SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 12 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 26, 1996
MERIT Securities Corporation
(Exact name of registrant as specified in charter)
Virginia 03992 54-1736551
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
4880 Cox Road, Glen Allen, Virginia 23060
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 967-7400
<PAGE>
Item 1. Changes in Control of Registrant.
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Not Applicable.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
On September 26, 1996, the Registrant issued $942,478,000 initial
principal balance of its Collateralized Mortgage Bonds, Series 8, Class A-1,
Class A-2 and Class A-3 (the "Bonds") pursuant to the Series 8 Supplement
dated as of September 1, 1996 (the "Series 8 Supplement"), to the Indenture
dated as of November 1, 1994 (the "Original Indenture" and, collectively with
the Series 8 Supplement, the "Indenture"), between the Registrant and Texas
Commerce Bank National Association, as trustee (the "Trustee"). Capitalized
terms used but not defined herein shall have the meanings assigned to them in
the Indenture. The Bonds were issued with the initial principal amount as
set forth below. The Class Interest Rates and the Stated Maturities of the
Bonds are as follows:
Original Class Interest Stated
Designation Principal Amount Rate Maturity
Class A-1 Bonds $710,500,000 (1) September 28, 2030
Class A-2 Bonds 142,000,000 (2) September 28, 2030
Class A-3 Bonds 89,978,000 (3) September 28, 2030
(1) The Class Interest Rate for the Class A-1 Bonds will initially be the
per annum rate equal to One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.22% accrued during
the applicable Accrual Period on the outstanding principal balance of
the Class A-1 Bonds immediately prior to such Payment Date, except that
(i) for the initial Payment Date, the Class Interest Rate on the Class
A-1 Bonds will be 5.7825%; and (ii) the Class Interest Rate for the
Class A-1 Bonds for any Payment Date following the first Payment Date
on which the Issuer has the option to redeem the Bonds shall be the per
annum rate equal to One-Month LIBOR, as determined on the applicable
Floating Rate Determination Date, plus 0.44%; provided that, if the
Issuer redeems the Class A-1 Bonds through an Affiliate and the Class
A-1 Bonds remain outstanding following such purchase, the Class A-1
Interest Rate shall not be increased as provided in this clause (ii).
(2) The Class Interest Rate for the Class A-2 Bonds will initially be the
per annum rate equal to One-Month LIBOR, as determined on the
applicable Floating Rate Determination Date, plus 0.60%, subject to a
cap of 10.00% per annum, accrued during the applicable Accrual Period
on the outstanding principal balance of the Class A-2 Bonds immediately
prior to such Payment Date, except that (i) for the initial Payment
Date, the Class Interest Rate on the Class A-2 Bonds will be 6.1625%;
and (ii) the Class Interest Rate for the Class A-2 Bonds for any
Payment Date following the first Payment Date on which the Issuer has
the option to redeem the Bonds shall be the per annum rate equal to
One-Month LIBOR, as determined on the applicable Floating Rate
Determination Date, plus 1.20%, subject to a cap of 10.60% per annum;
provided that, if the Issuer redeems the Class A-2 Bonds through an
Affiliate and the Class A-2 Bonds remain outstanding following such
purchase, the Class A-2 Interest Rate shall not be increased as
provided in this clause (ii).
(3) The Class Interest Rate for the Class A-3 Bonds will equal, subject
to a cap of 12.00% per annum, (a) twelve times the sum of (i) the
amount of interest at the per annum rate equal to the weighted average
(by principal balance) of the Net Rates on the Mortgage Loans accrued
during the applicable Accrual Period for the Class A-3 Bonds on the
outstanding principal balance of the Class A-3 Bonds immediately prior
to such Payment Date; and (ii) the amount of interest at the per annum
rate equal to the excess of (x) the weighted average (by principal
balance) of the Net Rates on the Mortgage Loans over (y) the weighted
average (by principal balance) of the Class Interest Rate on the Class
A-1 and Class A-2 Bonds, accrued during the applicable Accrual Period
for the Class A-1 and Class A-2 Bonds on a notional principal balance
equal to the outstanding principal balance of the Class A-1 and Class
A-2 Bonds immediately prior to such Payment Date, divided by (b) the
outstanding principal balance of the Class A-3 Bonds immediately prior
to such Payment Date. For the initial Payment Date, the Class Interest
Rate for the Class A-3 Bonds will be 12.00% per annum on the original
principal amount of the Class A-3 Bonds.
The financial guaranty insurance policy (the "FSA Policy") issued by
Financial Security Assurance Inc. provides an unconditional and irrevocable
guarantee as to payment of Insured Payments, subject to the terms of the FSA
Policy.
As security for the Bonds, the Registrant pledged a pool of
conventional, one- to four-family, fully amortizing first lien Mortgage Loans
to the Trustee pursuant to the Indenture. The Mortgage Loans were purchased
by the Registrant in a privately-negotiated transaction with Issuer Holding
Corp. ("IHC") pursuant to a Sales Agreement dated September 20, 1996, between
the Registrant and RMCI.
The Class A-1 and Class A-2 Bonds have been sold by the Registrant to
Lehman Brothers Inc. (the "Underwriter") pursuant to an Underwriting
Agreement dated as of September 20, 1996, among the Underwriter, the
Registrant and RMCI. The Class A-3 Bonds have been sold by the Registrant to
MSC I, L.P., a Virginia limited partnership ("MSC"), pursuant to a Purchase
Agreement dated as of September 20, 1996, between MSC and the Registrant.
The description of the Mortgage Loans pledged to the Trustee pursuant
to the Indenture begins on the following page. The amounts contained in the
following tables have been rounded to the nearest dollar amount or
percentage, as applicable. Asterisks (*) in the following tables indicate
values between 0.0% and 0.5%.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
October 7, 1996 MERIT SECURITIES CORPORATION
By:
<PAGE>
Description of the Mortgage Pool and Mortgaged Premises
Except as otherwise indicated, the Mortgage Loans underlying the Merit 8
Securities have the following characteristics as of September 1, 1996 (the
"Cut-off Date"):
(Due to rounding conventions in the Scheduled Principal Balance and Percent of
Scheduled Principal Balance columns in each of the following tables, column
totals may not equal the sum of the amounts in such columns.)
Current Scheduled Principal Balances
<TABLE>
<CAPTION>
Current Scheduled Principal Number of Loans Scheduled Principal Balance Percent of Scheduled Principal
<C> <C> <C> <C>
1-100,000 709 51,796,961 5
100,001-150,000 860 106,502,492 11
150,001-203,150 749 131,756,081 14
203,151-250,000 774 173,711,847 18
250,001-300,000 435 118,866,638 13
300,001-350,000 218 71,126,790 8
350,001-400,000 143 53,467,758 6
400,001-450,000 92 39,334,633 4
450,001-500,000 75 35,929,818 4
500,001-550,000 61 32,232,055 3
550,001-600,000 38 22,030,035 2
600,001-650,000 26 16,313,091 2
650,001-700,000 18 12,257,683 1
700,001-800,000 20 15,221,696 2
800,001-900,000 10 8,576,644 1
900,001-1,000,000 23 22,521,311 2
1,000,001-2,000,000 29 35,568,564 4
Totals 4280 947,214,097 100
</TABLE>
The average Scheduled Principal Balance is approximately $221,312.
The maximum Scheduled Principal Balance is approximately $2,000,000.
The minimum Scheduled Principal Balance is approximately $5,760.
<PAGE>
Current Note Rates
<TABLE>
<CAPTION>
Current Note Rates (%) Number of Loans Scheduled Principal Balance Percent of Scheduled Principal Balance (%)
<C> <C> <C> <C>
4.250-7.499 42 8,842,572 1
7.500-7.749 195 90,480,787 10
7.750-7.999 143 38,447,663 4
8.000-8.249 686 193,297,049 20
8.250-8.499 1200 283,088,426 30
8.500-8.749 971 175,444,265 18
8.750-8.999 547 80,728,531 9
9.000-9.249 298 43,235,588 5
9.250-9.499 70 9,378,278 1
9.500-10.749 62 10,801,290 1
10.750-12.125 66 13,469,648 1
Totals 4280 947,214,097 100
</TABLE>
The weighted average current Note Rate is approximately 8.37% per annum.
The weighted average current Note Rate of the Fixed Mortgage Loans is
approximately 11.24% per annum.
The weighted average current Note Rate of the ARM Mortgage Loans is
approximately 8.33% per annum.
Approximately 78% of the Mortgage Loans have passed their first
Interest Adjustment Date.
<PAGE>
Gross Margins for ARM Loans
<TABLE>
<CAPTION>
Gross Margins (%) Number of Loans Scheduled Principal Balance Percent of Scheduled Principal Balance (%)
<C> <C> <C> <C>
1.750-2.749 412 205,716,162 22
2.750-2.999 1580 384,261,935 41
3.000-3.249 947 158,124,092 17
3.250-3.499 933 136,145,911 15
3.500-3.749 275 40,008,235 4
3.750-4.500 56 8,025,215 1
Totals 4203 932,281,550 100
</TABLE>
The weighted average Gross Margin is approximately 2.88%.
<PAGE>
Remaining Term to Stated Maturity
<TABLE>
<CAPTION>
Remaining Term (Months) Number of Loans Scheduled Principal Balance Percent of Scheduled Principal Balance (%)
<C> <C> <C> <C>
85-290 82 17,294,306 2
291-300 350 67,848,930 7
301-310 14 3,176,050 *
311-320 751 173,871,106 18
321-325 1094 225,606,783 24
326-330 1095 193,101,433 20
331-335 599 112,941,540 12
336-340 220 118,425,493 13
341-360 75 34,948,456 4
Totals 4280 947,214,097 100
</TABLE>
The weighted average remaining term to stated maturity is approximately
323 months.
