,208
L(113),O(7) 272,490 326,121 418,259 558,523
L(113),O(7) 255,635 571,048 757,477 1,767,305
L(116),O(4) 292,425 81,150 596,875 1,643,647
L(120),O(0) 237,959 340,849 342,599 392,574
L(80),O(4) 245,714 206,667 119,840 709,544
L(113),O(7) 257,169 347,679 378,812 1,390,495
L(120),O(0) 257,395 358,651 519,684 1,184,191
L(80),O(4) 260,548 305,751 317,817 615,627
L(300),O(0) 255,858 117,143 401,661 667,263
L(113),O(7) 246,759 375,257 360,156 585,751
L(120),O(0) 250,067 313,484 341,686 532,399
L(180),O(0) 295,854 640,730 560,867 1,231,623
L(120),O(0) 207,100 194,819 683,665
L(120),O(0) 246,120 446,800 446,800 788,234
L(135),O(0) 355,755 386,170
L(240),O(0) 274,596 584,731 554,854 1,175,647
L(120),O(0) 251,143 327,071 339,081 561,348
L(113),O(7) 226,868 251,103 (1997) 286,571 (1998) 732,886
211,748 237,192 362,200 1,034,485
91,943 117,937 171,181 349,208
- ---------------------------------------------------------------------------------------------------------------------------
L(180),O(0) 303,691 355,129 533,381 1,383,736
L(120),O(0) 219,480 294,401
L(120),O(0) 214,913 379,615 313,226 863,352
L(116),O(4) 208,506 327,207 724,499
L(120),O(0) 227,782 422,556 418,527 1,354,578
L(120),O(0) 226,846 570,556 448,067 1,341,508
L(120),O(0) 199,699 177,344 202,266 465,797
L(120),O(0) 203,349 262,431 263,575 605,989
L(120),O(0) 195,686 66,711 263,721 353,443
L(240),O(0) $221,905 $284,467 $264,951 $759,786
L(120),O(0) 205,993 456,192
L(0),Y(120),O(0) 207,647 874,031 879,685 1,317,994
L(120),O(0) 191,285 362,254
L(233),O(7) 217,308 152,056 335,700
L(226),O(0) 200,951 220,572
L(120),O(0) 188,170 136,183 209,946 340,026
L(36),Y(84),O(0) 214,616 355,441
L(120),O(0) 193,506 361,869 386,394 1,066,183
L(113),O(7) 196,999 292,110 300,335 586,549
L(240),O(0) 219,180 431,963 451,158 1,539,301
36,500 72,732
65,279 140,220
88,432 181,914
- ---------------------------------------------------------------------------------------------------------------------------
L(120),O(0) 190,211 394,866
L(120),O(0) 183,503 280,817 228,836 620,553
L(120),O(0) 186,127 262,820 278,180 342,589
L(116),O(4) 178,104 256,529 241,930 408,918
L(12),Y(108),O(0) 190,508 275,897 390,969 929,761
L(113),O(7) 158,086 221,086 145,028 428,702
L(113),O(7) 181,792 149,136 326,346 1,180,217
L(120),O(0) 154,867 204,832 197,561 430,260
L(120),O(0) 168,557 439,467 486,679 601,812
L(120),O(0) 188,379 370,530 245,845 714,234
L(120),O(0) 167,010 241,743 261,438 379,713
L(240),O(0) 187,599 473,018 404,084 667,130
L(80),O(4) 158,364 244,193 240,180 353,473
L(36),Y(84),O(0) 149,793 112,556 200,702 351,809
33,315 47,047 59,403 104,518
43,170 65,418 73,691 122,250
19,496 23,706 40,732 84,594
99,517 111,755 140,414 269,649
- ---------------------------------------------------------------------------------------------------------------------------
L(180),O(0) 195,499 247,926 314,240 581,012
L(120),O(0) 178,526 468,539 455,278 869,779
L(113),O(7) 156,686 301,154 740,366
L(120),O(0) 154,785 98,032 77,665 734,435
L(120),O(0) 136,957 193,925 217,196 328,985
L(120),O(0) 152,884 604,405 602,252 1,200,108
L(116),O(4) 158,283 169,416 238,613 309,642
L(180),O(0) 172,588 290,487 333,180 622,337
L(120),O(0) 157,622 332,059 305,243 683,715
L(120),O(0) 138,161 266,945
L(180),O(0) 178,423 393,207 417,327 817,302
L(80),O(4) 137,129 186,965 200,043 539,919
L(120),O(0) 131,970 139,783 166,065 457,587
L(120),O(0) 159,860 355,675 796,898
88,086 297,608
43,720 159,600
- ---------------------------------------------------------------------------------------------------------------------------
L(116),O(4) 131,807 281,859 263,879 457,208
L(120),O(0) 134,285 136,991 199,899 523,919
L(120),O(0) 137,293 278,575 237,658 843,503
L(120),O(0) 133,253 109,303 198,665 268,217
L(120),O(0) 164,823 391,401
L(120),O(0) 135,369 293,264 248,894 579,568
L(240),O(0) 142,595 233,133 238,455 462,861
L(120),O(0) 137,293 207,222 204,007 299,049
L(120),O(0) 129,819 159,950 126,097 303,058
89,940 -7,394 88,949 222,908
34,263 54,230 48,689 116,881
- ---------------------------------------------------------------------------------------------------------------------------
L(120),O(0) 124,203 46,836 137,638 339,789
L(180),O(0) 135,425 247,915 286,474 701,860
L(12),Y(48),O(0) 117,813 125,399 161,080 290,223
L(120),O(0) 116,179 254,592
L(240),O(0) 130,654 247,458
L(120),O(0) 130,832 51,550 275,385
L(113),O(7) 112,166 82,437 246,635
L(300),O(0) 118,560 117,016 197,087 354,757
L(120),O(0) 119,190 -28,533 172,655 702,529
L(120),O(0) 130,097 172,007 282,587 783,796
L(120),O(0) 116,096 273,399 319,211 390,796
74,830 197,442
41,420 64,802 125,198
- ---------------------------------------------------------------------------------------------------------------------------
L(120),O(0) 116,250 322,640
L(120),O(0) 115,067 147,147 280,777
L(240),O(0) 123,630 105,554 258,964 450,400
L(120),O(0) 100,805 139,112 183,598 249,257
L(179),O(61) 106,663 127,969 138,756 204,549
L(120),O(0) 112,097 112,361 111,199 345,148
L(120),O(0) 108,785 156,516 287,316
L(120),O(0) 101,972 168,744 194,013
L(120),O(0) 105,014 176,565 257,571
L(120),O(0) 121,795 193,387 219,234 803,984
L(120),O(0) 106,602 122,051 140,157 227,679
L(180),O(0) 131,533 174,969 173,353 255,452
L(180),O(0) 130,238 187,209 218,016 476,122
L(120),O(0) 109,574 121,161 116,065 200,326
L(120),O(0) 91,617 408,500
L(116),O(4) 90,724 84,531 135,892 189,346
L(120),O(0) 86,725 159,403
L(240),O(0) 98,624 188,564 267,859 604,712
L(180),O(0) 108,195 384,489 438,968 1,180,151
L(113),O(7) 83,875 237,800
L(120),O(0) 81,897 89,676 111,727 194,151
L(60),YM(56),O(4) 78,707 68,289 115,638 220,253
L(120),O(0) 74,781 118,845
L(120),O(0) 67,667 69,770 100,850 150,332
L(120),O(0) 67,513 106,518 112,184 185,250
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNDERWRITING
TOTAL UNDERWRITING UNDERWRITING APPRAISED APPRAISAL CURRENT REPAYMENT YEAR
EXPENSE NCF DSCR VALUE YEAR LTV LTV BUILT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3,156,741 4,211,009 1.65x $46,750,000 1998 71.0% 61.7% 1967
1,061,830 2,084,063 1.45 25,000,000 1998 73.9 64.5 1982
6,789,421 2,758,102 1.60 23,500,000 1999 72.8 55.2 1992
1,622,757 1,588,354 1.21 20,600,000 1999 79.3 69.9 1961
6,441,403 2,741,226 1.73 26,400,000 1999 59.6 45.2 1980
0 1,320,000 1.00 15,400,000 1998 96.6 33.6 1972
150,231 1,391,919 1.25 18,000,000 1998 71.0 61.1 1998
1,003,625 1,284,796 1.32 16,750,000 1998 74.7 65.2 1986
43,399 1,216,481 1.23 15,980,000 1999 71.8 64.2 1989
1,072,629 1,198,867 1.25 16,200,000 1999 67.9 59.5 1980
452,813 1,136,434 1.20 14,000,000 1999 78.3 69.8 1996
729,058 1,091,924 1.22 13,450,000 1999 79.6 72.8 1989
1,151,942 1,065,472 1.31 12,600,000 1999 79.0 69.0 1970
748,531 1,021,551 1.26 12,700,000 1999 75.7 64.4 1989
1,169,209 1,060,766 1.32 12,150,000 1998 78.8 69.3 1985
629,671 980,152 1.22 11,900,000 1999 79.8 68.0 1988
328,020 963,535 1.22 12,300,000 1999 74.6 66.4 1988
20,300 892,691 1.06 9,500,000 1998 91.2 0.7 1993
380,725 836,243 1.20 11,400,000 1998 75.0 66.2 1985
0 652,788 1.00 9,200,000 1999 91.6 6.3 1998
310,894 972,158 1.22 10,700,000 1998 78.0 54.7 1998
1,138,040 999,747 1.47 10,400,000 1999 79.3 69.2 1974
20,585 623,606 1.02 8,200,000 1998 96.5 30.0 1988
424,763 794,951 1.20 9,694,000 1999 79.3 70.8 1998
704,533 1,052,786 1.70 10,300,000 1998 74.5 65.6 1993
1,230,714 813,147 1.27 9,900,000 1999 76.6 67.9 1976
862,743 790,195 1.25 9,450,000 1999 79.3 69.6 1979
6,581,730 1,787,922 2.27 10,400,000 1998 71.5 50.9 1940
192,605 712,415 1.26 8,900,000 1998 78.1 68.9 1990
323,187 1,026,440 1.93 10,800,000 1998 59.9 46.7 1930
887,627 674,067 1.25 9,300,000 1998 69.5 60.8 1983
1,782,156 893,147 1.57 9,600,000 1998 66.0 53.3 1978
783,280 670,252 1.25 8,100,000 1999 77.9 69.3 1979
994,053 667,927 1.25 8,600,000 1999 73.0 67.9 1977
854,408 660,706 1.25 8,200,000 1999 75.7 70.4 1984
1,361,780 817,370 1.73 9,360,000 1998 63.7 54.9 1987
1,767,307 816,013 1.47 8,000,000 1998 73.9 61.5 1978
444,436 614,347 1.25 8,330,000 1998 70.2 61.7 1987
831,016 739,808 1.39 8,100,000 1998 67.1 47.3 1971
767,624 560,000 1.25 7,250,000 1999 73.1 64.2 1979
238,887 635,406 1.63 6,800,000 1998 74.5 64.8 1920
295,858 569,271 1.30 6,600,000 1998 75.7 67.7 1976
320,194 490,476 1.20 7,000,000 1998 70.9 65.1 1981
573,661 571,132 1.42 6,250,000 1998 79.3 70.1 1966
193,124 631,582 1.40 7,450,000 1999 65.7 58.4 1980
0 524,205 1.00 5,210,000 1998 91.0 29.7 1997
632,866 491,862 1.25 5,860,000 1999 79.2 70.4 1973
513,257 826,476 8,400,000 1998 1979
347,411 495,782 5,200,000 1998 1970
- -------------------------------------------------------------------------------------------------------------------------------
860,669 1,322,259 2.66 13,600,000 1998 33.9 .85
414,850 474,182 1.35 6,900,000 1998 63.3 55.7 1963
165,798 534,360 1.52 5,650,000 1998 76.4 67.5 1996
1,107,202 616,223 1.43 6,469,000 1998 66.4 3.3 1997
2,685 58,538 475,000 1998 1966
2,041 38,816 375,000 1998 1959
2,610 56,817 625,000 1998 1964
3,806 92,443 1,050,000 1998 1972
1,368 16,913 275,000 1998 1975
10,906 314,671 3,250,000 1998 1978
- -------------------------------------------------------------------------------------------------------------------------------
23,413 578,198 1.29 6,050,000 1998 68.4 2.4
985,450 436,697 4,450,000 1998 1989
415,929 57,265 1,080,000 1998 1852
- -------------------------------------------------------------------------------------------------------------------------------
1,401,379 493,962 1.40 5,530,000 1998 72.4 58.0
1,695,751 557,096 1.76 5,225,000 1998 74.0 58.9 1958
343,495 479,975 1.44 6,200,000 1998 62.1 50.1 1958
507,163 456,594 1.27 4,980,000 1998 76.8 72.1 1968
458,076 606,311 1.55 5,500,000 1999 69.4 59.4 1971
780,222 399,321 1.31 5,200,000 1999 71.5 62.4 1976
116,491 380,998 1.27 4,540,000 1998 79.2 70.3 1997
376,539 400,949 1.35 4,810,000 1998 73.9 64.8 1988
1,517,021 631,072 1.60 7,900,000 1998 43.9 35.5 1974
1,591,981 572,477 1.68 6,100,000 1997 55.3 0.5 1971
725,758 520,627 1.81 5,100,000 1998 65.9 53.4 1969
806,409 555,613 1.85 4,550,000 1998 71.8 59.6 1993
177,910 354,046 1.27 4,000,000 1997 79.2 74.2 1986
547,811 335,397 1.26 4,000,000 1999 78.6 69.9 1977
199,360 326,712 1.20 5,100,000 1998 60.2 49.4 1886
1,159,854 607,451 2.38 5,200,000 1998 57.6 46.6 1952
1,183,637 460,010 1.57 4,570,000 1998 64.9 45.0 1968
41,236 321,338 1.35 3,670,000 1998 79.5 70.2 1988
303,476 380,179 1.55 5,500,000 1999 52.7 49.1 1930
964,046 426,449 1.66 3,920,000 1998 73.3 60.3 1963
794,005 390,185 1.52 3,900,000 1998 73.6 60.6 1995
230,914 341,913 1.31 4,880,000 1999 58.4 55.0 1993
214,067 408,322 1.60 3,950,000 1998 71.5 5.3 1970
192,092 327,878 1.33 4,000,000 1998 70.4 57.6 1985
178,342 304,598 1.22 3,740,000 1999 74.8 67.3 1978
775,353 456,270 1.54 5,000,000 1998 55.7 1.4 1992
259,305 343,771 1.66 4,650,000 1998 59.8 51.6 1984
310,967 377,017 1.53 5,150,000 1998 53.9 44.2 1971
1,201 380,658 1.07 4,700,000 1998 58.9 0.7 1993
713,567 462,080 1.68 3,800,000 1998 72.5 3.5 1967
191,188 342,535 1.36 3,400,000 1999 79.3 65.7 1967
442,758 290,127 1.28 3,360,000 1999 79.9 70.1 1980
722,135 325,760 2,945,000 1998 1988
183,210 155,595 1,445,000 1998 1995
- -------------------------------------------------------------------------------------------------------------------------------
925,172 481,354 1.59 4,390,000 1998 60.0 1.9 1988
16,016 267,109 1.22 3,300,000 1998 76.8 62.5 1979
471,124 347,228 1.62 3,400,000 1998 72.9 59.3 1952
458,925 265,574 1.27 3,450,000 1998 71.8 63.7 1965
949,976 404,602 1.78 3,200,000 1998 77.3 64.2 1986
976,449 365,059 1.61 4,000,000 1998 60.5 47.7 1990
169,214 260,948 1.31 3,800,000 1998 63.5 56.2 1910
278,866 280,052 1.38 3,200,000 1998 74.6 66.5 1920
81,473 267,872 1.37 3,100,000 1998 76.9 68.0 1900
$359,155 357,531 1.61x $4,100,000 1998 57.4% 2.3% 1965
90,751 317,328 1.54 3,800,000 1998 60.5 54.5 1962
762,906 555,088 2.67 3,400,000 1998 67.6 55.7 1984
74,000 265,016 1.39 3,000,000 1998 76.1 67.7 1997
56,473 264,791 1.22 3,250,000 1998 69.6 3.0 1912
1,500 217,027 1.08 2,640,000 1998 85.6 23.3 1997
87,358 235,868 1.25 2,850,000 1998 79.2 63.6 1994
22,663 282,437 1.32 3,250,000 1998 68.6 48.2 1998
784,165 282,017 1.46 3,000,000 1998 73.5 60.0 1972
263,462 265,860 1.35 3,200,000 1998 67.9 61.4 1972
1,245,370 293,925 1.34 2,950,000 1998 73.1 3.8 1973
24,694 45,038 520,000 1998 1998
59,244 73,476 930,000 1998 1997
62,967 111,447 1,260,000 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
146,904 229,961 1.21 2,710,000 1998 79.2 71.2 1997
306,033 290,521 1.58 3,000,000 1998 70.8 57.6 1966
58,867 257,516 1.38 2,950,000 1998 71.2 58.5 1971
151,866 242,939 1.36 3,000,000 1999 69.9 62.1 1995
614,982 314,778 1.65 2,850,000 1998 72.9 60.5 1988
196,867 209,808 1.33 2,800,000 1998 72.7 63.4 1987
879,588 300,629 1.65 3,000,000 1998 67.7 55.7 1970
190,846 223,242 1.44 2,500,000 1998 79.4 69.3 1917
157,757 344,850 2.05 4,100,000 1998 48.2 39.0 1967
341,299 307,759 1.63 3,500,000 1998 54.2 45.9 1981
155,526 208,446 1.25 2,400,000 1998 78.5 64.3 1923
405,077 262,052 1.40 2,500,000 1998 74.6 3.8 1995
91,008 234,028 1.48 2,800,000 1999 66.4 61.9 1982
107,863 219,991 1.47 2,800,000 1998 64.2 57.0 1920
53,215 41,870 550,000 1998 1974
58,394 54,234 650,000 1998 1972
51,834 23,548 425,000 1998 1969
124,173 124,284 1,350,000 1998 1959
- -------------------------------------------------------------------------------------------------------------------------------
287,617 243,935 1.25 2,975,000 1998 59.8
544,662 325,117 1.82 2,600,000 1998 68.1 48.8 1984
433,097 308,269 1.97 2,380,000 1998 73.5 60.6 1996
479,395 212,290 1.37 2,700,000 1998 63.9 57.5 1973
129,341 191,593 1.40 2,300,000 1998 73.3 64.7 1990
730,475 469,633 3.07 6,000,000 1998 28.1 23.2 1973
85,835 218,469 1.38 2,600,000 1998 64.0 44.8 1965
287,333 325,304 1.88 3,220,000 1998 49.7 1.3 1970
452,650 231,065 1.47 2,150,000 1998 73.5 52.3 1994
42,113 186,154 1.35 2,150,000 1998 73.5 60.1 1969
518,869 298,433 1.67 2,315,000 1998 67.0 2.1 1958
254,931 223,067 1.63 2,850,000 1999 54.4 51.0 1979
236,847 199,340 1.51 1,940,000 1999 79.9 71.0 1964
485,145 311,753 1.95 2,300,000 1998 66.7 48.4 1996
163,726 133,883 845,000 1998 1976
93,149 66,451 1,635,000 1998 1976
- -------------------------------------------------------------------------------------------------------------------------------
256,874 200,334 1.52 2,480,000 1998 61.5 49.1 1996
240,197 200,742 1.49 3,220,000 1998 46.9 38.5 1979
625,103 218,400 1.59 2,125,000 1998 70.7 58.6 1967
80,093 165,663 1.24 2,100,000 1999 71.1 58.2 1987
101,519 275,676 1.67 3,480,000 1998 42.7 20.6 1998
379,441 200,127 1.48 2,070,000 1998 71.7 59.4 1995
248,548 214,313 1.50 1,930,000 1998 76.6 3.3 1993
86,328 182,801 1.33 1,950,000 1998 74.3 51.7 1987
127,774 162,784 1.25 1,880,000 1998 76.3 69.0 1965
77,280 128,905 1,260,000 1998 1910
40,169 69,732 600,000 1998 1900
- -------------------------------------------------------------------------------------------------------------------------------
117,450 198,636 1.60 1,860,000 1998 76.9 62.8 1900
378,460 298,830 2.21 3,600,000 1998 39.6 16.9 1972
125,804 152,826 1.30 1,880,000 1998 74.0 71.0 1984
7,638 183,552 1.58 2,100,000 1998 65.8 53.1 1920
76,706 156,203 1.20 1,900,000 1997 72.4 3.0 1998
94,293 172,973 1.32 1,850,000 1999 73.9 61.8 1998
65,770 167,614 1.49 1,800,000 1998 74.5 66.2 1996
173,025 169,220 1.43 1,900,000 1998 70.3 4.8 1928
434,809 199,156 1.67 1,900,000 1998 70.2 57.8 1964
502,787 281,010 2.16 2,075,000 1998 61.9 44.3 1996
140,132 200,994 1.73 2,600,000 1998 49.4 40.8 1974
94,208 93,980 1,050,000 1999 1971
58,636 54,696 570,000 1999 1974
- -------------------------------------------------------------------------------------------------------------------------------
152,845 148,676 1.28 1,620,000 1999 78.7 64.8 1971
121,462 146,315 1.27 1,575,000 1999 80.1 66.0 1965
234,479 215,921 1.75 1,700,000 1998 73.8 3.4 1996
84,056 157,416 1.56 1,675,000 1998 74.1 65.4 1995
51,208 146,906 1.38 1,650,000 1998 74.2 30.3 1986
177,786 147,012 1.31 1,600,000 1998 74.6 62.1 1963
135,118 138,252 1.27 1,535,000 1999 77.7 64.0 1965
40,946 141,277 1.39 1,645,000 1998 72.4 64.8 1996
88,160 158,193 1.51 1,750,000 1998 68.0 55.6 1920
615,375 188,609 1.55 1,900,000 1998 62.4 45.0 1986
83,480 133,599 1.25 1,570,000 1998 75.5 62.3 1906
56,185 162,577 1.24 1,600,000 1998 72.9 2.1 1979
252,031 204,302 1.57 2,600,000 1998 44.9 1.3 1970
43,399 140,449 1.28 1,500,000 1998 75.1 53.1 1972
149,098 254,302 2.78 2,700,000 1998 40.4 32.5 1900
64,313 125,033 1.38 1,375,000 1998 76.4 61.0 1996
30,095 121,545 1.40 1,400,000 1998 74.5 66.1 1998
418,547 186,165 1.89 2,000,000 1998 50.0 2.3 1984
703,243 433,670 4.01 5,500,000 1998 17.7 0.5 1974
96,747 128,053 1.53 1,300,000 1998 72.2 59.5 1963
81,615 105,286 1.29 1,200,000 1998 74.7 67.7 1936
88,213 113,237 1.44 1,250,000 1998 68.4 55.5 1972
4,650 106,495 1.42 1,250,000 1998 67.2 55.3 1997
44,611 99,870 1.48 1,000,000 1998 79.0 64.1 1920
85,055 94,252 1.40 1,000,000 1998 72.5 65.9 1920
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN PER
SQ FT, UNITS, SQ FT, UNIT, INITIAL
BEDS, PADS, BED, PAD, OCCUPANCY OCCUPANCY RESERVES UNDERWRITING RESERVES
OR ROOM OR ROOM PERCENTAGE DATE AT CLOSING RESERVES COLLECTED
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
517,724 sq. ft. 64 PSF 96% Dec-98 711,458 0.20 0.20
204,665 sq. ft. 90 PSF 98% Dec-98 464,184 0.20 0.20
180 Beds 95,000 Per Room 98% NAP 44,338 250 250
410 units 39,847 Per Unit 95% Dec-98 341,469 250 250
180 Beds 87,444 Per Room 93% NAP 78,014 250 250
163,156 sq. ft. 91 PSF 100% May-99 0 0.00 0.00
56,200 sq. ft. 227 PSF 100% Jul-98 91,810 0.15 none
134,226 sq. ft. 93 PSF 96% Dec-98 223,923 0.20 0.20
180,514 sq. ft. 64 PSF 100% Mar-99 0 0.20 0.20
139,651 sq. ft. 79 PSF 91% Apr-99 25,808 0.25 0.25
128,819 sq. ft. 85 PSF 92% Feb-99 140,897 0.15 0.15
204 Units 52,451 Per Unit 96% Mar-99 0 250 250
419 Units 23,771 Per Unit 96% Jan-99 10,424 260 260
280 Units 34,314 Per Unit 93% Mar-99 0 250 250
399 Per Unit 24,003 Per Unit 94% Jan-99 107,732 207 207
202 Units 47,030 Per Unit 97% Mar-99 0 250 250
154,426 sq. ft. 59 PSF 88% Mar-99 196,287 0.21 0.21
107,400 sq. ft. 81 PSF 100% May-99 26,108 0.25 0.25
188 Units 45,475 Per Unit 95% Sep-98 68,397 200 200
246,046 sq. ft. 34 PSF 100% NAP 0 0.00 none
59,397 sq. ft. 141 PSF 100% Nov-98 75,371 0.20 0.11
350 units 23,557 Per Unit 95% Jan-99 41,500 250 250
49,700 sq. ft. 159 PSF 100% May-99 358,308 0.00 0.00
186 Units 41,369 Per Unit 93% Feb-99 55,535 250 250
107,595 sq. ft. 71 PSF 93% Aug-98 5,594 0.15 0.15
489 Units 15,520 Per Unit 95% Feb-99 272,713 250 250
276 units 27,146 Per Unit 98% Mar-99 102,316 225 225
80 Beds 92,977 Per Bed 94% Sep-98 69,998 300 300
149,279 sq. ft. 47 PSF 100% Aug-98 212,144 0.15 0.15
14,349 sq. ft. 451 PSF 100% Feb-99 118,948 0.22 0.15
256 units 25,236 Per Unit 99% Mar-99 123,358 225 225
28,129 sq. ft. 225 PSF 100% NAP 58,070 2% 2%
348 Units 18,151 Per Unit 95% Feb-99 194,109 250 250
304 Units 20,647 Per Unit 96% Feb-99 148,835 222 222
272 Units 22,819 Per Unit 93% Feb-99 118,467 214 214
74 Beds 80,577 Per Bed 100% Aug-98 25,274 300 300
122 Units 48,471 Per Room 50% Dec-97 332,509 1,059 960
128 Units 45,682 Per Unit 99% Jan-99 37,416 252 252
221 Units 24,619 Per Unit 96% Jan-99 100,264 315 315
236 units 22,471 Per Unit 96% Mar-99 90,445 225 225
56,003 sq. ft. 91 PSF 100% Jun-98 21,332 0.20 0.20
118,765 sq. ft. 42 PSF 91% Jan-99 39,909 0.22 0.22
120,000 sq. ft. 41 PSF 100% Jun-98 27,720 0.20 0.20
192 Units 25,826 Per Unit 94% Sep-98 257,036 250 250
38,276 sq. ft. 128 PSF 100% Mar-99 317,805 0.15 0.15
29,362 sq. ft. 162 PSF 100% May-99 130,935 0.19 0.19
236 Units 19,668 Per Unit 94% Feb-99 52,396 250 250
387 Units 6,981 Per Unit 100% Dec-98 1,832 50 30
254 Units 7,551 Per Unit 100% Nov-98 1,808 50 30
- ---------------------------------------------------------------------------------------------------------------------------------
641 Units 7,207 Per Unit 3,640 50 30
162,819 sq. ft. 27 PSF 65% Jun-98 33,177 0.20 0.14
71,462 sq. ft. 60 PSF 98% Dec-98 43,938 0.20 0.20
111 Units 38,785 Per Room 64% Dec-98 34,850 621 789
3,884 sq. ft. 109 PSF 100% Dec-98 0.40
1,728 sq. ft. 163 PSF 100% Dec-98 0.86
2,100 sq. ft. 195 PSF 100% Dec-98 0.82
5,984 sq. ft. 111 PSF 100% Dec-98 0.48
2,130 sq. ft. 59 PSF 100% Dec-98 0.67
14,569 sq. ft. 154 PSF 100% Dec-98 0.42
- ---------------------------------------------------------------------------------------------------------------------------------
30,395 sq. ft. 137 PSF 100% Dec-98 13,625 0.50 0.15
56 Beds 63,181 Per Bed 95% Oct-98 29,088 289 289
24 Beds 19,463 Per Bed 91% Oct-98 7,319 321 321
- ---------------------------------------------------------------------------------------------------------------------------------
80 Beds 50,065 Per Bed 610 610
143 Units 27,056 Per Room 65% Dec-98 174,363 630 776
71,000 sq. ft. 54 PSF 95% Dec-98 528,919 0.20 0.20
201 Units 19,038 Per Room 99% Oct-98 5,804 50 50
71,139 sq. ft. 54 PSF 100% Dec-98 45,216 0.20 0.20
256 units 14,525 Per Unit 97% Mar-99 70,691 200 200
40,276 sq. ft. 89 PSF 100% Feb-99 13,056 0.20 0.20
124 Units 28,657 Per Unit 97% Dec-98 132,147 250 250
200 Units 17,356 Per Room 70% Apr-98 25,545 537 508
123 Rooms 27,447 Per Room NAP NAP 22,203 4% 4%
157,923 sq. ft. 21 PSF 77% Feb-99 53,296 0.31 0.31
91 Units 35,925 Per Room 76% Dec-98 26,847 748 626
35,385 sq. ft. 90 PSF 100% Mar-99 62,449 0.31 0.31
196 Units 16,050 Per Unit 97% Feb-99 32,240 250 250
39,419 sq. ft. 78 PSF 77% Nov-98 27,663 0.18 0.18
84 Units 35,708 Per Room 77% Dec-98 68,812 1,052 726
93 rooms 31,903 Per Room NAP NAP 33,800 4% 4%
120 Units 24,318 Per Unit 100% Sep-98 27,185 250 225
16,060 sq. ft. 181 PSF 91% Mar-99 11,250 0.20 0.18
111 Units 25,925 Per Room 65% Jun-98 24,329 626 628
83 Units 34,630 Per Room 70% Dec-97 27,336 713 558
44,824 sq. ft. 64 PSF 92% Mar-99 69,971 0.20 0.17
35,890 sq. ft. 79 PSF 96% Jan-99 39,964 0.35 0.35
85,253 sq. ft. 33 PSF 93% Dec-98 63,645 0.23 0.23
62,353 sq. ft. 45 PSF 94% Feb-99 516,260 0.15 0.15
77 Units 36,271 Per Room 84% Dec-97 23,667 800 611
54,921 sq. ft. 51 PSF 85% Nov-98 0 0.20 0.20
206,700 sq. ft. 13 PSF 100% Sep-98 281,000 0.20 0.20
23,000 sq. ft. 121 PSF 100% May-99 9,450 0.19 0.19
88 Units 31,373 Per Room 57% Dec-97 31,237 668 499
107 Units 25,207 Per Unit 91% Jan-99 177,910 258 255
144 units 18,642 Per Unit 100% Mar-99 69,533 225 225
80 Units 23,035 Per Room 72% Dec-97 647
42 Units 19,051 Per Room 66% Dec-97 429
- ---------------------------------------------------------------------------------------------------------------------------------
122 Units 21,663 Per Room 23,190 571 540
56,382 sq. ft. 45 PSF 100% Aug-98 0 0.20 none
180 Units 13,775 Per Unit 97% Oct-98 125,342 250 250
114 Units 21,721 Per Unit 97% Nov-98 226,483 250 250
105 Units 23,565 Per Room 76% Dec-98 43,440 645 457
85 Units 28,488 Per Room 78% Dec-98 37,138 789 719
15,700 sq. ft. 154 PSF 100% Oct-98 45,070 0.42 0.42
43,778 sq. ft. 55 PSF 94% Nov-98 21,281 0.20 0.19
10 Units 238,409 Per Unit 100% May-98 11,364 140 141
100 Units 23,586 Per Unit 96% Dec-98 162,957 431 1,090
23,225 sq. ft. 99 PSF 100% Jan-99 105,316 0.20 0.20
100 Units 22,997 Per Room 62% Jun-98 13,069 659 590
21,320 sq. ft. 107 PSF 94% Jun-98 21,298 0.15 0.15
15,650 sq. ft. 145 PSF 100% Jun-98 13,859 0.16 0.20
10,908 sq. ft. 207 PSF 100% May-99 125 0.19 0.19
42 Units 53,806 Per Unit 69% Jan-99 20,612 400 500
40,000 sq. ft. 56 PSF 100% Aug-98 0 0.25 0.25
98 Units 22,522 Per Room 69% Dec-98 37,519 544 543
39,455 sq. ft. 55 PSF 100% Jan-99 85,870 0.20 0.20
133 Units 16,233 Per Room 63% Dec-98 61,915 499 612
12 Units 34,358 Per Unit 100% Oct-98 250 0.00
30 Units 24,579 Per Unit 97% Oct-98 250 0.00
30 Units 33,297 Per Unit 97% Oct-98 250 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
72 Units 29,841 Per Unit 97% Oct-98 20,424 250 250
96 Units 22,158 Per Unit 100% Oct-98 42,498 250 250
22,865 sq. ft. 92 PSF 97% Feb-99 28,809 0.23 0.32
48 Units 43,718 Per Unit 100% Dec-98 28,101 250 250
62 Units 33,520 Per Room 75% Apr-98 77,010 750 747
83 Units 24,554 Per Unit 100% Dec-98 132,504 265 250
92 Units 22,111 Per Room 72% Apr-98 29,331 641 575
52 Units 38,203 Per Unit 98% Nov-98 19,459 311 311
103,800 sq. ft. 19 PSF 100% Dec-98 44,646 0.24 0.24
55,821 sq. ft. 34 PSF 98% Nov-98 149,818 0.27 0.27
53 Units 35,604 Per Unit 100% Dec-98 27,882 297 297
60 Units 31,126 Per Room 59% Dec-98 19,665 445 585
53,776 sq. ft. 35 PSF 100% Mar-99 39,565 0.24 0.24
21,993 sq. ft. 82 PSF 99% May-98 992 0.20 0.20
24 Units 12,669 Per Unit 79% Feb-99 393 0.00
24 Units 16,417 Per Unit 88% Feb-99 401 0.00
24 Units 7,414 Per Unit 83% Feb-99 384 0.00
44 Units 20,643 Per Unit 98% Feb-99 482 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
116 Units 15,382 Per Unit 89% Feb-99 24,473 426 250
91 Units 19,477 Per Unit 73% Oct-98 41,516 478 469
68 Units 25,746 Per Room 59% Feb-98 18,989 436 294
150 Units 11,500 Per Unit 89% Mar-99 103,742 285 285
15 Units 112,489 Per Unit 100% May-98 27,350 269 493
20 Units 84,265 Per Room 74% Dec-98 46,494 3,000 2,817
4,863 sq. ft. 343 PSF 100% Mar-98 27,830 0.48 0.48
194 Units 8,280 Per Unit 100% Dec-98 2,202 50 30
52 Units 30,447 Per Room 74% Jun-98 21,818 657 647
53,120 sq. ft. 30 PSF 100% Oct-98 97,398 0.30 0.30
108 Units 14,413 Per Unit 76% Dec-98 114,360 378 347
36,684 sq. ft. 42 PSF 88% Mar-99 155,567 0.41 0.41
80 Units 19,375 Per Unit 100% Dec-98 32,665 268 282
59 Units 26,050 Per Room 69% Dec-98 29,666 675 585
105 Pads 9,715 Per Pad 72% Sep-98
180 Pads 2,813 Per Pad 83% Sep-98
- ---------------------------------------------------------------------------------------------------------------------------------
285 Pads 5,356 Per Pad 25,850 63 63
78,005 sq. ft. 19 PSF 92% Feb-99 22,668 0.27 0.30
73 Units 20,604 Per Room 81% Dec-97 14,028 578 561
36,768 sq. ft. 41 PSF 100% Nov-98 35,833 0.20 0.20
15,952 sq. ft. 93 PSF 100% Feb-99 49,506 0.15 0.15
48 Units 30,952 Per Room 70% Dec-97 42,081 604 479
47 Units 31,506 Per Room 57% Dec-98 12,066 394 471
24,620 sq. ft. 59 PSF 100% Dec-98 23,487 0.20 0.20
50 Units 28,714 Per Unit 100% Aug-98 25,037 250 250
9,851 sq. ft. 105 PSF 100% Jan-99 0.27 0.00
17 Units 23,225 Per Unit 100% Jan-99 411 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
100% Jan-99 20,579 28,250
91 Units 15,692 Per Unit 98% Feb-99 37,634 270 none
36 Units 38,649 Per Unit 92% Feb-99 26,036 322 322
130,728 sq. ft. 11 PSF 100% Dec-98 798,358 0.20 0.20
10,700 sq. ft. 129 PSF 100% Sep-98 264 0.31 0.20
54,125 sq. ft. 25 PSF 89% Dec-98 13,710 0.15 0.15
14,897 sq. ft. 90 PSF 100% Nov-98 12,604 0.15 0.15
46 Units 29,082 Per Unit 98% Jan-99 59,246 272 300
85,203 sq. ft. 16 PSF 87% Dec-98 26,071 0.20 0.20
54 Units 23,829 Per Room 80% Dec-98 17,824 726 604
62,010 sq. ft. 21 PSF 100% Nov-98 37,314 0.15 0.15
32 Units 25,660 Per Unit 94% Nov-98 289
27 Units 16,834 Per Unit 93% Nov-98 439
- ---------------------------------------------------------------------------------------------------------------------------------
59 Units 21,621 Per Unit 93% Nov-98 44,962 358 358
52 Units 24,281 Per Unit 90% Nov-98 58,349 250 250
43 Units 29,228 Per Room 54% Dec-98 113,900 524 504
51,900 sq. ft. 24 PSF 85% Apr-98 12,022 0.15 0.15
8,502 sq. ft. 144 PSF 100% Jul-98 57,289 0.10 0.10
74 Units 16,148 Per Unit 96% Jul-98 76,242 275 264
51 Units 23,406 Per Unit 90% Nov-98 80,276 273 273
11,900 sq. ft. 100 PSF 100% Dec-98 7,955 0.24 0.20
6,000 sq. ft. 199 PSF 100% Sep-98 52,212 0.22 0.22
64 Units 18,564 Per Room 64% Dec-98 5,580 628 495
39,034 sq. ft. 30 PSF 100% Jan-99 22,776 0.18 0.18
24,960 sq. ft. 47 PSF 100% Dec-98 13,310 0.57 0.57
71 Units 16,476 Per Unit 94% Feb-99 22,793 279 none
11,300 sq. ft. 100 PSF 100% Aug-98 11,892 0.51 0.51
17 Units 64,301 Per Unit 100% Jun-98 54,574 300 300
94 Pads 11,177 Per Pad 97% Sep-98 22,004 50 50
8,275 sq. ft. 126 PSF 100% Jul-98 2,217 0.20 0.12
68 Units 14,731 Per Room 52% Dec-97 16,039 490 390
147 Units 6,631 Per Unit 98% Feb-99 55,401 294 none
52 Units 18,069 Per Unit 94% May-98 10,089 250 250
29 Units 30,944 Per Unit 100% Mar-99 195,151 250 250
14,800 sq. ft. 58 PSF 100% Nov-98 58,052 0.15 0.15
7,000 sq. ft. 120 PSF 100% Aug-98 15,148 0.15 0.15
3,877 sq. ft. 204 PSF 100% Dec-98 6,753 0.18 0.18
21 Units 34,524 Per Unit 100% Feb-99 17,790 283 283
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TWO LARGEST RETAIL TENANT
-----------------------------------------------------------------------------------------
AREA LEASED LEASE
TENANT NAME (1) (SQ. FT.) EXP DATE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PSF PDP Group, Inc. 82,716 11/30/00
PSF Kaiser Permanente 28,888 2/28/00
Per Bed
Per Unit
Per Bed
PSF Beckman Coulter, Inc. 163,156 6/5/18
PSF Staples 24,000 7/11/13
PSF Medex Brooks 23,059 4/30/02
PSF Kelsey Hayes 180,514 4/30/07
PSF First Security Bank 17,947 4/30/00
PSF Baby Superstore, Inc. (Babies R Us) 42,296 7/31/11
Per Unit
Per Unit
Per Unit
Per Unit
Per Unit
PSF Gart 52,870 1/31/09
PSF Prev. Builders Square/Now Masso Expo 107,400 7/31/18
Per Unit
PSF Delta Education 246,046 12/31/18
PSF GSA 47,397 4/23/18
Per Unit
PSF Regal Cinemas, Inc. 49,700 6/30/23
Per Unit
PSF Mikasa 8,000 6/30/03
Per Unit
Per Unit
Per Bed
PSF K-Mart 86,479 10/30/16
PSF Miles Discount, Inc. 6,210 1/31/11
Per Unit
Of Revenue Harbor Bay Club, Inc. 28,129 Single Tenant
Per Unit
Per Unit
Per Unit
Per Bed
Per Room
Per Unit
Per Unit
Per Unit
PSF KnowMed Systems 10,570 9/30/01
PSF Tech Medical 21,500 4/30/00
PSF HADCO 60,000 5/31/05
Per Unit
PSF The Wiz 27,246 8/31/10
PSF Laidlaw Med. Trans. 29,362 5/31/13
Per Unit
Per Unit
Per Unit
- --------------------------------------------------------------------------------------------------------
Per Unit
PSF TSI Graphics 27,446 12/31/99
PSF The Antigua Group 7,553 3/3/00
Per Room
PSF Summit Bank 3,884 8/31/03
PSF Summit Bank 1,728 8/31/03
PSF Summit Bank 2,100 8/31/03
PSF Summit Bank 5,984 8/31/03
PSF Summit Bank 2,130 8/31/03
PSF Summit Bank 14,569 8/31/03
- --------------------------------------------------------------------------------------------------------
PSF Summit Bank 3,884 8/31/03
Per Bed
Per Bed
- --------------------------------------------------------------------------------------------------------
Per Bed
Per Room
PSF Studio Instrumental Rental 17,000 12/31/99
Per Room
PSF Overseas Enterprises 17,684 4/30/04
Per Unit
PSF Robert Bosch Corporation 15,640 11/1/02
Per Unit
Per Room
Of Revenue
PSF Dekalb County Roads and Drainage 11,683 8/31/02
Per Room
PSF Cleveland Clinic of Florida 35,385 6/30/02
Per Unit
PSF "E" Street Alley 15,000 3/31/13
Per Room
Of Revenue
Per Unit
PSF Colour By Carb 4,200 4/30/04
Per Room
Per Room
PSF DRS Siudmax 3,000 12/31/00
PSF Bobby Z's, Inc. 5,798 10/31/04
PSF Kash-N-Karry 45,153 10/31/05
PSF Eagle Food Center 28,646 8/31/03
Per Room
PSF Premier Title 4,161 2/29/04
PSF Mako Marine International, Inc. 206,700 7/31/01
PSF Prev. Computer City/Now CompUSA 23,000 11/30/09
Per Room
Per Unit
Per Unit
Per Room
Per Room
- --------------------------------------------------------------------------------------------------------
Per Room
PSF Golden State Foods Corp. 56,382 6/30/22
Per Unit
Per Unit
Per Room
Per Room
PSF Chin-Chin 3,700 2/28/09
PSF OPS 9,858 7/31/00
Per Unit
Per Unit
PSF C.W. Cook Co., Inc. 10,723 8/31/12
Per Room
PSF Premier Pre-School 4,800 12/21/07
PSF Hard Rock Cafe 8,850 2/28/13
PSF Eckerd Corporation 10,908 6/1/17
Per Unit
PSF Advanced Services 40,000 2/28/03
Per Room
PSF Liebowitz 4,699 1/31/02
Per Room
Per Unit
Per Unit
Per Unit
- --------------------------------------------------------------------------------------------------------
Per Unit
Per Unit
PSF Cramer LaMaster Leasing 3,500 5/31/01
Per Unit
Per Room
Per Unit
Per Room
Per Unit
PSF Superpetz 26,500 11/30/04
PSF Justin's 10,280 5/30/00
Per Unit
Per Room
PSF Wearnes Hollingsworth Corporation 53,776 10/31/03
PSF Wheat First Union 3,960 8/31/06
Per Unit
Per Unit
Per Unit
Per Unit
- --------------------------------------------------------------------------------------------------------
Per Unit
Per Unit
Per Room
Per Unit
Per Unit
Per Room
PSF McDonald's 1,763 12/31/12
Per Unit
Per Room
PSF Quaker State Corporation 53,120 5/3/03
Per Unit
PSF Floridian Mortgage Corp. 3,125 8/31/00
Per Unit
Per Room
- --------------------------------------------------------------------------------------------------------
Per Pad
PSF Rivergage Christian 8,113 11/30/99
Per Room
PSF Dynamic Controls, Inc. 16,814 7/31/02
PSF Blockbuster Video 6,500 9/1/08
Per Room
Per Room
PSF Selective Site Consultants 2,832 12/31/99
Per Unit
PSF Cubellis Associates 5,855 12/31/08
Per Unit
- --------------------------------------------------------------------------------------------------------
Per Unit
Per Unit
Per Unit
PSF TDC Filter Manufacturing 130,728 6/30/13
PSF Burnet Realty, Inc. 10,700 5/31/08
PSF
PSF Conoco/Bread Box 3,300 11/30/10
Per Unit
PSF Majestic Love Centre Church 6,078 3/31/01
Per Room
PSF Greenbriar Discount Mall 38,022 12/31/09
Per Unit
Per Unit
- --------------------------------------------------------------------------------------------------------
Per Unit
Per Unit
Per Room
PSF
PSF Burger Plus 1,500 5/31/06
Per Unit
Per Unit
PSF Pinkstaff Daniels & Simpson 5,950 11/21/05
PSF Valentine Jewelery Mfg. Co. 3,000 6/14/00
Per Room
PSF Mason & Mason insurance 4,635 10/31/07
PSF O'Connors Pub - Suite 5-7 3,000 8/1/99
Per Unit
PSF Ethan Allen, Inc. 11,300 12/31/04
Per Unit
Per Pad
PSF First Union 4,375 6/30/08
Per Room
Per Unit
Per Unit
Per Unit
PSF Brown Campbell Steel 2,750 4/30/04
PSF Hollywood Video 7,000 10/31/07
PSF Store 24 1,969 9/30/02
Per Unit
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AREA LEASED LEASE CONTROL
TENANT NAME (2) (SQ. FT.) EXP DATE NO.
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Blue Cross Blue Shield 37,032 11/30/01 PW - 4817
Essel Enterprises, Inc. 23,534 2/28/03 PW - 4818
ML-133
ML-129
ML-134
PW - 3825
Old Navy (Gap) 22,200 7/12/08 ML-100
Clifton, Gunderson LLC 20,179 1/31/01 PW - 4819
PW - 7371
Executive Suites 10,463 5/31/00 ML-144
Marmaxx Operating Corp. (T.J. Maxx) 32,143 11/30/08 PW - 6093
ML-146
ML-127
ML-148
ML-113
ML-147
Michael's 35,045 2/28/06 PW - 7215
PW - 1696
ML-120
ML-121
GSA 12,000 4/23/18 PW - 3346
ML-130
PW - 3879
PW - 7009
Bass Shoe 6,693 5/31/00 PW - 3000
PW - 6542
ML-141
ML-109
Sentry Foods 38,000 11/30/06 PW - 4035
Conway Store (Simpson Concourse Realty) 3,072 12/31/12 PW - 2034
ML-139
ML-105
PW - 6543
ML-125
ML-124
ML-102
PW - 5651
ML-112
PW - 4747
ML-142
Erickson Outdoors 5,752 3/1/00 PW - 2365
Rockford Corporation 15,000 12/31/00 PW - 4139
HADCO-12A Manor Pkwy 30,000 5/31/08 PW - 4149
PW - 3766
Olive Garden 11,000 10/31/04 ML-131
PW - 2804
PW - 6545
PW - 4151A
PW - 4151B
- -------------------------------------------------------------------------------------------------------
PW - 4151
Ackrad 17,138 12/31/05 PW - 1890
Cal Camp 6,975 10/31/99 PW - 2005
PW - 4370
PW - 2982A
PW - 2982B
PW - 2982C
PW - 2982D
PW - 2982E
PW - 2982F
- -------------------------------------------------------------------------------------------------------
PW - 2982
ML-103a
ML-103b
- -------------------------------------------------------------------------------------------------------
ML-103
PW - 4923
Archive 17,100 10/31/01 PW - 3441
PW - 4975
United Drug Wholesale 10,416 10/30/99 PW - 6460
ML-140
EMC Corporation 12,396 10/31/02 PW - 3471
ML-111
PW - 2550
ML-110
State Pardons & Parole 7,300 6/30/99 PW - 3397
PW - 3086
PW - 6024
PW - 6544
The Lobster Co. 4,300 11/30/07 PW - 4047
PW - 2348
ML-106
PW - 3189
Serafina 2,800 11/30/06 PW - 6023
PW - 4479
PW - 4319
Pembroke Pines Kids Zone 4,500 7/31/03 PW - 6025
Post Haste Pharmacy 4,036 MTM PW - 2358
Walgreens 10,585 8/31/25 PW - 2064
Walgreen's 11,000 9/30/08 PW - 6329
PW - 4709
A Signature Mortgage 2,771 9/15/00 PW - 4625
PW - 3886
PW - 3268
PW - 4355
PW - 6265
ML-143
PW - 3265A
PW - 3265B
- -------------------------------------------------------------------------------------------------------
PW - 3265
PW - 1481
PW - 4345
ML-122
PW - 3146
PW - 3821
Continental Chief Catering Co. 3,000 2/28/08 PW - 3322
CTA 3,598 6/30/99 PW - 4629
PW - 2969
PW - 3615
Clarity Station, Inc. 6,717 6/30/03 PW - 7098
PW - 4467
Farmers Insurance 2,200 9/30/07 PW - 2346
Bandar Restaurant 2,500 2/29/08 PW - 4048
PW - 3185
PW - 3736
PW - 2233
PW - 3714
Khovri 2,575 5/31/01 PW - 5668
PW - 3035
PW - 5994A
PW - 5994B
PW - 5994C
- -------------------------------------------------------------------------------------------------------
PW - 5994
PW - 1623
Castle Creek Tubs 1,000 3/31/03 PW - 3329
PW - 6314
PW - 4008
PW - 4112
PW - 4762
PW - 4674
McBiz Corp. (Chuck E Cheese) 14,937 12/31/02 PW - 3463
Classic Billiards 9,638 4/14/00 PW - 6021
PW - 4896
PW - 3666
PW - 6022
Bergstrahi-Shaw-Newman 3,500 1/31/00 PW - 3901
PW - 3563A
PW - 3563B
PW - 3563C
PW - 3563D
- -------------------------------------------------------------------------------------------------------
PW - 3563
PW - 3709
PW - 4553
PW - 7313
PW - 1586
PW - 3466
Tandy Corp 1,600 11/30/01 PW - 1596
PW - 4153
PW - 5025
PW - 3286
PW - 1777
Howard Baron 2,200 2/28/00 PW - 6112
PW - 6414
PW - 3686
ML-108a
ML-108b
- -------------------------------------------------------------------------------------------------------
ML-108
Pacific Executives 3,740 9/30/01 PW - 2526
PW - 3076
PGS 5,956 5/31/01 PW - 5083
Bert Bibbentuckers 5,006 3/31/08 PW - 4678
PW - 3426
PW - 3893
Voice-Tel Enterprises 2,832 12/31/99 PW - 2443
PW - 4991
David Zaharris (Boston Wraps & Pizza) 2,040 12/31/02 PW - 3545A
PW - 3545B
- -------------------------------------------------------------------------------------------------------
PW - 3545
PW - 3616
PW - 3968
PW - 2509
PW - 3807
PW - 6377
American General Life Insurance 2,388 8/14/07 PW - 3970
PW - 3093
Sharing and Caring MH 5,065 5/31/01 PW - 3031
PW - 3687
Direct Furniture Imports 12,188 9/30/02 PW - 2799
PW - 7134A
PW - 7134B
- -------------------------------------------------------------------------------------------------------
PW - 7134
PW - 7133
PW - 3570
PW - 3176
El Mexicano Market 1,500 7/31/99 ML-123
PW - 4546
PW - 7021
Hilliard-Lyons 5,950 7/31/03 PW - 3214
Three Tier Corporation 1,500 1/31/07 PW - 4426
PW - 4897
FP Giglio Enterprises 750 MTM PW - 2903
Carioca Company Suite 10 2,400 7/31/01 PW - 2495
PW - 3618
PW - 1445
PW - 4309
ML-145
North George Orthodontics 2,100 5/31/08 PW - 4038
PW - 4614
PW - 3619
PW - 4371
PW - 5254
Dr. Wright 2,600 9/1/05 ML-114
PW - 3515
Dennehy Barnes Bentures dba C-21 1,908 5/31/01 PW - 1663
PW - 5947
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN ID PROPERTY NAME/LOCATION LESSEE GUARANTOR
<S> <C> <C> <C>
1696 Kmart - Ponce - Ponce, PR Builders Square Kmart Corporation
3268 Tandy - East Hanover - East Hanover, NJ Tandy NAP
3825 Beckman Coulter, Inc. - Chaska, MN Beckman Coulter, Inc. NAP
2804 Laidlaw Transit, Inc. - Las Vegas, NV Laidlaw Med. Trans. Laidlaw Transit, Inc.
3879 Regal Cinemas, Inc. - Fredericksburg, VA Regal Cinemas, Inc. NAP
3185 Eckerd - Palm Beach - Palm Beach, FL Eckerd Corp. NAP
ML-121 Delta Education Torstar - Nashua, NH Delta Education Torstar Corporation
<CAPTION>
LEASE TYPE (BONDABLE, LEASED
LESSEE/GUARANTOR RATINGS CASUALTY/CONDEMNATION ONLY, NNN, APPRAISED
(S&P / MOODYS) PROPERTY-TYPE NN) CUT-OFF,BALANCE VALUE
BB+/Ba1 CTL - retail NN $ 8,664,604.07 $ 9,500,000
A-/Baa1 CTL - retail NN 2,769,932.10 4,700,000
BB+/Ba1 CTL - mixed use Bondable 14,875,023.74 15,400,000
Shadow Rated * CTL - office NN 4,742,905.11 5,210,000
BB-/Ba3 ** CTL - retail NN 7,911,958.72 8,200,000
NR/Baa2 (Sr. Subordinate) CTL - retail NN 2,259,986.77 2,640,000
Shadow Rated * CTL - industrial NNN 8,426,129.20 9,200,000
* Shadow ratings are not necessarily by S&P or Moodys
** S&P's rating of Regal Cinemas is an issuer credit
rating. Moodys' rating of Regal Cinemas is a senior implied issuer
rating
</TABLE>
A-2-1
<PAGE>
<TABLE>
<CAPTION>
LOAN CURRENT AS DARK CURRENT BALLOON STATE LEASE INITIAL
ID LEASED APPRAISED DARK AMOUNT MATURITY TERMINATION DATE
LTV VALUE LTV DATE
<S> <C> <C> <C> <C> <C> <C>
1696 91.21% $ 8,080,000 107.24% $ 69,035 7/1/18 7/31/18
3268 58.93% 3,900,000 71.02% 33,055 11/1/09 11/30/09
3825 96.59% 12,000,000 123.96% 5,178,669 6/5/18 6/5/18
2804 91.03% 4,960,000 95.62% 1,546,889 5/1/08 5/31/13
3879 96.49% 6,200,000 127.61% 2,461,730 6/1/23 6/30/23
3185 85.61% 1,785,000 126.61% 614,398 5/1/17 6/1/17
ML-121 91.59% 9,600,000 87.77% 577,964 12/31/18 12/31/18
<CAPTION>
CUT-OFF DATE ANNUAL RENT DSCR FIRST STEP DATE OF DEBT
LOAN ANNUAL DEBT PAYMENT SERVICE
ID SERVICE
<S> <C> <C> <C> <C>
1696 $ 842,161.32 $939,841 1.06 NAP
3268 355,754.52 $386,170 1.07 12/1/04
3825 1,320,000.00 $1,320,000 1.00 NAP
2804 523,739.40 $529,710 1.00 6/1/00
3879 609,088.92 $623,606 1.02 See Supplemental Schedule
3185 200,950.68 $220,572 1.08 6/1/02
ML-121 652,788.00 $652,788 1.00 2/1/99
</TABLE>
A-2-2
<PAGE>
<TABLE>
<CAPTION>
FIRST STEP FIRST STEP
DATE ANNUAL DATE ANNUAL FIRST STEP
LOAN ID PROPERTY NAME/LOCATION DEBT SERVICE NET RENT DATE DSCR
<S> <C> <C> <C> <C>
1696 Kmart - Ponce - Ponce, PR NAP NAP NAP
3268 Tandy - East Hanover - East Hanover, NJ $398,960 12/1/04 1.07
3825 Beckman Coulter, Inc. - Chaska, MN NAP NAP NAP
2804 Laidlaw Transit, Inc. - Las Vegas, NV $539,617 6/1/00 1.00
3879 Regal Cinemas, Inc. - Fredericksburg, VA
3185 Eckerd - Palm Beach - Palm Beach, FL $205,995 6/1/02 1.08
ML-121 Delta Education Torstar - Nashua, NH $652,788 2/1/99 1.00
<CAPTION>
SECOND STEP SECOND STEP SECOND STEP SECOND STEP THIRD STEP THIRD STEP DATE
DATE OF DEBT DATE ANNUAL DATE ANNUAL DATE DSCR DATE OF DEBT ANNUAL DEBT SERVICE
LOAN ID SERVICE DEBT SERVICE NET RENT SERVICE
<S> <C> <C> <C> <C> <C> <C>
1696 NAP NAP NAP NAP NAP NAP
3268 NAP NAP NAP NAP NAP NAP
3825 NAP NAP NAP NAP NAP NAP
2804 6/1/01 $555,970 6/1/01 1.00 6/1/02 $572,814
3879
3185 6/1/07 $211,045 6/1/07 1.08 6/1/12 $216,095
ML-121 2/1/04 $741,900 2/1/04 1.00 2/1/09 $843,168
</TABLE>
A-2-3
<PAGE>
<TABLE>
<CAPTION>
LOAN ID PROPERTY NAME/LOCATION THIRD STEP THIRD STEP FOURTH STEP
DATE ANNUAL DATE DSCR DATE OF DEBT
NET RENT SERVICE
<S> <C> <C> <C> <C>
1696 Kmart - Ponce - Ponce, PR NAP NAP NAP
3268 Tandy - East Hanover - East Hanover, NJ NAP NAP NAP
3825 Beckman Coulter, Inc. - Chaska, MN NAP NAP NAP
2804 Laidlaw Transit, Inc. - Las Vegas, NV 6/1/02 1.00 6/1/03
3879 Regal Cinemas, Inc. - Fredericksburg, VA
3185 Eckerd - Palm Beach - Palm Beach, FL 6/1/12 1.08 NAP
ML-121 Delta Education Torstar - Nashua, NH 2/1/09 1.00 2/1/14
<CAPTION>
FOURTH STEP FOURTH STEP FOURTH STEP FIFTH STEP FIFTH STEP FIFTH STEP FIFTH STEP
DATE ANNUAL DATE ANNUAL DATE DSCR DATE OF DEBT DATE ANNUAL DATE ANNUAL DATE DSCR
LOAN ID DEBT SERVICE NET RENT SERVICE DEBT SERVICE NET RENT
<S> <C> <C> <C> <C> <C> <C> <C>
1696 NAP NAP NAP NAP NAP NAP NAP
3268 NAP NAP NAP NAP NAP NAP NAP
3825 NAP NAP NAP NAP NAP NAP NAP
2804 $590,164 6/1/03 1.00 6/1/04 $608,034 6/1/04 1.00
3879
3185 NAP NAP NAP NAP NAP NAP NAP
ML-121 $958,260 2/1/14 1.00 NAP NAP NAP NAP
</TABLE>
A-2-4
<PAGE>
<TABLE>
<CAPTION>
LOAN ID PROPERTY NAME/LOCATION SIXTH STEP SIXTH STEP SIXTH STEP
DATE OF DEBT DATE ANNUAL DATE ANNUAL
SERVICE DEBT SERVICE NET RENT
<S> <C> <C> <C> <C>
1696 Kmart - Ponce - Ponce, PR NAP NAP NAP
3268 Tandy - East Hanover - East Hanover, NJ NAP NAP NAP
3825 Beckman Coulter, Inc. - Chaska, MN NAP NAP NAP
2804 Laidlaw Transit, Inc. - Las Vegas, NV 6/1/05 $626,440 6/1/05
3879 Regal Cinemas, Inc. - Fredericksburg, VA
3185 Eckerd - Palm Beach - Palm Beach, FL NAP NAP NAP
ML-121 Delta Education Torstar - Nashua, NH NAP NAP NAP
<CAPTION>
LOAN ID SIXTH STEP SEVENTH STEP SEVENTH STEP SEVENTH STEP SEVENTH STEP EIGHTH STEP
DATE DSCR DATE OF DATE ANNUAL DATE ANNUAL DATE DSCR DATE OF
DEBT SERVICE DEBT SERVICE NET RENT DEBT SERVICE
<S> <C> <C> <C> <C> <C> <C>
1696 NAP NAP NAP NAP NAP NAP
3268 NAP NAP NAP NAP NAP NAP
3825 NAP NAP NAP NAP NAP NAP
2804 1.00 6/1/06 $645,398 6/1/06 1.00 6/1/07
3879
3185 NAP NAP NAP NAP NAP NAP
ML-121 NAP NAP NAP NAP NAP NAP
</TABLE>
A-2-5
<PAGE>
<TABLE>
<CAPTION>
LOAN ID PROPERTY NAME/LOCATION EIGHTH STEP EIGHTH STEP EIGHTH STEP
DATE ANNUAL DATE ANNUAL DATE DSCR
DEBT SERVICE NET RENT
<S> <C> <C> <C> <C>
1696 Kmart - Ponce - Ponce, PR NAP NAP NAP
3268 Tandy - East Hanover - East Hanover, NJ NAP NAP NAP
3825 Beckman Coulter, Inc. - Chaska, MN NAP NAP NAP
2804 Laidlaw Transit, Inc. - Las Vegas, NV $664,925 6/1/07 1.00
3879 Regal Cinemas, Inc. - Fredericksburg, VA
3185 Eckerd - Palm Beach - Palm Beach, FL NAP NAP NAP
ML-121 Delta Education Torstar - Nashua, NH NAP NAP NAP
</TABLE>
A-2-6
<PAGE>
<TABLE>
<CAPTION>
Annex A-2 Continued: Schedule for Loan 3879
RENT PARKING CAM INSURANCE DEBT SERVICE DEBT INTEREST @
DATE PERIOD PAYMENT TAX RESERVES RESERVES RESERVE SERVICE 7.450%
<S> <C> <C> <C> <C> <C> <C> <C>
6/1/99 0
7/1/99 1 $50,560.49 $ 724.79 $ 344.00 $2,385.71 $ 49,120.08 $49,120.08
8/1/99 2 50,560.49 724.79 344.00 4,023.04 50,757.41 50,757.41
9/1/99 3 50,560.49 724.79 344.00 4,023.04 50,757.41 50,757.41
10/1/99 4 50,560.49 724.79 344.00 2,385.71 49,120.08 49,120.08
11/1/99 5 50,560.49 724.79 344.00 4,023.04 50,757.41 50,757.41
12/1/99 6 50,560.49 724.79 344.00 2,385.71 49,120.08 49,120.08
1/1/00 7 50,560.49 724.79 344.00 4,023.04 50,757.41 50,757.41
2/1/00 8 50,560.49 724.79 344.00 4,023.04 50,757.41 50,757.41
3/1/00 9 50,560.49 724.79 344.00 748.37 47,482.74 47,482.74
4/1/00 10 50,560.49 724.79 344.00 4,023.04 50,757.41 50,757.41
5/1/00 11 50,560.49 724.79 344.00 2,385.71 49,120.08 49,120.08
6/1/00 12 50,560.49 724.79 344.00 4,023.04 50,757.41 50,757.41
7/1/00 13 53,893.82 724.79 344.00 - 49,881.99 49,120.08
8/1/00 14 53,893.82 724.79 344.00 870.53 50,752.53 50,752.53
9/1/00 15 53,893.82 724.79 344.00 870.53 50,752.53 50,752.53
10/1/00 16 53,893.82 724.79 344.00 - 49,881.99 49,115.35
11/1/00 17 53,893.82 724.79 344.00 865.61 50,747.61 50,747.61
12/1/00 18 53,893.82 724.79 344.00 - 49,881.99 49,110.59
1/1/01 19 53,893.82 724.79 344.00 860.67 50,742.66 50,742.66
2/1/01 20 53,893.82 724.79 344.00 860.67 50,742.66 50,742.66
3/1/01 21 53,893.82 724.79 344.00 - 49,881.99 45,832.08
4/1/01 22 53,893.82 724.79 344.00 834.68 50,716.68 50,716.68
5/1/01 23 53,893.82 724.79 344.00 - 49,881.99 49,080.65
6/1/01 24 53,893.82 724.79 344.00 829.54 50,711.54 50,711.54
7/1/01 25 53,893.82 724.79 344.00 - 49,881.99 49,075.68
8/1/01 26 53,893.82 724.79 344.00 824.37 50,706.36 50,706.36
9/1/01 27 53,893.82 724.79 344.00 824.37 50,706.36 50,706.36
10/1/01 28 53,893.82 724.79 344.00 - 49,881.99 49,070.67
11/1/01 29 53,893.82 724.79 344.00 819.17 50,701.16 50,701.16
12/1/01 30 53,893.82 724.79 344.00 - 49,881.99 49,065.64
1/1/02 31 53,893.82 724.79 344.00 813.93 50,695.92 50,695.92
2/1/02 32 53,893.82 724.79 344.00 813.93 50,695.92 50,695.92
3/1/02 33 53,893.82 724.79 344.00 - 49,881.99 45,789.86
4/1/02 34 53,893.82 724.79 344.00 787.68 50,669.67 50,669.67
5/1/02 35 53,893.82 724.79 344.00 - 49,881.99 49,035.16
6/1/02 36 53,893.82 724.79 344.00 782.24 50,664.24 50,664.24
7/1/02 37 56,001.08 724.79 344.00 - 51,871.85 49,029.91
8/1/02 38 56,001.08 724.79 344.00 - 51,871.85 50,646.00
9/1/02 39 56,001.08 724.79 344.00 - 51,871.85 50,638.14
10/1/02 40 56,001.08 724.79 344.00 - 51,871.85 48,996.99
11/1/02 41 56,001.08 724.79 344.00 - 51,871.85 50,611.78
12/1/02 42 56,001.08 724.79 344.00 - 51,871.85 48,971.32
1/1/03 43 56,001.08 724.79 344.00 - 51,871.85 50,585.09
2/1/03 44 56,001.08 724.79 344.00 - 51,871.85 50,576.84
3/1/03 45 56,001.08 724.79 344.00 - 51,871.85 45,674.80
4/1/03 46 56,001.08 724.79 344.00 - 51,871.85 50,528.77
5/1/03 47 56,001.08 724.79 344.00 - 51,871.85 48,890.47
6/1/03 48 56,001.08 724.79 344.00 - 51,871.85 50,501.03
7/1/03 49 56,001.08 724.79 344.00 - 51,871.85 48,863.45
8/1/03 50 56,001.08 724.79 344.00 - 51,871.85 50,472.94
9/1/03 51 56,001.08 724.79 344.00 - 51,871.85 50,463.96
10/1/03 52 56,001.08 724.79 344.00 - 51,871.85 48,827.35
11/1/03 53 56,001.08 724.79 344.00 - 51,871.85 50,435.40
12/1/03 54 56,001.08 724.79 344.00 - 51,871.85 48,799.53
1/1/04 55 56,001.08 724.79 344.00 - 51,871.85 50,406.47
2/1/04 56 56,001.08 724.79 344.00 - 51,871.85 50,397.07
3/1/04 57 56,001.08 724.79 344.00 - 51,871.85 47,136.80
4/1/04 58 56,001.08 724.79 344.00 - 51,871.85 50,357.24
5/1/04 59 56,001.08 724.79 344.00 - 51,871.85 48,723.40
6/1/04 60 56,001.08 724.79 344.00 - 51,871.85 50,327.32
7/1/04 61 56,001.08 724.79 344.00 - 51,871.85 48,694.27
8/1/04 62 56,001.08 724.79 344.00 - 51,871.85 50,297.03
9/1/04 63 56,001.08 724.79 344.00 - 51,871.85 50,286.92
10/1/04 64 56,001.08 724.79 344.00 - 51,871.85 48,654.93
11/1/04 65 56,001.08 724.79 344.00 - 51,871.85 50,256.12
12/1/04 66 56,001.08 724.79 344.00 - 51,871.85 48,624.92
1/1/05 67 56,001.08 724.79 344.00 - 51,871.85 50,224.92
2/1/05 68 56,001.08 724.79 344.00 - 51,871.85 50,214.36
3/1/05 69 56,001.08 724.79 344.00 - 51,871.85 45,345.30
4/1/05 70 56,001.08 724.79 344.00 - 51,871.85 50,161.85
5/1/05 71 56,001.08 724.79 344.00 - 51,871.85 48,533.11
6/1/05 72 56,001.08 724.79 344.00 - 51,871.85 50,129.47
7/1/05 73 56,001.08 724.79 344.00 - 51,871.85 48,501.57
8/1/05 74 56,001.08 724.79 344.00 - 51,871.85 50,096.67
9/1/05 75 56,001.08 724.79 344.00 - 51,871.85 50,085.28
10/1/05 76 56,001.08 724.79 344.00 - 51,871.85 48,458.53
11/1/05 77 56,001.08 724.79 344.00 - 51,871.85 50,051.92
12/1/05 78 56,001.08 724.79 344.00 - 51,871.85 48,426.04
1/1/06 79 56,001.08 724.79 344.00 - 51,871.85 50,018.14
2/1/06 80 56,001.08 724.79 344.00 - 51,871.85 50,006.25
3/1/06 81 56,001.08 724.79 344.00 - 51,871.85 45,156.12
4/1/06 82 56,001.08 724.79 344.00 - 51,871.85 49,951.19
5/1/06 83 56,001.08 724.79 344.00 - 51,871.85 48,327.94
6/1/06 84 56,001.08 724.79 344.00 - 51,871.85 49,916.14
7/1/06 85 56,001.08 724.79 344.00 - 51,871.85 48,293.80
8/1/06 86 56,001.08 724.79 344.00 - 51,871.85 49,880.64
9/1/06 87 56,001.08 724.79 344.00 - 51,871.85 49,867.86
10/1/06 88 56,001.08 724.79 344.00 - 51,871.85 48,246.78
11/1/06 89 56,001.08 724.79 344.00 - 51,871.85 49,831.75
12/1/06 90 56,001.08 724.79 344.00 - 51,871.85 48,211.61
1/1/07 91 56,001.08 724.79 344.00 - 51,871.85 49,795.18
2/1/07 92 56,001.08 724.79 344.00 - 51,871.85 49,781.86
3/1/07 93 56,001.08 724.79 344.00 - 51,871.85 44,952.15
4/1/07 94 56,001.08 724.79 344.00 - 51,871.85 49,724.06
5/1/07 95 56,001.08 724.79 344.00 - 51,871.85 48,106.72
6/1/07 96 56,001.08 724.79 344.00 - 51,871.85 49,686.13
7/1/07 97 61,694.54 724.79 344.00 - 57,248.11 48,069.78
8/1/07 98 61,694.54 724.79 344.00 - 57,248.11 49,613.22
9/1/07 99 61,694.54 724.79 344.00 - 57,248.11 49,564.24
10/1/07 100 61,694.54 724.79 344.00 - 57,248.11 47,917.69
11/1/07 101 61,694.54 724.79 344.00 - 57,248.11 49,455.09
12/1/07 102 61,694.54 724.79 344.00 - 57,248.11 47,811.38
1/1/08 103 61,694.54 724.79 344.00 - 57,248.11 49,344.56
2/1/08 104 61,694.54 724.79 344.00 - 57,248.11 49,293.85
3/1/08 105 61,694.54 724.79 344.00 - 57,248.11 46,065.87
4/1/08 106 61,694.54 724.79 344.00 - 57,248.11 49,171.09
5/1/08 107 61,694.54 724.79 344.00 - 57,248.11 47,534.78
6/1/08 108 61,694.54 724.79 344.00 - 57,248.11 49,056.96
7/1/08 109 61,694.54 724.79 344.00 - 57,248.11 47,423.62
8/1/08 110 61,694.54 724.79 344.00 - 57,248.11 48,941.38
9/1/08 111 61,694.54 724.79 344.00 - 57,248.11 48,888.09
10/1/08 112 61,694.54 724.79 344.00 - 57,248.11 47,259.16
11/1/08 113 61,694.54 724.79 344.00 - 57,248.11 48,770.38
12/1/08 114 61,694.54 724.79 344.00 - 57,248.11 47,144.51
1/1/09 115 61,694.54 724.79 344.00 - 57,248.11 48,651.18
2/1/09 116 61,694.54 724.79 344.00 - 57,248.11 48,596.02
3/1/09 117 61,694.54 724.79 344.00 - 57,248.11 43,843.05
4/1/09 118 61,694.54 724.79 344.00 - 57,248.11 48,454.52
5/1/09 119 61,694.54 724.79 344.00 - 57,248.11 46,836.88
6/1/09 120 61,694.54 724.79 344.00 - 57,248.11 48,331.32
7/1/09 121 63,694.54 724.79 344.00 - 59,136.69 46,716.88
8/1/09 122 63,694.54 724.79 344.00 - 59,136.69 48,194.44
9/1/09 123 63,694.54 724.79 344.00 - 59,136.69 48,124.24
10/1/09 124 63,694.54 724.79 344.00 - 59,136.69 46,503.47
11/1/09 125 63,694.54 724.79 344.00 - 59,136.69 47,972.55
12/1/09 126 63,694.54 724.79 344.00 - 59,136.69 46,355.73
1/1/10 127 63,694.54 724.79 344.00 - 59,136.69 47,818.93
2/1/10 128 63,694.54 724.79 344.00 - 59,136.69 47,746.32
3/1/10 129 63,694.54 724.79 344.00 - 59,136.69 43,059.71
4/1/10 130 63,694.54 724.79 344.00 - 59,136.69 47,570.11
5/1/10 131 63,694.54 724.79 344.00 - 59,136.69 45,963.78
6/1/10 132 63,694.54 724.79 344.00 - 59,136.69 47,411.40
7/1/10 133 63,694.54 724.79 344.00 - 59,136.69 45,809.21
8/1/10 134 63,694.54 724.79 344.00 - 59,136.69 47,250.68
9/1/10 135 63,694.54 724.79 344.00 - 59,136.69 47,174.43
10/1/10 136 63,694.54 724.79 344.00 - 59,136.69 45,578.41
11/1/10 137 63,694.54 724.79 344.00 - 59,136.69 47,010.71
12/1/10 138 63,694.54 724.79 344.00 - 59,136.69 45,418.95
1/1/11 139 63,694.54 724.79 344.00 - 59,136.69 46,844.91
2/1/11 140 63,694.54 724.79 344.00 - 59,136.69 46,766.06
3/1/11 141 63,694.54 724.79 344.00 - 59,136.69 42,168.63
4/1/11 142 63,694.54 724.79 344.00 - 59,136.69 46,577.84
5/1/11 143 63,694.54 724.79 344.00 - 59,136.69 44,997.36
6/1/11 144 63,694.54 724.79 344.00 - 59,136.69 46,406.57
7/1/11 145 63,694.54 724.79 344.00 - 59,136.69 44,830.55
8/1/11 146 63,694.54 724.79 344.00 - 59,136.69 46,233.12
9/1/11 147 63,694.54 724.79 344.00 - 59,136.69 46,150.34
10/1/11 148 63,694.54 724.79 344.00 - 59,136.69 44,581.00
11/1/11 149 63,694.54 724.79 344.00 - 59,136.69 45,973.65
12/1/11 150 63,694.54 724.79 344.00 - 59,136.69 44,408.91
1/1/12 151 63,694.54 724.79 344.00 - 59,136.69 45,794.73
2/1/12 152 63,694.54 724.79 344.00 - 59,136.69 45,709.13
3/1/12 153 63,694.54 724.79 344.00 - 59,136.69 42,679.57
4/1/12 154 63,694.54 724.79 344.00 - 59,136.69 45,517.41
5/1/12 155 63,694.54 724.79 344.00 - 59,136.69 43,964.56
6/1/12 156 63,694.54 724.79 344.00 - 59,136.69 45,332.71
7/1/12 157 66,337.89 724.79 344.00 - 61,632.77 43,784.66
8/1/12 158 66,337.89 724.79 344.00 - 61,632.77 45,129.65
9/1/12 159 66,337.89 724.79 344.00 - 61,632.77 45,023.78
10/1/12 160 66,337.89 724.79 344.00 - 61,632.77 43,468.29
11/1/12 161 66,337.89 724.79 344.00 - 61,632.77 44,800.70
12/1/12 162 66,337.89 724.79 344.00 - 61,632.77 43,251.02
1/1/13 163 66,337.89 724.79 344.00 - 61,632.77 44,574.79
2/1/13 164 66,337.89 724.79 344.00 - 61,632.77 44,465.36
3/1/13 165 66,337.89 724.79 344.00 - 61,632.77 40,062.79
4/1/13 166 66,337.89 724.79 344.00 - 61,632.77 44,216.85
5/1/13 167 66,337.89 724.79 344.00 - 61,632.77 42,682.38
6/1/13 168 66,337.89 724.79 344.00 - 61,632.77 43,983.55
7/1/13 169 66,337.89 724.79 344.00 - 61,632.77 42,455.15
8/1/13 170 66,337.89 724.79 344.00 - 61,632.77 43,747.30
9/1/13 171 66,337.89 724.79 344.00 - 61,632.77 43,632.56
10/1/13 172 66,337.89 724.79 344.00 - 61,632.77 42,113.30
11/1/13 173 66,337.89 724.79 344.00 - 61,632.77 43,391.86
12/1/13 174 66,337.89 724.79 344.00 - 61,632.77 41,878.87
1/1/14 175 66,337.89 724.79 344.00 - 61,632.77 43,148.11
2/1/14 176 66,337.89 724.79 344.00 - 61,632.77 43,029.53
3/1/14 177 66,337.89 724.79 344.00 - 61,632.77 38,757.58
4/1/14 178 66,337.89 724.79 344.00 - 61,632.77 42,763.43
5/1/14 179 66,337.89 724.79 344.00 - 61,632.77 41,266.82
6/1/14 180 66,337.89 724.79 344.00 - 61,632.77 42,511.72
7/1/14 181 66,337.89 724.79 344.00 - 61,632.77 41,021.67
8/1/14 182 66,337.89 724.79 344.00 - 61,632.77 42,256.83
9/1/14 183 66,337.89 724.79 344.00 - 61,632.77 42,132.53
10/1/14 184 66,337.89 724.79 344.00 - 61,632.77 40,652.35
11/1/14 185 66,337.89 724.79 344.00 - 61,632.77 41,872.83
12/1/14 186 66,337.89 724.79 344.00 - 61,632.77 40,399.42
1/1/15 187 66,337.89 724.79 344.00 - 61,632.77 41,609.85
2/1/15 188 66,337.89 724.79 344.00 - 61,632.77 41,481.40
3/1/15 189 66,337.89 724.79 344.00 - 61,632.77 37,350.30
4/1/15 190 66,337.89 724.79 344.00 - 61,632.77 41,196.34
5/1/15 191 66,337.89 724.79 344.00 - 61,632.77 39,740.55
6/1/15 192 66,337.89 724.79 344.00 - 61,632.77 40,924.79
7/1/15 193 71,337.89 724.79 344.00 - 66,354.20 39,476.08
8/1/15 194 71,337.89 724.79 344.00 - 66,354.20 40,619.52
9/1/15 195 71,337.89 724.79 344.00 - 66,354.20 40,454.42
10/1/15 196 71,337.89 724.79 344.00 - 66,354.20 38,988.64
11/1/15 197 71,337.89 724.79 344.00 - 66,354.20 40,112.71
12/1/15 198 71,337.89 724.79 344.00 - 66,354.20 38,655.83
1/1/16 199 71,337.89 724.79 344.00 - 66,354.20 39,766.67
2/1/16 200 71,337.89 724.79 344.00 - 66,354.20 39,596.10
3/1/16 201 71,337.89 724.79 344.00 - 66,354.20 36,880.93
4/1/16 202 71,337.89 724.79 344.00 - 66,354.20 39,235.36
5/1/16 203 71,337.89 724.79 344.00 - 66,354.20 37,801.34
6/1/16 204 71,337.89 724.79 344.00 - 66,354.20 38,878.21
7/1/16 205 71,337.89 724.79 344.00 - 66,354.20 37,453.50
8/1/16 206 71,337.89 724.79 344.00 - 66,354.20 38,516.54
9/1/16 207 71,337.89 724.79 344.00 - 66,354.20 38,337.96
10/1/16 208 71,337.89 724.79 344.00 - 66,354.20 36,927.31
11/1/16 209 71,337.89 724.79 344.00 - 66,354.20 37,969.44
12/1/16 210 71,337.89 724.79 344.00 - 66,354.20 36,568.40
1/1/17 211 71,337.89 724.79 344.00 - 66,354.20 37,596.26
2/1/17 212 71,337.89 724.79 344.00 - 66,354.20 37,411.77
3/1/17 213 71,337.89 724.79 344.00 - 66,354.20 33,623.57
4/1/17 214 71,337.89 724.79 344.00 - 66,354.20 37,016.12
5/1/17 215 71,337.89 724.79 344.00 - 66,354.20 35,639.91
6/1/17 216 71,337.89 724.79 344.00 - 66,354.20 36,630.87
7/1/17 217 74,298.44 724.79 344.00 - 69,149.81 35,264.70
8/1/17 218 74,298.44 724.79 344.00 - 69,149.81 36,222.80
9/1/17 219 74,298.44 724.79 344.00 - 69,149.81 36,011.57
10/1/17 220 74,298.44 724.79 344.00 - 69,149.81 34,644.17
11/1/17 221 74,298.44 724.79 344.00 - 69,149.81 35,577.61
12/1/17 222 74,298.44 724.79 344.00 - 69,149.81 34,221.52
1/1/18 223 74,298.44 724.79 344.00 - 69,149.81 35,138.16
2/1/18 224 74,298.44 724.79 344.00 - 69,149.81 34,919.97
3/1/18 225 74,298.44 724.79 344.00 - 69,149.81 31,342.27
4/1/18 226 74,298.44 724.79 344.00 - 69,149.81 34,457.83
5/1/18 227 74,298.44 724.79 344.00 - 69,149.81 33,130.91
6/1/18 228 74,298.44 724.79 344.00 - 69,149.81 34,004.20
7/1/18 229 74,298.44 724.79 344.00 - 69,149.81 32,689.09
8/1/18 230 74,298.44 724.79 344.00 - 69,149.81 33,544.82
9/1/18 231 74,298.44 724.79 344.00 - 69,149.81 33,316.41
10/1/18 232 74,298.44 724.79 344.00 - 69,149.81 32,019.22
11/1/18 233 74,298.44 724.79 344.00 - 69,149.81 32,848.32
12/1/18 234 74,298.44 724.79 344.00 - 69,149.81 31,563.33
1/1/19 235 74,298.44 724.79 344.00 - 69,149.81 32,374.31
2/1/19 236 74,298.44 724.79 344.00 - 69,149.81 32,138.39
3/1/19 237 74,298.44 724.79 344.00 - 69,149.81 28,813.76
4/1/19 238 74,298.44 724.79 344.00 - 69,149.81 31,642.18
5/1/19 239 74,298.44 724.79 344.00 - 69,149.81 30,388.61
6/1/19 240 74,298.44 724.79 344.00 - 69,149.81 31,152.90
7/1/19 241 74,298.44 724.79 344.00 - 69,149.81 29,912.07
8/1/19 242 74,298.44 724.79 344.00 - 69,149.81 30,657.41
9/1/19 243 74,298.44 724.79 344.00 - 69,149.81 30,410.47
10/1/19 244 74,298.44 724.79 344.00 - 69,149.81 29,188.99
11/1/19 245 74,298.44 724.79 344.00 - 69,149.81 29,905.59
12/1/19 246 74,298.44 724.79 344.00 - 69,149.81 28,697.25
1/1/20 247 74,298.44 724.79 344.00 - 69,149.81 29,394.31
2/1/20 248 74,298.44 724.79 344.00 - 69,149.81 29,139.27
3/1/20 249 74,298.44 724.79 344.00 - 69,149.81 27,019.20
4/1/20 250 74,298.44 724.79 344.00 - 69,149.81 28,612.31
5/1/20 251 74,298.44 724.79 344.00 - 69,149.81 27,437.67
6/1/20 252 74,298.44 724.79 344.00 - 69,149.81 28,084.66
7/1/20 253 79,898.44 724.79 344.00 - 74,437.82 26,923.76
8/1/20 254 79,898.44 724.79 344.00 - 74,437.82 27,516.40
9/1/20 255 79,898.44 724.79 344.00 - 74,437.82 27,215.39
10/1/20 256 79,898.44 724.79 344.00 - 74,437.82 26,044.30
11/1/20 257 79,898.44 724.79 344.00 - 74,437.82 26,601.98
12/1/20 258 79,898.44 724.79 344.00 - 74,437.82 25,446.87
1/1/21 259 79,898.44 724.79 344.00 - 74,437.82 25,980.81
2/1/21 260 79,898.44 724.79 344.00 - 74,437.82 25,669.95
3/1/21 261 79,898.44 724.79 344.00 - 74,437.82 22,903.18
4/1/21 262 79,898.44 724.79 344.00 - 74,437.82 25,026.48
5/1/21 263 79,898.44 724.79 344.00 - 74,437.82 23,912.41
6/1/21 264 79,898.44 724.79 344.00 - 74,437.82 24,385.36
7/1/21 265 79,898.44 724.79 344.00 - 74,437.82 23,287.99
8/1/21 266 79,898.44 724.79 344.00 - 74,437.82 23,736.12
9/1/21 267 79,898.44 724.79 344.00 - 74,437.82 23,410.85
10/1/21 268 79,898.44 724.79 344.00 - 74,437.82 22,338.87
11/1/21 269 79,898.44 724.79 344.00 - 74,437.82 22,749.27
12/1/21 270 79,898.44 724.79 344.00 - 74,437.82 21,694.52
1/1/22 271 79,898.44 724.79 344.00 - 74,437.82 22,079.31
2/1/22 272 79,898.44 724.79 344.00 - 74,437.82 21,743.41
3/1/22 273 79,898.44 724.79 344.00 - 74,437.82 19,333.88
4/1/22 274 79,898.44 724.79 344.00 - 74,437.82 21,051.86
5/1/22 275 79,898.44 724.79 344.00 - 74,437.82 20,041.33
6/1/22 276 79,898.44 724.79 344.00 - 74,437.82 20,360.40
7/1/22 277 83,214.25 724.79 344.00 - 77,568.90 19,367.89
8/1/22 278 83,214.25 724.79 344.00 - 77,568.90 19,640.11
9/1/22 279 83,214.25 724.79 344.00 - 77,568.90 19,268.48
10/1/22 280 83,214.25 724.79 344.00 - 77,568.90 18,284.97
11/1/22 281 83,214.25 724.79 344.00 - 77,568.90 18,514.14
12/1/22 282 83,214.25 724.79 344.00 - 77,568.90 17,550.28
1/1/23 283 83,214.25 724.79 344.00 - 77,568.90 17,750.25
2/1/23 284 83,214.25 724.79 344.00 - 77,568.90 17,366.50
3/1/23 285 83,214.25 724.79 344.00 - 77,568.90 15,337.03
4/1/23 286 83,214.25 724.79 344.00 - 77,568.90 16,581.05
5/1/23 287 83,214.25 724.79 344.00 - 77,568.90 15,667.54
6/1/23 288 83,214.25 724.79 344.00 - 2,477,522.56 15,792.68
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Balance
<S> <C>
- $7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
- 7,911,958.72
761.92 7,911,196.80
- 7,911,196.80
- 7,911,196.80
766.65 7,910,430.16
- 7,910,430.16
771.41 7,909,658.75
- 7,909,658.75
- 7,909,658.75
4,049.91 7,905,608.84
- 7,905,608.84
801.34 7,904,807.50
- 7,904,807.50
806.31 7,904,001.19
- 7,904,001.19
- 7,904,001.19
811.32 7,903,189.87
- 7,903,189.87
816.36 7,902,373.52
- 7,902,373.52
- 7,902,373.52
4,092.13 7,898,281.39
- 7,898,281.39
846.83 7,897,434.56
- 7,897,434.56
2,841.94 7,894,592.61
1,225.85 7,893,366.77
1,233.71 7,892,133.06
2,874.86 7,889,258.20
1,260.07 7,887,998.13
2,900.53 7,885,097.60
1,286.76 7,883,810.84
1,295.01 7,882,515.83
6,197.05 7,876,318.78
1,343.08 7,874,975.70
2,981.38 7,871,994.32
1,370.82 7,870,623.50
3,008.40 7,867,615.11
1,398.91 7,866,216.19
1,407.89 7,864,808.30
3,044.50 7,861,763.80
1,436.45 7,860,327.35
3,072.32 7,857,255.03
1,465.38 7,855,789.66
1,474.78 7,854,314.88
4,735.05 7,849,579.83
1,514.62 7,848,065.21
3,148.45 7,844,916.76
1,544.53 7,843,372.23
3,177.58 7,840,194.65
1,574.82 7,838,619.83
1,584.93 7,837,034.90
3,216.93 7,833,817.97
1,615.73 7,832,202.24
3,246.93 7,828,955.31
1,646.93 7,827,308.39
1,657.49 7,825,650.89
6,526.55 7,819,124.34
1,710.00 7,817,414.34
3,338.74 7,814,075.61
1,742.39 7,812,333.22
3,370.28 7,808,962.94
1,775.18 7,807,187.76
1,786.57 7,805,401.18
3,413.32 7,801,987.86
1,819.93 7,800,167.93
3,445.81 7,796,722.13
1,853.71 7,794,868.41
1,865.60 7,793,002.81
6,715.73 7,786,287.08
1,920.66 7,784,366.42
3,543.91 7,780,822.51
1,955.71 7,778,866.80
3,578.05 7,775,288.75
1,991.21 7,773,297.53
2,003.99 7,771,293.55
3,625.07 7,767,668.48
2,040.10 7,765,628.38
3,660.24 7,761,968.13
2,076.67 7,759,891.47
2,089.99 7,757,801.47
6,919.70 7,750,881.77
2,147.79 7,748,733.98
3,765.13 7,744,968.85
2,185.72 7,742,783.13
9,178.33 7,733,604.80
7,634.89 7,725,969.91
7,683.87 7,718,286.04
9,330.42 7,708,955.62
7,793.02 7,701,162.60
9,436.73 7,691,725.87
7,903.55 7,683,822.32
7,954.26 7,675,868.06
11,182.24 7,664,685.82
8,077.02 7,656,608.80
9,713.33 7,646,895.47
8,191.15 7,638,704.32
9,824.49 7,628,879.83
8,306.73 7,620,573.10
8,360.02 7,612,213.08
9,988.96 7,602,224.12
8,477.73 7,593,746.39
10,103.60 7,583,642.79
8,596.94 7,575,045.85
8,652.09 7,566,393.77
13,405.06 7,552,988.70
8,793.59 7,544,195.11
10,411.23 7,533,783.88
8,916.80 7,524,867.08
12,419.80 7,512,447.28
10,942.25 7,501,505.03
11,012.45 7,490,492.58
12,633.21 7,477,859.37
11,164.14 7,466,695.23
12,780.95 7,453,914.28
11,317.75 7,442,596.53
11,390.36 7,431,206.16
16,076.97 7,415,129.19
11,566.57 7,403,562.62
13,172.90 7,390,389.72
11,725.28 7,378,664.43
13,327.48 7,365,336.96
11,886.00 7,353,450.95
11,962.26 7,341,488.70
13,558.28 7,327,930.42
12,125.98 7,315,804.45
13,717.73 7,302,086.71
12,291.77 7,289,794.94
12,370.63 7,277,424.32
16,968.05 7,260,456.26
12,558.84 7,247,897.42
14,139.32 7,233,758.10
12,730.12 7,221,027.98
14,306.14 7,206,721.84
12,903.56 7,193,818.28
12,986.34 7,180,831.94
14,555.69 7,166,276.25
13,163.03 7,153,113.22
14,727.77 7,138,385.44
13,341.96 7,125,043.48
13,427.55 7,111,615.93
16,457.11 7,095,158.82
13,619.27 7,081,539.55
15,172.13 7,066,367.42
13,803.98 7,052,563.44
17,848.10 7,034,715.34
16,503.11 7,018,212.23
16,608.99 7,001,603.24
18,164.48 6,983,438.76
16,832.07 6,966,606.69
18,381.75 6,948,224.94
17,057.97 6,931,166.97
17,167.41 6,913,999.56
21,569.98 6,892,429.58
17,415.92 6,875,013.67
18,950.39 6,856,063.28
17,649.22 6,838,414.06
19,177.61 6,819,236.45
17,885.47 6,801,350.98
18,000.21 6,783,350.77
19,519.46 6,763,831.30
18,240.91 6,745,590.39
19,753.89 6,725,836.50
18,484.66 6,707,351.84
18,603.24 6,688,748.60
22,875.18 6,665,873.42
18,869.34 6,647,004.08
20,365.95 6,626,638.13
19,121.04 6,607,517.09
20,611.10 6,586,905.99
19,375.94 6,567,530.05
19,500.24 6,548,029.82
20,980.41 6,527,049.40
19,759.93 6,507,289.47
21,233.34 6,486,056.12
20,022.92 6,466,033.21
20,151.37 6,445,881.84
24,282.46 6,421,599.38
20,436.42 6,401,162.96
21,892.21 6,379,270.74
20,707.97 6,358,562.77
26,878.12 6,331,684.64
25,734.69 6,305,949.96
25,899.78 6,280,050.18
27,365.56 6,252,684.62
26,241.49 6,226,443.13
27,698.37 6,198,744.76
26,587.53 6,172,157.23
26,758.10 6,145,399.13
29,473.27 6,115,925.86
27,118.84 6,088,807.02
28,552.86 6,060,254.16
27,475.99 6,032,778.17
28,900.70 6,003,877.47
27,837.66 5,976,039.81
28,016.25 5,948,023.56
29,426.89 5,918,596.67
28,384.76 5,890,211.91
29,785.80 5,860,426.11
28,757.94 5,831,668.17
28,942.43 5,802,725.73
32,730.63 5,769,995.10
29,338.08 5,740,657.02
30,714.29 5,709,942.73
29,723.33 5,680,219.40
33,885.12 5,646,334.28
32,927.01 5,613,407.28
33,138.24 5,580,269.03
34,505.64 5,545,763.39
33,572.20 5,512,191.19
34,928.29 5,477,262.90
34,011.65 5,443,251.25
34,229.84 5,409,021.41
37,807.54 5,371,213.87
34,691.98 5,336,521.89
36,018.90 5,300,502.99
35,145.61 5,265,357.38
36,460.72 5,228,896.66
35,604.99 5,193,291.67
35,833.40 5,157,458.27
37,130.59 5,120,327.68
36,301.49 5,084,026.19
37,586.48 5,046,439.71
36,775.50 5,009,664.21
37,011.42 4,972,652.79
40,336.05 4,932,316.74
37,507.63 4,894,809.11
38,761.20 4,856,047.90
37,996.91 4,818,050.99
39,237.74 4,778,813.24
38,492.40 4,740,320.85
38,739.34 4,701,581.51
39,960.83 4,661,620.68
39,244.22 4,622,376.46
40,452.56 4,581,923.91
39,755.50 4,542,168.41
40,010.54 4,502,157.87
42,130.61 4,460,027.26
40,537.50 4,419,489.76
41,712.15 4,377,777.62
41,065.15 4,336,712.47
47,514.06 4,289,198.40
46,921.42 4,242,276.98
47,222.43 4,195,054.55
48,393.52 4,146,661.03
47,835.84 4,098,825.19
48,990.95 4,049,834.25
48,457.01 4,001,377.24
48,767.87 3,952,609.37
51,534.64 3,901,074.72
49,411.34 3,851,663.38
50,525.41 3,801,137.98
50,052.46 3,751,085.51
51,149.83 3,699,935.68
50,701.70 3,649,233.98
51,026.97 3,598,207.01
52,098.95 3,546,108.06
51,688.55 3,494,419.51
52,743.30 3,441,676.21
52,358.51 3,389,317.70
52,694.40 3,336,623.30
55,103.94 3,281,519.36
53,385.96 3,228,133.40
54,396.49 3,173,736.91
54,077.41 3,119,659.49
58,201.01 3,061,458.48
57,928.79 3,003,529.69
58,300.42 2,945,229.28
59,283.93 2,885,945.35
59,054.75 2,826,890.59
60,018.62 2,766,871.98
59,818.64 2,707,053.33
60,202.40 2,646,850.94
62,231.86 2,584,619.07
60,987.85 2,523,631.23
61,901.35 2,461,729.88
2,461,729.87 0.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CSSA PERIODIC DATA RECORD LAYOUT
- --------------------------------------------------------------------------------
FIELD NAME FIELD TYPE FORMAT
NUMBER
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Transaction Id (pool ID) 1 AN XXX97001
- --------------------------------------------------------------------------------
Group Id (subgroup within a pool) 2 AN XXX9701A
- --------------------------------------------------------------------------------
Loan Id (loan number) 3 AN 00000000012345
- --------------------------------------------------------------------------------
Prospectus Id 4 AN 123
- --------------------------------------------------------------------------------
Distribution Date 5 AN YYYYMMDD
- --------------------------------------------------------------------------------
Current Beginning Scheduled Balance 6 Numeric 100000.00
- --------------------------------------------------------------------------------
Current Ending Scheduled Balance 7 Numeric 100000.00
- --------------------------------------------------------------------------------
Paid To Date 8 AN YYYYMMDD
- --------------------------------------------------------------------------------
Current Index Rate 9 Numeric 0.09
- --------------------------------------------------------------------------------
Current Note Rate 10 Numeric 0.09
- --------------------------------------------------------------------------------
Maturity Date 11 AN YYYYMMDD
- --------------------------------------------------------------------------------
Servicer and Trustee Fee Rate 12 Numeric 0.00025
- --------------------------------------------------------------------------------
Fee Rate/Strip Rate 1 13 Numeric 0.00001
- --------------------------------------------------------------------------------
Fee Rate/Strip Rate 2 14 Numeric 0.00001
- --------------------------------------------------------------------------------
Fee Rate/Strip Rate 3 15 Numeric 0.00001
- --------------------------------------------------------------------------------
Fee Rate/Strip Rate 4 16 Numeric 0.00001
- --------------------------------------------------------------------------------
Fee Rate/Strip Rate 5 17 Numeric 0.00001
- --------------------------------------------------------------------------------
Net Pass-Through Rate 18 Numeric #VALUE!
- --------------------------------------------------------------------------------
Next Index Rate 19 Numeric 0.09
- --------------------------------------------------------------------------------
Next Note Rate 20 Numeric 0.09
- --------------------------------------------------------------------------------
Next Rate Adjustment Date 21 AN YYYYMMDD
- --------------------------------------------------------------------------------
Next Payment Adjustment Date 22 AN YYYYMMDD
- --------------------------------------------------------------------------------
Scheduled Interest Amount 23 Numeric 1000.00
- --------------------------------------------------------------------------------
Scheduled Principal Amount 24 Numeric 1000.00
- --------------------------------------------------------------------------------
Total Scheduled P&I Due 25 Numeric 1000.00
- --------------------------------------------------------------------------------
Neg am/Deferred Interest Amount 26 Numeric 1000.00
- --------------------------------------------------------------------------------
Unscheduled Principal Collections 27 Numeric 1000.00
- --------------------------------------------------------------------------------
Other Principal Adjustments 28 Numeric 1000.00
- --------------------------------------------------------------------------------
Liquidation/Prepayment Date 29 AN YYYYMMDD
- --------------------------------------------------------------------------------
Prepayment Penalty/Yield Maint Received 30 Numeric 1000.00
- --------------------------------------------------------------------------------
Prepayment Interest Excess (Shortfall) 31 Numeric 1000.00
- --------------------------------------------------------------------------------
Liquidation/Prepayment Code 32 Numeric 1
- --------------------------------------------------------------------------------
Most Recent ASER $ 33 Numeric 1000.00
- --------------------------------------------------------------------------------
Most Recent ASER Date 34 AN YYYYMMDD
- --------------------------------------------------------------------------------
Cumulative ASER $ 35 Numeric 1000.00
- --------------------------------------------------------------------------------
Actual Balance 36 Numeric 100000.00
- --------------------------------------------------------------------------------
Total P&I Advance Outstanding 37 Numeric 1000.00
- --------------------------------------------------------------------------------
Total T&I Advance Outstanding 38 Numeric 1000.00
- --------------------------------------------------------------------------------
Other Expense Advance Outstanding 39 Numeric 1000.00
- --------------------------------------------------------------------------------
Status of Loan 40 AN 1
- --------------------------------------------------------------------------------
In Bankruptcy 41 AN Y
- --------------------------------------------------------------------------------
Foreclosure Date 42 AN YYYYMMDD
- --------------------------------------------------------------------------------
REO Date 43 AN YYYYMMDD
- --------------------------------------------------------------------------------
Bankruptcy Date 44 AN YYYYMMDD
- --------------------------------------------------------------------------------
Net Proceeds Received on Liquidation 45 Numeric 100000.00
- --------------------------------------------------------------------------------
Liquidation Expense 46 Numeric 100000.00
- --------------------------------------------------------------------------------
Realized Loss to Trust 47 Numeric 10000.00
- --------------------------------------------------------------------------------
Date of Last Modification 48 AN YYYYMMDD
- --------------------------------------------------------------------------------
Modification Code 49 Numeric 1
- --------------------------------------------------------------------------------
Modified Note Rate 50 Numeric 0.09
- --------------------------------------------------------------------------------
Modified Payment Rate 51 Numeric 0.09
- --------------------------------------------------------------------------------
Preceding Fiscal Year Revenue 52 Numeric 1000.00
- --------------------------------------------------------------------------------
Preceding Fiscal Year Expenses 53 Numeric 1000.00
- --------------------------------------------------------------------------------
Preceding Fiscal Year NOI 54 Numeric 1000.00
- --------------------------------------------------------------------------------
Preceding Fiscal Year Debt Service Amt. 55 Numeric 1000.00
- --------------------------------------------------------------------------------
Preceding Fiscal Year DSCR 56 Numeric 2.55
- --------------------------------------------------------------------------------
Preceding Fiscal Year Physical Occupancy 57 Numeric 0.85
- --------------------------------------------------------------------------------
Preceding FY Financial As of Date 58 AN YYYYMMDD
- --------------------------------------------------------------------------------
Second Preceding FY Revenue 59 Numeric 1000.00
- --------------------------------------------------------------------------------
Second Preceding FY Expenses 60 Numeric 1000.00
- --------------------------------------------------------------------------------
Second Preceding FY NOI 61 Numeric 1000.00
- --------------------------------------------------------------------------------
Second Preceding FY Debt Service 62 Numeric 1000.00
- --------------------------------------------------------------------------------
Second Preceding FY DSCR 63 Numeric 2.55
- --------------------------------------------------------------------------------
Sec Preceding FY Physical Occupancy 64 Numeric 0.85
- --------------------------------------------------------------------------------
Sec Preceding FY Financial As of Date 65 AN YYYYMMDD
- --------------------------------------------------------------------------------
Most Recent Fiscal YTD Revenue 66 Numeric 1000.00
- --------------------------------------------------------------------------------
Most Recent Fiscal YTD Expenses 67 Numeric 1000.00
- --------------------------------------------------------------------------------
Most Recent Fiscal YTD NOI 68 Numeric 1000.00
- --------------------------------------------------------------------------------
Most Recent Fiscal YTD Debt Service 69 Numeric 1000.00
- --------------------------------------------------------------------------------
Most Recent Fiscal YTD DSCR 70 Numeric 2.55
- --------------------------------------------------------------------------------
Most Recent Fiscal YTD Phys. Occ. 71 Numeric 0.85
- --------------------------------------------------------------------------------
Most Recent Fiscal YTD Start Date 72 AN YYYYMMDD
- --------------------------------------------------------------------------------
Most Recent Fiscal YTD End Date 73 AN YYYYMMDD
- --------------------------------------------------------------------------------
Most Recent Appraisal Date 74 AN YYYYMMDD
- --------------------------------------------------------------------------------
Most Recent Appraisal Value 75 Numeric 100000.00
- --------------------------------------------------------------------------------
Workout Strategy Code 76 Numeric 1
- --------------------------------------------------------------------------------
Most Recent Spec Service Transfer Date 77 AN YYYYMMDD
- --------------------------------------------------------------------------------
Most Recent Master Service Return Date 78 AN YYYYMMDD
- --------------------------------------------------------------------------------
Date Asset is Expected to Be Resolved 79 AN YYYYMMDD
- --------------------------------------------------------------------------------
Year Last Renovated 80 AN 1997
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CSSA PROPERTY DATA FILE
- -------------------------------------------------------------------------------------------------------
DESCRIPTION
<C>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Unique Issue Identification Mnemonic
- -------------------------------------------------------------------------------------------------------
Unique Identification Number Assigned To Each Loan Group Within An Issue
- -------------------------------------------------------------------------------------------------------
Unique Identification Number Assigned To Each Collateral Item In A Pool
- -------------------------------------------------------------------------------------------------------
Unique Identification Number Assigned To Each Collateral Item In The Prospectus
- -------------------------------------------------------------------------------------------------------
Date Payments Made To Certificateholders
- -------------------------------------------------------------------------------------------------------
Outstanding Scheduled Principal Balance At The Beginning Of The Current Period
- -------------------------------------------------------------------------------------------------------
Outstanding Scheduled Principal Balance At The End Of The Current Period
- -------------------------------------------------------------------------------------------------------
Due Date Of The Last Interest Payment Received
- -------------------------------------------------------------------------------------------------------
Index Rate Used In The Determination Of The Current Period Gross Interest Rate
- -------------------------------------------------------------------------------------------------------
Annualized Gross Rate Applicable To The Calculation Of The Current Period Scheduled Interest
- -------------------------------------------------------------------------------------------------------
Date Collateral Is Scheduled To Make Its Final Payment
- -------------------------------------------------------------------------------------------------------
Annualized Fee Paid To The Servicer And Trustee
- -------------------------------------------------------------------------------------------------------
Annualized Fee/Strip Netted Against Current Note Rate To Determine Net Pass-Through Rate
- -------------------------------------------------------------------------------------------------------
Annualized Fee/Strip Netted Against Current Note Rate To Determine Net Pass-Through Rate
- -------------------------------------------------------------------------------------------------------
Annualized Fee/Strip Netted Against Current Note Rate To Determine Net Pass-Through Rate
- -------------------------------------------------------------------------------------------------------
Annualized Fee/Strip Netted Against Current Note Rate To Determine Net Pass-Through Rate
- -------------------------------------------------------------------------------------------------------
Annualized Fee/Strip Netted Against Current Note Rate To Determine Net Pass-Through Rate
- -------------------------------------------------------------------------------------------------------
Annualized Interest Rate Applicable To The Calculation Of The Current Period Remittance Interest
- -------------------------------------------------------------------------------------------------------
Index Rate Used In The Determination Of The Next Period Gross Interest Rate
- -------------------------------------------------------------------------------------------------------
Annualized Gross Interest Rate Applicable To The Calculation Of The Next Period Scheduled Interest
- -------------------------------------------------------------------------------------------------------
Date Note Rate Is Next Scheduled To Change
- -------------------------------------------------------------------------------------------------------
Date Scheduled P&I Amount Is Next Scheduled To Change
- -------------------------------------------------------------------------------------------------------
Scheduled Gross Interest Payment Due For The Current Period
- -------------------------------------------------------------------------------------------------------
Scheduled Principal Payment Due For The Current Period
- -------------------------------------------------------------------------------------------------------
Scheduled Principal And Interest Payment Due For The Current Period
- -------------------------------------------------------------------------------------------------------
Negative Amortization/Deferred Interest Amount Due For The Current Period
- -------------------------------------------------------------------------------------------------------
Unscheduled Payments Of Principal Received During The Related Collection Period
- -------------------------------------------------------------------------------------------------------
Unscheduled Principal Adjustments For The Related Collection Period
- -------------------------------------------------------------------------------------------------------
Date Unscheduled Payment Of Principal Received
- -------------------------------------------------------------------------------------------------------
Additional Payment Required From Borrower Due To Prepayment Of Loan Prior To Maturity
- -------------------------------------------------------------------------------------------------------
Scheduled Gross Interest Applicable To The Prepayment Amount
- -------------------------------------------------------------------------------------------------------
See Liquidation/Prepayment Codes Legend
- -------------------------------------------------------------------------------------------------------
Excess Of The Principal Balance Over The Defined Appraisal Percentage
- -------------------------------------------------------------------------------------------------------
Date ASER Amount Applied To Loan
- -------------------------------------------------------------------------------------------------------
Cumulative ASER Amount
- -------------------------------------------------------------------------------------------------------
Outstanding Actual Principal Balance At the End of The Current Period
- -------------------------------------------------------------------------------------------------------
Outstanding P&I Advances At The End Of The Current Period
- -------------------------------------------------------------------------------------------------------
Outstanding Taxes & Insurance Advances At The End Of The Current Period
- -------------------------------------------------------------------------------------------------------
Other Outstanding Advances At The End Of The Current Period
- -------------------------------------------------------------------------------------------------------
See Status Of Loan Legend
- -------------------------------------------------------------------------------------------------------
Bankruptcy Status Of Loan (If In Bankruptcy "Y", Else "N")
- -------------------------------------------------------------------------------------------------------
Date Of Foreclosure
- -------------------------------------------------------------------------------------------------------
Date Of REO
- -------------------------------------------------------------------------------------------------------
Date of Bankruptcy
- -------------------------------------------------------------------------------------------------------
Net Proceeds Received On Liquidation To Be Remitted To The Trust Per The Trust Documentation
- -------------------------------------------------------------------------------------------------------
Expenses Associated With The Liquidation To Be Netted From The Trust Per The Trust Documentation
- -------------------------------------------------------------------------------------------------------
Liquidation Balance Less Net Liquidation Proceeds Received
- -------------------------------------------------------------------------------------------------------
Date Loan Was Modified
- -------------------------------------------------------------------------------------------------------
See Modification Codes Legend
- -------------------------------------------------------------------------------------------------------
Note Rate Loan Modified To
- -------------------------------------------------------------------------------------------------------
Payment Rate Loan Modified To
- -------------------------------------------------------------------------------------------------------
Preceding Fiscal Year Revenue
- -------------------------------------------------------------------------------------------------------
Preceding Fiscal Year Expenses
- -------------------------------------------------------------------------------------------------------
Preceding Fiscal Year Net Operating Income
- -------------------------------------------------------------------------------------------------------
Preceding Fiscal Year Debt Service Amount
- -------------------------------------------------------------------------------------------------------
Preceding Fiscal Year Debt Service Coverage Ratio
- -------------------------------------------------------------------------------------------------------
Preceding Fiscal Year Physical Occupancy
- -------------------------------------------------------------------------------------------------------
Preceding Fiscal Year Financial As Of Date
- -------------------------------------------------------------------------------------------------------
Second Preceding Fiscal Year Revenue
- -------------------------------------------------------------------------------------------------------
Second Preceding Fiscal Year Expenses
- -------------------------------------------------------------------------------------------------------
Second Preceding Fiscal Year Net Operating Income
- -------------------------------------------------------------------------------------------------------
Second Preceding Fiscal Year Debt Service
- -------------------------------------------------------------------------------------------------------
Second Preceding Fiscal Year Debt Service Coverage Ratio
- -------------------------------------------------------------------------------------------------------
Second Preceding Fiscal Year Physical Occupancy
- -------------------------------------------------------------------------------------------------------
Second Preceding Fiscal Year Financial As Of Date
- -------------------------------------------------------------------------------------------------------
Most Recent Fiscal Year To Date Revenue
- -------------------------------------------------------------------------------------------------------
Most Recent Fiscal Year To Date Expenses
- -------------------------------------------------------------------------------------------------------
Most Recent Fiscal Year To Date Net Operating Income
- -------------------------------------------------------------------------------------------------------
Most Recent Fiscal Year To Date Debt Service
- -------------------------------------------------------------------------------------------------------
Most Recent Fiscal Year To Date Debt Service Coverage Ratio
- -------------------------------------------------------------------------------------------------------
Most Recent Fiscal Year To Date Physical Occupancy
- -------------------------------------------------------------------------------------------------------
Most Recent Fiscal Year To Date Start Date
- -------------------------------------------------------------------------------------------------------
Most Recent Fiscal Year To Date End Date
- -------------------------------------------------------------------------------------------------------
The Date Of The Latest Available Appraisal For The Property
- -------------------------------------------------------------------------------------------------------
The Latest Available Appraisal Value For The Property
- -------------------------------------------------------------------------------------------------------
See Workout Strategy Codes Legend
- -------------------------------------------------------------------------------------------------------
Date Transferred To The Special Servicer
- -------------------------------------------------------------------------------------------------------
Date Returned To The Master Servicer
- -------------------------------------------------------------------------------------------------------
Date Asset Is Expected To Be Resolved
- -------------------------------------------------------------------------------------------------------
Year Property Last Renovated
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Field
Field Name Number Type Format
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
Transaction Id 1 AN XXX97001
- ------------------------------------------------------------------------------------
Loan Id 2 AN 00000000012345
- ------------------------------------------------------------------------------------
Prospectus Loan ID 3 AN 123
- ------------------------------------------------------------------------------------
Property ID 4 AN 1001-001
- ------------------------------------------------------------------------------------
Distribution Date 5 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Cross-Collateralized Loan Grouping 6 Numeric 9(3)
- ------------------------------------------------------------------------------------
Property Name 7 AN Text
- ------------------------------------------------------------------------------------
Property Address 8 AN Text
- ------------------------------------------------------------------------------------
Property City 9 AN Text
- ------------------------------------------------------------------------------------
Property State 10 AN Text
- ------------------------------------------------------------------------------------
Property Zip Code 11 AN 30303
- ------------------------------------------------------------------------------------
Property County 12 AN Text
- ------------------------------------------------------------------------------------
Property Type Code 13 AN MF
- ------------------------------------------------------------------------------------
Year Built 14 AN YYYY
- ------------------------------------------------------------------------------------
Year Last Renovated 15 AN YYYY
- ------------------------------------------------------------------------------------
Net Square Feet At Securitization 16 Numeric 25000
- ------------------------------------------------------------------------------------
# Of Units/Beds/Rooms At Securitization 17 Numeric 75
- ------------------------------------------------------------------------------------
Property Status 18 AN 1
- ------------------------------------------------------------------------------------
Allocated Percentage of Loan at Securitization 19 Numeric 0.75
- ------------------------------------------------------------------------------------
Current Allocated Percentage 20 Numeric 0.75
- ------------------------------------------------------------------------------------
Current Allocated Loan Amount 21 Numeric 5900900
- ------------------------------------------------------------------------------------
Ground Lease (Y/N) 22 AN N
- ------------------------------------------------------------------------------------
Other Escrow / Reserve Balances 23 Numeric 25000
- ------------------------------------------------------------------------------------
Most Recent Appraisal Date 24 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Most Recent Appraised Value 25 Numeric 10000000
- ------------------------------------------------------------------------------------
Date Asset is Expected to Be Resolved 26 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Foreclosure Date 27 AN YYYYMMDD
- ------------------------------------------------------------------------------------
REO Date 28 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Occupancy % 29 Numeric 0.75
- ------------------------------------------------------------------------------------
Occupancy Date 30 Numeric YYYYMMDD
- ------------------------------------------------------------------------------------
Date Lease Rollover Review 31 AN YYYYMMDD
- ------------------------------------------------------------------------------------
% Sq. Feet expiring 1-12 months 32 Numeric 0.20
- ------------------------------------------------------------------------------------
% Sq. Feet expiring 13-24 months 33 Numeric 0.20
- ------------------------------------------------------------------------------------
% Sq. Feet expiring 25-36 months 34 Numeric 0.20
- ------------------------------------------------------------------------------------
% Sq. Feet expiring 37-48 months 35 Numeric 0.20
- ------------------------------------------------------------------------------------
% Sq. Feet expiring 49-60 months 36 Numeric 0.20
- ------------------------------------------------------------------------------------
Largest Tenant (Tenant Name) 37 AN Text
- ------------------------------------------------------------------------------------
Square Feet of Largest Tenant 38 Numeric 15000
- ------------------------------------------------------------------------------------
2nd Largest Tenant (Tenant Name) 39 AN Text
- ------------------------------------------------------------------------------------
Square Feet of 2nd Largest Tenant 40 Numeric 15000.000
- ------------------------------------------------------------------------------------
3rd Largest Tenant (Tenant Name) 41 AN Text
- ------------------------------------------------------------------------------------
Square Feet of 3rd Largest Tenant 42 Numeric 15000
- ------------------------------------------------------------------------------------
Fiscal Year End Month 43 Numeric 12
- ------------------------------------------------------------------------------------
Securitization Financials As Of Date 44 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Revenue At Securitization 45 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Operating Expenses At Securitization 46 Numeric 1000000.00
- ------------------------------------------------------------------------------------
NOI At Securitization 47 Numeric 1000000.00
- ------------------------------------------------------------------------------------
DSCR At Securitization 48 Numeric 1.5
- ------------------------------------------------------------------------------------
Appraisal Value At Securitization 49 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Appraisal Date At Securitization 50 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Physical Occupancy At Securitization 51 Numeric
- ------------------------------------------------------------------------------------
Date of Last Inspection 52 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Preceding FY Financial As of Date 53 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Preceding Fiscal Year Revenue 54 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Preceding Fiscal Year Expenses 55 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Preceding Fiscal Year NOI 56 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Preceding Fiscal Year Debt Service Amt 57 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Preceding Fiscal Year DSCR 58 Numeric 1.3
- ------------------------------------------------------------------------------------
Preceding Fiscal Year Physical Occupancy 59 Numeric 0.9
- ------------------------------------------------------------------------------------
Sec Preceding FY Financial As of Date 60 AN YYYYMMDD
- ------------------------------------------------------------------------------------
Second Preceding FY Revenue 61 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Second Preceding FY Expenses 62 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Second Preceding FY NOI 63 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Second Preceding FY Debt Service 64 Numeric 1000000.00
- ------------------------------------------------------------------------------------
Second Preceding FY DSCR 65 Numeric 1.3
- ------------------------------------------------------------------------------------
Second Preceding FY Physical Occupancy 66 Numeric 0.90
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Description
- -------------------------------------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------------------
Unique Issue Identification Mnemonic
- -------------------------------------------------------------------------------------------
Unique Indentification Number Assigned To Each Collateral Item In A Pool
- -------------------------------------------------------------------------------------------
Unique Indentification Number Assigned To Each Collateral Item In The Prospectus
- -------------------------------------------------------------------------------------------
Should contain Prospectus ID and property identifier, e.g., 1001-001, 1000-002
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
All Loans With The Same Numeric Value Are Crossed
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
RT, IN, WH, OF, MU, SS, OT - SF
- -------------------------------------------------------------------------------------------
MF, MHP, LO, HC - Units
- -------------------------------------------------------------------------------------------
1=FCL, 2-REO, 3=Defeased, 4=partial Releases, 5=Released, 6=Same as at Securitization
- -------------------------------------------------------------------------------------------
Issuer to allocate loan % attributable to property for multi-property loans
- -------------------------------------------------------------------------------------------
Calculation based on Current Allocated Loan Amount and Current SPB for associated loan
- -------------------------------------------------------------------------------------------
Maintained by servicer
- -------------------------------------------------------------------------------------------
Either Y=Yes, S=Subordinate, N=No ground lease
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Could be different dates for different properties if foreclosing
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Map to Most Recent Fiscal YTD Physical Occupancy in CSSA, multiply times Current Allocated %
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Roll over review to be completed every 12 months
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
For Office, WH, Retail, Industrial, *Only if disclosed in the offering document
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
For Office, WH, Retail, Industrial, *Only if disclosed in the offering document
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Needed to indicate month ending for borrower's Fiscal Year
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Multiply times the Allocated % at Securitization
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Multiply times the Allocated % at Securitization
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Multiply times the Allocated % at Securitization
- -------------------------------------------------------------------------------------------
Multiply times the Allocated % at Securitization
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
AS OF MM/DD/YY OPERATING STATEMENT ANALYSIS REPORT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW:
---------------
Prospectus Number
----------------------------
Sched Balance/Paid to Date
----------------------------
Property Name
---------------
Property Type
---------------
Property Address
----------------------------
City, State
----------------------------
Net Rentable Square Feet
----------------------------
Year Built/Renovated
---------------------------------------------------------------------
199X
Year of Operations UNDERWRITING 199X 199X 199X YTD/TRAILING*
---------------------------------------------------------------------
Occupancy Rate
---------------------------------------------------------------------
Average Rental Rate
---------------------------------------------------------------------
**Servicer will not be expected to "Normalize" these YTD numbers
INCOME:
---------------
No. of Months # OF MONTHS
------------------------------------------------------------------------------------------------
Period Ended 199X
UNDERWRITING 199X 199X 199X YTD/TRAILING 199X-BASE 199X-199X
Statement Classification BASIS NORMALIZED NORMALIZED NORMALIZED ---------------- VARIANCE VARIANCE
------------------------------------------------------------------------------------------------
Rental Income - Category 1
------------------------------------------------------------------------------------------------
Rental Income - Category 2
------------------------------------------------------------------------------------------------
Rental Income - Category 3
------------------------------------------------------------------------------------------------
Pass Through/Escalations
------------------------------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME
------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
------------------------------------------------------------------------------------------------
Real Estate Taxes
------------------------------------------------------------------------------------------------
Property insurance
------------------------------------------------------------------------------------------------
Utilities
------------------------------------------------------------------------------------------------
General and Administration
------------------------------------------------------------------------------------------------
Repairs and Maintenance
------------------------------------------------------------------------------------------------
Management Fees
------------------------------------------------------------------------------------------------
Payroll and Benefits
------------------------------------------------------------------------------------------------
Advertising and Marketing
------------------------------------------------------------------------------------------------
Professional Fees
------------------------------------------------------------------------------------------------
Other Expenses
------------------------------------------------------------------------------------------------
Ground Rent
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
OPERATING EXPENSE RATIO
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
NET OPERATING INCOME
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Leasing Commissions
------------------------------------------------------------------------------------------------
Tenant Improvements
------------------------------------------------------------------------------------------------
Replacement Reserves
------------------------------------------------------------------------------------------------
Total Capital Items
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
NOI AFTER CAPITAL ITEMS
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Debt Service (per servicer)
------------------------------------------------------------------------------------------------
Cash Flow after Debt Service
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
DSCR (NOI/Debt Service)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
DSCR (after reserves\cap exp)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Source of Financial Data:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Income Comments:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Expense Comments:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Capital Items Comments:
------------------------------------------------------------------------------------------------
</TABLE>
B-13
<PAGE>
<TABLE>
AS OF MM/DD/YY NOI ADJUSTMENT WORKSHEET
<CAPTION>
<S> <C> <C> <C>
PROPERTY OVERVIEW:
---------------
Prospectus Number
----------------------------
Sched Balance/Paid to Date
----------------------------
Property Name
---------------
Property Type
---------------
Property Address
----------------------------
City, State
----------------------------
Net Rentable Square Feet
----------------------------
Year Built/Renovated
------------------------------------------------------------------------------------------------
Year of Operations BORROWER ADJUSTMENT NORMALIZED
------------------------------------------------------------------------------------------------
Occupancy Rate
------------------------------------------------------------------------------------------------
Average Rental Rate
------------------------------------------------------------------------------------------------
INCOME:
---------------
No. of Months Annualized # OF MONTHS
------------------------------------------------------------------------------------------------
Period Ended BORROWER ADJUSTMENT NORMALIZED
Statement Classification
------------------------------------------------------------------------------------------------
Rental Income - Category 1
------------------------------------------------------------------------------------------------
Rental Income - Category 2
------------------------------------------------------------------------------------------------
Rental Income - Category 3
------------------------------------------------------------------------------------------------
Pass Through/Escalations
------------------------------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME
------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
------------------------------------------------------------------------------------------------
Real Estate Taxes
------------------------------------------------------------------------------------------------
Property insurance
------------------------------------------------------------------------------------------------
Utilities
------------------------------------------------------------------------------------------------
General and Administration
------------------------------------------------------------------------------------------------
Repairs and Maintenance
------------------------------------------------------------------------------------------------
Management Fees
------------------------------------------------------------------------------------------------
Payroll and Benefits
------------------------------------------------------------------------------------------------
Advertising and Marketing
------------------------------------------------------------------------------------------------
Professional Fees
------------------------------------------------------------------------------------------------
Other Expenses
------------------------------------------------------------------------------------------------
Ground Rent
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
OPERATING EXPENSE RATIO
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
NET OPERATING INCOME
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Leasing Commissions
------------------------------------------------------------------------------------------------
Tenant Improvements
------------------------------------------------------------------------------------------------
Replacement Reserves
------------------------------------------------------------------------------------------------
Total Capital Items
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
NOI AFTER CAPITAL ITEMS
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Debt Service (per servicer)
------------------------------------------------------------------------------------------------
Cash Flow after Debt Service
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
DSCR (NOI/Debt Service)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
DSCR (after reserves\cap exp)
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Source of Financial Data:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Income Comments:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Expense Comments:
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Capital Items Comments:
------------------------------------------------------------------------------------------------
</TABLE>
B-14
<PAGE>
ANNEX C
SCHEDULE OF INTEREST RESERVE LOANS
<TABLE>
<CAPTION>
GROSS INTEREST
LOAN CUT-OFF DATE MORTGAGE ACCRUAL SERVICING
COUNT NUMBER LOAN NAME BALANCE RATE METHOD FEE RATE
- ------- -------- ----------- -------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
C-1
<PAGE>
PROSPECTUS
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
PAINEWEBBER MORTGAGE ACCEPTANCE CORPORATION V
DEPOSITOR
The mortgage pass-through certificates offered hereby and by Supplements
to this Prospectus (the "Offered Certificates") will be offered from time to
time in series. The Offered Certificates of any series, together with any other
mortgage pass-through certificates of such series, are collectively referred to
herein as the "Certificates."
Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (the "Trust Fund") to be
established by the Depositor. The Certificates of each series may be divided
into one or more classes (each, a "Class"), each of which will evidence
beneficial ownership of a specified percentage or portion of future interest
payments, a specified percentage or portion of future principal payments on the
assets in the related Trust Fund or both as described herein and in the related
Prospectus Supplement. In addition, the rights of holders of certain Classes of
Certificates to receive distributions of principal and interest may be
subordinated to those of other Classes to the extent described in the related
Prospectus Supplement. Each Trust Fund shall consist primarily of a segregated
pool of multifamily or commercial mortgage loans or participation interests
therein, together with installment sales contracts (collectively the "Mortgage
Loans") and/or agency or non-agency mortgage pass-through certificates or other
mortgage-backed securities evidencing interests in or secured by Mortgage Loans
(the "MBS Securities") that evidence interests in, or that are secured by
pledges of, one or more of the following types of real property (each, a
"Mortgaged Property"): (i) residential properties consisting of five or more
rental or cooperatively-owned dwelling units (or shares allocable to a number
of such units and proprietary leases appurtenant thereto) ("Multifamily
Properties") and (ii) commercial properties consisting of (a) office buildings,
retail facilities related to the sale of goods and products and facilities
related to providing entertainment, recreation or personal services, hotels and
motels, casinos, nursing homes, hospitals or other health care-related
facilities, recreational vehicle parks, warehouse facilities, mini-warehouse
facilities, self-storage facilities, industrial facilities, parking lots, auto
parks, golf courses, arenas, mobile home parks and restaurants (or
cooperatively owned units therein), (b) mixed use properties (that is, any
combination of the foregoing) and (c) unimproved land ("Commercial
Properties"). Multifamily properties consisting of multiple rental or
cooperatively owned dwellings, office, hotel, and industrial properties will
represent security for a material concentration of the Mortgage Loans (and the
mortgage loans underlying the MBS Securities included in a particular Trust
Fund) constituting the Trust Fund for any Series, based on principal balance at
the time such Series is issued.
The Certificates will not represent an obligation of or an interest in the
Depositor, any Master Servicer or Special Servicer or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. Neither the Certificates nor any assets in the related
Trust Fund will be guaranteed or insured by any governmental agency or
instrumentality or by any other person, unless otherwise provided in the
related Prospectus Supplement.
As described in the related Prospectus Supplement, the Certificates of
each Series, including the Offered Certificates, will consist of one or more
classes of Certificates that may (i) be senior or subordinate to one or more
other classes of Certificates in respect of certain distributions on the
Certificates; (ii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iii) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (iv) provide for distributions of accrued interest thereon
commencing only following the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of such series; and/or
(v) provide for payments of principal sequentially, based on specified payment
schedules or other methodologies, to the extent of available funds. See
"Description of the Certificates."
If so specified in the related Prospectus Supplement, the Trust Fund for a
series of Certificates may include letters of credit, insurance policies,
guarantees, reserve funds or other types of credit support described in this
Prospectus, or any combination thereof (with respect to any series,
collectively, "Credit Support"), and interest rate exchange agreements,
interest rate cap or floor agreements or currency exchange agreements described
in this Prospectus, or any combination thereof (with respect to any series,
collectively, "Cash Flow Agreements"). See "Description of the Trust Funds",
"Description of the Certificates" and "Description of Credit Support."
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" ON PAGE 14 OF THIS PROSPECTUS HEREIN AND IN THE RELATED
PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATES.
If so provided in the related Prospectus Supplement, an election may be
made to treat the related Trust Fund or one or more designated portions thereof
as one or more "real estate mortgage investment conduits" or "financial asset
securitization investment trusts" for federal income tax purposes. See "Certain
Federal Income Tax Consequences" herein.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Depositor does not intend to list any of the Offered Certificates on
any securities exchange and has not made any other arrangement for secondary
trading of the Certificates. Prior to issuance there will have been no market
for the Certificates of any series and there can be no assurance that a
secondary market for any Offered Certificates will develop or that, if such a
market does develop, that it will continue.
It will be a condition to the issuance of the Certificates of each series
that the Offered Certificates of such series be rated in one of the four
highest rating categories by one or more nationally recognized statistical
rating organizations.
- --------------------------------------------------------------------------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES OFFERED
HEREBY UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
THE DATE OF THIS PROSPECTUS IS ,
<PAGE>
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to the Offered Certificates of each series will, among other things, set forth
with respect to such Certificates, as appropriate: (i) a description of the
Class or Classes of Offered Certificates, the payment provisions with respect
to each such Class and the rate at which interest accrues on such Certificates
(the "Pass-Through Rate") or the method of determining the Pass-Through Rate
with respect to each such Class and whether interest with respect to each such
Class will accrue from time to time on its aggregate principal amount or on a
specified notional amount, if at all; (ii) the aggregate principal amount or
notional amount and distribution dates relating to such series and, if
applicable, the initial and final scheduled distribution dates for each Class;
(iii) information as to the assets comprising the Trust Fund for such series,
including the general characteristics of the assets included therein, including
the Mortgage Assets and any Credit Support and Cash Flow Agreements (with
respect to the Offered Certificates of any series, the "Trust Assets"); (iv)
the circumstances, if any, under which the related Trust Fund may be subject to
early termination; (v) additional information with respect to the method of
distribution of such Offered Certificates; (vi) whether one or more REMIC or
FASIT elections will be made and the designation of the regular interests and
residual interests in each REMIC or FASIT to be created; provided, however,
that the assets to be added to a FASIT following issuance of Offered
Certificates of any series will consist exclusively of mortgage loans that were
under contract or otherwise committed to be funded at the time of issuance of
the Offered Certificates of such series but that were funded subsequent to the
date of such issuance and, if required by applicable regulation or
interpretation, subject to underwriting standards substantially similar in all
material respects to those used with respect to the mortgage loans originally
sold by the Mortgage Loan Seller to the Depositor; provided, further, that
prior to the addition of such additional mortgage loans any unused proceeds of
issuance will be invested in eligible investments under the related pooling and
servicing agreement; (vii) the aggregate original percentage ownership interest
in the Trust Fund to be evidenced by each Class of Certificates; (viii)
information as to any Master Servicer, any Special Servicer (or provision for
the appointment thereof) and the Trustee, as applicable; (ix) information as to
the nature and extent of subordination with respect to any Class of
Certificates that is subordinate in right of payment to any other Class; and
(x) whether such Offered Certificates will be initially issued in definitive or
book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Offered Certificates contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Chicago Regional Office, 500 West Madison,
14th Floor, Chicago, Illinois 60661; and New York Regional Office, Seven World
Trade Center, New York, New York 10048. The Commission also maintains a World
Wide Web site, which provides on-line access to reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission, at the address "http://www.sec.gov."
2
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any
Prospectus Supplement with respect hereto and, if given or made, such
information or representations must not be relied upon. This Prospectus and any
Prospectus Supplement with respect hereto do not constitute an offer to sell or
a solicitation of an offer to buy any securities other than the Offered
Certificates or an offer of the Offered Certificates to any person in any state
or other jurisdiction in which such offer would be unlawful. The delivery of
this Prospectus at any time does not imply that information herein is correct
as of any time subsequent to its date; however, if any material change occurs
while this Prospectus is required by law to be delivered, this Prospectus will
be amended or supplemented accordingly.
A Master Servicer or the Trustee will be required to mail to holders of
Offered Certificates of each series periodic unaudited reports concerning the
related Trust Fund. If beneficial interests in a Class of Offered Certificates
are being held and transferred in book-entry format through the facilities of
The Depository Trust Company ("DTC") as described herein, then unless otherwise
provided in the related Prospectus Supplement, such reports will be sent on
behalf of the related Trust Fund to Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") and registered holder of the Offered
Certificates, pursuant to the applicable Agreement. Such reports may be
available to holders of interests in the Certificates (the
"Certificateholders") upon request to their respective DTC participants. See
"Description of the Certificates--Reports to Certificateholders" and
"Description of the Agreements-- Evidence as to Compliance". The Depositor will
file or cause to be filed with the Commission such periodic reports with
respect to each Trust Fund as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor will provide or cause to be provided without charge to each person to
whom this Prospectus is delivered in connection with the offering of one or
more Classes of Offered Certificates, a copy of any or all documents or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to one or more of such Classes of such Offered Certificates,
other than the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests to the
Depositor should be directed in writing to its principal executive office at
1285 Avenue of the Americas, New York, New York 10019, Attention: Secretary, or
by telephone at (212) 713-2900. The Depositor has determined that its financial
statements are not material to the offering of any Offered Certificates.
3
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
PROSPECTUS SUPPLEMENT ...................................................... 2
AVAILABLE INFORMATION ...................................................... 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE .......................... 3
SUMMARY OF PROSPECTUS ...................................................... 7
RISK FACTORS ............................................................... 14
Limited Liquidity ....................................................... 14
Limited Assets .......................................................... 14
Yield Considerations .................................................... 14
Risks Associated with Certain Mortgage Loans and Mortgaged Properties ... 15
Risks Particular to Multifamily Rental Properties ....................... 16
Risks Particular to Cooperatively-Owned Apartment Buildings ............. 16
Risks Particular to Office Properties ................................... 16
Risks Particular to Retail Properties ................................... 17
Risks Particular to Hotel and Motel Properties .......................... 17
Risks Particular to Industrial Properties ............................... 18
Risks Particular to Health Care-Related Properties ...................... 18
Adjustable Rate Mortgages ............................................... 19
Balloon Payments ........................................................ 19
Credit Support Limitations .............................................. 19
Enforceability .......................................................... 20
Environmental Risks ..................................................... 20
Control ................................................................. 20
DESCRIPTION OF THE TRUST FUNDS ............................................. 21
Mortgage Assets ......................................................... 21
Certificate Accounts .................................................... 29
Credit Support .......................................................... 30
Cash Flow Agreements .................................................... 30
Book-Entry Registration ................................................. 30
Delinquent Mortgage Loans ............................................... 30
USE OF PROCEEDS ............................................................ 31
YIELD CONSIDERATIONS ....................................................... 32
General ................................................................. 32
Pass-Through Rate ....................................................... 32
Timing of Payment of Interest and Principal ............................. 32
Principal Prepayments ................................................... 32
Prepayments--Maturity and Weighted Average Life ......................... 33
Other Factors Affecting Weighted Average Life ........................... 34
THE DEPOSITOR .............................................................. 36
DESCRIPTION OF THE CERTIFICATES ............................................ 36
General ................................................................. 36
Distributions ........................................................... 36
Available Distribution Amount ........................................... 37
Distributions of Interest on the Certificates ........................... 37
Distributions of Principal of the Certificates .......................... 38
</TABLE>
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<TABLE>
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<S> <C>
Distributions on the Certificates of Prepayment Premium or in Respect of Equity
Participations ................................................................... 39
Allocation of Losses and Shortfalls ............................................... 39
Advances in Respect of Delinquencies .............................................. 39
Reports to Certificateholders ..................................................... 40
Termination ....................................................................... 42
Book-Entry Registration and Definitive Certificates ............................... 42
DESCRIPTION OF THE AGREEMENTS ........................................................ 44
Assignment of Mortgage Assets; Repurchases ........................................ 44
Representations and Warranties; Repurchases ....................................... 45
Certificate Account ............................................................... 46
Collection and Other Servicing Procedures; Modifications .......................... 49
Sub-Servicers ..................................................................... 50
Special Servicers ................................................................. 50
Realization upon Defaulted Whole Loans ............................................ 50
Hazard Insurance Policies ......................................................... 52
Due-on-Sale and Due-on-Encumbrance Provisions ..................................... 54
Retained Interest; Servicing Compensation and Payment of Expenses ................. 54
Evidence as to Compliance ......................................................... 54
Certain Matters Regarding a Master Servicer and the Depositor ..................... 55
Events of Default ................................................................. 56
Rights upon Event of Default ...................................................... 56
Amendment ......................................................................... 57
List of Certificateholders ........................................................ 57
The Trustee ....................................................................... 58
Duties of the Trustee ............................................................. 58
Certain Matters Regarding the Trustee ............................................. 58
Resignation and Removal of the Trustee ............................................ 58
DESCRIPTION OF CREDIT SUPPORT ........................................................ 59
General ........................................................................... 59
Subordinate Certificates .......................................................... 59
Cross-Support Provisions .......................................................... 59
Insurance or Guarantees with Respect to the Whole Loans ........................... 60
Letter of Credit .................................................................. 60
Insurance Policies and Surety Bonds ............................................... 60
Reserve Funds ..................................................................... 60
Credit Support with respect to MBS ................................................ 61
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS .............................................. 62
General ........................................................................... 62
Types of Mortgage Instruments ..................................................... 62
Leases and Rents .................................................................. 62
Personalty ........................................................................ 63
Foreclosure ....................................................................... 63
Leasehold Risks ................................................................... 66
Cooperative Shares ................................................................ 66
Bankruptcy Laws ................................................................... 67
Environmental Legislation ......................................................... 70
Due-on-Sale and Due-on-Encumbrance Provisions ..................................... 71
Subordinate Financing ............................................................. 71
</TABLE>
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<S> <C>
Default Interest and Limitations on Prepayments .............................. 72
Adjustable Rate Loans ........................................................ 72
Applicability of Usury Laws .................................................. 72
Soldiers' and Sailors' Civil Relief Act of 1940 .............................. 72
Type of Mortgaged Property ................................................... 73
Americans with Disabilities Act .............................................. 73
Forfeitures in Drug and RICO Proceedings ..................................... 73
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ......................................... 75
Federal Income Tax Consequences for REMIC Certificates ....................... 75
Taxation of Regular Certificates ............................................. 78
Taxation of Residual Certificates ............................................ 85
Taxes That May Be Imposed on the REMIC Pool .................................. 91
Liquidation of the REMIC Pool ................................................ 92
Administrative Matters ....................................................... 92
Limitations on Deduction of Certain Expenses ................................. 92
Taxation of Certain Foreign Investors ........................................ 93
Backup Withholding ........................................................... 94
Reporting Requirements ....................................................... 94
Federal Income Tax Consequences For Certificates as to Which No REMIC Election
Is Made ..................................................................... 95
Federal Income Tax Consequences for FASIT Certificates ....................... 100
Reporting Requirements and Backup Withholding ................................ 101
Taxation of Certain Foreign Investors ........................................ 101
STATE AND OTHER TAX CONSIDERATIONS .............................................. 101
ERISA CONSIDERATIONS ............................................................ 102
General ...................................................................... 102
Plan Asset Regulations ....................................................... 102
Administrative Exemptions .................................................... 103
Unrelated Business Taxable Income; Residual Certificates ..................... 103
LEGAL INVESTMENT ................................................................ 104
METHOD OF DISTRIBUTION .......................................................... 106
LEGAL MATTERS ................................................................... 107
FINANCIAL INFORMATION ........................................................... 107
RATING .......................................................................... 107
</TABLE>
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SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by reference to the
more detailed information appearing elsewhere in this Prospectus and by
reference to the information contained in the Prospectus Supplement to be
prepared and delivered in connection with each series of Certificates. An Index
of Principal Definitions is included at the end of this Prospectus.
TITLE OF CERTIFICATES....... Mortgage Pass-Through Certificates, issuable in
series (the "Certificates").
DEPOSITOR................... PaineWebber Mortgage Acceptance Corporation V,
(the "Depositor"), a wholly-owned limited purpose
finance subsidiary of PaineWebber Group Inc. The
Depositor maintains its principal office at 1285
Avenue of the Americas, New York, New York. Its
telephone number is (212) 713-2900. See "The
Depositor."
MASTER SERVICER............. The master servicer (the "Master Servicer"), if
any, for each series of Certificates will be
named in the related Prospectus Supplement. See
"Description of the Agreements--Collection and
Other Servicing Procedures".
SPECIAL SERVICER............ The special servicer (the "Special Servicer"),
if any, for each series of Certificates will be
named, or the circumstances in which a Special
Servicer may be appointed will be described, in
the related Prospectus Supplement. See
"Description of the Agreements--Special
Servicers".
TRUSTEE..................... The trustee (the "Trustee") for each series of
Certificates will be named in the related
Prospectus Supplement. See "Description of the
Agreements--The Trustee".
TRUST FUND.................. Each series of Certificates will represent in
the aggregate the entire beneficial ownership
interest in a Trust Fund consisting primarily of:
A. MORTGAGE ASSETS......... The Mortgage Assets with respect to each series
of Certificates will consist of multifamily
and/or commercial mortgage loans, or
participation interests therein, together with
installment sales contracts (the "Mortgage
Loans"), agency or non-agency mortgage
pass-through certificates or other
mortgage-backed securities evidencing interests
in or secured by Mortgage Loans (the "MBS
Securities") or a combination of Mortgage Loans
or MBS Securities.
The Mortgage Loans will not be guaranteed or
insured by the Depositor or any of its
affiliates or, unless otherwise provided in the
Prospectus Supplement, by any governmental
agency or instrumentality or any other person.
To the extent described in the applicable
Prospectus Supplement, the Mortgage Loans will
be secured by first, second or more junior liens
on properties consisting of (i) residential
properties consisting of five or more rental or
cooperatively-owned dwelling units (or shares
allocable to a number of such units and
proprietary leases appurtenant thereto)
("Multifamily Properties") and (ii) commercial
properties consisting of (a) office buildings,
retail facilities related to the sale of goods
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<PAGE>
and products and facilities related to providing
entertainment, recreation or personal services,
hotels and motels, casinos, nursing homes,
hospitals or other health care-related
facilities, recreational vehicle parks,
warehouse facilities, mini-warehouse facilities,
self-storage facilities, industrial facilities,
parking lots, auto parks, golf courses, arenas,
mobile home parks and restaurants (or
cooperatively owned units therein) and (b) mixed
use properties (that is, any combination of the
foregoing) and unimproved land.
Unless otherwise specified in the applicable
Prospectus Supplement, the Mortgaged Properties
will be located in one of the fifty states of
the United States, the District of Columbia or
the Commonwealth of Puerto Rico.
Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans will
not have been originated by the Depositor or any
affiliate thereof, and will have been purchased,
either directly or indirectly, by the Depositor
on or before the date of the initial issuance of
the related series of Certificates.
Each Mortgage Loan may provide for no accrual of
interest or for accrual of interest thereon at
an interest rate (a "Mortgage Rate") that is
fixed over its term or that adjusts from time to
time, or that may be converted from an
adjustable to a fixed Mortgage Rate, or from a
fixed to an adjustable Mortgage Rate, from time
to time at the mortgagor's election, in each
case as described in the related Prospectus
Supplement. Each Mortgage Loan may provide for
scheduled payments to maturity, payments that
adjust from time to time to accommodate changes
in the Mortgage Rate or to reflect the
occurrence of certain events, and may provide
for negative amortization or accelerated
amortization, in each case as described in the
related Prospectus Supplement. Each Mortgage
Loan may be fully amortizing or require a
balloon payment due on its stated maturity date,
in each case as described in the related
Prospectus Supplement. Each Mortgage Loan may
contain prohibitions on prepayment or require
payment of a premium or a yield maintenance
penalty in connection with a prepayment, in each
case as described in the related Prospectus
Supplement. The Mortgage Loans may provide for
payments of principal, interest or both, on due
dates that occur monthly, quarterly, semi-
annually or at such other interval as is
specified in the related Prospectus Supplement.
Unless otherwise provided in the related
Prospectus Supplement, each Mortgage Loan will
have had a principal balance at origination of
not less than $25,000 and an original term to
maturity of not more than 40 years. See
"Description of the Trust Funds--Mortgage
Assets".
B. CERTIFICATE ACCOUNT..... Each Trust Fund will include one or more
accounts (collectively, the "Certificate
Account") established and maintained on behalf of
the Certificateholders into which the person or
persons designated in the related Prospectus
Supplement will, to the extent described herein
and in such Prospectus Supplement,
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deposit all payments and collections received or
advanced with respect to the Mortgage Assets and
other assets in the Trust Fund. A Certificate
Account may be maintained as an interest bearing
or a non-interest bearing account, and funds
held therein may be held as cash or invested in
certain short-term, investment grade
obligations, in each case as described in the
related Prospectus Supplement. See "Description
of the Agreements--Certificate Account".
C. CREDIT SUPPORT.......... If so provided in the related Prospectus
Supplement, partial or full protection against
certain defaults and losses on the Mortgage
Assets in the related Trust Fund may be provided
to one or more Classes of Certificates of the
related series in the form of subordination of
one or more other Classes of Certificates of such
series, which other Classes may include one or
more Classes of Offered Certificates, or by one
or more other types of credit support, such as a
letter of credit, insurance policy, guarantee,
reserve fund or another type of credit support,
or a combination thereof (any such coverage with
respect to the Certificates of any series,
"Credit Support"). The amount and types of
coverage, the identification of the entity
providing the coverage (if applicable) and
related information with respect to each type of
Credit Support, if any, will be described in the
Prospectus Supplement for a series of
Certificates. The Prospectus Supplement for any
series of Certificates evidencing an interest in
a Trust Fund that includes MBS Securities will
describe any similar forms of credit support that
are provided by or with respect to, or are
included as part of the trust fund evidenced by
or providing security for, such MBS Securities.
See "Risk Factors--Credit Support Limitations"
and "Description of Credit Support".
D. CASH FLOW AGREEMENTS.... If so provided in the related Prospectus
Supplement, the Trust Fund may include guaranteed
investment contracts pursuant to which moneys
held in the funds and accounts established for
the related series will be invested at a
specified rate. The Trust Fund may also include
certain other agreements, such as interest rate
exchange agreements, interest rate cap or floor
agreements, currency exchange agreements or
similar agreements provided to reduce the effects
of interest rate or currency exchange rate
fluctuations on one or more Classes of
Certificates. The principal terms of any such
guaranteed investment contract or other agreement
(any such agreement, a "Cash Flow Agreement"),
including, without limitation, provisions
relating to the timing, manner and amount of
payments thereunder and provisions relating to
the termination thereof, will be described in the
Prospectus Supplement for the related series. In
addition, the related Prospectus Supplement will
provide certain information with respect to the
obligor under any such Cash Flow Agreement. The
Prospectus Supplement for any series of
Certificates videncing an interest in a Trust
Fund that includes MBS Securities will describe
any cash flow agreements that are
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included as part of the trust fund evidenced by
or providing security for such MBS Securities.
See "Description of the Trust Funds--Cash Flow
Agreements".
DESCRIPTION OF
CERTIFICATES................ Each series of Certificates will be issued
pursuant to a pooling and servicing agreement (a
"Pooling and Servicing Agreement"). Each series
of Certificates will consist of one or more
Classes of Certificates, and the Certificates of
each series, including any Class or Classes of
Certificates not offered hereby,will represent in
the aggregate the entire beneficial ownership
interest in the related Trust Fund.
Unless otherwise provided in the related
Prospectus Supplement, each Class of Offered
Certificates (other than certain Stripped
Interest Certificates, as defined below) will be
assigned a stated principal balance (a
"Certificate Principal Balance") and (other than
certain Stripped Principal Certificates) will
accrue interest thereon at a fixed, variable or
adjustable interest rate (a "Pass-Through
Rate"). The related Prospectus Supplement will
specify the Certificate Principal Balance (or
notional amount in the case of certain Stripped
Interest Certificates) and the Pass-Through Rate
for each Class of Offered Certificates or, in
the case of a variable or adjustable
Pass-Through Rate, the method for determining
the Pass-Through Rate.
In addition, one or more Classes of Certificates
of a series may be entitled to receive
additional distributions of prepayment premiums
or yield maintenance payments received on the
Mortgage Assets, in such amounts and allocated
among the Classes of such series as is described
in the related Prospectus Supplement.
Each series of Certificates will consist of one
or more Classes of Certificates that may (i) be
senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate
Certificates") to one or more other Classes of
Certificates in respect of certain distributions
on the Certificates; (ii) be entitled to
principal distributions, with disproportionately
low, nominal or no interest distributions
(collectively, "Stripped Principal
Certificates"); (iii) be entitled to interest
distributions, with disproportionately low,
nominal or no principal distributions
(collectively, "Stripped Interest
Certificates"); (iv) provide for distributions
of accrued interest thereon commencing only
following the occurrence of certain events, such
as the retirement of one or more other Classes
of Certificates of such series (collectively,
"Accrual Certificates"); and/or (v) provide for
payments of principal sequentially, based on
specified payment schedules or other
methodologies, to the extent of available funds,
in each case as described in the related
Prospectus Supplement. Any such Classes may
include Classes of Offered Certificates.
The Certificates will not be guaranteed or
insured by the Depositor or any of its
affiliates, by any governmental agency or
instrumentality or by any other person, unless
otherwise provided in the related Prospectus
Supplement. See "Risk Factors--Limited Assets"
and "Description of the Certificates".
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<PAGE>
DISTRIBUTIONS OF INTEREST ON
THE CERTIFICATES........... Unless otherwise provided in the related
Prospectus Supplements interest on each Class of
Offered Certificates (other than certain Classes
of Stripped Interest Certificates Stripped
Principal Certificates and Residual Certificates)
of each series will accrue at the applicable
Pass-Through Rate on the outstanding Certificate
Principal Balance thereof and will be distributed
to Certificateholders as provided in the related
Prospectus Supplement (each of the specified
dates on which distributions are to be made, a
"Distribution Date"). Distributions with respect
to interest on Stripped Interest Certificates may
be made on each Distribution Date on the basis of
a notional amount as described in the related
Prospectus Supplement. If specified in the
related Prospectus Supplement, interest may
accrue on one or more Classes of Certificates of
a series but will not be distributable until the
occurrence of specified events. Prior to such
time, the amount of accrued interest will, unless
otherwise provided in the related Prospectus
Supplement, be added to the Certificate Principal
Balance of the Certificates of such Classes.
Distributions of interest with respect to one or
more Classes of Certificates may be reduced to
the extent of certain delinquencies, losses and
other contingencies described herein and in the
related Prospectus Supplement. See "Risk
Factors--Limited Assets--Yield Considerations",
"Yield Considerations", and "Description of the
Certificates--Distributions of Interest on the
Certificates".
DISTRIBUTIONS OF PRINCIPAL
OF CERTIFICATES............ Unless otherwise provided in the related
Prospectus Supplements the Certificates of each
series (other than certain Classes of Stripped
Interest Certificates and certain Classes of
Residual Certificates) will have an initial
aggregate Certificate Principal Balance no
greater than the outstanding principal balance of
the Mortgage Assets as of the close of business
on the first day of the month of formation of the
related Trust Fund (the "Cut-off Date"), after
application of scheduled payments due on or
before such date, whether or not received. The
Certificate Principal Balance of a Certificate
outstanding from time to time represents the
maximum amount that the holder thereof is then
entitled to receive in respect of principal from
future cash flow on the assets in the related
Trust Fund. Unless otherwise provided in the
related Prospectus Supplement, distributions of
principal will be made on each Distribution Date
to the Class or Classes of Certificates entitled
thereto until the Certificate Principal Balances
of such Certificates have been reduced to zero.
Unless otherwise provided in the related
Prospectus Supplement distributions of principal
of any Class of Certificates will be made on a
pro rata basis among all of the Certificates of
such Class.
Stripped Interest Certificates with no
Certificate Principal Balance will not receive
distributions in respect of principal. See
"Description of the Certificates--Distributions
of Principal of the Certificates".
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<PAGE>
ADVANCES.................... Unless otherwise provided in the Prospectus
Supplement for any series, the Master Servicer
for such series will be obligated as part of its
servicing responsibilities to make certain
advances with respect to delinquent scheduled
payments on the Mortgage Loans in the related
Trust Fund. Advances made by a Master Servicer
are reimbursable generally from subsequent
recoveries in respect of such Mortgage Loans and
otherwise to the extent described herein and in
the related Prospectus Supplement. If and to the
extent provided in the Prospectus Supplement for
any series, the Master Servicer will be entitled
to receive interest on its outstanding advances,
payable from amounts in the related Trust Fund.
See "Description of the Certificates--Advances
in Respect of Delinquencies".
TERMINATION................. If so specified in the related Prospectus
Supplement, a series of Certificates may be
subject to optional early termination through the
repurchase of the Mortgage Assets in the related
Trust Fund under the circumstances and in the
manner set forth in such Prospectus Supplement.
See "Description of the Certificates--
Termination".
REGISTRATION OF
CERTIFICATES................ If so provided in the related Prospectus
Supplement, one or more Classes of the Offered
Certificates will initially be represented by one
or more Certificates registered in the name of
Cede & Co., as the nominee of DTC. No person
acquiring an interest in Offered Certificates so
registered will be entitled to receive a
definitive certificate representing such person's
interest except in the event that definitive
certificates are issued under the limited
circumstances described herein. See "Description
of the Certificates--Book Entry Registration and
Definitive Certificates".
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............... The federal income tax treatment of the
Certificates of any series will depend on whether
an election is made to treat the Trust Fund or
any segregated pool of assets within the Trust
Fund as a REMIC or a FASIT. The Prospectus
Supplement for each series of Certificates will
specify whether one or more such elections will
be made. See "Certain Federal Income Tax
Consequences."
ERISA CONSIDERATIONS........ Fiduciaries of employee benefit plans and
certain other retirement plans and arrangements,
including individual retirement accounts,
annuities, Keogh plans, and collective investment
funds and insurance company general and separate
accounts in which such plans, accounts, annuities
or arrangements are invested, that are subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of
the Code, should carefully review with their
legal advisors whether the purchase and holding
of Offered Certificates could give rise to a
transaction that is prohibited or is not
otherwise permissible under either ERISA or
Section 4975 of the Code. See "ERISA
Considerations" herein and in the related
Prospectus Supplement. See "ERISA
Considerations."
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LEGAL INVESTMENT............ Unless otherwise specified in the Prospectus
Supplement, the Offered Certificates will not
constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA"). Accordingly, investors whose
investment authority is subject to legal
restrictions should consult their own legal
advisors to determine whether and to what extent
the Offered Certificates constitute legal
investments for them. See "Legal Investment."
RATING OF CERTIFICATES...... At the date of issuance, as to each series,
each Class of Offered Certificates will be rated
not lower than investment grade by one or more
nationally recognized statistical rating agencies
(each, a "Rating Agency"). See "Rating" herein.
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RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors" in the related Prospectus
Supplement:
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates of
any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single-family mortgage loans. Except to the extent described herein and in the
related Prospectus Supplement, Certificateholders will have no redemption
rights and the Certificates are subject to early retirement only under certain
specified circumstances described herein and in the related Prospectus
Supplement. See "Description of the Certificates--Termination".
LIMITED ASSETS
Unless otherwise specified in the related Prospectus Supplement, a series
of Certificates will not have any claim against or security interest in the
Trust Funds for any other series. If the related Trust Fund is insufficient to
make payments on such Certificates, no other assets will be available for
payment of the deficiency. If so provided in the Prospectus Supplement for a
series of Certificates consisting of one or more Classes of Subordinate
Certificates, on any Distribution Date in respect of which losses or shortfalls
in collections on the Mortgage Assets have been incurred, the amount of such
losses or shortfalls will be borne first by one or more Classes of the
Subordinate Certificates, and, thereafter, by the remaining Classes of
Certificates in the priority and manner and subject to the limitations
specified in such Prospectus Supplement.
YIELD CONSIDERATIONS
The yield to maturity on the Offered Certificates of any series will
depend upon the price paid by the Certificateholder, the related Pass-Through
Rate and the rate and timing of distributions in reduction of the Certificate
Principal Balances of the Certificates (and, in the case of certain Stripped
Interest Certificates, the rate and timing of reductions of the Notional Amount
of such Certificates). The rate and timing of distributions in reduction of
Certificate Principal Balance of the Certificates of any series will be
affected by the rate and timing of principal payments on the Mortgage Assets in
the related Trust Fund, including scheduled payments of principal (such as
monthly principal payments or balloon payments at the stated maturity of such
Mortgage Assets) and unscheduled payments of principal (such as voluntary
principal prepayments or the receipt of Liquidation Proceeds allocable to
principal of such Mortgage Assets after default). In addition, such
distributions could result from purchases of the Mortgage Assets as described
under "Description of the Agreements--Assignment of Mortgage Assets;
Repurchases".
Prepayments on the Mortgage Assets in any Trust Fund generally will result
in a faster rate of principal payments on one or more Classes of the related
Certificates than if payments on such Mortgage Assets were made as scheduled.
Thus, the prepayment experience on the Mortgage Assets may affect the average
life of each Class of related Certificates. The rate of principal payments on
pools of mortgage loans varies between pools and from time to time is
influenced by a variety of economic, demographic, geographic, social, tax,
legal and other factors.
In general, if mortgage interest rates fall significantly below the
interest rates on the Mortgage Loans or such mortgage loans, the rate of
prepayment is likely to be higher than if prevailing rates remain at or above
the rates borne by the Mortgage Loans underlying or comprising the Mortgage
Assets. Mortgage Loans with a Lock-out Period or a Prepayment Premium
provision, to the extent enforceable, generally would be expected to experience
a lower rate of principal prepayments than otherwise identical Mortgage Loans
without such provisions, with shorter Lock-out Periods or with lower Prepayment
Premiums. If the purchaser of a Certificate offered at a discount calculates
its anticipated yield to maturity based on an
14
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assumed rate of distributions of principal that is faster than that actually
experienced on the Mortgage Assets, the actual yield to maturity will be lower
than that so calculated. Conversely, if the purchaser of a Certificate offered
at a premium calculates its anticipated yield to maturity based on an assumed
rate of distributions of principal that is slower than that actually
experienced on the Mortgage Assets, the actual yield to maturity will be lower
than that so calculated.
Conversely, defaults and delinquencies on the Mortgage Loans underlying or
comprising the Mortgage Assets, such as defaulted balloon payments, may result
in a slower than expected rate of principal payments on the Mortgage Assets. If
so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Mortgage Loans, a Master Servicer will be permitted
(within prescribed parameters) to extend and modify Mortgage Loans that are in
default or as to which default is reasonably foreseeable. As a result, the
actual maturity of any Class of Certificates could occur significantly later
than expected.
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made on the security of multifamily or commercial property
may entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single-family
property. See "Description of the Trust Funds--Mortgage Assets". The ability of
a Mortgagor to repay a loan secured by an income-producing property typically
is dependent primarily upon the successful operation of such property rather
than any independent income or assets of the Mortgagor; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. In contrast, the ability of a Mortgagor to repay a
single-family loan typically is dependent primarily upon the Mortgagor's
household income rather than the capacity of the property to produce income;
thus, other than in geographical areas where employment is dependent upon a
particular employer or an industry, the Mortgagor's income tends not to reflect
directly the value of such property. A decline in the net operating income of
an income-producing property will likely affect both the performance of the
related loan as well as the liquidation value of such property, whereas a
decline in the income of a Mortgagor on a single-family property will likely
affect the performance of the related loan but may not affect the liquidation
value of such property.
The performance of a mortgage loan secured by an income-producing property
leased by the Mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the credit worthiness of such tenants or both;
the risks associated with such loans may be offset by the number of tenants or,
if applicable, a diversity of types of business operated by such tenants.
It is anticipated that a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which
recourse may be restricted or unenforceable, as to which, in the event of
Mortgagor default, recourse may be had only against the specific multifamily or
commercial property and such other assets, if any, as have been pledged to
secure the Mortgage Loan. With respect to those Mortgage Loans that provide for
recourse against the Mortgagor and its assets generally, there can be no
assurance that such recourse will ensure a recovery in respect of a defaulted
Mortgage Loan greater than the liquidation value of the related Mortgaged
Property.
Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of
single-family loans both because the Mortgage Assets in a Trust Fund will
generally consist of a smaller number of loans than would a single-family pool
of comparable aggregate unpaid principal balance and because of the higher
principal balance of individual Mortgage Loans. Mortgage Assets in a Trust Fund
may consist of a single Mortgage Loan.
If applicable, certain legal aspects of the Mortgage Loans for a series of
Certificates may be described in the related Prospectus Supplement. See also
"Certain Legal Aspects of Mortgage Loans" herein.
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RISKS PARTICULAR TO MULTIFAMILY RENTAL PROPERTIES.
Adverse economic conditions, either local, regional or national, may limit
the amount of rent that can be charged for rental units, may adversely affect
tenants' ability to pay rent and may result in a reduction in timely rent
payments or a reduction in occupancy levels without a corresponding decrease in
expenses. Occupancy and rent levels may also be affected by construction of
additional housing units, local military base closings, company relocations and
closings and national and local politics, including current or future rent
stabilization and rent control laws and agreements. Multifamily apartment units
are typically leased on a short-term basis, and consequently, the occupancy
rate of a multifamily rental property may be subject to rapid decline,
including for some of the foregoing reasons. In addition, the level of mortgage
interest rates may encourage tenants in multifamily rental properties to
purchase single-family housing rather than continue to lease housing or the
characteristics of a neighborhood may change over time or in relation to newer
developments. Further, the cost of operating a multifamily rental property may
increase, including the cost of utilities and the costs of required capital
expenditures. Also, multifamily rental properties may be subject to rent
control laws which could impact the future cash flows of such properties.
Certain multifamily rental properties are eligible to receive low-income
housing tax credits pursuant to Section 42 of the Code ("Section 42
Properties"). However, rent limitations associated therewith may adversely
affect the ability of the applicable borrowers to increase rents to maintain
such Mortgaged Properties in proper condition during periods of rapid inflation
or declining market value of such Mortgaged Properties. In addition, the income
restrictions on tenants imposed by Section 42 of the Code may reduce the number
of eligible tenants in such Mortgaged Properties and result in a reduction in
occupancy rates applicable thereto. Furthermore, some eligible tenants may not
find any differences in rents between the Section 42 Properties and other
multifamily rental properties in the same area to be a sufficient economic
incentive to reside at a Section 42 Property, which may have fewer amenities or
otherwise be less attractive as a residence. All of these conditions and events
may increase the possibility that a borrower may be unable to meet its
obligations under its Mortgage Loan.
RISKS PARTICULAR TO COOPERATIVELY-OWNED APARTMENT BUILDINGS.
Generally, a tenant-shareholder of a cooperative corporation must make a
monthly maintenance payment to the cooperative corporation that owns the
subject apartment building representing such tenant-shareholder's pro rata
share of the corporation's payments in respect of the Mortgage Loan secured by,
and all real property taxes, maintenance expenses and other capital and
ordinary expenses with respect to, such property, less any other income that
the cooperative corporation may realize. Adverse economic conditions, either
local regional or national, may adversely affect tenant-shareholders' ability
to make required maintenance payments, either because such adverse economic
conditions have impaired the individual financial conditions of such
tenant-shareholders or their ability to sub-let the subject apartments. To the
extent that a large number of tenant-shareholders in a cooperatively-owned
apartment building rely on sub-letting their apartments to make maintenance
payments, the lender on any mortgage loan secured by such building will be
subject to all the risks that it would have in connection with lending on the
security of a multifamily rental property. See "--Risks Particular to
Multifamily Rental Properties" above. In addition, if in connection with any
cooperative conversion of an apartment building, the sponsor holds the shares
allocated to a large number of the apartment units, any lender secured by a
mortgage on such building will be subject to a risk associated with such
sponsor's creditworthiness.
RISKS PARTICULAR TO OFFICE PROPERTIES.
In addition to risks generally associated with real estate, Mortgage Loans
secured by office properties are also affected significantly by adverse changes
in population and employment growth (which generally creates demand for office
space), local competitive conditions (such as the supply of office space or the
existence or construction of new competitive office buildings), the quality and
management philosophy of management, the attractiveness of the properties to
tenants and their customers or clients, the attractiveness of the surrounding
neighborhood and the need to make major repairs or improvements to
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satisfy the needs of major tenants. Office properties that are not equipped to
accommodate the needs of modern business may become functionally obsolete and
thus non-competitive. In addition, office properties may be adversely affected
by an economic decline in the businesses operated by their tenants. Such
decline may result in one or more significant tenants ceasing operations at
such locations (which may occur on account of a voluntary decision not to renew
a lease, bankruptcy or insolvency of such tenants, such tenants' general
cessation of business activities or for other reasons). The risk of such an
economic decline is increased if revenue is dependent on a single tenant or if
there is a significant concentration of tenants in a particular business or
industry.
RISKS PARTICULAR TO RETAIL PROPERTIES.
In addition to risks generally associated with real estate, Mortgage Loans
secured by retail properties are also affected significantly by adverse changes
in consumer spending patterns, local competitive conditions (such as the supply
of retail space or the existence or construction of new competitive shopping
centers or shopping malls), alternative forms of retailing (such as direct
mail, video shopping networks and selling through the Internet, which reduce
the need for retail space by retail companies), the quality and management
philosophy of management, the attractiveness of the properties and the
surrounding neighborhood to tenants and their customers, the public perception
of the safety of customers (at shopping malls and shopping centers, for
example) and the need to make major repairs or improvements to satisfy the
needs of major tenants.
Retail properties may be adversely affected if an anchor or other
significant tenant ceases operations at such locations (which may occur on
account of a decision not to renew a lease, bankruptcy or insolvency of such
tenant, such tenant's general cessation of business activities or for other
reasons). Significant tenants at a shopping center play an important part in
generating customer traffic and making the property a desirable location for
other tenants at such property. In addition, certain tenants at retail
properties may be entitled to terminate their leases if an anchor tenant ceases
operations at such property.
RISKS PARTICULAR TO HOTEL AND MOTEL PROPERTIES.
Hotel and motel properties are subject to operating risks common to the
lodging industry. These risks include, among other things, a high level of
continuing capital expenditures to keep necessary furniture, fixtures and
equipment updated, competition from other hotels and motels, increases in
operating costs (which increases may not necessarily in the future be offset by
increased room rates), dependence on business and commercial travelers and
tourism, increases in energy costs and other expenses of travel and adverse
effects of general and local economic conditions. These factors could adversely
affect the related borrower's ability to make payments on the related Mortgage
Loans. Since limited service hotels and motels are relatively quick and
inexpensive to construct and may quickly reflect a positive value, an
over-building of such hotels and motels could occur in any given region, which
would likely adversely affect occupancy and daily room rates. Further, because
hotel and motel rooms are generally rented for short periods of time, hotel and
motel properties tend to be more sensitive to adverse economic conditions and
competition than many other commercial properties. Additionally, the revenues
of certain hotels and motels, particularly those located in regions whose
economies depend upon tourism, may be highly seasonal in nature.
A hotel or motel property may present additional risks as compared to
other commercial property types in that: (i) hotels and motels may be operated
pursuant to franchise, management and operating agreements that may be
terminable by the franchiser, the manager or the operator; (ii) the
transferability of any operating, liquor and other licenses to the entity
acquiring such hotel or motel (either through purchase or foreclosure) is
subject to local law requirements; (iii) it may be difficult to terminate an
ineffective operator of a hotel or motel property subsequent to a foreclosure
of such property; and (iv) future occupancy rates may be adversely affected by,
among other factors, any negative perception of a hotel or motel based upon its
historical reputation.
Hotel and motel properties may be operated pursuant to franchise
agreements. The continuation of franchises is typically subject to specified
operating standards and other terms and conditions. The
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franchiser periodically inspects its licensed properties to confirm adherence
to its operating standards. The failure of the hotel or motel property to
maintain such standards or adhere to such other terms and conditions could
result in the loss or cancellation of the franchise license. It is possible
that the franchiser could condition the continuation of a franchise license on
the completion of capital improvements or the making of certain capital
expenditures that the related borrower determines are too expensive or are
otherwise unwarranted in light of general economic conditions or the operating
results or prospects of the affected hotels. In that event, the related
borrower may elect to allow the franchise license to lapse. In any case, if the
franchise is terminated, the related borrower may seek to obtain a suitable
replacement franchise or to operate such hotel or motel property independently
of a franchise license. The loss of a franchise license could have a material
adverse effect upon the operations or the underlying value of the hotel or
motel covered by the franchise because of the loss of associated name
recognition, marketing support and centralized reservation systems provided by
the franchiser.
RISKS PARTICULAR TO INDUSTRIAL PROPERTIES.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment
and/or by a general slow-down in the economy, and an industrial property that
suited the particular needs of its original tenant may be difficult to relet to
another tenant or may become functionally obsolete relative to newer
properties. Furthermore, industrial properties may be adversely affected by the
availability of labor sources or a change in the proximity of supply sources.
Because industrial properties frequently have a single tenant, any such
property is heavily dependent on the success of such tenant's business.
RISKS PARTICULAR TO HEALTH CARE-RELATED PROPERTIES.
Certain types of health care-related facilities (including nursing homes)
typically receive a substantial portion of their revenues from government
reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare
are subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings, policy interpretations, delays by fiscal intermediaries
and government funding restrictions, all of which can adversely affect revenues
from operation. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care providers and various proposals for
national health care relief could, if enacted, further limit these payments. In
addition, providers of long-term nursing care and other medical services are
highly regulated by federal, state and local law and are subject to, among
other things, federal and state licensing requirements, facility inspections,
the setting of rates and charges, governmental reimbursement policies and laws
relating to the adequacy of medical care, distribution of pharmaceuticals,
equipment, personnel operating policies and maintenance of and additions to
facilities and services, any or all of which factors can increase the cost of
operation and limit growth. In extreme cases, violations of applicable laws can
result in suspension or cessation of operations.
Under federal and state laws and regulations, Medicare and Medicaid
reimbursements are generally not permitted to be made to any person other than
the provider who actually furnished the related medical goods and services.
Accordingly, in the event of foreclosure on a Mortgaged Property that is
operated as a health care-related facility, neither the Trustee nor a
subsequent lessee or operator of the Mortgaged Property would generally be
entitled to obtain any outstanding reimbursement payments relating to services
furnished prior to such foreclosure. Furthermore, in the event of foreclosure,
there can be no assurance that the Trustee or purchaser in a foreclosure sale
would be entitled to the rights under any required licenses and regulatory
approvals, that a new license could be obtained or that a new approval would be
granted. In addition, Health Care-Related Properties are generally "special
purpose" properties that are not readily converted to general residential,
retail or office use, and transfers of Health Care-Related Properties are
subject to regulatory approvals under state, and in some cases federal, law not
required for transfers of most other types of commercial operations and other
types of real estate. Any of the foregoing circumstances may adversely affect
the liquidation value.
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ADJUSTABLE RATE MORTGAGES
Certain of the Mortgage Loans may accrue interest at a rate that varies
over time in conjunction with a stated index. Where an increase in that
interest-rate index leads to an increase in the related Mortgage Rate, such
Mortgage Loan's debt service payments may increase. Such Mortgage Loans may be
more likely to default following such an increase than Mortgage Loans bearing a
fixed interest rate because the related Mortgaged Properties may be unable to
generate sufficient income to meet the increased debt service payments.
BALLOON PAYMENTS
Certain of the Mortgage Loans as of the Cut-off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their stated maturity. Mortgage
Loans with balloon payments involve a greater degree of risk because the
ability of a Mortgagor to make a balloon payment typically will depend upon its
ability either to timely refinance the loan or to timely sell the related
Mortgaged Property. The ability of a Mortgagor to accomplish either of these
goals will be affected by a number of factors, including the level of available
mortgage rates at the time of sale or refinancing, the Mortgagor's equity in
the related Mortgaged Property, the financial condition and operating history
of the Mortgagor and the related Mortgaged Property, tax laws, rent control
laws (with respect to certain Multifamily Properties and mobile home parks),
reimbursement rates (with respect to certain hospitals, nursing homes and
convalescent homes), renewability of operating licenses, prevailing general
economic conditions and the availability of credit for commercial or
multifamily, as the case may be, real Properties generally.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of Credit Support,
or combinations thereof. Use of Credit Support will be subject to the
conditions and limitations described herein and in the related Prospectus
Supplement. Moreover, such Credit Support may not cover all potential losses or
risks: for example, Credit Support may or may not cover fraud or negligence by
a mortgage loan originator or other parties.
A series of Certificates may include one or more Classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates of delinquent distributions or ultimate
losses, the amount of subordination will be limited and may decline under
certain circumstances. In addition, if principal payments on one or more
Classes of Certificates of a series are made in a specified order of priority,
any limits with respect to the aggregate amount of claims under any related
Credit Support may be exhausted before the principal of the lower priority
Classes of Certificates of such series has been repaid. As a result, the impact
of significant losses and shortfalls on the may be more likely to default
following such an increase than Mortgage Loans bearing a fixed interest rate
because the related Mortgaged Payments may be unable to generate sufficient
income to meet the increased debt service payments. Mortgage Assets may fall
primarily upon those Classes of Certificates having a lower priority of
payment. Moreover, if a form of Credit Support covers more than one series of
Certificates (each, a "Covered Trust"), holders of Certificates evidencing an
interest in a Covered Trust will be subject to the risk that such Credit
Support will be exhausted by the claims of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more Classes
of Offered Certificates, including the subordination of one or more Classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such Classes of Certificates based on an assumed level of
defaults, delinquencies, other losses or other factors. There can, however, be
no assurance that the loss experience on the related Mortgage Assets will not
exceed such assumed levels. See "--Limited Nature of Ratings" "Description of
the Certificates" and "Description of Credit Support".
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ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the Mortgagor sells, transfers
or conveys the related Mortgaged Property or its interest in the Mortgaged
Property. Mortgages may also include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or non-monetary default of
the Mortgagor. Such clauses are generally enforceable subject to certain
exceptions. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
when an acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render the acceleration unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
Mortgagor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to
the lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so long as there is no default. In the event the
Mortgagor defaults, the license terminates and the lender is entitled to
collect rents. Such assignments are typically not perfected as security
interests prior to actual possession of the cash flows. Some state laws may
require that the lender take possession of the Mortgaged Property and obtain a
judicial appointment of a receiver before becoming entitled to collect the
rents. In addition, if bankruptcy or similar proceedings are commenced by or in
respect of the Mortgagor, the lender's ability to collect the rents may be
adversely affected. See "Certain Legal Aspects of Mortgage Loans--Leases and
Rents".
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination of
a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), a lender may be liable, as an "owner" or
"operator", for costs of addressing releases or threatened releases of
hazardous substances that require remedy at a property, if agents or employees
of the lender have become sufficiently involved in the operations of the
Mortgagor, regardless of whether or not the environmental damage or threat was
caused by a prior owner. A lender also risks such liability on foreclosure of
the Mortgage. Unless otherwise specified in the related Prospectus Supplement,
each Pooling and Servicing Agreement will provide that the Master Servicer,
acting on behalf of the Trust Fund, may not acquire title to a Mortgaged
Property securing a Mortgage Loan or take over its operation unless the Master
Servicer has previously determined, based upon a report prepared by a person
who regularly conducts environmental audits, that: (i) the Mortgaged Property
is in compliance with applicable environmental laws, and there are no
circumstances present at the Mortgaged Property relating to the use, management
or disposal of any hazardous substances, hazardous materials, wastes, or
petroleum based materials for which investigating, testing, monitoring,
containment, clean-up or remediation could be required under any federal, state
or local law or regulation; or (ii) if the Mortgaged Property is not so in
compliance or such circumstances are so present, then it would be in the best
economic interest of the Trust Fund to acquire title to the Mortgaged Property
and further to take such actions as would be necessary and appropriate to
effect such compliance and/or respond to such circumstances. See "Certain Legal
Aspects of Mortgage Loans--Environmental Legislation".
CONTROL
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a series or a similar means of allocating decision-making under
the related Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders of such series to, certain actions,
including amending the related Agreement in certain circumstances. See
"Description of the Agreements--Events of Default", "--Rights Upon Event of
Default", "--Amendment" and "--List of Certificateholders".
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DESCRIPTION OF THE TRUST FUNDS
MORTGAGE ASSETS
The primary assets of each Trust Fund will include (i) multifamily and/or
commercial mortgage loans or participation interests therein, together with
installment sales contracts (the "Mortgage Loans"), (ii) agency or non-agency
mortgage, pass-through certificates or other mortgage-backed securities
evidencing interests in or secured by Mortgage Loans ("MBS Securities") or
(iii) a combination of Mortgage Loans and MBS Securities (collectively,
"Mortgage Assets"). As used herein, "Mortgage Loans" refers to both whole
Mortgage Loans and Mortgage Loans underlying MBS Securities. Mortgage Loans
that secure, or interests in which are evidenced by, MBS Securities are herein
sometimes referred to as Underlying Mortgage Loans. Mortgage Loans that are not
Underlying Mortgage Loans are sometimes referred to as Whole Loans. The
Mortgage Assets will not be guaranteed or insured by PaineWebber Mortgage
Acceptance Corporation V (the "Depositor") or any of its affiliates or, unless
otherwise provided in the Prospectus Supplement, by any governmental agency or
instrumentality or by any other person.
Mortgage Loans
The Mortgage Loans will be secured by first, second or more junior liens
on, or security interests in, Mortgaged Properties consisting of: (i)
residential or mixed commercial/residential properties consisting of five or
more rental or cooperatively-owned dwelling units in high-rise, mid-rise or
garden apartment buildings (or shares allocable to a number of such units and
proprietary leases appurtenant thereto) ("Multifamily Properties" and the
related loans, "Multifamily Loans") and (ii) office buildings, retail
facilities related to the sale of goods and products and facilities related to
providing entertainment, recreation or personal services, hotels and motels,
casinos, nursing homes, hospitals or other health care-related facilities,
recreational vehicle parks, warehouse facilities, mini-warehouse facilities,
self-storage facilities, industrial facilities, parking lots, auto parks, golf
courses, arenas, mobile home parks and restaurants (or cooperatively owned
units therein), mixed use properties (that is, any combination of the
foregoing) and unimproved land ("Commercial Properties"). ("Commercial
Properties" and the related loans, "Commercial Loans") located, unless
otherwise specified in the related Prospectus Supplement, in any one of the
fifty states or the District of Columbia. Multifamily Property may include
mixed commercial and residential structures and may include apartment buildings
owned by private cooperative housing corporations ("Cooperatives"). The
Mortgaged Properties may include leasehold interests in properties, the title
to which is held by third party lessors. The Mortgage Loans will be evidenced
by promissory notes or other evidence of indebtedness (the "Mortgage Notes")
secured by mortgages, deeds of trust or similar instruments (the "Mortgages")
creating a lien on the Mortgaged Properties. Mortgage Loans will generally also
be secured by an assignment of leases and rents and/or operating or other cash
flow guarantees relating to the Mortgage Loan.
Mortgage Loans Secured by Multifamily Rental Properties. Significant
factors determining the value and successful operation of a multifamily rental
property are the location of the property, the number of competing residential
developments in the local market (such as apartment buildings, manufactured
housing communities and site-built single family homes), the physical
attributes of the multifamily building (such as its age and appearance) and
state and local regulations affecting such property. In addition, the
successful operation of an apartment building will depend upon other factors
such as its reputation, the ability of management to provide adequate
maintenance and insurance, and the types of services it provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection.
For example, there are provisions that limit the basis on which a landlord may
terminate a tenancy or increase its rent or prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
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In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment
buildings. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases determined through mediation
or binding arbitration. In many cases, the rent control laws do not provide for
decontrol of rental rates upon vacancy of individual units. Any limitations on
a borrower's ability to raise property rents may impair such borrower's ability
to repay its Mortgage Loan from its net operating income or the proceeds of a
sale or refinancing of the related Mortgaged Property.
Adverse economic conditions, either local, regional or national, may limit
the amount of rent that can be charged, may adversely affect tenants' ability
to pay rent and may result in a reduction in timely rent payments or a
reduction in occupancy levels. Occupancy and rent levels may also be affected
by construction of additional housing units, local military base closings,
company relocations and closings and national and local politics, including
current or future rent stabilization and rent control laws and agreements.
Multifamily apartment units are typically leased on a short-term basis, and
consequently, the occupancy rate of a multifamily rental property may be
subject to rapid decline, including for some of the foregoing reasons. In
addition, the level of mortgage interest rates may encourage tenants to
purchase single-family housing rather than continue to lease housing. The
location and construction quality of a particular building may affect the
occupancy level as well as the rents that may be charged for individual units.
The characteristics of a neighborhood may change over time or in relation to
newer developments.
Mortgage Loans Secured by Cooperatively-Owned Apartment Buildings. A
cooperative apartment building and the land under the building are owned or
leased by a non-profit cooperative corporation. The cooperative corporation is
in turn owned by tenant-shareholders who, through ownership of stock, shares or
membership certificates in the corporation, receive proprietary leases or
occupancy agreements which confer exclusive rights to occupy specific
apartments or units. Generally, a tenant-shareholder of a cooperative
corporation must make a monthly maintenance payment to the corporation
representing such tenant-shareholder's pro rata share of the corporation's
payments in respect of any mortgage loan secured by, and all real property
taxes, maintenance expenses and other capital and ordinary expenses with
respect to, the real property owned by such cooperative corporation, less any
other income that the cooperative corporation may realize. Such payments to the
cooperative corporation are in addition to any payments of principal and
interest the tenant-shareholder must make on any loans of the
tenant-shareholder secured by its shares in the corporation.
A cooperative corporation is directly responsible for building management
and payment of real estate taxes and hazard and liability insurance premiums. A
cooperative corporation's ability to meet debt service obligations on a
mortgage loan secured by the real property owned by such corporation, as well
as all other operating expenses of such property, is dependent primarily upon
the receipt of maintenance payments from the tenant-shareholders, together with
any rental income from units or commercial space that the cooperative
corporation might control. Unanticipated expenditures may in some cases have to
be paid by special assessments on the tenant-shareholders. A cooperative
corporation's ability to pay the amount of any balloon payment due at the
maturity of a mortgage loan secured by the real property owned by such
cooperative corporation depends primarily on its ability to refinance the
mortgage loan. Neither the Depositor nor any other person will have any
obligation to provide refinancing for any of the Mortgage Loans.
In a typical cooperative conversion plan, the owner of a rental apartment
building contracts to sell the building to a newly formed cooperative
corporation. Shares are allocated to each apartment unit by the owner or
sponsor, and the current tenants have a certain period to subscribe at prices
discounted from the prices to be offered to the public after such period. As
part of the consideration for the sale, the owner or sponsor receives all the
unsold shares of the cooperative corporation. The sponsor usually also controls
the corporation's board of directors and management for a limited period of
time.
Each purchaser of shares in the cooperative corporation generally enters
into a long-term proprietary lease which provides the shareholder with the
right to occupy a particular apartment unit. However, many cooperative
conversion plans are "non-eviction" plans. Under a non-eviction plan, a tenant
at the time of conversion who chooses not to purchase shares is entitled to
reside in the unit as a subtenant from the
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owner of the shares allocated to such apartment unit. Any applicable rent
control or rent stabilization laws would continue to be applicable to such
subtenancy, and the subtenant may be entitled to renew its lease for an
indefinite number of times, with continued protection from rent increases above
those permitted by any applicable rent control and rent stabilization laws. The
shareholder is responsible for the maintenance payments to the cooperative
without regard to its receipt or non-receipt of rent from the subtenant, which
may be lower than maintenance payments on the unit. Newly-formed cooperative
corporations typically have the greatest concentration of non-tenant
shareholders.
Mortgage Loans Secured by Office Properties. Significant factors affecting
the value of office properties include the quality of the tenants in the
building, the physical attributes of the building in relation to competing
buildings, the location of the building with respect to the central business
district or population centers, demographic trends within the metropolitan area
to move away from or towards the central business district, social trends
combined with space management trends (which may change towards options such as
telecommuting ), tax incentives offered to businesses by cities or suburbs
adjacent to or near the city where the building is located and the strength and
stability of the market area as a desirable business location. Office
properties may be adversely affected by an economic decline in the businesses
operated by their tenants. The risk of such an economic decline is increased if
revenue is dependent on a single tenant or if there is a significant
concentration of tenants in a particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a building's age,
condition, design (including floor sizes and layout), access to transportation,
availability of parking and ability to offer certain amenities to its tenants
(including sophisticated building systems, such as fiberoptic cables, satellite
communications or other base building technological features). Office
properties that are not equipped to accommodate the needs of modern business
may become functionally obsolete and thus non-competitive.
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for example,
may be affected by such factors as labor cost and quality, tax environment and
quality of life matters, such as schools and cultural amenities. A central
business district may have a substantially different economy from that of a
suburb. The local economy will affect an office property's ability to attract
stable tenants on a consistent basis. In addition, the cost of refitting office
space for a new tenant is often higher than for other property types.
Mortgage Loans Secured by Retail Properties. Retail properties generally
derive all or a substantial percentage of their income from lease payments from
commercial tenants. Income from and the market value of retail properties is
dependent on various factors including, but not limited to, the ability to
lease space in such properties, the ability of tenants to meet their lease
obligations, the possibility of a significant tenant becoming bankrupt or
insolvent, as well as fundamental aspects of real estate such as location and
market demographics.
The correlation between the success of tenant businesses and property
value is more direct with respect to retail properties than other types of
commercial property because a significant component of the total rent paid by
retail tenants is often tied to a percentage of gross sales. Declines in tenant
sales will cause a corresponding decline in percentage rents and may cause such
tenants to become unable to pay their rent or other occupancy costs. The
default by a tenant under its lease could result in delays and costs in
enforcing the lessor's rights. Repayment of the related Mortgage Loans will be
affected by the expiration of space leases and the ability of the respective
borrowers to renew or relet the space on comparable terms. Even if vacated
space is successfully relet, the costs associated with reletting, including
tenant improvements, leasing commissions and free rent, could be substantial
and could reduce cash flow from the retail properties. The correlation between
the success of tenant businesses and property value is increased when the
property is a single tenant property.
Whether a shopping center is "anchored" or "unanchored" is also an
important distinction. Anchor tenants in shopping centers traditionally have
been a major factor in the public's perception of a shopping center. The anchor
tenants at a shopping center play an important part in generating customer
traffic and making a center a desirable location for other tenants of the
center. The failure of an anchor tenant to
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renew its leases, the termination of an anchor tenant's lease, the bankruptcy
or economic decline of an anchor tenant, or the cessation of the business of an
anchor tenant (notwithstanding any continued payment of rent) can have a
material negative effect on the economic performance of a shopping center.
Furthermore, the correlation between the success of tenant businesses and
property value is increased when the property is a single tenant property.
Unlike certain other types of commercial properties, retail properties
also face competition from sources outside a given real estate market.
Catalogue retailers, home shopping networks, telemarketing, selling through the
Internet, and outlet centers all compete with more traditional retail
properties for consumer dollars. Continued growth of these alternative retail
outlets (which are often characterized by lower operating costs) could
adversely affect the retail properties.
Mortgage Loans Secured by Hotel and Motel Properties. Hotel and motel
properties may include full service hotels, resort hotels with many amenities,
limited service hotels, hotels and motels associated with national franchise
chains, hotels and motels associated with regional franchise chains and hotels
that are not affiliated with any franchise chain but may have their own brand
identity. Various factors, including location, quality and franchise
affiliation affect the economic performance of a hotel or motel. Adverse
economic conditions, either local, regional or national, may limit the amount
that can be charged for a room and may result in a reduction in occupancy
levels. The construction of competing hotels and motels can have similar
effects. To meet competition in the industry and to maintain economic values,
continuing expenditures must be made for modernizing, refurbishing, and
maintaining existing facilities prior to the expiration of their anticipated
useful lives. Because hotel and motel rooms generally are rented for short
periods of time, hotels and motels tend to respond more quickly to adverse
economic conditions and competition than do other commercial properties.
Furthermore, the financial strength and capabilities of the owner and operator
of a hotel or motel may have an impact on quality of service and economic
performance. Additionally, the lodging industry, in certain locations, is
seasonal in nature and this seasonality can be expected to cause periodic
fluctuations in room and other revenues, occupancy levels, room rates and
operating expenses. The demand for particular accommodations may also be
affected by changes in travel patterns caused by changes in energy prices,
strikes, relocation of highways, the construction of additional highways and
other factors.
The viability of any hotel or motel property that is part of a national or
regional hotel or motel chain depends in part on the continued existence and
financial strength of the franchiser, the public perception of the franchise
service mark and the duration of the franchise licensing agreement. The
transferability of franchise license agreements may be restricted and, in the
event of a foreclosure on any such hotel or motel property, the consent of the
franchiser for the continued use the franchise license by the hotel or motel
property would be required. Conversely, a lender may be unable to remove a
franchiser that it desires to replace following a foreclosure. Further, in the
event of a foreclosure on a hotel or motel property, it is unlikely that the
purchaser of such hotel or motel property would be entitled to the rights under
any associated liquor license, and such purchaser would be required to apply in
its own right for such license. There can be no assurance that a new license
could be obtained or that it could be obtained promptly.
Mortgage Loans Secured by Industrial Properties. Significant factors that
affect the value of industrial properties are the quality of tenants, building
design and adaptability and the location of the property. Industrial properties
may be adversely affected by reduced demand for industrial space occasioned by
a decline in a particular industry segment and/or by a general slow-down in the
economy, and an industrial property that suited the particular needs of its
original tenant may be difficult to relet to another tenant or may become
functionally obsolete relative to newer properties. Furthermore, industrial
properties may be adversely affected by the availability of labor sources or a
change in the proximity of supply sources. Because industrial properties
frequently have a single tenant, any such property is heavily dependent on the
success of such tenant's business.
Aspects of building site, design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, number
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of bays and bay depths, divisibility, floor loading capacities, truck turning
radius and overall functionality and accessibility. Nevertheless, site
characteristics of an industrial property suitable for one tenant may not be
appropriate for other potential tenants, which may make it difficult to relet
the property.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Further, industrial properties may be adversely affected by economic declines
in the industry segment of their tenants.
Mortgage Loans Secured by Health Care-Related Properties. The Mortgaged
Properties may include Senior Housing, Assisted Living Facilities, Skilled
Nursing Facilities and Acute Care Facilities (any of the foregoing, "Health
Care-Related Properties"). "Senior Housing" generally consists of
apartment-style facilities, the residents of which are ambulatory and handle
their own affairs. "Assisted Living Facilities" are typically single or double
room occupancy, dormitory-style housing facilities which provide food service,
cleaning and some personal care and assistance with certain daily routines.
"Skilled Nursing Facilities" provide services to post trauma and frail
residents with limited mobility who require sub-acute medical treatment. "Acute
Care Facilities" generally consist of hospital and other facilities providing
short-term, acute medical care services.
Certain types of Health Care-Related Properties, particularly Acute Care
Facilities and Skilled Nursing Facilities, typically receive a substantial
portion of their revenues from government reimbursement programs, primarily
Medicaid and Medicare. Medicaid and Medicare reimbursements are subject to
statutory and regulatory changes, retroactive rate adjustments, administrative
rulings, policy interpretations, delays by fiscal intermediaries and government
funding restrictions. Moreover, governmental payors have employed
cost-containment measures that limit payments to health care providers, and
there exist various proposals for national health care reform that could
further limit those payments. Accordingly, there can be no assurance that
payments under government reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of caring for program beneficiaries. If
such payments are insufficient, net operating income of those Health
Care-Related Properties that receive revenues from those sources, and
consequently the ability of the related borrowers to meet their obligations
under any Mortgage Loans secured thereby, could be adversely affected.
Moreover, Health Care-Related Properties that provide medical care are
generally subject to federal and state laws that relate to the adequacy of
medical care, distribution of pharmaceuticals, rates and charges, equipment,
personnel, operating policies and additions to facilities and services. In
addition, those facilities are subject to periodic inspection by governmental
authorities to determine compliance with various standards necessary to
continued licensing under state law and continued participation in the Medicaid
and Medicare reimbursement programs. Providers of assisted living services are
also subject to state licensing requirements in certain states. The failure of
an operator to maintain or renew any required license or regulatory approval
could prevent it from continuing operations at a Health Care-Related Property
or, if applicable, prohibit it from participating in government reimbursement
programs. Furthermore, under applicable federal and state laws, Medicare and
Medicaid reimbursements are generally not permitted to be made to any person
other than the provider who actually furnished the related medical goods and
services. Accordingly, in the event of foreclosure, neither the Trustee nor a
subsequent lessee or operator of any Health Care-Related Property securing a
defaulted Mortgage Loan would generally be entitled to obtain from federal or
state governments any outstanding reimbursement payments relating to services
furnished prior to such foreclosure. Any of the aforementioned circumstances
may adversely affect the ability of the related borrowers to meet their
Mortgage Loan obligations.
Government regulation applying specifically to Acute Care Facilities,
Skilled Nursing Facilities and Assisted Living Facilities includes health
planning legislation, enacted by most states, intended, at least in part, to
regulate the supply of nursing beds. The most common method of control is the
requirement that a state authority first make a determination of need,
evidenced by its issuance of a Certificate of Need ("CON"), before a long-term
care provider can establish a new facility, add beds to an existing facility
or, in some states, take certain other actions (for example, acquire major
medical equipment, make major capital expenditures, add services, refinance
long-term debt, or transfer ownership of a facility). States
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also regulate nursing bed supply in other ways. For example, some states have
imposed moratoria on the licensing of new beds, or on the certification of new
Medicaid beds, or have discouraged the construction of new nursing facilities
by limiting Medicaid reimbursements allocable to the cost of new construction
and equipment. In general, a CON is site specific and operator specific; it
cannot be transferred from one site to another, or to another operator, without
the approval of the appropriate state agency.
Accordingly, if a Mortgage Loan secured by a lien on such a Health
Care-Related Property were foreclosed upon, the purchaser at foreclosure might
be required to obtain a new CON or an appropriate exemption. In addition,
compliance by a purchaser with applicable regulations may in any case require
the engagement of a new operator and the issuance of a new operating license.
Upon a foreclosure, a state regulatory agency may be willing to expedite any
necessary review and approval process to avoid interruption of care to a
facility's residents, but there can be no assurance that any will do so or that
any necessary licenses or approvals will be issued.
Further government regulation applicable to Health Care-Related Properties
exists in the form of federal and state "fraud and abuse" laws that generally
prohibit payment or fee-splitting arrangements between health care providers
that are designed to induce or encourage the referral of patients to, or the
recommendation of, a particular provider for medical products or services.
Violation of these restrictions can result in license revocation, civil and
criminal penalties, and exclusion from participation in Medicare or Medicaid
programs. The state law restrictions in this area vary considerably from state
to state. Moreover, the federal anti-kickback law includes broad language that
potentially could be applied to a wide range of referral arrangements, and
regulations designed to create "safe harbors" under the law provide only
limited guidance. Accordingly, there can be no assurance that such laws will be
interpreted in a manner consistent with the practices of the owners or
operators of the Health Care-Related Properties that are subject to such laws.
The operators of Health Care-Related Properties are likely to compete on a
local and regional basis with others that operate similar facilities, some of
which competitors may be better capitalized, may offer services not offered by
such operators, or may be owned by non-profit organizations or government
agencies supported by endowments, charitable contributions, tax revenues and
other sources not available to such operators. The successful operation of a
Health Care-Related Property will generally depend upon the number of competing
facilities in the local market, as well as upon other factors such as its age,
appearance, reputation and management, the types of services it provides and,
where applicable, the quality of care and the cost of that care.
Default and Loss Considerations with Respect to the Mortgage Loans
Mortgage loans secured by commercial and multifamily properties are
markedly different from owner-occupied single-family home mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of such property rather than upon the
liquidation value of the real estate. Unless otherwise specified in the
Prospectus Supplement, the Mortgage Loans will be non-recourse loans, which
means that, absent special facts, the Mortgagee may look only to the Net
Operating Income from the property for repayment of the mortgage debt, and not
to any other of the Mortgagor's assets, in the event of the Mortgagor's
default. Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important measure of the risk of
default on such a loan. The "Debt Service Coverage Ratio" of a Mortgage Loan at
any given time is the ratio of the Net Operating Income for a twelve-month
period to the annualized scheduled payments on the Mortgage Loan. "Net
Operating Income" means, for any given period, unless otherwise specified in
the related Prospectus Supplement, the total operating revenues derived from a
Mortgaged Property during such period, minus the total operating expenses
incurred in respect of such Mortgaged Property during such period other than
(i) non-cash items such as depreciation and amortization, (ii) capital
expenditures and (iii) debt service on loans secured by the Mortgaged Property.
The Net Operating Income of a Mortgaged Property will fluctuate over time and
may be sufficient or insufficient to cover debt service on the related Mortgage
Loan at any given time.
As the primary component of Net Operating Income, rental income (and
maintenance payments from tenant-stockholders of a Cooperative) is subject to
the vagaries of the applicable real estate market
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and/or business climate. Properties typically leased, occupied or used on a
short-term basis, such as health care-related facilities, hotels and motels,
and mini-warehouse and self-storage facilities, tend to be affected more
rapidly by changes in market or business conditions than do properties leased,
occupied or used for longer periods, such as (typically) warehouses, retail
stores, shopping centers, office buildings and industrial plants. Commercial
Loans may be secured by owner-occupied Mortgaged Properties or Mortgaged
Properties leased to a single tenant. Accordingly, a decline in the financial
condition of the mortgagor or single tenant, as applicable, may have a
disproportionately greater effect on the Net Operating Income from such
Mortgaged Properties than would be the case with respect to Mortgaged
Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
Mortgage Loan. As may be further described in the related Prospectus
Supplement, in some cases leases of Mortgaged Properties may provide that the
lessee, rather than the Mortgagor, is responsible for payment of certain of
these expenses ("Net Leases"); however, because leases are subject to default
risks as well when a tenant's income is insufficient to cover its rent and
operating expenses, the existence of such "net of expense" provisions will only
temper, not eliminate, the impact of expense increases on the performance of
the related Mortgage Loan.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and/or federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low- and moderate-income housing may be particularly subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines
in rental or occupancy rates. Lenders generally use the loan-to-value Ratio of
a mortgage loan as a measure of risk of loss if a property must be liquidated
upon a default by the Mortgagor. The "loan-to-value Ratio" of a Mortgage Loan
at any given time is the ratio (expressed as a percentage) of the then
outstanding principal balance of the Mortgage Loan to the value of the related
Mortgaged Property at such time. The value of a Mortgaged Property as of the
date of initial issuance of the related series of Certificates may be less than
the value at origination and will fluctuate from time to time based upon
changes in economic conditions and the real estate market.
Appraised values of income-producing properties may be based on the market
comparison method (recent resale value of comparable properties at the date of
the appraisal), the cost replacement method (the cost of replacing the property
at such date), the income capitalization method (a projection of value based
upon the property's projected net cash flow), or upon a selection from or
interpolation of the values derived from such methods. Each of these appraisal
methods presents analytical challenges. It is often difficult to find truly
comparable properties that have recently been sold; the replacement cost of a
property may have little to do with its current market value; and income
capitalization is inherently based on inexact projections of income and expense
and the selection of an appropriate capitalization rate. Where more than one of
these appraisal methods are used and create significantly different results, or
where a high loan-to-value Ratio accompanies a high Debt Service Coverage Ratio
(or vice versa), the analysis of default and loss risks is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Mortgage Loans from
single-family mortgage loans and provide insight to the risks
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associated with income-producing real estate, there is no assurance that such
factors will in fact have been considered by the originators of the Mortgage
Loans, or that, for a particular Mortgage Loan, they are complete or relevant.
See "Risk Factors--Risks Associated with Certain Mortgage Loans and Mortgaged
Properties" and "--Balloon Payments".
Mortgage Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, to the extent then
applicable and specifically known to the Depositor, with respect to the
Mortgage Loans constituting related Trust Assets, including (i) the aggregate
outstanding principal balance and the largest, smallest and average outstanding
principal balance of the Mortgage Loans as of the applicable Cut-off Date, (ii)
the type of property securing the Mortgage Loans (e.g., Multifamily Property or
Commercial Property and the type of property in each such category), (iii) the
remaining terms to maturity of the Mortgage Loans, and/or the earliest and
latest maturity date and weighted average remaining term to maturity of the
Mortgage Loans, (iv) the loan-to-value ratios of the Mortgage Loans, and/or the
lowest and highest loan-to-value ratio and weighted average loan-to-value ratio
of the Mortgage Loans, in each case determined in the manner and as of a date
specified in the related Prospectus Supplement, (v) the Mortgage Rates or range
of Mortgage Rates and the weighted average Mortgage Rate borne by the Mortgage
Loans, (vi) the geographical distribution of the Mortgaged Properties on a
state-by-state basis, (vii) with respect to Mortgage Loans with adjustable
Mortgage Rates ("ARM Loans"), the adjustment dates, the highest, lowest and
weighted average margin, and the maximum Mortgage Rate variation at the time of
any adjustment and over the life of the ARM Loan, (viii) the Debt Service
Coverage Ratio and/or the range of Debt Service Coverage Ratio and the weighted
average Debt Service Coverage Ratio of the Mortgage Loans, in each case
determined in the manner and as of a date specified in the related Prospectus
Supplement and (ix) information regarding the payment characteristics of the
Mortgage Loans, including without limitation prepayment provisions, balloon
payment and other amortization provisions. The related Prospectus Supplement
will also contain certain information available to the Depositor with respect
to the provisions of leases and the nature of tenants of the Mortgaged
Properties and other information referred to in a general manner under
"Description of the Trust Funds--Mortgage Assets--Default and Loss
Considerations with Respect to the Mortgage Loans" above. In certain instances
specific information respecting the Mortgage Loans may not be known by the
Depositor at the time Offered Certificates of a series are initially offered.
In such case, more general information of the nature described above will be
provided in the Prospectus Supplement, and more specific information may be set
forth in a report which will be available to purchasers of the related
Certificates at or before the initial issuance thereof and will be filed as
part of a Current Report on Form 8-K with the Securities and Exchange
Commission within fifteen days after such initial issuance.
Payment Provisions of the Mortgage Loans
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans will provide for payments of principal, interest or both, on
due dates that occur monthly, quarterly or semi-annually or at such other
interval as is specified in the related Prospectus Supplement. Each Mortgage
Loan may provide for no accrual of interest or for accrual of interest thereon
at an interest rate (a "Mortgage Rate") that is fixed over its term or that
adjusts from time to time, or that may be converted from an adjustable to a
fixed Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, from time
to time at the Mortgagor's election, in each case as described in the related
Prospectus Supplement. Each Mortgage Loan may provide for scheduled payments to
maturity or payments that adjust from time to time to accommodate changes in
the Mortgage Rate or to reflect the occurrence of certain events, and may
provide for negative amortization or accelerated amortization, in each case as
described in the related Prospectus Supplement. Each Mortgage Loan may be fully
amortizing or require a balloon payment due on its stated maturity date, in
each case as described in the related Prospectus Supplement. Each Mortgage Loan
may contain prohibitions on prepayment (a "Lock-out Period" and the date of
expiration thereof, a "Lock-out Date") or require payment of a premium or a
yield maintenance charge (a "Prepayment Premium") in connection with a
prepayment, in each case as described in the related Prospectus Supplement. In
the event that holders of any Class or Classes of Offered Certificates will be
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entitled to all or a portion of any Prepayment Premiums collected in respect of
Mortgage Loans, the related Prospectus Supplement will specify the method or
methods by which any such amounts will be allocated. A Mortgage Loan may also
contain provisions entitling the Mortgagee to a share of profits realized from
the operation or disposition of the Mortgaged Property ("Equity
Participations"), as described in the related Prospectus Supplement. In the
event that holders of any Class or Classes of Offered Certificates will be
entitled to all or a portion of an Equity Participation, the related Prospectus
Supplement will specify the terms and provisions of the Equity Participation
and the method or methods by which distributions in respect thereof will be
allocated among such Certificates.
MBS Securities
Any MBS Securities will have been issued pursuant to a participation and
servicing agreement, a pooling and servicing agreement, an indenture or similar
agreement (an "MBS Agreement"). A seller (the "MBS Issuer") and/or servicer
(the "MBS Servicer") of the underlying Mortgage Loans will have entered into
the MBS Agreement with a trustee or a custodian under the MBS Agreement (the
"MBS Trustee"), if any, or with the original purchaser of the interest in the
underlying Mortgage Loans evidenced by the MBS Securities.
Distributions of principal and interest will be made on MBS Securities on
the dates specified in the related Prospectus Supplement. The MBS Securities
may be issued in one or more classes with characteristics similar to the
classes of Certificates described in this Prospectus. principal and interest
distributions will be made on the MBS Securities by the MBS Trustee or the MBS
Servicer. The MBS Issuer or the MBS Servicer or another person specified in the
related Prospectus Supplement may have the right or obligation to repurchase or
substitute assets underlying the MBS after a certain date or under other
circumstances specified in the related Prospectus Supplement.
Enhancement in the form of reserve funds, subordination of other credit
support similar to that described for the Certificates under "Description of
Credit Support" may be provided with respect to the MBS. The type,
characteristics and amount of such credit support, if any, will be a function
of certain characteristics of the Mortgage Loans evidenced by or securing such
MBS Securities and other factors and generally will have been established for
the MBS Securities on the basis of requirements of either any Rating Agency
that may have assigned a rating to the MBS or the initial purchasers of the MBS
Securities.
The Prospectus Supplement for a series of Certificates evidencing
interests in Mortgage Assets that include MBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount and type of the MBS to be included in the Trust Fund, (ii) the original
and remaining term to stated maturity of the MBS Securities, if applicable,
(iii) the pass-through or bond rate of the MBS Securities or formula for
determining such rates, (iv) the applicable payment provisions for the MBS
Securities, (v) the MBS Issuer, MBS Servicer and MBS Trustee, as applicable,
(vi) certain characteristics of the credit support, if any, such as
subordination, reserve funds, insurance policies, letters of credit or
guarantees relating to the related Underlying Mortgage Loans or directly to
such MBS Securities, (vii) the terms on which the related Underlying Mortgage
Loans for such MBS Securities or the MBS Securities may, or are required to, be
purchased prior to their maturity, (viii) the terms on which Mortgage Loans may
be substituted for those originally underlying the MBS Securities, (ix) the
servicing fees payable under the MBS Agreement, (x) to the extent available to
the Depositor, the type of information in respect of the Underlying Mortgage
Loans described under "Description of the Trust Funds--Mortgage
Assets--Mortgage Loan Information in Prospectus Supplements" and (xi) the
characteristics of any cash flow agreements that are included as part of the
trust fund evidenced or secured by the MBS.
CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Certificate Account") established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will, to the extent described herein and in such
Prospectus Supplement deposit all payments and collections received or advanced
with respect to the Mortgage Assets and other assets in the Trust Fund. A
Certificate Account may be maintained as an
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interest bearing or a non-interest bearing account, and funds held therein may
be held as cash or invested in certain short-term, investment grade
obligations, in each case as described in the related Prospectus Supplement.
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more Classes of Certificates in
the related series in the form of subordination of one or more other Classes of
Certificates in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy, guarantee, reserve fund or
another type of credit support, or a combination thereof (any such coverage
with respect to the Certificates of any series, "Credit Support"). The amount
and types of coverage, the identification of the entity providing the coverage
(if applicable) and related information with respect to each type of Credit
Support, if any, will be described in the Prospectus Supplement for a series of
Certificates. See "Risk Factors--Credit Support Limitations" and "Description
of Credit Support".
CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements provided to reduce the
effects of interest rate or currency exchange rate fluctuations on one or more
Classes of Certificates. The principal terms of any such guaranteed investment
contract or other agreement (any such agreement, a "Cash Flow Agreement"),
including, without limitation, provisions relating to the timing, manner and
amount of payments thereunder and provisions relating to the termination
thereof, will be described in the Prospectus Supplement for the related series.
In addition, the related Prospectus Supplement will provide certain information
with respect to the obligor under any such Cash Flow Agreement.
BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more Classes
of the Offered Certificates of any series will be issued as Book-Entry
Certificates. Each Class of Book-Entry Certificates will be initially
represented by one or more Certificates registered in the name of a nominee for
DTC. As a result, unless and until corresponding Definitive Certificates are
issued, the Certificate Owners with respect to any Class of Book-Entry
Certificates will be able to exercise the rights of Certificateholders only
indirectly through DTC and its participating organizations ("Participants"). In
addition, the access of Certificate Owners to information regarding the
Book-Entry Certificates in which they hold interests may be limited. Conveyance
of notices and other communications by DTC to its Participants, and directly
and indirectly through such Participants to Certificate Owners, will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Furthermore, as described
herein, Certificate Owners may suffer delays in the receipt of payments on the
Book-Entry Certificates, and the ability of any Certificate Owner to pledge or
otherwise take actions with respect to its interest in the Book-Entry
Certificates may be limited due to the lack of a physical certificate
evidencing such interest. See "Description of the Certificates--Book-Entry
Registration and Definitive Certificates."
DELINQUENT MORTGAGE LOANS
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular series of Certificates may include Mortgage Loans that are past-due
(i.e. beyond any applicable grace period); provided, however, that such
delinquent Mortgage Loans may only constitute up to, but not including, 20% (by
principal balance) of the Trust Fund. If so specified in the related Prospectus
Supplement, the servicing of such Mortgage Loans may be performed by a Special
Servicer. When a Mortgage Loan has a loan-to-value ratio of 100% or more, the
related mortgagor will have no equity in the related Mortgaged
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Property. In such cases, the related mortgagor may not have an incentive to
continue to perform under the subject Mortgage Loan. In addition, when the debt
service coverage ratio of a Mortgage Loan is below 1.0x, the revenue derived
from the use and operation of the related Mortgaged Property is insufficient to
cover the operating expenses of such Mortgaged Property and to pay debt service
on such Mortgage Loan and all mortgage loans senior thereto. In such cases, the
related mortgagor will be required to pay a portion of such items from sources
other than cash flow from the related Mortgaged Property. If the related
mortgagor ceases to use such alternative cash sources at a time when operating
revenue from the related Mortgaged Property is still insufficient to cover such
items, deferred maintenance at the related Mortgaged Property and/or a default
under the subject Mortgage Loan may occur. Credit Support provided with respect
to a particular series of Certificates may not cover all losses related to
delinquent Mortgage Loans, and investors should consider the risk that the
inclusion of such Mortgage Loans in the Trust Fund may adversely affect the
rate of defaults and prepayments on the Mortgage Assets in such Trust Fund and
the yield on the Offered Certificates of such series. See "Description of the
Trust Funds--Mortgage Loans--General."
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Trust Assets, to repay short-term
loans incurred to finance the purchase of Trust Assets until the sale of the
Certificates or for general corporate purposes. The Depositor expects to sell
the Certificates from time to time, but the timing and amount of offerings of
Certificates will depend on a number of factors, including the volume of
Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
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YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate. See "Risk
Factors--Limited Assets--Yield Considerations".
PASS-THROUGH RATE
Certificates of any Class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Mortgage Assets in the related Trust Fund. The Prospectus
Supplement with respect to any series of Certificates will specify the
Pass-Through Rate for each Class of such Certificates or, in the case of a
variable or adjustable Pass-Through Rate, the method of determining the
Pass-Through Rate; the effect, if any, of the prepayment of any Mortgage Asset
on the Pass-Through Rate of one or more Classes of Certificates; and whether
the distributions of interest on the Certificates of any Class will be
dependent, in whole or in part, on the performance of any obligor under a Cash
Flow Agreement.
TIMING OF PAYMENT OF INTEREST AND PRINCIPAL
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a Class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. If the Interest Accrual Period ends on a date other than a
Distribution Date for the related series, the yield realized by the holders of
such Certificates may be lower than the yield that would result if the Interest
Accrual Period ended on such Distribution Date. In addition, if so specified in
the related Prospectus Supplement, interest accrued for an Interest Accrual
Period for one or more Classes of Certificates may be calculated on the
assumption that distributions of principal (and additions to the Certificate
Balance of Accrual Certificates) and allocations of losses on the Mortgage
Assets may be made on the first day of the Interest Accrual Period for a
Distribution Date and not on such Distribution Date. Such method would produce
a lower effective yield than if interest were calculated on the basis of the
actual principal amount outstanding during an Interest Accrual Period. The
Interest Accrual Period for any Class of Offered Certificates will be described
in the related Prospectus Supplement.
PRINCIPAL PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Mortgage Assets (including principal prepayments on
Mortgage Loans resulting from both voluntary prepayments by the Mortgagors and
involuntary liquidations). The rate at which principal prepayments occur on the
Mortgage Loans will be affected by a variety of factors, including, without
limitation, the terms of the Mortgage Loans, the level of prevailing interest
rates, the availability of mortgage credit and economic, demographic,
geographic, tax, legal and other factors. In general, however, if prevailing
interest rates fall significantly below the Mortgage Rates on the Mortgage
Loans comprising or underlying the Mortgage Assets in a particular Trust Fund,
such Mortgage Loans are likely to be the subject of higher principal
prepayments than if prevailing rates remain at or above the rates borne by such
Mortgage Loans. In this regard, it should be noted that certain Mortgage Assets
may consist of Mortgage Loans with different Mortgage Rates and the stated
pass-through or pay-through interest rate of certain MBS Securities may be a
number of percentage points higher or lower than certain of the underlying
Mortgage Loans. The rate of principal payments on some or all of the Classes of
Certificates of a series will correspond to the rate of principal payments on
the Mortgage Assets in the related Trust Fund and is likely to be affected by
the existence of Lock-out Periods and Prepayment Premium provisions of the
Mortgage Loans underlying or comprising such Mortgage Assets, and by the extent
to which the servicer of any such Mortgage Loan is able to enforce such
provisions. Mortgage Loans with a Lock-out Period or a Prepayment Premium
provision, to the extent enforceable, generally would be expected to experience
a lower rate of principal prepayments than otherwise identical Mortgage Loans
without such provisions, with shorter Lock-out Periods or with lower Prepayment
Premiums.
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If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. Conversely,
if the purchaser of a Certificate offered at a premium calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is slower than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. In either
case, if so provided in the Prospectus Supplement for a series of Certificates,
the effect on the yield of one or more Classes of the Certificates of such
series of prepayments of the Mortgage Assets in the related Trust Fund may be
mitigated or exacerbated by any provisions for sequential or selective
distribution of principal to such Classes.
The timing of changes in the rate of principal payments on the Mortgage
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Mortgage Assets and distributed on a Certificate, the greater the effect on
such investor's yield to maturity. The effect on an investor's yield of
principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Mortgage Assets
included in or comprising a Trust Fund and the rate at which payments are made
from any Credit Support or Cash Flow Agreement for the related series of
Certificates may affect the ultimate maturity and the weighted average life of
each Class of such series. Prepayments on the Mortgage Loans comprising or
underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the Classes of
the Certificates of the related series.
If so provided in the Prospectus Supplement for a series of Certificates,
one or more Classes of Certificates may have a final scheduled Distribution
Date, which is the date on or prior to which the Certificate Principal Balance
thereof is scheduled to be reduced to zero, calculated on the basis of the
assumptions applicable to such series set forth therein.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
Class of Certificates of a series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets is
paid to such Class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model or the Standard Prepayment Assumption ("SPA") prepayment model, each as
described below. CPR represents a constant assumed rate of prepayment each
month (expressed as an annual percentage) relative to the then outstanding
principal balance of a pool of loans for the life of such loans. SPA represents
an assumed rate of prepayment each month (expressed as an annual percentage)
relative to the then outstanding principal balance of a pool of loans. A
prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum
of the then outstanding principal balance of such loans in the first month of
the life of the loans and an additional 0.2% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth month and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
annualized prepayment rate of 6% each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR
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and SPA were developed based upon historical prepayment experience for
single-family loans. Thus, it is likely that prepayment of any Mortgage Loans
comprising or underlying the Mortgage Assets for any series will not conform to
any particular level of CPR or SPA.
The Depositor is not aware of any meaningful publicly available prepayment
statistics for multifamily or commercial mortgage loans.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average
life of each Class of Offered Certificates of such series and the percentage of
the initial Certificate Balance of each such Class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Mortgage Assets are made at rates
corresponding to various percentages of CPR, SPA or at such other rates
specified in such Prospectus Supplement. Such tables and assumptions are
intended to illustrate the sensitivity of weighted average life of the
Certificates to various prepayment rates and will not be intended to predict or
to provide information that will enable investors to predict the actual
weighted average life of the Certificates. It is unlikely that prepayment of
any Mortgage Loans comprising or underlying the Mortgage Assets for any series
will conform to any particular level of CPR, SPA or any other rate specified in
the related Prospectus Supplement.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
Type of Mortgage Loan
A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the mortgagor or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted Mortgage Loans,
the servicer may, to the extent and under the circumstances set forth in the
related Prospectus Supplement, be permitted to modify Mortgage Loans that are
in default or as to which a payment default is imminent. Any defaulted balloon
payment or modification that extends the maturity of a Mortgage Loan will tend
to extend the weighted average life of the Certificates, thereby lengthening
the period of time elapsed from the date of issuance of a Certificate until it
is retired.
Foreclosures and Payment Plans
The number of foreclosures and the principal amount of the Mortgage Loans
comprising or underlying the Mortgage Assets that are foreclosed in relation to
the number and principal amount of Mortgage Loans that are repaid in accordance
with their terms will affect the weighted average life of the Mortgage Loans
comprising or underlying the Mortgage Assets and that of the related series of
Certificates. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceedings, may also have an
effect upon the payment patterns of particular Mortgage Loans and thus the
weighted average life of the Certificates.
Due-on-Sale and Due-on-Encumbrance Clauses
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates that may not be reflected in the prepayment
standards or models used in the relevant Prospectus Supplement. A number of the
Mortgage Loans comprising or underlying the Mortgage Assets may include
"due-on-sale" clauses or "due-on-encumbrance" clauses that allow the holder of
the Mortgage Loans to demand payment in full of the remaining principal balance
of the Mortgage Loans upon sale or certain other transfers of or the
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creation of encumbrances upon the related Mortgaged Property. With respect to
any Whole Loans, unless otherwise provided in the related Prospectus
Supplement, the Master Servicer, on behalf of the Trust Fund, will be required
to exercise (or waive its right to exercise) any such right that the Trustee
may have as mortgagee to accelerate payment of the Whole Loan in a manner
consistent with the servicing standard specified in the related Prospectus
Supplement or, if no such standard is specified, consistent with the Master
Servicer's normal servicing practices. See "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance" and "Description of the
Agreements--Due-on-Sale and Due-on-Encumbrance Provisions".
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THE DEPOSITOR
PaineWebber Mortgage Acceptance Corporation V, the Depositor, is a
Delaware corporation organized on April 23, 1987, as a wholly-owned limited
purpose finance subsidiary of PaineWebber Group Inc. The Depositor maintains
its principal office at 1285 Avenue of the Americas, New York, New York. Its
telephone number is (212) 713-2000.
The Depositor does not have, nor is it expected in the future to have, any
significant assets. It is not expected that the Depositor will have any
business operations other than acquiring and pooling mortgage loans or
interests therein and MBS Securities, offering Certificates of the type
described herein or other mortgage-related securities, and related activities.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each series (including any Class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Agreement. Each series of
Certificates will consist of one or more Classes of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
adjustable rates; (ii) be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") to one or more other
Classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions (collectively,
"Stripped Principal Certificates"); (iv) be entitled to interest distributions,
with disproportionately low, nominal or no principal distributions
(collectively, "Stripped Interest Certificates"); (v) provide for distributions
of accrued interest thereon commencing only following the occurrence of certain
events, such as the retirement of one or more other Classes of Certificates of
such series (collectively, "Accrual Certificates"); and/or (vi) provide for
payments of principal sequentially, or based on specified payment schedules or
other methodologies, to the extent of available funds, in each case as
described in the related Prospectus Supplement. Any such Classes may include
Classes of Offered Certificates.
Each Class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the Certificate Principal Balances or, in case
of Stripped Interest Certificates, notional amounts specified in the related
Prospectus Supplement. The transfer of any Offered Certificates may be
registered and such Certificates may be exchanged without the payment of any
service charge payable in connection with such registration of transfer or
exchange, but the Depositor or the Trustee or any agent thereof may require
payment of a sum sufficient to cover any tax or other governmental charge. One
or more Classes of Certificates of a series may be issued in definitive form
("Definitive Certificates") or in book-entry form ("Book-Entry Certificates"),
as provided in the related Prospectus Supplement. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates". Definitive
Certificates will be exchangeable for other Certificates of the same Class and
series of a like aggregate Certificate Principal Balance or notional amount but
of different authorized denominations. See "Risk Factors--Limited Liquidity"
and "--Limited Assets".
DISTRIBUTIONS
Distributions on the Certificates of each series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such series
and such Distribution Date. Except as otherwise specified in the related
Prospectus Supplement, distributions (other than the final distribution) will
be made to the persons in whose names the Certificates are registered at the
close of business on the last business day of the month preceding the month in
which the Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date").
Unless otherwise specified in the related Prospectus Supplement, all
distributions with respect to each Class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such
Class. Payments will be made either by
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check mailed to the address of the person entitled thereto as it appears on the
Certificate Register or, if so provided in the related Prospectus Supplement
and if a Certificateholder holds Certificates in the requisite amount specified
therein by wire transfer in immediately available funds to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder has so notified the Trustee or other person
required to make such payments no later than the date specified in the related
Prospectus Supplement; provided, however, that the final distribution in
retirement of the Certificates (whether Definitive Certificates or Book-Entry
Certificates) will be made only upon presentation and surrender of the
Certificates at the location specified in the notice to Certificateholders of
such final distribution.
AVAILABLE DISTRIBUTION AMOUNT
Distributions on the Certificates of each series on each Distribution Date
will be made from the "Available Distribution Amount" for such Distribution
Date, in accordance with the terms described in the related Prospectus
Supplement. Unless provided otherwise in the related Prospectus Supplement, the
"Available Distribution Amount" for each Distribution Date will equal the sum
of the following amounts:
(i) the total amount of all cash on deposit in the related Certificate
Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest already collected
but due on a date subsequent to the related Due Period (unless the
related Prospectus Supplement provides otherwise, a "Due Period" with
respect to any Distribution Date will commence on the second day of the
month in which the immediately preceding Distribution Date occurs, or
the day after the Cut-off Date in the case of the first Due Period, and
will end on the first day of the month of the related Distribution
Date),
(b) all prepayments, together with related payments of the interest
thereon and related Prepayment Premiums, Liquidation Proceeds, Insurance
Proceeds and other unscheduled recoveries received subsequent to the
related Prepayment Period, as defined in the related Prospectus
Supplement, and
(c) all amounts in the Certificate Account that are due or
reimbursable to the Depositor, the Trustee, the Master Servicer, the
Special Servicer or any other person described in the related
Prospectus Supplement, or that are payable in respect of certain
expenses of the related Trust Fund;
(ii) all advances made by a Master Servicer with respect to such
Distribution Date;
(iii) if and to the extent the related Prospectus Supplement so provides,
amounts paid by a Master Servicer with respect to interest shortfalls
resulting from prepayments during the related Prepayment Period; and
(iv) to the extent not on deposit in the related Certificate Account as
of the corresponding Determination Date, any amounts collected under, from
or in respect of any Credit Support with respect to such Distribution Date.
In addition, interest on investment income on deposit in the Certificate
Account, including any net payments paid under any Cash Flow Agreement, may be
included in the Available Distribution Amount, or may be allocated solely to
one or more Classes of Certificates of the related series on such Distribution
Date (in addition to the portion of the Available Distribution Amount allocable
to such Class or Classes).
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released
from the Trust Fund and will not be available for any future distributions.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each Class of Certificates (other than Classes Residual Certificates and
Stripped Principal Certificates that have no Pass-Through Rate) may have a
different Pass-Through Rate, which may be a fixed,
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variable or adjustable Pass-Through Rate. The related Prospectus Supplement
will specify the Pass-Through Rate for each Class or, in the case of a variable
or adjustable Pass-Through Rate, the method for determining the Pass-Through
Rate. Unless otherwise specified in the related Prospectus Supplement, interest
on the Certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any Class will
be made on each Distribution Date (other than any Class of Accrual
Certificates, which will be entitled to distributions of accrued interest
commencing only on the Distribution Date, or under the circumstances, specified
in the related Prospectus Supplement, and any Class of Stripped Principal
Certificates that are not entitled to any distributions of interest) based on
the Accrued Certificate Interest for such Class and such Distribution Date,
subject to the sufficiency of the portion of the Available Distribution Amount
allocable to such Class on such Distribution Date. Prior to the time interest
is distributable on any Class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such Class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
Class of Certificates and each Distribution Date (other than certain Classes of
Stripped Interest Certificates), "Accrued Certificate Interest" will be equal
to interest accrued for a specified period on the outstanding Certificate
Balance thereof immediately prior to the Distribution Date, at the applicable
Pass-Through Rate, reduced as described below. Unless otherwise provided in the
Prospectus Supplement, Accrued Certificate Interest on Stripped Interest
Certificates will be equal to interest accrued for a specified period on the
outstanding notional amount thereof immediately prior to each Distribution
Date, at the applicable Pass-Through Rate, reduced as described below. The
method of determining the notional amount for any Class of Stripped Interest
Certificates will be described in the related Prospectus Supplement. Reference
to notional amount is solely for convenience in certain calculations and does
not represent the right to receive any distributions of principal. Unless
otherwise provided in the related Prospectus Supplement, the Accrued
Certificate Interest on a series of Certificates will be reduced in the event
of prepayment interest shortfalls, which are shortfalls in collections of
interest for a full accrual period resulting from prepayments prior to the due
date in such accrual period on the Mortgage Loans comprising or underlying the
Mortgage Assets in the Trust Fund for such series. The particular manner in
which such shortfalls are to be allocated among some or all of the Classes of
Certificates of that series will be specified in the related Prospectus
Supplement. The related Prospectus Supplement will also describe the extent to
which the amount of Accrued Certificate Interest that is otherwise
distributable on (or, in the case of Accrual Certificates, that may otherwise
be added to the Certificate Balance of) a Class of Offered Certificates may be
reduced as a result of any other contingencies, including delinquencies, losses
and deferred interest on or in respect of the Mortgage Loans comprising or
underlying the Mortgage Assets in the related Trust Fund. Unless otherwise
provided in the related Prospectus Supplement, any reduction in the amount of
Accrued Certificate Interest otherwise distributable on a Class of Certificates
by reason of the allocation to such Class of a portion of any deferred interest
on the Mortgage Loans comprising or underlying the Mortgage Assets in the
related Trust Fund will result in a corresponding increase in the Certificate
Balance of such Class. See "Risk Factors--Limited Assets--Yield Considerations"
and "Yield Considerations".
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
The Certificates of each series, other than certain Classes of Stripped
Interest Certificates, will have a "Certificate Principal Balance" which, at
any time, will equal the then maximum amount that the holder will be entitled
to receive in respect of principal out of the future cash flow. on the Mortgage
Assets and other assets included in the related Trust Fund. The outstanding
Certificate Principal Balance of a Certificate will be reduced to the extent of
distributions of principal thereon from time to time and, if and to the extent
so provided in the related Prospectus Supplement, by the amount of losses
incurred in respect of the related Mortgage Assets, may be increased in respect
of deferred interest on the related Mortgage Loans to the extent provided in
the related Prospectus Supplement and, in the case of Accrual Certificates
prior to the Distribution Date on which distributions of interest are required
to commence, will be increased by any Accrued Certificate Interest. Unless
otherwise provided in the related Prospectus Supplement, the initial aggregate
Certificate Principal Balance of all Classes of Certificates of a series will
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not be greater than the outstanding aggregate principal balance of the related
Mortgage Assets as of the applicable Cut-off Date. The initial aggregate
Certificate Principal Balance of a series and each Class thereof will be
specified in the related Prospectus Supplement. Unless otherwise provided in
the related Prospectus Supplement, distributions of principal will be made on
each Distribution Date to the Class or Classes of Certificates entitled thereto
in accordance with the provisions described in such Prospectus Supplement until
the Certificate Principal Balance of such Class has been reduced to zero.
Stripped Interest Certificates with no Certificate Principal Balance are not
entitled to any distributions of principal.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUM OR IN RESPECT OF EQUITY
PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums
or payments in respect of Equity Participations that are collected on the
Mortgage Assets in the related Trust Fund will be distributed on each
Distribution Date to the Class or Classes of Certificates entitled thereto in
accordance with the provisions described in such Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for a series of Certificates
consisting of one or more Classes of Subordinate Certificates, on any
Distribution Date in respect of which losses or shortfalls in collections on
the Mortgage Assets have been incurred, the amount of such losses or shortfalls
will be borne first by a Class of Subordinate Certificates in the priority and
manner and subject to the limitations specified in such Prospectus Supplement.
See "Description of Credit Support" for a description of the types of
protection that may be included in a Trust Fund against losses and shortfalls
on Mortgage Assets comprising such Trust Fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of Certificates evidencing an interest in a
Trust Fund consisting of Mortgage Assets other than MBS Securities, unless
otherwise provided in the related Prospectus Supplement, the Master Servicer
will be required as part of its servicing responsibilities to advance on or
before each Distribution Date its own funds or funds held in the Certificate
Account that are not included in the Available Distribution Amount for such
Distribution Date, in an amount equal to the aggregate of payments of principal
(other than any balloon payments) and interest (net of related servicing fees)
that were due on the Whole Loans in such Trust Fund during the related Due
Period and were delinquent on the related Determination Date, subject to the
Master Servicer's good faith determination that such advances will be
reimbursable from Related Proceeds (as defined below). In the case of a series
of Certificates that includes one or more Classes of Subordinate Certificates
and if so provided in the related Prospectus Supplement, the Master Servicer's
advance obligation may be limited only to the portion of such delinquencies
necessary to make the required distributions on one or more Classes of Senior
Certificates and/or may be subject to the Master Servicer's good faith
determination that such advances will be reimbursable not only from Related
Proceeds but also from collections on other Mortgage Assets otherwise
distributable on one or more Classes of such Subordinate Certificates. See
"Description of Credit Support".
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the Class or Classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Unless otherwise
provided in the related Prospectus Supplement, advances of the Master
Servicer's funds will be reimbursable only out of related recoveries on the
Mortgage Loans (including amounts received under any form of Credit Support)
respecting which such advances were made (as to any Mortgage Loan, "Related
Proceeds") and, if so provided in the Prospectus Supplement, out of any amounts
otherwise distributable on one or more Classes of Subordinate Certificates of
such series; provided, however, that any such advance will be reimbursable from
any amounts in the Certificate Account prior to any distributions being made on
the Certificates to the extent that the Master Servicer shall determine in good
faith that such advance (a "Nonrecoverable Advance") is not ultimately
recoverable from Related Proceeds or, if applicable, from collections on other
Mortgage Assets otherwise distributable on such Subordinate Certificates. If
advances have been made by the Master Servicer from
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excess funds in the Certificate Account, the Master Servicer is required to
replace such funds in the Certificate Account on any future Distribution Date
to the extent that funds in the Certificate Account on such Distribution Date
are less than payments required to be made to Certificateholders on such date.
If so specified in the related Prospectus Supplement, the obligations of the
Master Servicer to make advances may be secured by a cash advance reserve fund
or a surety bond. If applicable, information regarding the characteristics of,
and the identity of any obligor on, any such surety bond, will be set forth in
the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, the
Master Servicer will be entitled to receive interest at the rate specified
therein on its outstanding advances and will be entitled to pay itself such
interest periodically from general collections on the Mortgage Loans prior to
any payment to Certificateholders or as otherwise provided in the related
Agreement and described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS Securities will describe any
corresponding advancing obligation of any person in connection with such MBS
Securities.
REPORTS TO CERTIFICATEHOLDERS
With each distribution to holders of any class of Certificates of a
series, a Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, will forward or cause to be forwarded to each such holder, to the
Depositor and to such other parties as may be specified in the related
Agreement, a statement that, unless otherwise provided in the related
Prospectus Supplement, will set forth, among other things, in each case to the
extent applicable and available:
(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Principal Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment
Premiums and (b) payments on account of Equity Participations;
(iv) the amount, if any, by which such distribution is less than the
amounts to which holders of such class of Offered Certificates are
entitled;
(v) the amount of related servicing compensation received by a Master
Servicer (and, if payable directly out of the related Trust Fund, by any
Special Servicer) and such other customary information as any such Master
Servicer or the Trustee deems necessary or desirable, or that a
Certificateholder reasonably requests, to enable Certificateholders to
prepare their tax returns;
(vi) the aggregate amount of advances included in such distribution, and
the aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(vii) the aggregate principal balance of the Mortgage Assets at the close
of business on such Distribution Date;
(viii) the number and aggregate principal balance of Mortgage Loans in
respect of which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are
delinquent and (4) foreclosure proceedings have been commenced;
(ix) with respect to each Mortgage Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) if applicable, the aggregate amount of any
interest accrued and payable on related servicing expenses and related
advances assuming such Mortgage Loan is subsequently liquidated through
foreclosure, (f) whether a notice of acceleration has been sent to the
mortgagor and, if so, the date of such notice, (g) whether foreclosure
proceedings have been
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commenced and, if so, the date so commenced and (h) if such Mortgage Loan
is more than three months delinquent and foreclosure has not been
commenced, the reason therefor;
(x) with respect to any Whole Loan liquidated during the related Due
Period or Prepayment Period, as applicable (other than by payment in full),
(a) the loan number thereof, (b) the manner in which it was liquidated, (c)
the aggregate amount of liquidation proceeds received, (d) the portion of
such liquidation proceeds payable or reimbursable to the Master Servicer in
respect of such Mortgage Loan and (e) the amount of any loss to
Certificateholders;
(xi) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period or
Prepayment Period, as applicable, (a) the loan number of the related
Mortgage Loan, (b) the date of acquisition, (c) the book value, (d) the
principal balance of the related Mortgage Loan immediately following such
Distribution Date (calculated as if such Mortgage Loan were still
outstanding taking into account certain limited modifications to the terms
thereof specified in the Agreement), (e) the aggregate amount of
unreimbursed servicing expenses and unreimbursed advances in respect
thereof and (f) if applicable, the aggregate amount of interest accrued and
payable on related servicing expenses and related advances;
(xii) with respect to any such REO Property sold during the related Due
Period or Prepayment Period, as applicable, (a) the loan number of the
related Mortgage Loan, (b) the aggregate amount of sale proceeds, (c) the
portion of such sales proceeds payable or reimbursable to the Master
Servicer or a Special Servicer in respect of such REO Property or the
related Mortgage Loan and (d) the amount of any loss to Certificateholders
in respect of the related Mortgage Loan;
(xiii) the aggregate Certificate Balance or notional amount, as the case
may be, of each class of Certificates (including any class of Certificates
not offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to the
allocation of any loss and increase in the Certificate Balance of a Class
of Accrual Certificates in the event that Accrued Certificate Interest has
been added to such balance;
(xiv) the aggregate amount of principal prepayments made during the
related Prepayment Period;
(xv) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xvi) the amount remaining in the reserve fund, if any, as of the close
of business on such Distribution Date;
(xvii) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of Certificates at the close of business on such Distribution Date;
(xviii) in the case of Certificates with a variable Pass-Through Rate,
the Pass-Through Rate applicable to such Distribution Date, as calculated
in accordance with the method specified in the related Prospectus
Supplement;
(xix) in the case of Certificates with an adjustable Pass-Through Rate,
for statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to the next succeeding
Distribution Date as calculated in accordance with the method specified in
the related Prospectus Supplement;
(xx) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(xxi) the aggregate amount of payments by the mortgagors of (a) default
interest, (b) late charges and (c) assumption and modification fees
collected during the related Due Period or Prepayment Period, as
applicable.
In the case of information furnished pursuant to subclauses (i)-(v) above,
the amounts shall be expressed as a dollar amount per minimum denomination of
Certificates or for such other specified portion thereof. The Prospectus
Supplement for each series of Offered Certificates will describe any additional
information to be included in reports to the holders of such Certificates.
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Within a reasonable period of time after the end of each calendar year,
the Master Servicer, if any, or the Trustee, as provided in the related
Prospectus Supplement, shall furnish to each person who at any time during the
calendar year was a holder of a Certificate a statement containing the
information set forth in subclauses (i)-(v) above, aggregated for such calendar
year or the applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Master Servicer or the Trustee shall
be deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Master Servicer or the Trustee pursuant to
any requirements of the Code as are from time to time in force. See
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates".
TERMINATION
The obligations created by the Agreement for each series of Certificates
will terminate upon the payment to Certificateholders of that series of all
amounts held in the Certificate Account or by the Master Servicer, if any, or
the Trustee and required to be paid to them pursuant to such Agreement
following the earlier of (i) the final payment or other liquidation of the last
Mortgage Asset subject thereto or the disposition of all property acquired upon
foreclosure of any Mortgage Loan subject thereto and (ii) the purchase of all
of the assets of the Trust Fund by the party entitled to effect such
termination, under the circumstances and in the manner set forth in the related
Prospectus Supplement. In no event, however, will the trust created by the
Agreement continue beyond the date specified in the related Prospectus
Supplement. Written notice of termination of the Agreement will be given to
each Certificateholder, and the final distribution will be made only upon
presentation and surrender of the Certificates at the location to be specified
in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the
repurchase of the assets in the related Trust Fund by the party specified
therein, under the circumstances and in the manner set forth therein. If so
provided in the related Prospectus Supplement, upon the reduction of the
Certificate Balance of a specified Class or Classes of Certificates by a
specified percentage or amount, the party specified therein will solicit bids
for the purchase of all assets of the Trust Fund, or of a sufficient portion of
such assets to retire such Class or Classes under the circumstances and in the
manner set forth therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the Prospectus Supplement for a series of Certificates,
one or more Classes of the Offered Certificates of such series will be offered
in book-entry format through the facilities of The Depository Trust Company
("DTC"), and each such Class will be represented by one or more global
Certificates registered in the name of DTC or its nominee.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking corporation" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement
of securities certificates. "Direct Participants", which maintain accounts with
DTC, include PaineWebber Incorporated, other securities brokers and dealers,
banks, trust companies and clearing corporations and may include certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system also
is available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable
to DTC and its Participants are on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership
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interest of each actual purchaser of a Book-Entry Certificate (a "Certificate
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Certificate Owners will not receive written confirmation from DTC of
their purchases, but Certificate Owners are expected to receive written
confirmations providing details of such transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which each Certificate Owner entered into the transaction. Transfers of
ownership interest in the Book-Entry Certificates are to be accomplished by
entries made on the books of Participants acting on behalf of Certificate
Owners. Certificate Owners will not receive certificates representing their
ownership interests in the Book-Entry Certificates, except in the event that
use of the book-entry system for the Book-Entry Certificates of any series is
discontinued as described below.
To facilitate subsequent transfer, all Offered Certificates deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Offered Certificates with DTC and their registration
with Cede & Co. effect no change in beneficial ownership. DTC has no knowledge
of the actual Certificate Owners of the Book-Entry Certificates; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Certificates are credited, which may or may not be the Certificate Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed
by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by Participants to Certificate Owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of each such Participant (and
not of DTC, the Depositor or any Trustee or Master Servicer), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Under a book-entry system, Certificate Owners may receive payments after the
related Distribution Date.
Unless otherwise provided in the related Prospectus Supplement, investors
that are not Participants or Indirect Participants but desire to purchase, sell
or otherwise transfer ownership of, or other interests in, Book-Entry
Certificates may do so only through Participants and Indirect Participants. In
addition, such investors ("Certificate Owners") will receive all distributions
on the Book-Entry Certificates through DTC and its Participants. Under a
book-entry format, Certificate Owners will receive payments after the related
Distribution Date because, while payments are required to be forwarded to Cede,
as nominee for DTC, on each such date, DTC will forward such payments to its
Participants which thereafter will be required to forward them to Indirect
Participants or Certificate Owners. Unless otherwise provided in the related
Prospectus Supplement, the only "Certificateholder" (as such term is used in
the Agreement) will be Cede, as nominee of DTC, and the Certificate Owners will
not be recognized by the Trustee as Certificateholders under the Agreement.
Certificate Owners will be permitted to exercise the rights of
Certificateholders under the related Agreement only indirectly through the
Participants who in turn will exercise their rights through DTC.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability of
a Certificate Owner to pledge its interest in Book-Entry Certificates to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of its interest in Book-Entry Certificates, may be
limited due to the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under an Agreement only at the direction of one or
more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited.
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Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued as Definitive
Certificates to Certificate Owners or their nominees, rather than to DTC or its
nominee, only if (i) the Depositor advises the Trustee in writing that DTC is
no longer willing or able to discharge properly its responsibilities as
depository with respect to such Certificates and the Depositor is unable to
locate a qualified successor or (ii) the Depositor, at its option, elects to
terminate the book- entry system through DTC with respect to such Certificates.
Upon the occurrence of either of the events described in the preceding
sentence, DTC will be required to notify all Participants of the availability
through DTC of Definitive Certificates. Upon surrender by DTC of the
certificate or certificates representing a Class of Book-Entry Certificates,
together with instructions for registration, the Trustee for the related series
or other designated party will be required to issue to the Certificate Owners
identified in such instructions the Definitive Certificates to which they are
entitled, and thereafter the holders of such Definitive Certificates will be
recognized as Certificateholders under the related Pooling and Servicing
Agreement.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
consisting of Mortgage Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer
appointed as of the date of the Pooling and Servicing Agreement and the
Trustee. The Certificates of each series evidencing interests in a Trust Fund
consisting exclusively of MBS Securities will be issued pursuant to a Trust
Agreement between the Depositor and a Trustee. Any Master Servicer, any such
Special Servicer and the Trustee with respect to any series of Certificates
will be named in the related Prospectus Supplement. The provisions of each
Agreement will vary depending upon the nature of the Certificates to be issued
thereunder and the nature of the related Trust Fund. A form of a Pooling and
Servicing Agreement has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The following summaries describe certain
provisions that may appear in each Agreement. The Prospectus Supplement for a
series of Certificates will describe any provision of the Agreement relating to
such series that materially differs from the description thereof contained in
this Prospectus. The summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the provisions
of the Agreement for each Trust Fund and the description of such provisions in
the related Prospectus Supplement. As used herein with respect to any series,
the term "Certificate" refers to all of the Certificates of that series,
whether or not offered hereby and by the related Prospectus Supplement, unless
the context otherwise requires. The Depositor will provide a copy of the
Agreement (without exhibits) relating to any series of Certificates without
charge upon written request of a holder of a Certificate of such series
addressed to PaineWebber Mortgage Acceptance Corporation V, 1285 Avenue of the
Americas, New York, New York 10019, Attention: Secretary.
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor will
assign (or cause to be assigned) to the Trustee for such series the Mortgage
Assets to be included in the related Trust Fund, together with all principal
and interest to be received on or with respect to such Mortgage Assets after
the Cut-off Date, other than principal and interest due on or before the
Cut-off Date and other than any Retained Interest. The Trustee will,
concurrently with such assignment, deliver the Certificates to the Depositor in
exchange for the Mortgage Assets and the other assets comprising the Trust Fund
for such series. Each Mortgage Asset will be identified in a schedule appearing
as an exhibit to the related Agreement. Unless otherwise provided in the
related Prospectus Supplement, such schedule will include detailed information
(i) in respect of each Mortgage Loan included in the related Trust Fund,
including without limitation, the address of the related Mortgaged Property and
type of such property, the Mortgage Rate and, if applicable, the applicable
index, margin, adjustment date and any rate cap information, the remaining term
to maturity, the outstanding principal balance and balloon payment, if any, and
(ii) in respect of each MBS Security included in the related Trust Fund,
including without limitation, the MBS Issuer, MBS Servicer and MBS Trustee, the
pass-through or bond rate or formula for determining such rate, the issue date
and original and remaining term to maturity, if applicable, the original or
outstanding principal amount and payment provisions, if applicable.
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With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to) certain
loan documents, which unless otherwise specified in the related Prospectus
Supplement will include the original Mortgage Note endorsed, without recourse,
to the order of the Trustee, the original Mortgage (or a certified copy
thereof) with evidence of recording indicated thereon and an assignment of the
Mortgage to the Trustee in recordable form. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that the
Depositor or other party thereto promptly cause each such assignment of
Mortgage to be recorded in the appropriate public office for real property
records, except in the State of California or in other states where, in the
opinion of counsel acceptable to the Trustee, such recording is not required to
protect the Trustee's interest in the related Whole Loan against the claim of
any subsequent transferee or any successor to or creditor of the Depositor, the
Master Servicer, or any prior holder of the Whole Loan.
The Trustee (or the custodian) will review such Whole Loan documents
within a specified period of days after receipt thereof, and the Trustee (or
the custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Master Servicer and the Depositor. If the omission or defect is not cured
within a specified number of days after receipt of such notice, then unless
otherwise specified in the related Prospectus Supplement, the Depositor or
another person specified in the related Prospectus Supplement will be
obligated, within a specified number of days of receipt of such notice, to
repurchase the related Whole Loan from the Trustee at the Purchase Price or
substitute for such Mortgage Loan. Unless otherwise specified in the related
Prospectus Supplement, this repurchase or substitution obligation constitutes
the sole remedy available to the Certificateholders or the Trustee for omission
of, or a material defect in, a constituent document.
With respect to each MBS Security, the Depositor will deliver or cause to
be delivered to the Trustee (or the custodian) the original certificate or
other definitive evidence of the MBS Security, together with bond power or
other instruments, certifications or documents required to transfer fully the
MBS Security to the Trustee for the benefit of the Certificateholders in
accordance with the related MBS Agreement. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause the MBS to be re-registered, with
the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan constituting a Mortgage Asset
in the related Trust Fund, make or assign certain representations and
warranties, as of a specified date (the person making such representations and
warranties, the "Warranting Party") covering, by way of example, the following
types of matters: (i) the accuracy of the information set forth for such Whole
Loan on the schedule of Mortgage Assets appearing as an exhibit to the related
Agreement; (ii) the existence of title insurance insuring the lien priority of
the Whole Loan; (iii) the authority of the Warranting Party to sell the Whole
Loan; (iv) the payment status of the Whole Loan and the status of payments of
taxes, assessments and other charges affecting the related Mortgaged Property;
(v) the existence of customary provisions in the related Mortgage Note and
Mortgage to permit realization against the Mortgaged Property of the benefit of
the security of the Mortgage; and (vi) the existence of hazard and extended
perils insurance coverage on the Mortgaged Property.
Any Warranting Party other than the Depositor will be identified in the
related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the Warranting
Party will be obligated to cure such breach or repurchase or replace the
affected Whole Loan as described below. Since the representations and
warranties may not
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address events that may occur following the date as of which they were made,
the Warranting Party will have a cure, repurchase or substitution obligation in
connection with a breach of such a representation and warranty only if the
relevant event that causes such breach occurs prior to such date. Such party
would have no such obligations if the relevant event that causes such breach
occurs after such date.
Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be required
to notify promptly the relevant Warranting Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that
materially and adversely affects the value of such Mortgage Loan or the
interests therein of the Certificateholders. If such Warranting Party cannot
cure such breach within a specified period following the date on which such
party was notified of such breach, then such Warranting Party will be obligated
to repurchase such Mortgage Loan from the Trustee within a specified period
from the date on which the Warranting Party was notified of such breach, at the
Purchase Price therefor. As to any Whole Loan, unless otherwise specified in
the related Prospectus Supplement, the "Purchase Price" is equal to the sum of
the unpaid principal balance thereof, plus unpaid accrued interest thereon at
the Mortgage Rate from the date as to which interest was last paid to the due
date in the Prepayment Period in which the relevant purchase is to occur, plus
certain servicing expenses that are reimbursable to the Master Servicer. If so
provided in the Prospectus Supplement for a series, a Warranting Party, rather
than repurchase a Mortgage Loan as to which a breach has occurred, will have
the option, within a specified period after initial issuance of such series of
Certificates, to cause the removal of such Mortgage Loan from the Trust Fund
and substitute in its place one or more other Whole Loans, in accordance with
the standards described in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, this repurchase or substitution
obligation will constitute the sole remedy available to holders of Certificates
or the Trustee for a breach of representation by a Warranting Party.
Neither the Depositor (except to the extent that it is the Warranting
Party) nor the Master Servicer will be obligated to purchase or substitute for
a Whole Loan if a Warranting Party defaults on its obligation to do so, and no
assurance can be given that Warranting Parties will carry out such obligations
with respect to Whole Loans.
With respect to a Trust Fund that includes MBS Securities, the related
Prospectus Supplement will describe any representations or warranties made or
assigned by the Depositor with respect to such MBS Securities, the person
making them and the remedies for breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. A breach of any such representation
of the Master Servicer which materially and adversely affects the interests of
the Certificateholders and which continues unremedied for thirty days after the
giving of written notice of such breach to the Master Servicer by the Trustee
or the Depositor, or to the Master Servicer, the Depositor and the Trustee by
the holders of Certificates evidencing not less than 25% of the Voting Rights
(or such other percentage of Voting Rights as is specified in the related
Prospectus Supplement will constitute an Event of Default. See "--Events of
Default" and "--Rights Upon Event of Default".
CERTIFICATE ACCOUNT
General
The Master Servicer, if any, and/or the Trustee will, as to each Trust
Fund, establish and maintain or cause to be established and maintained one or
more separate accounts for the collection of payments on the related Mortgage
Assets (collectively, the "Certificate Account"), which must be either (i) an
account or accounts the deposits in which are insured by the Bank Insurance
Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance
Corporation ("FDIC") (to the limits established by the FDIC) and the uninsured
deposits in which are otherwise secured such that the Certificateholders have a
claim with respect to the funds in the Certificate Account or a perfected first
priority security interest against any collateral securing such funds that is
superior to the claims of any other depositors or general creditors of the
institution with which the Certificate Account is maintained or (ii) otherwise
maintained
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with a bank or trust company, and in a manner, satisfactory to the Rating
Agency or Agencies rating any Class of Certificates of such series. The
collateral eligible to secure amounts in the Certificate Account is limited to
United States government securities and other investment grade obligations
specified in the Agreement ("Permitted Investments"). A Certificate Account may
be maintained as an interest bearing or a non-interest bearing account and the
funds held therein may be invested pending each succeeding Distribution Date in
certain short-term Permitted Investments. Unless otherwise provided in the
related Prospectus Supplement, any interest or other income earned on funds in
the Certificate Account will be paid to a Master Servicer or its designee as
additional servicing compensation. The Certificate Account may be maintained
with an institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards imposed by the Rating Agency
or Agencies. If permitted by the Rating Agency or Agencies and so specified in
the related Prospectus Supplement, a Certificate Account may contain funds
relating to more than one series of mortgage pass-through certificates and may
contain other funds respecting payments on mortgage loans belonging to the
Master Servicer or serviced or master serviced by it on behalf of others.
Deposits
A Master Servicer or the Trustee will deposit or cause to be deposited in
the Certificate Account for each Trust Fund on a daily basis, unless otherwise
provided in the related Agreement and described in the related Prospectus
Supplement, the following payments and collections received, or advances made,
by the Master Servicer or the Trustee or on its behalf subsequent to the
Cut-off Date (other than payments due on or before the Cut-off Date, and
exclusive of any amounts representing a Retained Interest):
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Assets;
(ii) all payments on account of interest on the Mortgage Assets,
including any default interest collected, in each case net of any portion
thereof retained by a Master Servicer as its servicing compensation and net
of any Retained Interest;
(iii) all proceeds of the hazard insurance policies to be maintained in
respect of each Mortgaged Property securing a Mortgage Loan in the Trust
Fund (to the extent such proceeds are not applied to the restoration of the
property or released to the mortgagor in accordance with the normal
servicing procedures of a Master Servicer, subject to the terms and
conditions of the related Mortgage and Mortgage Note) (collectively,
"Insurance Proceeds") and all other amounts received and retained in
connection with the liquidation of defaulted Mortgage Loans in the Trust
Fund, by foreclosure or otherwise ("Liquidation Proceeds"), together with
the net proceeds on a monthly basis with respect to any Mortgaged
Properties acquired for the benefit of Certificateholders by foreclosure or
by deed in lieu of foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";
(vii) all proceeds of any Mortgage Loan or property acquired in respect
thereof purchased by the Depositor, any Mortgage Asset Seller or any other
specified person as described under "--Assignment of Mortgage Assets;
Repurchases" and "Representations and Warranties; Repurchases", all
proceeds of any defaulted Mortgage Loan purchased as described under
"--Realization Upon Defaulted Whole Loans", and all proceeds of any
Mortgage Asset purchased as described under "Description of the
Certificates--Termination" (also, "Liquidation Proceeds");
(viii) any amounts paid by a Master Servicer to cover certain interest
shortfalls arising out of the prepayment of Mortgage Loans in the Trust
Fund as described under "Description of the Agreements--Retained Interest;
Servicing Compensation and Payment of Expenses";
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(ix) to the extent that any such item does not constitute additional
servicing compensation to a Master Servicer, any payments on account of
modification or assumption fees, late payment charges, Prepayment Premiums
or Equity Participations on the Mortgage Assets;
(x) all payments required to be deposited in the Certificate Account with
respect to any deductible clause in any blanket insurance policy described
under "--Hazard Insurance Policies";
(xi) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit
of the Master Servicer or the Trustee, as the case may be, of funds held in
the Certificate Account; and
(xii) any other amounts required to be deposited in the Certificate
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
Withdrawals
A Master Servicer or the Trustee may, from time to time, unless otherwise
provided in the related Agreement and described in the related Prospectus
Supplement, make withdrawals from the Certificate Account for each Trust Fund
for any of the following purposes:
(i) to make distributions to the Certificateholders on each Distribution
Date;
(ii) to reimburse a Master Servicer for unreimbursed amounts advanced as
described under "Description of the Certificates--Advances in Respect of
Delinquencies", such reimbursement to be made out of amounts received which
were identified and applied by the Master Servicer as late collections of
interest (net of related servicing fees and Retained Interest) on and
principal of the particular Mortgage Loans with respect to which the
advances were made or out of amounts drawn under any form of Credit Support
with respect to such Mortgage Loans;
(iii) to reimburse a Master Servicer for unpaid servicing fees earned and
certain unreimbursed servicing expenses incurred with respect to Mortgage
Loans in the Trust Fund and properties acquired in respect thereof, such
reimbursement to be made out of amounts that represent Liquidation Proceeds
and Insurance Proceeds collected on the particular Mortgage Loans and
properties, and net income collected on the particular properties, with
respect to which such fees were earned or such expenses were incurred or
out of amounts drawn under any form of Credit Support with respect to such
Mortgage Loans and properties;
(iv) to reimburse a Master Servicer for any advances described in clause
(ii) above and any servicing expenses described in clause (iii) above
which, in the Master Servicer's good faith judgment, will not be
recoverable from the amounts described in clauses (ii) and (iii),
respectively, such reimbursement to be made from amounts collected on other
Mortgage Assets or, if and to the extent so provided by the related
Agreement and described in the related Prospectus Supplement, just from
that portion of amounts collected on other Mortgage Assets that is
otherwise distributable on one or more Classes of Subordinate Certificates
of the related series;
(v) if and to the extent described in the related Prospectus Supplement,
to pay a Master Servicer interest accrued on the advances described in
clause (ii) above and the servicing expenses described in clause (iii)
above while such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments with respect to, and for containment,
clean-up or remediation of hazardous wastes and materials on, Mortgaged
Properties securing defaulted Mortgage Loans in the Trust Fund as described
under "Realization Upon Defaulted Whole Loans";
(vii) to reimburse a Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be,
for certain expenses, costs and liabilities incurred thereby, as and to the
extent described under "--Certain Matters Regarding a Master Servicer and
the Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
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(ix) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
"--Certain Matters Regarding the Trustee";
(x) to pay a Master Servicer, as additional servicing compensation,
interest and investment income earned in respect of amounts held in the
Certificate Account;
(xi) to pay the person entitled thereto any amounts deposited in the
Certificate Account that were identified and applied by the Master Servicer
as recoveries of Retained Interest;
(xii) to pay for costs reasonably incurred in connection with the proper
operation, management and maintenance of any Mortgaged Property acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise, such payments to be made out of income received
on such property;
(xiii) if one or more elections have been made to treat the Trust Fund or
designated portions thereof as a REMIC, to pay any federal, state or local
taxes imposed on the Trust Fund or its assets or transactions, as and to
the extent described under "Certain Federal Income Tax Consequences--Federal
Income Tax Consequences for REMIC Certificates--Taxes That May Be Imposed
on the REMIC Pool";
(xiv) to pay for the cost of an independent appraiser or other expert in
real estate matters retained to determine a fair sale price for a defaulted
Mortgage Loan in the Trust Fund or a property acquired in respect thereof
in connection with the liquidation of such Mortgage Loan or property;
(xv) to pay for the cost of various opinions of counsel obtained pursuant
to the related Agreement for the benefit of Certificateholders;
(xvi) to pay for the costs of recording the related Agreement if such
recordation materially and beneficially affects the interests of
Certificateholders;
(xvii) to pay the person entitled thereto any amounts deposited in the
Certificate Account in error, including amounts received on any Mortgage
Asset after its removal from the Trust Fund whether by reason of purchase
or substitution as contemplated by "--Assignment of Mortgage Assets;
Repurchase" and "--Representations and Warranties; Repurchases" or
otherwise;
(xviii) to make any other withdrawals permitted by the related Agreement
and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account at the termination
of the Trust Fund.
COLLECTION AND OTHER SERVICING PROCEDURES; MODIFICATIONS
The Master Servicer is required to make reasonable efforts to collect all
scheduled payments under the Whole Loans and will follow or cause to be
followed such collection procedures as it would follow with respect to mortgage
loans that are comparable to the Whole Loans and held for its own account,
provided such procedures are consistent with (i) the terms of the related
Agreement and any related hazard insurance policy or instrument of Credit
Support included in the related Trust Fund described herein or under
"Description of Credit Support", (ii) applicable law and (iii) the general
servicing standard specified in the related Prospectus Supplement or, if no
such standard is so specified, its normal servicing practices (in either case,
the "Servicing Standard"). In connection therewith, the Master Servicer will be
permitted in its discretion to waive any late payment charge or penalty
interest in respect of a late Whole Loan payment.
Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining hazard
insurance policies as described herein and in any related Prospectus
Supplement, and filing and settling claims thereunder; maintaining escrow or
impoundment accounts of mortgagors for payment of taxes, insurance and other
items required to be paid by any mortgagor pursuant to the Whole Loan;
processing assumptions or substitutions in those cases where the Master
Servicer has determined not to enforce any applicable due-on-sale clause;
attempting to cure
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delinquencies; supervising foreclosures; inspecting and managing Mortgaged
Properties under certain circumstances; and maintaining accounting records
relating to the Whole Loans. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer will be responsible for filing and
settling claims in respect of particular Whole Loans under any applicable
instrument of Credit Support. See "Description of Credit Support".
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the Servicing Standard so long as the
modification, waiver or amendment will not (i) affect the amount or timing of
any scheduled payments of principal or interest on the Whole Loan or (ii) in
its judgment, materially impair the security for the Whole Loan or reduce the
likelihood of timely payment of amounts due thereon. The Master Servicer also
may agree to any modification, waiver or amendment that would so affect or
impair the payments on, or the security for, a Whole Loan if, unless otherwise
provided in the related Prospectus Supplement, (i) in its judgment, a material
default on the Whole Loan has occurred or a payment default is imminent and
(ii) in its judgment, such modification, waiver or amendment is reasonably
likely to produce a greater recovery with respect to the Whole Loan on a
present value basis than would liquidation. The Master Servicer is required to
notify the Trustee in the event of any modification, waiver or amendment of any
Whole Loan.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of the
Whole Loans to third-party servicers (each, a "Sub-Servicer"), but such Master
Servicer will remain obligated under the related Agreement. Each sub-servicing
agreement between a Master Servicer and a Sub-Servicer (a "Sub-Servicing
Agreement") must be consistent with the terms of the related Agreement and must
provide that, if for any reason the Master Servicer for the related series of
Certificates is no longer acting in such capacity, the Trustee or any successor
Master Servicer may assume the Master Servicer's rights and obligations under
such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be solely liable for all fees owed by it to any Sub-Servicer,
irrespective of whether the Master Servicer's compensation pursuant to the
related Agreement is sufficient to pay such fees. However, a Sub-Servicer may
be entitled to a Retained Interest in certain Whole Loans. Each Sub-Servicer
will be reimbursed by the Master Servicer for certain expenditures which it
makes, generally to the same extent the Master Servicer would be reimbursed
under an Agreement. See "--Retained Interest, Servicing Compensation and
Payment of Expenses".
SPECIAL SERVICERS
To the extent so specified in the related Prospectus Supplement, a special
servicer (the "Special Servicer") may be appointed. The related Prospectus
Supplement will describe the rights, obligations and compensation of a Special
Servicer. A Master Servicer will only be responsible for the duties and
obligations of a Special Servicer to the extent as set forth in the Prospectus
Supplement.
REALIZATION UPON DEFAULTED WHOLE LOANS
A mortgagor's failure to make required payments may reflect inadequate
operating income or the diversion of that income from the service of payments
due under the Mortgage Loan, and may call into question such mortgagor's
ability to make timely payment of taxes and to pay for necessary maintenance of
the related Mortgaged Property. Unless otherwise provided in the related
Prospectus Supplement, the Master Servicer is required to monitor any Whole
Loan which is in default, contact the mortgagor concerning the default,
evaluate whether the causes of the default can be cured over a reasonable
period without significant impairment of the value of the Mortgaged Property,
initiate corrective action in cooperation with the mortgagor if cure is likely,
inspect the Mortgaged Property and take such other actions as are consistent
with the Servicing Standard. A significant period of time may elapse before the
Master Servicer is able to assess the success of such corrective action or the
need for additional initiatives.
The time within which the Master Servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceed-
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ings and actually forecloses (or takes a deed to a Mortgaged Property in lieu
of foreclosure) on behalf of the Certificateholders, may vary considerably
depending on the particular Whole Loan, the Mortgaged Property, the mortgagor,
the presence of an acceptable party to assume the Mortgage Loan and the laws of
the jurisdiction in which the Mortgaged Property is located. Under federal
bankruptcy law, the Master Servicer in certain cases may not be permitted to
accelerate a Whole Loan or to foreclose on a Mortgaged Property for a
considerable period of time. See "Certain Legal Aspects of Mortgage Loans".
Any Agreement relating to a Trust Fund that includes Whole Loans may grant
to the Master Servicer and/or the holder or holders of certain Classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an Offered Certificate will be described in the related Prospectus
Supplement. The related Prospectus Supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under "Representations and Warranties; Repurchases".
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer may offer to sell any defaulted Whole Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a
greater recovery on a present value basis than would liquidation through
foreclosure or similar proceeding. The related Agreement will provide that any
such offering be made in a commercially reasonable manner for a specified
period and that the Master Servicer accept the highest cash bid received from
any person (including itself, an affiliate of the Master Servicer or any
Certificateholder) that constitutes a fair price for such defaulted Whole Loan.
In the absence of any bid determined in accordance with the related Agreement
to be fair, the Master Servicer shall proceed with respect to such defaulted
Mortgage Loan as described below. Any bid in an amount at least equal to the
Purchase Price described under "--Representations and Warranties; Repurchases"
will in all cases be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged
Property securing a Whole Loan by operation of law or otherwise, if such action
is consistent with the Servicing Standard and a default on the related Mortgage
loan has occurred or, in the Master Servicer's judgment, is imminent. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
may not, however, acquire title to any Mortgaged Property or take any other
action that would cause the Trustee, for the benefit of Certificateholders, or
any other specified person to be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or an "operator" of such
Mortgaged Property within the meaning of certain federal environmental laws,
unless the Master Servicer has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the Trust Fund), that either:
(i) the Mortgaged Property is in compliance with applicable environmental
laws, and there are no circumstances present at the Mortgaged Property
relating to the use, management or disposal of any hazardous substances,
hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or regulation; or
(ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic
interest of the Trust Fund to acquire title to the Mortgaged Property and
further to take such actions as would be necessary and appropriate to
effect such compliance and/or respond to such circumstances (the cost of
which actions will be an expense of the Trust Fund).
Unless otherwise provided in the related Prospectus Supplement, if title
to any Mortgaged Property is acquired by a Trust Fund as to which one or more
REMIC or FASIT elections have been made, the Master Servicer, on behalf of the
Trust Fund, will be required to sell the Mortgaged Property within two years of
acquisition, unless (i) the Internal Revenue Service grants an extension of
time to sell such property or (ii) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the Trust
Fund subsequent to two years after its acquisition will not result in the
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imposition of a tax on the Trust Fund or cause the Trust Fund (or designated
portion thereof) to fail to qualify as one or more REMICs or FASITs under the
Code at any time that any Certificate is outstanding. Subject to the foregoing,
the Master Servicer will be required to (i) solicit bids for any Mortgaged
Property so acquired in such a manner as will be reasonably likely to realize a
fair price for such property and (ii) accept the first (and, if multiple bids
are contemporaneously received, the highest) cash bid received from any person
that constitutes a fair price.
If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
The limitations imposed by the related Agreement and the REMIC or FASIT
provisions of the Code (if one or more REMIC or FASIT elections have been made
with respect to the related Trust Fund (or designated portion thereof) on the
operations and ownership of any Mortgaged Property acquired on behalf of the
Trust Fund may result in the recovery of an amount less than the amount that
would otherwise be recovered. See "Certain Legal Aspects of Mortgage
Loans--Foreclosure".
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Whole Loan. If the proceeds of any liquidation of the property securing the
defaulted Whole Loan are less than the outstanding principal balance of the
defaulted Whole Loan plus interest accrued thereon at the Mortgage Rate plus
the aggregate amount of expenses incurred by the Master Servicer in connection
with such proceedings and which are reimbursable under the Agreement, the Trust
Fund will realize a loss in the amount of such difference. The Master Servicer
will be entitled to withdraw or cause to be withdrawn from the Certificate
Account out of the Liquidation Proceeds recovered on any defaulted Whole Loan,
prior to the distribution of such Liquidation Proceeds to Certificateholders,
amounts representing its normal servicing compensation on the Whole Loan,
unreimbursed servicing expenses incurred with respect to the Whole Loan and any
unreimbursed advances of delinquent payments made with respect to the Whole
Loan.
If any property securing a defaulted Whole Loan is damaged and proceeds,
if any, from the related hazard insurance policy are insufficient to restore
the damaged property to a condition sufficient to permit recovery under the
related instrument of Credit Support, if any, the Master Servicer is not
required to expend its own funds to restore the damaged property unless it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Whole Loan after reimbursement of the
Master Servicer for its expenses and (ii) that such expenses will be
recoverable by it from related Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of itself,
the Trustee and the Certificateholders, will present claims to the obligor
under each instrument of Credit Support, and will take such reasonable steps as
are necessary to receive payment or to permit recovery thereunder with respect
to defaulted Whole Loans.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
Certificate Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See "--Hazard Insurance Policies" and "Description
of Credit Support".
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Agreement for a Trust Fund that includes Whole Loans will require the Master
Servicer to cause the mortgagor on each Whole Loan
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to maintain a hazard insurance policy providing for such coverage as is
required under the related Mortgage or, if any Mortgage permits the holder
thereof to dictate to the mortgagor the insurance coverage to be maintained on
the related Mortgaged Property, then such coverage as is consistent with the
Servicing Standard. Unless otherwise specified in the related Prospectus
Supplement, such coverage will be in general in an amount equal to the lesser
of the principal balance owing on such Whole Loan and the amount necessary to
fully compensate for any damage or loss to the improvements on the Mortgaged
Property on a replacement cost basis, but in either case not less than the
amount necessary to avoid the application of any co-insurance clause contained
in the hazard insurance policy. The ability of the Master Servicer to assure
that hazard insurance proceeds are appropriately applied may be dependent upon
its being named as an additional insured under any hazard insurance policy and
under any other insurance policy referred to below, or upon the extent to which
information in this regard is furnished by mortgagors. All amounts collected by
the Master Servicer under any such policy (except for amounts to be applied to
the restoration or repair of the Mortgaged Property or released to the
mortgagor in accordance with the Master Servicer's normal servicing procedures,
subject to the terms and conditions of the related Mortgage and Mortgage Note)
will be deposited in the Certificate Account. The Agreement will provide that
the Master Servicer may satisfy its obligation to cause each mortgagor to
maintain such a hazard insurance policy by the Master Servicer's maintaining a
blanket policy insuring against hazard losses on the Whole Loans. If such
blanket policy contains a deductible clause, the Master Servicer will be
required to deposit in the Certificate Account all sums that would have been
deposited therein but for such clause. Unless otherwise specified in the
related Prospectus Supplement, the Master Servicer will also be required to
maintain a fidelity bond and errors and omissions policy with respect to its
officers and employees that provides coverage against losses that may be
sustained as a result of an officer's or employee's misappropriation of funds,
errors and omissions or negligence, subject to certain limitations as to amount
of coverage, deductible amounts, conditions, exclusions and exceptions.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Whole Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), hurricanes,
tornadoes, wet or dry rot, vermin, domestic animals and certain other kinds of
uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified percentage
(generally 80% to 90%) of the full replacement value of the improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, such clause generally
provides that the insurer's liability in the event of partial loss does not
exceed the lesser of (i) the replacement cost of the improvements less physical
depreciation and (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
Each Agreement for a Trust Fund that includes Whole Loans will require the
Master Servicer to cause the mortgagor on each Whole Loan to maintain all such
other insurance coverage with respect to the related Mortgaged Property as is
consistent with the terms of the related Mortgage and the Servicing Standard,
which insurance may typically include flood insurance (if the related Mortgaged
Property was located at the time of origination in a federally designated flood
area) and business interruption or loss of rents insurance.
Under the terms of the Whole Loans, mortgagors will generally be required
to present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
Certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on Mortgaged
Properties securing the Whole Loans. However, the ability of the Master
Servicer to present or cause to be presented such claims is dependent upon the
extent to which information in this regard is furnished to the Master Servicer
by mortgagors.
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DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged Property,
or due-on-sale clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon any sale or other transfer of the related Mortgaged Property.
Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to the creation of any other lien or encumbrance on the Mortgaged
Property or due-on-encumbrance clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon the creation of any other lien or encumbrance
upon the Mortgaged Property. Unless otherwise provided in the related
Prospectus Supplement, the Master Servicer, on behalf of the Trust Fund, will
determine whether to exercise any right the Trustee may have as mortgagee to
accelerate payment of any such Whole Loan or to withhold its consent to any
transfer or further encumbrance in a manner consistent with the Servicing
Standard. Unless otherwise specified in the related Prospectus Supplement, any
fee collected by or on behalf of the Master Servicer for entering into an
assumption agreement will be retained by or on behalf of the Master Servicer as
additional servicing compensation. See "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance".
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Mortgage Assets, and, if so,
the owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related
Agreement. A "Retained Interest" in a Mortgage Asset represents a specified
portion of the interest payable thereon. The Retained Interest will be deducted
from mortgagor payments as received and will not be part of the related Trust
Fund.
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a series of
Certificates will come from the periodic payment to it of a portion of the
interest payment on each Whole Loan. Since any Retained Interest and a Master
Servicer's primary compensation are percentages of the principal balance of
each Mortgage Asset, such amounts will decrease in accordance with the
amortization of the Mortgage Loans underlying or comprising such Mortgage
Asset. The Prospectus Supplement with respect to a series of Certificates
evidencing interests in a Trust Fund that includes Whole Loans may provide
that, as additional compensation, the Master Servicer or the Sub- Servicers may
retain all or a portion of assumption fees, modification fees, late payment
charges or Prepayment Premiums collected from mortgagors and any interest or
other income which may be earned on funds held in the Certificate Account or
any Sub-Servicing Account. Any Sub-Servicer will receive a portion of the
Master Servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any Sub-Servicer, a Master Servicer may,
to the extent provided in the related Prospectus Supplement, pay from its
servicing compensation certain expenses incurred in connection with its
servicing of the Mortgage Loans, including, without limitation, payment of the
fees and disbursements of the Trustee and independent accountants, payment of
expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the related
Prospectus Supplement. Certain other expenses, including certain expenses
relating to defaults and liquidations on the Mortgage Loans and, to the extent
so provided in the related Prospectus Supplement, interest thereon at the rate
specified therein, and the fees of any Special Servicer, may be borne by the
Trust Fund.
If and to the extent provided in the related Prospectus Supplement, the
Master Servicer may be required to apply a portion of the servicing
compensation otherwise payable to it in respect of any Due Period or Prepayment
Period, as applicable, to certain interest shortfalls resulting from the
voluntary prepayment of any Whole Loans in the related Trust Fund during such
period prior to their respective due dates therein.
EVIDENCE AS TO COMPLIANCE
Each Agreement relating to Mortgage Assets which include Whole Loans will
provide that on or before a specified date in each year, beginning with the
first such date at least six months after the related
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Cut-off Date, a firm of independent public accountants will furnish a statement
to the Trustee to the effect that, on the basis of the examination by such firm
conducted substantially in compliance with either the Uniform Single Audit
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC, the servicing by or on behalf of the Master Servicer of mortgage loans
under pooling and servicing agreements substantially similar to each other
(including the related Agreement) was conducted in compliance with the terms of
such agreements except for any significant exceptions or errors in records
that, in the opinion of the firm, either the Audit Program for Mortgages
serviced for FHLMC, or paragraph 4 of the Uniform Single Audit Program for
Mortgage Bankers, requires it to report. In rendering its statement such firm
may rely, as to matters relating to the direct servicing of mortgage loans by
Sub-Servicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Audit Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered within
one year of such statement) of firms of independent public accountants with
respect to the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve month period.
Unless otherwise provided in the related Prospectus Supplement, copies of
the annual accountants' statement and the statement of officers of a Master
Servicer will be obtainable by Certificateholders without charge upon written
request to the Master Servicer at the address set forth in the related
Prospectus Supplement.
CERTAIN MATTERS REGARDING A MASTER SERVICER AND THE DEPOSITOR
The Master Servicer, if any, under each Agreement will be named in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the related Agreement will provide that the Master
Servicer may resign from its obligations and duties thereunder only upon a
determination that its duties under the Agreement are no longer permissible
under applicable law or are in material conflict by reason of applicable law
with any other activities carried on by it, the other activities of the Master
Servicer so causing such a conflict being of a type and nature carried on by
the Master Servicer at the date of the Agreement. No such resignation will
become effective until the Trustee or a successor servicer has assumed the
Master Servicer's obligations and duties under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will further provide that neither any Master Servicer, the Depositor
nor any director, officer, employee, or agent of a Master Servicer or the
Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against any breach of a representation, warranty or covenant made in such
Agreement, or against any liability specifically imposed thereby, or against
any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of obligations or
duties thereunder or by reason of reckless disregard of obligations and duties
thereunder. Unless otherwise specified in the related Prospectus Supplement,
each Agreement will further provide that any Master Servicer, the Depositor and
any director, officer, employee or agent of a Master Servicer or the Depositor
will be entitled to indemnification by the related Trust Fund and will be held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to the Agreement or the Certificates; provided, however,
that such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to such Agreement); (ii)
incurred in connection with any breach of a representation, warranty or
covenant made in such Agreement; (iii) incurred by reason of misfeasance, bad
faith or negligence in the performance of obligations or duties thereunder, or
by reason of reckless disregard of such obligations or duties; or (iv) incurred
in connection with any violation of any state or
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federal securities law. In addition, each Agreement will provide that neither
any Master Servicer nor the Depositor will be under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its
respective responsibilities under the Agreement and which in its opinion may
involve it in any expense or liability. Any such Master Servicer or the
Depositor may, however, in its discretion undertake any such action which it
may deem necessary or desirable with respect to the Agreement and the rights
and duties of the parties thereto and the interests of the Certificateholders
thereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom will be expenses, costs and liabilities of the
Certificateholders, and the Master Servicer or the Depositor, as the case may
be, will be entitled to be reimbursed therefor and to charge the Certificate
Account.
Any person into which the Master Servicer or the Depositor may be merged
or consolidated, or any person resulting from any merger or consolidation to
which the Master Servicer or the Depositor is a party, or any person succeeding
to the business of the Master Servicer or the Depositor, will be the successor
of the Master Servicer or the Depositor, as the case may be, under the related
Agreement.
EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement for a Trust
Fund that includes Whole Loans, Events of Default under the related Agreement
will include (i) any failure by the Master Servicer to distribute or cause to
be distributed to Certificateholders, or to remit to the Trustee for
distribution to Certificateholders, any required payment that continues
unremedied for five days; (ii) any failure by the Master Servicer duly to
observe or perform in any material respect any of its other covenants or
obligations under the Agreement which continues unremedied for thirty days
after written notice of such failure has been given to the Master Servicer by
the Trustee or the Depositor, or to the Master Servicer, the Depositor and the
Trustee by the holders of Certificates evidencing not less than 25% of the
Voting Rights; (iii) any breach of a representation or warranty made by the
Master Servicer under the Agreement which materially and adversely affects the
interests of Certificateholders and which continues unremedied for thirty days
after written notice of such breach has been given to the Master Servicer by
the Trustee or the Depositor, or to the Master Servicer, the Depositor and the
Trustee by the holders of Certificates evidencing not less than 25% of the
Voting Rights; and (iv) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings and certain
actions by or on behalf of the Master Servicer indicating its insolvency or
inability to pay its obligations. Material variations to the foregoing Events
of Default (other than to shorten cure periods or eliminate notice
requirements) will be specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, the Trustee shall,
not later than the later of 60 days after the occurrence of any event which
constitutes or, with notice or lapse of time or both, would constitute an Event
of Default and five days after certain officers of the Trustee become aware of
the occurrence of such an event, transmit by mail to the Depositor and all
Certificateholders of, the applicable series notice of such occurrence, unless
such default shall have been cured or waived.
RIGHTS UPON EVENT OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement for a Trust
Fund, so long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, and at the direction of holders of Certificates
evidencing not less than 51% of the ,Voting Rights, the Trustee shall,
terminate all of the rights and obligations of the Master Servicer under the
Agreement and in and to the Mortgage Loans (other than as a Certificateholder
or as the owner of any Retained Interest), whereupon the Trustee will succeed
to all of the responsibilities, duties and liabilities of the Master Servicer
under the Agreement (except that if the Trustee is prohibited by law from
obligating itself to make advances regarding delinquent mortgage loans, or if
the related Prospectus Supplement so specifies, then the Trustee will not be
obligated to make such advances) and will be entitled to similar compensation
arrangements. Unless otherwise specified in the related Prospectus Supplement,
in the event that the Trustee is unwilling or unable so to act, it may or, at
the written request of the holders of Certificates entitled to at least 51% of
the Voting Rights, it shall appoint, or petition a court of competent
jurisdiction for the appointment of, a loan servicing institution acceptable to
the Rating Agency with a net worth at
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the time of such appointment of at least $15,000,000 to act as successor to the
Master Servicer under the Agreement. Pending such appointment, the Trustee is
obligated to act in such capacity. The Trustee and any such successor may agree
upon the servicing compensation to be paid, which in no event may be greater
than the compensation payable to the Master Servicer under the Agreement.
Unless otherwise described in the related Prospectus Supplement, the
holders of Certificates representing at least 662/3% of the Voting Rights
allocated to the respective Classes of Certificates affected by any Event of
Default will be entitled to waive such Event of Default; provided, however,
that an Event of Default described in clause (i) under "--Events of Default"
may be waived only by all of the Certificateholders. Upon any such waiver of an
Event of Default, such Event of Default shall cease to exist and shall be
deemed to have been remedied for every purpose under the Agreement.
No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given to
the Trustee written notice of default and unless the holders of Certificates
evidencing not less than 25% of the Voting Rights have made written request
upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the
Trustee for sixty days has neglected or refused to institute any such
proceeding. The Trustee, however, is under no obligation to exercise any of the
trusts or powers vested in it by any Agreement or to make any investigation of
matters arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any of
the holders of Certificates covered by such Agreement, unless such
Certificateholders have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
AMENDMENT
Each Agreement may be amended by the Depositor, the Master Servicer, if
any, and the Trustee, without the consent of any of the holders of Certificates
covered by the Agreement, (i) to cure any ambiguity, (ii) to correct, modify or
supplement any provision therein which may be inconsistent with any other
provision therein, (iii) to make any other provisions with respect to matters
or questions arising under the Agreement which are not inconsistent with the
provisions thereof, or (iv) to comply with any requirements imposed by the
Code; provided that such amendment (other than an amendment for the purpose
specified in clause (iv) above) will not (as evidenced by an opinion of counsel
to such effect) adversely affect in any material respect the interests of any
holder of Certificates covered by the Agreement. Unless otherwise specified in
the related Prospectus Supplement, each Agreement may also be amended by the
Depositor, the Master Servicer, if any, and the Trustee, with the consent of
the holders of Certificates evidencing not less than 51% of the Voting Rights
(or such other percentage of Voting Rights that is specified in the related
Prospectus Supplement for a Trust Fund), for any purpose; provided, however,
that unless otherwise specified in the related Prospectus Supplement, no such
amendment may (i) reduce in any manner the amount of or delay the timing of,
payments received or advanced on Mortgage Loans which are required to be
distributed on any Certificate without the consent of the holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
holders of any Class of Certificates in a manner other than as described in
(i), without the consent of the holders of all Certificates of such Class or
(iii) modify the provisions of such Agreement described in this paragraph
without the consent of the holders of all Certificates covered by such
Agreement then outstanding. However, with respect to any series of Certificates
as to which one or more REMIC or FASIT elections are to be made, the Trustee
will not consent to any amendment of the Agreement unless it shall first have
received an opinion of counsel to the effect that such amendment will not
result in the imposition of a tax on the related Trust Fund or cause the
related Trust Fund (or designated portion thereof) to fail to qualify as one or
more REMICs or FASITs at any time that the related Certificates are
outstanding.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Certificateholder of record of a series of
Certificates, for purposes of communicating with other Certificateholders with
respect to their rights under the Agreement for such series, the Trustee will
afford such Certificateholder access during business hours to the most recent
list of Certificateholders of that series held by the Trustee.
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THE TRUSTEE
The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank, national banking association, banking
corporation or trust company serving as Trustee may have typical banking
relationships with the Depositor and its affiliates and with any Master
Servicer and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Mortgage Loan or related document and
is not accountable for the use or application by or on behalf of any Master
Servicer of any funds paid to the Master Servicer or its designee or any
Special Servicer in respect of the Certificates or the Mortgage Loans, or
deposited into or withdrawn from the Certificate Account or any other account
by or on behalf of the Master Servicer or any Special Servicer. If no Event of
Default has occurred and is continuing, the Trustee is required to perform only
those duties specifically required under the related Agreement. However, upon
receipt of the various certificates, reports or other instruments required to
be furnished to it, the Trustee is required to examine such documents and to
determine whether they conform to the requirements of the Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Certificate Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement)
incurred in connection with the Trustee's (i) enforcing its rights and remedies
and protecting the interests, and enforcing the rights and remedies, of the
Certificateholders during the continuance of an Event of Default, (ii)
defending or prosecuting any legal action in respect of the related Agreement
or series of Certificates, (iii) being the mortgagee of record with respect to
the Mortgage Loans in a Trust Fund and the owner of record with respect to any
Mortgaged Property acquired in respect thereof for the benefit of
Certificateholders, or (iv) acting or refraining from acting in good faith at
the direction of the holders of the related series of Certificates entitled to
not less than 25% (or such higher percentage as is specified in the related
Agreement with respect to any particular matter) of the Voting Rights for such
series; provided, however, that such indemnification will not extend to any
loss, liability or expense that constitutes a specific liability of the Trustee
pursuant to the related Agreement, or to any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence on the part
of the Trustee in the performance of its obligations and duties thereunder, or
by reason of its reckless disregard of such obligations or duties, or as may
arise from a breach of any representation, warranty or covenant of the Trustee
made therein.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may at any time resign from its obligations and duties under
an Agreement by giving written notice thereof to the Depositor, the Master
Servicer, if any, and all Certificateholders. Upon receiving such notice of
resignation, the Depositor is required promptly to appoint a successor trustee
acceptable to the Master Servicer, if any. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as such
under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee and appoint a successor trustee acceptable to the Master
Servicer, if any. Unless otherwise provided in the related Prospectus
Supplement for a Trust Fund, Holders of the Certificates of any series entitled
to at least 51% of the Voting Rights for such series may at any time remove the
Trustee without cause and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any series of Certificates, Credit Support may be provided with
respect to one or more Classes thereof or the related Mortgage Assets. Credit
Support may be in the form of the subordination of one or more Classes of
Certificates, letters of credit, insurance policies, guarantees, the
establishment of one or more reserve funds or another method of Credit Support
described in the related Prospectus Supplement, or any combination of the
foregoing. If so provided in the related Prospectus Supplement, any form of
Credit Support may be structured so as to be drawn upon by more than one series
to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a
series of Certificates, the Credit Support will not provide protection against
all risks of loss and will not guarantee repayment of the entire Certificate
Balance of the Certificates and interest thereon. If losses or shortfalls occur
that exceed the amount covered by Credit Support or that are not covered by
Credit Support, Certificateholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers more than one series
of Certificates (each, a "Covered Trust"), holders of Certificates evidencing
interests in any of such Covered Trusts will be subject to the risk that such
Credit Support will be exhausted by the claims of other Covered Trusts prior to
such Covered Trust ,receiving any of its intended share of such coverage.
If Credit Support is provided with respect to one or more Classes of
Certificates of a series, or the related Mortgage Assets, the related
Prospectus Supplement will include a description of (a) the nature and amount
of coverage under such Credit Support, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount of coverage under such Credit Support may be reduced and under which
such Credit Support may be terminated or replaced and (d) the material
provisions relating to such Credit Support. Additionally, the related
Prospectus Supplement will set forth certain information with respect to the
obligor under any instrument of Credit Support, including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation and the jurisdiction under which it is
chartered or licensed to do business and (iii) if applicable, the identity of
regulatory agencies that exercise primary jurisdiction over the conduct of its
business. See "Risk Factors--Credit Support Limitations".
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more Classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions of principal and interest
from the Certificate Account on any Distribution Date will be subordinated to
such rights of the holders of Senior Certificates. If so provided in the
related Prospectus Supplement, the subordination of a Class may apply only in
the event of (or may be limited to) certain types of losses or shortfalls. The
related Prospectus Supplement will set forth information concerning the amount
of subordination of a Class or Classes of Subordinate Certificates in a series,
the circumstances in which such subordination will be applicable and the
manner, if any, in which the amount of subordination will be effected. If one
or more Classes of Subordinate Certificates of a series are Offered
Certificates, the related Prospectus Supplement will provide information as to
the sensitivity of distributions on such Certificates based on certain default
assumptions.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets for a series are divided into separate groups, each
supporting a separate Class or Classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that
distributions be made on Senior Certificates evidencing interests in one group
of Mortgage Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
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INSURANCE OR GUARANTEES WITH RESPECT TO THE WHOLE LOANS
If so provided in the Prospectus Supplement for a series of Certificates,
the Whole Loans constituting Mortgage Assets in the related Trust Fund will be
covered for various default risks by insurance policies or guarantees. A copy
of any such material instrument for a series will be filed with the Commission
as an exhibit to a Current Report on Form 8-K to be filed within 15 days of
issuance of the Certificates of the related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
Classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the "L/C
Bank"). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, generally equal to a percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or of the initial aggregate Certificate Principal Balance
of one or more Classes of Certificates. If so specified in the related
Prospectus Supplement, the letter of credit may permit draws in the event of
only certain types of losses and shortfalls. The amount available under the
letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments thereunder and may otherwise be reduced as described in
the related Prospectus Supplement. The obligations of the L/C Bank under the
letter of credit for each series of Certificates will expire at the earlier of
the date specified in the related Prospectus Supplement or the termination of
the Trust Fund. A copy of any such letter of credit for a series will be filed
with the Commission as an exhibit to a Current Report on Form 8-K to be filed
within 15 days of issuance of the Certificates of the related series.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
Classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more Classes of Certificates of the related
series, timely distributions of interest and/or full distributions of principal
on the basis of a schedule of principal distributions set forth in or
determined in the manner specified in the related Prospectus Supplement. A copy
of any such instrument for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed with the Commission within
15 days of issuance of the Certificates of the related series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
Classes thereof will be covered by one or more reserve funds in which cash, a
letter of credit, Permitted Investments, a demand note or a combination thereof
will be deposited, in the amounts so specified in such Prospectus Supplement.
The reserve funds for a series may also be funded over time by depositing
therein a specified amount of the distributions received on the related
Mortgage Assets as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. If so specified in the
related Prospectus Supplement, reserve funds may be established to provide
limited protection against only certain types of losses and shortfalls.
Following each Distribution Date amounts in a reserve fund in excess of any
amount required to be maintained therein may be released from the reserve fund
under the conditions and to the extent specified in the related Prospectus
Supplement and will not be available for further application to the
Certificates.
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Moneys deposited in any Reserve Funds will be invested in Permitted
investments, except as otherwise specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
any reinvestment income or other gain from such investments will be credited to
the related Reserve Fund for such series, and any loss resulting from such
investments will ,be charged to such Reserve Fund. However, such income may be
payable to any related Master Servicer or another service provider as
additional compensation. The Reserve Fund, if any, for a series will not be a
part of the Trust Fund unless otherwise specified in the related Prospectus
Supplement.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purposes for which funds in the Reserve Fund may
be applied to make distributions to Certificateholders and use of investment
earnings from the Reserve Fund, if any.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of Certificates,
the MBS constituting Mortgage Assets in the related Trust Fund and/or the
Mortgage Loans underlying such MBS may be covered by one or more of the types
of Credit Support described herein. The related Prospectus Supplement will
specify as to each such form of Credit Support the information indicated above
with respect thereto, to the extent such information is material and available.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because such legal aspects are governed by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete, to reflect
the laws of any particular state, or to encompass the laws of all states in
which the security for the Mortgage Loans (or mortgage loans underlying any
MBS) is situated. Accordingly, the summaries are qualified in their entirety by
reference to the applicable laws of those states. See "Description of the Trust
Funds--Mortgage Loans". For purposes of the following discussion, "Mortgage
Loan" includes a mortgage loan underlying an MBS.
GENERAL
Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgages". A mortgage creates a lien upon, or
grants a title interest in, the real property covered thereby, and represents
the security for the repayment of the indebtedness customarily evidenced by a
promissory note. The priority of the lien created or interest granted will
depend on the terms of the mortgage and, in some cases, on the terms of
separate subordination agreements or intercreditor agreements with others that
hold interests in the real property, the knowledge of the parties to the
mortgage and, generally, the order of re-cordation of the mortgage in the
appropriate public recording office. However, the lien of a recorded mortgage
will generally be subordinate to later-arising liens for real estate taxes and
assessments and other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent of a
borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property, irrevocably until the debt is paid, in trust
and generally with a power of sale, to the trustee to secure repayment of the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties. The grantor (the borrower) conveys title to the real property to
the grantee (the lender) generally with a power of sale, until such time as the
debt is repaid. In a case where the borrower is a land trust, there would be an
additional party because legal title to the property is held by a land trustee
under a land trust agreement for the benefit of the borrower. At origination of
a mortgage loan involving a land trust, the borrower executes a separate
undertaking to make payments on the related note. The mortgagee's authority
under a mortgage, the trustee's authority under a deed of trust and the
grantee's authority under a deed to secure debt are governed by the express
provisions of the related instrument, the law of the state in which the real
property is located, certain federal laws (including, without limitation, the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended) and, in some deed
of trust transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease
and the income derived therefrom, while (unless rents are to be paid directly
to the lender) retaining a revocable license to collect the rents for so long
as there is no default. If the borrower defaults, the license terminates and
the lender is entitled to collect the rents. Local law may require that the
lender take possession of the property and/or obtain a court-appointed receiver
before becoming entitled to collect the rents.
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In most states, hotel and motel room revenues are considered accounts
receivable under the Uniform Commercial Code ("UCC"); in cases where hotels or
motels constitute loan security, the revenues are generally pledged by the
borrower as additional security for the loan. In general, the lender must file
financing statements in order to perfect its security interest in the revenues
and must file continuation statements, generally every five years, to maintain
perfection of such security interest. Even if the lender's security interest in
room revenues is perfected under the UCC, it may be required to commence a
foreclosure action or otherwise take possession of the property in order to
collect the room revenues following a default. See "--Bankruptcy Laws".
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the
borrower and not previously pledged) may constitute a significant portion of
the property's value as security. The creation and enforcement of liens on
personal property are governed by the UCC. Accordingly, if a borrower pledges
personal property as security for a mortgage loan, the lender generally must
file UCC financing statements in order to perfect its security interest
therein, and must file continuation statements, generally every five years, to
maintain that perfection.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to
recover its mortgage debt by enforcing its rights and available legal remedies
under the mortgage. If the borrower defaults in payment or performance of its
obligations under the note or mortgage, the lender has the right to institute
foreclosure proceedings to sell the real property at public auction to satisfy
the indebtedness.
Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and non-judicial foreclosure pursuant to a power of sale granted in the
mortgage instrument. Other foreclosure procedures are available in some states,
but they are either infrequently used or available only in limited
circumstances.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes requires several years to complete. Moreover, as discussed below,
even a non-collusive, regularly conducted foreclosure sale may be challenged as
a fraudulent conveyance, regardless of the parties' intent, if a court
determines that the sale was for less than fair consideration and such sale
occurred while the borrower was insolvent and within a specified period prior
to the borrower's filing for bankruptcy protection.
Judicial Foreclosure. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action is
initiated by the service of legal pleadings upon all parties having a
subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. Delays in completion of the foreclosure may
occasionally result from difficulties in locating defendants. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
Upon successful completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other
officer to conduct a public sale of the mortgaged property, the proceeds of
which are used to satisfy the judgment. Such sales are made in accordance with
procedures that vary from state to state.
Equitable Limitations on Enforceability of Certain Provisions. United
States courts have traditionally imposed general equitable principles to limit
the remedies available to lenders in foreclosure actions. These principles are
generally designed to relieve borrowers from the effects of mortgage defaults
perceived as harsh or unfair. Relying on such principles, a court may alter the
specific terms of a loan to the extent it considers necessary to prevent or
remedy an injustice, undue oppression or overreaching, or may require the
lender to undertake affirmative actions to determine the cause of the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
that of the lenders and have required that lenders reinstate loans or recast
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payment schedules in order to accommodate borrowers who are suffering from a
temporary financial disability. In other cases, courts have limited the right
of the lender to foreclose in the case of a non-monetary default, such as a
failure to adequately maintain the mortgaged property or an impermissible
further encumbrance of the mortgaged property. Finally, some courts have
addressed the issue of whether federal or state constitutional provisions
reflecting due process concerns for adequate notice require that a borrower
receive notice in addition to statutorily-prescribed minimum notice. For the
most part, these cases have upheld the reasonableness of the notice provisions
or have found that a public sale under a mortgage providing for a power of sale
does not involve sufficient state action to trigger constitutional protections.
Non-Judicial Foreclosure/Power of Sale. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale pursuant to a power of
sale typically granted in the deed of trust. A power of sale may also be
contained in any other type of mortgage instrument if applicable law so
permits. A power of sale under a deed of trust allows a non-judicial public
sale to be conducted generally following a request from the beneficiary/lender
to the trustee to sell the property upon default by the borrower and after
notice of sale is given in accordance with the terms of the mortgage and
applicable state law. In some states, prior to such sale, the trustee under the
deed of trust must record a notice of default and notice of sale and send a
copy to the borrower and to any other party who has recorded a request for a
copy of a notice of default and notice of sale. In addition, in some states the
trustee must provide notice to any other party having an interest of record in
the real property, including junior lienholders. A notice of sale must be
posted in a public place and, in most states, published for a specified period
of time in one or more newspapers. The borrower or junior lienholder may then
have the right, during a reinstatement period required in some states, to cure
the default by paying the entire actual amount in arrears (without regard to
the acceleration of the indebtedness), plus the lender's expenses incurred in
enforcing the obligation. In other states, the borrower or the junior
lienholder is not provided a period to reinstate the loan, but has only the
right to pay off the entire debt to prevent the foreclosure sale. Generally,
state law governs the procedure for public sale, the parties entitled to
notice, the method of giving notice and the applicable time periods.
Public Sale. A third party may be unwilling to purchase a Mortgaged
Property at a public sale because of the difficulty in determining the value of
such property at the time of sale, due to, among other things, redemption
rights which may exist and the possibility of physical deterioration of the
property during the foreclosure proceedings. Potential buyers may be reluctant
to purchase property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company and other decisions that have followed
its reasoning. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under the federal
Bankruptcy Code, as amended from time to time (11 U.S.C.) and, therefore, could
be rescinded in favor of the bankrupt's estate, if (i) the foreclosure sale was
held while the debtor was insolvent and not more than one year prior to the
filing of the bankruptcy petition and (ii) the price paid for the foreclosed
property did not represent "fair consideration" ("reasonably equivalent value"
under the Bankruptcy Code). Although the reasoning and result of Durrett in
respect of the Bankruptcy Code was rejected by the United States Supreme Court
in May 1994, the case could nonetheless be persuasive to a court applying a
state fraudulent conveyance law which has provisions similar to those construed
in Durrett. For these reasons, it is common for the lender to purchase the
mortgaged property for an amount equal to the lesser of fair market value and
the underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs and
expenses which may be recovered by a lender. Thereafter, subject to the
mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and
have both the benefits and burdens of ownership of the mortgaged property. For
example, the lender will have the obligation to pay debt service on any senior
mortgages, to pay taxes, obtain casualty insurance and to make such repairs at
its own expense as are necessary to render the property suitable for sale.
Frequently, the lender employs a third party management company to manage and
operate the property. The costs of operating and maintaining a commercial or
multifamily residential property may be significant and may be greater than the
income derived from that property. The costs of management and operation of
those mortgaged properties which are hotels, motels or
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nursing or convalescent homes or hospitals may be particularly significant
because of the expertise, knowledge and, with respect to nursing or
convalescent homes or hospitals, regulatory compliance, required to run such
operations and the effect which foreclosure and a change in ownership may have
on the public's and the industry's (including franchisors') perception of the
quality of such operations. The lender will commonly obtain the services of a
real estate broker and pay the broker's commission in connection with the sale
of the property. Depending upon market conditions, the ultimate proceeds of the
sale of the property may not equal the amount of the mortgage against the
property. Moreover, a lender commonly incurs substantial legal fees and court
costs in acquiring a mortgaged property through contested foreclosure and/or
bankruptcy proceedings. Furthermore, a few states require that any
environmental contamination at certain types of properties be cleaned up before
a property may be resold. In addition, a lender may be responsible under
federal or state law for the cost of cleaning up a mortgaged property that is
environmentally contaminated. See "--Environmental Risks". Generally state law
controls the amount of foreclosure expenses and costs, including attorneys'
fees, that may be recovered by a lender.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure of
its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
The proceeds received by the referee or trustee from a foreclosure sale
are generally applied first to the costs, fees and expenses of sale and then in
satisfaction of the indebtedness secured by the mortgage under which the sale
was conducted. Any proceeds remaining after satisfaction of senior mortgage
debt are generally payable to the holders of junior mortgages and other liens
and claims in order of their priority, whether or not the borrower is in
default. Any additional proceeds are generally payable to the borrower. The
payment of the proceeds to the holders of junior mortgages may occur in the
foreclosure action of the senior mortgage or a subsequent ancillary proceeding
or may require the institution of separate legal proceedings by such holders.
Rights of Redemption. The purposes of a foreclosure action are to enable
the lender to realize upon its security and to bar the borrower, and all
persons who have interests in the property that are subordinate to that of the
foreclosing lender, from exercise of their "equity of redemption". The doctrine
of equity of redemption provides that, until the property encumbered by a
mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. Those having an equity of redemption must
generally be made parties and joined in the foreclosure proceeding in order for
their equity of redemption to be terminated.
The equity of redemption is a common-law (non-statutory) right which
should be distinguished from post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the borrower and foreclosed junior lienors are given a statutory period in
which to redeem the property. In some states, statutory redemption may occur
only upon payment of the foreclosure sale price. In other states, redemption
may be permitted if the former borrower pays only a portion of the sums due.
The effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property because the exercise of a right of
redemption would defeat the title of any purchaser through a foreclosure.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has expired. In some states, a post-sale statutory right of
redemption may exist following a judicial foreclosure, but not following a
trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held for more than two years. Unless
otherwise provided in the related Prospectus Supplement, with respect to a
series of Certificates for which an election is made to qualify the Trust Fund
or a portion thereof as a REMIC, the Agreement will permit foreclosed property
to be held for more than two years if the Internal Revenue Service grants an
extension of time within which to sell such property or independent counsel
renders an opinion to the effect that holding such property for such additional
period is permissible under the REMIC Provisions.
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Anti-Deficiency Legislation. Some or all of the Mortgage Loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the Mortgaged Property and such other assets, if any, that were pledged to
secure the Mortgage Loan. However, even if a mortgage loan by its terms
provides for recourse to the borrower's other assets, a lender's ability to
realize upon those assets may be limited by state law. For example, in some
states a lender cannot obtain a deficiency judgment against the borrower
following foreclosure or sale under a deed of trust. A deficiency judgment is a
personal judgment against the former borrower equal to the difference between
the net amount realized upon the public sale of the real property and the
amount due to the lender. Other statutes may require the lender to exhaust the
security afforded under a mortgage before bringing a personal action against
the borrower. In certain other states, the lender has the option of bringing a
personal action against the borrower on the debt without first exhausting such
security; however, in some of those states, the lender, following judgment on
such personal action, may be deemed to have elected a remedy and thus may be
precluded from foreclosing upon the security. Consequently, lenders in those
states where such an election of remedy provision exists will usually proceed
first against the security. Finally, other statutory provisions, designed to
protect borrowers from exposure to large deficiency judgments that might result
from bidding at below-market values at the foreclosure sale, limit any
deficiency judgment to the excess of the outstanding debt over the fair market
value of the property at the time of the sale.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on the borrower's leasehold
interest in a ground lease. Leasehold mortgage loans are subject to certain
risks not associated with mortgage loans secured by a lien on the fee estate of
the borrower. The most significant of these risks is that if the borrower's
leasehold were to be terminated upon a lease default, the leasehold mortgagee
would lose its security. This risk may be lessened if the ground lease requires
the lessor to give the leasehold mortgagee notices of lessee defaults and an
opportunity to cure them, permits the leasehold estate to be assigned to and by
the leasehold mortgagee or the purchaser at a foreclosure sale, and contains
certain other protective provisions typically included in a "mortgageable"
ground lease. The ground leases that secure the Mortgage Loans at issue may not
contain some of these protective provisions, and the related mortgages may not
contain the other protections discussed in the next paragraph. Protective
ground lease provisions include the right of the leasehold mortgagee to receive
notices from the ground lessor of any defaults by the borrower under the ground
lease; the right to cure such defaults, with adequate cure periods; if a
default is not susceptible of cure by the leasehold mortgagee, the right to
acquire the leasehold estate through foreclosure or otherwise; the ability of
the ground lease to be assigned to and by the leasehold mortgagee or purchaser
at a foreclosure sale and for the concomitant release of the ground lessee's
liabilities thereunder; and the right of the leasehold mortgagee to enter into
a new ground lease with the ground lessor on the same terms and conditions as
the old ground lease in the event of a termination of the ground lease.
In addition to the foregoing protections, a leasehold mortgagee may
prohibit the ground lessee from treating the ground lease as terminated in the
event of the ground lessor's bankruptcy and rejection of the ground lease in
the lessor's bankruptcy case. As further protection, a leasehold mortgage may
provide for the assignment of the debtor-ground lessee's right to reject the
lease in a ground lessee bankruptcy case, although the enforceability of such a
provision has not been established. Without the protections described in this
and the foregoing paragraph, a leasehold mortgagee may be more likely to lose
the collateral securing its leasehold mortgage. In addition, the terms and
conditions of a leasehold mortgage are subject to the terms and conditions of
the ground lease. Although certain rights given to a ground lessee can be
limited by the terms of a leasehold mortgage, the rights of a ground lessee or
a leasehold mortgagee with respect to, among other things, insurance, casualty
and condemnation proceeds will ordinarily be governed by the provisions of the
ground lease, unless otherwise agreed to by the ground lessee and leasehold
mortgagee.
COOPERATIVE SHARES
Mortgage Loans may be secured by a security interest on the borrower's
ownership interest in shares, and the proprietary leases appurtenant thereto,
allocable to cooperative dwelling units that may be vacant
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or occupied by non-owner tenants. Such loans are subject to certain risks not
associated with mortgage loans secured by a lien on the fee estate of a
borrower in real property. Such a loan typically is subordinate to the
mortgage, if any, on the Cooperative's building which, if foreclosed, could
extinguish the equity in the building and the proprietary leases of the
dwelling units derived from ownership of the shares of the Cooperative.
Further, transfer of shares in a Cooperative are subject to various regulations
as well as to restrictions under the governing documents of the Cooperative,
and the shares may be cancelled in the event that associated maintenance
charges due under the related proprietary leases are not paid. Typically, a
recognition agreement between the lender and the Cooperative provides, among
other things, the lender with an opportunity to cure a default under a
proprietary lease.
Under the laws applicable in many states, "foreclosure" on Cooperative
shares is accomplished by a sale in accordance with the provisions of Article 9
of the UCC and the security agreement relating to the shares. Article 9 of the
UCC requires that a sale be conducted in a "commercially reasonable" manner,
which may be dependent upon, among other things, the notice given the debtor
and the method, manner, time, place and terms of the sale. Article 9 of the UCC
provides that the proceeds of the sale will be applied first to pay the costs
and expenses of the sale and then to satisfy the indebtedness secured by the
lender's security interest. A recognition agreement, however, generally
provides that the lender's right to reimbursement is subject to the right of
the Cooperative to receive sums due under the proprietary leases. If, following
payment to the lender, there are proceeds remaining, the lender must account to
the tenant-stockholder for the surplus. Conversely, if a portion of the
indebtedness remains unpaid, the tenant-stockholder may be responsible for the
deficiency. See "--Anti-Deficiency Legislation".
BANKRUPTCY LAWS
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a secured lender to realize upon collateral and/or to
enforce a deficiency judgment. For example, under the Bankruptcy Code,
virtually all actions (including foreclosure actions and deficiency judgment
proceedings) to collect a debt are automatically stayed upon the filing of the
bankruptcy petition and, often, no interest or principal payments are made
during the course of the bankruptcy case. The delay and the consequences
thereof caused by such automatic stay can be significant. Also, under the
Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a
junior lienor may stay the senior lender from taking action to foreclose out
such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender are met, the amount and terms of a mortgage
loan secured by a lien on property of the debtor may be modified. For example,
the lender's lien may be transferred to other collateral and/or the outstanding
amount of the secured loan may be reduced to the then-current value of the
property (with a corresponding partial reduction of the amount of the lender's
security interest) pursuant to a confirmed plan or lien avoidance proceeding,
thus leaving the lender a general unsecured creditor for the difference between
such value and the outstanding balance of the loan. Other modifications may
include the reduction in the amount of each scheduled payment, by means of a
reduction in the rate of interest and/or an alteration of the repayment
schedule (with or without affecting the unpaid principal balance of the loan),
and/or by an extension (or shortening) of the term to maturity. The priority of
a mortgage loan may also be subordinated to bankruptcy court-approved
financing. Some bankruptcy courts have approved plans, based on the particular
facts of the reorganization case, that effected the cure of a mortgage loan
default by paying arrearages over a number of years. Also, a bankruptcy court
may permit a debtor, through its rehabilitative plan, to reinstate a loan
mortgage payment schedule even if the lender has obtained a final judgment of
foreclosure prior to the filing of the debtor's petition.
The bankruptcy court can also reinstate accelerated indebtedness and also,
in effect, invalidate due-on-sale clauses through confirmed Chapter 11 plans of
reorganization. Under Section 363(b) and (f) of the Bankruptcy Code, a trustee
for a lessor, or a lessor as debtor-in-possession, may, despite the provisions
of the related Mortgage Loan to the contrary, sell the Mortgaged Property free
and clear of all liens, which liens would then attach to the proceeds of such
sale.
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The Bankruptcy Code provides that a lender's perfected pre-petition
security interest in leases, rents and hotel revenues continues in the
post-petition leases, rents and hotel revenues, unless a bankruptcy court
orders to the contrary "based on the equities of the case." Thus, unless a
court orders otherwise, revenues from a Mortgaged Property generated after the
date the bankruptcy petition is filed will constitute "cash collateral" under
the Bankruptcy Code. Debtors may only use cash collateral upon obtaining the
lender's consent or a prior court order finding that the lender's interest in
the Mortgaged Properties and the cash collateral is "adequately protected" and
such term is defined and interpreted under the Bankruptcy Code. It should be
noted, however, that the court may find that the lender has no security
interest in either pre-petition or post-petition revenues if the court finds
that the loan documents do not contain language covering accounts, room rents,
or other forms of personalty necessary for a security interest to attach to
hotel revenues.
Lessee bankruptcies at the Mortgaged Properties could have an adverse
impact on the borrowers' ability to meet their obligations. For example,
Section 365(e) of the Bankruptcy Code provides generally that rights and
obligations under an unexpired lease may not be terminated or modified at any
time after the commencement of a case under the Bankruptcy Code solely because
of a provision in the lease conditioned upon the commencement of a case under
the Bankruptcy Code or certain other similar events. In addition, Section 362
of the Bankruptcy Code operates as an automatic stay of, among other things,
any act to obtain possession of property of or from a debtor's estate, which
may delay the borrower's exercise of such remedies in the event that a lessee
becomes the subject of a proceeding under the Bankruptcy Code.
Section 365(a) of the Bankruptcy Code generally provides that a trustee or
a debtor-in-possession in a case under the Bankruptcy Code has the power to
assume or to reject an executory contract or an unexpired lease of the debtor,
in each case subject to the approval of the bankruptcy court administering such
case. If the trustee or debtor-in-possession rejects an executory contract or
an unexpired lease, such rejection generally constitutes a breach of the
executory contract or unexpired lease immediately before the date of the filing
of the petition. As a consequence, the other party or parties to such executory
contract or unexpired lease, such as the lessor or borrower, as lessor under a
lease, would have only an unsecured claim against the debtor for damages
resulting from such breach, which could adversely affect the security for the
related Mortgage Loan. Moreover, under Section 502(b)(6) of the Bankruptcy
Code, the claim of a lessor for such damages from the termination of a lease of
real property will be limited to the sum of (i) the rent reserved by such
lease, without acceleration, for the greater of one year or 15 percent, not to
exceed three years, of the remaining term of such lease, following the earlier
of the date of the filing of the petition and the date on which such lender
repossessed, or the lessee surrendered, the leased property, and (ii) any
unpaid rent due under such lease, without acceleration, on the earlier of such
dates.
Under Section 365(f) of the Bankruptcy Code, if a trustee or
debtor-in-possession assumes an executory contract or an unexpired lease of the
debtor, the trustee or debtor-in-possession generally may assign such executory
contract or unexpired lease, notwithstanding any provision therein or in
applicable law that prohibits, restricts or conditions such assignment,
provided that the trustee or debtor-in-possession provides "adequate assurance
of future performance" by the assignee. The Bankruptcy Code specifically
provides, however, that adequate assurance of future performance for purposes
of a lease of real property in a shopping center includes adequate assurance of
the source of rent and other consideration due under such lease, and in the
case of an assignment, that the financial condition and operating performance
of the proposed assignee and its guarantors, if any, shall be similar to the
financial condition and operating performance of the debtor and its guarantors,
if any, as of the time the debtor became the lessee under the lease, that any
percentage rent due under such lease will not decline substantially, that the
assumption and assignment of the lease is subject to all the provisions
thereof, including (but not limited to) provisions such as a radius location,
use or exclusivity provision, and will not breach any such provision contained
in any other lease, financing agreement, or master agreement relating to such
shopping center, and that the assumption or assignment of such lease will not
disrupt the tenant mix or balance in such shopping center. Thus, an
undetermined third party may assume the obligations of the lessee under a lease
in the event of commencement of a proceeding under the Bankruptcy Code with
respect to the lessee.
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Under Section 365(h) of the Bankruptcy Code, if a trustee for a lessor as
a debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat such lease as terminated by such rejection or, in the alternative,
may remain in possession of the leasehold for the balance of such term and for
any renewal or extension of such term that is enforceable by the lessee under
applicable nonbankruptcy law. The Bankruptcy Code provides that if a lessee
elects to remain in possession after such a rejection of a lease, the lessee
may offset against rents reserved under the lease for the balance of the term
after the date of rejection of the lease, and any such renewal or extension
thereof, any damages occurring after such date caused by the nonperformance of
any obligation of the lessor under the lease after such date.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor under
the related Mortgage Loan to the related Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction. In addition, some court decisions
suggest that even a non-collusive, regularly conducted foreclosure sale could
be challenged in a bankruptcy case as a "fraudulent conveyance", regardless of
the parties' intent, if a bankruptcy court determines that the mortgaged
property has been sold for less than fair consideration while the mortgagor was
insolvent and within one year (or within any longer state statutes of
limitations periods if the trustee in bankruptcy elects to proceed under state
fraudulent conveyance law) of the filing of the bankruptcy.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may
have the power to grant liens senior to the lien of a mortgage, and analogous
state statutes and general principles of equity may also provide a mortgagor
with means to halt a foreclosure proceeding or sale and to force a
restructuring of a mortgage loan on terms a lender would not otherwise accept.
Moreover, the laws of certain states also give priority to certain tax liens
over the lien of a mortgage or deed of trust. Under the Bankruptcy Code, if the
court finds that actions of the mortgagee have been unreasonable, the lien of
the related mortgage may be subordinated to the claims of unsecured creditors.
Pursuant to the federal doctrine of "substantive consolidation" or to the
(predominantly state law) doctrine of "piercing the corporate veil", a
bankruptcy court, in the exercise of its equitable powers, also has the
authority to order that the assets and liabilities of a related entity be
consolidated with those of an entity before it. Thus, property ostensibly the
property of one entity may be determined to be the property of a different
entity in bankruptcy, the automatic stay applicable to the second entity may be
extended to the first and the rights of creditors of the first entity may be
impaired in the fashion set forth above in the discussion of bankruptcy
principles. Depending on facts and circumstances not wholly in existence at the
time a Mortgage Loan is originated or transferred to the related Trust Fund,
the application of any of these doctrines to one or more of the mortgagors in
the context of the bankruptcy of one or more of their affiliates could result
in material impairment of the rights of the Certificateholders.
For each mortgagor that is described as a "special purpose entity",
"single purpose entity" or "bankruptcy-remote entity" in the Prospectus
Supplement, the activities that may be conducted by such mortgagor and its
ability to incur debt are restricted by the applicable Mortgage or the
organizational documents of such mortgagor in such manner as is intended to
make the likelihood of a bankruptcy proceeding being commenced by or against
such mortgagor remote, and such mortgagor has been organized and is designed to
operate in a manner such that its separate existence should be respected
notwithstanding a bankruptcy proceeding in respect of one or more affiliated
entities of such mortgagor. However, the Depositor makes no representation as
to the likelihood of the institution of a bankruptcy proceeding by or in
respect of any mortgagor or the likelihood that the separate existence of any
mortgagor would be respected if there were to be a bankruptcy proceeding in
respect of any affiliated entity of a mortgagor.
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ENVIRONMENTAL LEGISLATION
A lender may be subject to unforeseen environmental risks with respect to
loans secured by real or personal property, such as the Mortgage Loans. Such
environmental risks may give rise to (i) a diminution in value of property
securing a Mortgage Loan or the inability to foreclose against such property or
(ii) in certain circumstances as more fully described below, liability for
clean-up costs or other remedial actions, which liability could exceed the
value of such property or the principal balance of the related Mortgage Loan.
Under the laws of many states, contamination on a property may give rise to a
lien on the property for cleanup costs. In several states, such a lien has
priority over all existing liens (a "superlien"), including those of existing
mortgages; in these states, the lien of the mortgage for any Mortgage Loan may
lose its priority to such a superlien.
Under the federal Comprehensive Response Compensation and Liability Act
("CERCLA"), a lender may be liable either to the government or to private
parties for cleanup costs on a property securing a loan, even if the lender
does not cause or contribute to the contamination. CERCLA imposes strict, as
well as joint and several, liability on several Classes of potentially
responsible parties ("PRPs"), including current owners and operators of the
property who did not cause or contribute to the contamination. Many states have
laws similar to CERCLA.
Lenders may be held liable under CERCLA as owners or operators unless they
qualify for the secured creditor exemption to CERCLA. A 1990 decision of the
United States Court of Appeals for the Eleventh Circuit, United States v. Fleet
Factors Corp., 901 F.2d 1550 (11th Cir. 1990), narrowly construed the security
interest exemption under CERCLA to hold lenders liable if they had the capacity
to influence their borrower's management of hazardous waste. In response to the
Fleet Factors case, the Environmental Protection Agency ("EPA") promulgated a
rule in 1992 intended to reduce interpretive uncertainties that surrounded the
scope of the secured lender exemption to liability under CERCLA. The rule,
which the EPA stated would be entitled to deference in CERCLA cost recovery
actions brought against lenders by private parties, clarified the scope of the
secured creditor exemption and identified specific types of actions that, if
taken by a lender, would preclude application of the exemption. In the decision
of Kelley v. EPA, 15 F.3d 1100 (D.C. Cir. 1994), the Court of Appeals for the
District of Columbia vacated the EPA's lender liability rule. On September 30,
1996, President Clinton signed into law the "Asset Conservation, Lender
Liability and Deposit Insurance Protection Act of 1996" (the "Asset
Conservation Act"), which substantially protects lenders and fiduciaries from
liability for the environmental obligations of borrowers and beneficiaries. The
Asset Conservation Act includes amendments to CERCLA and to the underground
storage tank provisions of the Resource Conservation and Recovery Act and
applies to any claim that was not finally adjudicated as of September 30, 1996.
The Act offers substantial protection to lenders by defining the activities in
which a lender can engage and still have the benefit of a secured creditor
exemption. However, the secured creditor exemption is not available to a lender
that participates in management of mortgaged property prior to a foreclosure.
In order for a lender to be deemed to have participated in the management of a
mortgaged property, the lender must actually participate in the operational
affairs of the property of the borrower. The Act provides that "merely having
the capacity to influence, or unexercised right to control" operations does not
constitute participation in management. A lender will be deemed to have
participated in management and will lose the protection of the secured creditor
exemption only if it exercises decision-making control over the borrower's
environmental compliance and hazardous substance handling and disposal
practices, or assumes day-to-day management of all operational functions of the
mortgaged property. The Act also provides that a lender will continue to have
the benefit of the secured creditor exemption even if it forecloses on a
mortgaged property, purchases it at a foreclosure sale or accepts a
deed-in-lieu of foreclosure provided that the lender seeks to sell the
mortgaged property at the earliest practicable commercially reasonable time on
commercially reasonable terms.
Environment clean-up costs may be substantial. It is possible that such
costs could become a liability of the related Trust Fund and occasion a loss to
Certificateholders if such remedial costs were incurred.
In a few states, transfers of some types of properties are conditioned
upon cleanup of contamination prior to transfer. It is possible that a property
securing a Mortgage Loan could be subject to such transfer restrictions. In
such a case, if the lender becomes the owner upon foreclosure, it may be
required to clean up the contamination before selling the property.
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The cost of remediating hazardous substance contamination at a property
can be substantial. If a lender is or becomes liable, it can bring an action
for contribution against the owner or operator that created the environmental
hazard, but that person or entity may be without substantial assets.
Accordingly, it is possible that such costs could become a liability of a Trust
Fund and occasion a loss to Certificateholders of the related series.
To reduce the likelihood of such a loss, and unless otherwise provided in
the related Prospectus Supplement, the related Pooling and Servicing Agreement
will provide that the Master Servicer, acting on behalf of the related Trust
Fund, may not acquire title to a Mortgaged Property or take over its operation
unless the Master Servicer, based on a report prepared by a person who
regularly conducts environmental site assessments, has made the determination
that it is appropriate to do so, as described under "Description of the Pooling
and Servicing Agreements--Realization Upon Defaulted Mortgage Loans". There can
be no assurance that any environmental site assessment obtained by the Master
Servicer will detect all possible environmental contamination or conditions or
that the other requirements of the related Pooling and Servicing Agreement,
even if fully observed by the Master Servicer, will in fact insulate the
related Trust Fund from liability with respect to environmental matters.
Even when a lender is not directly liable for cleanup costs on property
securing loans, if a property securing a loan is contaminated, the value of the
security is likely to be affected. In addition, a lender bears the risk that
unanticipated cleanup costs may jeopardize the borrower's repayment. Neither of
these two issues is likely to pose risks exceeding the amount of unpaid
principal and interest of a particular loan secured by a contaminated property,
particularly if the lender declines to foreclose on a mortgage secured by the
property.
If a lender forecloses on a mortgage secured by a property the operations
of which are subject to environmental laws and regulations, the lender will be
required to operate the property in accordance with those laws and regulations.
Compliance may entail some expense.
In addition, a lender may be obligated to disclose environmental
conditions on a property to government entities and/or to prospective buyers
(including prospective buyers at a foreclosure sale or following foreclosure).
Such disclosure may decrease the amount that prospective buyers are willing to
pay for the affected property and thereby lessen the ability of the lender to
recover its investment in a loan upon foreclosure.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain "due-on-sale" and
"due-on-encumbrance" clauses that purport to permit the lender to accelerate
the maturity of the loan if the borrower transfers or encumbers the related
Mortgaged Property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce such clauses
in many states. By virtue, however, of the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn Act"), effective October 15, 1982 (which
purports to preempt state laws that prohibit the enforcement of due-on-sale
clauses by providing among other matters, that "due-on-sale" clauses in certain
loans made after the effective date of the Garn Act are enforceable, within
certain limitations, as set forth in the Garn Act and the regulations
promulgated thereunder), the Master Servicer may nevertheless have the right to
accelerate the maturity of a Mortgage Loan that contains a "due-on-sale"
provision upon transfer of an interest in the property, regardless of the
Master Servicer's ability to demonstrate that a sale threatens its legitimate
security interest.
SUBORDINATE FINANCING
Certain of the Mortgage Loans may not restrict the ability of the borrower
to use the Mortgaged Property as security for one or more additional loans.
Where a borrower encumbers a Mortgaged Property with one or more junior liens,
the senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower (as is frequently the case) and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that prejudice
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the junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. Third, if the borrower defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior
lenders can impair the security available to the senior lender and can
interfere with or delay the taking of action by the senior lender. Moreover,
the bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and
in some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower
for delinquent payments. Certain states also limit the amounts that a lender
may collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
ADJUSTABLE RATE LOANS
The laws of certain states may provide that mortgage notes relating to
adjustable rate loans are not negotiable instruments under the UCC. In such
event, the related Trust Fund will not be deemed to be a "holder in due course"
within the meaning of the UCC and may take such a mortgage note subject to
certain restrictions on the ability to foreclose and to certain contractual
defenses available to a mortgagor.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended ("Title V") provides that state usury limitations shall
not apply to certain types of residential (including multifamily) first
mortgage loans originated by certain lenders after March 31, 1980. Title V
authorized any state to reimpose interest rate limits by adopting, before April
1, 1983, a law or constitutional provision that expressly rejects application
of the federal law. In addition, even where Title V is not so rejected, any
state is authorized by the law to adopt a provision limiting discount points or
other charges on mortgage loans covered by Title V. Certain states have taken
action to reimpose interest rate limits and/or to limit discount points or
other charges.
No Mortgage Loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will (if originated after that rejection or adoption)
be eligible for inclusion in a Trust Fund unless (i) such Mortgage Loan
provides for such interest rate, discount points and charges as are permitted
under the laws of such state or (ii) such Mortgage Loan provides that the terms
thereof are to be construed in accordance with the laws of another state under
which such interest rate, discount points and charges would not be usurious and
the borrower's counsel has rendered an opinion that such choice of law
provision would be given effect.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's Mortgage Loan (including a borrower who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies
to individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who
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are called to active duty) after origination of the related Mortgage Loan, no
information can be provided as to the number of loans with individuals as
borrowers that may be affected by the Relief Act. Application of the Relief Act
would adversely affect, for an indeterminate period of time, the ability of any
servicer to collect full amounts of interest on certain of the Mortgage Loans.
Any shortfalls in interest collections resulting from the application of the
Relief Act would result in a reduction of the amounts distributable to the
holders of the related series of Certificates, and would not be covered by
advances or, unless otherwise specified in the related Prospectus Supplement,
any instrument of Credit Support provided in connection with such Certificates.
In addition, the Relief Act imposes limitations that would impair the ability
of the servicer to foreclose on an affected Mortgage Loan during the borrower's
period of active duty status, and, under certain circumstances, during an
additional three-month period thereafter. Thus, in the event such a Mortgage
Loan goes into default, there may be delays and losses occasioned by the
inability to realize upon the Mortgaged Property in a timely fashion.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of
the operation, maintenance, control and financing of health care institutions.
Mortgages on Mortgaged Properties which are owned by the borrower under a
condominium form of ownership are subject to the declaration, by-laws and other
rules and regulation of the condominium association. Mortgaged Properties which
are hotels or motels may present additional risk to the lender in that: (i)
hotels and motels are typically operated pursuant to franchise, management and
operating agreements which may be terminable by the operator; and (ii) the
transferability of the hotel's operating, liquor and other licenses to the
entity acquiring the hotel either through purchase or foreclosure is subject to
the vagaries of local law requirements. In addition, Mortgaged Properties which
are multifamily properties or cooperatively owned multifamily properties may be
subject to rent control laws, which could impact the future cash flows of such
properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels, shopping
centers, hospitals, schools and social service center establishments) must
remove architectural and communication barriers which are structural in nature
from existing places of public accommodation to the extent "readily
achievable." In addition, under the ADA, alterations to a place of public
accommodation or a commercial facility are to be made so that, to the maximum
extent feasible, each altered portions are readily accessible to and usable by
disabled individuals. The "readily achievable" standard takes into account,
among other factors, the financial resources of the affected site, owner,
landlord or other applicable person. In addition to imposing a possible
financial burden on the borrower in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the borrower as owner or landlord. Furthermore, since the "readily
achievable" standard may vary depending on the financial condition of the owner
or landlord, a foreclosing lender who is financially more capable than the
borrower of complying with the requirements of the ADA may be subject to more
stringent requirements than those to which the borrower is subject.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction.
The government must publish notice of the forfeiture proceeding and may give
notice to all parties "known to have an alleged interest in the property",
including the holders of mortgage loans.
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A lender may avoid forfeiture of its interest in the property if it
established that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
In addition, there may be other state or municipal laws providing for
forfeiture of mortgaged properties.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
Certificates. The discussion below does not purport to address all federal
income tax consequences that may be applicable to particular categories of
investors, some of which may be subject to special rules. The authorities on
which this discussion is based are subject to change or differing
interpretations, and any such change or interpretation could apply
retroactively. This discussion reflects the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), as well as regulations
(the "REMIC Regulations") promulgated by the U.S. Department of Treasury (the
"Treasury"). Investors should consult their own tax advisors in determining the
federal, state, local and other tax consequences to them of the purchase,
ownership and disposition of Certificates.
For purposes of this discussion, (i) references to the Mortgage Loans
include references to the mortgage loans underlying MBS included in the
Mortgage Assets and (ii) where the applicable Prospectus Supplement provides
for a fixed retained yield with respect to the Mortgage Loans underlying a
series of Certificates, references to the Mortgage Loans will be deemed to
refer to that portion of the Mortgage Loans held by the Trust Fund which does
not include the Retained Interest. References to a "holder" or
"Certificateholder" in this discussion generally mean the beneficial owner of a
Certificate.
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
General. With respect to a particular series of Certificates, an election
may be made to treat the Trust Fund or one or more segregated pools of assets
therein as one or more REMICs within the meaning of Code Section 860D. A Trust
Fund or a portion thereof as to which a REMIC election will be made will be
referred to as a "REMIC Pool". For purposes of this discussion, Certificates of
a series as to which one or more REMIC elections are made are referred to as
"REMIC Certificates" and will consist of one or more Classes of "Regular
Certificates" and one Class of "Residual Certificates" in the case of each
REMIC Pool. Qualification as a REMIC requires ongoing compliance with certain
conditions. With respect to each series of REMIC Certificates, O'Melveny &
Myers LLP, counsel to the Depositor, has advised the Depositor that in the
firm's opinion, assuming (i) the making of such an election, (ii) compliance
with the Pooling and Servicing Agreement and (iii) compliance with any changes
in the law, including any amendments to the Code or applicable Treasury
regulations thereunder, each REMIC Pool will qualify as a REMIC. In such case,
the Regular Certificates will be considered to be "regular interests" in the
REMIC Pool and generally will be treated for federal income tax purposes as if
they were newly originated debt instruments, and the Residual Certificates will
be considered to be "residual interests" in the REMIC Pool. The Prospectus
Supplement for each series of Certificates will indicate whether one or more
REMIC elections will be made with respect to the related Trust Fund, in which
event references to "REMIC" or "REMIC Pool" herein shall be deemed to refer to
each such REMIC Pool. If so specified in the applicable Prospectus Supplement,
the portion of a Trust Fund as to which a REMIC election is not made may be
treated as either a financial asset securitization investment trust (a "FASIT")
or a grantor trust for federal income tax purposes. See "--Federal Income Tax
Consequences for FASIT Certificates" and "--Federal Income Tax Consequences for
Certificates as to Which No REMIC Election Is Made".
Status of REMIC Certificates. REMIC Certificates held by a domestic
building and loan association will constitute "a regular or residual interest
in a REMIC" within the meaning of Code Section 7701(a)(19)(C)(xi), but only in
the same proportion that the assets of the REMIC Pool would be treated as
"loans . . . secured by an interest in real property which is . . . residential
real property" (such as single family or multifamily properties, but not
commercial properties) within the meaning of Code Section 7701(a)(19)(C)(v) or
as other assets described in Code Section 7701(a)(19)(C), and otherwise will
not qualify for such treatment. REMIC Certificates held by a real estate
investment trust will constitute "real estate assets" within the meaning of
Code Section 856(c)(4)(A), and interest on the Regular Certificates and income
with respect to Residual Certificates will be considered "interest on
obligations secured by mortgages on real property or on interests in real
property" within the meaning of Code Section 856(c)(3)(B) in the same
proportion that, for both purposes, the assets of the REMIC Pool would be so
treated. If at all times 95% or more of the assets of the REMIC Pool qualify
for each of the foregoing
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respective treatments, the REMIC Certificates will qualify for the
corresponding status in their entirety. For purposes of Code Section
856(c)(4)(A), payments of principal and interest on the Mortgage Loans that are
reinvested pending distribution to holders of REMIC Certificates qualify for
such treatment. Where two REMIC Pools are a part of a tiered structure they
will be treated as one REMIC for purposes of the tests described above
respecting asset ownership of more or less than 95%. In addition, if the assets
of the REMIC include Buy-Down Mortgage Loans, it is possible that the
percentage of such assets constituting "loans . . . secured by an interest in
real property which is . . . residential real property" for purposes of Code
Section 7701(a)(19)(C)(v) may be required to be reduced by the amount of the
related Buy-Down Funds. REMIC Certificates held by a regulated investment
company will not constitute "Government Securities" within the meaning of Code
Section 851(b)(3)(A)(i). REMIC Certificates held by certain financial
institutions will constitute "evidence of indebtedness" within the meaning of
Code Section 582(c)(1). The Small Business Job Protection Act of 1996 (the
"SBJPA of 1996") repealed the reserve method for bad debts of domestic building
and loan associations and mutual savings banks, and thus has eliminated the
asset category of "qualifying real property loans" in former Code Section
593(d) for taxable years beginning after December 31, 1995. The requirement in
the SBJPA of 1996 that such institutions must "recapture" a portion of their
existing bad debt reserves is suspended if a certain portion of their assets
are maintained in "residential loans" under Code Section 7701(a)(19)(C)(v), but
only if such loans were made to acquire, construct or improve the related real
property and not for the purpose of refinancing. However, no effort will be
made to identify the portion of the Mortgage Loans of any series meeting this
requirement, and no representation is made in this regard.
Qualification as a REMIC. In order for the REMIC Pool to qualify as a
REMIC, there must be ongoing compliance on the part of the REMIC Pool with the
requirements set forth in the Code. The REMIC Pool must fulfill an asset test,
which requires that no more than a de minimis portion of the assets of the
REMIC Pool, as of the close of the third calendar month beginning after the
"Startup Day" (which for purposes of this discussion is the date of issuance of
the REMIC Certificates) and at all times thereafter, may consist of assets
other than "qualified mortgages" and "permitted investments". The REMIC
Regulations provide a safe harbor pursuant to which the de minimis requirement
is met if at all times the aggregate adjusted basis of the nonqualified assets
is less than 1% of the aggregate adjusted basis of all the REMIC Pool's assets.
An entity that fails to meet the safe harbor may nevertheless demonstrate that
it holds no more than a de minimis amount of nonqualified assets. A REMIC also
must provide "reasonable arrangements" to prevent its residual interest from
being held by "disqualified organizations" and must furnish applicable tax
information to transferors or agents that violate this requirement. The Pooling
and Servicing Agreement for each series will contain a provision designed to
meet this requirement. See "Taxation of Residual Certificates--Tax-Related
Restrictions on Transfer of Residual Certificates--Disqualified Organizations".
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC Pool on
the Startup Day in exchange for Regular Certificates or Residual Certificates
or is purchased by the REMIC Pool within a three-month period thereafter
pursuant to a fixed price contract in effect on the Startup Day. Qualified
mortgages include whole mortgage loans, such as the Mortgage Loans,
certificates of beneficial interest in a grantor trust that holds mortgage
loans, including certain of the MBS, regular interests in another REMIC, such
as MBS in a trust as to which a REMIC election has been made, loans secured by
timeshare interests and loans secured by shares held by a tenant stockholder in
a cooperative housing corporation, provided, in general, (i) the fair market
value of the real property securing the mortgage (including buildings and
structural components thereof) is at least 80% of the principal balance of the
related Mortgage Loan or mortgage loan underlying the Mortgage Certificate
either at origination of the relevant loan or as of the Startup Day (an
original loan-to-value ratio of not more than 125% with respect to the real
property securing the mortgage) or (ii) substantially all the proceeds of the
Mortgage Loan or the underlying mortgage loan were used to acquire, improve or
protect an interest in real property that, at the origination date, was the
only security for the Mortgage Loan or underlying mortgage loan. If the
Mortgage Loan has been substantially modified other than in connection with a
default or reasonably foreseeable default, it must meet the loan-to-value test
in clause (i) of the preceding sentence as of the date of the last such
modification or at closing. A qualified mortgage includes a qualified
replacement mortgage, which is any property that would
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have been treated as a qualified mortgage if it were transferred to the REMIC
Pool on the Startup Day and that is received either (i) in exchange for any
qualified mortgage within a three-month period thereafter or (ii) in exchange
for a "defective obligation" within a two-year period thereafter. A "defective
obligation" includes (i) a mortgage in default or as to which default is
reasonably foreseeable, (ii) a mortgage as to which a customary representation
or warranty made at the time of transfer to the REMIC Pool has been breached,
(iii) a mortgage that was fraudulently procured by the mortgagor, and (iv) a
mortgage that was not in fact principally secured by real property (but only if
such mortgage is disposed of within 90 days of discovery). A Mortgage Loan that
is "defective" as described in clause (iv) that is not sold or, if within two
years of the Startup Day, sold or exchanged, within 90 days of discovery,
ceases to be a qualified mortgage after such 90-day period. A qualified
mortgage also includes any regular interest in a FASIT transferred to the REMIC
Pool on the Startup Day in exchange for Regular Certificates or Residual
Certificates, or purchased by the REMIC Pool within three months after the
Startup Day pursuant to a fixed price contract in effect on the Startup Day,
provided that at least 95% of the value of the FASIT assets is at all times
attributable to obligations principally secured by interests in real property
and which are transferred to, or purchased by, a REMIC as provided in this
sentence.
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13 months,
until distributed to holders of interests in the REMIC Pool. A qualified
reserve asset is any intangible property (other than a REMIC residual interest)
held for investment that is part of any reasonably required reserve maintained
by the REMIC Pool to provide for payments of expenses of the REMIC Pool or
amounts due on the regular or residual interests in the event of defaults
(including delinquencies) on the qualified mortgages, lower than expected
reinvestment returns, prepayment interest shortfalls and certain other
contingencies. The reserve fund will be disqualified if more than 30% of the
gross income from the assets in such fund for the year is derived from the sale
or other disposition of property held for less than three months, unless
required to prevent a default on the regular interests caused by a default on
one or more qualified mortgages. A reserve fund must be reduced "promptly and
appropriately" as payments on the Mortgage Loans are received. Foreclosure
property is real property acquired by the REMIC Pool in connection with the
default or imminent default of a qualified mortgage and generally held beyond
the close of the third calendar year following the acquisition of the property
by REMIC Pool for not more than two years, with possible extensions granted by
the Internal Revenue Service (the "Service") of up to an additional four years.
In addition to the foregoing requirements, the various interests in a
REMIC Pool also must meet certain requirements. All of the interests in a REMIC
Pool must be either of the following: (i) one or more Classes of regular
interests or (ii) a single Class of residual interests on which distributions,
if any, are made pro rata. A regular interest is an interest in a REMIC Pool
that is issued on the Startup Day with fixed terms, is designated as a regular
interest, and unconditionally entitles the holder to receive a specified
principal amount (or other similar amount), and provides that interest payments
(or other similar amounts), if any, at or before maturity either are payable
based on a fixed rate or a qualified variable rate, or consist of a specified,
nonvarying portion of the interest payments on qualified mortgages. Such a
specified portion may consist of a fixed number of basis points, a fixed
percentage of the total interest, or a fixed or qualified variable or inverse
variable rate on some or all of the qualified mortgages minus a different fixed
or qualified variable rate. The specified principal amount of a regular
interest that provides for interest payments consisting of a specified,
nonvarying portion of interest payments on qualified mortgages may be zero. A
residual interest is an interest in a REMIC Pool other than a regular interest
that is issued on the Startup Day and that is designated as a residual
interest. An interest in a REMIC Pool may be treated as a regular interest even
if payments of principal with respect to such interest are subordinated to
payments on other regular interests or the residual interest in the REMIC Pool,
and are dependent on the absence of defaults or delinquencies on qualified
mortgages or permitted investments, lower than reasonably expected returns on
permitted investments, unanticipated expenses incurred by the REMIC Pool or
prepayment interest shortfalls. Accordingly, the Regular Certificates of a
series will constitute one or more Classes of regular interests, and the
Residual Certificates with respect to that series will constitute a single
Class of residual interests on which distributions are made pro rata.
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If an entity, such as the REMIC Pool, fails to comply with one or more of
the ongoing requirements of the Code for REMIC status during any taxable year,
the Code provides that the entity will not be treated as a REMIC for 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 the Regular Certificates may be treated as
equity interests therein. The Code, however, authorizes the Treasury Department
to issue regulations that address situations where failure to meet one or more
of the requirements for REMIC status occurs inadvertently and in good faith,
and disqualification of the REMIC Pool would occur absent regulatory relief.
Investors should be aware, however, that the Conference Committee Report to the
Tax Reform Act of 1986 (the "1986 Act") indicates that the relief may be
accompanied by sanctions, such as the imposition of a corporate tax on all or a
portion of the REMIC Pool's income for the period of time in which the
requirements for REMIC status are not satisfied.
TAXATION OF REGULAR CERTIFICATES
General
In general, interest, original issue discount and market discount on a
Regular Certificate will be treated as ordinary income to a holder of the
Regular Certificate (the "Regular Certificateholder") as they accrue, and
principal payments on a Regular Certificate will be treated as a return of
capital to the extent of the Regular Certificateholder's basis in the Regular
Certificate allocable thereto. Regular Certificateholders must use the accrual
method of accounting with regard to Regular Certificates, regardless of the
method of accounting otherwise used by such Regular Certificateholders.
Original Issue Discount
Accrual Certificates and principal-only Certificates will be, and other
Classes of Regular Certificates may be, issued with "original issue discount"
within the meaning of Code Section 1273(a). Holders of any Class of Regular
Certificates having original issue discount generally must include original
issue discount in ordinary income for federal income tax purposes as it
accrues, in accordance with the constant yield method that takes into account
the compounding of interest, in advance of receipt of the cash attributable to
such income. The following discussion is based in part on temporary and final
Treasury regulations issued on February 2, 1994, as amended on June 14, 1996,
(the "OID Regulations") under Code Sections 1271 through 1273 and 1275 and in
part on the provisions of the 1986 Act. Regular Certificateholders should be
aware, however, that the OID Regulations do not adequately address certain
issues relevant to prepayable securities, such as the Regular Certificates. To
the extent such issues are not addressed in such regulations, the Depositor
intends to apply the methodology described in the Conference Committee Report
to the 1986 Act. No assurance can be provided that the Service will not take a
different position as to those matters not currently addressed by the OID
Regulations. Moreover, the OID Regulations include an anti-abuse rule allowing
the Service to apply or depart from the OID Regulations where necessary or
appropriate to ensure a reasonable tax result in light of the applicable
statutory provisions. A tax result will not be considered unreasonable under
the anti-abuse rule in the absence of a substantial effect on the present value
of a taxpayer's tax liability. Investors are advised to consult their own tax
advisors as to the discussion herein and the appropriate method for reporting
interest and original issue discount with respect to the Regular Certificates.
Each Regular Certificate (except to the extent described below with
respect to a Regular Certificate on which principal is distributed by random
lot ("Random Lot Certificates")) will be treated as a single installment
obligation for purposes of determining the original issue discount includible
in a Regular Certificateholder's income. The total amount of original issue
discount on a Regular Certificate is the excess of the "stated redemption price
at maturity" of the Regular Certificate over its "issue price". The issue price
of a Class of Regular Certificates offered pursuant to this Prospectus
generally is the first price at which a substantial amount of Regular
Certificates of that Class is sold to the public (excluding bond houses,
brokers and underwriters). Although unclear under the OID Regulations, the
Depositor intends to treat the issue price of a Class as to which there is no
substantial sale as of the issue date or that is
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retained by the Depositor as the fair market value of that Class as of the
issue date. The issue price of a Regular Certificate also includes the amount
paid by an initial Regular Certificateholder for accrued interest that relates
to a period prior to the issue date of the Regular Certificate, unless the
Regular Certificateholder elects on its federal income tax return to exclude
such amount from the issue price and to recover it on the first Distribution
Date. The stated redemption price at maturity of a Regular Certificate always
includes the original principal amount of the Regular Certificate, but
generally will not include distributions of stated interest if such interest
distributions constitute "qualified stated interest". Under the OID
Regulations, qualified stated interest generally means interest payable at a
single fixed rate or a qualified variable rate (as described below) provided
that such interest payments are unconditionally payable at intervals of one
year or less during the entire term of the Regular Certificate. Because there
is no penalty or default remedy in the case of nonpayment of interest with
respect to a Regular Certificate, it is possible that no interest on any Class
of Regular Certificates will be treated as qualified stated interest. However,
except as provided in the following three sentences or in the applicable
Prospectus Supplement, because the underlying Mortgage Loans provide for
remedies in the event of default, the Depositor intends to treat interest with
respect to the Regular Certificates as qualified stated interest. Distributions
of interest on an Accrual Certificate, or on other Regular Certificates with
respect to which deferred interest will accrue, will not constitute qualified
stated interest, in which case the stated redemption price at maturity of such
Regular Certificates includes all distributions of interest as well as
principal thereon. Likewise, the Depositor intends to treat an "interest only"
Class, or a Class on which interest is substantially disproportionate to its
principal amount (a so-called "super-premium" Class) as having no qualified
stated interest. Where the interval between the issue date and the first
Distribution Date on a Regular Certificate is shorter than the interval between
subsequent Distribution Dates, the interest attributable to the additional days
will be included in the stated redemption price at maturity.
Under a de minimis rule, original issue discount on a Regular Certificate
will be considered to be zero if 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 maturity of the Regular Certificate. For
this purpose, the weighted average maturity of the Regular Certificate is
computed as the sum of the amounts determined by multiplying the number of full
years (i.e., rounding down partial years) from the issue date until all
distributions in reduction of are scheduled to be made by a fraction, the
numerator of which is the amount of each distribution included in the stated
redemption price at maturity of the Regular Certificate and the denominator of
which is the stated redemption price at maturity of the Regular Certificate.
The Conference Committee Report to the 1986 Act provides that the schedule of
such distributions should be determined in accordance with the assumed rate of
prepayment of the Mortgage Loans (the "Prepayment Assumption") and the
anticipated reinvestment rate, if any, relating to the Regular Certificates.
The Prepayment Assumption with respect to a series of Regular Certificates will
be set forth in the related Prospectus Supplement. Holders generally must
report de minimis original issue discount pro rata as principal payments are
received, and such income will be capital gain if the Regular Certificate is
held as a capital asset. However, under the OID Regulations, Regular
Certificateholders may elect to accrue all de minimis original issue discount
as well as market discount and market premium under the constant yield method.
See "Election to Treat All Interest Under the Constant Yield Method".
A Regular Certificateholder generally must include in gross income for any
taxable year the sum of the "daily portions", as defined below, of the original
issue discount on the Regular Certificate accrued during an accrual period for
each day on which it holds the Regular Certificate, including the date of
purchase but excluding the date of disposition. The Depositor will treat the
monthly period ending on the day before each Distribution Date as the accrual
period. With respect to each Regular Certificate, a calculation will be made of
the original issue discount that accrues during each successive full accrual
period (or shorter period from the date of original issue) that ends on the day
before the related Distribution Date on the Regular Certificate. The Conference
Committee Report to the 1986 Act states that the rate of accrual of original
issue discount is intended to be based on the Prepayment Assumption. Other than
as discussed below with respect to a Random Lot Certificate, the original issue
discount accruing in a full accrual period would be the excess, if any, of (i)
the sum of (a) the present value of all of the remaining distributions to be
made on the Regular Certificate as of the end of that accrual period that are
included in the Regular Certificate's stated redemption price at maturity and
(b) the distributions
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made on the Regular Certificate during the accrual period that are included in
the Regular Certificate's stated redemption price at maturity, over (ii) the
adjusted issue price of the Regular Certificate at the beginning of the accrual
period. The present value of the remaining distributions referred to in the
preceding sentence is calculated based on (i) the yield to maturity of the
Regular Certificate at the issue date, (ii) events (including actual
prepayments) that have occurred prior to the end of the accrual period and
(iii) the Prepayment Assumption. For these purposes, the adjusted issue price
of a Regular Certificate at the beginning of any accrual period equals the
issue price of the Regular Certificate, increased by the aggregate amount of
original issue discount with respect to the Regular Certificate that accrued in
all prior accrual periods and reduced by the amount of distributions included
in the Regular Certificate's stated redemption price at maturity that were made
on the Regular Certificate in such prior periods. The original issue discount
accruing during any accrual period (as determined in this paragraph) will then
be divided by the number of days in the period to determine the daily portion
of original issue discount for each day in the period. With respect to an
initial accrual period shorter than a full accrual period, the daily portions
of original issue discount must be determined according to an appropriate
allocation under any reasonable method.
Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the Regular
Certificates as a result of prepayments on the Mortgage Loans that exceed the
Prepayment Assumption, and generally will decrease (but not below zero for any
period) if the prepayments are slower than the Prepayment Assumption. An
increase in prepayments on the Mortgage Loans with respect to a series of
Regular Certificates can result in both a change in the priority of principal
payments with respect to certain Classes of Regular Certificates and either an
increase or decrease in the daily portions of original issue discount with
respect to such Regular Certificates.
In the case of a Random Lot Certificate, the Depositor intends to
determine the yield to maturity of such Certificate based upon the anticipated
payment characteristics of the Class as a whole under the Prepayment
Assumption. In general, the original issue discount accruing on each Random Lot
Certificate in a full accrual period would be its allocable share of the
original issue discount with respect to the entire Class, as determined in
accordance with the preceding paragraph. However, in the case of a distribution
in retirement of the entire unpaid principal balance of any Random Lot
Certificate (or portion of such unpaid principal balance), (a) the remaining
unaccrued original issue discount allocable to such Certificate (or to such
portion) will accrue at the time of such distribution, and (b) the accrual of
original issue discount allocable to each remaining Certificate of such Class
(or the remaining unpaid principal balance of a partially redeemed Random Lot
Certificate after a distribution of principal has been received) will be
adjusted by reducing the present value of the remaining payments on such Class
and the adjusted issue price of such Class to the extent attributable to the
portion of the unpaid principal balance thereof that was distributed. The
Depositor believes that the foregoing treatment is consistent with the "pro
rata prepayment" rules of the OID Regulations, but with the rate of accrual of
original issue discount determined based on the Prepayment Assumption for the
Class as a whole. Investors are advised to consult their tax advisors as to
this treatment.
Acquisition Premium
A purchaser of a Regular Certificate at a price greater than its adjusted
issue price but less than its stated redemption price at maturity will be
required to include in gross income the daily portions of the original issue
discount on the Regular Certificate reduced pro rata by a fraction, the
numerator of which is the excess of its purchase price over such adjusted issue
price and the denominator of which is the excess of the remaining stated
redemption price at maturity over the adjusted issue price. Alternatively, such
a subsequent purchaser may elect to treat all such acquisition premium under
the constant yield method, as described below under the heading "Election to
Treat All Interest Under the Constant Yield Method".
Variable Rate Regular Certificates
Regular Certificates may provide for interest based on a variable rate.
Under the OID Regulations, interest is treated as payable at a variable rate
if, generally, (i) the issue price does not exceed the original
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principal balance by more than a specified de minimis amount and (ii) the
interest compounds or is payable at least annually at current values of (a) one
or more "qualified floating rates", (b) a single fixed rate and one or more
qualified floating rates, (c) a single "objective rate", or (d) a single fixed
rate and a single objective rate that is a "qualified inverse floating rate". A
floating rate is a qualified floating rate if variations in the rate can
reasonably be expected to measure contemporaneous variations in the cost of
newly borrowed funds, or where such rate is subject to a fixed multiple that is
greater than 0.65, but not more than 1.35. Such rate may also be increased or
decreased by a fixed spread or subject to a fixed cap or floor, or a cap or
floor that is not reasonably expected as of the issue date to affect the yield
of the instrument significantly. Two or more qualified floating rates will be
treated as a single qualified floating rate if all such qualified floating
rates can reasonably be expected to have approximately the same values
throughout the terms of the instrument. This requirement will be conclusively
presumed to be satisfied if the values of all such qualified floating rates are
within 0.25% of each other on the issue date. An objective rate (other than a
qualified floating rate) is a rate that is determined using a single fixed
formula and that is based on objective financial or economic information,
provided that such information is not (i) within the control of the issuer or a
related party or (ii) unique to the circumstances of the issuer or a related
party. A qualified inverse floating rate is an objective rate that is equal to
a fixed rate minus a qualified floating rate that inversely reflects
contemporaneous variations in the cost of newly borrowed funds; an inverse
floating rate that is not a qualified floating rate may nevertheless be an
objective rate. A Class of Regular Certificates may be issued under this
Prospectus that does not have a variable rate under the OID Regulations, for
example, a Class that bears different rates at different times during the
period it is outstanding such that it is considered significantly
"front-loaded" or "back-loaded" within the meaning of the OID Regulations. It
is possible that such a Class may be considered to bear "contingent interest"
within the meaning of the OID Regulations. The OID Regulations, as they relate
to the treatment of contingent interest, are by their terms not applicable to
Regular Certificates. However, if final regulations dealing with contingent
interest with respect to Regular Certificates apply the same principles as the
OID Regulations, such regulations may lead to different timing of income
inclusion than would be the case under the OID Regulations. Furthermore,
application of such principles could lead to the characterization of gain on
the sale of contingent interest Regular Certificates as ordinary income.
Investors should consult their tax advisors regarding the appropriate treatment
of any Regular Certificate that does not pay interest at a fixed rate or
variable rate as described in this paragraph.
Under the REMIC Regulations, a Regular Certificate (i) bearing a rate that
qualifies as a variable rate under the OID Regulations that is tied to current
values of a variable rate (or the highest, lowest or average of two or more
variable rates), including a rate based on the average cost of funds of one or
more financial institutions, or a positive or negative multiple of such a rate
(plus or minus a specified number of basis points), or that represents a
weighted average of rates on some or all of the Mortgage Loans which bear
interest at a fixed rate or at a qualifying variable rate under the REMIC
Regulations, including such a rate that is subject to one or more caps or
floors, or (ii) bearing one or more such variable rates for one or more periods
or one or more fixed rates for one or more periods, and a different variable
rate or fixed rate for other periods qualifies as a regular interest in a
REMIC. Accordingly, unless otherwise indicated in the applicable Prospectus
Supplement, the Depositor intends to treat Regular Certificates that qualify as
regular interests under this rule in the same manner as obligations bearing a
variable rate for original issue discount reporting purposes.
The amount of original issue discount with respect to a Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above under "Original Issue Discount" with the yield to maturity and
future payments on such Regular Certificate generally to be determined by
assuming that interest will be payable for the life of the Regular Certificate
based on the initial rate (or, if different, the value of the applicable
variable rate as of the pricing date) for the relevant Class. Unless otherwise
specified in the applicable Prospectus Supplement, the Depositor intends to
treat such variable interest as qualified stated interest, other than variable
interest on an interest-only or super-premium Class, which will be treated as
non-qualified stated interest includible in the stated redemption price at
maturity. Ordinary income reportable for any period will be adjusted based on
subsequent changes in the applicable interest rate index.
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Although unclear under the OID Regulations, unless required otherwise by
applicable final regulations, the Depositor intends to treat Regular
Certificates bearing an interest rate that is a weighted average of the net
interest rates on Mortgage Loans or Mortgage Certificates having fixed or
adjustable rates, as having qualified stated interest, except to the extent
that initial "teaser" rates cause sufficiently "back-loaded" interest to create
more than de minimis original issue discount. The yield on such Regular
Certificates for purposes of accruing original issue discount will be a
hypothetical fixed rate based on the fixed rates, in the case of fixed rate
Mortgage Loans, and initial "teaser rates" followed by fully indexed rates, in
the case of adjustable rate Mortgage Loans. In the case of adjustable rate
Mortgage Loans, the applicable index used to compute interest on the Mortgage
Loans in effect on the pricing date (or possibly the issue date) will be deemed
to be in effect beginning with the period in which the first weighted average
adjustment date occurring after the issue date occurs. Adjustments will be made
in each accrual period either increasing or decreasing the amount of ordinary
income reportable to reflect the actual Pass-Through Rate on the Regular
Certificates.
Deferred Interest
Under the OID Regulations, all interest on a Regular Certificate as to
which there may be Deferred Interest is includible in the stated redemption
price at maturity thereof. Accordingly, any Deferred Interest that accrues with
respect to a Class of Regular Certificates may constitute income to the holders
of such Regular Certificates prior to the time distributions of cash with
respect to such Deferred Interest are made.
Market Discount
A purchaser of a Regular Certificate also may be subject to the market
discount rules of Code Section 1276 through 1278. Under these Code sections and
the principles applied by the OID Regulations in the context of original issue
discount, "market discount" is the amount by which the purchaser's original
basis in the Regular Certificate (i) is exceeded by the then-current principal
amount of the Regular Certificate or (ii) in the case of a Regular Certificate
having original issue discount, is exceeded by the adjusted issue price of such
Regular Certificate at the time of purchase. Such purchaser generally will be
required to recognize ordinary income to the extent of accrued market discount
on such Regular Certificate as distributions includible in the stated
redemption price at maturity thereof are received, in an amount not exceeding
any such distribution. Such market discount would accrue in a manner to be
provided in Treasury regulations and should take into account the Prepayment
Assumption. The Conference Committee Report to the 1986 Act provides that until
such regulations are issued, such market discount would accrue either (i) on
the basis of a constant interest rate or (ii) in the ratio of stated interest
allocable to the relevant period to the sum of the interest for such period
plus the remaining interest as of the end of such period, or in the case of a
Regular Certificate issued with original issue discount, in the ratio of
original issue discount accrued for the relevant period to the sum of the
original issue discount accrued for such period plus the remaining original
issue discount as of the end of such period. Such purchaser also generally will
be required to treat a portion of any gain on a sale or exchange of the Regular
Certificate as ordinary income to the extent of the market discount accrued to
the date of disposition under one of the foregoing methods, less any accrued
market discount previously reported as ordinary income as partial distributions
in reduction of the stated redemption price at maturity were received. Such
purchaser will be required to defer deduction of a portion of the excess of the
interest paid or accrued on indebtedness incurred to purchase or carry a
Regular Certificate over the interest distributable thereon. The deferred
portion of such interest expense in any taxable year generally will not exceed
the accrued market discount on the Regular Certificate for such year. 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 or the
Regular Certificate is disposed of. As an alternative to the inclusion of
market discount in income on the foregoing basis, the Regular Certificateholder
may elect to include market discount in income currently as it accrues on all
market discount instruments acquired by such Regular Certificateholder in that
taxable year or thereafter, in which case the interest deferral rule will not
apply. See "Election to Treat All Interest Under the Constant Yield Method"
below regarding an alternative manner in which such election may be deemed to
be made.
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Market discount with respect to a Regular Certificate will be considered
to be zero if such market discount is less than 0.25% of the remaining stated
redemption price at maturity of such Regular Certificate multiplied by the
weighted average maturity of the Regular Certificate (determined as described
above in the third paragraph under "Original Issue Discount") remaining after
the date of purchase. It appears that de minimis market discount should be
reported in a manner similar to de minimis original issue discount. See
"Original Issue Discount" above. Treasury regulations implementing the market
discount rules have not yet been issued, and therefore investors should consult
their own tax advisors regarding the application of these rules. Investors
should also consult Revenue Procedure 92-67 concerning the elections to include
market discount in income currently and to accrue market discount on the basis
of the constant yield method.
Premium
A Regular Certificate purchased at a cost greater than its remaining
stated redemption price at maturity generally is considered to be purchased at
a premium. If the Regular Certificateholder holds such Regular Certificate as a
"capital asset" within the meaning of Code Section 1221, the Regular
Certificateholder may elect under Code Section 171 to amortize such premium
under the constant yield method. The Conference Committee Report to the 1986
Act indicates a Congressional intent that the same rules that will apply to the
accrual of market discount on installment obligations will also apply to
amortizing bond premium under Code Section 171 on installment obligations such
as the Regular Certificates, although it is unclear whether the alternatives to
the constant yield method described above under "Market Discount" are
available. Amortizable bond premium will be treated as an offset to interest
income on a Regular Certificate rather than as a separate deduction item. See
"Election to Treat All Interest Under the Constant Yield Method" below
regarding an alternative manner in which the Code Section 171 election may be
deemed to be made.
Sale or Exchange of Regular Certificates
If a Regular Certificateholder sells or exchanges a Regular Certificate,
the Regular Certificateholder will recognize gain or loss equal to the
difference, if any, between the amount received and its adjusted basis in the
Regular Certificate. The adjusted basis of a Regular Certificate generally will
equal the cost of the Regular Certificate to the seller, increased by any
original issue discount or market discount previously included in the seller's
gross income with respect to the Regular Certificate and reduced by amounts
included in the stated redemption price at maturity of the Regular Certificate
that were previously received by the seller, by any amortized premium and by
previously recognized losses.
Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
Regular Certificate realized by an investor who holds the Regular Certificate
as a capital asset will be capital gain or loss and will be long-term or
short-term depending on whether the Regular Certificate has been held for the
long-term capital gain holding period (currently more than one year). Such gain
will be treated as ordinary income (i) if a Regular Certificate is held as part
of a "conversion transaction" as defined in Code Section 1258(c), up to the
amount of interest that would have accrued on the Regular Certificateholder's
net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate under Code Section 1274(d) in effect at the time the
taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior distribution of property that was
held as a part of such transaction, (ii) in the case of a non-corporate
taxpayer, to the extent such taxpayer has made an election under Code Section
163(d)(4) to have net capital gains taxed as investment income at ordinary
rates, or (iii) to the extent that such gain does not exceed the excess, if
any, of (a) the amount that would have been includible in the gross income of
the holder if its yield on such Regular Certificate were 110% of the applicable
Federal rate as of the date of purchase, over (b) the amount of income actually
includible in the gross income of such holder with respect to the Regular
Certificate. In addition, gain or loss recognized from the sale of a Regular
Certificate by certain banks or thrift institutions will be treated as ordinary
income or loss
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pursuant to Code Section 582(c). Capital gains of certain non-corporate
taxpayers are subject to a lower maximum tax rate (20%) than ordinary income of
such taxpayers (39.6%), for property held for more than 12 months. The maximum
tax rate for corporations is the same with respect to both ordinary income and
capital gains.
Treatment of Losses
Holders of Regular Certificates will be required to report income with
respect to Regular Certificates on the accrual method of accounting, without
giving effect to delays or reductions in distributions attributable to defaults
or delinquencies on the Mortgage Loans allocable to a particular Class of
Regular Certificates, except to the extent it can be established that such
losses are uncollectible. Accordingly, the holder of a Regular Certificate may
have income, or may incur a diminution in cash flow as a result of a default or
delinquency, but may not be able to take a deduction (subject to the discussion
below) for the corresponding loss until a subsequent taxable year. In this
regard, investors are cautioned that while they may generally cease to accrue
interest income if it reasonably appears that the interest will be
uncollectible, the Internal Revenue Service may take the position that original
issue discount must continue to be accrued in spite of its uncollectibility
until the debt instrument is disposed of in a taxable transaction or becomes
worthless in accordance with the rules of Code Section 166. To the extent the
rules of Code Section 166 regarding bad debts are applicable, it appears that
holders of Regular Certificates that are corporations or that otherwise hold
the Regular Certificates in connection with a trade or business should in
general be allowed to deduct as an ordinary loss any such loss sustained during
the taxable year on account of any such Regular Certificates becoming wholly or
partially worthless, and that, in general, holders of Regular Certificates that
are not corporations and do not hold the Regular Certificates in connection
with a trade or business will be allowed to deduct as a short-term capital loss
any loss with respect to principal sustained during the taxable year on account
of a portion of any Class or subClass of such Regular Certificates becoming
wholly worthless. Although the matter is not free from doubt, non-corporate
holders of Regular Certificates should be allowed a bad debt deduction at such
time as the principal balance of any Class or subClass of such Regular
Certificates is reduced to reflect losses resulting from any liquidated
Mortgage Loans. The Service, however, could take the position that
non-corporate holders will be allowed a bad debt deduction to reflect such
losses only after all Mortgage Loans remaining in the Trust Fund have been
liquidated or such Class of Regular Certificates has been otherwise retired.
The Service could also assert that losses on the Regular Certificates are
deductible based on some other method that may defer such deductions for all
holders, such as reducing future cash flow for purposes of computing original
issue discount. This may have the effect of creating "negative" original issue
discount which would be deductible only against future positive original issue
discount or otherwise upon termination of the Class. Holders of Regular
Certificates are urged to consult their own tax advisors regarding the
appropriate timing, amount and character of any loss sustained with respect to
such Regular Certificates. While losses attributable to interest previously
reported as income should be deductible as ordinary losses by both corporate
and non-corporate holders, the Internal Revenue Service may take the position
that losses attributable to accrued original issue discount may only be
deducted as short-term capital losses by non-corporate holders not engaged in a
trade or business. Special loss rules are applicable to banks and thrift
institutions, including rules regarding reserves for bad debts. Such taxpayers
are advised to consult their tax advisors regarding the treatment of losses on
Regular Certificates.
Election to Treat All Interest Under the Constant Yield Method
A holder of a debt instrument such as a Regular Certificate may elect to
treat all interest that accrues on the instrument using the constant yield
method, with none of the interest being treated as qualified stated interest.
For purposes of applying the constant yield method to a debt instrument subject
to such an election, (i) "interest" includes stated interest, original issue
discount, de minimis original issue discount, market discount and de minimis
market discount, as adjusted by any amortizable bond premium or acquisition
premium and (ii) the debt instrument is treated as if the instrument were
issued on the holder's acquisition date in the amount of the holder's adjusted
basis immediately after acquisition. It is unclear whether, for this purpose,
the initial Prepayment Assumption would continue to apply or if a new
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prepayment assumption as of the date of the holder's acquisition would apply. A
holder generally may make such an election on an instrument by instrument basis
or for a Class or group of debt instruments. However, if the holder makes such
an election with respect to a debt instrument with amortizable bond premium or
with market discount, the holder is deemed to have made elections to amortize
bond premium or to report market discount income currently as it accrues under
the constant yield method, respectively, for all debt instruments acquired by
the holder in the same taxable year or thereafter. The election is made on the
holder's federal income tax return for the year in which the debt instrument is
acquired and is irrevocable except with the approval of the Service. Investors
should consult their own tax advisors regarding the advisability of making such
an election.
TAXATION OF RESIDUAL CERTIFICATES
Taxation of REMIC Income
Generally, the "daily portions" of REMIC taxable income or net loss will
be includible as ordinary income or loss in determining the federal taxable
income of holders of Residual Certificates ("Residual Certificateholders"), and
will not be taxed separately to the REMIC Pool. The daily portions of REMIC
taxable income or net loss of a Residual Certificateholder are determined by
allocating the REMIC Pool's taxable income or net loss for each calendar
quarter ratably to each day in such quarter and by allocating such daily
portion among the Residual Certificateholders in proportion to their respective
holdings of Residual Certificates in the REMIC Pool on such day. REMIC taxable
income is generally determined in the same manner as the taxable income of an
individual using the accrual method of accounting, except that (i) the
limitations 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. The REMIC Pool's gross
income includes interest, original issue discount income and market discount
income, if any, on the Mortgage Loans, reduced by amortization of any premium
on the Mortgage Loans, plus income from amortization of issue premium, if any,
on the Regular Certificates, plus income on reinvestment of cash flows and
reserve assets, plus any cancellation of indebtedness income upon allocation of
realized losses to the Regular Certificates. The REMIC Pool's deductions
include interest and original issue discount expense on the Regular
Certificates, servicing fees on the Mortgage Loans, other administrative
expenses of the REMIC Pool and realized losses on the Mortgage Loans. The
requirement that Residual Certificateholders report their pro rata share of
taxable income or net loss of the REMIC Pool will continue until there are no
Certificates of any Class of the related series outstanding.
The taxable income recognized by a Residual Certificateholder in any
taxable year will be affected by, among other factors, the relationship between
the timing of recognition of interest and original issue discount or market
discount income or amortization of premium with respect to the Mortgage Loans,
on the one hand, and the timing of deductions for interest (including original
issue discount) on the Regular Certificates or income from amortization of
issue premium on the Regular Certificates, on the other hand. In the event that
an interest in the Mortgage Loans is acquired by the REMIC Pool at a discount,
and one or more of such Mortgage Loans is prepaid, the Residual
Certificateholder may recognize taxable income without being entitled to
receive a corresponding amount of cash because (i) the prepayment may be used
in whole or in part to make distributions in reduction of principal on the
Regular Certificates and (ii) the discount on the Mortgage Loans which is
includible in income may exceed the deduction allowed upon such distributions
on those Regular Certificates on account of any unaccrued original issue
discount relating to those Regular Certificates. When there is more than one
Class of Regular Certificates that distribute principal sequentially, this
mismatching of income and deductions is particularly likely to occur in the
early years following issuance of the Regular Certificates when distributions
in reduction of principal are being made in respect of earlier Classes of
Regular Certificates to the extent that 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. Taxable income may also
be greater in earlier years than in later years as a result of the fact that
interest expense deductions, expressed as a percentage of the outstanding
principal amount of such a series of Regular Certificates, may increase over
time as distributions in reduction of
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principal are made on the lower yielding Classes of Regular Certificates,
whereas to the extent that the REMIC Pool includes fixed rate Mortgage Loans,
interest income with respect to any given Mortgage Loan will remain constant
over time as a percentage of the outstanding principal amount of that loan.
Consequently, Residual Certificateholders must have sufficient other sources of
cash to pay any federal, state or local income taxes due as a result of such
mismatching or unrelated deductions against which to offset such income,
subject to the discussion of "excess inclusions" below under "Limitations on
Offset or Exemption of REMIC Income". The timing of such mismatching of income
and deductions described in this paragraph, if present with respect to a series
of Certificates, may have a significant adverse effect upon the Residual
Certificateholder's after-tax rate of return. In addition, a Residual
Certificateholder's taxable income during certain periods may exceed the income
reflected by such Residual Certificateholder for such periods in accordance
with generally accepted accounting principles. Investors should consult their
own accountants concerning the accounting treatment of their investment in
Residual Certificates.
Basis and Losses
The amount of any net loss of the REMIC Pool that may be taken into
account by the Residual Certificateholder is limited to the adjusted basis of
the Residual Certificate as of the close of the quarter (or time of disposition
of the Residual Certificate if earlier), determined without taking into account
the net loss for the quarter. The initial adjusted basis of a purchaser of a
Residual Certificate is the amount paid for such Residual Certificate. Such
adjusted basis will be increased by the amount of taxable income of the REMIC
Pool reportable by the Residual Certificateholder and will be decreased (but
not below zero), first, by a cash distribution from the REMIC Pool and, second,
by the amount of loss of the REMIC Pool reportable by the Residual
Certificateholder. Any loss that is disallowed on account of this limitation
may be carried over indefinitely with respect to the Residual Certificateholder
as to whom such loss was disallowed and may be used by such Residual
Certificateholder only to offset any income generated by the same REMIC Pool.
A Residual Certificateholder will not be permitted to amortize directly
the cost of its Residual Certificate as an offset to its share of the taxable
income of the related REMIC Pool. However, that taxable income will not include
cash received by the REMIC Pool that represents a recovery of the REMIC Pool's
basis in its assets. Such recovery of basis by the REMIC Pool will have the
effect of amortization of the issue price of the Residual Certificates over
their life. However, in view of the possible acceleration of the income of
Residual Certificateholders described above under "Taxation of REMIC Income",
the period of time over which such issue price is effectively amortized may be
longer than the economic life of the Residual Certificates.
A Residual Certificate may have a negative value if the net present value
of anticipated tax liabilities exceeds the present value of anticipated cash
flows. The REMIC Regulations appear to treat the issue price of such a residual
interest as zero rather than such negative amount for purposes of determining
the REMIC Pool's basis in its assets. The preamble to the REMIC Regulations
states that the Service may provide future guidance on the proper tax treatment
of payments made by a transferor of such a residual interest to induce the
transferee to acquire the interest, and Residual Certificateholders should
consult their own tax advisors in this regard.
Further, to the extent that the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in the Residual Certificate
is greater that the corresponding portion of the REMIC Pool's basis in the
Mortgage Loans, the Residual Certificateholder will not recover a portion of
such basis until termination of the REMIC Pool unless future Treasury
regulations provide for periodic adjustments to the REMIC income otherwise
reportable by such holder. The REMIC Regulations currently in effect do not so
provide. See "Treatment of Certain Items of REMIC Income and Expense--Market
Discount" below regarding the basis of Mortgage Loans to the REMIC Pool and
"Sale or Exchange of a Residual Certificate" below regarding possible treatment
of a loss upon termination of the REMIC Pool as a capital loss.
Treatment of Certain Items of REMIC Income and Expense
Although the Depositor intends to compute REMIC income and expense in
accordance with the Code and applicable regulations, the authorities regarding
the determination of specific items of income
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and expense are subject to differing interpretations. The Depositor makes no
representation as to the specific method that it will use for reporting income
with respect to the Mortgage Loans and expenses with respect to the Regular
Certificates, and different methods could result in different timing of
reporting of taxable income or net loss to Residual Certificateholders or
differences in capital gain versus ordinary income.
Original Issue Discount and Premium. Generally, the REMIC Pool's
deductions for original issue discount and income from amortization of issue
premium will be determined in the same manner as original issue discount income
on Regular Certificates as described above under "Taxation of Regular
Certificates--Original Issue Discount" and "--Variable Rate Regular
Certificates", without regard to the de minimis rule described therein, and
"--Premium".
Deferred Interest. Any Deferred Interest that accrues with respect to any
adjustable rate Mortgage Loans held by the REMIC Pool will constitute income to
the REMIC Pool and will be treated in a manner similar to the Deferred Interest
that accrues with respect to Regular Certificates as described above under
"Taxation of Regular Certificates--Deferred Interest".
Market Discount. The REMIC Pool will have market discount income in
respect of Mortgage Loans if, in general, the basis of the REMIC Pool allocable
to such Mortgage Loans is exceeded by their unpaid principal balances. The
REMIC Pool's basis in such Mortgage Loans is generally the fair market value of
the Mortgage Loans immediately after the transfer thereof to the REMIC Pool.
The REMIC Regulations provide that such basis is equal in the aggregate to the
issue prices of all regular and residual interests in the REMIC Pool (or the
fair market value thereof at the Closing Date, in the case of a retained
Class). In respect of Mortgage Loans that have market discount to which Code
Section 1276 applies, the accrued portion of such market discount would be
recognized currently as an item of ordinary income in a manner similar to
original issue discount. Market discount income generally should accrue in the
manner described above under "Taxation of Regular Certificates--Market
Discount".
Premium. Generally, if the basis of the REMIC Pool in the Mortgage Loans
exceeds the unpaid principal balances thereof, the REMIC Pool will be
considered to have acquired such Mortgage Loans at a premium equal to the
amount of such excess. As stated above, the REMIC Pool's basis in Mortgage
Loans is the fair market value of the Mortgage Loans, based on the aggregate of
the issue prices (or the fair market value of retained Classes) of the regular
and residual interests in the REMIC Pool immediately after the transfer thereof
to the REMIC Pool. In a manner analogous to the discussion above under
"Taxation of Regular Certificates--Premium", a REMIC Pool that holds a Mortgage
Loan as a capital asset under Code Section 1221 may elect under Code Section
171 to amortize premium on whole mortgage loans or mortgage loans underlying
MBS that were originated after September 27, 1985 or MBS that are REMIC regular
interests under the constant yield method. Amortizable bond premium will be
treated as an offset to interest income on the Mortgage Loans, rather than as a
separate deduction item. To the extent that the mortgagors with respect to the
Mortgage Loans are individuals, Code Section 171 will not be available for
premium on Mortgage Loans (including underlying mortgage loans) originated on
or prior to September 27, 1985. Premium with respect to such Mortgage Loans may
be deductible in accordance with a reasonable method regularly employed by the
holder thereof. The allocation of such premium pro rata among principal
payments should be considered a reasonable method; however, the Service may
argue that such premium should be allocated in a different manner, such as
allocating such premium entirely to the final payment of principal.
Limitations on Offset or Exemption of REMIC Income
A portion or all of the REMIC taxable income includible in determining the
federal income tax liability of a Residual Certificateholder will be subject to
special treatment. That portion, referred to as the "excess inclusion", is
equal to the excess of REMIC taxable income for the calendar quarter allocable
to a Residual Certificate over the daily accruals for such quarterly period of
(i) 120% of the long-term applicable Federal rate that would have applied to
the Residual Certificate (if it were a debt instrument) on the Startup Day
under Code Section 1274(d), multiplied by (ii) the adjusted issue price of such
Residual Certificate at the beginning of such quarterly period. For this
purpose, the adjusted issue price of a Residual Certificate at the beginning of
a quarter is the issue price of the Residual Certificate, plus
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the amount of such daily accruals of REMIC income described in this paragraph
for all prior quarters, decreased by any distributions made with respect to
such Residual Certificate prior to the beginning of such quarterly period.
Accordingly, the portion of the REMIC Pool's taxable income that will be
treated as excess inclusions will be a larger portion of such income as the
adjusted issue price of the Residual Certificates diminishes.
The portion of a Residual Certificateholder's REMIC taxable income
consisting of the excess inclusions generally may not be offset by other
deductions, including net operating loss carry forwards, on such Residual
Certificateholder's return. However, net operating loss carryovers are
determined without regard to excess inclusion income. Further, if the Residual
Certificateholder is an organization subject to the tax on unrelated business
income imposed by Code Section 511, the Residual Certificateholder's excess
inclusions will be treated as unrelated business taxable income of such
Residual Certificateholder for purposes of Code Section 511. In addition, REMIC
taxable income is subject to 30% withholding tax with respect to certain
persons who are not U.S. Persons (as defined below under "Tax-Related
Restrictions on Transfer of Residual Certificates--Foreign Investors"), and the
portion thereof attributable to excess inclusions is not eligible for any
reduction in the rate of withholding tax (by treaty or otherwise). See
"Taxation of Certain Foreign Investors--Residual Certificates" below. Finally,
if a real estate investment trust or a regulated investment company owns a
Residual Certificate, a portion (allocated under Treasury regulations yet to be
issued) of dividends paid by the real estate investment trust or a regulated
investment company could not be offset by net operating losses of its
shareholders, would constitute unrelated business taxable income for tax-exempt
shareholders, and would be ineligible for reduction of withholding to certain
persons who are not U.S. Persons. The SBJPA of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess
inclusion income from Residual Certificates that have "significant value"
within the meaning of the REMIC Regulations.
In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on the alternative minimum taxable income of a
Residual Certificateholder. First, alternative minimum taxable income for a
Residual Certificateholder is determined without regard to the special rule,
discussed above, that taxable income cannot be less than excess inclusions.
Second, a Residual Certificateholder's alternative minimum taxable income for a
taxable year cannot be less than the excess inclusions for the year. Third, the
amount of any alternative minimum tax net operating loss deduction must be
computed without regard to any excess inclusions.
Tax-Related Restrictions on Transfer of Residual Certificates
Disqualified Organizations. If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as defined
below) other than in connection with the formation of a REMIC Pool, if the
Disqualified organization is required, pursuant to a binding contract, to sell
such Residual Certificate, which sale occurs within seven days after the
Startup Days, 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. The REMIC
Regulations provide that the anticipated excess inclusions are based on actual
prepayment experience to the date of the transfer and projected payments based
on the Prepayment Assumption. The present value rate equals the applicable
Federal rate under Code Section 1274(d) as of the date of the transfer for a
term ending with the last calendar quarter in which excess inclusions are
expected to accrue. Such a tax generally would be imposed on the transferor of
the Residual Certificate, except that where such transfer is through an agent
(including a broker, nominee or other middleman) for a Disqualified
Organization, the tax would instead be imposed on such agent. However, a
transferor of a Residual Certificate would in no event be liable for such tax
with respect to a transfer if the transferee furnishes to the transferor an
affidavit that the transferee is not a Disqualified Organization and, as of the
time of the transfer, the transferor does not have actual knowledge that such
affidavit is false. The tax also may be waived by the Treasury Department if
the Disqualified Organization promptly disposes of the residual interest and
the transferor pays income tax at the highest corporate rate on the excess
inclusions for the period the Residual Certificate is actually held by the
Disqualified Organization.
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In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
such entity, then a tax is 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 during the period such interest is
held by such Disqualified Organization, and (ii) the highest marginal federal
corporate income tax rate. Such tax would be deductible from the ordinary gross
income of the Pass-Through Entity for the taxable year. The Pass-Through Entity
would not be liable for such tax if it has received an affidavit from such
record holder that it is not a Disqualified Organization or stating such
holder's taxpayer identification number and, during the period such person is
the record holder of the Residual Certificate, the Pass-Through Entity does not
have actual knowledge that such affidavit is false.
For these purposes, (i) "Disqualified Organization" means the United
States, any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing (provided, that such term does not include an instrumentality if all
of its activities are subject to tax and, except in the case of the Federal
Home Loan Mortgage Corporation, a majority of its board of directors is not
selected by any such governmental entity), any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas as described in Code Section 1381(a)(2)(C), and any organization (other
than a farmers' cooperative described in Code Section 521) that is exempt from
taxation under the Code unless such organization is subject to the tax on
unrelated business income imposed by Code Section 511, and (ii) "Pass-Through
Entity" means any regulated investment company, real estate investment trust,
common trust fund, partnership, trust or estate and certain corporations
operating on a cooperative basis. Except as may be provided in Treasury
regulations, any person holding an interest in a Pass-Through Entity as a
nominee for another will, with respect to such interest, be treated as a
Pass-Through Entity.
The Pooling and Servicing Agreement with respect to a series of
Certificates will provide that no legal or beneficial interest in a Residual
Certificate may be transferred unless (i) the proposed transferee provides to
the transferor and the Trustee an affidavit providing its taxpayer
identification number and stating that such transferee is the beneficial owner
of the Residual Certificate, is not a Disqualified Organization and is not
purchasing such Residual Certificates on behalf of a Disqualified Organization
(i.e., as a broker, nominee or middleman thereof), and (ii) the transferor
provides a statement in writing to the Depositor and the Trustee that it has no
actual knowledge that such affidavit is false. Moreover, the Pooling and
Servicing Agreement will provide that any attempted or purported transfer in
violation of these transfer restrictions will be null and void and will vest no
rights in any purported transferee. Each Residual Certificate with respect to a
series will bear a legend referring to such restrictions on transfer, and each
Residual Certificateholder will be deemed to have agreed, as a condition of
ownership thereof, to any amendments to the related Pooling and Servicing
Agreement required under the Code or applicable Treasury regulations to
effectuate the foregoing restrictions. Information necessary to compute an
applicable excise tax must be furnished to the Service and to the requesting
party within 60 days of the request, and the Depositor or the Trustee may
charge a fee for computing and providing such information.
Noneconomic Residual Interests. The REMIC Regulations would disregard
certain transfers of Residual Certificates, in which case the transferor would
continue to be treated as the owner of the Residual Certificates and thus would
continue to be subject to tax on its allocable portion of the net income of the
REMIC Pool. Under the REMIC Regulations, a transfer of a "noneconomic residual
interest" (as defined below) to a Residual Certificateholder (other than a
Residual Certificateholder who is not a U.S. Person, as defined below under
"Foreign Investors") is disregarded for all federal income tax purposes if a
significant purpose of the transferor is to impede the assessment or collection
of tax. A residual interest in a REMIC (including a residual interest with a
positive value at issuance) is a "noneconomic residual interest" unless, at the
time of the transfer, (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
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amount sufficient to satisfy the accrued taxes. The anticipated excess
inclusions and the present value rate are determined in the same manner as set
forth above under "Disqualified Organizations". The REMIC Regulations explain
that a significant purpose to impede the assessment or collection of tax exists
if the transferor, at the time of the transfer, either knew or should have
known that the transferee would be unwilling or unable to pay taxes due on its
share of the taxable income of the REMIC. A safe harbor is provided if (i) the
transferor conducted, at the time of the transfer, a reasonable investigation
of the financial condition of the transferee and found that the transferee
historically had paid its debts as they came due and found no significant
evidence to indicate that the transferee would not continue to pay its debts as
they came due in the future, and (ii) the transferee represents to the
transferor that it understands that, as the holder of the noneconomic residual
interest, the transferee may incur tax liabilities in excess of cash flows
generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest as they become due. The Pooling
and Servicing Agreement with respect to each series of Certificates will
require the transferee of a Residual Certificate to certify to the matters in
the preceding sentence as part of the affidavit described above under the
heading "Disqualified Organizations". The transferor must have no actual
knowledge or reason to know that such statements are false.
Foreign Investors. The REMIC Regulations provide that the transfer of a
Residual Certificate that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended to
apply to a transferee who is not a "U.S. Person" (as defined below), unless
such transferee's income is effectively connected with the conduct of a trade
or business within the United States or not otherwise subject to a withholding
tax. A Residual Certificate is deemed to have tax avoidance potential unless,
at the time of the transfer, (i) the future value of expected distributions
equals at least 30% of the anticipated excess inclusions after the transfer,
and (ii) the transferor reasonably expects that the transferee will receive
sufficient distributions from the REMIC Pool at or after the time at which the
excess inclusions accrue and prior to the end of the next succeeding taxable
year for the accumulated withholding tax liability to be paid. If the non-U.S.
Person transfers the Residual Certificate back to a U.S. Person, the transfer
will be disregarded and the foreign transferor will continue to be treated as
the owner unless arrangements are made so that the transfer does not have the
effect of allowing the transferor to avoid tax on accrued excess inclusions.
The Prospectus Supplement relating to a series of Certificates may provide
that a Residual Certificate may not be purchased by or transferred to any
person that is not a U.S. Person or may describe the circumstances and
restrictions pursuant to which such a transfer may be made. The term "U.S.
Person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any State, an estate that is subject to United States federal
income tax regardless of the source of its income or a trust if a court within
the United States is able to exercise primary supervision over the
administration of such trust, and one or more United States persons have the
authority to control all substantial decisions of such trust.
Sale or Exchange of a Residual Certificate
Upon the sale or exchange of a Residual Certificate, the Residual
Certificateholder will recognize gain or loss equal to the excess, if any, of
the amount realized over the adjusted basis (as described above under "Taxation
of Residual Certificates--Basis and Losses") of such Residual Certificateholder
in such Residual Certificate at the time of the sale or exchange. In addition
to reporting the taxable income of the REMIC Pool, a Residual Certificateholder
will have taxable income to the extent that any cash distribution to it from
the REMIC Pool exceeds such adjusted basis on that Distribution Date. Such
income will be treated as gain from the sale or exchange of the Residual
Certificate. It is possible that the termination of the REMIC Pool may be
treated as a sale or exchange of a Residual Certificateholder's Residual
Certificate, in which case, if the Residual Certificateholder has an adjusted
basis in such Residual Certificateholder's Residual Certificate remaining when
its interest in the REMIC Pool terminates, and if such Residual
Certificateholder holds such Residual Certificate as a capital asset under Code
Section 1221, then such Residual Certificateholder will recognize a capital
loss at that time in the amount of such remaining adjusted basis.
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Any gain on the sale of a Residual Certificate will be treated as ordinary
income (i) if a Residual Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the Residual Certificateholder's net investment in
the conversion transaction at 120% of the appropriate applicable Federal rate
in effect at the time the taxpayer entered into the transaction minus any
amount previously treated as ordinary income with respect to any prior
disposition of property that was held as a part of such transaction or (ii) in
the case of a non-corporate taxpayer, to the extent such taxpayer has made an
election under Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. In addition, gain or loss
recognized from the sale of a Residual Certificate by certain banks or thrift
institutions will be treated as ordinary income or loss pursuant to Code
Section 582(c).
The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of Code
Section 1091 will apply to dispositions of Residual Certificates where the
seller of 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) any residual
interest in any REMIC or any interest in a "taxable mortgage pool" (such as a
non-REMIC owner trust) that is economically comparable to a Residual
Certificate.
Mark to Market Regulations
The Service has issued regulations (the "Mark to Market Regulations")
under Code Section 475 relating to the requirement that a securities dealer
mark to market securities held for sale to customers. This mark-to-market
requirement applies to all securities of a dealer, except to the extent that
the dealer has specifically identified a security as held for investment. The
Mark to Market Regulations provide that, for purposes of this mark-to-market
requirement, a Residual Certificate is not treated as a security and thus may
not be marked to market.
TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
Prohibited Transactions
Income from certain transactions by the REMIC Pool, called prohibited
transactions, will not be part of the calculation of income or loss includible
in the federal income tax returns of Residual Certificateholders, but rather
will be taxed directly to the REMIC Pool at a 100% rate. Prohibited
transactions generally include (i) the disposition of a qualified mortgage
other than pursuant to a (a) substitution within two years of the Startup Day
for a defective (including a defaulted) obligation (or repurchase in lieu of
substitution of a defective (including a defaulted) obligation at any time) or
for any qualified mortgage within three months of the Startup Day, (b)
foreclosure, default or imminent default of a qualified mortgage, (c)
bankruptcy or insolvency of the REMIC Pool or (d) qualified (complete)
liquidation, (ii) the receipt of income from assets that are not the type of
mortgages or investments that the REMIC Pool 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
liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction
to sell REMIC Pool property to prevent a default on Regular Certificates as a
result of a default on qualified mortgages or to facilitate a clean-up call
(generally, an optional termination to save administrative costs when no more
than a small percentage of the Certificates is outstanding). The REMIC
Regulations indicate that the modification of a Mortgage Loan generally will
not be treated as a disposition if it is occasioned by a default or reasonably
foreseeable default, an assumption of the Mortgage Loan, the waiver of a
due-on-sale or due-on-encumbrance clause or the conversion of an interest rate
by a mortgagor pursuant to the terms of a convertible adjustable rate Mortgage
Loan.
Contributions to the REMIC Pool After the Startup Day
In general, the REMIC Pool will be subject to a tax at a 100% rate on the
value of any property contributed to the REMIC Pool after the Startup Day.
Exceptions are provided for cash contributions to
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the REMIC Pool (i) during the three months following the Startup Day, (ii) made
to a qualified reserve fund by a Residual Certificateholder, (iii) in the
nature of a guarantee, (iv) made to facilitate a qualified liquidation or
clean-up call and (v) as otherwise permitted in Treasury regulations yet to be
issued.
Net Income from Foreclosure Property
The REMIC Pool will be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property", determined by
reference to the rules applicable to real estate investment trusts. Generally,
property acquired by deed in lieu of foreclosure would be treated as
"foreclosure property" for a period of two years, with possible extensions of
up to an additional four years. Net income from foreclosure property generally
means gain from the sale of a foreclosure property that is inventory property
and gross income from foreclosure property other than qualifying rents and
other qualifying income for a real estate investment trust.
It is not anticipated that the REMIC Pool will receive income or
contributions subject to tax under the preceding three paragraphs, except as
described in the applicable Prospectus Supplement with respect to net income
from foreclosure property on a commercial or multifamily residential property
that secured a Mortgage Loan. In addition, unless otherwise disclosed in the
applicable Prospectus Supplement, it is not anticipated that any material state
income or franchise tax will be imposed on a REMIC Pool.
LIQUIDATION OF THE REMIC POOL
If a REMIC Pool adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC Pool's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on the date of the adoption of the plan of liquidation, the REMIC
Pool will not be subject to the prohibited transaction rules on the sale of its
assets, provided that the REMIC Pool credits or distributes in liquidation all
of the sale proceeds plus its cash (other than amounts retained to meet claims)
to holders of Regular Certificates and Residual Certificateholders within the
90-day period.
ADMINISTRATIVE MATTERS
The REMIC Pool will be required to maintain its books on a calendar year
basis and to file federal income tax returns for federal income tax purposes in
a manner similar to a partnership. The form for such income tax return is Form
1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return. The
Trustee will be required to sign the REMIC Pool's returns. Treasury regulations
provide that, except where there is a single Residual Certificateholder for an
entire taxable year, the REMIC Pool will be subject to the procedural and
administrative rules of the Code applicable to partnerships, including the
determination by the Service of any adjustments to, among other things, items
of REMIC income, gain, loss, deduction or credit in a unified administrative
proceeding. The Residual Certificateholder owning the largest percentage
interest in the Residual Certificates will be obligated to act as "tax matters
person", as defined in applicable Treasury regulations, with respect to the
REMIC Pool. Each Residual Certificateholder will be deemed, by acceptance of
such Residual Certificates, to have agreed (i) to the appointment of the tax
matters person as provided in the preceding sentence and (ii) to the
irrevocable designation of the Master Servicer as agent for performing the
functions of the tax matters person.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that such itemized deductions, in the aggregate, do
not exceed 2% of the investor's adjusted gross income. In addition, Code
Section 68 provides that itemized deductions otherwise allowable for a taxable
year of an individual taxpayer will be reduced by the lesser of (i) 3% of the
excess, if any, of adjusted gross income over $124,500 for the taxable year
beginning in 1998 ($62,250 in the case of a married individual filing a
separate return) (subject to adjustments for inflation in subsequent years) or
(ii) 80% of the amount of itemized deductions otherwise allowable for such
year. In the case of a REMIC Pool, such deductions may include deductions under
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Code Section 212 for the servicing fee and all administrative and other
expenses relating to the REMIC Pool, or any similar expenses allocated to the
REMIC Pool with respect to a regular interest it holds in another REMIC. Such
investors who hold REMIC Certificates either directly or indirectly through
certain pass-through entities may have their pro rata share of such expenses
allocated to them as additional gross income, but may be subject to such
limitation on deductions. In addition, such expenses are not deductible at all
for purposes of computing the alternative minimum tax, and may cause such
investors to be subject to significant additional tax liability. Temporary
Treasury regulations provide that the additional gross income and corresponding
amount of expenses generally are to be allocated entirely to the holders of
Residual Certificates in the case of a REMIC Pool that would not qualify as a
fixed investment trust in the absence of a REMIC election. However, such
additional gross income and limitation on deductions will apply to the
allocable portion of such expenses to holders of Regular Certificates, as well
as holders of Residual Certificates, where such Regular Certificates are issued
in a manner that is similar to pass-through certificates in a fixed investment
trust. In general, such allocable portion will be determined based on the ratio
that a REMIC Certificateholder's income, determined on a daily basis, bears to
the income of all holders of Regular Certificates and Residual Certificates
with respect to a REMIC Pool. As a result, individuals, estates or trusts
holding REMIC Certificates (either directly or indirectly through a grantor
trust, partnership, S corporation, REMIC, or certain other pass-through
entities described in the foregoing temporary Treasury regulations) may have
taxable income in excess of the interest income at the pass-through rate on
Regular Certificates that are issued in a single Class or otherwise
consistently with fixed investment trust status or in excess of cash
distributions for the related period on Residual Certificates. Unless otherwise
indicated in the applicable Prospectus Supplement, all such expenses will be
allocable to the Residual Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
Regular Certificates
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or other
Non-U.S. Persons (as defined below), will be considered "portfolio interest"
and, therefore, generally will not be subject to 30% United States withholding
tax, provided that such Non-U.S. Person (i) is not a "10-percent shareholder"
within the meaning of Code Section 871(h)(3)(B) or a controlled foreign
corporation described in Code Section 881(c)(3)(C) and (ii) provides the
Trustee, or the person who would otherwise be required to withhold tax from
such distributions under Code Section 1441 or 1442, with an appropriate
statement, signed under penalties of perjury, identifying the beneficial owner
and stating, among other things, that the beneficial owner of the Regular
Certificate is a Non-U.S. Person. If such statement, or any other required
statement, is not provided, 30% withholding will apply unless reduced or
eliminated pursuant to an applicable tax treaty or unless the interest on the
Regular Certificate is effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Person. In the latter case,
such Non-U.S. Person will be subject to United States federal income tax at
regular rates. Prepayment Premiums distributable to Regular Certificateholders
who are Non-U.S. Persons may be subject to 30% United States withholding tax.
Investors who are Non-U.S. Persons should consult their own tax advisors
regarding the specific tax consequences to them of owning a Regular
Certificate. The term "Non-U.S. Person" means any person who is not a U.S.
Person.
Residual Certificates
The Conference Committee Report to the 1986 Act indicates that amounts
paid to Residual Certificateholders who are Non-U.S. Persons are treated as
interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Treasury regulations provide that amounts distributed to
Residual Certificateholders may qualify as "portfolio interest", subject to the
conditions described in "Regular Certificates" above, but only to the extent
that (i) the Mortgage Loans (including mortgage loans underlying MBS) were
issued after July 18, 1984 and (ii) the Trust Fund or segregated pool of assets
therein (as to which a separate REMIC election will be made), to which the
Residual Certificate relates, consists of obligations issued in "registered
form" within the meaning of Code Section 163(f)(1).
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Generally, whole mortgage loans will not be, but MBS and regular interests in
another REMIC Pool will be, considered obligations issued in registered form.
Furthermore, a Residual Certificateholder will not be entitled to any exemption
from the 30% withholding tax (or lower treaty rate) to the extent of that
portion of REMIC taxable income that constitutes an "excess inclusion". See
"Taxation of Residual Certificates--Limitations on Offset or Exemption of REMIC
Income". If the amounts paid to Residual Certificateholders who are Non-U.S.
Persons are effectively connected with the conduct of a trade or business
within the United States by such Non-U.S. Persons, 30% (or lower treaty rate)
withholding will not apply. Instead, the amounts paid to such Non-U.S. Persons
will be subject to United States federal income tax at regular rates. If 30%
(or lower treaty rate) withholding is applicable, such amounts generally will
be taken into account for purposes of withholding only when paid or otherwise
distributed (or when the Residual Certificate is disposed of) under rules
similar to withholding upon disposition of debt instruments that have original
issue discount. See "Tax-Related Restrictions on Transfer of Residual
Certificates--Foreign Investors" above concerning the disregard of certain
transfers having "tax avoidance potential". Investors who are Non-U.S. Persons
should consult their own tax advisors regarding the specific tax consequences
to them of owning Residual Certificates.
BACKUP WITHHOLDING
Distributions made on the Regular Certificates, and proceeds from the sale
of the Regular Certificates to or through certain brokers, may be subject to a
"backup" withholding tax under Code Section 3406 of 31% on "reportable
payments" (including interest distributions, original issue discount, and,
under certain circumstances, principal distributions) unless the Regular
Certificateholder complies with certain reporting and/or certification
procedures, including the provision of its taxpayer identification number to
the Trustee, its agent or the broker who effected the sale of the Regular
Certificate, or such Certificateholder is otherwise an exempt recipient under
applicable provisions of the Code. Any amounts to be withheld from distribution
on the Regular Certificates would be refunded by the Service or allowed as a
credit against the Regular Certificateholder's federal income tax liability.
REPORTING REQUIREMENTS
Reports of accrued interest, original issue discount and information
necessary to compute the accrual of any market discount on the Regular
Certificates will be made annually to the Service and to individuals, estates,
non-exempt and non-charitable trusts, and partnerships who are either holders
of record of Regular Certificates or beneficial owners who own Regular
Certificates through a broker or middleman as nominee. All brokers, nominees
and all other non-exempt holders of record of Regular Certificates (including
corporations, non-calendar year taxpayers, securities or commodities dealers,
real estate investment trusts, investment companies, common trust funds, thrift
institutions and charitable trusts) may request such information for any
calendar quarter by telephone or in writing by contacting the person designated
in Service Publication 938 with respect to a particular series of Regular
Certificates. Holders through nominees must request such information from the
nominee.
The Service's Form 1066 has an accompanying Schedule Q, Quarterly Notice
to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the REMIC Pool to
each Residual Certificateholder by the end of the month following the close of
each calendar quarter (41 days after the end of a quarter under proposed
Treasury regulations) in which the REMIC Pool is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of Regular
Certificates, and filed annually with the Service concerning Code Section 67
expenses (see "Limitations on Deduction of Certain Expenses" above) allocable
to such holders. Furthermore, under such regulations, information must be
furnished quarterly to Residual Certificateholders, furnished annually to
holders of Regular Certificates, and filed annually with the Service concerning
the percentage of the REMIC Pool's assets meeting the qualified asset tests
described above under "Status of REMIC Certificates".
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FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES AS TO WHICH NO REMIC ELECTION
IS MADE
STANDARD CERTIFICATES
General
In the event that no election is made to treat a Trust Fund (or a
segregated pool of assets therein) with respect to a series of Certificates
that are not designated as "Stripped Certificates", as described below, as a
REMIC or FASIT (Certificates of such a series hereinafter referred to as
"Standard Certificates"), the Trust Fund will be Classified as a grantor trust
under subpart E, Part 1 of subchapter J of the Code and not as an association
taxable as a corporation or a "taxable mortgage pool" within the meaning of
Code Section 7701(i). Where there is no fixed retained yield with respect to
the Mortgage Loans underlying the Standard Certificates, the holder of each
such Standard Certificate (a "Standard Certificateholder") in such series will
be treated as the owner of a pro rata undivided interest in the ordinary income
and corpus portions of the Trust Fund represented by its Standard Certificate
and will be considered the beneficial owner of a pro rata undivided interest in
each of the Mortgage Loans, subject to the discussion below under
"Recharacterization of Servicing Fees". Accordingly, the holder of a Standard
Certificate of a particular series will be required to report on its federal
income tax return its pro rata share of the entire income from the Mortgage
Loans represented by its Standard Certificate, including interest at the coupon
rate on such Mortgage Loans, original issue discount (if any), prepayment fees,
assumption fees, and late payment charges received by the Master Servicer, in
accordance with such Standard Certificateholder's method of accounting. A
Standard Certificateholder generally will be able to deduct its share of the
servicing fee and all administrative and other expenses of the Trust Fund in
accordance with its method of accounting, provided that such amounts are
reasonable compensation for services rendered to that Trust Fund. However,
investors who are individuals, estates or trusts who own Standard Certificates,
either directly or indirectly through certain pass-through entities, will be
subject to limitation with respect to certain itemized deductions described in
Code Section 67, including deductions under Code Section 212 for the servicing
fee and all such administrative and other expenses of the Trust Fund, to the
extent that such deductions, in the aggregate, do not exceed two percent of an
investor's adjusted gross income. In addition, Code Section 68 provides that
itemized deductions otherwise allowable for a taxable year of an individual
taxpayer will be reduced by the lesser of (i) 3% of the excess, if any, of
adjusted gross income over $124,500 for the taxable year beginning in 1998
($62,250 in the case of a married individual filing a separate return) (subject
to adjustments for inflation in subsequent years), or (ii) 80% of the amount of
itemized deductions otherwise allowable for such year. As a result, such
investors holding Standard Certificates, directly or indirectly through a
pass-through entity, may have aggregate taxable income in excess of the
aggregate amount of cash received on such Standard Certificates with respect to
interest at the pass-through rate on such Standard Certificates. In addition,
such expenses are not deductible at all for purposes of computing the
alternative minimum tax, and may cause such investors to be subject to
significant additional tax liability. Moreover, where there is fixed retained
yield with respect to the Mortgage Loans underlying a series of Standard
Certificates or where the servicing fee is in excess of reasonable servicing
compensation, the transaction will be subject to the application of the
"stripped bond" and "stripped coupon" rules of the Code, as described below
under "Stripped Certificates" and "Recharacterization of Servicing Fees",
respectively.
Tax Status
Standard Certificates will have the following status for federal income
tax purposes:
1. A Standard Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) will be
considered to represent "loans . . . secured by an interest in real
property which is . . . residential real property" within the meaning of
Code Section 7701(a)(19)(C)(v), provided that the real property securing
the Mortgage Loans represented by that Standard Certificate is of the type
described in such section of the Code.
2. A Standard Certificate owned by a real estate investment trust will be
considered to represent "real estate assets" within the meaning of Code
Section 856(c)(4)(A) to the extent that the assets of
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the related Trust Fund consist of qualified assets, and interest income on
such assets will be considered "interest on obligations secured by
mortgages on real property" to such extent within the meaning of Code
Section 856(c)(3)(B).
3. A Standard Certificate owned by a REMIC will be considered to
represent an "obligation . . . which is principally secured by an interest
in real property" within the meaning of Code Section 860G(a)(3)(A) to the
extent that the assets of the related Trust Fund consist of "qualified
mortgages" within the meaning of Code Section 860G(a)(3).
Premium and Discount
Standard Certificateholders are advised to consult with their tax advisors
as to the federal income tax treatment of premium and discount arising either
upon initial acquisition of Standard Certificates or thereafter.
Premium. The treatment of premium incurred upon the purchase of a Standard
Certificate will be determined generally as described above under "Certain
Federal Income Tax Consequences for REMIC Certificates--Taxation of Residual
Certificates--Treatment of Certain Items of REMIC Income and Expense--Premium".
Original Issue Discount. The original issue discount rules will be
applicable to a Standard Certificateholder's interest in those Mortgage Loans
as to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount income are applicable
to mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgages in an amount greater than a statutory de
minimis exception, including a payment of points currently deductible by the
borrower under applicable Code provisions or, under certain circumstances, by
the presence of "teaser rates" on the Mortgage Loans.
Original issue discount must generally be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest, in advance of the cash attributable to such
income. Unless indicated otherwise in the applicable Prospectus Supplement, no
prepayment assumption will be assumed for purposes of such accrual. However,
Code Section 1272 provides for a reduction in the amount of original issue
discount includible in the income of a holder of an obligation that acquires
the obligation after its initial issuance at a price greater than the sum of
the original issue price and the previously accrued original issue discount,
less prior payments of principal. Accordingly, if such Mortgage Loans acquired
by a Standard Certificateholder are purchased at a price equal to the then
unpaid principal amount of such Mortgage Loans, no original issue discount
attributable to the difference between the issue price and the original
principal amount of such Mortgage Loans (i.e., points) will be includible by
such holder.
Market Discount. Standard Certificateholders also will be subject to the
market discount rules to the extent that the conditions for application of
those sections are met. Market discount on the Mortgage Loans will be
determined and will be reported as ordinary income generally in the manner
described above under "Certain Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Market Discount", except that
the ratable accrual methods described therein will not apply and it is unclear
whether a Prepayment Assumption would apply. Rather, the holder will accrue
market discount pro rata over the life of the Mortgage Loans, unless the
constant yield method is elected. Unless indicated otherwise in the applicable
Prospectus Supplement, no prepayment assumption will be assumed for purposes of
such accrual.
Recharacterization of Servicing Fees. If the servicing fee paid to the
Master Servicer were deemed to exceed reasonable servicing compensation, the
amount of such excess would represent neither income nor a deduction to
Certificateholders. In this regard, there are no authoritative guidelines for
federal income tax purposes as to either the maximum amount of servicing
compensation that may be considered reasonable in the context of this or
similar transactions or whether, in the case of the Standard Certificate, the
reasonableness of servicing compensation should be determined on a weighted
average or loan-by--
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loan basis. If a loan-by-loan basis is appropriate, the likelihood that such
amount would exceed reasonable servicing compensation as to some of the
Mortgage Loans would be increased. Service guidance indicates that a servicing
fee in excess of reasonable compensation ("excess servicing") will cause the
Mortgage Loans to be treated under the "stripped bond" rules. Such guidance
provides safe harbors for servicing deemed to be reasonable and requires
taxpayers to demonstrate that the value of servicing fees in excess of such
amounts is not greater than the value of the services provided.
Accordingly, if the Service's approach is upheld, a servicer who receives
a servicing fee in excess of such amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the Mortgage Loans.
Under the rules of Code Section 1286, the separation of ownership of the right
to receive some or all of the interest payments on an obligation from the right
to receive some or all of the principal payments on the obligation would result
in treatment of such Mortgage Loans as "stripped coupons" and "stripped bonds".
Subject to the de minimis rule discussed below under "--Stripped Certificates",
each stripped bond or stripped coupon could be considered for this purpose as a
non-interest bearing obligation issued on the date of issue of the Standard
Certificates, and the original issue discount rules of the Code would apply to
the holder thereof. While Standard Certificateholders would still be treated as
owners of beneficial interests in a grantor trust for federal income tax
purposes, the corpus of such trust could be viewed as excluding the portion of
the Mortgage Loans the ownership of which is attributed to the Master Servicer,
or as including such portion as a second Class of equitable interest.
Applicable Treasury regulations treat such an arrangement as a fixed investment
trust, since the multiple Classes of trust interests should be treated as
merely facilitating direct investments in the trust assets and the existence of
multiple Classes of ownership interests is incidental to that purpose. In
general, such a recharacterization should not have any significant effect upon
the timing or amount of income reported by a Standard Certificateholder, except
that the income reported by a cash method holder may be slightly accelerated.
See "Stripped Certificates" below for a further description of the federal
income tax treatment of stripped bonds and stripped coupons.
Sale or Exchange of Standard Certificates. Upon sale or exchange of a
Standard Certificate, a Standard Certificateholder will recognize gain or loss
equal to the difference between the amount realized on the sale and its
aggregate adjusted basis in the Mortgage Loans and the other assets represented
by the Standard Certificate. In general, the aggregate adjusted basis will
equal the Standard Certificateholder's cost for the Standard Certificate,
increased by the amount of any income previously reported with respect to the
Standard Certificate and decreased by the amount of any losses previously
reported with respect to the Standard Certificate and the amount of any
distributions received thereon. Except as provided above with respect to market
discount on any Mortgage Loans, and except for certain financial institutions
subject to the provisions of Code Section 582(c), any such gain or loss would
be capital gain or loss if the Standard Certificate was held as a capital
asset. However, gain on the sale of a Standard Certificate will be treated as
ordinary income (i) if a Standard Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the Standard Certificateholder's net investment in
the conversion transaction at 120% of the appropriate applicable Federal rate
in effect at the time the taxpayer entered into the transaction minus any
amount previously treated as ordinary income with respect to any prior
disposition of property that was held as a part of such transaction or (ii) in
the case of a non-corporate taxpayer, to the extent such taxpayer has made an
election under Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. Capital gains of certain
non-corporate taxpayers are subject to a lower maximum tax rate (20%) than
ordinary income of such taxpayers (39.6%) for property held for more than one
year. The maximum tax rate for corporations is the same with respect to both
ordinary income and capital gains.
STRIPPED CERTIFICATES
General
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the principal payments on an obligation from ownership
of the right to receive some or all of the interest
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payments results in the creation of "stripped bonds" with respect to principal
payments and "stripped coupons" with respect to interest payments. For purposes
of this discussion, Certificates that are subject to those rules will be
referred to as "Stripped Certificates". Stripped Certificates include "Stripped
Interest Certificates" and "Stripped Principal Certificates" (as defined in
this Prospectus) as to which no REMIC election is made.
The Certificates will be subject to those rules if (i) the Depositor or
any of its affiliates retains (for its own account or for purposes of resale),
in the form of fixed retained yield or otherwise, an ownership interest in a
portion of the payments on the Mortgage Loans, (ii) the Master Servicer is
treated as having an ownership interest in the Mortgage Loans to the extent it
is paid (or retains) servicing compensation in an amount greater than
reasonable consideration for servicing the Mortgage Loans (see "Standard
Certificates--Recharacterization of Servicing Fees" above) and (iii)
Certificates are issued in two or more Classes or subClasses representing the
right to non-pro-rata percentages of the interest and principal payments on the
Mortgage Loans.
In general, a holder of a Stripped Certificate will be considered to own
"stripped bonds" with respect to its pro rata share of all or a portion of the
principal payments on each Mortgage Loan and/or "stripped coupons" with respect
to its pro rata share of all or a portion of the interest payments on each
Mortgage Loan, including the Stripped Certificate's allocable share of the
servicing fees paid to the Master Servicer, to the extent that such fees
represent reasonable compensation for services rendered. See discussion above
under "Standard Certificates--Recharacterization of Servicing Fees". Although
not free from doubt, for purposes of reporting to Stripped Certificateholders,
the servicing fees will be allocated to the Stripped Certificates in proportion
to the respective entitlements to distributions of each Class (or subClass) of
Stripped Certificates for the related period or periods. The holder of a
Stripped Certificate generally will be entitled to a deduction each year in
respect of the servicing fees, as described above under "Standard
Certificates--General", subject to the limitation described therein.
Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an original issue discount on the date that such stripped
interest is purchased. Although the treatment of Stripped Certificates for
federal income tax purposes is not clear in certain respects at this time,
particularly where such Stripped Certificates are issued with respect to a
Mortgage Pool containing variable-rate Mortgage Loans, the Depositor has been
advised by counsel that (i) the Trust Fund will be treated as a grantor trust
under subpart E, Part 1 of subchapter J of the Code and not as an association
taxable as a corporation or a "taxable mortgage pool" within the meaning of
Code Section 7701(i), and (ii) each Stripped Certificate should be treated as a
single installment obligation for purposes of calculating original issue
discount and gain or loss on disposition. This treatment is based on the
interrelationship of Code Section 1286, Code Sections 1272 through 1275, and
the OID Regulations. While under Code Section 1286 computations with respect to
Stripped Certificates arguably should be made in one of the ways described
below under "Taxation of Stripped Certificates--Possible Alternative
Characterizations", the OID Regulations state, in general, that two or more
debt instruments issued by a single issuer to a single investor in a single
transaction should be treated as a single debt instrument for original issue
discount purposes. The Pooling and Servicing Agreement requires that the
Trustee make and report all computations described below using this aggregate
approach, unless substantial legal authority requires otherwise.
Furthermore, Treasury regulations issued December 28, 1992 assume that a
Stripped Certificate will be treated as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount
and that the interest component of such a Stripped Certificate would be treated
as qualified stated interest under the OID Regulations. Further pursuant to
these final regulations the purchaser of such a Stripped Certificate will be
required to account for any discount as market discount rather than original
issue discount unless either (i) the initial discount with respect to the
Stripped Certificate was treated as zero under the de minimis rule of Code
Section 1273(a)(3), or (ii) no more than 100 basis points in excess of
reasonable servicing is stripped off the related Mortgage Loans. Any such
market discount would be reportable as described under "Certain Federal Income
Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates--Market Discount", without regard to the de minimis rule therein,
assuming that a prepayment assumption is employed in such computation.
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Status of Stripped Certificates
No specific legal authority exists as to whether the character of the
Stripped Certificates, for federal income tax purposes, will be the same as
that of the Mortgage Loans. Although the issue is not free from doubt, counsel
has advised the Depositor that Stripped Certificates owned by applicable
holders should be considered to represent "real estate assets" within the
meaning of Code Section 856(c)(4)(A), "obligation[s] principally secured by an
interest in real property" within the meaning of Code Section 860G(a)(3)(A),
and "loans . . . secured by an interest in real property which is . . .
residential real property" within the meaning of Code Section
7701(a)(19)(C)(v), and interest (including original issue discount) income
attributable to Stripped Certificates should be considered to represent
"interest on obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), provided that in each case the Mortgage
Loans and interest on such Mortgage Loans qualify for such treatment.
Taxation of Stripped Certificates
Original Issue Discount. Except as described above under "General", each
Stripped Certificate will be considered to have been issued at an original
issue discount for federal income tax purposes. Original issue discount with
respect to a Stripped Certificate must be included in ordinary income as it
accrues, in accordance with a constant interest method that takes into account
the compounding of interest, which may be prior to the receipt of the cash
attributable to such income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Code made by the 1986
Act, the amount of original issue discount required to be included in the
income of a holder of a Stripped Certificate (referred to in this discussion as
a "Stripped Certificateholder") in any taxable year likely will be computed
generally as described above under "Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Original Issue Discount" and
"--Variable Rate Regular Certificates". However, with the apparent exception of
a Stripped Certificate qualifying as a market discount obligation, as described
above under "General", the issue price of a Stripped Certificate will be the
purchase price paid by each holder thereof, and the stated redemption price at
maturity will include the aggregate amount of the payments, other than
qualified stated interest to be made on the Stripped Certificate to such
Stripped Certificateholder, presumably under the Prepayment Assumption.
If the Mortgage Loans prepay at a rate either faster or slower than that
under the Prepayment Assumption, a Stripped Certificateholder's recognition of
original issue discount will be either accelerated or decelerated and the
amount of such original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each Mortgage
Loan represented by such Stripped Certificateholder's Stripped Certificate.
While the matter is not free from doubt, the holder of a Stripped Certificate
should be entitled in the year that it becomes certain (assuming no further
prepayments) that the holder will not recover a portion of its adjusted basis
in such Stripped Certificate to recognize an ordinary loss equal to such
portion of unrecoverable basis.
As an alternative to the method described above, the fact that some or all
of the interest payments with respect to the Stripped Certificates will not be
made if the Mortgage Loans are prepaid could lead to the interpretation that
such interest payments are "contingent" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of contingent
interest, are by their terms not applicable to prepayable securities such as
the Stripped Certificates. However, if final regulations dealing with
contingent interest with respect to the Stripped Certificates apply the same
principles as the OID Regulations, such regulations may lead to different
timing of income inclusion that would be the case under the OID Regulations.
Furthermore, application of such principles could lead to the characterization
of gain on the sale of contingent interest Stripped Certificates as ordinary
income. Investors should consult their tax advisors regarding the appropriate
tax treatment of Stripped Certificates.
Sale or Exchange of Stripped Certificates. Sale or exchange of a Stripped
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under "Certain Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Sale or
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Exchange of Regular Certificates". To the extent that a subsequent purchaser's
purchase price is exceeded by the remaining payments on the Stripped
Certificates, such subsequent purchaser will be required for federal income tax
purposes to accrue and report such excess as if it were original issue discount
in the manner described above. It is not clear for this purpose whether the
assumed prepayment rate that is to be used in the case of a Stripped
Certificateholder other than an original Stripped Certificateholder should be
the Prepayment Assumption or a new rate based on the circumstances at the date
of subsequent purchase.
Purchase of More Than One Class of Stripped Certificates. Where an
investor purchases more than one Class of Stripped Certificates, it is
currently unclear whether for federal income tax purposes such Classes of
Stripped Certificates should be treated separately or aggregated for purposes
of the rules described above.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates discussed above are not the only possible interpretations
of the applicable Code provisions. For example, the Stripped Certificateholder
may be treated as the owner of (i) one installment obligation consisting of
such Stripped Certificate's pro rata share of the payments attributable to
principal on each Mortgage Loan and a second installment obligation consisting
of such Stripped Certificate's pro rata share of the payments attributable to
interest on each Mortgage Loan, (ii) as many stripped bonds or stripped coupons
as there are scheduled payments of principal and/or interest on each Mortgage
Loan or (iii) a separate installment obligation for each Mortgage Loan,
representing the Stripped Certificate's pro rata share of payments of principal
and/or interest to be made with respect thereto. Alternatively, the holder of
one or more Classes of Stripped Certificates may be treated as the owner of a
pro rata fractional undivided interest in each Mortgage Loan to the extent that
such Stripped Certificate, or Classes of Stripped Certificates in the
aggregate, represent the same pro rata portion of principal and interest on
each such Mortgage Loan, and a stripped bond or stripped coupon (as the case
may be), treated as an installment obligation or contingent payment obligation,
as to the remainder. Final regulations issued on December 28, 1992 regarding
original issue discount on stripped obligations make the foregoing
interpretations less likely to be applicable. The preamble to those regulations
states that they are premised on the assumption that an aggregation approach is
appropriate for determining whether original issue discount on a stripped bond
or stripped coupon is de minimis, and solicits comments on appropriate rules
for aggregating stripped bonds and stripped coupons under Code Section 1286.
Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income tax
purposes.
FEDERAL INCOME TAX CONSEQUENCES FOR FASIT CERTIFICATES
If and to the extent set forth in the Prospectus Supplement relating to a
particular series of Certificates, an election may be made to treat the related
Trust Fund or one or more segregated pools of assets therein as one or more
financial asset securitization investment trusts ("FASITs") within the meaning
of Code Section 860L(a). Qualification as a FASIT requires ongoing compliance
with certain conditions. With respect to each series of FASIT Certificates,
O'Melveny & Myers LLP, counsel to the Depositor, will advise the Depositor that
in the firm's opinion, assuming (i) the making of such an election, (ii)
compliance with the Pooling and Servicing Agreement and (iii) compliance with
any changes in the law, including any amendments to the Code or applicable
Treasury Regulations thereunder, each FASIT Pool will qualify as a FASIT. In
such case, the Regular Certificates will be considered to be "regular
interests" in the FASIT and will be treated for federal income tax purposes as
if they were newly originated debt instruments, and the Residual Certificate
will be considered the "ownership interest" in the FASIT Pool. The Prospectus
Supplement for each series of Certificates will indicate whether one or more
FASIT elections will be made with respect to the related Trust Fund.
FASIT treatment has become available pursuant to recently enacted
legislation, and no Treasury Regulations have as yet been issued detailing the
circumstances under which a FASIT election may be made or the consequences of
such an election. If a FASIT election is made with respect to any Trust Fund or
as to any segregated pool of assets therein, the related Prospectus Supplement
will describe the Federal income tax consequences of such election.
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REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Trustee will furnish, within a reasonable time after the end of each
calendar year, to each Standard Certificateholder or Stripped Certificateholder
at any time during such year, such information (prepared on the basis described
above) as the Trustee deems to be necessary or desirable to enable such
Certificateholders to prepare their federal income tax returns. Such
information will include the amount of original issue discount accrued on
Certificates held by persons other than Certificateholders exempted from the
reporting requirements. The amounts required to be reported by the Trustee may
not be equal to the proper amount of original issue discount required to be
reported as taxable income by a Certificateholder, other than an original
Certificateholder that purchased at the issue price. In particular, in the case
of Stripped Certificates, unless provided otherwise in the applicable
Prospectus Supplement, such reporting will be based upon a representative
initial offering price of each Class of Stripped Certificates. The Trustee will
also file such original issue discount information with the Service. If a
Certificateholder fails to supply an accurate taxpayer identification number or
if the Secretary of the Treasury determines that a Certificateholder has not
reported all interest and dividend income required to be shown on his federal
income tax return, 31% backup withholding may be required in respect of any
reportable payments, as described above under "Certain Federal Income Tax
Consequences for REMIC Certificates--Backup Withholding".
TAXATION OF CERTAIN FOREIGN INVESTORS
To the extent that a Certificate evidences ownership in Mortgage Loans
that are issued on or before July 18, 1984, interest or original issue discount
paid by the person required to withhold tax under Code Section 1441 or 1442 to
nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or such lower rate as may
be provided for interest by an applicable tax treaty. Accrued original issue
discount recognized by the Standard Certificateholder or Stripped
Certificateholder on original issue discount recognized by the Standard
Certificateholder or Stripped Certificateholders on the sale or exchange of
such a Certificate also will be subject to federal income tax at the same rate.
Treasury regulations provide that interest or original issue discount paid
by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and such persons will
be subject to the same certification requirements, described above under
"Certain Federal Income Tax Consequences for REMIC Certificates--Taxation of
Certain Foreign Investors--Regular Certificates".
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences", potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of
the Offered Certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their own tax advisors with
respect to the various tax consequences of investments in the Offered
Certificates.
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ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain requirements on employee benefit
plans, and on certain other retirement plans and arrangements, including
individual retirement accounts and annuities, Keogh plans, collective
investment funds, insurance company and separate accounts and some insurance
company general accounts in which such plans, accounts or arrangements are
invested (all of which are hereinafter referred to as "Plans"), and on persons
who are fiduciaries with respect to Plans in connection with the investment of
Plan assets.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and
the requirement that a Plan's investments be made in accordance with the
documents governing the Plan. In addition, ERISA and the Code prohibit a broad
range of transactions involving assets of a Plan and persons ("Parties in
Interest") who have certain specified relationships to the Plan, unless a
statutory or administrative exemption is available. Parties in Interest that
participate in a prohibited transaction may be subject to an excise tax imposed
pursuant to Section 4975 of the Code, unless a statutory or administrative
exemption is available. These prohibited transactions generally are set forth
in Section 406 of ERISA and Section 4975 of the Code. Special caution should be
exercised before the assets of a Plan are used to purchase a Certificate if,
with respect to such assets, the Depositor, the Master Servicer, a Special
Servicer or any Sub-Servicer or the Trustee or an affiliate thereof, either:
(a) has discretionary authority or control with respect to the investment of
such assets of such Plan; or (b) has authority or responsibility to give, or
regularly gives, investment advice with respect to such assets of such Plan for
a fee and pursuant to an agreement or understanding that such advice will serve
as a primary basis for investment decisions with respect to such assets and
that such advice will be based on the particular investment needs of the Plan.
Before purchasing any Offered Certificates, a Plan fiduciary should
consult with its counsel and determine whether there exists any prohibition to
such purchase under the requirements of ERISA, whether any prohibited
transaction Class exemption or any individual prohibited transaction exemption
(as described below) applies, including whether the appropriate conditions set
forth therein would be met, or whether any statutory prohibited transaction
exemption is applicable, and further should consult the applicable Prospectus
Supplement relating to such series of Certificates.
Certain employee benefit plans, such as governmental plans (as defined in
ERISA Section 3(32)), and, if no election has been made under Section 410(d) of
the Code, church plans (as defined in Section 3(33) of ERISA) are not subject
to ERISA requirements. Accordingly, assets of such governmental and church
plans may be invested in Offered Certificates without regard to the ERISA
considerations described below, subject to the provisions of other applicable
federal and state law. Any such plan which is qualified and exempt from
taxation under Sections 401(a) and 501(a) of the Code, however, is subject to
the prohibited transaction rules set forth in Section 503 of the Code.
PLAN ASSET REGULATIONS
A Plan's investment in Offered Certificates may cause the Trust Assets to
be deemed Plan assets. Section 2510.3-101 of the regulations ("Plan Asset
Regulations") of the United States Department of Labor ("DOL") provides that
when a Plan acquires an equity interest in an entity, the Plan's assets include
both such equity interest and an undivided interest in each of the underlying
assets of the entity, unless certain exceptions not applicable to this
discussion apply, or unless the equity participation in the entity by "benefit
plan investors" (that is, Plans, certain employee benefit plans not subject to
ERISA, and entities whose underlying assets include plan assets) is not
"significant". For this purpose, the Plan Asset Regulations provide, in
general, that participation in an entity, such as a Trust Fund, is
"significant" if, immediately after the most recent acquisition of any equity
interest, 25% or more of any Class of equity interests, such as Certificates,
is held by benefit plan investors. Unless restrictions on ownership of and
transfer to Plans apply with respect to a series of Certificates, there can be
no assurance that benefit plan investors will not own at least 25% of a Class
of Certificates.
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Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides
investment advice with respect to such assets for a fee, is a fiduciary of the
investing Plan. If the Trust Assets constitute Plan assets, then any party
exercising management or discretionary control regarding those assets, such as
a Master Servicer, a Special Servicer or any Sub-Servicer, may be deemed to be
a Plan "fiduciary" with respect to the investing Plan, and thus subject to the
fiduciary responsibility provisions and prohibited transaction provisions of
ERISA and the Code. In addition, if the Trust Assets constitute Plan assets,
the purchase of Certificates by a Plan, as well as the operation of the Trust
Fund, may constitute or involve one or more prohibited transactions under ERISA
and the Code.
ADMINISTRATIVE EXEMPTIONS
Several underwriters of mortgage-backed securities have applied for and
obtained from DOL individual administrative ERISA prohibited transaction
exemptions that apply to the purchase and holding of mortgage-backed securities
which, among other conditions, are sold in an offering with respect to which
such underwriter serves as the sole or a managing underwriter or as a selling
or placement agent. If such an exemption may be applicable to a series of
Certificates, the related Prospectus Supplement will refer to such possibility,
as well as provide a summary of the conditions to the exemption's
applicability.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code Section
501(a), including most varieties of ERISA Plans, may give rise to "unrelated
business taxable income" as described in Code Sections 511-515 and 860E.
Further, prior to the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a "Disqualified
Organization", which term as defined above includes certain tax-exempt entities
not subject to Code Section 511 including certain governmental plans, as
discussed above under the caption "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Residual Certificates--Tax-Related Restrictions on Transfer of Residual
Certificates--Disqualified Organizations."
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in prohibited transactions, it is particularly important
that potential investors who are Plan fiduciaries consult with their counsel
regarding the consequences under ERISA of their acquisition and ownership of
Certificates.
The sale of Certificates to an employee benefit plan is in no respect a
representation by the Depositor or the Underwriter that this investment meets
all relevant legal requirements with respect to investments by plans generally
or by any particular plan, or that this investment is appropriate for plans
generally or for any particular plan.
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LEGAL INVESTMENT
The Offered Certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended
("SMMEA"), only if so specified in the related Prospectus Supplement. The
appropriate characterization of those Certificates not qualifying as "mortgage
related securities" ("Non-SMMEA Certificates") under various legal investment
restriction, and thus the ability of investors subject to these restrictions to
purchase such Certificates, may be subject to significant interpretive
uncertainties. Accordingly, investors whose investment authority is subject to
legal restrictions should consult their own legal advisors to determine whether
and to what extent the Non-SMMEA Certificates constitute legal investments for
them.
Generally, only Classes of Offered Certificates that (i) are rated in one
of the two highest rating categories by one or more Rating Agencies, (ii) are
part of a series evidencing interests in a Trust Fund consisting of loans
originated by certain types of Originators as specified in SMMEA and (iii) are
part of a series evidencing interests in a Trust Fund consisting of mortgage
loans each of which is secured by a first lien on (a) a single parcel of real
estate on which is located a residential and/or mixed residential and
commercial structure or (b) one or more parcels of real estate upon which are
located one or more commercial structures will be "mortgage related securities"
for purposes of SMMEA. As "mortgage related securities", such Classes will
constitute legal investments, for persons, trusts, corporations, partnerships,
associations, business trusts and business entities (including depository
institutions, insurance companies, trustees and pension funds) created pursuant
to or existing under the laws of the United States or of any state (including
the District of Columbia and Puerto Rico) whose authorized investments are
subject to state regulation, to the same extent that obligations issued by or
guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities under
applicable law. Under SMMEA, a number of states enacted legislation on or prior
to the October 3, 1991 cut-off for such enactments limiting to various extends
the ability of certain entities (in particular, insurance companies) to invest
in "mortgage related securities", secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, states are authorized to enact legislation, on or before September 23,
2001, prohibiting or restricting the purchase, holding or investment by state
regulated entities in certificates satisfying the rating and qualified
Originator requirements for "mortgage related securities", but evidencing
interests in a Trust Fund consisting, in whole or in part, of first liens on
one or more parcels of real estate upon which are located one or more
commercial structures. Accordingly, the investors affected by such legislation
will be authorized to invest in Offered Certificates qualifying as "mortgage
related securities" only to the extent provided in such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. Section 24 (Seventh), subject in each case to such
regulations as the applicable federal regulatory authority may prescribe. In
this connection, effective December 31, 1996, the Office of the Comptroller of
the Currency (the "OCC") has amended 12 C.F.R. Part 1 to authorize national
banks to purchase and sell for their own account, without limitation as to a
percentage of the bank's capital and surplus (but subject to compliance with
certain general standards in 12 C.F.R. Section 1.5 concerning "safety and
soundness" and retention of credit information), certain "Type IV securities",
defined in 12 C.F.R. Section 1.2(1) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage related security"
within the meaning of SMMEA, provided that, in the case of a "commercial
mortgage-related security", it "represents ownership of a promissory note or
certificate of interest or participation that is directly secured by a first
lien on one or more parcels of real estate upon which one or more commercial
structures are located and that is fully secured by interests in a pool of
loans to numerous obligors." In the absence of any rule or
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administrative interpretation by the OCC defining the term "numerous obligors",
no representation is made as to whether any Class of Certificates will qualify
as "commercial mortgage-related securities", and thus as "Type IV securities",
for investment by national banks. federal credit unions should review NCUA
Letter to Credit Unions No. 96, as modified by Letter to Credit Unions No. 108,
which includes guidelines to assist federal credit unions in making investment
decisions for mortgage related securities. The NCUA has adopted rules, codified
as 12 C.F.R. Section Section 703.5(f)-(k), which prohibit federal credit
unions from investing in certain mortgage related securities (including
securities such as certain Classes of the Offered Certificates), except under
limited circumstances. Effective January 1, 1998, the NCUA has amended its
rules governing investments by federal credit unions at 12 C.F.R. Part 703; the
revised rules will permit investments in "mortgage related securities" under
certain limited circumstances, but will prohibit investments in stripped
mortgage related securities, residual interests in mortgage related securities,
and commercial mortgage related securities, unless the credit union has
obtained written approval from the NCUA to participate in the "investment pilot
program" described in 12 C.F.R. Section 703.140.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994 (the "Policy
Statement") of the Federal Financial Institutions Examination Council (the
"FFIEC"). The Policy Statement, which has been adopted by the Board of
Governors of the Federal Reserve System, the OCC, the Federal Depository
Insurance Company and the Office of Thrift Supervision, and by the NCUA (with
certain modifications), prohibits depository institutions from investing in
certain "high-risk mortgage securities" (including securities such as certain
Classes of the Offered Certificates), except under limited circumstances, and
sets forth certain investment practices deemed to be unsuitable for regulated
institutions. On September 29, 1997, the FFEIC released for public comment a
proposed "Supervisory Policy Statement on Investment Securities and End-User
Derivatives Activities" (the "1997 Statement"), which would replace the Policy
Statement. As proposed, the 1997 Statement would delete the specific "high-risk
mortgage securities" tests, and substitute general guidelines which depository
institutions should follow in managing risks (including market, credit,
liquidity, operational (transactional), and legal risks) applicable to all
securities (including mortgage pass-through securities and mortgage-derivative
products) used for investment purposes.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Class of
the Offered Certificates, as certain Classes may be deemed unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying", and, with regard to any Class of the Offered
Certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
Except as to the status of certain Classes of Offered Certificates as
"mortgage related securities", no representations are made as to the proper
characterization of any Class of Offered Certificates for legal investment
purposes, financial institution regulatory purposes, or other purposes, or as
to the ability of particular investors to purchase any Class of Offered
Certificates under applicable legal investment restrictions. These
uncertainties (and any unfavorable future determinations concerning legal
investment or financial institution regulatory characteristics of the Offered
Certificates) may adversely affect the liquidity of any Class of Offered
Certificates.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors
in determining whether and to what extent the Offered Certificates of any Class
constitute legal investments or are subject to investment, capital or other
restrictions.
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METHOD OF DISTRIBUTION
The Offered Certificates offered hereby and by the Supplements to this
Prospectus will be offered in series. The distribution of the Offered
Certificates may be effected from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of
commitment therefor. If so specified in the related Prospectus Supplement, the
Offered Certificates will be distributed in a firm commitment underwriting,
subject to the terms and conditions of the underwriting agreement, by
PaineWebber Incorporated ("PaineWebber") acting as underwriter with other
underwriters, if any, named therein. In such event, the Prospectus Supplement
may also specify that the underwriters will not be obligated to pay for any
Offered Certificates agreed to be purchased by purchasers pursuant to purchase
agreements acceptable to the Depositor. In connection with the sale of Offered
Certificates, underwriters may receive compensation from the Depositor or from
purchasers of Offered Certificates in the form of discounts, concessions or
commissions. The Prospectus Supplement will describe any such compensation paid
by the Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by PaineWebber acting as agent or in some
cases as principal with respect to Offered Certificates that it has previously
purchased or agreed to purchase. If PaineWebber acts as agent in the sale of
Offered Certificates, PaineWebber will receive a selling commission with
respect to such Offered Certificates, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or notional amount of such
Offered Certificates as of the Cut-off Date. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that PaineWebber elects to purchase Offered Certificates as
principal, PaineWebber may realize losses or profits based upon the difference
between its purchase price and the sales price. The Prospectus Supplement with
respect to any series offered other than through underwriters will contain
information regarding the nature of such offering and any agreements to be
entered into between the Depositor and purchasers of Offered Certificates of
such series.
The Depositor will indemnify PaineWebber and any underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933, or will contribute to payments PaineWebber and any underwriters may be
required to make in respect thereof.
In the ordinary course of business, PaineWebber and the Depositor may
engage in various securities and financing transactions, including repurchase
agreements to provide interim financing of the Depositor's mortgage loans
pending the sale of such mortgage loans or interests therein, including the
Certificates.
The Depositor anticipates that the Offered Certificates will be sold
primarily to institutional investors. Purchasers of Offered Certificates,
including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act of 1933 in connection with reoffers and sales by them of Offered
Certificates. Certificateholders should consult with their legal advisors in
this regard prior to any such reoffer or sale.
As to each series of Certificates, only those Classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any unrated Class may be initially retained by the Depositor, and may be sold
by the Depositor at any time to one or more institutional investors.
If and to the extent required by applicable law or regulation, this
Prospectus will be used by PaineWebber in connection with offers and sales
related to market-making transactions in Certificates previously offered
hereunder in transactions in which PaineWebber acts as principal. PaineWebber
may also act as agent in such transactions. Sales may be made at negotiated
prices determined at the time of sale.
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LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the Depositor
and PaineWebber Incorporated by O'Melveny & Myers LLP.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any Class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in
one of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors or of the degree by which such prepayments
might differ from those originally anticipated. As a result,
certificateholders, might suffer a lower than anticipated yield, and, in
addition, holders of stripped interest certificates in extreme cases might fail
to recoup their initial investments. A security rating is not a recommendation
to buy, sell or hold securities and may be subject to revision or withdrawal at
any time by the assigning rating organization. Each security rating should be
evaluated independently of any other security rating.
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INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
1986 Act ............................... 78
1997 Statement ......................... 105
Accrual Certificates ................... 10, 36
ADA .................................... 73
ARM Loans .............................. 28
Asset Conservation Act ................. 70
Section 42 Properties .................. 16
Book-Entry Certificates ................ 36
Cash Flow Agreement .................... 9, 30
Cash Flow Agreements ................... 1
Cede ................................... 3
CERCLA ................................. 20, 70
Certificate Account .................... 29, 46
Certificate Owner ...................... 43
Certificate Owners ..................... 43
Certificate Principal Balance .......... 10
Certificateholders ..................... 3
Class .................................. 1
Code ................................... 75
Commercial Loans ....................... 21
Commercial Properties .................. 1, 21
Commission ............................. 2
CON .................................... 25
Cooperatives ........................... 21
Covered Trust .......................... 19, 59
CPR .................................... 33
Credit Support ......................... 1, 9, 30
Crime Control Act ...................... 73
Cut-off Date ........................... 11
Definitive Certificates ................ 36
Depositor .............................. 21
Determination Date ..................... 36
Distribution Date ...................... 11
DOL .................................... 102
DTC .................................... 3, 42
Due Period ............................. 37
due-on-sale ............................ 71
EPA .................................... 70
Equity Participations .................. 29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ERISA .................................. 12, 102
excess servicing ....................... 97
Exchange Act ........................... 3
FASIT .................................. 75
FASITs ................................. 100
FDIC ................................... 46
FFIEC .................................. 105
Foreign Investors ...................... 89
Garn Act ............................... 71
Health Care-Related Properties ......... 25
Indirect Participants .................. 42
Insurance Proceeds ..................... 47
L/C Bank ............................... 60
Liquidation Proceeds ................... 47
Lock-out Date .......................... 28
Lock-out Period ........................ 28
Mark to Market Regulations ............. 91
Master Servicer ........................ 7
MBS Agreement .......................... 29
MBS Issuer ............................. 29
MBS Securities ......................... 1, 7, 21
MBS Servicer ........................... 29
MBS Trustee ............................ 29
Mortgage Assets ........................ 21
Mortgage Loans ......................... 1, 21
Mortgage Notes ......................... 21
Mortgage Rate .......................... 8, 28
Mortgaged Property ..................... 1
Mortgages .............................. 21
Multifamily Loans ...................... 21
Multifamily Properties ................. 1, 7, 21
Net Leases ............................. 27
Nonrecoverable Advance ................. 39
Non-SMMEA Certificates ................. 104
OCC .................................... 104
Offered Certificates ................... 1
OID Regulations ........................ 78
Original Issue Discount ................ 83
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
PaineWebber ............................. 106
Participants ............................ 30, 42
Parties in Interest ..................... 102
Pass-Through Rate ....................... 2
Permitted Investments ................... 47
Plan Asset Regulations .................. 102
Plans ................................... 102
Policy Statement ........................ 105
Pooling and Servicing Agreement ......... 10
prepayment .............................. 33
Prepayment Assumption ................... 79
Prepayment Premium ...................... 28
PRPs .................................... 70
Random Lot Certificates ................. 78
Rating Agency ........................... 13
reasonably equivalent value ............. 64
Record Date ............................. 36
Regular Certificateholder ............... 78
Related Proceeds ........................ 39
Relief Act .............................. 72
REMIC Regulations ....................... 75
Residual Certificateholders ............. 85
RICO .................................... 73
safety and soundness .................... 104
SBJPA of 1996 ........................... 76
Section 42 Properties ................... 16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Senior Certificates ..................... 10, 36
Service ................................. 77
Servicing Standard ...................... 49
SMMEA ................................... 13, 104
SPA ..................................... 33
Special Servicer ........................ 7, 50
Standard Certificateholder .............. 95
Standard Certificates ................... 95
Stripped Certificateholder .............. 99
Stripped Interest Certificates .......... 10, 36
Stripped Principal Certificates ......... 36
Subordinate Certificates ................ 36
Sub-Servicer ............................ 50
Sub-Servicing Agreement ................. 50
superlien ............................... 70
super-premium ........................... 79
thrift institutions ..................... 88
Title V ................................. 72
Treasury ................................ 75
Trust Assets ............................ 2
Trust Fund .............................. 1
Trustee ................................. 7
UCC ..................................... 63
Voting Rights ........................... 20
Warranting Party ........................ 45
</TABLE>
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This diskette contains one spreadsheet file (the "Spreadsheet File") that
can be put on a user-specified hard drive or network drive. The Spreadsheet File
PMAC99C1.XLS is a Microsoft Excel (1), Version 5.0 spreadsheet. The Spreadsheet
File provides, in electronic format, all of the information shown in Annex A-1 &
Annex A-2 of the Prospectus Supplement dated May , 1999 (the "Prospectus
Supplement"). The information contained in this diskette appears elsewhere in
paper form in this Prospectus Supplement and must be considered as part of, and
together with, the information contained elsewhere in this Prospectus Supplement
and the Prospectus. Defined terms used in this diskette but not otherwise
defined therein shall have the respective meanings assigned to them in the paper
portion of the Prospectus Supplement and Prospectus. All of the information
contained in this diskette is subject to the same limitations and qualifications
contained elsewhere in this Prospectus Supplement and the Prospectus.
Prospective investors are strongly urged to read the paper portion of this
Prospectus Supplement and the Prospectus in its entirety prior to accessing this
diskette. If this diskette was not received in a sealed package, there can be no
assurances that it remains in its original format and should not be relied upon
for any purpose. Prospective investors may contact PaineWebber Incorporated or
(212) 713-7900 to receive an original copy of the diskette. As a precautionary
measure, scan this diskette for computer viruses before opening. Upon opening
the Microsoft Excel file contained on this diskette, a legend will be displayed,
which should be read carefully.
Open the file as you would normally open any Spreadsheet File in Microsoft
Excel. After the Spreadsheet File is opened, a legend will be displayed. READ
THE LEGEND CAREFULLY. The data in the Spreadsheet File that corresponds to the
information shown in Annex A-1 is in the worksheet labeled "ANNEX A-1;" the
data in the spreadsheet file that corresponds to the information shown in Annex
A-2 is in the worksheet labelled "Annex A-2."
- ------------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Important Notice about the Information Presented in
this Prospectus Supplement and the Accompanying
Prospectus .............................................. S-2
Summary of Structure ...................................... S-4
Summary of Terms .......................................... S-6
Risk Factors .............................................. S-22
Description of the Mortgage Pool .......................... S-41
Description of the Certificates ........................... S-77
Yield and Maturity Considerations ......................... S-99
Servicing of the Mortgage Loans ........................... S-105
Certain Federal Income Tax Consequences ................... S-118
Method of Distribution .................................... S-120
Legal Matters ............................................. S-121
Ratings ................................................... S-121
Legal Investment Considerations ........................... S-122
ERISA Considerations ...................................... S-122
Index of Principal Definitions ............................ S-125
ANNEX A-1 -- Certain Characteristics of the
Mortgage Loans .......................................... A-1
ANNEX A-2 -- Credit Tenant Loans .......................... A-2
ANNEX B -- Servicer Reports ............................... B
ANNEX C -- Interest Reserve Loans ......................... C
PROSPECTUS
Prospectus Supplement ..................................... 2
Available Information ..................................... 2
Incorporation of Certain Information by Reference ......... 3
Summary of Prospectus ..................................... 7
Risk Factors .............................................. 14
Description of the Trust Funds ............................ 21
Use of Proceeds ........................................... 31
Yield Considerations ...................................... 32
The Depositor ............................................. 36
Description of the Certificates ........................... 36
Description of the Agreements ............................. 44
Description of Credit Support ............................. 59
Certain Legal Aspects of Mortgage Loans ................... 62
Certain Federal Income Tax Consequences ................... 75
State and Other Tax Consequences .......................... 101
ERISA Considerations ...................................... 102
Legal Investment .......................................... 104
Method of Distribution .................................... 106
Legal Matters ............................................. 107
Financial Information ..................................... 107
Rating .................................................... 107
Index of Principal Definitions ............................ 108
</TABLE>
UNTIL SEPTEMBER , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$616,668,000
(APPROXIMATE)
PAINEWEBBER MORTGAGE
ACCEPTANCE CORPORATION V
(DEPOSITOR)
PAINE WEBBER REAL ESTATE SECURITIES INC.
AND
MERRILL LYNCH MORTGAGE CAPITAL INC.
(MORTGAGE LOAN SELLERS)
CLASS A-1, CLASS A-2, CLASS X,
CLASS B, CLASS C AND CLASS D
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 1999-C1
--------------------------------------------------------------
PROSPECTUS SUPPLEMENT
MAY , 1999
--------------------------------------------------------------
PAINEWEBBER INCORPORATED
MERRILL LYNCH & CO.
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