As filed with the Securities and Exchange Commission on July 2, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM S-3+
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
OAKWOOD MORTGAGE INVESTORS, INC.
(Registrant)
(Exact name of registrant as specified in its charter)
North Carolina 56-886793
(State of Incorporation) (I.R.S. Employee I.D. No.)
7800 McCloud Road
Greensboro, North Carolina 27409-9634
(336) 664-2400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------------
<TABLE>
<CAPTION>
<S> <C>
Douglas R. Muir, Treasurer Copy to:
7800 McCloud Road Jack A. Molenkamp
Greensboro, North Carolina 27409 Hunton & Williams
(336) 664-2400 Riverfront Plaza, East Tower
(336) 664-3224 (telecopy) 951 East Byrd Street
(Name, address, including zip code and telephone Richmond, Virginia 23219-4074
number, including area code, of agent for service) (804) 788-8200
(804) 788-8218 (telecopy)
</TABLE>
----------------------------
Approximate date of commencement of proposed sale to
the public: From time to time after the effective date of
this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
----------------------
<TABLE>
<CAPTION>
<S> <C>
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Securities Amount to be Offering Price Aggregate Amount of
Being Registered Registered* Per Unit* Offering Price* Registration Fee
- -------------------------------------------------------------------------------------------------------------------------
Pass-Through Certificates $1,000,000,000 100% $1,000,000,000 $295,000
=========================================================================================================================
</TABLE>
* Estimated solely for calculating the registration fee.
The within Prospectus and related Prospectus Supplements cover the
$1,000,000,000 in principal amount of Pass-Through Certificates being registered
hereunder, plus the $2,500,000,000 in principal amount of Pass-Through
Certificates registered by the Registrant under Registration Statements No.
333-31441 on Form S-3, $147,554,345 of which is being carried forward. The
registration fees in respect to the latter Pass-Through Certificates were paid
at the time of the original filing of Registration No. 333-31441 relating to
those Pass-Through Certificates in the aggregate amount of $675,444.10.
--------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
+In addition, pursuant to Rule 429, this Registration Statement on Form S-3
constitutes Post-Effective Amendment No. 1 to Registration Statement 333-31441
on Form S-3 (filed by Registrant on July 30, 1997).
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the
<PAGE>
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
PROSPECTUS
Oakwood Mortgage Investors, Inc., Depositor
Pass-Through Certificates
(Issuable in Series)
The Pass-Through Certificates (the "Certificates") offered hereby and
by the related Prospectus Supplements will be offered from time to time in one
or more series (each, a "Series"). Capitalized terms used herein and not defined
herein shall have the respective meanings assigned to them in the Glossary on
page 87 herein.
The Certificates of each Series will evidence specified interests in
separate pools ("Asset Pools") comprised of manufactured housing installment
sales contracts ("Contracts") and/or mortgage loans secured by first liens on
one- to four-family residential real properties ("Mortgage Loans"). The Asset
Pool underlying a Series of Certificates (collectively, the "Trust Estate") will
be conveyed by Oakwood Mortgage Investors, Inc. ("OMI" or the "Company") to the
trust (the "Trust") that issues such Series. The Asset Pool will be described in
the related Prospectus Supplement. The Asset Pool is expected to be acquired by
the Company from Oakwood Acceptance Corporation ("Oakwood"), the parent of the
Company. The seller of Contracts or Mortgage Loans to the Company, whether it be
Oakwood or another entity, is sometimes referred to herein as the "Seller." The
Assets in a Trust Estate will be serviced by one or more servicers (each, a
"Servicer"), which in most cases will be Oakwood. In addition to the related
Asset Pool, if so specified in the related Prospectus Supplement, the Trust
Estate will include monies on deposit in a trust account to be established with
the Trustee (a "Pre-Funding Account"), which will be used by the Trust to
purchase additional Assets beyond those delivered on the related Closing Date
("Pre-Funded Assets") from the Company from time to time during a Pre-Funding
Period specified in the related Prospectus Supplement. In addition, if so
specified in the related Prospectus Supplement, a pool insurance policy, letter
of credit, cash reserve fund, surety bond, guarantee, or other forms of credit
enhancement, or any combination of the foregoing, may be provided with respect
to a Series of Certificates or certain Classes of Certificates of a Series and
may be included in the related Trust Estate.
The Certificates of a Series are obligations of the related Trust only,
and holders of Certificates of a Series may look only to the assets of the
related Trust for distributions on such Certificates. The only obligations of
the Company with respect to the Certificates will be pursuant to certain limited
representations and warranties, as described further herein. The Servicer's
obligations with respect to the Certificates are limited to its contractual
servicing and certificate administration obligations. The Seller of Assets to
the Company will make certain representations, warranties and covenants to the
Company concerning such Assets, and the Company will assign its rights to
enforce such representations, warranties and covenants to the related Trust. See
"Description of the Certificates."
The effective yield to Certificateholders will be lower than the yield
otherwise produced by the applicable Pass-Through Rates and purchase prices of
the Certificates because, although interest will accrue on the Certificates from
the first day of each month, the distributions of such interest will not be made
until the Distribution Date in the month following the month of such accrual. In
addition, the effective yield on the Certificates will be reduced by any
Shortfalls and Realized Losses allocated to such Certificates.
CERTAIN RISK FACTORS SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF
ANY CERTIFICATES OFFERED HEREBY. SEE "RISK FACTORS" HEREIN AT PAGE 10 AND IN THE
RELATED PROSPECTUS SUPPLEMENT.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES
UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
THE CERTIFICATES WILL NOT BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY OR BY ANY OTHER PERSON OR ENTITY, INCLUDING THE COMPANY, THE SERVICER OR
ANY OF THEIR AFFILIATES (EXCEPT AS MAY BE SET FORTH HEREIN). SEE "RISK FACTORS"
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BEFORE PURCHASING
THE CERTIFICATES OF ANY SERIES.
------------------------
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 OR THE RELATED PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 2 , 1998.
<PAGE>
Each Series of Certificates will consist of one or more Classes of
Certificates, which may include one or more senior Classes of Certificates (the
"Senior Certificates") and one or more subordinate Classes of Certificates (the
"Subordinated Certificates"). The related Prospectus Supplement will specify the
Classes of each Series being offered thereby. Such Classes may represent
interests in specified percentages of distributions of principal or interest, or
both, on the Asset Pool relating to such Series, as specified in the related
Prospectus Supplement. Each Prospectus Supplement will describe the Series and
Classes of Certificates offered thereby.
The Company may elect to cause the Trust Estate relating to a Series of
Certificates (or one or more segregated Asset Pools thereof) to be treated as
one or more "real estate mortgage investment conduits" ("REMICs") for federal
income tax purposes. See "Federal Income Tax Consequences" herein.
The Prospectus Supplement relating to a Series of Certificates will set
forth, among other things, the following information if applicable to such
Series: (1) the allocations and order of application of principal and interest
collections on the Asset Pool held by the related Trust to the respective
Classes of such Certificates; (2) certain information as to the nature of the
Contracts or Mortgage Loans and any other assets assigned or pledged to the
related Trust; (3) the dates on which periodic distributions will be made on the
Certificates of such Series; (4) the aggregate principal amount or notional
amount and the Pass-Through Rate (or the manner of determining the Pass-Through
Rate) for each Class of the Certificates of such Series; (5) the optional
redemption or termination features pertaining to such Certificates; (6) certain
information regarding the subordination of certain Classes' rights to receive
distributions to the rights of other Classes; and (7) additional information
concerning the plan of distribution of such Certificates.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports and other information filed
by the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Commission at 7 World
Trade Center, New York, New York 10048; and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained from the Public Reference Section of the Commission at
its principal office in Washington, D.C., at prescribed rates. The Commission
maintains a web site that contains reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission at http://www.sec.gov.
This Prospectus does not contain all the information set forth in the
Registration Statement (of which this Prospectus is a part) and exhibits
relating thereto which the Company has filed with the Commission in Washington,
D.C. Copies of the information and the exhibits are on file at the offices of
the Commission and may be obtained, upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the Commission.
Copies of the Pooling and Servicing Agreement for a Series will be filed by the
Company with the Commission (without exhibits) on a Current Report on Form 8-K
within 15 days after the applicable Closing Date.
Each Trust will file periodic reports with the Commission in compliance
with the requirements of the Exchange Act.
The Company and the Servicer are not obligated with respect to the
Certificates. Accordingly, the Company has determined that financial statements
of the Company and the Servicer are not material to the offering made hereby.
ii
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
With respect to any Class of Certificates that is supported by a
guarantee of Oakwood Homes Corporation, a North Carolina corporation ("Oakwood
Homes") or one of its affiliates, the following documents have been filed by
Oakwood Homes with the Commission pursuant to the Exchange Act and are
incorporated herein by reference and made a part of this Prospectus and any
Prospectus Supplement: (a) the Oakwood Homes Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998 and (b) the Oakwood Homes Annual Report on Form
10-K for the fiscal year ended September 30, 1997.
All documents filed by the Company or Oakwood Homes Corporation
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, after the date of this Prospectus and prior to the termination
of the offering of the Certificates shall be deemed, in the case of the Company,
to be incorporated by reference into this Prospectus and, in the case of Oakwood
Homes Corporation, to be incorporated by reference into this Prospectus and the
Prospectus Supplement relating to a Class of Certificates that is supported by a
guarantee of Oakwood Homes Corporation or one of its affiliates, in each case to
be a part thereof from the respective dates of filing of such documents. Any
statement contained herein or in a document all or any portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus and the related
Prospectus Supplement to the extent that a statement contained herein or therein
or in any other subsequently filed document which also is or deemed to be
incorporated by reference herein or therein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus and the
related Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus and any Prospectus Supplement are delivered on request of such
person, a copy of any or all of the documents incorporated herein by reference
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests should be directed to
Oakwood Mortgage Investors, Inc., in writing at 7800 McCloud Road, Greensboro,
North Carolina, 27425-7081 (Telephone (336) 664-2400), Attn: Secretary.
iii
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION....................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................iii
SUMMARY OF TERMS............................................................ 1
RISK FACTORS................................................................ 14
DESCRIPTION OF THE CERTIFICATES............................................. 19
General............................................................ 19
Book-Entry Procedures.............................................. 20
Allocation of Collections from the Assets.......................... 22
Optional Redemption or Termination................................. 23
MATURITY AND PREPAYMENT CONSIDERATIONS...................................... 24
Maturity........................................................... 24
Prepayment Considerations.......................................... 24
YIELD CONSIDERATIONS........................................................ 25
THE TRUSTS.................................................................. 26
General............................................................ 26
The Assets......................................................... 26
Substitution of Contracts or Mortgage Loans........................ 31
Pre-Funding........................................................ 31
Distribution Account............................................... 32
Reserve Funds or Liquidity Accounts................................ 32
Insurance.......................................................... 33
Delivery of Additional Assets...................................... 41
Investment of Funds................................................ 41
Certificate Guarantee Insurance.................................... 41
Oakwood Homes Guarantee............................................ 42
Alternate Credit Enhancement....................................... 42
UNDERWRITING POLICIES....................................................... 42
Oakwood's Contract Underwriting Guidelines......................... 42
General Underwriting Standards for Mortgage Loans.................. 43
SALE AND SERVICING OF CONTRACTS AND MORTGAGE LOANS.......................... 44
Assignment of Contracts and Mortgage Loans......................... 44
Representations and Warranties..................................... 45
Servicing.......................................................... 47
Advances............................................................50
Compensating Interest.............................................. 51
Maintenance of Insurance Policies and Other Servicing Procedures... 51
THE POOLING AND SERVICING AGREEMENTS........................................ 54
The Servicer....................................................... 54
The Trustee........................................................ 54
Reports to Certificateholders...................................... 55
Events of Default.................................................. 56
Certificateholder Rights........................................... 56
Amendment.......................................................... 57
Termination........................................................ 57
CERTAIN LEGAL ASPECTS OF CONTRACTS AND MORTGAGE LOANS....................... 57
The Contracts...................................................... 58
The Mortgage Loans................................................. 63
Environmental Considerations....................................... 66
Enforceability of Certain Provisions............................... 67
USE OF PROCEEDS............................................................. 68
THE COMPANY................................................................. 68
yTHE SERVICER............................................................... 68
FEDERAL INCOME TAX CONSEQUENCES............................................. 68
General............................................................ 69
REMIC Certificates................................................. 69
Taxation of Certain Foreign Holders of REMIC Certificates.......... 92
Reporting and Tax Administration................................... 94
Non-REMIC Certificates............................................. 95
STATE TAX CONSIDERATIONS....................................................100
ERISA CONSIDERATIONS........................................................100
PLAN OF DISTRIBUTION........................................................102
LEGAL INVESTMENT CONSIDERATIONS.............................................103
EXPERTS.....................................................................103
LEGAL MATTERS...............................................................104
GLOSSARY....................................................................105
iv
<PAGE>
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. Capitalized terms used herein shall have the respective
meanings assigned them in the "Glossary" on page 87 herein.
Securities Offered............Pass-Through Certificates (the "Certificates")
evidencing interests in separate pools of
Contracts and/or Mortgage Loans (each as defined
below) may be issued from time to time in one or
more Series (each, a "Series") pursuant to
separate Pooling and Servicing Agreements (each,
an "Agreement") among Oakwood Mortgage Investors,
Inc. (the "Company"), Oakwood Acceptance
Corporation ("Oakwood" or the "Servicer"), and the
Trustee (the "Trustee") specified in the
Prospectus Supplement for such Series of
Certificates.
Depositor.....................The Company is a wholly owned, limited purpose
subsidiary of Oakwood Acceptance Corporation,
which is a wholly owned subsidiary of Oakwood
Homes Corporation. Neither Oakwood Homes
Corporation nor any of its affiliates, including
the Company and the Servicer, have guaranteed
distributions on the Certificates, nor are any of
such entities otherwise obligated with respect to
the Certificates of any Series. See "Risk Factors"
herein.
Servicer......................Oakwood Acceptance Corporation, the parent of the
Company, will service the Contracts and Mortgage
Loans and administer the Certificates.
The Asset Pools...............The Asset Pools supporting the Certificates will
consist of Contracts and Mortgage Loans
(collectively, the "Assets").
The Contracts supporting a Series of Certificates
will consist of manufactured housing installment
sales contracts. Each Contract may be secured by a
new, used or repossessed Manufactured Home or by a
Manufactured Home that has been transferred from a
previous owner to a new Obligor. The Contracts may
be fixed or adjustable rate Contracts and may be
conventional Contracts or Contracts insured by the
FHA or partially guaranteed by the VA.
The Mortgage Loans supporting a Series of
Certificates, as specified in the related
Prospectus Supplement, will be first mortgage
loans secured by one-to four-family residential
properties (each a "Mortgaged Property"). The
Mortgage Loans may be fixed or adjustable rate
Mortgage Loans. The Mortgage Loans may be
conventional Mortgage Loans ("Conventional
Mortgage Loans") or Mortgage Loans insured by the
FHA ("FHA Mortgage Loans") or partially guaranteed
by the VA ("VA Mortgage
1
<PAGE>
Loans"). Mortgage Loans generally will have a 15-
to 30-year term to maturity at origination and a
loan-to-value ratio at origination (as defined
herein, the "Mortgage Loan-to-Value Ratio") not to
exceed 95%. Mortgage Loans generally will not be
covered by a Primary Mortgage Insurance Policy.
See "The Trusts -- Insurance -- Credit Insurance"
herein.
The adjustable rate Contracts and Mortgage Loans
(together, the "Adjustable Rate Assets") will, as
described in the related Prospectus Supplement,
permit or require periodic changes in the interest
rates borne by the Mortgage Loans, and in the
Monthly Payments made on such Assets. The Assets
included in a Trust Estate may be subject to
various types of payment provisions, and may
include Level Payment Loans, Buy-Down Loans, GPM
Loans, Step-up Rate Loans, Interest Reduction
Loans, GEM Loans, Balloon Payment Loans,
Convertible Loans, Bi-Weekly Loans, Level Payment
Buy-Down Loans, Increasing Payment Loans or other
types of Assets specified and described in the
related Prospectus Supplement. See "The Trusts --
General" herein.
The Prospectus Supplement for each Series will
provide information with respect to (1) the
approximate aggregate principal balance of the
Assets comprising the Asset Pool, as of the date
specified in the Prospectus Supplement (the
"Cut-off Date") and the percentage of the Assets
(by principal balance as of the Cut-off Date)
comprised of Contracts and Mortgage Loans,
respectively; (2) the weighted average Contract
Rate on the Contracts, the weighted average
Mortgage Rate on the Mortgage Loans, the weighted
average Asset Rate on the Assets (each based on
outstanding principal balances as of the Cut-off
Date) and the range of Contract Rates, Mortgage
Rates and Asset Rates as of the Cut-off Date and,
in the case of Adjustable Rate Assets, the method
to be used to determine the Contract Rates,
Mortgage Rates and Asset Rates on the Assets; (3)
the weighted average term to scheduled maturity of
the Assets as of origination (based on outstanding
principal balances as of the Cut-off Date); (4)
the weighted average remaining term to scheduled
maturity of the Assets as of the Cut-off Date
(based on outstanding principal balances as of the
Cut-off Date) and the range of remaining terms to
maturity of the Assets; (5) the percentages of the
Contracts included in the Asset Pool (by principal
balance as of the Cut-off Date) secured by new
Manufactured Homes, used Manufactured Homes,
repossessed Manufactured Homes, and Manufactured
Homes that were transferred to an assignee of the
original Obligor, respectively; (6) the types of
Mortgaged Properties securing any Mortgage Loans
included in the Asset Pool (e.g., second homes,
investor-
2
<PAGE>
owned, manufactured homes); (7) the average
outstanding principal balance of the Contracts,
the Mortgage Loans and the Assets as an entirety
as of the Cut-off Date; (8) the weighted average
(based on outstanding principal balances as of the
Cut-off Date) and range of Contract Loan-to-Value
Ratios of the Contracts and Mortgage Loan-to-Value
Ratios of the Mortgage Loans; (9) the aggregate
outstanding principal balance, if any, of
Conventional Contracts and Conventional Mortgage
Loans, FHA Contracts and FHA Mortgage Loans, VA
Contracts and VA Mortgage Loans, Level Payment
Loans, Adjustable Rate Assets, Buy-Down Loans, GPM
Loans, Step-up Rate Loans, Interest Reduction
Loans, GEM Loans, Balloon Payment Loans,
Convertible Loans, Bi-Weekly Loans, Level Payment
Buy-Down Loans, Increasing Payment Loans and any
other type of Assets included in the related Asset
Pool as of the Cut-off Date; (10) the amount of
any hazard insurance required to be maintained
with respect to each Manufactured Home and each
Mortgaged Property; (11) the amount of any Pool
Insurance Policy, Special Hazard Insurance Policy
and Obligor Bankruptcy Insurance (each as
hereinafter described) to be maintained with
respect to all or any portion of the Asset Pool;
(12) the amount and terms of any form of credit
enhancement to be provided with respect to the
related Series, if any; and (13) the geographic
location of the Manufactured Homes and Mortgaged
Properties securing the Contracts and the Mortgage
Loans.
The Company will acquire the Contracts and the
Mortgage Loans from Oakwood or another Seller,
which may have originated the Contracts or may
have acquired them in the open market or in
privately negotiated transactions.
Description of Certificates...Each Series of Certificates may consist of one or
more Classes, one or more of which may be Senior
Certificates and one or more of which may be
Subordinated Certificates. Each such Class will
evidence the right to receive a specified portion
of collections of principal or interest, or both,
on the underlying Assets and certain other
property held in trust for the benefit of the
Certificateholders (the "Trust Estate"). Each
Class of a Series may be assigned a principal
balance (the "Certificate Principal Balance") and
a fixed or adjustable stated annual interest rate
(the "Pass-Through Rate"), and may represent
entitlement to receive distributions in reduction
of its Certificate Principal Balance to the extent
of funds available therefor in the manner,
priority and amounts specified in the related
Prospectus Supplement. A Class of Certificates may
be a "Compound Interest Class," which consists of
Certificates on which interest will accrue, but
3
<PAGE>
on which interest will not be paid for the period
set forth in the related Prospectus Supplement.
The Certificates may be Book-Entry Certificates or
Definitive Certificates issuable in fully
registered form, in either case in the authorized
denominations specified in the related Prospectus
Supplement. See "Description of the Certificates"
herein. Certain Series or Classes of Certificates
may be enhanced by pool insurance, letters of
credit, surety bonds, guarantees, or any
combination thereof, or other forms of credit
enhancement including the subordination of
Subordinated Certificates, if any.
THE CERTIFICATES WILL NOT BE GUARANTEED OR INSURED
BY ANY GOVERNMENT AGENCY OR, UNLESS OTHERWISE
SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT,
ANY OTHER INSURER. UNLESS OTHERWISE SPECIFIED IN
THE RELATED PROSPECTUS SUPPLEMENT, NEITHER THE
CONTRACTS NOR THE MORTGAGE LOANS COMPRISING ANY
RELATED ASSET POOL WILL BE GUARANTEED OR INSURED
BY ANY GOVERNMENT AGENCY OR ANY OTHER INSURER
EXCEPT TO THE LIMITED EXTENT OF ANY LIMITED
GUARANTEE.
Subordinated Certificates
And Reserve Funds...........One or more Classes of any Series of Certificates
may be Subordinated Certificates, as specified in
the related Prospectus Supplement. The rights of
the Subordinated Certificateholders to receive any
or a specified portion of distributions with
respect to the Assets will be subordinated to the
rights of Senior Certificateholders to the extent
and in the manner specified in the related
Prospectus Supplement. In addition, Realized
Losses and/or Shortfalls may be allocated on each
Distribution Date to Subordinated Certificates
before being allocated to Senior Certificates, in
any event to the extent and in the manner
described in the related Prospectus Supplement.
This subordination is intended to enhance the
likelihood of regular receipt by Senior
Certificateholders of the full amount of scheduled
monthly distributions of principal and interest
due them and to protect the Senior
Certificateholders against losses. If a Series of
Certificates contains more than one Class of
Subordinated Certificates, distributions and
losses will be allocated among such Classes in the
manner specified in the related Pooling and
Servicing Agreement and described, as to those
Classes offered hereby, in the related Prospectus
Supplement.
Certain Classes of Certificates may be granted
preferential rights over the rights of other
Classes of Certificates to receive current
distributions from the related Asset Pool or as to
the allocation of Realized Losses and/or
Shortfalls
4
<PAGE>
to the extent specified in the related Prospectus
Supplement. Protection also may be afforded
certain Classes of Certificates by the
establishment of a reserve fund (a "Reserve
Fund"). A Reserve Fund may be funded, to the
extent specified in the related Prospectus
Supplement, by an initial cash deposit, the
retention of specified periodic distributions of
principal or interest or both otherwise payable to
holders of Subordinated or Residual Certificates,
or the provision of a letter of credit, guarantee,
insurance policy or other form of credit
enhancement, or any combination of any of the
aforementioned methods.
Insurance and Credit
Enhancement.................As an alternative, or in addition, to the credit
enhancement afforded by subordination of
Subordinated Certificates and/or the establishment
of a Reserve Fund, credit enhancement with respect
to a Series of Certificates may be provided by
contract pool insurance and/or mortgage pool
insurance, a guarantee of Oakwood Homes
Corporation or one of its affiliates with respect
to certain collections with respect to the Asset
Pool of such Series, or other forms of credit
enhancement or liquidity enhancement acceptable to
a nationally recognized rating agency rating one
or more Classes of a Series of Certificates.
Credit enhancement through hazard insurance or
credit insurance is summarized below. See "The
Trusts -- Insurance" below.
Standard Hazard Insurance
and Special Hazard
Insurance.................All of the Manufactured Homes and Mortgaged
Properties will be covered by Standard Hazard
Insurance Policies insuring against losses due to
various causes, including fire, lightning and
windstorm. Certain other physical risks that are
not otherwise insured against (such as
earthquake, flood, nuclear accident or war) may
be covered by a Special Hazard Insurance Policy
or Policies, as specified in the related
Prospectus Supplement. Each Special Hazard
Insurance Policy will be limited in scope and
will cover losses in an initial amount equal to a
set percentage of the aggregate principal balance
of the covered Mortgage Loans and/or Contracts as
of the Cut-off Date or other maximum coverage, as
set forth in the related Prospectus Supplement.
Any hazard losses not covered by insurance or
other credit enhancement will be borne by the
related Certificateholders. See "The Trusts --
Insurance -- Hazard Insurance" herein.
5
<PAGE>
Pool Insurance............. A Pool Insurance Policy or Policies may be
obtained with respect to all or part of an Asset
Pool. Any Pool Insurance Policy will be limited in
scope, covering defaults on the related Contracts
and/or Mortgage Loans in an initial amount of not
less than a specified percentage of the aggregate
principal balance thereof as of the related
Cut-off Date as set forth in the related
Prospectus Supplement. See "The Trusts --
Insurance -- Credit Insurance -- Pool Insurance"
herein.
Obligor Bankruptcy
Insurance................ As specified in the related Prospectus Supplement,
Obligor Bankruptcy Insurance may be obtained to
cover certain losses resulting from action which
may be taken by a bankruptcy court in connection
with a Mortgage Loan or Contract. The level of
coverage of such insurance, if any, will be
specified in the applicable Prospectus Supplement.
See "The Trusts -- Insurance -- Credit Insurance
-- Obligor Bankruptcy Insurance" herein.
FHA Insurance
and VA Guarantees.........To the extent specified in the related Prospectus
Supplement, all or a portion of the Contracts or
Mortgage Loans may be subject to FHA insurance and
all or a portion of the Contracts or Mortgage
Loans may be partially guaranteed by the VA. See
"The Trusts -- Insurance -- Credit Insurance --
FHA Insurance and VA Guarantees on Contracts"
herein.
Certificate Guarantee
Insurance.................If so specified in the related Prospectus
Supplement, credit enhancement for a Series may be
provided by an insurance policy (the "Certificate
Guarantee Insurance") issued by one or more
insurers. Such Certificate Guarantee Insurance may
guarantee timely distributions of interest and
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. See "The Trusts --
Certificate Guarantee Insurance" herein.
Oakwood Homes Guarantee....If so specified in the related Prospectus
Supplement, some or all of the collections of
principal of and interest on the Asset Pool of a
Series may be guaranteed by Oakwood Homes or one
of its affiliates. The terms of and limitations on
any such guarantee will be described in the
related Prospectus Supplement. See "The Trusts --
Oakwood Homes Guarantee" herein.
Alternate Credit
Enhancement..............To the extent specified in the related Prospectus
Supplement, the Company may provide for alter-
native credit enhancement for all or part of the
related Trust Estate or Asset Pool, in the form of
a letter of credit, guarantee, surety bond or
insurance policy, or any combination thereof, in
each case satisfactory to a rating agency rating
the Series of Certificates. See "The Trusts --
6
<PAGE>
Delivery of Additional Assets" herein.
Certain insurance policies or other forms of
credit enhancement obtained for any particular
Series of Certificates may previously have been
pledged to secure other Series of Certificates or
other pass-through securities or collateralized
mortgage or manufactured housing contract
obligations to the extent described in the related
Prospectus Supplement. In addition, any such
insurance policies or other forms of credit
enhancement provided for a Series may be further
pledged to secure other securities or obligations
after the issuance of such Series to the extent so
provided in the related Prospectus Supplement and
to the extent such further pledge will not result
in a downgrading of any rating assigned to
Certificates of such Series by a nationally
recognized rating agency identified in the related
Prospectus Supplement.
With respect to any Series of Certificates secured
by insurance policies or other forms of credit
enhancement, the Company will have the right to
substitute comparable coverage from another
insurer or to provide equivalent protection for
any of such insurance policies or other forms of
credit enhancement so long as such substitution
will not result in the downgrading of any rating
assigned to Certificates of such Series by a
nationally recognized rating agency identified in
the related Prospectus Supplement.
Advances......................The Servicer will make advances of delinquent
payments of principal and interest ("P&I
Advances"), as well as advances of delinquent
payments of taxes, insurance premiums and escrowed
items, as well as liquidation-related expenses
("Servicing Advances" and, together with P&I
Advances, "Advances"), with respect to the
Contracts and Mortgage Loans unless (i) the
Servicer concludes that the Advance cannot be
recovered out of the Liquidation Proceeds of the
related Asset or (ii) the Advance would exceed a
limit specified by the applicable Rating Agencies.
Compensating Interest.........If a Contract or Mortgage Loan is prepaid in full
or liquidated other than on a Due Date, the
Obligor generally is only required to pay interest
to the date of prepayment or liquidation. In such
event, if provided in the Prospectus Supplement,
for so long as Oakwood is the Servicer of the
related Asset, the Servicer may be obligated to
pay interest from the last day for which interest
was due from the Obligor to the next succeeding
Due Date, so long as such amount does not exceed
the Servicer's servicing compensation for such
month ("Compensating Interest").
Pooling and Servicing
Agreement...................Each Series of Certificates will be issued
pursuant to one
7
<PAGE>
or more Pooling and Servicing Agreements among the
Company, the Servicer and the Trustee identified
in the related Prospectus Supplement. Pursuant to
the Pooling and Servicing Agreement, the Company
will sell and assign the Asset Pool and other
assets comprising the related Trust Estate to the
trustee named in the related Prospectus Supplement
(the "Trustee") in exchange for a Series of
Certificates. Following the closing for a Series,
payments of principal, including prepayments, and
interest on the Contracts and Mortgage Loans with
respect to the Series (together with payments from
any Reserve Fund or other funds for such Series)
and, if applicable, reinvestment income thereon,
will be passed through to the Trust as specified
in the Prospectus Supplement.
The Trustee will periodically allocate such
amounts, to the extent actually collected,
advanced or received during the applicable
Collection Period or Prepayment Period (as
appropriate), net of various fees, premiums and
expenses (the "Available Distribution Amount")
among the Classes of Certificates of the related
Series in the proportion and order of application
set forth in the related Pooling and Servicing
Agreement and described in the related Prospectus
Supplement. The Available Distribution Amount may
be allocated so that amounts paid as interest on
the Contracts and Mortgage Loans may be
distributed as principal on the Certificates and
amounts paid as principal on the Contracts and
Mortgage Loans may be distributed as interest on
the Certificates.
Distributions of Interest.....Interest will be distributed periodically by the
Trustee on each Class of Certificates entitled to
interest distributions on the dates specified in
the related Prospectus Supplement (each, a
"Distribution Date"). Interest will accrue on each
Class of the Certificates entitled to interest
distributions at the applicable Pass-Through Rate
on the outstanding actual or notional principal
amount of such Certificates or in accordance with
such other formula as may be specified in the
related Prospectus Supplement. Each periodic
distribution of interest on the Certificates of a
particular Class will be distributed among holders
of such Class pro rata in accordance with their
respective percentage ownership interests in the
outstanding Certificates of such Class. Each such
distribution of interest will include all interest
accrued through the Accounting Date immediately
preceding the applicable Distribution Date or to
another date specified in the related Prospectus
Supplement, provided that distributions of
interest on the Certificates of a Series may be
reduced as a result of delinquencies or losses on
Contracts and Mortgage Loans in the related Trust.
Distributions of Principal....Principal will be distributed periodically by the
Trustee on
8
<PAGE>
the Distribution Dates specified in the related
Prospectus Supplement. Each periodic distribution
of principal on the Certificates of a particular
Class will be distributed among holders of such
Class pro rata in accordance with their respective
percentage ownership interests in the outstanding
Certificates of such Class, or in such other
manner specified in the related Prospectus
Supplement. Distributions of principal on the
Certificates of a Series may be reduced to the
extent of delinquencies or losses on the Contracts
and Mortgage Loans in the related Trust.
The Final Scheduled Distribution Date for each
Class of a Series is the date after which no
Certificates of such Class will remain
outstanding, assuming timely payments are made on
the Contracts and Mortgage Loans in the related
Trust in accordance with their terms, and that no
Contracts or Mortgage Loans are prepaid in whole
or in part. The Final Scheduled Distribution Date
for a Class will be determined by reference to the
maturity date of the Contract or Mortgage Loan in
the related Trust which has the latest stated
maturity or will be determined on the basis of the
assumptions set forth in the related Prospectus
Supplement. The actual maturity date of the
Certificates of a Series will depend primarily
upon the level of prepayments and defaults with
respect to the Contracts and Mortgage Loans
comprising the related Asset Pool. The actual
maturity of any Certificate is likely to occur
earlier and may occur substantially earlier than
its Final Scheduled Distribution Date as a result
of the application of prepayments to the reduction
of the principal amounts of the Certificates. See
"Maturity and Prepayment Considerations" and
"Yield Considerations" herein.
Allocation of Losses
and Shortfalls..............With respect to any defaulted Contract or Mortgage
Loan that is finally liquidated for cash (a
"Liquidated Loan") through repossession and resale
of the underlying Manufactured Home or through
foreclosure sale or other liquidation of the
underlying Mortgaged Property, disposition of the
related Mortgaged Property if acquired by deed in
lieu of foreclosure, or otherwise, the amount of
loss realized, if any (a "Realized Loss"), will
equal the sum of (a) (1) the Unpaid Principal
Balance of the Liquidated Loan, plus (2) amounts
reimbursable to the Servicer or Trustee for
related previously unreimbursed costs, expenses
and advances, plus (3) amounts attributable to
interest accrued but not paid on such Liquidated
Loan, minus (b) Liquidation Proceeds with respect
to the Liquidated Loan. Liquidation Proceeds will
be allocated first to reimburse the Servicer for
previously unreimbursed Advances it made in
respect of the related Asset, second to reduce
accrued and unpaid interest on such Asset, and
finally to reduce the Unpaid Principal Balance of
such Asset.
9
<PAGE>
Realized Losses also include Obligor Bankruptcy
Losses, Special Hazard Losses and Fraud Losses.
Obligor Bankruptcy Losses result when the Unpaid
Principal Balance of a Contract or Mortgage Loan
is reduced in connection with bankruptcy
proceedings concerning the Obligor. Special Hazard
Losses are losses attributable to physical damage
to Mortgaged Properties or Manufactured Homes of a
type which is not covered by standard hazard
insurance policies, but do not include losses
caused by war, nuclear reaction, nuclear or atomic
weapons, insurrection or normal wear and tear.
Fraud Losses are losses on Contracts or Mortgage
Loans as to which there was fraud in connection
with the origination of the Contract or Mortgage
Loan or fraud, dishonesty or misrepresentation in
connection with the application for any insurance
obtained as to such Contract or Mortgage Loan.
In the event that P&I Advances are not made or are
insufficient to cover delinquencies in principal
and interest payments on the related Asset Pool,
such delinquencies may result in reduced principal
and interest distributions on the Certificates. A
shortfall of interest may also result (1) from the
application of the Soldiers' and Sailors' Civil
Relief Act of 1940, which caps the interest rate
payable by certain Obligors who enter military
service after entering into their Contracts or
Mortgage Loans ("Soldiers' and Sailors'
Shortfall"); (2) from the receipt of Liquidation
Proceeds and Insurance Proceeds in an amount
insufficient to pay accrued and unpaid interest on
a liquidated Contract or Mortgage Loan ("Realized
Interest Losses"); (3) from the prepayment in full
or liquidation of a Contract or Mortgage Loan to
the extent such shortfall is not covered by a
Compensating Interest payment by the Servicer as
described above ("Due Date Interest Shortfall")
and (4) from a shortfall in interest collected on
an Asset that accompanies a Special Hazard Loss,
Obligor Bankruptcy Loss or Fraud Loss.
A Series may include one or more Classes of
Certificates as to which the right to receive
distributions with respect to the Asset Pool will
be subordinate to the rights of holders of more
Senior Certificates of such Series. Such
subordination may only be to the extent of a
specific amount specified in the related
Prospectus Supplement (the "Subordination Amount")
or may require allocation of all Realized Losses
or Shortfalls to a Subordinated Class of
Certificates until its Certificate Principal
Balance has been reduced to zero. If so provided
in the related Prospectus Supplement, certain
types of Realized Losses or Shortfalls may be
allocated differently than other Realized Losses
or Shortfalls. Any allocation of a Realized Loss
to a Class of
10
<PAGE>
Certificates generally will be made by reducing
the Certificate Principal Balance thereof as of
the applicable Distribution Date by an amount
equal to the amount of such Realized Loss.
Optional Redemption
or Termination.............. To the extent specified in the related Prospectus
Supplement, the Certificates of a Series may be
redeemed or otherwise retired early by the party
specified therein under certain circumstances. See
"Description of the Certificates -- Termination"
herein.
Federal Income Tax
Considerations...............If an election is made to treat all or a portion
of the Trust Estate relating to a Series of
Certificates as a real estate mortgage investment
conduit (a "REMIC"), each Class of Certificates of
such Series will constitute "regular interests" in
a REMIC or "residual interests" in a REMIC, as
specified in the related Prospectus Supplement. If
no election is made to treat all or any portion of
the Trust Estate relating to a Series of
Certificates as a REMIC, the Trust Estate will be
classified as a grantor trust and not as an
association taxable as a corporation for federal
income tax purposes, and therefore holders of
Certificates will be treated as the owners of
undivided pro rata interests in the Asset Pool and
any other assets held by the Trust. See "Federal
Income Tax Consequences" herein.
Yield Considerations..........The Prospectus Supplement for a Series may specify
certain weighted average life calculations, based
upon an assumed rate of prepayment or a range of
prepayment assumptions on the related Asset Pool.
A higher level of principal prepayments on the
Contracts and Mortgage Loans than anticipated is
likely to have an adverse effect on the yield on
any Certificate that has a purchase price greater
than its principal amount ("Premium Certificates")
and a lower level of principal prepayments on the
Contracts and Mortgage Loans than anticipated is
likely to have an adverse effect on the yield on
any Certificate that has a purchase price less
than its principal amount ("Discount
Certificates"). It is possible under certain
circumstances for holders of Premium Certificates
not only to suffer a lower than anticipated yield
but, in extreme cases, to fail to recoup fully
their initial investment.
Pre-Funding...................If so specified in the related Prospectus
Supplement, a portion of the issuance proceeds of
the Certificates of a particular Series (such
amount, the "Pre-Funded Amount") will be deposited
in an account (the "Pre-Funding Account") to be
established with the Trustee, which will be used
to acquire additional Mortgage Loans or Contracts
from time to time during the period specified in
the related Prospectus Supplement (the
"Pre-Funding Period"). Prior to the investment of
the Pre-Funded
11
<PAGE>
Amount in additional Mortgage Loans or Contracts,
such Pre-Funded Amount may be invested in one or
more Eligible Investments. Any Eligible Investment
must mature no later than the Business Day prior
to the next Distribution Date. See "The Trusts -
Pre-Funding" herein.
During any Pre-Funding Period, the Company will be
obligated (subject only to the availability
thereof) to transfer to the related Trust
additional Mortgage Loans or Contracts from time
to time during such Pre-Funding Period. Such
additional Mortgage Loans or Contracts will be
required to satisfy certain eligibility criteria
more fully set forth in the related Prospectus
Supplement, which eligibility criteria will be
consistent with the eligibility criteria of the
Mortgage Loans or Contracts included in the Trust
as of the Closing Date, subject to such exceptions
as are expressly stated in such Prospectus
Supplement.
Although the specific parameters of the
Pre-Funding Account with respect to any issuance
of Certificates will be specified in the related
Prospectus Supplement, it is anticipated that: (a)
the Pre-Funding Period will not exceed three
months from the related Closing Date, (b) the
additional Mortgage Loans or Contracts to be
acquired during the Pre-Funding Period will be
subject to the same representations and warranties
as the Mortgage Loans or Contracts included in the
related Trust on the Closing Date (although
additional criteria may also be required to be
satisfied, as described in the related Prospectus
Supplement) and (c) the Pre-Funded Amount will not
exceed 25% of the principal amount of the
Certificates issued pursuant to a particular
offering.
ERISA Considerations..........A fiduciary of any employee benefit plan subject
to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the Code, should
review carefully with its legal advisors whether
the purchase or holding of Certificates could give
rise to a transaction that is prohibited under
ERISA or the Code. See "ERISA Considerations"
herein.
Legal Investment
Considerations...............If so specified in the Prospectus Supplement
relating to a Series of Certificates, one or more
Classes within such Series will constitute
"mortgage related securities" under the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA")
if and for so long as they are rated in one of the
two highest rating categories by the Rating Agency
or Agencies identified in the related Prospectus
Supplement. Certificates that are "mortgage
related securities" for SMMEA purposes would be
"legal investments" for certain types of
institutional investors to the extent provided in
SMMEA, subject to state laws overriding
12
<PAGE>
SMMEA. A number of states have enacted legislation
overriding the state securities registration
and/or legal investment provisions of SMMEA.
Some Classes of Certificates offered hereby may
not be rated in one of the two highest rating
categories by the appropriate Rating Agency or
Agencies, and thus would not constitute "mortgage
related securities" under SMMEA. Certificates may
not qualify as "mortgage related securities" for
other reasons as well. Certificates that do not
constitute "mortgage-related securities" under
SMMEA may require registration, qualification or
an exemption under applicable state securities
laws and may not be "legal investments" to the
same extent as "mortgage related securities." See
"Legal Investment Considerations" herein.
Use of Proceeds...............Substantially all of the net proceeds from the
sale of a Series of Certificates offered hereby
and by the related Prospectus Supplement will be
applied to the simultaneous purchase of the
Contracts and Mortgage Loans underlying such
Series of Certificates or to reimburse the amounts
previously used to effect the purchase of the
Contracts and Mortgage Loans underlying the
Certificates, the costs of carrying the Contracts
and Mortgage Loans until sale of the Certificates
and to pay other expenses connected with pooling
the Contracts and Mortgage Loans and issuing the
Certificates. Any excess will be used by the
Company for its general corporate purposes. See
"Use of Proceeds" herein.
Rating........................It is a condition to the issuance of the
Certificates to be offered hereunder that they be
rated in one of the four highest rating categories
(without regard to modifiers) by at least one
nationally recognized statistical rating
organization, such as Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies,
Inc., Moody's Investors Service, Inc., Fitch IBCA,
Inc. or Duff & Phelps Credit Rating Co.
13
<PAGE>
RISK FACTORS
Prospective Certificateholders should consider the following factors,
among others, in connection with the purchase of the Certificates.
1. VALUE OF CONTRACTS AND MORTGAGE LOANS IN WHICH CERTIFICATEHOLDERS
HAVE INVESTED IS DEPENDENT ON CONDITIONS BEYOND THE COMPANY'S CONTROL.
VALUE OF CONTRACTS SENSITIVE TO AMBIENT ECONOMIC CONDITIONS AND LIKELY
WILL DECREASE OVER TIME . An investment in Certificates evidencing interests in
Contracts may be affected by, among other things, downturns in regional or local
economic conditions. Regional or local economic conditions are often volatile,
and historically have affected the delinquency, loan loss and repossession
experience of manufactured housing installment sales contracts. Holders of the
Certificates of a Series will bear all risk of loss resulting from defaults by
Obligors on the underlying Contracts and will have to look primarily to the
value of the related Manufactured Homes for recovery of the outstanding
principal and unpaid interest of the defaulted Contracts to the extent that
losses on the Contracts underlying such Series are not absorbed by other
Certificates, if any, that are subordinated to such Holders' Certificates, by
applicable insurance policies, if any, or by any other credit enhancement. The
value of Manufactured Homes typically declines over time, and the amount
recoverable upon repossession and resale of a Manufactured Home may not be
sufficient to pay all principal and interest due on the defaulted Contract it
secured. See "The Trusts -- The Assets -- The Contracts" herein.
Contracts differ from Mortgage Loans in certain material respects. In
general, Contracts may experience a higher level of delinquencies than Mortgage
Loans, because the credit underwriting standards applied to borrowers under
manufactured housing installment sales contracts generally are not as stringent
as those applied to borrowers under many conventional residential first-lien
mortgage loans. See "Underwriting Policies -- Oakwood's Contract Underwriting
Guidelines" herein. As noted above, Manufactured Homes generally decline in
value over time, which may not necessarily be the case with respect to Mortgaged
Properties underlying Mortgage Loans. Consequently, the losses incurred upon
repossession of or foreclosure on Manufactured Homes securing the Contracts
generally may be expected to be more severe than the losses that would be
incurred upon foreclosure on Mortgaged Properties securing Mortgage Loans (in
each case measured as a percentage of the outstanding principal balances of the
related Assets). The servicing of manufactured housing installment sales
contracts is generally similar to the servicing of conventional residential
mortgage loans, except that, in general, servicers of manufactured housing
installment sales contracts place greater emphasis on making prompt telephone
contact with delinquent borrowers than is generally customary in the case of the
servicing of conventional residential mortgage loans. See "Sale and Servicing of
Contracts and Mortgage Loans -- Servicing" herein. Realization on defaulted
Contracts is generally accomplished through repossession and subsequent resale
of the underlying Manufactured Homes by or on behalf of the Servicer, whereas
realization on defaulted Mortgage Loans is generally accomplished through
foreclosure on the underlying Mortgaged Properties or similar proceedings.
Realization on defaulted Land Secured Contracts may involve a combination of
repossession and foreclosure-related procedures. See "Certain Legal Aspects of
Contracts and Mortgage Loans" herein. Certificates evidencing interests in
Contracts may also be subject to other risks that are not present in the case of
Certificates evidencing interests in Mortgage Loans. See "-- 3.
Certificateholders May Realize Losses If The Servicer Is Unable to Realize on
Assets Because of Provisions of Applicable State Law," and "-- 4. Compliance
with Federal and State Lender Regulations May Cause Certain Credit and
Prepayment Risks to Certificateholders," below and "Certain Legal Aspects of
Contracts and Mortgage Loans" herein.
VALUE OF MORTGAGE LOANS SENSITIVE TO CHANGES IN RESIDENTIAL REAL ESTATE
MARKETS. An investment in Certificates evidencing interests in mortgage loans
may be affected, among other things, by declines in real estate values or
downturns in regional or local economic conditions. If the residential real
estate market should experience an overall decline in property values such that
the outstanding balances of the Mortgage Loans underlying a Series, together
with any secondary financing on the related Mortgaged Properties, become equal
to or greater than the value of the related Mortgaged Properties, the actual
rates of
14
<PAGE>
delinquencies, foreclosures and losses on such Mortgage Loans could be higher
than those now generally experienced in the mortgage lending industry. Holders
of the Certificates evidencing interests in such Mortgage Loans will bear all
risk of loss resulting from default by the related mortgagors and will have to
look primarily to the value of the related Mortgaged Properties for recovery of
the outstanding principal of and unpaid interest on the defaulted Mortgage Loans
to the extent that such losses are not covered by other Certificates, if any,
that are subordinated to such Holders' Certificates, by applicable insurance
policies, if any, or by any other credit enhancement. See "The Trusts -- The
Assets -- The Mortgage Loans" herein.
VALUE OF ASSETS TRANSFERRED TO THE TRUST ESTATE MAY DECREASE. If the
assets assigned to a Trust were to be sold, there can be no assurance that the
proceeds of any such sale would be sufficient to distribute in full the
outstanding principal amount of the related Certificates and all accrued
interest due thereon. The market value of the Assets included in any Trust
Estate generally will fluctuate with changes in prevailing rates of interest,
among other factors. Consequently, the items included in the Trust Estate for a
Series may be liquidated at a discount from their par value or from their
purchase price, in which case the proceeds of such liquidation might be less
than the aggregate outstanding principal amount of the Certificates of that
Series, plus interest at the Pass-Through Rate allocated to each Class of such
Certificates. In such event, any shortfalls in the amounts necessary to make
required distributions on the Certificates would be borne by the
Certificateholders.
2. PREPAYMENTS, YIELD AND CREDIT RISKS TO CERTIFICATEHOLDERS
FROM OWNERSHIP OF FIXED POOL OF CONTRACTS AND MORTGAGE LOANS.
PREPAYMENT TIMING AND FREQUENCY MAY ADVERSELY AFFECT YIELD OF
CERTIFICATEHOLDERS. Yields realized by holders of certain Classes of
Certificates entitled to disproportionate allocations of principal or interest
on the underlying Asset Pool will be extremely sensitive to levels of
prepayments (including for this purpose, payments resulting from refinancings,
liquidations due to defaults, casualties, condemnations and purchases by or on
behalf of the Company or the Seller) on the Assets in the related Trust. In
general, yields on Premium Certificates will be adversely affected by higher
than anticipated levels of prepayments on the Assets and enhanced by lower than
anticipated levels of prepayments. Conversely, yields on Discount Certificates
are likely to be enhanced by higher than expected levels of prepayments and
adversely affected by lower than anticipated levels of prepayments. The level of
sensitivity of a Class to prepayment levels will be magnified as the
disproportion of the allocation of principal and interest payments on the Assets
to such Class increases. Holders of certain Classes of Certificates could fail
to recover their initial investments.
The rate of principal payments on the Contracts and Mortgage Loans will
be affected by the amortization schedules of such Contracts and Mortgage Loans
and the rate of principal prepayments thereon (including for this purpose
payments resulting from refinancings, liquidations due to defaults, casualties,
condemnations and purchases by or on behalf of the Company or the Seller). The
rate of principal prepayments on pools of Contracts and Mortgage Loans is
influenced by a variety of economic, geographic, social, tax, legal and other
factors. In general, however, if the Contracts and Mortgage Loans are not
subject to prepayment penalties and if prevailing interest rates fall
significantly below the interest rates on the Contracts and Mortgage Loans, such
Contracts and 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
Contracts and Mortgage Loans. This is because, in a declining interest rate
environment, the Obligors may be able to secure alternative financing of their
Manufactured Homes or Mortgaged Properties with lower interest rates and lower
Monthly Payments than those borne by their current Contracts or Mortgage Loans.
Conversely, an Obligor is less likely to prepay his Contract or Mortgage Loan
when market interest rates are higher than those in effect when the Contract or
Mortgage Loan was originated. This general causal relationship may be more
pronounced in the case of Mortgage Loans than in the case of Contracts, because
Contracts typically have smaller principal balances than Mortgage Loans and,
consequently, the effect of interest rate changes on Monthly Payments due on
Contracts may be less dramatic than the effect of such changes on Monthly
Payments due on Mortgage Loans.
The holder of a Contract or Mortgage Loan (i.e., the Trustee, and
through it, the Certificateholders)
15
<PAGE>
generally does not want the Contract or Mortgage Loan to be prepaid when
prevailing interest rates are lower than they were at the time of the holder's
investment in the related Certificates and generally does want the Contract or
Mortgage Loan to be prepaid when prevailing interest rates are higher than they
were at the time of the holder's investment in the related Certificates. This
conflict between the Obligor and the holder of the Contract or Mortgage Loan
exposes the holder to reinvestment risk when prevailing interest rates are lower
than at the time of the holder's investment (it can only reinvest the proceeds
of prepayment of a Contract or Mortgage Loan in investments bearing a lower rate
of interest than that borne by the Certificate backed by the prepaid Contract or
Mortgage Loan) and the loss of reinvestment opportunity when prevailing interest
rates are higher than at the time of the holder's investment (it cannot reinvest
its funds in higher yielding instruments).
YIELD TO CERTIFICATEHOLDERS WILL BE ADVERSELY AFFECTED BY ACCRUAL
PERIODS, SHORTFALLS AND REALIZED LOSSES. The effective yield to
Certificateholders will be lower than the yield otherwise produced by the
applicable Pass-Through Rates and purchase prices of the Certificates because,
although interest will accrue on the Certificates from the first day of each
month, the distribution of such interest will not be made until the Distribution
Date in the month following the month of such accrual. In addition, the
effective yield on the Certificates will be reduced by any Shortfalls and
Realized Losses allocated to such Certificates.
CREDIT RATINGS PROVIDED BY RATING AGENCIES DO NOT ADDRESS ALL RISKS IN
AN INVESTMENT IN THE OFFERED CERTIFICATES. Each Class of Certificates of a
Series offered hereby and by means of the related Prospectus Supplement will be
rated in not less than the fourth highest rating category by the Rating Agency
or Agencies identified in such Prospectus Supplement. Any such rating does not
constitute a recommendation to buy, sell or hold the rated Certificates and is
subject to revision or withdrawal at any time by the Rating Agency that issued
the rating. An investor may obtain further details with respect to any rating on
the Certificates from the Rating Agency that issued the rating. In addition, any
such rating will be based, among other things, on the credit quality of the
underlying Asset Pool only and will represent only an assessment of the
likelihood of receipt by Certificateholders of payments with respect to such
Asset Pool. Such rating will not represent any assessment of the likelihood that
prepayment experience may differ from prepayment assumptions and, accordingly,
will not constitute any assessment of the possibility that holders of Premium
Certificates will fail to recoup their initial investment if a high rate of
principal prepayments is experienced on the related Assets. Security ratings
assigned to Classes of Certificates representing a disproportionate entitlement
to principal or interest collections on the underlying Assets should be
evaluated independently of similar security ratings assigned to other kinds of
securities.
3. CERTIFICATEHOLDERS MAY REALIZE LOSSES IF THE SERVICER IS
UNABLE TO REALIZE ON ASSETS BECAUSE OF PROVISIONS OF APPLICABLE STATE LAW. Each
Contract is secured by a security interest in a Manufactured Home. Perfection of
security interests in Manufactured Homes are subject to a number of state laws,
including, in some states, the Uniform Commercial Code (the "UCC") as adopted in
such states and, in other states, such states' motor vehicle titling statutes.
In some states, perfection of security interests in Manufactured Homes is
governed both by the applicable UCC and by motor vehicle titling statutes. The
steps necessary to perfect a security interest in a Manufactured Home will vary
from state to state. Because of the expense and administrative inconvenience
involved, neither the Seller nor the Company will amend any certificates of
title to change the lienholder specified therein from Oakwood (or any other
Seller) to the Trustee or take any other steps to effect re-registration of any
Manufactured Home in the Trustee's name with the appropriate state motor vehicle
authority. In addition, neither the Seller nor the Company will deliver any
certificate of title to the Trustee or note thereon the Trustee's interest or
file any UCC-3 financing statements or other instruments evidencing the
assignment to the Trustee of the Seller's security interest in any Manufactured
Home. In some states, in the absence of such an amendment to the certificate of
title or such a filing under the applicable UCC, it is unclear whether the
assignment to the Trustee of the security interest created by a Contract in the
underlying Manufactured Home will be effective or whether the Trustee's security
interest in the Manufactured Home will be perfected. In addition, in the absence
of notation of the Trustee's interest in a Manufactured Home on the related
certificate of title or re-registration of the Manufactured Home in the
Trustee's name with the appropriate state motor vehicle authority or delivery of
the certificate of title to the Trustee or filing of an appropriate transfer
instrument under the
16
<PAGE>
applicable UCC, it is unclear whether the assignment to the Trustee of the
security interest created by a Contract in the underlying Manufactured Home will
be effective against creditors of the Seller or a trustee in bankruptcy of the
Seller. The Seller will make certain warranties relating to the validity,
perfection and priority of the security interest created by each Contract in the
underlying Manufactured Home in favor of the Contract's originator. A breach of
any such warranty that materially and adversely affects the Trust's interest in
any Contract or Mortgage Loan would create an obligation on the part of the
Seller to repurchase or substitute for such Contract or Mortgage Loan unless
such breach is cured within 90 days after the Seller's discovery of or receipt
of notice of such breach.
4. COMPLIANCE WITH FEDERAL AND STATE LENDER REGULATIONS MAY CAUSE
CERTAIN CREDIT AND PREPAYMENT RISKS TO CERTIFICATEHOLDERS. Numerous federal and
state consumer protection laws impose requirements on lending under mortgage
loans or retail installment sales contracts such as the Contracts, and the
failure by the lender or seller of goods to comply with such requirements could
give rise to liabilities on the part of such lender's assignees to the Obligors
for amounts due under such mortgage loans or contracts or to an Obligor's right
of set-off against claims by such assignees as a result of such lender's or
seller's noncompliance. To the extent these laws affect the Contracts or the
Mortgage Loans, these laws would apply to the Trustee as assignee of the
Contracts and the Mortgage Loans. The Seller will warrant that the origination
of each Contract and Mortgage Loan complied with all requirements of law and
that there exists no right of rescission, set-off, counterclaim or defense in
favor of the Obligor under any Contract and that each Asset is enforceable
against the related Obligor in accordance with its terms, subject to applicable
bankruptcy and similar laws, laws affecting creditors' rights generally and
general principles of equity. A breach of any such warranty that materially and
adversely affects the Trust's interest in any Contract or Mortgage Loan would
create an obligation on the part of the Seller to repurchase or substitute for
such Contract or Mortgage Loan unless such breach is cured within 90 days after
the Seller's discovery of such breach or after notice of such breach is provided
to the Seller. If the credit support provided by any Subordinated Certificates,
any insurance or any other credit enhancement is exhausted, application of these
consumer protection laws could limit the ability of the Certificateholders to
realize upon Manufactured Homes or Mortgaged Properties securing defaulted
Contracts and Mortgage Loans or could limit the amount collected on such
defaulted Contracts and Mortgage Loans to less than the amount due thereunder.
See "Certain Legal Aspects of the Contracts and Mortgage Loans -- The Contracts
- -- Enforcement of Security Interests in Manufactured Homes" and "-- Consumer
Protection Laws" herein and "Certain Legal Aspects of the Contracts and Mortgage
Loans -- The Mortgage Loans -- Anti-Deficiency Legislation and Other Limitations
on Lenders" herein.
5. CERTIFICATEHOLDERS MUST LOOK SOLELY TO THE TRUST ESTATE FOR
DISTRIBUTIONS OF PRINCIPAL AND INTEREST. The Certificates of a Series are
obligations of the related Trust only, and holders of Certificates of a Series
may look only to the assets of the related Trust for distributions on such
Certificates. The Certificates will not represent an interest in or obligation
of the Company, the Servicer or any Underwriter, or any affiliates of the
Company, the Servicer or any Underwriter, except to the extent described herein.
See "The Trusts - Certificate Guarantee Insurance," "-- Oakwood Homes Guarantee"
and "- Alternate Credit Enhancement." The Certificates will not be insured or
guaranteed by any government agency or instrumentality, the Company, the
Servicer or any Underwriter or any of their affiliates, except as described
herein. See "The Trusts - Certificate Guarantee Insurance," "-- Oakwood Homes
Guarantee" and "-- Alternate Credit Enhancement."
The Limited Guarantee, if any, with respect to a Series of Certificates
will be an unsecured general obligation of Oakwood Homes and will not be
supported by any letter of credit or other credit enhancement arrangement.
6. THERE WILL BE A LIMITED MARKET FOR THE OFFERED CERTIFICATES.
There can be no assurance that a secondary market will develop for the
Certificates of any Series or, if it does develop, that it will provide the
holders of such Certificates with liquidity of investment or that any such
liquidity will continue to exist for the term of such Certificates. Certificates
issued in book-entry form may be less liquid than
17
<PAGE>
Certificates issued in fully-registered certificated form. See "Description of
the Certificates -- Book-Entry Procedures" herein.
7. AVAILABILITY OF EXTERNAL CREDIT ENHANCEMENT DOES NOT ELIMINATE RISKS
OF REALIZED LOSSES ON THE OFFERED CERTIFICATES. If insurance policies or other
credit enhancement are provided with respect to a Series of Certificates, the
insurance policies (including FHA insurance and any VA guarantees) or other
credit enhancement on the Contracts or the Mortgage Loans or any other part of
the related Trust Estate will not provide protection against all contingencies
and will cover certain contingencies only to a limited extent. See "The Trusts
- -- Insurance" herein.
8. CERTIFICATEHOLDERS SUBJECT TO LOSS IF RATE OF DELINQUENCIES
AND AMOUNT OF REALIZED LOSSES EXCEED CERTAIN LEVELS. With respect to
Certificates of a Series that includes a Class of Subordinated Certificates,
while the subordination feature is intended to enhance the likelihood of timely
payment of principal and interest to Senior Certificateholders, the available
subordination may be limited, as specified in the related Prospectus Supplement.
In addition, with respect to Certificates of a Series supported by a Reserve
Fund, the Reserve Fund could be depleted under certain circumstances. In either
case, shortfalls could result for both the Senior Certificates and the
Subordinated Certificates of such Series. Prospective purchasers of a Class of
Certificates should carefully review the credit risks entailed in such Class
resulting from its subordination or from the timing of the distributions
intended to be made on such Class.
9. CERTIFICATES PURCHASED AT A DISCOUNT OR PREMIUM FROM THEIR PARITY
PRICE ARE SUBJECT TO PARTICULAR TAX CONSIDERATIONS. Discount Certificates
generally will be treated as issued with original issue discount for federal
income tax purposes. In addition, certain classes of Premium Certificates (e.g.,
interest-only securities) may be treated by the Trustee under applicable
provisions of the Code as stripped coupons issued with original issue discount.
The Trustee will report original issue discount with respect to such Discount
and Premium Certificates on an accrual basis, which may be prior to the receipt
of cash associated with such income. See "Federal Income Tax Consequences"
herein.
10. REMIC RESIDUAL CERTIFICATES SUBJECT TO PARTICULAR TAX RISKS.
Residual Certificates are subject to certain special tax considerations that
differ from those applicable to REMIC Regular Certificates and to Certificates
in a Series for which no REMIC election is made. See "Federal Income Tax
Consequences" herein.
11. RECHARACTERIZATION OF THE TRANSACTION IN BANKRUPTCY CASES
COULD RESULT IN DELAYS OR ACCELERATION OF DISTRIBUTIONS ON THE OFFERED
CERTIFICATES. The Seller and the Company intend that the transfer of an Asset
Pool to the related Trust constitute a sale rather than a pledge of such Asset
Pool to secure indebtedness of the Seller. However, if the Seller were to become
a debtor under the federal bankruptcy code, it is possible that a creditor, a
bankruptcy trustee of the Seller, or the Seller itself as debtor-in-possession
may argue that the sale of the Asset Pool by the Seller is a pledge of the Asset
Pool rather than a sale. This position, if argued before or accepted by a court,
could result in a delay in or reduction of distributions to the related
Certificateholders. In addition, if an affiliate of the Seller were to become
insolvent, a creditor, a bankruptcy trustee of such affiliate, or such affiliate
itself as debtor-in-possession may argue that the Seller's assets should be
substantively consolidated into such affiliate's estate. This position, if
argued before or accepted by a court, could similarly result in a delay in or
reduction of distributions to the related Certificateholders.
A case Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.),
cert. denied 114 S.Ct. 554 (1993) decided by the United States Court of Appeals
for the Tenth Circuit contains language to the effect that accounts sold by a
debtor under Article 9 of the UCC would remain property of the debtor's
bankruptcy estate. Although the Contracts constitute chattel paper under the UCC
rather than accounts, sales of chattel paper are similarly governed by Article 9
of the UCC. If, following a bankruptcy of Oakwood, a court were to follow the
reasoning of the Tenth Circuit and apply such reasoning to chattel paper, then
delays or reductions in payments of collections on or in respect of the
Contracts could occur.
18
<PAGE>
12. THE RATE OF PAYMENTS ON THE CERTIFICATES IS DEPENDENT ON THE
PAYMENT PROVISIONS OF THE ASSETS AND THE ASSETS MAY CONTAIN A VARIETY OF PAYMENT
PROVISIONS. The Assets included in the Trust for a Series may be subject to
various types of payment provisions. As more fully described herein under "The
Trusts -- The Assets," such Assets may consist of Level Payment Loans,
Adjustable Rate Assets, Buy-Down Loans, Interest Reduction Loans, GEM Loans, GPM
Loans, Step-up Rate Loans, Balloon Payment Loans, Convertible Loans, Bi-Weekly
Loans, Level Payment Buy-Down Loans, Increasing Payment Loans, and such other
types of Assets as are specified and described in the related Prospectus
Supplement.
In general, Buy-Down Loans, Level Payment Buy-Down Loans, Increasing
Payment Loans, GEM Loans, GPM Loans and Step-up Rate Loans involve lower Monthly
Payment obligations for some period following their origination, followed by
higher Monthly Payment obligations thereafter. Obligors on these types of Assets
may be more likely to default on their obligations to make Monthly Payments than
Obligors on Level Payment Loans, particularly as their Monthly Payments
increase. The Monthly Payments payable by Obligors on Balloon Payment Loans are
not sufficient to provide for complete amortization of their loans by their
stated maturity dates, and, on the stated maturity date for a Balloon Payment
Loan, the related Obligor is required to make a "balloon" payment in excess, and
likely substantially in excess, of the Monthly Payments required from such
Obligor during preceding months. Obligors on Balloon Payment Loans are generally
more likely to default on their final "balloon" payments than are Obligors on
Level Payment Loans to default in making their Monthly Payments. As a result,
the rate of repossession of and foreclosure on Manufactured Homes and Mortgaged
Properties securing Buy-Down Loans, Level Payment Buy-Down Loans, Increasing
Payment Loans, GEM Loans, GPM Loans, Step-up Rate Loans and Balloon Payment
Loans may be higher than the rate of repossession of and foreclosure on
Manufactured Homes and Mortgaged Properties securing Level Payment Loans, and
the likelihood that Realized Losses will be allocated to Certificates may be
higher than would otherwise be the case to the extent the related Trust Estate
includes Buy-Down Loans, Level Payment Buy-Down Loans, Increasing Payment Loans,
GEM Loans, GPM Loans, Step-up Rate Loans and/or Balloon Payment Loans in
addition to or instead of Level Payment Loans.
The interest rates on Adjustable Rate Assets will adjust periodically
to equal the sum of the applicable Index and Gross Margin. As the Index
applicable to an Adjustable Rate Asset increases, the amount of the related
Obligor's Monthly Payments will be increased, subject to certain limitations. As
a result, Obligors on Adjustable Rate Assets may be more likely to default on
their obligations to make Monthly Payments than Obligors on Assets bearing
interest at fixed rates in rising interest rate environments. In addition, the
Seller of any Convertible Loan, to the extent provided in the related Prospectus
Supplement, may be required to repurchase such Asset if the related Obligor
elects to convert the related Asset Rate from an adjustable rate to a fixed rate
of interest. Any such repurchase of a Convertible Loan included in an Asset Pool
will have the same effect on the holders of the Certificates of the related
Series as a prepayment in full of such Asset. Certificates may be subject to a
higher rate of prepayments of the underlying Assets than would otherwise be the
case to the extent the related Trust Estate includes Convertible Loans and to
the extent the related Seller has such a repurchase obligation.
DESCRIPTION OF THE CERTIFICATES
General
Each Series of Certificates will be issued pursuant to a Pooling and
Servicing Agreement (the "Series Agreement") among the Company, as seller of the
Certificates, Oakwood, as the Servicer (or another Servicer if one is named in
the related Prospectus Supplement) and the Trustee named in the related
Prospectus Supplement. A copy of the form of the Series Agreement, together with
standard terms thereto (the "Standard Terms," and, together with the applicable
Series Agreement, the "Agreement") is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Prospectus Supplement for each
Series will describe any provisions of the Series Agreement relating to such
Series which differ materially from the form of the Agreement filed as an
exhibit to the Registration Statement.
The Company may sell to investors one or more Classes of a Series of
Certificates in transactions not
19
<PAGE>
requiring registration under the Securities Act of 1933, as amended.
The Offered Certificates of each Series of Certificates will be rated
upon issuance as specified in the related Prospectus Supplement by the Rating
Agency or Agencies identified therein. The following summaries describe certain
provisions common to each Series of Certificates. The summaries do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, the provisions of the particular Agreement relating to the Series
of Certificates. When particular provisions or terms used in the Agreement are
referred to, the actual provisions thereof (including definitions of terms
therein) are incorporated by reference.
The Certificates of each Series will represent interests in a separate
Trust created pursuant to the related Agreement, as specified in the related
Prospectus Supplement. The Trust Estate for a Series will be held by the related
Trustee for the benefit of the related Certificateholders. Each Trust Estate, to
the extent specified in the related Prospectus Supplement, will include: (1) the
Assets which are subject to the related Agreement from time to time; (2) such
assets as from time to time are identified as deposited in any account held for
the benefit of the Certificateholders (including the Certificate Account and the
Distribution Account maintained pursuant to the related Agreement); (3) with
respect to a Series of Certificates evidencing interests in Contracts,
underlying Manufactured Homes and Real Properties acquired by the Trust through
repossession, foreclosure or otherwise; (4) with respect to a Series of
Certificates evidencing interests in Mortgage Loans, property which secured a
Mortgage Loan and which was acquired by foreclosure or deed in lieu of
foreclosure; (5) (a) the Standard Hazard Insurance Policies maintained with
respect to the underlying Manufactured Homes and Mortgaged Properties, (b) the
related Pool Insurance Policy, if any, (c) the related Special Hazard Insurance
Policy, if any, (d) the related Obligor Bankruptcy Insurance, if any, (e) any
Primary Mortgage Insurance Policies, FHA insurance and VA guarantees and (f) the
Buy-Down Fund and GPM Fund, if any; (6) the Reserve Fund, if any; (7) any letter
of credit, guarantee or surety bond, insurance policy or other credit
enhancement securing payment of all or part of the related Series of
Certificates; (8) if specified in the related Prospectus Supplement, any related
Pre-Funding Account; (9) such other property as may be specified in the related
Prospectus Supplement; and (10) proceeds of any of the foregoing.
The Agreement for a Series will generally provide that Certificates may
be issued thereunder up to the aggregate principal amount authorized by the
Company. Each Series will consist of one or more Classes of Certificates and may
include: (1) one or more Classes of Senior Certificates entitled to certain
preferential rights to distributions of principal and interest; (2) one or more
Classes of Subordinated Certificates; (3) one or more Classes of Certificates
representing an interest only in a specified portion of interest payments on the
Assets in the related Trust and that may have no principal balance, a nominal
principal balance or a Notional Principal Amount ("Strip Classes"); (4) one or
more Classes of Certificates representing an interest only in specified payments
of principal on the Assets ("Principal Only Classes"); (5) one or more Classes
of Certificates upon which interest will accrue but will not be distributed
until certain other Classes of Certificates of the same Series have received
their final distributions ("Compound Interest Classes" and "Capital Appreciation
Classes" and, collectively, "Accretion Classes"); and (6) one or more Classes of
Certificates entitled to fixed principal payments under certain conditions ("PAC
Classes") and companion classes thereto ("Companion Classes"). Each Series as to
which a REMIC election has been or is to be made will consist of one or more
Classes of REMIC Regular Certificates (which may consist of Certificates of the
types specified in the preceding sentence) and one Class of Residual
Certificates for each related REMIC.
The Certificates of each Series will be issued in fully-registered
certificated or book-entry form in authorized denominations for each related
Class as specified in the related Prospectus Supplement. The Certificates of
each Series issued in certificated form may be transferred or exchanged at the
corporate trust office of the Trustee without the payment of any service charge,
other than any tax or other governmental charge payable in connection with a
transfer. The Trustee will make distributions of principal and interest on each
certificated Certificate by check or wire transfer to each person in whose name
such Certificate is registered as of the close of business on the Record Date
for such distribution (as specified in the related Prospectus Supplement) at the
address appearing in the Certificate Register, except that the final
20
<PAGE>
distributions in retirement of each certificated Certificate will be made only
upon presentation and surrender of such Certificate at the corporate trust
office of the Trustee. The Trustee will make distributions with respect to
Book-Entry Certificates as set forth below.
Book-Entry Procedures
The Prospectus Supplement for a Series may specify that certain Classes
of Certificates initially will be issued as Book-Entry Certificates in the
authorized denominations specified in such Prospectus Supplement. Each such
Class will be represented by a single certificate registered in the Certificate
Register in the name of a nominee of the depository, which is expected to be The
Depository Trust Company ("DTC" and, together with any successor or other
depository (which must be a Clearing Agency) selected by the Company, the
"Depository"). No person acquiring a Book-Entry Certificate (a "Beneficial
Owner") will be entitled to receive a definitive certificate representing its
Certificate.
DTC performs services for its Participants, some of whom (and/or their
representatives) own DTC. In accordance with its normal procedures, DTC is
expected to record the positions held by each DTC Participant in the Book-Entry
Certificates, whether held for its own account or as a nominee for another
person. In general, beneficial ownership of Book-Entry Certificates will be
subject to the rules, regulations and procedures governing the Depository and
Depository Participants as in effect from time to time.
A Beneficial Owner's ownership of a Book-Entry Certificate will be
reflected in the records of the brokerage firm, bank, thrift institution or
other financial intermediary (any of the foregoing, a "Financial Intermediary")
that maintains such Beneficial Owner's account for such purpose. In turn, the
Financial Intermediary's ownership of such Book-Entry Certificate will be
reflected in the records of the Depository (or of a participating firm that acts
as agent for the Financial Intermediary whose interest in turn will be reflected
in the records of the Depository, if the Beneficial Owner's Financial
Intermediary is not a direct Depository Participant). Therefore, the Beneficial
Owner must rely on the procedures of its Financial Intermediary or
Intermediaries and of the Depository in order to evidence its beneficial
ownership of a Book-Entry Certificate, and beneficial ownership of a Book-Entry
Certificate may only be transferred by compliance with the procedures of such
Financial Intermediaries and Depository participants.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC accepts securities for deposit
from its participating organizations ("Depository Participants") and facilitates
the clearance and settlement of securities transactions between Depository
Participants in such securities through electronic book-entry changes in
accounts of Depository Participants, thereby eliminating the need for physical
movement of certificates. Depository Participants include securities brokers and
dealers, banks and trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Depository Participant, either
directly or indirectly ("indirect participants").
Distributions of principal and interest on the Book-Entry Certificates
will be made on each Distribution Date to the Depository. The Depository will be
responsible for crediting the amount of such distributions to the accounts of
the applicable Depository Participants in accordance with the Depository's
normal procedures. Each Depository Participant will be responsible for
disbursing such payments to the Beneficial Owners of the Book-Entry Certificates
that it represents and to each Financial Intermediary for which it acts as
agent. Each such Financial Intermediary will be responsible for disbursing funds
to the Beneficial Owners of the Book-Entry Certificates that it represents. As a
result of the foregoing procedures, Beneficial Owners of the Book Entry
Certificates may experience some delay in their receipt of payments.
While the Offered Certificates are outstanding (except if the Offered
Certificates are subsequently issued in certificated, fully-registered form,
which can only occur under the limited circumstances described
21
<PAGE>
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Offered
Certificates and is required to receive and transmit distributions of principal
of, and interest on, the Offered Certificates. Unless and until the Offered
Certificates are issued in certificated form, Beneficial Owners who are not
Participants may transfer ownership of the Offered Certificates only through
Participants by instructing such Participants to transfer the Offered
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Certificates, which account is maintained with such
purchasers' respective Participants. Under the Rules and in accordance with
DTC's normal procedures, transfers of ownership of the Offered Certificates will
be executed through DTC and the accounts of the respective Participants at DTC
will be debited and credited. Because transactions in Book-Entry Certificates
can be effected only through the Depository, participating organizations,
indirect participants and certain banks, the ability of a Beneficial Owner of a
Book-Entry Certificate to pledge such Certificate to persons or entities that
are not Depository Participants, or otherwise to take actions in respect of such
Certificate, may be limited due to the lack of a physical certificate
representing such Certificate. Issuance of the Book-Entry Certificates in
book-entry form may reduce the liquidity of such Certificates in the secondary
trading market because investors may be unwilling to purchase Book-Entry
Certificates for which they cannot obtain physical certificates.
The Book-Entry Certificates will be issued in fully-registered,
certificated form to Beneficial Owners of such Book-Entry Certificates or their
nominees, rather than to the Depository or its nominee, only if (1) the Company
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as depository with respect to the
Book-Entry Certificates and the Company is unable to locate a qualified
successor within 30 days or (2) the Company, at its option, elects to terminate
the book-entry system maintained through the Depository. Upon the occurrence of
either event described in the preceding sentence, the Trustee is required to
notify the Depository, which in turn will notify all Beneficial Owners of
Book-Entry Certificates through Depository participants, of the availability of
certificated Certificates. Upon surrender of the Depository of the certificates
representing the Book-Entry Certificates and receipt of instructions for
re-registration, the Trustee will reissue the Book-Entry Certificates as
certificated Certificates to the Beneficial Owners of the Book-Entry
Certificates. Upon issuance of certificated Certificates to Beneficial Owners,
such Certificates will be transferable directly (and not exclusively on a
book-entry basis) and registered holders will deal directly with the Trustee
with respect to transfers, notices and distributions.
DTC has advised the Company and the Trustee that, unless and until the
Offered Certificates are issued in certificated, fully-registered form under the
circumstances described above, DTC will take any action permitted to be taken by
a Certificateholder under the Agreement only at the direction of one or more
Participants to whose DTC accounts the Certificates are credited. DTC has
advised the Company that DTC will take such action with respect to any
Percentage Interests of the Offered Certificates only at the direction of and on
behalf of such Participants with respect to such Percentage Interests of the
Offered Certificates. DTC may take action, at the direction of the related
Participants, with respect to some Offered Certificates which conflict with
actions taken with respect to other Offered Certificates.
Neither the Company, Oakwood, the Servicer nor the Trustee will have
any liability for any aspect of the records relating to or payment made on
account of beneficial ownership interests of the Book-Entry Certificates held by
the Depository, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
22
<PAGE>
Allocation of Collections from the Assets
The Prospectus Supplement for a Series will specify the Available
Distribution Amount for such Series, which in general will be equal to the
amount of principal and interest actually collected, advanced or otherwise
received with respect to the related Asset Pool during the applicable Collection
Period or Prepayment Period, net of applicable servicing, administrative,
guarantee and other fees, insurance premiums, the costs of any other credit
enhancement and amounts required to reimburse any unreimbursed advances. The
Available Distribution Amount will be allocated among the Classes of
Certificates of the related Series in the proportion and order of application
set forth in the related Agreement and described in the related Prospectus
Supplement. The Available Distribution Amount may be allocated so that amounts
paid as interest on the Assets may be distributed as principal on the
Certificates and amounts paid as principal on the Assets may be distributed as
interest on the Certificates.
A Class of Certificates entitled to distributions of interest may
receive such interest at a specified rate (a "Pass-Through Rate"), which may be
fixed or adjustable. The Classes of Certificates within a Series may have the
same or different Pass-Through Rates. The related Prospectus Supplement will
specify the Pass-Through Rate, or the method for determining the Pass-Through
Rate, for each applicable Class, and the method of determining the amount to be
distributed on any Strip Classes on each Distribution Date. Residual
Certificates offered hereby may or may not have a Pass-Through Rate. In addition
to representing entitlement to regular distributions of principal and interest,
if any, that are allocated to the Residual Certificates, Residual Certificates
also generally will represent entitlement to receive amounts remaining in the
Distribution Account on any Distribution Date after allocation of scheduled
distributions to all other outstanding Classes of Certificates of that Series
and after all required deposits have been made into any related Reserve Funds.
Certain Classes of Certificates may have a Notional Principal Amount. A
"Notional Principal Amount" of a Certificate is used solely for purposes of
determining the amount of interest distributions and certain other rights and
obligations of the holder of such Certificate and does not represent any
beneficial interest in principal payments on the Assets in the related Trust.
Interest distributions on the Certificates generally will include interest
accrued through the Accounting Date preceding the applicable Distribution Date
or through another date specified in the related Prospectus Supplement. Interest
will be computed on the basis of a 360-day year consisting of twelve 30-day
months, or on the basis of actual elapsed days, as specified in the related
Prospectus Supplement.
With respect to a Series that includes one or more Classes of
Subordinated Certificates, the Senior Certificates will generally not bear any
Realized Losses on the related Contracts or Mortgage Loans, until the
Subordinated Certificates of that Series have borne Realized Losses up to a
specified Subordination Amount or loss limit or until the principal amount of
the Subordinated Certificates has been reduced to zero, either through the
allocation of Realized Losses, distributions of principal, or both.
Distributions of interest may be reduced to the extent of Shortfalls on
Contracts or Mortgage Loans comprising the Assets of the related Trust. With
respect to a Series that includes a Class of Subordinated Certificates, any
Shortfall may result in a reallocation of amounts otherwise distributable to
less senior Certificates for distribution to more senior Certificates.
Principal and interest distributable on a Class of Certificates may be
distributed among the Certificates of such Class pro rata in the proportion that
the outstanding principal or notional amount of each Certificate of such Class
(or each Certificate's designated "percentage interest," in the case of
Certificates with no Certificate Principal Balance or notional principal amount)
bears to the aggregate outstanding principal or notional amount of all
Certificates of such Class (or to a "percentage interest" of 100%, in the case
of Certificates with no Certificate Principal Balance or notional principal
amount), or in such other manner as may be detailed in the related Prospectus
Supplement. Interest distributable on a Class of Certificates will be allocated
among the Certificates of such Class pro rata in the proportion that the
outstanding principal or notional amount of each Certificate of such Class (or
each Certificate's designated "percentage interest," in the case of Certificates
with no Certificate Principal Balance or notional principal amount) bears to the
aggregate outstanding principal or notional amount of all Certificates of such
Class (or to a "percentage interest" of 100%, in the case of Certificates with
no Certificate Principal Balance or notional principal
23
<PAGE>
amount), or in such other manner as may be detailed in the related Prospectus
Supplement.
The Final Scheduled Distribution Date for each Class of Certificates
will be the date on which the last distribution of the principal thereof is
scheduled to occur, assuming no prepayments of principal with respect to the
Assets included in the Trust for that Series.
Optional Redemption or Termination
To the extent and under the circumstances specified in the related
Prospectus Supplement, the Certificates of a Series may be redeemed prior to
their Final Scheduled Distribution Date at the option of the Company, the
Servicer or such other party as may be specified in the related Prospectus
Supplement by purchase of the outstanding Certificates of such Series. Unless
otherwise specified in the related Prospectus Supplement, the right so to redeem
the Certificates of a Series will be conditioned upon (1) the passage of a
certain date specified in the Prospectus Supplement and/or (2) (a) the decline
of the aggregate Scheduled Principal Balance of the Assets in the Trust to less
than a percentage (specified in the related Prospectus Supplement) of the
aggregate Scheduled Principal Balance of the Assets in the Trust at the related
Cut-off Date or (b) the decline of the aggregate Certificate Principal Balance
of a specified Class or Classes of Certificates to less than a percentage
(specified in the related Prospectus Supplement) of the aggregate Certificate
Principal Balance of the applicable Class or Classes of Certificates at the
Closing Date for the Series. The percentage balances of the aggregate Scheduled
Principal Balance of the Assets and the aggregate Certificate Principal Balance
of a Class referred to in (2)(a) and (2)(b), respectively, above, may range from
5% to 25%. In the event the option to redeem the Certificates is exercised, the
purchase price distributed with respect to each Certificate offered hereby and
by the related Prospectus Supplement will equal 100% of its then outstanding
principal amount, plus accrued and unpaid interest thereon at the applicable
Pass-Through Rate, less any unreimbursed Advances and unrealized losses
allocable to such Certificate. Notice of the redemption of the Certificates will
be given to Certificateholders as provided in the related Agreement.
In addition, unless otherwise specified in the related Prospectus
Supplement, the Company or the Servicer or the holders of a majority in interest
of any Class of Residual Certificates of the related Series may at their
respective options repurchase all related Contracts and Mortgage Loans remaining
outstanding at a time specified in the related Prospectus Supplement, which will
be when the aggregate Scheduled Principal Balance of such Contracts or Mortgage
Loans is less than a percentage (specified in the related Prospectus Supplement,
but may range from 5% to 25%) of the aggregate Scheduled Principal Balance of
the Contracts or Mortgage Loans on the Cut-off Date, or when the aggregate
Certificate Principal Balance of a specified Class or Classes of Certificates is
less than a percentage (specified in the related Prospectus Supplement, but may
range from 5% to 25%) of the aggregate Certificate Principal Balance of such
Class or Classes at the Closing Date. The termination price for a Trust will be
specified in the related Agreement, and will generally equal the sum of (1) any
Liquidation Expenses incurred by the Servicer in respect of any Contract or
Mortgage Loan that has not yet been liquidated; (2) all amounts required to be
reimbursed or paid to the Servicer in respect of previously unreimbursed
Servicing Advances; and (3) the greater of (a) the sum of (i) the aggregate
Unpaid Principal Balance of the related Contracts and Mortgage Loans, plus
accrued and unpaid interest thereon through the preceding Accounting Date for
the date of repurchase at the Asset Rates borne by such Contracts and Mortgage
Loans, plus (ii) the lesser of (A) the aggregate Unpaid Principal Balance of
each Contract and Mortgage Loan that had been secured by any Repo Property or
REO Property remaining in the Trust, plus accrued interest thereon at the Asset
Rates borne by such Contracts and Mortgage Loans through the Accounting Date
preceding such purchase, and (B) the current appraised value of any such Repo
Property or REO Property (net of Liquidation Expenses to be incurred in
connection with the disposition of such property estimated in good faith by the
Servicer), such appraisal to be conducted by an appraiser mutually agreed upon
by the Servicer and the Trustee, plus all previously unreimbursed P&I Advances
made in respect of such Repo Property or REO Property, and (b) the aggregate
fair market value of the assets of the related Trust (as reasonably determined
by the Servicer as described in the related Agreement) plus all previously
unreimbursed P&I Advances made with respect to the related Assets. The fair
market value of the assets of a Trust as determined for purposes of a
terminating purchase shall be
24
<PAGE>
deemed to include accrued interest through the Accounting Date preceding the
date of such purchase at the applicable Asset Rate on the Unpaid Principal
Balance of each Contract and Mortgage Loan (including any Contract that has
become a Repo Property and any Mortgage Loan that has become a REO Property,
which Repo Property or REO Property has not yet been disposed of by the
Servicer). The basis for any such valuation shall be furnished by the Servicer
to the Certificateholders upon request.
On the date set for termination of a Trust, the termination price shall
be distributed (1) first to the Servicer to reimburse it for all previously
unreimbursed Liquidation Expenses paid and Advances made by the Servicer with
respect to the related Assets and (2) second to the Certificateholders in
accordance with the payment priorities that apply on each Distribution Date as
described in the related Prospectus Supplement. This will result in the
distribution with respect to each Certificate offered hereby and by the related
Prospectus Supplement of an amount equal to 100% of its then outstanding
principal amount, plus accrued and unpaid interest thereon at the applicable
Pass-Through Rate, less any unreimbursed Advances and unrealized losses
allocable to such Certificate.
MATURITY AND PREPAYMENT CONSIDERATIONS
Maturity
No more than 1% of the Contracts and Mortgage Loans securing a Series
will have maturities at origination of more than 30 years.
Prepayment Considerations
The prepayment experience on an Asset Pool will affect (1) the average
life of the related Certificates and each Class thereof issued by the related
Trust; (2) the timing of the final distribution for each Class (and whether such
final distribution occurs prior to its Final Scheduled Distribution Date); and
(3) the effective yield on each Class of such Certificates. Because prepayments
will be passed through to the holders of Certificates of each Series as
distributions of principal, it is likely that in the event of such prepayments,
the final distribution on each Class of Certificates of a Series will occur
prior to its Final Scheduled Distribution Date.
Contracts and Mortgage Loans generally may be prepaid in full or in
part without penalty. FHA Contracts and Mortgage Loans and VA Contracts and
Mortgage Loans may be prepaid at any time without penalty. The Company
anticipates that a significant number of the Contracts and Mortgage Loans will
be paid in full prior to their maturity. A number of factors, including
homeowner mobility, national and local economic conditions, age of the Contracts
and Mortgage Loans, interest rates and the availability of alternative financing
may affect the prepayment experience of a particular Asset Pool.
The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing market
interest rates fall significantly below the interest rates borne by particular
Contracts or Mortgage Loans, the Contracts and Mortgage Loans are likely to be
subject to higher prepayment rates than if prevailing interest rates remain at
or above the interest rates borne by such Contracts and Mortgage Loans. However,
the rate of principal prepayments on Contracts and Mortgage Loans is influenced
by a variety of economic, geographic, social, tax, legal and other factors.
Accordingly, there can be no assurance that any Contracts or Mortgage Loans
included in an Asset Pool will conform to past prepayment experience or any
assumed rate of prepayment.
It is customary in the mortgage industry in quoting yields (1) on a
pool of 30-year fixed-rate, level payment mortgages, to compute the yield as if
the pool were a single loan that is amortized according to a 30-year schedule
and is then prepaid in full at the end of the 12th year and (2) on a pool of
15-year fixed-rate, level payment mortgages, to compute the yield as if the pool
were a single loan that is amortized according to a 15-year schedule and then is
prepaid in full at the end of the seventh year.
25
<PAGE>
Information regarding the prepayment model utilized in preparing any
Prospectus Supplement will be set forth in the Prospectus Supplement with
respect to a Series of Certificates.
See "Description of the Certificates -- Optional Redemption or
Termination" for a description of the Company's or other party's option to
repurchase the Contracts or Mortgage Loans comprising part of a Trust Estate
when certain triggering events occur. See also "The Trusts -- The Contracts" and
"-- The Mortgage Loans" and "Sale and Servicing of Contracts and Mortgage Loans
- -- Representations and Warranties" herein for a description of the obligations
of the Company, the Servicer or another party, as specified in the related
Prospectus Supplement, to repurchase a Contract or Mortgage Loan in case of a
breach of a representation or warranty relative to such Contract or Mortgage
Loan. Any such repurchase will have the effect of a full prepayment of the
outstanding principal balance of the related Contract or Mortgage Loan. See also
"Yield Considerations" herein.
YIELD CONSIDERATIONS
Distributions of interest on the Certificates generally will include
interest accrued through the Accounting Date for the applicable Distribution
Date. Because distributions to the Certificateholders generally will not be made
until the Distribution Date following the preceding Accounting Date, the
effective yield to the holder of a Certificate will be lower than the yield
otherwise produced by the applicable Pass-Through Rate and purchase price for
the Certificate.
The yield to maturity of any Certificate will be affected by the rate
and timing of payment of principal of the underlying Contracts and Mortgage
Loans. If the purchaser of a Certificate offered at a discount from its Parity
Price (as defined below) calculates the anticipated yield to maturity of such
Certificate based on an assumed rate of payment of principal that is faster than
that actually received on the underlying Contracts and Mortgage Loans, the
actual yield to maturity will be lower than that so calculated. Similarly, if
the purchaser of a Certificate offered at a premium over its Parity Price
calculates the anticipated yield to maturity of such Certificate based on an
assumed rate of payment of principal that is slower than that actually received
on the underlying Contracts and Mortgage Loans, the actual yield to maturity
will be lower than that so calculated. "Parity Price" is the price at which a
Certificate will yield its coupon, after giving effect to any payment delay.
The timing of changes in the rate of prepayments on the Contracts and
Mortgage Loans may significantly affect an investor's actual yield to maturity,
even if the average rate of principal payments experienced over time is
consistent with an investor's expectation. In general, the earlier a prepayment
of principal on an Asset, the greater will be the effect on a related investor's
yield to maturity. As a result, 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 the period immediately following the issuance of the
Certificates would not be fully offset by a subsequent like reduction (or
increase) in the rate of principal payments. Because the rate of principal
payments on the underlying Assets affects the weighted average life and other
characteristics of any Class of Certificates, prospective investors are urged to
consider their own estimates as to the anticipated rate of future prepayments on
the underlying Contracts and Mortgage Loans and the suitability of the
applicable Certificates to their investment objectives. For a discussion of
factors affecting principal prepayments on the Contracts and Mortgage Loans
underlying a Series of Certificates, see "Maturity and Prepayment
Considerations" above.
The yield on each Class of Certificates also will be affected by
Realized Losses or Shortfalls allocated to such Class.
26
<PAGE>
THE TRUSTS
General
A Trust Estate may include Contracts and/or Mortgage Loans. Each Trust
Estate also may include (1) such assets as from time to time are identified as
deposited in any account held for the benefit of the Certificateholders
(including the Certificate Account and the Distribution Account) maintained
pursuant to the related Agreement; (2) any Manufactured Home or Real Property
which initially secured a related Contract and which is acquired by
repossession, foreclosure or otherwise; (3) any property which initially secured
a related Mortgage Loan and which is acquired by foreclosure or deed in lieu of
foreclosure or otherwise; (4) if so specified in the related Prospectus
Supplement, any related Reserve Fund; (5) if specified in the related Prospectus
Supplement, any related Pre-Funding Account; (6) any insurance policies,
guarantees and any other credit enhancement maintained with respect to the
related Certificates, the related Contracts, the related Mortgage Loans or all
or any part of such Trust Estate that is required to be maintained pursuant to
the related Agreement; and (7) such other property as is specified in the
related Prospectus Supplement.
The Assets
General
Each Certificate will evidence an interest in one Trust Estate,
containing one or more Asset Pools comprised of Contracts and/or Mortgage Loans
having the aggregate principal balance as of the Cut-off Date specified in the
related Prospectus Supplement. Holders of Certificates of a Series will have
interests only in the related Asset Pool(s) and will have no interest in any
Asset Pools created with respect to any other Series of Certificates.
The Company will acquire the underlying Contracts and Mortgage Loans
from Oakwood, which may have originated the Contracts and Mortgage Loans or may
have acquired them in the open market or in privately negotiated transactions. A
brief description of the Contracts and Mortgage Loans expected to be included in
the Trust Estates is set forth under "-- The Contracts" and "-- The Mortgage
Loans" below. Specific information respecting the Contracts and Mortgage Loans
included in a particular Trust Estate will be provided in the related Prospectus
Supplement and, to the extent such information is not fully provided in the
related Prospectus Supplement, in a Current Report on Form 8-K to be filed with
the Securities and Exchange Commission within fifteen days after the initial
issuance of such Certificates. A copy of the Pooling and Servicing Agreement
with respect to each Series of Certificates will be attached to the related
Current Report on Form 8-K and will be available for inspection at the corporate
trust office of the Trustee (the location of which will be specified in the
related Prospectus Supplement).
Whenever in this Prospectus terms such as "Asset Pool," "Trust Estate,"
"Agreement" or "Pass-Through Rate" are used, those terms apply, unless the
context otherwise indicates, to one specific Asset Pool, Trust Estate, Agreement
and the Pass-Through Rates applicable to the related Series of Certificates.
For each Series of Certificates, the Company will cause the Contracts
and Mortgage Loans included in the related Asset Pool to be assigned to the
trustee named in the related Prospectus Supplement (the "Trustee"). Oakwood
Acceptance Corporation, as servicer (the "Servicer"), the parent of the Company,
will service the Contracts and Mortgage Loans and administer the Certificates,
either exclusively or through other servicing institutions ("Sub-servicers").
See "Sale and Servicing of the Contracts and Mortgage Loans -- Servicing"
herein. With respect to those Contracts and Mortgage Loans serviced by the
Servicer through a Sub-servicer, the Servicer will remain liable for its
servicing obligations under the Agreement as if the Servicer alone were
servicing such Contracts and Mortgage Loans. The Servicer may delegate certain
computational, data processing, collection and foreclosure (including
repossession) duties under any Agreement without appointing a Sub-servicer and
without any notice to or consent from the Company or the Trustee, provided that
the Servicer remains fully responsible for the performance of such duties.
27
<PAGE>
Types of Assets
The Assets included in the Trust for a Series may be subject to various
types of payment provisions. Such Assets may consist of (1) "Level Payment
Loans," which may provide for the payment of interest and full repayment of
principal in level Monthly Payments with a fixed rate of interest computed on
their declining principal balances; (2) "Adjustable Rate Assets," which may
provide for periodic adjustments to their rates of interest to equal the sum
(which may be rounded) of a fixed margin and an index; (3) "Buy-Down Loans,"
which are Assets for which funds have been provided by someone other than the
related Obligors to reduce the Obligors' Monthly Payments during the early
period after origination of such Assets; (4) "Level Payment Buy-Down Loans," as
described below; (5) "Increasing Payment Loans," as described below; (6)
"Interest Reduction Loans," which provide for the one-time reduction of the
interest rate payable thereon; (7) "GEM Loans," which provide for (a) Monthly
Payments during the first year after origination that are at least sufficient to
pay interest due thereon, and (b) an increase in such Monthly Payments in
subsequent years at a predetermined rate resulting in full repayment over a
shorter term than the initial amortization terms of such Assets; (8) "GPM
Loans," which allow for payments during a portion of their terms which are or
may be less than the amount of interest due on the Unpaid Principal Balances
thereof, and which unpaid interest will be added to the principal balances of
such Assets and will be paid, together with interest thereon, in later years;
(9) "Step-up Rate Loans," which provide for Asset Rates that increase over time;
(10) "Balloon Payment Loans," which include Assets on which only interest is
payable until maturity, as well as Assets that provide for the full amortization
of principal over a certain amortization period, but require all remaining
principal to be paid at the end of a shorter period; (11) "Convertible Loans,"
which are Adjustable Rate Assets subject to provisions pursuant to which,
subject to certain limitations, the related Obligors may exercise an option to
convert the adjustable Asset Rate to a fixed Asset Rate; and (12) "Bi-Weekly
Loans," which provide for Obligor payments to be made on a bi-weekly basis. The
Assets included in a Trust also may include Level Payment Buy-Down Loans and
Increasing Payment Loans, which are described below.
A Level Payment Buy-Down Loan is an Asset that provides for a reduction
in the Obligor's Monthly Payments thereunder for a period of up to the first
four years after origination of such Asset and as to which funds have been
provided by someone other than the Obligor to cover such reductions during those
years. Accordingly, payments due on Level Payment Buy-Down Loans will be the
same as payments due on Level Payment Loans without buy-down provisions, except
that the former will include amounts to be collected from the related Servicers
pursuant to either buy-down or subsidy agreements in addition to amounts to be
collected from the related Obligors.
An Increasing Payment Loan is an Asset that provides for Obligor
Monthly Payments that are fixed for an initial period of six, 12 or 24 months,
and which increase thereafter (at a predetermined rate expressed as a percentage
of the Obligor's Monthly Payment during the preceding payment period, subject to
any caps on the amount of any single Monthly Payment increase) for a period not
to exceed nine years from the date of origination, after which the Obligor's
Monthly Payment is fixed at a level-payment amount so as to fully amortize the
Asset over its remaining term to maturity. The scheduled Monthly Payment with
respect to an Increasing Payment Loan is the total amount required to be paid
each month in accordance with its terms and equals the sum of (1) the Obligor's
Monthly Payments referred to in the preceding sentence and (2) in the case of
certain Increasing Payment Loans, payments made by the respective Servicers
pursuant to buy-down or subsidy agreements. The Obligor's initial Monthly
Payments for each Increasing Payment Loan are set at the level-payment amount
that would apply to an otherwise identical Level Payment Loan having an Asset
Rate a certain number of percentage points below the Asset Rate of such
Increasing Payment Loan. The Obligor's Monthly Payments on each Increasing
Payment Loan, together with any payments made thereon by the related Servicers
pursuant to buy-down or subsidy agreements, will in all cases be sufficient to
allow payment of accrued interest on such Increasing Payment Loan at the related
Asset Rate, without negative amortization. An Obligor's Monthly Payments on such
an Asset may, however, not be sufficient to result in any reduction of the
principal balance of such Asset until after the period when such payments may be
increased.
28
<PAGE>
"Due-on-Sale" Clauses
A Contract or the Mortgage Note or Mortgage used in originating a
conventional Mortgage Loan may contain a "due-on-sale" provision permitting the
holder of the Contract or Mortgage Loan to accelerate the maturity of the
Contract or Mortgage Loan upon the Obligor's conveyance of the underlying
Manufactured Home or Mortgaged Property. See "-- The Contracts -- Transfers of
Manufactured Homes; Enforceability of 'Due-on-Sale' Clauses" and "- The Mortgage
Loans 'Due-On-Sale' Clauses," in each case under the heading "Certain Legal
Aspects of Contracts and Mortgage Loans" herein. The Prospectus Supplement for a
Series will specify the approximate percentages of the underlying Contracts and
Mortgage Loans, respectively, that contain "due-on-sale" provisions. Enforcement
of a "due-on-sale" clause applicable to a Contract or Mortgage Loan will have
the same effect on Certificates backed by such Contract or Mortgage Loan as a
prepayment in full of such Contract or Mortgage Loan. The weighted average lives
of Certificates of a Series will be decreased to the extent that sales of
Manufactured Homes and Mortgaged Properties result in prepayments of the Assets
underlying such Certificates. See "Maturity and Prepayment Considerations" and
"Yield Considerations" herein for a discussion of the effect of Asset
prepayments on the weighted average lives of and yields to maturity on the
related Certificates.
To the extent the Assets underlying a Series do not contain
"due-on-sale" clauses, or to the extent the Servicer does not enforce
"due-on-sale" clauses, the weighted average lives of the Certificates of such
Series may be expected to be longer than would have been the case had such
Assets been subject to "due-on-sale" clauses and had the Servicer enforced such
clauses, because the assumption of a Contract or Mortgage Loan by the buyer of
the underlying Manufactured Home or Mortgaged Property would have the effect of
avoiding a prepayment of the assumed Contract or Mortgage Loan. While it is
expected that most Contracts will contain "due-on-sale" provisions, the Servicer
will be permitted to allow proposed assumptions of Contracts in accordance with
the guidelines described below. To the extent the Servicer has knowledge of any
conveyance or prospective conveyance by any Mortgagor of any property securing a
Mortgage Loan, the Servicer will be required to exercise the right to accelerate
the maturity of such Mortgage Loan under any applicable "due-on-sale" clause to
the extent, under the circumstances, and in the manner in which the Servicer
enforces such clauses with respect to other Mortgage Loans held in its own
portfolio. The Servicer will not be permitted to allow assumptions of Assets if
prohibited by law from doing so or if the exercise of such rights would affect
adversely or jeopardize any coverage under any applicable insurance policy, and
the Servicer will only be permitted to allow the assumption of an Asset if the
Servicer has reasonably determined that the assumption will not increase
materially the risk of nonpayment of amounts due under the Asset.
If the Servicer determines not to enforce such "due-on-sale" clause,
the Servicer will be required to enter into an assumption and/or modification
agreement with the person to whom such property has been conveyed or is proposed
to be conveyed, pursuant to which such person becomes liable under the Asset and
pursuant to which, to the extent permitted by applicable law and deemed
appropriate in the Servicer's reasonable judgment, the original obligor remains
liable thereon. FHA Contracts, FHA Mortgage Loans, VA Contracts and VA Mortgage
Loans are not permitted to contain "due-on-sale" clauses, and so are freely
assumable. The rate of prepayments of FHA Contracts, FHA Mortgage Loans, VA
Contracts and VA Mortgage Loans therefore may be lower than the rate of
prepayments of Conventional Mortgage Loans bearing interest at comparable rates.
Prepayments on manufactured housing installment sales contracts and
mortgage loans are commonly measured relative to a prepayment standard or model
(a "Prepayment Model"), which represents an assumed rate of prepayment of Assets
in an Asset Pool relative to the aggregate outstanding principal balance of such
Asset Pool from time to time. The Prospectus Supplement for a Series of
Certificates may contain a table setting forth percentages of the original
Certificate Principal Balances of certain Classes of Certificates of such Series
anticipated to be outstanding on certain dates specified in the table assuming
that prepayments of the underlying Assets occur in accordance with the
applicable Prepayment Model and at different rates determined by applying
different percentages to the rates of prepayment assumed under the
29
<PAGE>
Prepayment Model. It is unlikely that the prepayment of the Assets of any
Trust will conform to any of the percentages of the rates assumed under the
applicable Prepayment Model set forth in any such table.
The FHA has compiled prepayment statistics relating to one- to
four-family, level payment mortgage loans insured by the FHA under the National
Housing Act of 1934, as amended, at various interest rates, all of which permit
assumption by a new buyer of the mortgaged property. Such statistics indicate
that while some of such mortgage loans remain outstanding until their scheduled
maturities, a substantial number are paid prior to their respective stated
maturities. The Actuarial Division of HUD has prepared tables which, assuming
full mortgage loan prepayments at the rates experienced by FHA on FHA mortgage
loans, set forth the percentages of the original number of FHA mortgage loans
included in pools of Level Payment Mortgage Loans with varying maturities that
will remain outstanding on each anniversary of the origination date of such
mortgage loans (assuming they all have the same origination date) (such tables
being referred to as the "FHA Prepayment Experience").
Representations and Warranties
The Seller will make certain representations and warranties concerning
the Contracts and Mortgage Loans included in an Asset Pool, in order to ensure
the accuracy in all material respects of certain information furnished to the
Trustee in respect of each Contract and Mortgage Loan included in such Asset
Pool. Upon a breach of any representation that materially and adversely affects
the interests of the Certificateholders in a Contract or Mortgage Loan, the
Seller will be obligated to cure the breach in all material respects within 90
days after the Seller's discovery of or receipt of written notice of such breach
or, in the alternative, either to repurchase the Contract or Mortgage Loan from
the Trust, or to substitute another Contract or Mortgage Loan as described
below. In addition, each Seller will be required to indemnify the Company and
its assignees (including the Trust) against losses and damages they incur as a
result of breaches of the Seller's representations and warranties. The Seller's
obligations to repurchase or substitute for an Asset affected by a breach of a
representation or warranty and to indemnify the Company and its assignees for
losses and damages caused by such a breach constitute the sole remedies
available to the Certificateholders or the Trustee for a breach of
representation by the Seller. See "Sale and Servicing of the Contracts and
Mortgage Loans -- Representations and Warranties" herein.
The Contracts
The Contracts supporting a Series of Certificates will consist of
manufactured housing installment sales contracts originated by Oakwood (which
may have been originated in the name of OMH or another manufactured housing
dealer with funds provided by Oakwood) or originated by other originators not
affiliated with Oakwood, in any case in the ordinary course of the originator's
business. The Contracts may be conventional manufactured housing contracts or
contracts insured by the FHA or partially guaranteed by the VA. Each Contract is
secured by a Manufactured Home. The Contracts will be fully amortizing and will
bear interest at a fixed or adjustable annual percentage rate ("Contract Rate")
or at a Contract Rate which steps up on a particular date (a "Step-up Rate").
The Seller will represent that the Manufactured Homes securing the
Contracts consist of manufactured homes within the meaning of 42 United States
Code, Section 5402(6), which defines a "manufactured home" as "a structure,
transportable in one or more sections, which in the traveling mode, is eight
body feet or more in width or forty body feet or more in length, or, when
erected on site, is three hundred twenty or more square feet, and which is built
on a permanent chassis and designed to be used as a dwelling with or without a
permanent foundation when connected to the required utilities, and includes the
plumbing, heating, air-conditioning, and electrical systems contained therein;
except that such term shall include any structure which meets all the
requirements of [this] paragraph except the size requirements and with respect
to which the manufacturer voluntarily files a certification required by the
Secretary of Housing and Urban Development and complies with the standards
established under [Chapter 70 under Title 42 of the United States Code]."
30
<PAGE>
Each Contract will bear interest at a fixed or adjustable Contract Rate
or at a Step-up Rate, as specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, the Monthly Payments
for Contracts bearing interest at an interest rate that increases over time
(sometimes referred to herein as "Step-up Rate Contracts") will increase on the
dates on which the Contract Rates are stepped up.
With respect to the Contracts expected to be contained in an Asset
Pool, the related Prospectus Supplement will specify, to the extent known, (1)
the range of dates of origination of the Contracts; (2) the range of Contract
Rates on the Contracts and the weighted average Contract Rate as of the Cut-off
Date; (3) the range of Contract Loan-to-Value Ratios; (4) the minimum and
maximum outstanding principal balances of the Contracts as of the Cut-off Date
and the weighted average outstanding principal balance of the Contracts as of
the Cut-off Date; (5) the range of original terms to maturity of the Contracts,
the range of remaining terms to maturity of the Contracts and the last maturity
date of any of the Contracts; (6) the geographic distribution of the underlying
Manufactured Homes; and (7) the range of original principal balances of the
Contracts.
The Mortgage Loans
The Mortgage Loans supporting a Series of Certificates will consist of
conventional mortgage loans, FHA-insured mortgage loans or VA-guaranteed
mortgage loans evidenced by promissory notes (the "Mortgage Notes") secured by
mortgages or deeds of trust or other similar security instruments ("Mortgages")
creating first liens on one-to four-family residential properties (the
"Mortgaged Properties"). To the extent specified in the related Prospectus
Supplement, the Mortgaged Properties may include investment properties, vacation
and second homes, or land upon which a residence is to be built. The Company
expects that the Mortgage Loans will have been originated by FHA-approved
mortgagees or FNMA/FHLMC-approved seller/servicers in the ordinary course of
their real estate lending activities.
Each Mortgage Loan will bear interest at a fixed or adjustable annual
rate of interest ("Mortgage Rate") or at a Mortgage Rate which steps up on a
particular date (a "Step-up Rate"), as specified in the Prospectus Supplement.
Each registered holder of a Certificate will be entitled to receive periodic
distributions of all or a portion of the payments of principal and/or interest
collected on the underlying Mortgage Loans.
With respect to the Mortgage Loans expected to be contained in an Asset
Pool, the related Prospectus Supplement will specify, to the extent known, (1)
the range of dates of origination of the Mortgage Loans; (2) the range of
Mortgage Rates, and in the case of Adjustable Rate Assets, the range of initial
adjustable mortgage rates, the Index, if any, used to determine the adjustable
mortgage rate and the range of maximum permitted adjustable mortgage rates, if
any, and the range of then-current adjustable mortgage rates; (3) the range of
Mortgage Loan-to-Value Ratios; (4) the minimum and maximum outstanding principal
balances of the Mortgage Loans as of the Cut-off Date and the average
outstanding principal balance of the Mortgage Loans as of the Cut-off Date; (5)
the range of outstanding principal balances of the Conventional Mortgage Loans,
FHA Mortgage Loans and VA Mortgage Loans (in each case to the extent such
Mortgage Loans are included in such Asset Pool) included in the Asset Pool; (6)
the range of original maturities of the Mortgage Loans and the last maturity
date of any of the Mortgage Loans; (7) the geographic distribution of the
underlying Mortgaged Properties; and (8) the range of original principal
balances of the Mortgage Loans.
31
<PAGE>
Substitution of Contracts or Mortgage Loans
The Company or the Seller may, within three months after the Closing
Date, deliver to the Trustee other Assets in substitution for any one or more
Assets initially included in the Trust Estate for such Series. In addition, if
there is a breach of any representation or warranty made as to an Asset by the
Company or the Seller (or in certain cases where an incomplete or defective
Contract File or Trustee Mortgage Loan File is delivered by the Seller), which
breach, defect or incompleteness is not cured within 90 days after the breaching
party's receipt of notice of such breach, defect or incompleteness, the
breaching party generally must repurchase the affected Asset for its Repurchase
Price, but generally may, as an alternative to such a repurchase, substitute one
or more new Assets for the affected Asset (but only if the substitution is to
take place no later than two years after the related Closing Date). In general,
any substitute Asset must, on the date of such substitution (1) have an Unpaid
Principal Balance not greater than (and not more than $10,000 less than) the
Unpaid Principal Balance of the replaced Asset; (2) have an Asset Rate not less
than (and not more than one percentage point in excess of) the Asset Rate of the
replaced Asset; (3) have a Net Rate equal to the Net Rate of the replaced Asset;
(4) have a remaining term to maturity not greater than (and not more than one
year less than) that of the replaced Asset; and (5) comply with each
representation and warranty relating to the replaced Asset and, if the Seller is
effecting the substitution, comply with each representation and warranty set
forth in the Sales Agreement pursuant to which the Seller conveyed the replaced
Asset(s) to the Company. If Contracts or Mortgage Loans are being substituted,
the substitute Contract or Mortgage Loan must have a Loan-to-Value Ratio as of
the first day of the month in which the substitution occurs equal to or less
than the Loan-to-Value Ratio of the replaced Contract or Mortgage Loan as of
such date (in each case, using the value of the underlying Manufactured Home or
Mortgaged Property at origination, and after taking into account the payments
due on the substituted Asset and the replaced Asset on such date). Further, no
Adjustable Rate Asset may be substituted for any Asset in a Trust Estate unless
the deleted Asset is also an Adjustable Rate Asset. A substituted Adjustable
Rate Asset must (1) have a minimum lifetime Mortgage Rate that is not less than
the minimum lifetime Mortgage Rate on the replaced Adjustable Rate Asset; (2)
have a maximum lifetime Mortgage Rate that is not less than the maximum lifetime
Mortgage Rate on the replaced Adjustable Rate Asset; (3) provide for a lowest
possible Net Rate that is not lower than the lowest possible Net Rate for the
replaced Adjustable Rate Asset and a highest possible Net Rate that is not lower
than the highest possible Net Rate for the replaced Adjustable Rate Asset; (4)
have a Gross Margin not less than the Gross Margin of the replaced Adjustable
Rate Asset; (5) have a Periodic Rate Cap equal to the Periodic Rate Cap on the
replaced Adjustable Rate Asset; (6) have a next Interest Adjustment Date that is
the same as the next Interest Adjustment Date for the replaced Adjustable Rate
Asset or occurs not more than two months prior to the next Interest Adjustment
Date for the replaced Adjustable Rate Asset; and (7) not have an interest rate
that is convertible from an adjustable rate to a fixed rate unless the Asset
Rate on the replaced Adjustable Rate Asset is so convertible. In the event that
more than one Asset is substituted for one or more replaced Assets, one or more
of the foregoing characteristics may be applied on a weighted average basis as
described in the Pooling and Servicing Agreement.
Pre-Funding
If so specified in the related Prospectus Supplement, a portion of the
issuance proceeds of the Certificates of a particular Series (such amount, the
"Pre-Funded Amount") will be deposited in an account (the "Pre-Funding Account")
to be established with the Trustee, which will be used to acquire additional
Contracts or Mortgage Loans from time to time during the time period specified
in the related Prospectus Supplement (the "Pre-Funding Period"). Prior to the
investment of the Pre-Funded Amount in additional Contracts or Mortgage Loans,
such Pre-Funded Amount may be invested in one or more Eligible Investments. Any
Eligible Investment must mature no later than the Business Day prior to the next
Distribution Date.
During any Pre-Funding Period, the Company will be obligated (subject
only to the availability thereof) to transfer to the related Trust additional
Contracts or Mortgage Loans from time to time during such Pre-Funding Period.
Such additional Contracts or Mortgage Loans will be required to satisfy certain
eligibility criteria more fully set forth in the related Prospectus Supplement,
which eligibility criteria will be
32
<PAGE>
consistent with the eligibility criteria of the Contracts or Mortgage Loans
included in the Trust as of the Closing Date, subject to such exceptions as are
expressly stated in such Prospectus Supplement.
Use of a Pre-Funding Account with respect to any issuance of
Certificates will be subject to the following general conditions: (a) the
Pre-Funding Period will not exceed three months from the related Closing Date,
(b) the additional Assets to be acquired during the Pre-Funding Period will be
subject to the same underwriting standards, representations and warranties as
the Contracts or Mortgage Loans included in the related Trust on the Closing
Date (although additional criteria may also be required to be satisfied, as
described in the related Prospectus Supplement), (c) the Pre-Funded Amount will
be not exceed 25% of the principal amount of the Certificates issued pursuant to
a particular offering, (d) the Pre-Funded Amount will not exceed 25% of the
Scheduled Principal Balance of the Assets (inclusive of the related Pre-Funded
Amount) as of the Cut-off Date, and (e) the Pre-Funded Amount shall be invested
in Eligible Investments.
To the extent that amounts on deposit in the Pre-Funding Account have
not been fully applied to the purchase of additional Contracts or Mortgage Loans
by the end of the Pre-Funding Period, the Certificateholders of the related
Series of Certificates then entitled to receive distributions of principal will
receive a prepayment of principal in an amount equal to the related Pre-Funded
Amount remaining in the Pre-Funding Account on the first Distribution Date
following the end of the Pre-Funding Period. Any such prepayment of principal
would have an adverse effect on the yield to maturity of Certificates purchased
at a premium, and would expose Certificateholder to the risk that alternative
investments of equivalent value may not be available at such later time.
A maximum of 5% of the Assets (including Assets acquired after Closing
with Pre-Funded Amounts) included in the Trust Estate will deviate from the
characteristics of the Assets described in the related Prospectus Supplement.
Further, information regarding additional Assets acquired by a Trust Estate
during the Pre-Funding Period comparable to the disclosure regarding the Assets
in the related Prospectus Supplement will be filed on a Current Report in Form
8-K (in addition to any other reporting requirements of the Trust under the
Exchange Act) within fifteen days following the end of the Pre-Funding Period.
Distribution Account
Payments on the Contracts and Mortgage Loans included in the Trust for
a Series will be remitted to the Certificate Account and then to the
Distribution Account for such Series. Such deposits may be made net of amounts
required to pay servicing fees and any amounts which are to be included in any
Reserve Fund as set forth in the related Prospectus Supplement. All or a portion
of the amounts in such Distribution Account, together with reinvestment income
thereon if payable to the Certificateholders, will be available, to the extent
specified in the related Prospectus Supplement, for the payment of previously
unpaid servicing and administrative fees and distributions of principal and
interest on each Class of the Certificates of such Series in the manner
described in the related Prospectus Supplement.
33
<PAGE>
Reserve Funds or Liquidity Accounts
If so stated in the Prospectus Supplement for a Series, the Company
will establish one or more Reserve Funds or Liquidity Accounts, which may be
used by the Trustee to make any required distributions of principal or interest
on the Certificates of the Series to the extent funds are not otherwise
available. The Company may fund a Reserve Fund by depositing cash, certificates
of deposit and/or letters of credit therein at the Closing Date, or a Reserve
Fund may be funded by the Trustee's deposit therein of Available Distribution
Amounts not required to pay servicing or administrative fees or to make
distributions on the Certificates on each Distribution Date until amounts on
deposit in the Reserve Fund equal an initial required amount. The method of
funding any Reserve Fund will be described in the related Prospectus Supplement.
Any Reserve Fund will be maintained in trust but may or may not constitute a
part of the Trust Estate for the related Series. The Company may have certain
rights on any Distribution Date to cause the Trustee to make withdrawals from
the Reserve Fund for a Series and to pay such amounts in accordance with the
instructions of the Company to the extent that such funds are no longer required
to be maintained for the Certificateholders.
Insurance
To the extent specified in the related Prospectus Supplement, the
Certificates of a Series or all or any part of the related Trust Estate may be
supported by insurance policies or alternate forms of credit enhancement
described below.
The insurers under Standard Hazard Insurance Policies are selected by
the related Obligors and are generally not required to meet any credit rating
criteria. Any other type of insurance supporting a Series of Certificates will
not in and of itself be subject to any specific credit rating requirements.
However, any such insurance obtained with respect to a Series will be considered
a part of the aggregate credit enhancement provided for such Series, and the
total credit enhancement obtained to support any Series must be in sufficient
quantity and of sufficient quality for the Classes of the Certificates of such
Series to merit the ratings assigned to such Classes by each applicable Rating
Agency, as described in the related Prospectus Supplement. The acceptability of
the insurers to the applicable Rating Agencies is the only criterion used in the
selection of any insurers other than insurers under Standard Hazard Insurance
Policies.
Hazard Insurance
The following descriptions are general and do not purport to be
complete. Such descriptions are qualified in their entirety by reference to the
description of any material variances from such description contained in the
related Prospectus Supplement. In general, coverage under Standard Hazard
Insurance Policies and Special Hazard Insurance Policies varies among insurers.
Standard Hazard Insurance Policies. The terms of an Agreement may
require the Servicer to cause to be maintained with respect to each Contract and
Mortgage Loan one or more Standard Hazard Insurance Policies. With respect to
Contracts, each such policy will provide, at a minimum, the same coverage as
that provided by a standard fire and extended coverage insurance policy that is
customary for manufactured housing and issued by a company authorized to issue
such policies in the state in which the related Manufactured Home is located.
The Standard Hazard Insurance Policies maintained for Mortgage Loans will
provide coverage at least equal to the applicable state standard form of fire
insurance policy with extended coverage. In general, the standard form of fire
and extended coverage policy will cover physical damage to, or destruction of,
the improvements on the related Manufactured Home or Mortgaged Property caused
by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to the conditions and exclusions specific to each policy.
Because the Standard Hazard Insurance Policies relating to the Contracts and
Mortgage Loans will be underwritten by different insurers and will cover
Manufactured Homes and Mortgaged Properties located in various states, such
policies will not contain identical terms and conditions. The basic terms,
however, generally will be determined by state law and generally will be
similar. Most such policies typically will not cover any physical damage
resulting from war, revolution,
34
<PAGE>
governmental actions, floods and other water-related causes, earth movement
including earthquakes, landslides, and mudflows), nuclear reaction, wet or dry
rot, vermin, rodents, insects or domestic animals, theft and, in certain cases,
vandalism. The foregoing list is merely indicative of certain kinds of uninsured
risks and is not intended to be all-inclusive. When a Manufactured Home or
Mortgaged Property is located (at the time of origination of the related
Contract or Mortgage Loan) in a flood area identified by HUD pursuant to the
National Flood Insurance Act of 1968, as amended, the Servicer will cause to be
maintained flood insurance providing coverage in the same amount as that
provided by the related Standard Hazard Insurance Policy with respect to such
Manufactured Home or Mortgaged Property, to the extent such coverage is
available.
Each Standard Hazard Insurance Policy must provide coverage in an
amount at least equal to the lesser of (1) the maximum insurable value of the
Manufactured Home or Mortgage Property or (2) the principal balance due from the
Obligor on the related Contract or Mortgage Loan; provided, however, that the
amount of coverage provided by each Standard Hazard Insurance Policy must in any
event be sufficient to avoid the application of any co-insurance clause
contained in the policy.1
Each Standard Hazard Insurance Policy caused to be maintained by the
Servicer shall contain a standard loss payee clause in favor of the Servicer and
its successors and assigns. If any Obligor is in default in the payment of
premiums on its Standard Hazard Insurance Policy or Policies, the Servicer shall
pay such premiums out of its own funds, and may add such premium to the
Obligor's obligation as provided by the Contract or Mortgage Loan, but may not
add such premium to the remaining principal balance of the Contract or Mortgage
Loan. All amounts collected by the Servicer under any Standard Hazard Insurance
Policy maintained with respect to a Mortgage Loan (less amounts to be applied to
the restoration or repair of the Mortgaged Property and other amounts necessary
to reimburse the Servicer for previously incurred advances or approved expenses,
which may be retained by the Servicer) will be deposited to the applicable
Certificate Account.
To the extent a Standard Hazard Insurance Policy is not maintained with
respect to a Manufactured Home or Mortgaged Property, the related Contract or
Mortgage Loan will be covered by one or more blanket insurance policies
maintained by the Servicer to insure against losses on the Contracts and
Mortgage Loans resulting from the absence or insufficiency of individual
Standard Hazard Insurance Policies. The Servicer shall pay the premium for such
blanket policy and shall pay any deductible amount with respect to claims under
such blanket policy.
If the Servicer repossesses a Manufactured Home or forecloses on a
Mortgaged Property on behalf of the Trustee, the Servicer shall either (1)
maintain at its expense hazard insurance with respect to such Manufactured Home
or Mortgaged Property, or (2) indemnify the Trustee against any damage to such
Manufactured Home or Mortgaged Property prior to resale, foreclosure sale, or
other disposition thereof.
Any losses incurred with respect to Contracts or Mortgage Loans due to
uninsured risks (including earthquakes, mudflows and floods) or insufficient
hazard insurance proceeds may, to the extent such losses are not covered by the
Special Hazard Insurance Policy for a Series, affect payments to holders of
Certificates of such Series.
1 Each Standard Hazard Insurance Policy may contain a "coinsurance" clause
which, in effect, will require the insured at all times to carry insurance
of a specified percentage (generally 80% to 90%) of the full replacement
value of the dwellings, structures and other improvements on the related
Manufactured Home or Mortgaged Property in order to recover the full amount
of any partial loss. If the insured's coverage falls below this specified
percentage, such clause will provide that the insurer's liability in the
event of partial loss will not exceed the lesser of (1) the actual cash
value (the replacement cost less physical depreciation) of the dwellings,
structures and other improvements damaged or destroyed or (2) such
proportion of the loss, without deduction for depreciation, as the amount
of insurance carried bears to the specified percentage of the full
replacement cost of such dwellings, structures and other improvements.
35
<PAGE>
Special Hazard Insurance Policy. To the extent provided in the related
Prospectus Supplement, a special hazard insurance policy ("Special Hazard
Insurance Policy") will be obtained from the insurer or insurers (the "Special
Hazard Insurer") specified in the related Prospectus Supplement. Subject to the
limitations described below, a Special Hazard Insurance Policy will insure
against (1) loss by reason of damage to Manufactured Homes or Mortgaged
Properties underlying defaulted Contracts or Mortgage Loans caused by certain
hazards (including vandalism and earthquakes and, except where the related
Obligor is required to obtain flood insurance, floods and mudflows) not covered
by the Standard Hazard Insurance Policies covering such Contracts or Mortgage
Loans and (2) loss from partial damage to the Manufactured Homes or Mortgaged
Properties securing such defaulted Contracts or Mortgage Loans caused by reason
of the application of the coinsurance clause contained in the applicable
Standard Hazard Insurance Policies. The Special Hazard Insurance Policy for a
Series, however, will not cover losses occasioned by war, certain governmental
actions, nuclear reaction and certain other perils. The amount of coverage, if
any, under the Special Hazard Insurance Policy with respect to a Series will be
specified in the related Prospectus Supplement.
Subject to the foregoing limitations, the Special Hazard Insurance
Policy with respect to a Series will provide that, when there has been damage to
the Manufactured Home or Mortgaged Property securing a defaulted Contract or
Mortgage Loan and such damage is not covered by the Standard Hazard Insurance
Policy maintained by the related Obligor or the Servicer, the Special Hazard
Insurer will pay the lesser of (a) the cost of repair of such property or (b)
upon transfer of such property to the Special Hazard Insurer, the unpaid
principal amount of such Contract or Mortgage Loan at the time of the
acquisition of such property, plus accrued interest to the date of claim
settlement (excluding late charges and penalty interest) and certain expenses
incurred in respect of such property. No claim may be validly presented under a
Special Hazard Insurance Policy unless (1) the Standard Hazard Insurance Policy
covering the Manufactured Home or Mortgaged Property securing the Contract or
Mortgage Loan has been kept in force and other reimbursable protection,
preservation and foreclosure expenses have been paid (all of which must be
approved in advance as necessary by the Special Hazard Insurer) and (2) the
insured has acquired title to the Manufactured Home or Mortgaged Property as a
result of default by the related Obligor. If the sum of the unpaid principal
amount plus accrued interest on a Contract or Mortgage Loan, plus certain
related expenses, is paid by the Special Hazard Insurer, the amount of further
coverage under the Special Hazard Insurance Policy will be reduced by the amount
of such payment less any net proceeds from the sale of the Manufactured Home or
Mortgaged Property. Any amount paid as the cost of repair of the Manufactured
Home or Mortgaged Property will reduce coverage by such amount.
The Agreement with respect to a Series will require the Servicer to
maintain any Special Hazard Insurance Policy for such Series in full force and
effect, subject to certain conditions. See "Sale and Servicing of the Mortgage
Loans -- Maintenance of Insurance Policies and Other Servicing Procedures"
herein. The Servicer also must present claims, on behalf of the
Certificateholders and the Trustee, for all losses not otherwise covered by the
applicable Standard Hazard Insurance Policies and take all reasonable steps
necessary to permit recoveries on such claims. See "Sale and Servicing of the
Mortgage Loans -- Maintenance of Insurance Policies and Other Servicing
Procedures -- Presentation of Claims" herein.
To the extent provided in the related Prospectus Supplement, in lieu
(partially or wholly) of maintaining a Special Hazard Insurance Policy with
respect to a Series, a deposit of cash, a certificate of deposit, a letter of
credit or any other instrument acceptable to each Rating Agency rating the
Series as described in the related Prospectus Supplement may be provided in an
amount and for a term acceptable to each such Rating Agency. Such a deposit will
be credited to a Special Hazard or similar fund and the Trustee or Servicer will
be permitted to draw on the fund to recover losses that would otherwise be
covered by a Special Hazard Insurance Policy ("Special Hazard Losses"). Special
Hazard Losses may also be allocated to the Certificates of a Series on the terms
and subject to the conditions and limitations set forth in the related
Prospectus Supplement. The Company may also elect to insure against Special
Hazard Losses by the delivery of Additional Assets to the Trust rather than
through a Special Hazard Insurance Policy or special hazard fund.
36
<PAGE>
A Special Hazard Insurance Policy, if any, securing a Series may insure
against losses on Contracts or Mortgage Loans assigned to Trusts for other
Series of Certificates or that secure other pass-through securities or
collateralized mortgage or manufactured housing contract obligations issued by
the Company or one of its affiliates; provided, however, that the extension of
coverage (and corresponding assignment of the Special Hazard Insurance Policy)
to secure any other Series or such other securities or obligations will not be
permitted if it would result in the downgrading of the credit rating of any
outstanding Certificates of any Series offered hereby assigned by any Rating
Agency identified in the related Prospectus Supplement.
Credit Insurance
Any credit insurance relating to the Contracts or Mortgage Loans
underlying a Series of Certificates will be described in the Prospectus
Supplement.
Mortgage Loans underlying a Series of Certificates will, to the extent
described in the related Prospectus Supplement, be covered by primary mortgage
insurance policies ("Primary Mortgage Insurance Policies"). Contracts and
Mortgage Loans underlying a Series may, to the extent described in the related
Prospectus Supplement, be supported by FHA insurance, VA guarantees or one or
more pool insurance policies (each a "Pool Insurance Policy") or any combination
thereof (collectively, and together with any related Primary Mortgage Insurance
Policies, FHA insurance or VA guarantees, the "Credit Insurance" for such
Series).
No Mortgage Loan will be covered by a Primary Mortgage Insurance
Policy. To the extent so specified in the related Prospectus Supplement, the
Servicer will maintain a Primary Mortgage Insurance Policy on any Conventional
Mortgage Loan with an initial Mortgage Loan-to-Value Ratio of greater than 80%.
Any Primary Mortgage Insurance Policy that is so maintained will provide
coverage on at least the principal amount of the covered Mortgage Loan in excess
of 75% of the original appraised value of the related Mortgaged Property, which
coverage will remain in force until the principal balance of such Mortgage Loan
is reduced to 80% of such original appraised value. A Primary Mortgage Insurance
Policy also may be canceled, with the consent of the Servicer and any applicable
Pool Insurer, after the policy has been in effect for more than two years if the
Mortgage Loan-to-Value Ratio of such Mortgage Loan has declined to 80% or less
based upon the current fair market value of the related Mortgaged Property.
Certain other Mortgage Loans may also be covered by Primary Mortgage
Insurance Policies. Certain Primary Mortgage Insurance Policies may, to the
extent required by the related Prospectus Supplement, and subject to their
provisions and to certain conditions and exclusions described below, provide
full coverage against any loss sustained by reason of nonpayments by the related
Mortgagor (a "Full Coverage Insurance Policy").
The Pool Insurance Policy or Policies for a Series, if any, will be
designed to provide coverage for all Conventional Mortgage Loans which are not
covered by Full Coverage Insurance Policies. However, neither the Primary
Mortgage Insurance Policies nor the Pool Insurance Policies will insure against
certain losses sustained in the event of a personal bankruptcy of the Mortgagor
under a Mortgage Loan. See "Certain Legal Aspects of Contracts and Mortgage
Loans -- The Mortgage Loans -- Anti-Deficiency Legislation and Other Limitations
on Lenders" herein. Such losses may be covered to the extent provided by the
Obligor Bankruptcy Insurance, if any, described below for such Series.
The Credit Insurance policies will not provide coverage against hazard
losses. Certain hazard risks will be covered by Standard Hazard Insurance
Policies or Special Hazard Insurance Policies, but other hazard risks will not
be insured and thus may affect payments to holders of related Certificates. See
"- Hazard Insurance" above.
To the extent that Primary Mortgage Insurance Policies, FHA insurance
or VA guarantees do not cover all losses on a defaulted or foreclosed Contract
or Mortgage Loan, and to the extent such losses are not
37
<PAGE>
covered by the Pool Insurance Policy for the related Series of Certificates, if
any, such losses would affect payments to holders of related Certificates.
The following descriptions of Credit Insurance policies and the
coverage thereunder are provided for general informational purposes only, and do
not purport to be complete. There can be no assurance that the actual policies
and coverage with respect to a specific Series will comply with these
descriptions.
Primary Mortgage Insurance. Any Primary Mortgage Insurance Policy
covering Mortgage Loans will be issued by the related Mortgage Insurer pursuant
to the Mortgage Insurer's applicable master policy. The Company and the Trustee
as assignee of the Mortgage Loans will be the insureds or assignees of record
(the "Insured"), as their interests may appear, under each such Primary Mortgage
Insurance Policy. The Agreement with respect to such Series will require the
Servicer to cause a Primary Mortgage Insurance Policy to be maintained in full
force and effect with respect to each Mortgage Loan covered by the Agreement (to
the extent such insurance is required by such Agreement) and to act on behalf of
the Insured with respect to all actions required to be taken by the Insured
under each such Primary Mortgage Insurance Policy.
The amount of a claim for benefits (the "Loss") under a Primary
Mortgage Insurance Policy covering a Mortgage Loan will generally consist of the
insured portion of the unpaid principal balance of the covered Mortgage Loan (as
described herein) and accrued and unpaid interest thereon and reimbursement of
certain expenses, less (1) all rents or other payments collected or received by
the Insured (other than the proceeds of hazard insurance) that are derived from
or in any way related to the related Mortgaged Property; (2) hazard insurance
proceeds in excess of the amount required to restore the related Mortgaged
Property and which have not been applied to the payment of the Mortgage Loan;
(3) amounts expended but not approved by the Mortgage Insurer; (4) claim
payments previously made by the Mortgage Insurer; and (5) unpaid premiums.
As conditions precedent to the filing of or payment of a claim under a
Primary Mortgage Insurance Policy covering a Mortgage Loan, the Insured will
generally be required to (1) pay (a) all hazard insurance premiums and (b) as
necessary and approved in advance by the Mortgage Insurer, (i) real estate
property taxes, (ii) all expenses required to maintain the related Mortgaged
Property in at least as good a condition as existed at the effective date of
such Primary Mortgage Insurance Policy, ordinary wear and tear excepted, (iii)
property sales expenses, (iv) any outstanding liens (as defined in such Primary
Mortgage Insurance Policy) on the Mortgaged Property and (v) foreclosure costs,
including court costs and reasonable attorneys' fees; (2) in the event of any
physical loss or damage to the related Mortgaged Property, restore and repair
the Mortgaged Property to at least as good a condition as existed at the
effective date of such Primary Mortgage Insurance Policy, ordinary wear and tear
excepted; and (3) tender to the Mortgage Insurer good and merchantable title to
and possession of the related Mortgaged Property. A Primary Mortgage Insurance
Policy may not reimburse the Insured for attorneys' fees in respect of a
foreclosed Mortgage Loan in excess of 3% of the unpaid principal balance plus
accrued and unpaid interest on such Mortgage Loan. As a result, legal expenses
in excess of such reimbursement limitation may be charged as a loss on the
related Certificates.
Other provisions and conditions of each Primary Mortgage Insurance
Policy covering a Mortgage Loan generally will provide that: (1) no change may
be made in the terms of such Mortgage Loan without the consent of the Mortgage
Insurer; (2) written notice must be given to the Mortgage Insurer within 10 days
after the Insured becomes aware that a Mortgagor is delinquent in the payment of
a sum equal to the aggregate of two Monthly Payments due under such Mortgage
Loan or that any proceedings affecting the mortgagor's interest in the Mortgaged
Property securing such Mortgage Loan have been commenced, and thereafter the
Insured must report monthly to the Mortgage Insurer the status of any such
Mortgage Loan until such Mortgage Loan is brought current, such proceedings are
terminated or a claim is filed; (3) the Mortgage Insurer will have the right to
purchase such Mortgage Loan, at any time after the 10 days' notice described in
clause (2) above and prior to the commencement of foreclosure proceedings, at a
price equal to the unpaid principal amount of the Mortgage Loan plus (a) accrued
and unpaid interest thereon and (b) reimbursable amounts expended by the Insured
for the real estate taxes and fire and extended coverage
38
<PAGE>
insurance on the related Mortgaged Property for a period not exceeding 12
months, less the sum of any claim previously paid under the policy with respect
to such Mortgage Loan and any due and unpaid premium with respect to such
policy; (4) the Insured must commence proceedings at certain times specified in
the policy and diligently proceed to obtain good and merchantable title to and
possession of the related Mortgaged Property; (5) the Insured must (a) notify
the Mortgage Insurer of any proceedings described in clause (4) above and
provide the Mortgage Insurer with copies of documents relating thereto, (b)
notify the Mortgage Insurer of the price amounts specified in clause (3) above
at least 15 days prior to the sale of the related Mortgaged Property by
foreclosure, and (c) bid such amount unless the Mortgage Insurer specifies a
lower or higher amount; (6) the Insured may accept a conveyance of the related
Mortgaged Property in lieu of foreclosure with written approval of the Mortgage
Insurer provided the ability of the Insured to assign specified rights to the
Mortgage Insurer are not thereby impaired or the specified rights of the
Mortgage Insurer are not thereby adversely affected by such conveyance; (7) the
Insured agrees that the Mortgage Insurer has issued the policy in reliance upon
the correctness and completeness of the statements contained in the application
for the policy and in the appraisal, plans and specifications and other exhibits
and documentation submitted therewith or at any time thereafter; (8) under
certain policies, the Mortgage Insurer will not pay claims involving or arising
out of misrepresentation or dishonest, fraudulent, criminal or knowingly
wrongful acts (including errors or omissions) by certain persons, or claims
involving or arising out of the negligence of certain persons if such negligence
is material either to the acceptance of the risk or to the hazard assumed by the
Mortgage Insurer; and (9) the Insured must comply with other notice provisions
in the policy.
The Mortgage Insurer will generally be required to pay to the Insured
either: (1) the insured percentage of the Loss; or (2) at its option under
certain of the Primary Mortgage Insurance Policies, the sum of the delinquent
monthly payments plus any advances made by the Insured, each to the date of the
claim payment, and thereafter, monthly payments in the amount that would have
become due under the Mortgage Loan if it had not been discharged plus any
advances made by the Insured until the earlier of (A) the date the Mortgage Loan
would have been discharged in full if the default had not occurred, or (B) an
Approved Sale (as defined below under "-- Pool Insurance"). Any rents or other
payments collected or received by the Insured which are derived from or are in
any way related to the related Mortgaged Property will be deducted from any
claim payment.
FHA Insurance and VA Guarantees on Contracts. Certain of the Contracts
may be FHA-insured or VA-guaranteed. The nature of any such FHA insurance or VA
guarantees is described generally below.
The regulations governing FHA manufactured home contract insurance
provide that insurance benefits are payable upon the repossession and resale of
the collateral and assignment of the contract to HUD. With respect to a
defaulted FHA contract, the servicer must follow applicable regulations before
initiating repossession procedures as a prerequisite to payment. These
regulations include requirements that the lender arrange a face-to-face meeting
with the borrower, initiate a modification or repayment plan, if feasible, and
give the borrower 30 days' notice of default prior to any repossession. The
insurance claim is paid in cash by HUD. For manufactured housing contracts, the
amount of insurance benefits generally paid by the FHA currently is equal to 90%
of the sum of (1) the unpaid principal amount of the contract at the date of
default and uncollected interest earned to the date of default computed at the
applicable contract interest rate, after deducting the best price obtainable for
the collateral (based in part on a HUD-approved appraisal) and all amounts
retained or collected by the lender from other sources with respect to the
contract; (2) accrued and unpaid interest on the unpaid amount of the contract
from the date of default to the date of submission of the claim plus 15 calendar
days (but in no event more than nine months) computed at a rate of 7.00% per
annum; (3) costs paid to a dealer or other third party to repossess or preserve
the related manufactured home; (4) the amount of any sales commission paid to a
dealer or other third party for the resale of the property; (5) with respect to
any Land Secured Contract, property taxes, special assessments and other similar
charges and hazard insurance premiums, prorated to the date of disposition of
the property; (6) uncollected court costs; (7) legal fees, not to exceed $1,000;
and (8) expenses for recording the assignment of the lien on the collateral to
the United States, in each case subject to applicable caps as set by regulations
governing the FHA from time to time.
39
<PAGE>
The insurance available to a lender under FHA Title I insurance is
subject to the limit of a reserve amount equal to 10% of the original principal
balance of all Title I insured loans originated by the lender, which amount is
reduced by all claims paid to the lender and by an annual reduction in the
reserve amount of 10% of the reserve amount, and which is increased by an amount
equal to 10% of the original principal balance of insured loans subsequently
originated by the lender. The obligation to pay insurance premiums to the FHA is
the obligation of Oakwood, as the servicer of the FHA-insured Contracts.
The maximum guarantee that may be issued by the VA for a VA-guaranteed
contract is the lesser of (a) the lesser of $20,000 and 40% of the principal
amount of the contract and (b) the maximum amount of guaranty entitlement
available to the obligor veteran (which may range from $20,000 to zero). The
amount payable under any VA guarantee will be a percentage of the VA contract
originally guaranteed applied to indebtedness outstanding as of the applicable
date of computation specified in the VA regulations, interest accrued on the
unpaid balance of the loan to the appropriate date of computation and limited
expenses of the contract holder, but in each case only to the extent that such
amounts have not been recovered through resale of the manufactured home. The
amount payable under the guarantee may in no event exceed the original
guaranteed amount.
Pool Insurance. The Company may obtain a Pool Insurance Policy to cover
any loss (subject to the limitations described below) incurred by reason of
default by the Obligors on the Contracts and/or Mortgage Loans (in the case of
Mortgage Loans, to the extent such loss is not covered by any Primary Mortgage
Insurance Policy). The amount of the Pool Insurance Policy (or Policies) for a
Series, if any, will be specified in the related Prospectus Supplement. A Pool
Insurance Policy for a Series, however, will not be a blanket policy against
loss, because claims thereunder may only be made for particular defaulted
Contracts or Mortgage Loans and only upon satisfaction of certain conditions
precedent described below.
The Servicer will be required to maintain any Pool Insurance Policies
for each Series and to present or cause the Sub-servicers, if any, to present
claims to the Pool Insurer on behalf of the Trustee and the Certificateholders.
As set forth in the related Prospectus Supplement, any Pool Insurance Policy for
a Series will provide that as a condition precedent to the payment of any claim
the insured will be required (1) to advance hazard premiums on the Manufactured
Home or Mortgaged Property securing the defaulted Contract or Mortgage Loan; (2)
to advance, as necessary and approved in advance by the related insurer, (a)
real estate or personal property taxes, (b) all expenses required to preserve
and repair the Manufactured Home or Mortgaged Property, to protect the
Manufactured Home or Mortgaged Property from waste, so that the Manufactured
Home or Mortgaged Property is in at least as good a condition as it was in on
the date upon which coverage under the Pool Insurance Policy with respect to
such Manufactured Home or Mortgaged Property first became effective, ordinary
wear and tear excepted, (c) property sales expenses, (d) any outstanding liens
on the Manufactured Home or Mortgaged Property, and (e) foreclosure costs,
including court costs and reasonable attorneys' fees; and (3) if there has been
physical loss or damage to the Manufactured Home or Mortgaged Property, to
restore the Manufactured Home or Mortgaged Property to its condition (ordinary
wear and tear excepted) as of the issue date of the Pool Insurance Policy. It
also will be a condition precedent to the payment of any claim relating to a
Mortgage Loan under a Pool Insurance Policy that the Insured maintain a Primary
Mortgage Insurance Policy that is acceptable to the Pool Insurer on all Mortgage
Loans covered by the Pool Insurance Policy that have Mortgage Loan-to-Value
Ratios at the time of origination in excess of 80%. Assuming satisfaction of
these conditions, the Pool Insurer will pay to the Insured the amount of the
"loss" which will generally be (1) the amount of the unpaid principal balance of
the Contract or Mortgage Loan immediately prior to an Approved Sale of the
related Manufactured Home or Mortgaged Property, plus (2) the amount of the
accumulated unpaid interest on such Contract or Mortgage Loan to the date of
claim settlement at the contractual rate of interest, plus (3) advances made by
the Insured as described above, less certain payments (including the proceeds of
any prior Approved Sale and any Primary Mortgage Insurance Policies). An
"Approved Sale" is (1) a sale of the related Manufactured Home or Mortgaged
Property acquired by the Insured because of a default by the Obligor if the Pool
Insurer has given prior approval to such sale; (2) a foreclosure or trustee's
sale of the related Manufactured Home or Mortgaged Property at a price exceeding
the minimum amount specified by the Pool Insurer; (3) the
40
<PAGE>
acquisition of the Mortgaged Property under the Primary Mortgage Insurance
Policy by the Mortgage Insurer; or (4) the acquisition of the related
Manufactured Home or Mortgaged Property by the Pool Insurer. As a condition
precedent to the payment of any "loss" on any covered Contract or Mortgage Loan,
the Insured must provide the Pool Insurer with good and merchantable title to
the related Manufactured Home or Mortgaged Property if the Pool Insurer elects
to take title to such Manufactured Home or Mortgaged Property. If any property
securing a defaulted Contract or Mortgage Loan covered by a Pool Insurance
Policy is damaged and the proceeds, if any, from the related Standard Hazard
Insurance Policy or the applicable Special Hazard Insurance Policy are
insufficient to restore the damaged property to a condition sufficient to permit
recovery under the Pool Insurance Policy, the Servicer will not be required to
expend its own funds to restore the damaged Manufactured Home or Mortgaged
Property unless it determines (A) that such restoration will increase the
proceeds on liquidation of the Contract or Mortgage Loan after reimbursement of
the Servicer for its expenses and (B) that such expenses will be recoverable by
it through Liquidation Proceeds or Insurance Proceeds.
The Pool Insurance Policies will generally not insure (and many Primary
Mortgage Insurance Policies may not insure) against losses sustained by reason
of defaults arising from, among other things, (1) fraud or negligence in the
origination or servicing of a Contract or Mortgage Loan, including
misrepresentation by the Obligor or the originator; (2) failure to construct
Manufactured Homes or Mortgaged Properties in accordance with plans and
specifications; and (3) a claim in respect of a defaulted Mortgage Loan
occurring when the Servicer, at the time of default or thereafter, was not
approved by the Mortgage Insurer.
The original amount of coverage under any Pool Insurance Policy
securing a Series will be reduced over the life of the Certificates of such
Series by the aggregate dollar amount of claims paid under such policy, less the
aggregate of net amounts realized by the Pool Insurer upon disposition of all
repossessed or foreclosed Manufactured Home or Mortgaged Properties covered
thereby. The amount of claims paid includes certain expenses incurred by the
Servicer as well as accrued interest on delinquent Contracts or Mortgage Loans
to the date of payment of the claim. The net amounts realized by a Pool Insurer
in respect of a Contract or Mortgage Loan will depend primarily on the market
value of the Manufactured Home or Mortgaged Property securing the defaulted
Contract or Mortgage Loan. The market value of a Manufactured Home or Mortgaged
Property will be determined by a variety of economic, geographic, social,
environmental and other factors and may be affected by matters that were unknown
and could not reasonably be anticipated at the time the original loan was made.
If aggregate net claims paid under a Pool Insurance Policy securing a
Series reach the original policy limit, coverage under the Pool Insurance Policy
will lapse and any further losses will be borne by the related Trust, and thus
may affect adversely payments to the Certificateholders of such Series. In
addition, unless the Servicer can determine that a P&I Advance in respect of a
delinquent Contract or Mortgage Loan would be recoverable from the proceeds of
the liquidation of such Contract or Mortgage Loan or any other source, the
Servicer will not be obligated to make a P&I Advance with respect to such
delinquency. See "Sale and Servicing of Contracts and Mortgage Loans --
Advances" herein. The original amount of coverage under any Pool Insurance
Policy assigned to the Trust for a Series may also be reduced or canceled to the
extent each Rating Agency rating the Series confirms that such reduction will
not result in the lowering of the rating of the Certificates of such Series.
A Pool Insurance Policy for a Series may insure against losses on the
Contracts or Mortgage Loans assigned to Trusts for other Series of Certificates
or that secure other pass-through securities or collateralized mortgage or
manufactured housing contract obligations issued by the Company or one of its
affiliates; provided, however, that the extension of coverage (and corresponding
assignment of the Pool Insurance Policy) to secure any other Series or such
other securities or obligations will not be permitted if it would result in the
downgrading of the credit rating of any outstanding Certificates of any Series
offered hereby assigned by any Rating Agency identified in the related
Prospectus Supplement.
41
<PAGE>
Obligor Bankruptcy Insurance
In the event of a personal bankruptcy of an Obligor, the bankruptcy
court may establish the value of the related Manufactured Home or Mortgaged
Property at an amount less than the then Unpaid Principal Balance of the
Contract or Mortgage Loan secured by such Manufactured Home or Mortgaged
Property. The amount of the secured debt could be reduced to the value of the
collateral property, and the holder of the Contract or Mortgage Loan thus would
become an unsecured creditor to the extent the outstanding principal balance of
such Contract or Mortgage Loan exceeds the value assigned to the underlying
Manufactured Home or Mortgaged Property by the bankruptcy court. In addition,
certain other modifications of the terms of a Contract or Mortgage Loan can
result from a bankruptcy proceeding. See "-- The Contracts -- Enforcement of
Security Interests in Manufactured Homes" and "-- The Mortgage Loans --
Anti-Deficiency Legislation and Other Limitations on Lenders," each under the
heading "Certain Legal Aspects of Contracts and Mortgage Loans" herein. Losses
resulting from a bankruptcy proceeding affecting Contracts or Mortgage Loans
will, to the extent specified in the related Prospectus Supplement, be covered
by obligor bankruptcy insurance for the related Series (the "Obligor Bankruptcy
Insurance"). The amount and term of any Obligor Bankruptcy Insurance for a
Series must be acceptable to each Rating Agency rating the Series. Subject to
the terms of any Obligor Bankruptcy Insurance, the insurer may have the right to
purchase any Contract or Mortgage Loan with respect to which a payment has been
made or may be made, for an amount equal to the Unpaid Principal Balance of such
Contract or Mortgage Loan plus accrued and unpaid interest thereon. To the
extent Obligor Bankruptcy Insurance is required by a Prospectus Supplement, the
Company may, partially or entirely in lieu of Obligor Bankruptcy Insurance,
deposit or cause to be deposited cash, a certificate of deposit, a letter of
credit or any other instrument acceptable to each Rating Agency rating the
related Series as described in the related Prospectus Supplement. Such a deposit
will be credited to an obligor bankruptcy fund or similar fund and the Trustee
or Servicer will be able to draw on the fund to recover losses that otherwise
would be insured against by Obligor Bankruptcy Insurance. The amount of any
Obligor Bankruptcy Insurance for a Series or any deposit in lieu thereof may be
reduced as long as any such reduction will not result in a reduction of the then
applicable rating of the Series by any Rating Agency rating the Series as
described in the related Prospectus Supplement. Any Obligor Bankruptcy Insurance
or any obligor bankruptcy fund maintained with respect to a Series may insure
against losses on Contracts or Mortgage Loans assigned to Trusts for other
Series of Certificates or that secure other pass-through securities or
collateralized mortgage or manufactured contract obligations issued by the
Company or one of its affiliates; provided, however, that the extension of
coverage (and corresponding assignment of an Obligor Bankruptcy Insurance policy
or obligor bankruptcy fund) to secure any other Series or such other securities
or obligations will not be permitted if it would result in the downgrading of
the credit rating of any outstanding Certificates of any Series offered hereby
assigned by a Rating Agency identified in the related Prospectus Supplement. The
Company may elect to deposit Additional Assets to the Trust in lieu of obtaining
any required Obligor Bankruptcy Insurance or establishing an obligor bankruptcy
fund.
The foregoing description does not purport to be complete and is
qualified in its entirety by reference to any description of Obligator
Bankruptcy Insurance contained in the related Prospectus Supplement.
Delivery of Additional Assets
To the extent provided in the related Prospectus Supplement, in lieu of
or in addition to providing Pool Insurance, Special Hazard Insurance, Obligor
Bankruptcy Insurance or other insurance, the Company may assign to the Trust for
a Series of Certificates non-recourse guaranties of the timely payment of
principal and interest on Contracts and Mortgage Loans included in the Trust
secured by other assets satisfactory to each Rating Agency rating the Series.
The Company may also assign or undertake to deliver such other assets to any
Trust by such other means as may be specified in the related Prospectus
Supplement. Such other assets may consist of additional Contracts or Mortgage
Loans, letters of credit or other Eligible Investments ("Additional Assets").
42
<PAGE>
Investment of Funds
Funds deposited in or remitted to the Certificate Account, the
Distribution Account, any Reserve Fund and any other funds and accounts for a
Series are to be invested by the Trustee, as directed by the Servicer, in
certain eligible investments ("Eligible Investments"), which include (1)
obligations of the United States or any agency thereof provided such obligations
are backed by the full faith and credit of the United States; (2) within certain
limitations, securities bearing interest or sold at a discount issued by any
corporation, which securities are rated in the rating category required to
support the then applicable ratings assigned to that Series; (3) commercial
paper which is then rated in the commercial paper rating category required to
support the then applicable ratings assigned to that Series; (4) demand and time
deposits, certificates of deposit, bankers' acceptances and federal funds sold
by any depository institution or trust company incorporated under the laws of
the United States or of any state thereof, provided that either the senior debt
obligations or commercial paper of such depository institution or trust company
(or provided that either the senior debt obligations or commercial paper of the
parent company of such depository institution or trust company) are then rated
in the security rating category required to support the then applicable ratings
assigned to that Series; (5) demand and time deposits and certificates of
deposit issued by any bank or trust company or savings and loan association and
fully insured by the Federal Deposit Insurance Corporation (the "FDIC"); (6)
guaranteed reinvestment agreements issued by any insurance company, corporation
or other entity acceptable to each Rating Agency rating that Series at the time
of issuance of the Series; (7) certain repurchase agreements relating to United
States government securities; and (8) certain money market mutual funds
investing primarily in the obligations of the United States; provided such
mutual funds are rated in a rating category sufficient to support the initial
ratings assigned to that Series.
Eligible Investments with respect to a Series will include only
obligations or securities that mature on or before the date on which the
invested funds are required or may be anticipated to be required to be applied
for the benefit of the holders of such Series. Any income, gain or loss from
such investments for a Series will be credited or charged to the appropriate
fund or account for such Series. Reinvestment Income from Eligible Investments
may be payable to the Servicer as additional servicing compensation and, in that
event, will not accrue for the benefit of the Certificateholders of that Series.
If a reinvestment agreement is obtained with respect to a Series, the
related Agreement will require the Trustee to invest funds deposited in the
Certificate Account, the Distribution Account and the Reserve Fund, if any, for
that Series pursuant to the terms of the reinvestment agreement.
43
<PAGE>
Certificate Guarantee Insurance
If so specified in the related Prospectus Supplement, Certificate
Guarantee Insurance, if any, with respect to a Series of Certificates may be
provided by one or more insurers. Such Certificate Guarantee Insurance may
guarantee, with respect to one or more Classes of Certificates of the related
Series, timely distributions of interest and 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 the
Certificate Guarantee Insurance documentation for a Series, if any, will be
filed with the Commission as an exhibit to a Current Report on Form 8-K within
15 days of issuance of the Certificates of the related Series. Oakwood Homes
Guarantee
If so specified in the related Prospectus Supplement, some or all of
the collections of principal of and interest on the Asset Pool of a Series may
be guaranteed by Oakwood Homes or one of its affiliates. The terms of and
limitations on any such guarantee will be described in the related Prospectus
Supplement. The Prospectus Supplement for any Series containing a guarantee of
Oakwood Homes will contain summary financial information for Oakwood Homes. In
addition, Oakwood Homes' reports under the Exchange Act will be incorporated
therein by reference. A copy of the guaranty agreement under which Oakwood Homes
provides a guarantee for the Asset Pool of a Series will be filed with the
Commission as an exhibit to a Current Report on Form 8-K within 15 days of
issuance of such Certificates.
Alternate Credit Enhancement
From time to time with respect to a Series of Certificates, the Company
or the Servicer may obtain or cause to be obtained further or other liquidity
enhancement, insurance policies, guarantees, letters of credit, or surety bonds
(or make deposits in lieu thereof or in addition thereto) to provide for the
enhancement of the credit rating of such Certificates. To the extent any such
other enhancements are obtained or provided for with respect to a Series of
Certificates, or deposits are made in lieu thereof or in addition thereto, a
description thereof will be set forth in the related Prospectus Supplement.
UNDERWRITING POLICIES
Oakwood's Contract Underwriting Guidelines
Contracts included in an Asset Pool will have been underwritten by
Oakwood. These Contracts may have been originated in the name of Oakwood Mobile
Homes, Inc. ("OMH"), a wholly-owned retailing subsidiary of Oakwood Homes, or by
a third party manufactured housing broker or dealer, in either case with funds
provided by Oakwood, or may have been originated directly in Oakwood's name. The
following is a description of the underwriting practices generally followed by
Oakwood in connection with the origination of Contracts funded by Oakwood.
A customer desiring to obtain financing for the purchase of a
manufactured home through Oakwood must complete a loan application form at a
participating sales center. Loan applications are forwarded electronically or by
facsimile by sales centers to Oakwood's credit department for consideration.
Upon receipt of a loan application, Oakwood evaluates the ability of
the loan applicant to make the prospective required monthly payments and to pay
related charges. Oakwood utilizes a credit scoring system to evaluate credit
applicants. Oakwood's underwriting guidelines require that each applicant's
credit history, residence history, employment history and debt-to-income ratios
be examined. Oakwood's credit officers review the information relating to these
factors provided by the applicant on his or her loan application and obtain
credit reports and contact employers and other references to verify credit,
residence and employment-related information. Oakwood's automated loan
origination system computes debt-to-income ratios and assigns each applicant an
overall credit score based upon information contained in the application and in
the credit bureau report obtained with respect to such applicant. An applicant's
overall
44
<PAGE>
credit score is the sum of his or her credit scores in various areas of the
credit review. Each credit officer is authorized to approve certain applicants
within his lending authority (1) who are assigned overall credit scores and
credit report scores above a specified minimum score, (2) who have acceptable
debt-to-income ratios and (3) who have applied for credit not in excess of the
credit officer's authority. In order for a prospective borrower to be approved
for a loan, (1) his or her total monthly fixed debt obligations (including the
monthly payment on the contract applied for, rental fees charged for land
generally, monthly installment payments to acquire the land on which the home is
located and hazard insurance premiums relating to the home (collectively, the
"Home Payments")) should not exceed 47% of his or her gross monthly income and
(2) the proposed Home Payments should not exceed 33% of his or her gross monthly
income, however, more stringent standards generally apply to prospective
borrowers with relatively lower monthly incomes and/or relatively higher loan to
value ratios. The Company believes that these debt-to-income ratios are
generally consistent with those employed by other lenders under manufactured
housing installment sales contracts. These ratios are generally higher than the
comparable debt-to-income ratios employed by lenders under many types of
residential first-lien mortgage loans. To the extent the credit underwriting
criteria applied to borrowers under Contracts are less stringent than those
applied to borrowers under conventional types of residential first-lien mortgage
loans, the level of delinquencies experienced with respect to a pool of
Contracts may be expected to be higher than the level of delinquencies that
would be experienced with respect to a pool of conventional, residential
first-lien mortgage loans. Such a higher level of delinquencies could result in
a higher level of losses incurred on a pool of Contracts as compared to a pool
of conventional, residential first-lien mortgage loans.
Loan applicants who do not meet the objective criteria above may be
approved, on a case-by-case basis, by higher-level management in Oakwood's
credit department. Generally, applicants whose credit scores are less than the
minimums established for credit officer approval are approved only if other
favorable objective underwriting factors are present which are outside the scope
of the scoring systems. In addition, even if an applicant obtains an acceptable
credit score and has acceptable debt-to-income ratios, a credit officer or
manager retains the discretion to reject a credit application if the credit
officer or manager discerns objective factors outside the scope of the scoring
systems that indicate a lack of creditworthiness.
With respect to those customers deemed to be creditworthy, Oakwood
requires a down payment in the form of cash, the trade-in equity in a previously
owned manufactured home, and/or the borrower's equity in any real property
pledged as additional collateral for the loan. The value of any real property
pledged as additional collateral is estimated by a duly licensed independent
appraiser, and the borrower's equity in real property for down payment purposes
is limited to 75% of such estimated value. Generally, Oakwood requires a minimum
down payment of 5% of the purchase price of the home for purchases of new homes,
10% of the purchase price of the home for purchases of used homes (other than
repossessed homes), $1,000 for purchases of repossessed single-section homes,
$2,000 for purchases of repossessed multi-sectional homes, and the lesser of
$1,000 or 5% of the transfer price for homes transferred by a borrower to a new
borrower. In addition, if a borrower uses equity in real property as all or part
of his or her down payment, the total down payment must be at least equal to 5%
of the purchase price of the purchased home. The level of down payment offered
by a prospective purchaser of a new home will affect his or her overall credit
score, so that higher down payments are required from applicants with relatively
lower credit scores in areas other than down payment levels. The purchase price
of a manufactured home for purposes of determining a down payment amount
generally includes the stated cash sale price of the manufactured home
(including the stated cash sale price of any accessories sold with the home,
which may include appliances, furniture, skirting, steps, porches and related
items), sales and any other state and local taxes.
The balance of the purchase price is financed by an installment sale
contract providing for a purchase money security interest in the manufactured
home and a mortgage on any real property pledged as additional collateral. All
of these contracts funded at origination by Oakwood are written on forms
provided by Oakwood. Normally, each contract provides for level monthly payments
over the stated term of the contract, which is generally 15 to 20 years (or 20
to 30 years in the case of sales of multi-sectional homes and larger
single-section homes), at a fixed rate of interest (which may include a step-up
rate). Oakwood believes the typical manufactured home purchaser is primarily
sensitive to the amount of the
45
<PAGE>
monthly payment required by his or her contract, and not to the interest rate
charged thereunder.
General Underwriting Standards for Mortgage Loans
Mortgage Loans underwritten by Oakwood will be underwritten
substantially according to the underwriting guidelines Oakwood uses to
underwrite Contracts. See "-- Oakwood's Contract Underwriting Guidelines" above.
Any different underwriting standards that applied to the Mortgage Loans included
in any particular Asset Pool will be described in the related Prospectus
Supplement.
With respect to any Mortgage Loans underwritten by an entity other than
Oakwood, the Company expects that the originator will have underwritten and
originated such Mortgage Loans in compliance with underwriting standards which
are intended to evaluate the Obligor's credit standing and repayment ability and
the value and adequacy of the related Mortgaged Properties as collateral in
accordance with standard procedures complying with the applicable federal and
state laws and regulations. FHA Mortgage Loans and VA Mortgage Loans will comply
with the underwriting policies of FHA and VA, respectively. Conventional
Mortgage Loans will comply with the underwriting policies of the originator,
which will be described in the related Prospectus Supplement. Each Mortgage Loan
included in the Trust for a Series will have been originated by a savings and
loan association, savings bank, commercial bank, credit union, insurance
company, or similar institution which is supervised and examined by a federal or
state authority, or by a mortgagee approved by HUD.
The adequacy of a Mortgaged Property as security for a Mortgage Loan
will be determined by an appraisal performed by an appraiser who, at the time
the appraisal was made, was duly licensed. The appraiser must personally inspect
the property and will prepare a report which customarily includes a market data
analysis based on recent sales of comparable homes and, when deemed applicable,
a replacement cost analysis based on the current cost of constructing a similar
home.
The Company will obtain representations and warranties from the Seller
that each related Mortgage Loan was originated in accordance with the
underwriting guidelines described above and in the applicable Prospectus
Supplement. Any Mortgage Loan that does not comply with such standards after
inclusion in an Asset Pool must be repurchased or substituted for by its Seller,
unless such Mortgage Loan is otherwise demonstrated to be includible in the
Asset Pool, to the satisfaction of the Company. See "Description of the
Certificates -- Representations and Warranties" herein.
SALE AND SERVICING OF CONTRACTS AND MORTGAGE LOANS
Assignment of Contracts and Mortgage Loans
Pursuant to the applicable Pooling and Servicing Agreement, the Company
will cause the Contracts and Mortgage Loans and all other assets comprising the
related Trust Estate to be sold, assigned and transferred to the related
Trustee, together with all principal and interest payments due on such Contracts
and Mortgage Loans after the date specified in the related Prospectus Supplement
(the "Cut-off Date") and all prepayments of principal collected on or after such
Cut-off Date. In exchange for the Contracts and Mortgage Loans assigned to the
Trustee, the Trustee will deliver Certificates of the related Series in
authorized denominations, registered in such names as the Company may request,
representing the beneficial ownership interest in the related Trust Estate, to
the Company or its designee. Each Contract and Mortgage Loan included in a Trust
Estate will be identified in a schedule appearing as an exhibit to the related
Pooling and Servicing Agreement. Such schedule will contain information as to
the Cut-off Date Principal Balance of each Contract or Mortgage Loan and the
Asset Rate, original principal balance and certain other information concerning
each such Contract and Mortgage Loan. Such schedule is referred to herein as the
"Contract Schedule" to the extent it identifies Contracts, the "Mortgage Loan
Schedule" to the extent it identifies Mortgage Loans, and is referred to in its
entirety as the "Asset Schedule."
46
<PAGE>
Conveyance of Contracts. Prior to the conveyance of the Contracts to
the Trustee, the Servicer's operations department will complete a review of all
of the Contract Files, including the certificates of title to, or other evidence
of a perfected security interest in, the related Manufactured Homes, confirming
the accuracy of the related Contract Schedule delivered to the Trustee. With
respect to any Land Secured Contract, the Servicer will also review the Mortgage
and any necessary assignments thereof evidencing the Seller's interest in the
related Real Property. Any Contract discovered not to agree with such Contract
Schedule, or any Contract for which any required Contract Document is discovered
to be missing or defective, in either case in a manner that is materially
adverse to the interests of the Certificateholders, will be required to be
repurchased by the Seller at the related Repurchase Price or replaced with
another Contract as described herein if such discrepancy, incompleteness or
defect is not cured within 90 days after notice of such discrepancy,
incompleteness or defect is delivered to the Seller, except that in the case of
a discrepancy between the terms of a Contract and the Contract Schedule relating
to the Unpaid Principal Balance of a Contract, the Seller may deposit cash in
the Certificate Account in an amount sufficient to offset such discrepancy.
The Servicer will hold the original Contracts and copies of all
material documents and instruments relating to each Contract and evidencing the
security interest created by each Contract in the related Manufactured Home or
real estate as custodian on behalf of the Certificateholders in accordance with
the related Pooling and Servicing Agreement. In order to give notice of the
Trustee's right, title and interest in and to the Contracts, UCC-1 financing
statements identifying the Trustee or a co-trustee as the secured party or
purchaser and identifying all the Contracts as collateral will be filed in the
appropriate offices in the appropriate state. If a subsequent purchaser were
able to take physical possession of the Contracts without notice of the
assignment of the Contracts to the Trustee, the Trustee's interest in the
Contracts could be defeated. To provide some protection against this
possibility, in addition to filing UCC-1 financing statements, within one week
after the initial delivery of the Certificates, the Contracts will be stamped or
otherwise marked by the Servicer to reflect their assignment to the Trustee. See
"Certain Legal Aspects of Contracts and Mortgage Loans -- The Contracts" herein.
Conveyance of Mortgage Loans. On or prior to the date of conveyance of
the Mortgage Loans to the Trustee, the Company will, as to each Mortgage Loan,
deliver or cause to be delivered to the Trustee or a custodian acting on behalf
of the Trustee (a "Custodian") the related mortgage note (a "Mortgage Note")
endorsed in blank or to the order of the Trustee, an original or a certified
copy of the related Mortgage, with evidence of recordation of the Mortgage noted
thereon or attached thereto, an assignment of the related Mortgage in recordable
form naming the Trustee as assignee (together with originals or certified copies
of all recorded assignments necessary to show an unbroken chain of assignment of
the related Mortgage from the original mortgagee thereunder to the Trustee), and
certain other original documents evidencing or relating to the Mortgage Loan.
Within one year after the Closing Date for a Series, the Company will cause
assignments of each related Mortgage to be recorded in the appropriate public
recording offices for real property records wherever necessary to protect the
Trustee's interest in the related Mortgage Loans. In lieu of recording
assignments of Mortgages in a particular jurisdiction, the Company may deliver
or cause to be delivered to the Trustee an opinion of local counsel to the
effect that such recording is not necessary to protect the right, title and
interest of the Trustee in the related Mortgage Loans. In addition, the Seller
of a Mortgage Loan is required to submit to the Trustee with each Trustee
Mortgage Loan File a mortgagee title insurance policy, title insurance binder,
preliminary title report, or satisfactory evidence of title insurance for the
jurisdiction in which the related Mortgaged Property is located. If a
preliminary title report is delivered initially, the Seller is required to
deliver a final title insurance policy or other satisfactory evidence of the
existence of adequate title insurance. The Trustee or a Custodian will hold the
Trustee Mortgage Loan Files for the related Mortgage Loans, except to the extent
that any of the documents contained in such files are released to the Servicer
or a Sub-servicer for servicing purposes in accordance with the terms of the
related Agreement.
The Trustee or the Custodian (the latter if so specified in the related
Prospectus Supplement) will review any Trustee Mortgage Loan Files relating to a
Series. Unless otherwise provided in the Prospectus Supplement, if any Mortgage
Loan Document required to be included in a Trustee Mortgage Loan File is
47
<PAGE>
missing or is found to be defective in any material respect, and the Seller does
not cure such defect within 90 days after its receipt of notice of such missing
document or document defect, the Seller will be required to repurchase the
Mortgage Loan at the related Repurchase Price or replace such Mortgage Loan with
a substitute Mortgage Loan as described under "The Trusts -- Substitution of
Contracts or Mortgage Loans" herein. Unless otherwise described in the related
Prospectus Supplement, this repurchase or substitution obligation constitutes
the sole remedy available to the Certificateholder or the Trustee for a missing
or defective Mortgage Loan Document.
Representations and Warranties
The Company will make certain representations and warranties for each
Series in the related Agreement with respect to the related Contracts and
Mortgage Loans, including representations that it either is the owner of such
Contracts and Mortgage Loans or has a perfected first priority security interest
in the Contracts and Mortgage Loans. In addition, the Seller will make
representations and warranties with respect to the Contracts and Mortgage Loans
in the sales agreement pursuant to which the Contracts and Mortgage Loans were
transferred to the Company, including representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Company and the Trustee in respect of each Contract and Mortgage Loan.
In addition, the Seller will have represented, among other things, that
(1) immediately prior to the transfer and assignment of the Contracts and
Mortgage Loans to the Company, the Seller had good title to, and was the sole
owner of, each Contract and Mortgage Loan and there had been no other sale or
assignment thereof from the Seller; (2) as of the date of such transfer, the
Contracts and Mortgage Loans are subject to no offsets, defenses or
counterclaims; (3) each Contract and Mortgage Loan at the time it was made
complied in all material respects with applicable state and federal laws,
including usury, equal credit opportunity and disclosure laws; (4) as of the
date of such transfer, each Contract creates a valid first lien on the related
Manufactured Home and such Manufactured Home is free of material damage and is
in good repair; (5) as of the date of such transfer, no Contract or Mortgage
Loan is more than the number of days delinquent in payment set forth in the
Prospectus Supplement and there are no delinquent tax or assessment liens
against the related Manufactured Home or Mortgaged Property; (6) the
Manufactured Home or Mortgaged Property securing each Contract or Mortgage Loan
is covered by a Standard Hazard Insurance Policy providing coverage in the
amount required by the related Agreement and that all premiums now due on such
insurance have been paid in full; (7) a lender's policy of title insurance was
issued on the date of the origination of each Mortgage Loan and each such policy
is valid and remains in full force and effect; (8) as of the date of such
transfer, each Mortgage subject to the Agreement evidences a valid first lien on
the related Mortgaged Property (subject only to (a) the lien of current real
property taxes and assessments, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of public record as of the date of
the recording of such Mortgage, such exceptions appearing of record and either
being acceptable to mortgage lending institutions generally or specifically
reflected in the appraisal made in connection with the origination of the
related Mortgage Loan and (c) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage) and such property is free of
material damage and is in good repair; (9) with respect to each Contract and
Mortgage Loan, if the related Manufactured Home or Mortgaged Property is located
in an area identified by the Federal Emergency Management Agency as having
special flood hazards and subject in certain circumstances to the availability
of flood insurance under the National Flood Insurance Act of 1968, as amended,
such Manufactured Home or Mortgaged Property is covered by flood insurance, if
applicable regulations at the time such Contract or Mortgage Loan was originated
required that such flood insurance coverage be obtained; (10) for any Trust for
which a REMIC election is to be made, each related Asset is a Qualified
Mortgage; and (11) any FHA Contract, FHA Mortgage Loan, VA Contract or VA
Mortgage Loan has been serviced in compliance with applicable FHA or VA
regulations, and the FHA insurance or VA guarantee with respect to any such
Asset is in full force and effect.
The Company's right to enforce a Seller's representations and
warranties with respect to an Asset Pool will be assigned to the Trustee under
the related Agreement. To the extent that a Seller makes
48
<PAGE>
representations and warranties regarding the characteristics of certain
Contracts and Mortgage Loans, the Company generally will not make such
representations and warranties as to such Contracts and Mortgage Loans. In the
event that the representations and warranties of the Seller are breached, and
such breach or breaches materially and adversely affect the interests of the
Certificateholders in the related Contracts and Mortgage Loans, the Seller will
be required to cure such breach or, if such cure is not effected within 90 days
after the Seller is notified in writing of such breach, to repurchase the
affected Contracts or Mortgage Loans, in general at a price equal to the Unpaid
Principal Balance of such Contracts or Mortgage Loans, together with unpaid
interest thereon at the applicable Asset Rates through the end of the month in
which such repurchase is made, or to substitute Contracts or Mortgage Loans in
accordance with the criteria set forth herein under "The Trusts -- Substitution
of Contracts or Mortgage Loans."
The Servicer will be required under each Agreement to enforce the
Seller's obligations to cure breaches or to repurchase or substitute for Assets
for the benefit of the Trustee and the Certificateholders and to indemnify the
Company and its assignees (including the Trust) against losses or damages caused
by such breaches. The Seller's obligations to repurchase or substitute for
Assets affected by its breaches and to indemnify the Company and its assignees
against losses and damages caused by such breaches will constitute the sole
remedies available to Certificateholders or the Trustee for a breach of
representation by a Seller. Neither the Company nor the Servicer will be
obligated to repurchase or substitute for a Contract or Mortgage Loan if a
Seller defaults on its obligation to repurchase or substitute for such Asset
(except to the extent that Oakwood is both Servicer and Seller), and no
assurance can be given that a Seller will carry out its repurchase or
substitution obligations with respect to Contracts and Mortgage Loans.
Servicing
General. The Servicer will service and administer each Asset Pool
assigned to the Trustee either exclusively or through other servicing
institutions ("Sub-servicers"), as more fully set forth below.
The Servicer and any Sub-servicer (the latter subject to general
supervision by the Servicer) for any Asset Pool will perform diligently all
services and duties specified in the related Agreement, consistently with the
servicing standards and practices of prudent lending institutions with respect
to manufactured housing installment sales contracts of the same type as the
Contracts and mortgage loans of the same type as the Mortgage Loans in those
jurisdictions where the related Manufactured Homes and Mortgaged Properties are
located or as otherwise specified in the Agreement. The Servicer will monitor
the performance of each Sub-servicer, if any, and will have the right to remove
a Sub-servicer at any time if it considers such removal to be in the best
interest of the related Certificateholders. The duties to be performed by the
Servicer, directly or through a Sub-servicer, with respect to a Series will
include (1) collection and remittance of principal and interest payments on the
related Assets; (2) administration of any related mortgage escrow accounts; (3)
collection of related insurance claims; (4) if necessary, repossession of
related Manufactured Homes and/or foreclosure on related Mortgaged Properties;
and (5) if necessary, the obligation to advance funds to the extent certain
payments are not made by the Obligors and are considered recoverable from late
Obligor payments, from proceeds of any applicable insurance policies or from
Liquidation Proceeds of the related Contract or Mortgage Loan. The Servicer
shall also provide information on a periodic basis to the Company and the
Trustee concerning the Contracts and Mortgage Loans, and shall file required
reports with the Commission concerning the Trusts as required by the Agreements.
If a Sub-servicer shall be terminated by the Servicer, the servicing function of
the Sub-servicer either shall be transferred to a substitute Sub-servicer or
performed by the Servicer.
The Servicer shall keep in force throughout the term of each Agreement
(1) a policy or policies of insurance covering errors and omissions with respect
to its duties under such Agreement, and (2) a fidelity bond. Such policy or
policies and such fidelity bond shall be in such form and amount as is generally
customary among entities which service a portfolio of manufactured housing
installment sales contracts having an aggregate principal amount of $100 million
or more and which are generally regarded as servicers acceptable to
institutional investors.
49
<PAGE>
The Servicer, to the extent practicable, shall cause the Obligors to
pay all taxes and similar governmental charges when and as due. To the extent
that nonpayment of any taxes or charges would result in the creation of a lien
upon any Manufactured Home or Mortgaged Property having a priority equal or
senior to the lien of the related Contract or Mortgage Loan, the Servicer shall
advance any such delinquent tax or charge to the extent it determines that it
will be able to recover such advance from the related Obligor or from
Liquidation Proceeds of the related Contract or Mortgage Loan.
Collection Procedures. The Servicer, directly or through Sub-servicers,
will make reasonable efforts to collect all payments called for under the
Contracts or Mortgage Loans and, consistently with the Agreement and any Pool
Insurance Policy, any Primary Mortgage Insurance Policy, FHA insurance, VA
guaranty and Obligor Bankruptcy Insurance, will follow such collection
procedures as it follows with respect to contracts or mortgage loans serviced by
it that are comparable to the Contracts or Mortgage Loans.
Under the Agreement, the Servicer will repossess, foreclose upon or
otherwise convert the ownership of properties that secure a defaulted Contract
or Mortgage Loan if no satisfactory arrangements can be made for collection of
delinquent payments. In connection with such repossession, foreclosure or other
conversion, the Servicer will follow such practices and procedures as it shall
deem necessary or advisable and as shall be normal and usual in its general
Contract and Mortgage Loan servicing activities. The Servicer, however, will not
be required to expend its own funds in connection with any repossession or the
restoration of any property unless it determines (1) that such restoration or
repossession will increase the proceeds of liquidation of the related Contract
or Mortgage Loan to the Certificateholders after reimbursement to itself for
such expenses and (2) that such expenses will be recoverable to it either
through Liquidation Proceeds or through Insurance Proceeds.
A Contract or the Mortgage Note or Mortgage used in originating a
conventional Mortgage Loan may contain a "due-on-sale" clause. See "-- The
Contracts -- Transfers of Manufactured Homes; Enforceability of 'Due-on-Sale'
Clauses" and "-- The Mortgage Loans -- 'Due-On-Sale' Clauses," in each case
under the heading "Certain Legal Aspects of Contracts and Mortgage Loans"
herein. The Servicer may enforce "due-on-sale" clauses with respect to any
Contract, Mortgage Note or Mortgage containing such a clause, provided that such
enforcement has no adverse effect on the coverage of any applicable Insurance
Policy. In any case in which a Manufactured Home or Mortgaged Property has been
or is about to be conveyed by the Obligor on the related Contract or Mortgage
Loan and the due-on-sale clause has not been enforced (or the related Contract
or Mortgage Note is by its terms assumable), the Servicer will be authorized, on
behalf of the Trustee, to enter into an assumption agreement with the person to
whom such Manufactured Home or Mortgaged Property has been or is about to be
conveyed, if such person meets certain loan underwriting criteria, including the
criteria necessary to maintain the coverage provided by any applicable Credit
Insurance policies. In the event that the Servicer enters into an assumption
agreement in connection with any such conveyance of a Manufactured Home or
Mortgaged Property, the Servicer, on behalf of the Trustee, may release the
original Obligor from liability upon the Contract or Mortgage Loan and
substitute the assuming party as the new obligor thereon. In no event can the
assumption agreement permit a decrease in the Asset Rate or an increase in the
term of the assumed Contract or Mortgage Loan. Fees collected for entering into
an assumption agreement will be retained by the Servicer as additional servicing
compensation.
The Servicer, either directly or through Sub-servicers, to the extent
permitted by law, may establish and maintain an escrow account (the "Escrow
Account") in which mortgagors under Mortgage Loans may be required to deposit
amounts sufficient to pay taxes, assessments, mortgage insurance premiums and
standard hazard insurance premiums and other comparable items and in which
Obligors under Contracts will be required to deposit amounts sufficient to pay
standard hazard insurance premiums and other comparable items. Withdrawals from
the Escrow Account maintained for mortgagors may be made to effect timely
payment of taxes, assessments, mortgage insurance and hazard insurance, to
refund to mortgagors amounts determined to be overages, to pay interest to
mortgagors on balances in the Escrow Account to the extent required by law, to
repair or otherwise protect the related Mortgaged Properties and to clear and
50
<PAGE>
terminate the Escrow Account. The Servicer will be responsible for the
administration of the Escrow Account and will be obligated to make advances to
such account when a deficiency exists therein, so long as it determines that
such advances will be recoverable from the related Obligors or from Liquidation
Proceeds collected with respect to the related Assets. The Servicer may decline
to establish Escrow Accounts with respect to any Contracts or Mortgage Loans in
its discretion.
Collection of Payments on Contracts and Mortgage Loans. The Servicer
will establish and maintain a Certificate Account for the benefit of the
Trustee. The Certificate Account must be an "Eligible Account;" I.E i.e., it
must be maintained (1) at a depository institution organized under the laws of
the United States or any state, the deposits of which are insured to the full
extent permitted by law by the Federal Deposit Insurance Corporation (the
"FDIC"), whose commercial paper or long-term unsecured debt has a rating, as
specified in the related Agreement, sufficient to support the ratings requested
on the Certificates of the related Series, and which institution is subject to
examination by federal or state authorities; (2) in the corporate trust
department of the Trustee; or (3) at an institution otherwise acceptable to each
applicable Rating Agency. The Certificate Account is to be held in trust for the
benefit of the Trustee on behalf of the Certificateholders and shall be
designated as specified in the related Agreement. Funds in the Certificate
Account will be invested in Eligible Investments (as defined in the Agreement)
that will mature or be subject to redemption not later than the business day
preceding the applicable monthly Remittance Date. Earnings on amounts deposited
into a Certificate Account shall be credited to the account of the Servicer as
servicing compensation in addition to its monthly Servicing Fee. The Servicer
may use such earnings to offset P&I Advances due from the Servicer in respect of
the Remittance Date next succeeding the date on which such earnings were made
or, at the Servicer's option, such earnings may be released to the Servicer on
such Remittance Date. The amount of any losses incurred in respect of any such
investments shall be deposited into the Certificate Account by the Servicer out
of its own funds promptly after such losses are incurred.
All payments in respect of principal and interest on the Contracts and
Mortgage Loans in the Asset Pool for a Series that are received by the Servicer
on or after the applicable Cut-off Date (exclusive of collections relating to
scheduled payments due on or prior to the Cut-off Date) will be deposited into
the Certificate Account no later than the second business day following the
Servicer's receipt thereof. Such payments shall include the following:
(1) all Obligor payments in respect of principal, including
principal prepayments, on the Contracts and Mortgage Loans;
(2) all Obligor payments in respect of interest on the
Contracts and Mortgage Loans, together with moneys transferred from any
Buy-Down Fund or GPM Fund;
(3) all Net Liquidation Proceeds received and retained in
connection with the liquidation or disposition of defaulted Contracts,
Mortgage Loans or property acquired in respect thereof through
repossession, foreclosure or otherwise;
(4) all proceeds received under any title, hazard or other
insurance policy covering any Contract or Mortgage Loan, other than
proceeds received as part of Liquidation Proceeds or such proceeds that
are to be applied to the restoration or repair of the related
Manufactured Home or Mortgaged Property or released to the Obligor;
(5) any condemnation awards or settlements which are not
released to Obligors in accordance with normal servicing procedures;
(6) all amounts received from credit enhancement provided with
respect to a Series of Certificates;
(7) all proceeds of any Contract or Mortgage Loan (or property
acquired in respect thereof) that is repurchased by the related Seller
or by a terminating party as described above or
51
<PAGE>
under "The Pooling and Servicing Agreements -- Termination" below;
and
(8) all amounts, if any, required to be transferred to the
Certificate Account from a Reserve Fund pursuant to the Agreement.
In those cases where a Sub-servicer is servicing a Contract or Mortgage
Loan, the Sub-servicer will establish and maintain an Eligible Account (a
"Sub-servicing Account") that will comply with the standards set forth above for
the Certificate Account and which is otherwise acceptable to the Servicer. The
Sub-servicer is required to deposit into the Sub-servicing Account on a daily
basis all amounts enumerated in the preceding paragraph in respect of the
Contracts or Mortgage Loans as received by the Sub-servicer, less its servicing
compensation. On the date specified in the related Prospectus Supplement, the
Sub-servicer shall remit to the Servicer all funds held in the Sub-servicing
Account with respect to each related Contract or Mortgage Loan. The
Sub-servicer, to the extent described in the related Prospectus Supplement, may
be required to advance any monthly installment of principal and interest that
was not received, less its servicing fee, by the date specified in the related
Prospectus Supplement.
With respect to each Buy-Down Loan, the Servicer will deposit into a
custodial Eligible Account (which may be interest-bearing) complying with the
requirements set forth above for the Certificate Account (the "Buy-Down Fund")
an amount which, together with investment earnings thereon, will provide funds
sufficient to support the payments on such Buy-Down Loan on a level debt service
basis. The Servicer will not be obligated to supplement any Buy-Down Fund should
investment earnings prove insufficient to maintain the scheduled level of
payments on the Buy-Down Loans (in which event distributions to the
Certificateholders may be affected).
With respect to each GPM Loan, the Servicer will, if and to the extent
provided in the related Prospectus Supplement, deposit in a custodial Eligible
Account (which may be interest-bearing) complying with the requirements set
forth above for the Certificate Account (the "GPM Fund") an amount which,
together with investment earnings thereon, will provide funds sufficient to
support the payments thereon on a level debt service basis. The Servicer will
not be obligated to supplement any GPM Fund should investment earnings thereon
prove insufficient to maintain the scheduled level of payments (in which event
distributions to the Certificateholders may be affected).
Distributions on Certificates. On each Remittance Date, the Servicer
will withdraw from the applicable Certificate Account and remit to the Trustee
for deposit into the Distribution Account (1) all scheduled payments of
principal and interest due on the related Contracts and Mortgage Loans during
the related Collection Period and collected by the Servicer from the related
Obligors or otherwise and (2) all unscheduled collections in respect of
principal and interest on the Contracts and Mortgage Loans received during the
related Prepayment Period, in each case to the extent such collections comprise
part of the Available Distribution Amount (as specified in the related
Prospectus Supplement) for the upcoming Distribution Date (collectively, the
"Remittance Amount"). In addition, on each Remittance Date, the Servicer shall
remit to the Trustee, for deposit into the Distribution Account, the amount of
its required P&I Advance and of any Compensating Interest required to be paid by
the Servicer for the upcoming Distribution Date. See "-- Advances" and "--
Compensating Interest" below. The Remittance Date for any Distribution Date
shall be the business day preceding such Distribution Date.
The Available Distribution Amount for any Series will be allocated
among the related Classes of Certificates in the proportion and order of
application set forth in the related Agreement and described in the related
Prospectus Supplement. Prior to each Distribution Date for a Series, the
Servicer will furnish to the Trustee a report setting forth certain information
concerning the underlying Asset Pool and amounts to be distributed on each
related Class of Certificates.
52
<PAGE>
Advances
The Servicer will be required to advance funds to cover (1) delinquent
payments of principal and interest on related Contracts and Mortgage Loans ("P&I
Advances") and (2) delinquent payments of taxes, insurance premiums and escrowed
items in respect of related Contracts and Mortgage Loans and liquidation-related
expenses ("Servicing Advances," and, together with P&I Advances, "Advances").
The Servicer shall not be required to make an Advance to the extent it
determines, in its reasonable judgment, that such Advance, if made, would not be
recoverable from late collections from the related Obligor or from Liquidation
Proceeds or other collections in respect of the related Contract or Mortgage
Loan (such an advance being referred to as a "Non-Recoverable Advance"). The
Servicer may offset the otherwise applicable P&I Advance for any Remittance Date
by the amount of Early Payments made with respect to the related Due Date. The
failure of the Servicer to make any required Advances under an Agreement
constitutes a default under such Agreement for which the Servicer may be
terminated. Upon a default by the Servicer, the Trustee (as substitute Servicer)
may, if so provided in the related Agreement, be required to make Advances,
provided that, in its reasonable discretion, it deems such Advances not to be
Non-Recoverable Advances. With respect to certain Assets, the Company may obtain
an endorsement to an applicable Pool Insurance Policy which obligates the Pool
Insurer to advance delinquent payments of principal and interest. The Pool
Insurer would only be obligated under such endorsement to the extent the Obligor
fails to make such payment and the Servicer fails to make a required Advance.
The Servicer may agree to reimburse the Pool Insurer for any sums the Pool
Insurer pays under such endorsement.
The advance obligation of a Trustee or Pool Insurer may be limited to
an amount specified by the Rating Agency or Agencies rating the Certificates.
Any P&I Advances by the Servicer, the Trustee or a Pool Insurer, as the case may
be, must be deposited into the applicable Certificate Account or into the
Distribution Account and will be due not later than the Distribution Date to
which such delinquent payment relates. Any Advance made by the Servicer or the
Trustee or a Pool Insurer, as the case may be, will be reimbursable out of
future collections in respect of the particular Contract or Mortgage Loan in
respect of which the Advance was made (including collections of or from
Insurance Proceeds, Additional Assets or Liquidation Proceeds relating to such
Contract or Mortgage Loan) ("Related Proceeds"). If an Advance made by the
Servicer or a Trustee or a Pool Insurer later proves to be unrecoverable from
Related Proceeds, the Servicer or the Trustee or Pool Insurer, as the case may
be, will be entitled to reimbursement from funds in the Certificate Account or
Distribution Account prior to the disbursement of distributions to the
Certificateholders.
Any P&I Advances with respect to Contracts or Mortgage Loans included
in the Trust for any Series are intended to enable the Trustee to make timely
payment of the scheduled distributions of principal and interest on the
Certificates of such Series. However, neither the Servicer nor the Trustee nor
any Pool Insurer will insure or guarantee the Certificates of any Series or the
Contracts or Mortgage Loans included in the Trust for any Series.
Compensating Interest
If a Contract or Mortgage Loan is prepaid in full or liquidated other
than on a Due Date, the Obligor generally is only required to pay interest to
the date of prepayment or liquidation. In such event, if provided in the
Prospectus Supplement, for so long as Oakwood is the Servicer of the related
Asset, the Servicer may be obligated to pay interest from the last day for
which interest is due from the Obligor to the next Due Date, so long as such
amount does not exceed the Servicer's servicing compensation for such month
("Compensating Interest").
53
<PAGE>
Maintenance of Insurance Policies and Other Servicing Procedures
Standard Hazard Insurance. The Servicer will cause to be maintained for
each Asset underlying a Series, or use its best reasonable efforts to cause each
Sub-servicer to cause to be maintained for each such Asset, a Standard Hazard
Insurance Policy providing coverage in an amount at least equal to the lesser of
(a) 100% of the replacement value of the related Manufactured Home or Mortgaged
Property or (b) the outstanding principal balance of such Contract or Mortgage
Loan. The Servicer also shall maintain on any Manufactured Home acquired by
repossession or on any Real Property or Mortgaged Property acquired through
foreclosure or deed in lieu of foreclosure of any Mortgage Loan, a Standard
Hazard Insurance Policy in an amount that is at least equal to the lesser of the
Unpaid Principal Balance of the defaulted Contract or Mortgage Loan or the
maximum insurable value of the Manufactured Home or Mortgaged Property. To the
extent permitted by applicable law and if so specified in the related Prospectus
Supplement, the Servicer may require Obligors on Contracts or Mortgage Loans
secured by Manufactured Homes, Real Properties or Mortgaged Properties located
in California to maintain earthquake insurance on their Manufactured Homes, Real
Properties or Mortgaged Properties. Otherwise, no earthquake or other additional
insurance is to be required of any Obligor or maintained on property acquired in
respect of a Contract or Mortgage Loan, other than as required by applicable
laws and regulations. If, at the time of origination of a Contract or Mortgage
Loan, the related Manufactured Home or Mortgaged Property is located in a
federally designated special flood hazard area, the Servicer will cause to be
maintained, or to use its best reasonable efforts to cause the related
Sub-servicer to cause to be maintained, flood insurance, limited, under certain
circumstances, to availability under the National Flood Insurance Act of 1968,
as amended. In the event that an Asset is covered by a blanket policy providing
coverage against losses incurred on Assets as a result of the absence or
insufficiency of individual Standard Hazard Insurance Policies, the Servicer
will be deemed conclusively to have satisfied its obligations to cause to be
maintained a Standard Hazard Insurance Policy for such Asset. This blanket
policy may contain a deductible clause, in which case the Servicer will, in the
event that there has been a loss that would have been covered by such policy
absent such deductible clause, deposit in the Certificate Account the amount not
otherwise payable under the blanket policy because of the application of such
deductible clause.
Any amounts collected by the Servicer under any such policies (other
than amounts to be applied to the restoration or repair of the related
Manufactured Home or Mortgaged Property or released to the Obligor in accordance
with normal servicing procedures) shall be deposited into the Certificate
Account.
Other Insurance. The Servicer will not maintain a Primary Mortgage
Insurance Policy for any Mortgage Loan. To the extent specified in the related
Prospectus Supplement, the Servicer will maintain a Primary Mortgage Insurance
Policy on any Conventional Mortgage Loan with an initial Mortgage Loan-to-Value
Ratio in excess of 80% unless the conditions for waiver of such insurance by the
Servicer are met. See "The Trusts -- Insurance -- Credit Insurance -- Primary
Mortgage Insurance" herein.
The Servicer will be required to maintain any Special Hazard Insurance
Policy, any Obligor Bankruptcy Insurance and any Pool Insurance Policy for any
Series in full force and effect throughout the term of the related Trust,
subject to payment of the applicable premiums by the Trustee. The Servicer will
be required to notify the Trustee to pay from amounts in the Trust Estate the
premiums for any such Special Hazard Insurance Policy, any such Obligor
Bankruptcy Insurance and any such Pool Insurance Policy for such Series on a
timely basis. Any such premiums may be payable on a monthly basis in advance, or
pursuant to any other payment schedule acceptable to the applicable insurer. In
the event that the Special Hazard Insurance Policy, Obligor Bankruptcy Insurance
or Pool Insurance Policy for a Series is canceled or terminated for any reason
(other than the exhaustion of total policy coverage), the Servicer will be
obligated to obtain from another insurer a comparable replacement policy with a
total coverage which is equal to the remaining coverage (or a lesser amount if
the Servicer confirms in writing with each Rating Agency rating any Certificates
of such Series that such lesser amount will not impair the rating on such
Certificates) provided by the canceled or terminated Special Hazard Insurance
Policy, Obligor Bankruptcy Insurance or Pool Insurance Policy. However, if the
cost of any such replacement policy or bond is greater than the cost of the
policy or bond which has been terminated, then the amount of the coverage will
be reduced to a level
54
<PAGE>
such that the applicable premium will not exceed the cost of the premium for the
policy or bond that was terminated.
Presentation of Claims. The Servicer, on behalf of itself, the Trustee
and the Certificateholders, will present claims to the issuer of each insurance
policy described herein (including the FHA and the VA), and will take such
reasonable steps as are necessary to permit recovery under such insurance
policies respecting defaulted Contracts or Mortgage Loans that are the subject
of bankruptcy proceedings. As set forth above, all collections by the Servicer
under any insurance policy are to be deposited into the Certificate Account for
the related Series and are subject to withdrawal as described above. With
respect to a Mortgage Loan or Contract that is serviced by a Sub-servicer, the
Sub-servicer, on behalf of itself, the Trustee and the Certificateholders will
present claims to the applicable insurer, and all collections shall be deposited
into the applicable Sub-servicing Account for deposit into the Certificate
Account.
If any property securing a defaulted Contract or Mortgage Loan is
damaged and proceeds, if any, from the related Standard Hazard Insurance Policy
or the applicable Special Hazard Insurance Policy are insufficient to restore
the damaged property to a condition sufficient to permit recovery under any Pool
Insurance Policy or any Primary Mortgage Insurance Policy, any FHA insurance or
any VA guarantee, as the case may be, the Servicer is not required to expend its
own funds to restore the damaged property unless it determines (1) that such
restoration will increase the proceeds to the Certificateholders upon
liquidation of the Contract or Mortgage Loan after reimbursement of the expenses
incurred by the Servicer and (2) that such expenses will be recoverable by it
through proceeds of the sale of the property or proceeds of the related Pool
Insurance Policy or any related Primary Mortgage Insurance Policy, any FHA
insurance, or any VA guarantee, as the case may be.
If, in respect of any defaulted Contract or Mortgage Loan, recovery
under any related Pool Insurance Policy or any related Primary Mortgage
Insurance Policy, any FHA insurance, or any VA guarantee, as the case may be, is
not available, the Servicer nevertheless is obligated to follow such normal
practices and procedures as it deems necessary or advisable to liquidate the
collateral for the defaulted Contract or Mortgage Loan. If the proceeds of any
liquidation of the related Manufactured Home or Mortgaged Property are less than
the principal balance of the defaulted Contract or Mortgage Loan plus interest
accrued thereon at the applicable Asset Rate, the related Trust will realize a
loss in the amount of such difference plus the aggregate of expenses incurred by
the Servicer in connection with such proceedings.
Alternate Credit Enhancement. To the extent provided in a Prospectus
Supplement, the Company, the Servicer or another party, from time to time, may
be required to obtain or cause to be obtained an insurance policy, guarantee,
letter of credit or surety bond (or make deposits in lieu thereof) to enhance
the credit rating of the related Series of Certificates.
Servicing Compensation and Payment of Expenses. As compensation for its
servicing duties in respect of any Series, the Servicer will be entitled to the
Servicing Fee specified in a particular Prospectus Supplement. In addition, the
Servicer may be entitled to servicing compensation in the form of assumption
fees, late payment charges or otherwise, which fees or charges shall be retained
by the Servicer to the extent not required to be deposited into the related
Certificate Account.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with the servicing of the Contracts and Mortgage Loans
included in a Trust Estate, including, without limitation, payment of the fees
and expenses of the Trustee, payment of related insurance policy premiums (other
than premiums for Standard Hazard Insurance Policies or Primary Mortgage
Insurance Policies) and payment of expenses incurred in enforcing the
obligations of any Sub-servicers. Certain of these expenses may be reimbursable
from Liquidation Proceeds and proceeds of Pool Insurance and from specific
recoveries of costs.
The Servicer will be entitled to reimbursement for certain expenses
incurred by it in connection with the liquidation of defaulted Contracts or
Mortgage Loans. The related Trust will suffer no loss by reason of
55
<PAGE>
such expenses to the extent claims are paid under the related Pool Insurance
Policies, if any. If no Pool Insurance Policy is in effect for the Series, or if
claims are either not made or paid under the related Pool Insurance Policies or
coverage thereunder has been terminated or canceled, the related Trust will
suffer a loss to the extent that the Liquidation Proceeds of a defaulted Asset,
after reimbursement of the Servicer's related expenses, are less than the
principal balance of the Asset plus accrued interest thereon at the related
Asset Rate. In addition, the Servicer will be entitled to reimbursement of
expenditures incurred by it in connection with the restoration of any
Manufactured Home or Mortgaged Property, such right of reimbursement being prior
to the rights of the related Certificateholders to receive any related Pool
Insurance proceeds or Liquidation Proceeds.
Evidence as to Compliance. With respect to each Series of Certificates,
the Servicer will deliver each year to the Trustee an officer's certificate
stating that (i) a review of the activities of the Servicer and any
Sub-servicers during the preceding calendar year and of the Servicer's
performance under the related Agreement has been made under the supervision of
such officer, and (ii) to the best of such officer's knowledge, the Servicer has
fulfilled all its obligations under the Agreement throughout such year, and, to
the best of such officer's knowledge, based on such review, each Sub-servicer
has fulfilled its obligations throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof. Such officer's
certificate shall be accompanied by a statement by a firm of independent public
accountants to the effect that (1) such firm has audited the financial
statements of the Servicer for the Servicer's most recently ended fiscal year
and issued its report thereon; (2) such audit included tests of the records and
documents relating to manufactured housing installment sale contracts and
mortgage loans serviced by the Servicer for others in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers, or
any successor program promulgated by the accounting profession ("USAP"); and (3)
such other statements as are contemplated under USAP, including, if called for
under USAP, a statement as to whether the Servicer's management's written
assertion to such firm (which shall be attached to the statement of such firm)
that its servicing during the applicable fiscal year complied with USAP's
minimum servicing standards in all material respects is fairly stated in all
material respects. The audit tests referred to in clause (2) of the preceding
sentence in respect of any Series shall be applied to manufactured housing
installment sale contracts and mortgage loans serviced under the related Pooling
and Servicing Agreement and/or, in the sole discretion of such firm,
manufactured housing installment sale contracts and mortgage loans serviced
under pooling and servicing agreements, trust agreements or indentures
substantially similar to such Pooling and Servicing Agreement (hereinafter
referred to as "Pooling Agreements"). For purposes of such statement, such firm
may assume conclusively that all Pooling Agreements under which the Servicer is
the servicer of manufactured housing installment sale contracts and mortgage
loans for a trustee relating to certificates evidencing an interest in
manufactured housing installment sale contracts and mortgage loans are
substantially similar to one another except for any such Pooling Agreement which
by its terms specifically states otherwise.
THE POOLING AND SERVICING AGREEMENTS
The following summaries describe certain provisions of each Pooling and
Servicing Agreement, including the Standard Terms to Pooling and Servicing
Agreement to be incorporated by reference into each Series Agreement. Although
the Company believes that the following is a fair summary of the material terms
of the Pooling and Servicing Agreement, the summaries do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
the provisions of the Pooling and Servicing Agreement for each Series. When
particular provisions or terms used in an Agreement are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of such summaries.
56
<PAGE>
The Servicer
The Servicer shall not resign from the obligations and duties imposed
on it under a Pooling and Servicing Agreement, except (1) upon appointment of a
successor servicer and receipt by the Trustee of a letter from each applicable
Rating Agency that the Servicer's resignation and the appointment of the
successor will not, in and of itself, result in a downgrading of any rated
Certificates of the affected Series or (2) upon determination by the Servicer's
Board of Directors that the performance of its duties under the Agreement are no
longer permissible under applicable law. No such resignation shall become
effective until the Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with the
applicable Agreement.
Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Trust or the Certificateholders, and
all such Persons shall be held harmless, for any action taken or not taken in
good faith pursuant to each Pooling and Servicing Agreement, or for errors in
judgment; provided, however, that no such Person shall be protected from
liability (1) for actions or omissions resulting from willful misfeasance, bad
faith or gross negligence in the performance of such Person's duties or by
reason of reckless disregard of such Person's obligations and duties under the
Agreement or (2) for breaches of representations or warranties made by such
Person in the Agreement. The Servicer and any of the directors, officers,
employees or agents of the Servicer may rely in good faith on any document of
any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising under an Agreement. The Servicer shall be under
no obligation to appear in, prosecute or defend any legal action unless such
action is related to its duties under an Agreement and such action in its
opinion does not involve it in any expense or liability, except as otherwise
explicitly provided in the Agreement; provided, however, that the Servicer may
in its discretion undertake any such action that it deems necessary or desirable
with respect to an Agreement if the Certificateholders offer to the Servicer
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby.
The Trustee
The Prospectus Supplement for a Series of Certificates will specify the
Trustee for that Series. The Trustee for a Series may resign at any time, in
which event the Company will be obligated to attempt to appoint a successor
Trustee. The Company may remove a Trustee if the Trustee ceases to be eligible
to continue as Trustee under the applicable Agreement or upon the occurrence of
certain bankruptcy- or insolvency-related events with respect to the Trustee.
The Trustee for a Series will also be subject to being removed at any time by
the holders of Certificates of such Series evidencing at least 51% of the Voting
Rights of such of Series, as specified in the related Agreement. If the
Certificateholders remove the Trustee other than for reasonable cause based upon
the Trustee's failure to continue to meet the eligibility requirements set forth
in the related Agreement or the Trustee's failure to perform its duties as
described therein, then the Certificateholders so removing the Trustee shall
bear any and all costs and expenses arising from such removal and substitution.
Any resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance by the Company of the appointment of
the successor Trustee.
A Trustee must be a corporation or a national banking association
organized under the laws of the United States or any state and authorized under
the laws of the jurisdiction in which it is organized to have corporate trust
powers. It must also have combined capital and surplus of at least $50,000,000
(or be a Qualified Bank) and be subject to regulation and examination by state
or federal regulatory authorities. Although a Trustee may not be an affiliate of
the Company or the Servicer, either the Company or the Servicer may maintain
normal banking relations with the Trustee if the Trustee is a depository
institution.
<PAGE>
Reports to Certificateholders
The Trustee for a Series will furnish the related Certificateholders
with monthly statements prepared by the Servicer (each a "Remittance Report")
containing information with respect to principal and interest distributions and
Realized Losses for such Series and the assets of the related Trust. Any
financial information contained in such reports will not have been examined or
reported upon by an independent public accountant. Copies of such monthly
statements and any annual reports prepared by the Servicer evidencing the status
of its compliance with the provisions of an Agreement will be furnished to
related Certificateholders upon request addressed to the Trustee. A Remittance
Report for a Distribution Date in respect of any Series of Certificates will
identify the following items:
(1) the related Available Distribution Amount for such
Distribution Date;
(2) the amount of interest distributable on such Distribution
Date on each Class of the Certificates of such Series, and the amount
of interest to be distributed on each such Class based upon the
Available Distribution Amount for such Distribution Date;
(3) the amount to be distributed on such Distribution Date on
each Class of the Certificates of such Series to be applied to reduce
the Certificate Principal Balance of such Class, separately identifying
any portion of such amount attributable to prepayments;
(4) any other amounts to be distributed on the Certificates of
such Series (to the extent not covered by clauses (2) and (3) above);
(5) the aggregate amount of P&I Advances required to be made
by the related Servicer with respect to such Distribution Date in
connection with the related Asset Pool;
(6) the amount of any Realized Losses to be allocated to
reduce the Certificate Principal Balance of any Class of the
Certificates of such Series on such Distribution Date;
(7) the Certificate Principal Balance of each Class of the
Certificates of such Series after giving effect to the distributions
and allocations of any Realized Losses to be made on such Distribution
Date;
(8) the amount of Due Date Interest Shortfall, Soldiers' and
Sailors' Shortfall and Realized Interest Loss, in each case if any,
incurred during the related Collection Period on the related Assets;
(9) the aggregate interest remaining unpaid, if any, for each
Class of the Certificates of such Series (exclusive of Shortfall
allocated to such Class), after giving effect to the distribution made
on such Distribution Date;
(10) the aggregate amount of withdrawals, if any, from any
Reserve Fund or any other form of credit enhancement, and the amount,
if any, available thereunder;
(11) the amount of the Servicing Fee in respect of such
Distribution Date;
(12) the aggregate number and the aggregate of the Unpaid
Principal Balances of outstanding Contracts and outstanding Mortgage
Loans, stated separately, that are (i) delinquent one month (i.e., 30
to 59 days) as of the end of the related Prepayment Period, (ii)
delinquent two months (i.e., 60 to 89 days) as of the end of the
related Prepayment Period, (iii) delinquent three months (i.e., 90 days
or longer) as of the end of the related Prepayment Period and (iv) as
to which repossession, foreclosure or other comparable proceedings have
been commenced as of the end of the related Prepayment Period; and
58
<PAGE>
(13) in the case of a Trust (or designated assets thereof) for
which a REMIC election has been or will be made, any other information
required to be provided to Certificateholders by the REMIC Provisions.
In the case of information furnished pursuant to clauses (2), (3) and (4) above,
the amounts shall be expressed, with respect to any Certificate, as a dollar
amount per $1,000 denomination; provided, however, that if any Class of
Certificates does not have a Certificate Principal Balance, then the amounts
shall be expressed as a dollar amount per 10% Percentage Interest.
Events of Default
Events of Default by the Servicer under any Agreement will include (1)
any failure by the Servicer to remit funds to the Distribution Account as
required by the applicable Agreement, which failure continues unremedied for
five days (or such other period specified in the related Agreement) after the
date upon which such remittance was due; (2) any failure or breach by the
Servicer duly to observe or perform in any material respect any other of its
covenants or agreements that materially and adversely affects the interests of
Certificateholders, which, in either case, continues unremedied for 60 days
after the giving of written notice of such failure or breach to the Servicer by
the related Trustee or by the Holders of Certificates evidencing at least 25% of
the Voting Rights for the applicable Series; and (3) certain events involving
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings regarding the Servicer.
So long as an Event of Default remains unremedied, the Trustee may,
and, at the written direction of the Certificateholders of the applicable Series
evidencing greater than 50% of the Voting Rights for such Series, shall,
terminate all of the rights and obligations of the Servicer under the related
Agreement and in and to the related Contracts and Mortgage Loans and the
proceeds thereof, whereupon (subject to applicable law regarding the Trustee's
ability to make advances) the related Trustee or a successor Servicer will
succeed to all the responsibilities, duties and liabilities of the terminated
Servicer under the Agreement and such successor Servicer will be entitled to
similar compensation arrangements to those provided for the terminated Servicer.
In the event that the Trustee would be obligated to succeed the Servicer but is
unwilling or unable to do so, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor Servicer meeting the criteria
set forth in the related Agreement. Pending such appointment, the Trustee is
obligated to act as successor Servicer unless prohibited by law from doing so.
The Trustee and such successor Servicer may agree upon the servicing
compensation to be paid, which in no event may be greater than the compensation
paid to the terminated Servicer under the Agreement.
Certificateholder Rights
No Certificateholder will have any right under the related Agreement to
institute any proceeding with respect to such Agreement unless such holder
previously has provided the Trustee with written notice of a default thereunder
and unless the holders of Certificates evidencing at least 25% of the Voting
Rights for the applicable Series (a) requested the Trustee in writing to
institute such proceeding in its own name as Trustee and (b) have offered to the
Trustee reasonable indemnity and the Trustee for 15 days has neglected or
refused to institute any such proceeding. The Trustee will be under no
obligation to take any action or to institute, conduct or defend any litigation
under the related Agreement at the request, order or direction of any of the
holders of Certificates, unless such Certificateholders have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which the Trustee may incur.
59
<PAGE>
Amendment
An Agreement may be amended by the Company, the Servicer, and the
related Trustee without the consent of the related Certificateholders, (1) to
cure any ambiguity therein; (2) to correct or supplement any provision therein
that may be inconsistent with any other provision therein; (3) to maintain the
REMIC status of the Trust and to avoid the imposition of certain taxes on any
related REMIC (if applicable); or (4) to make any other provisions with respect
to matters or questions arising under such Agreement that are not covered by
such Agreement, provided that such action will not adversely affect in any
material respect the interests any holder of Certificates of the related Series,
as evidenced by (A) an opinion of counsel independent of the Company, the
Servicer and the Trustee or (B) a letter from each Rating Agency from whom the
Company requested a rating of any of the Certificates of such Series stating
that the proposed amendment will not result in a downgrading of the rating of
any of the Certificates of such Series rated by such Rating Agency. An Agreement
may also be amended by the Company, the Servicer and the related Trustee with
the consent of the related Certificateholders evidencing a majority of the
Voting Rights of each affected Class for the purpose of adding any provisions
to, or for the purpose of eliminating any provisions from, or for the purpose of
changing in any manner any of the provisions of, such Agreement, or for the
purpose of modifying in any manner the rights of the Certificateholders;
provided, however, that no such amendment that (a) reduces in any manner the
amount of, or delays the timing of, any payment received on or with respect to
Contracts or Mortgage Loans which are required to be distributed on any
Certificate; (b) otherwise materially adversely affects the rights of any
Certificateholder; or (c) reduces the percentage of Certificateholders required
to consent to any amendment of the related Agreement, may be effective without
the consent of the holder of each such Certificate.
Termination
The obligations created by each Agreement will terminate upon the date
calculated as specified in the Agreement, generally upon (1) the later of the
final payment or other liquidation of the last Contract or Mortgage Loan subject
thereto and the disposition of all property acquired upon repossession of any
Manufactured Home or foreclosure of (or other realization on) any Mortgage Loan
and (2) the payment to the related Certificateholders of all amounts held by the
Servicer or the Trustee and required to be paid to them pursuant to the
Agreement. In addition, (1) subject to the specifications in the related
Prospectus Supplement, a Trust may be subject to early termination at the option
of the Company, the Servicer or the holders of a majority in interest of any
related Residual Certificates and (2) if so specified in the related Prospectus
Supplement, the Certificates of a Series shall be subject to redemption by the
Company, the Servicer or any other party specified in the related Prospectus
Supplement, as described more fully herein under "Description of the
Certificates -- Optional Redemption or Termination."
CERTAIN LEGAL ASPECTS OF CONTRACTS AND MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of manufactured housing installment sales contracts and mortgage loans.
Because such legal aspects are governed by applicable state law (which laws may
differ substantially from state to state), the summaries do not purport to be
complete or to reflect the laws of any particular state, or to encompass the
laws of all states in which the security for the Contracts or Mortgage Loans is
situated. The summaries are qualified in their entirety by reference to the
applicable federal and state laws governing the Contracts and Mortgage Loans.
Contracts differ from Mortgage Loans in certain material respects. In
general, Contracts may experience a higher level of delinquencies than Mortgage
Loans, because the credit underwriting standards applied to borrowers under
manufactured housing installment sales contracts generally are not as stringent
as those applied to borrowers under many conventional residential first-lien
mortgage loans. See "Underwriting Policies -- Oakwood's Contract Underwriting
Guidelines" herein. In addition, Manufactured Homes generally decline in value
over time, which may not necessarily be the case with respect to the Mortgaged
Properties underlying Mortgage Loans. Consequently, the losses incurred upon
repossession of or foreclosure on Manufactured Homes securing the Contracts may
be expected to be more severe in many
60
<PAGE>
cases than the losses that would be incurred upon foreclosure on Mortgaged
Properties securing Mortgage Loans (in each case measured as a percentage of the
outstanding principal balances of the related Assets). The servicing of
manufactured housing installment sales contracts is generally similar to the
servicing of conventional residential mortgage loans, except that, in general,
servicers of manufactured housing installment sales contracts place greater
emphasis on making prompt telephone contact with delinquent borrowers than is
generally customary in the case of the servicing of conventional residential
mortgage loans. See "Sale and Servicing of Contracts and Mortgage Loans --
Servicing" herein. Realization on defaulted Contracts is generally accomplished
through repossession and subsequent resale of the underlying Manufactured Homes
by or on behalf of the Servicer, as described below under "-- The Contracts,"
whereas realization on defaulted Mortgage Loans is generally accomplished
through foreclosure on the underlying Mortgaged Properties or similar
proceedings, as described below under "-- The Mortgage Loans." Realization on
defaulted Land Secured Contracts may involve a combination of repossession and
foreclosure-related procedures. See "-- The Contracts" below. Certificates
evidencing interests in Contracts may also be subject to other risks that are
not present in the case of Certificates evidencing interests in Mortgage Loans.
See "Risk Factors -- 3. Security Interests in Manufactured Homes," "-- 4.
Conveyance of Contracts," and "-- 5. Lender Regulations" herein.
The Contracts
General. As a result of the assignment of the Contracts underlying a
Series to the related Trustee, the related Trust will succeed to all of the
rights (including the right to receive payments on the Contracts), and will
assume the obligations, of the obligee under the Contracts. Each Contract
evidences both (1) the obligation of the Obligor to repay the loan evidenced
thereby, and (2) the grant of a security interest in the related Manufactured
Home to secure repayment of such loan. Certain aspects of both features of the
Contracts are described more fully below.
The Contracts generally are "chattel paper" as defined in the Uniform
Commercial Code (the "UCC") in effect in the states in which the Manufactured
Homes initially were located. Pursuant to the UCC, the sale of chattel paper is
treated in a manner similar to perfection of a security interest in chattel
paper. Under the Agreement, the Servicer will retain possession of the Contracts
as custodian for the Trustee. Because the Servicer is not relinquishing
possession of the Contracts, the Servicer will file a UCC-1 financing statement
in the appropriate recording offices in North Carolina as necessary to perfect
the Trustee's ownership interest in the Contracts. Notwithstanding such filings,
if, through negligence, fraud or otherwise, a subsequent purchaser from the
Company or from a predecessor owner of the Contracts were able to take physical
possession of the Contracts without notice of the assignment of the Contracts to
the Trustee, the Trustee's interest in Contracts could be subordinated to the
interest of such purchaser. To provide a measure of protection against this
possibility, within ten days after the Closing Date, the Contracts will be
stamped or marked otherwise to reflect their assignment from the Company to the
Trustee.
Security Interests in the Manufactured Homes. The Manufactured Homes
securing the Contracts may be located in any or all of the 50 states and the
District of Columbia. The manner in which liens on Manufactured Homes are
"perfected" is governed by applicable state law. In many states ("Title
States"), a lien on a manufactured home may be "perfected" under applicable
motor vehicle titling statutes by notation of the secured party's lien on the
related certificate of title or by delivery of certain required documents and
payment of a fee to the state motor vehicle authority to re-register the home,
depending upon applicable state law. In some states ("UCC States"), perfection
of a lien on a manufactured home is accomplished pursuant to the provisions of
the applicable UCC by filing UCC-3 financing statements or other appropriate
transfer instruments with all appropriate UCC filing offices. Some states are
both Title States and UCC States. The Company will cause the security interests
created by the Contracts in the related Manufactured Homes to be assigned to the
Trustee on behalf of the Certificateholders. However, because of the expense and
administrative inconvenience involved, neither Oakwood nor any other Seller are
expected to amend any certificate of title to change the lienholder specified
therein from Oakwood or such Seller to the Trustee, deliver any documents or pay
fees to re-register any Manufactured Home, or file any UCC transfer instruments,
and neither Oakwood nor such Seller will deliver any certificate of title to the
Trustee or note
61
<PAGE>
thereon the Trustee's interest. In some states, simple assignment of the
security interest created by a Contract in the related Manufactured Home
constitutes an effective conveyance of such security interest without amendment
of any lien noted on the related certificate of title, re-registration of the
underlying home, or filing of any statement under the applicable UCC, and the
assignee succeeds to the seller's rights as the secured party as to such
Manufactured Home. In other states, however, the law is unclear whether a
security interest in a Manufactured Home is effectively assigned in the absence
of an amendment to a certificate of title, re-registration of the underlying
home, or the filing of an appropriate UCC transfer instrument, as appropriate
under applicable state law. In such event, the assignment of the security
interest created by a Contract in the related Manufactured Home may not be
effective against creditors of the Company or the Seller or a trustee in
bankruptcy of the Company or the Seller.
In recent years, manufactured homes have become increasingly large and
often are attached to their sites, without appearing to be readily mobile.
Perhaps in response to these trends, courts in many states have held that
manufactured homes, under certain circumstances, are subject to real estate
title and recording laws. As a result, a security interest created by an
installment sales contract in a manufactured home located in such a state could
be rendered subordinate to the interests of other parties claiming an interest
in the home under applicable state real estate law. In order to perfect a
security interest in a manufactured home under real estate laws, the holder of
the security interest must file either a "fixture filing" under the provisions
of the applicable UCC or a real estate mortgage, deed of trust, deed to secure
debt or security deed, as appropriate under the real estate laws of the state in
which the related home is located (any of the foregoing, a "Mortgage"). These
filings must be made in the real estate records office of the jurisdiction in
which the home is located. Neither Oakwood nor any other Seller will be required
to make fixture filings or to file Mortgages with respect to any of the
Manufactured Homes (except in the case of Land Secured Contracts, as described
below). Consequently, if a Manufactured Home is deemed subject to real estate
title or recording laws because the owner attaches it to its site or otherwise,
the Trustee's interest therein may be subordinated to the interests of others
that may claim an interest therein under applicable real estate laws.
The Trustee's security interest in a Manufactured Home would be
subordinate to, among others, subsequent purchasers for value of the
Manufactured Home and holders of perfected security interests therein, in either
case without notice to the Trustee's adverse interest in such home. In the
absence of fraud, forgery or affixation of the Manufactured Home to its site by
the Manufactured Home owner, or administrative error by state recording
officials, the notation of the lien of Oakwood (or another Seller) on the
related certificate of title or delivery of the required documents and fees
necessary to register the home in the name of Oakwood (or the other Seller) or
the public filing of appropriate transfer instruments reflecting the lien of
Oakwood (or another Seller), in each case as required under applicable state
law, will be sufficient to protect the Certificateholders against the rights of
subsequent purchasers of a Manufactured Home or subsequent lenders who take a
security interest in the Manufactured Home from anyone other than the entity
whose lien is perfected under state law (be it Oakwood or another Seller),
because they will be on notice of the interest in the home held by such entity.
Certain of the Contracts ("Land Secured Contracts") will be secured by
real estate as well as a Manufactured Home. The Seller will cause the liens
created by the Land Secured Contracts on the related real estate to be assigned
to the Trustee. The Contract File for each Land Secured Contract will be
required to include an original or a certified copy of the recorded Mortgage
relating to such Contract, together with originals or certified copies of a
chain of recorded assignments of such Mortgage sufficient to reflect the Seller
as the record holder of such Mortgage and the lien it evidences on the related
real estate. Assignments in recordable form for such Mortgages naming the
Trustee as assignee will not be prepared by the Servicer or any Seller. However,
the Seller will deliver to the Trustee a power of attorney entitling the Trustee
to prepare, execute and record such assignments of Mortgages, in the event that
recordation thereof becomes necessary to enable the Servicer to foreclose on the
related real property.
Under the laws of most states, in the event that a manufactured home is
moved to a state other than the state in which it initially is registered, any
perfected security interest in such home would continue automatically for four
months after such relocation, during which time the security interest must be
re-
62
<PAGE>
perfected in the new state in order to remain perfected after such four-month
period. Generally, a security interest in such a manufactured home may be
re-perfected after the expiration of such four-month period, but, for the period
between the end of such four-month period and the date of such re-perfection,
the security interest would be unperfected.
If a Manufactured Home is moved to a UCC State, an appropriate UCC
financing statement generally would have to be filed in such state within the
four-month period after the move in order for the Seller's security interest in
the Manufactured Home to remain perfected continuously. If a Manufactured Home
is moved to a Title State, re-perfection of a security interest in such home
generally would be accomplished by registering the Manufactured Home with the
Title State's motor vehicle authority. In the ordinary course of servicing its
portfolio of manufactured housing installment sales contracts, the Servicer
takes steps to re-perfect its security interests in the related manufactured
homes upon its receipt of notice of registration of such home in a new state
(which it should receive by virtue of the notation of its lien on the original
certificate of title, if the home is moved from a Title State to a Title State)
or of information from a related borrower as to relocation of such home. In some
Title States, the certificate of title to a Manufactured Home (which is required
to be in the Servicer's possession) must be surrendered before the home could be
re-registered; in such states an Obligor could not re-register a Manufactured
Home to a transferee without the Servicer's assistance. In other Title States,
when an Obligor under a Contract sells the related Manufactured Home (if it is
located in a Title State both before and after the sale), the Seller should at
least receive notice of any attempted re-registration thereof because its lien
is noted on the related certificate of title and accordingly should have the
opportunity to require satisfaction of the related Contract before releasing its
lien on the home. If the motor vehicle authority of a Title State to which a
Manufactured Home is relocated or in which a Manufactured Home is located when
it is transferred registers such Manufactured Home in the name of the owner
thereof or such owner's transferee without noting the Seller's lien on the
related certificate of title, whether because (1) such state did not require the
owner to surrender the certificate of title issued prior to the transfer or
issued by the Title State from which such home was moved or failed to notify the
Seller of re-registration and failed to note the Seller's lien on the new
certificate of title issued upon re-registration or (2) such Manufactured Home
was moved from a state that is not a Title State, such re-registration could
defeat the perfection of the Seller's lien in the Manufactured Home. In
addition, re-registration of a Manufactured Home (whether due to a transfer or
relocation thereof) in a state, such as a UCC State, which does not require a
certificate of title for registration of a Manufactured Home, could defeat
perfection of the Seller's lien thereon.
If the Seller and the Servicer are not the same entity, the Seller will
be required to report to the Servicer any notice it receives of any
re-registration of a Manufactured Home. Under the Pooling and Servicing
Agreement, the Servicer is obligated to take all necessary steps, at its own
expense, to maintain perfection of the Trustee's security interests in the
Manufactured Homes, to the extent it receives notice of relocation, sale or
re-registration thereof (provided that, as long as Oakwood remains the Servicer,
the Servicer will not be required to cause notations to be made on any
certificate of title or to execute any instrument relating to any Manufactured
Home (other than a notation or a transfer instrument necessary to show Oakwood
(or another Seller if applicable)) as the lienholder or legal titleholder).
However, the Servicer has no independent obligation to monitor the status of the
Seller's lien on any Manufactured Home.
Under the laws of most states, liens for repairs performed on a
manufactured home and for property taxes on a manufactured home take priority
even over a prior perfected security interest. Such liens could arise at any
time during the term of a Contract. No notice will be given to the Trustee or
Certificateholders in the event such a lien arises.
Enforcement of Security Interests in Manufactured Homes. The Servicer,
on behalf of the Trustee, to the extent required by the related Agreement, may
take action to enforce the Trustee's security interest with respect to Contracts
in default by repossession and resale of the Manufactured Homes securing such
defaulted Contracts. So long as the manufactured home has not become subject to
the real estate laws of a state, a creditor is entitled, in most states, to
repossess a manufactured home through the voluntary surrender thereof, by
"self-help" repossession that is "peaceful" (i.e., not including any breach of
the peace)
63
<PAGE>
or, if the creditor is unable to repossess through either of the foregoing
means, by judicial process. The holder of a Contract must give the debtor a
number of days' notice, which varies depending on the state (usually ranging
from 10 to 30 days depending on applicable state law), prior to commencement of
any repossession action. The UCC and consumer protection laws in most states
place restrictions on repossession sales; among other things, such laws require
prior notice to the debtor and commercial reasonableness in effecting such a
sale. The law in most states also requires that the debtor be given notice prior
to any resale of a repossessed home so that the debtor may redeem the home at or
before such resale. In the event of such repossession and resale of a
Manufactured Home, the Trustee would be entitled to receive the net proceeds of
such resale up to the amount of the Unpaid Principal Balance of the related
Contract plus all accrued and unpaid interest thereon at the related Contract
Rate.
Under applicable laws of most states, a creditor is entitled to obtain
a judgment against a debtor for any deficiency remaining after repossession and
resale of the manufactured home securing such debtor's loan. However, obtaining
and collecting such deficiency judgments is seldom economically feasible and,
for that reason, Oakwood generally has not attempted to obtain deficiency
judgments. In addition, some states impose prohibitions or limitations on
deficiency judgments, and certain other statutory provisions, including federal
and state bankruptcy and insolvency laws and general equitable principles, the
federal Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief
Act") and state laws affording relief to debtors, may interfere with or affect
the ability of a secured lender to repossess and resell collateral or to enforce
a deficiency judgment. For example, in certain proceedings under the federal
Bankruptcy Code, when a court determines that the value of a home is less than
the principal balance of the loan it secures, the court may prevent a lender
from repossessing or foreclosing on the home, and, as part of the debtor's
rehabilitation plan, reduce the amount of the secured indebtedness to the value
of the home as it exists at the time of the proceeding, leaving the lender as a
general unsecured creditor for the difference between that value and the amount
of outstanding indebtedness. A bankruptcy court may grant the debtor a
reasonable time to cure a payment default, and in the case of a manufactured
housing installment sales contract not secured by the debtor's principal
residence, also may reduce the monthly payments due under such contract, change
the rate of interest and alter the repayment schedule. Certain court decisions
have applied such relief to claims secured by the debtor's principal residence.
If a court relieves an Obligor's obligation to repay all or any portion of the
amounts otherwise due on a Contract, the Servicer will not be required to
advance such amounts, and any loss in respect thereof may reduce amounts
available for distribution on the related Certificates.
Under the terms of the federal Relief Act, an Obligor who enters
military service after the origination of such Obligor's Contract (including an
Obligor who is a member of the National Guard or who is in reserve status at the
time of the origination of the Contract and is later called to active duty) may
not be charged interest above an annual rate of 6.00% during the period of such
Obligor's active duty status, unless a court orders otherwise upon application
of the lender. It is possible that such action could have an effect, for an
indeterminate period of time, on the ability of the Servicer to collect full
amounts of interest on certain of the Contracts. Any shortfall in interest
collections resulting from the application of the Relief Act, to the extent not
covered by the subordination of a Class of Subordinated Certificates, could
result in losses to Certificateholders. In addition, the Relief Act imposes
limitations which would impair the ability of the Servicer to repossess or
foreclose on the Manufactured Home securing an affected Contract during the
Obligor's period of active duty status. Thus, in the event that such a Contract
goes into default, there may be delays and losses occasioned by the inability to
liquidate the related Manufactured Home in a timely fashion.
Because of certain requirements of the REMIC Provisions, a Trust as to
which a REMIC election has been made generally must dispose of any related
Manufactured Homes acquired pursuant to repossession, foreclosure, or similar
proceedings within two years after acquisition. Consequently, if the Servicer,
acting on behalf of the Trust, is unable to sell a Manufactured Home in the
course of its ordinary commercial practices within 22 months after its
acquisition thereof (or a longer period as permitted by the Pooling and
Servicing Agreement), the Servicer will auction such home to the highest bidder
(which bidder may be the Servicer) in an auction reasonably designed to produce
a fair price. There can be no assurance that the price
64
<PAGE>
for any Manufactured Home would not be substantially lower than the Unpaid
Principal Balance of the Contract relating thereto. In fact, manufactured homes,
unlike site-built homes, generally depreciate in value, and it has been
Oakwood's experience that, upon repossession and resale, the amount recoverable
on a manufactured home securing an installment sales contract is generally lower
than the principal balance of the contract.
Foreclosure under Real Property Laws. If a Manufactured Home has become
attached to real estate to a degree such that the home would be treated as real
property under the laws of the state in which it is located, it may not be
legally permissible for the Servicer to repossess the home under the provisions
of the UCC or other applicable personal property laws. If so, the Servicer could
obtain possession of the home only pursuant to real estate mortgage foreclosure
laws. See "-- The Mortgage Loans -- Foreclosure" below. In addition, in order to
realize upon the Real Property securing any Land Secured Contract, the Servicer
must proceed under applicable state real estate mortgage foreclosure laws. The
requirements that the Servicer must meet in order to foreclose on the Real
Property securing a Land Secured Contract, and the restrictions on such
foreclosure, are identical to the requirements and restrictions that would apply
to foreclosure of any Mortgage Loan. For a description of such foreclosure, see
"-- The Mortgage Loans" below. Mortgage foreclosure generally is accomplished
through judicial action, rather than by private action as permitted under
personal property laws, and real estate laws generally impose stricter notice
requirements and require public sale of the collateral. In addition, real estate
mortgage foreclosure is usually far more time-consuming and expensive than
repossession under personal property laws, and applicable real estate law
generally affords debtors many more protections than are provided under personal
property laws. Rights of redemption under real estate laws generally are more
favorable to debtors than they are under personal property laws, and in many
states antideficiency judgment legislation will be applicable in the real estate
foreclosure context even if it would not apply to repossessions under personal
property laws. If real estate laws apply to a Manufactured Home, to the extent
the Seller has not perfected its security interest in a Manufactured Home under
applicable real estate laws, the Seller's security interest in such Manufactured
Home would be subordinate to a lien on such home recorded pursuant to applicable
real estate laws.
Consumer Protection Laws. The so-called "Holder-in-Due-Course" rule of
the Federal Trade Commission is intended to prevent a seller of goods pursuant
to a consumer credit contract (and certain related lenders and assignees) from
transferring such contract free of claims by the debtor thereunder against the
seller. The effect of this rule is to subject the assignee of a consumer credit
contract to all claims and defenses that the debtor could have asserted against
the seller under the contract. Assignee liability under this rule (which would
be applicable to the Trust, as assignee of the Contracts) is limited to amounts
paid by the debtor under the assigned contract; however, a borrower also may
assert the rule to set off remaining amounts due under such a contract as a
defense against a claim brought by the assignee of such contract against such
borrower. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and lending pursuant to the
Contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Magnuson-Moss Warranty -- Federal Trade Commission Improvement Act, the Fair
Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection
Practices Act and the Uniform Consumer Credit Code. The failure of the
originator of a Contract to have complied with the provisions of some of these
laws may result in liability of the related Trust to the Obligor thereunder or
in a reduction of the amount payable under such Contract. However, each Seller
(a) will be required to represent and warrant that each Contract it sells to the
Company complied, at the time of its origination, with all requirements of law
and (b) will be required to make certain representations and warranties as to
each Contract to be included in an Asset Pool concerning the validity,
existence, perfection and priority of its security interest in each underlying
Manufactured Home as of the related Cut-off Date. A breach of any such
representation or warranty that materially and adversely affects a Trust's
interest in any Contract would create an obligation on the part of the related
Seller to use its best efforts to cure such breach to the satisfaction of the
Trustee or to repurchase such Contract. Nevertheless, this requirement may not
eliminate the Trust's liability to an Obligor.
Transfers of Manufactured Homes; Enforceability of "Due-on-Sale"
Clauses. The Contracts, in general, prohibit the sale or transfer of the related
Manufactured Homes without the consent of the Servicer and
65
<PAGE>
permit the acceleration of the maturity of the Contracts by the Servicer upon
any such sale or transfer to which consent has not been obtained. The Servicer
will act in accordance with its customary underwriting procedures and with the
terms of the related Pooling and Servicing Agreement in determining whether to
permit such transfers in respect of Contracts included in an Asset Pool. The
Servicer will require, among other things, a satisfactory credit review of any
person proposing to assume any Contract. If the Servicer permits an assumption
of a Contract, no material term of the Contract (including the interest rate or
the remaining term to maturity of the Contract) may be modified unless the
Servicer has received an opinion of independent counsel to the effect that such
modification will not be treated, for federal income tax purposes, as an
acquisition of the modified Contract by the Trust in exchange for the unmodified
Contract on the date the modification occurs. In certain cases, a delinquent
borrower may transfer his or her manufactured home in order to avoid a
repossession proceeding with respect to such manufactured home.
Applicability of Usery Laws. Title V of the Depository Institutions
Deregulation and Monetary Control Act of 1980, as amended ("Title V"), provides,
subject to certain conditions described in the next sentence, that state usury
limitations shall not apply to any loan that is secured by a first lien on
certain kinds of manufactured housing. The Contracts would be covered under
Title V if they satisfy certain conditions governing, among other things, the
terms of any prepayments, late charges and deferral fees and requiring 30 days'
prior notice before the institution of any action leading to repossession of or
foreclosure with respect to the related manufactured home.
Title V authorized any state to reimpose limitations on interest rates
and finance charges by adopting a law or constitutional provision which
expressly rejects application of the federal law before April 1, 1983. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition, even
where Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.
The Servicer will represent that all of the Contracts comply with applicable
usury laws.
The Mortgage Loans
General. Mortgage Loans as described herein are distinct from Land
Secured Contracts (which are discussed above under "-- The Contracts --
Foreclosure under Real Property Laws"). A Mortgage Loan is secured by a
Mortgaged Property on which a one- to four-family residential structure is
located, whereas a Land Secured Contract is secured primarily by a Manufactured
Home and is secured only secondarily by a parcel of Real Property.
The Mortgage Loans will be secured by either first mortgages, deeds of
trust, deeds to secure debt or security deeds (any of the foregoing, a
"Mortgage"), depending upon the prevailing practice in the state in which the
underlying Mortgaged Property is located. A mortgage creates a lien upon the
real property described in the mortgage. There are two parties to a mortgage:
the mortgagor, who is the obligor, and the mortgagee, who is the lender. Under a
first mortgage, the mortgagor delivers to the mortgagee a note or bond
evidencing the loan and the mortgage. Although a deed of trust is similar to a
mortgage, a deed of trust has three parties; the borrower, a lender as
beneficiary, and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid, in
trust, generally with a power of sale, to the trustee to secure payment of the
loan. The trustee's authority under a deed of trust and the mortgagee's
authority under a mortgage are governed by the express provisions of the deed of
trust or mortgage, applicable law, and, in some cases, with respect to the deed
of trust, the directions of the beneficiary.
Foreclosure. Foreclosure of a mortgage is generally accomplished by
judicial action. Generally, the action is initiated by the service of legal
pleadings upon all parties having an interest of record in the Mortgaged
Property. Delays in completion of the foreclosure occasionally may result from
difficulties in locating necessary parties. When the mortgagee's right to
foreclosure is contested, the legal proceedings necessary to resolve the issue
can be time-consuming. After the completion of a judicial foreclosure
proceeding, the court may issue a judgment of foreclosure and appoint a receiver
or other officer to conduct
66
<PAGE>
the sale of the property. In some states, mortgages may also be foreclosed by
advertisement, pursuant to a power of sale provided in the mortgage. Foreclosure
of a mortgage by advertisement is essentially similar to foreclosure of a deed
of trust by non-judicial power of sale as discussed below.
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust that
authorizes the trustee to sell the property to a third party upon any default by
the borrower under the terms of the related note or the deed of trust. In
certain states, such foreclosure also may be accomplished by judicial action in
the manner provided for foreclosure of mortgages. In some states the trustee
must record a notice of default and send a copy to the borrower-trustor and to
any person who has recorded a request for a copy of a notice of default and
notice of sale. In addition, the trustee must provide notice in some states to
any other individual having an interest of record in the underlying real
property, including any junior lienholders. If the deed of trust is not
reinstated within any applicable cure period, a notice of sale must be posted in
a public place and, in most states, must be published for a specified period of
time in one or more newspapers. In addition, some state laws require that a copy
of the notice of sale be posted on the property and sent to all parties having
an interest of record in the property. In some states, the borrower has the
right to reinstate the loan at any time following default until shortly before
the trustee's sale. See "-- Rights of Reinstatement and Redemption" below.
In the case of foreclosure under either a mortgage or a deed of trust,
the sale by the receiver or other designated officer, or by the trustee, is a
public sale. However, because of the difficulty a potential buyer at the sale
would have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is not common for a third party to purchase the property at the
foreclosure sale. Rather, the lender generally purchases the property from the
trustee or receiver for an amount which may be as great as (but is more often
somewhat less than) the unpaid principal amount of the note, accrued and unpaid
interest and the expenses of foreclosure. Thereafter, subject to the right of
the obligor in some states to remain in possession during the redemption period,
the lender will assume the burdens of ownership, including obtaining hazard
insurance and making such repairs at its own expense as are necessary to render
the property suitable for sale. The lender commonly will obtain the services of
a real estate broker and pay the broker a commission in connection with the sale
of the property. Depending upon market conditions, the ultimate proceeds of the
sale of the property may not equal the lender's investment in the property. Any
loss with respect to a Mortgage Loan may be reduced by the receipt of mortgage
insurance proceeds. See "The Trusts -- Insurance -- Credit Insurance" and "The
Trusts -- Insurance -- Hazard Insurance" herein.
Courts have imposed general equitable principles upon foreclosure.
These equitable principles are generally designed to relieve obligors from the
legal effect of defaults under the loan documents. Examples of judicial remedies
that may be fashioned include judicial requirements that the lender undertake
affirmative actions to determine the causes for the obligor's default and the
likelihood that the obligors will be able to reinstate the loan. In some cases,
courts have required lenders to reinstate loans or recast payment schedules to
accommodate obligors who are suffering temporary financial disabilities. In some
cases, courts have limited the right of a lender to foreclose if the default
under the related mortgage instrument is not monetary, such as a default arising
from the obligor's failure to maintain the property adequately or the obligor's
executing a second mortgage or deed of trust affecting the property. In other
cases, some courts have been faced with the issue whether federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that obligors under deeds of trust receive notices in addition to
statutorily-prescribed minimum requirements. For the most part, these cases have
upheld state statutory notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust or under a mortgage having a power
of sale does not involve sufficient state action to afford constitutional
protections to the obligor.
Rights of Reinstatement and Redemption. In some states, an obligor, or
any other person having a junior encumbrance on the related real estate, may,
during a reinstatement or redemption period, cure an obligor default by paying
the entire amount in arrears plus certain of the costs and expenses incurred by
or on behalf of the lender in attempting to enforce the obligor's obligation.
Certain state laws control the
67
<PAGE>
amount of foreclosure expenses and costs, including attorneys' fees, which may
be recovered by a lender. In some states, an obligor under a mortgage loan has
the right to reinstate the loan at any time following default until shortly
before the foreclosure sale.
In some states, after sale pursuant to a deed of trust or foreclosure
of a mortgage, the related obligor and certain foreclosed junior lienors are
given a statutory period in which to redeem the related property from the
foreclosure sale. In certain other states, this right of redemption applies only
to sale following judicial foreclosure, and not to sale pursuant to a
non-judicial power of sale. In most states where the right of redemption is
available, statutory redemption may occur upon payment of the foreclosure
purchase price, accrued interest and taxes. The effect of a right of redemption
is to diminish the ability of the lender to sell the foreclosed property that it
purchased. The exercise of a right of redemption would defeat the title of any
purchaser at a foreclosure sale, or of any purchaser from the lender subsequent
to its purchase of the related property at a judicial foreclosure sale or sale
under a deed of trust. Consequently, the practical effect of the redemption
right is to force the lender (or other purchaser of property at a foreclosure
sale) to maintain the property and pay the expenses of ownership until the
redemption period has run.
Anti-Deficiency Legislation and Other Limitations on Lenders. Certain
states have imposed statutory restrictions that limit the remedies of a
beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against a borrower following foreclosure on the related
property or sale of the related property under a deed of trust. A deficiency
judgment is a personal judgment against the obligor equal in most cases to the
difference between the amount due to the lender and the greater of the net
amount realized upon the foreclosure sale or the market value of the related
mortgaged property.
Some state statutes may require the beneficiary or mortgagee to exhaust
the security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
obligor. In certain other states, the lender has the option of bringing a
personal action against the obligor on the debt without first exhausting such
security; however, in some of these states, the lender, following judgment on
such personal action, may be deemed to have elected a remedy and may be
precluded from exercising other remedies with respect to such security.
Consequently, the practical effect of the election requirement, when applicable,
is that lenders will usually proceed first against the security for a mortgage
or deed of trust rather than bringing a personal action against the obligor.
Other statutory provisions may limit any deficiency judgment against
the former obligor under a mortgage loan following a foreclosure sale to the
excess of the outstanding debt over the fair market value of the property at the
time of such sale. The purpose of these statutes is to prevent a beneficiary or
a mortgagee from obtaining a large deficiency judgment against the former
obligor as a result of low or no bids at the foreclosure sale or sale pursuant
to a deed of trust.
In some states, exceptions to the anti-deficiency statutes are provided
in certain instances where the value of the lender's security has been impaired
by acts or omissions of the obligor, for example, in the event of waste of the
property by the obligor.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal and state
bankruptcy and insolvency laws and general equitable principles, the federal
Relief Act and state laws affording relief to debtors, may interfere with or
affect the ability of a secured mortgage lender to realize upon its security.
For example, in certain proceedings under the federal Bankruptcy Code, when a
court determines that the value of a home is less than the principal balance of
the loan it secures, the court may prevent a lender from foreclosing on the
home, and, as part of the debtor's rehabilitation plan, reduce the amount of the
secured indebtedness to the value of the home as it exists at the time of the
proceeding, leaving the lender as a general unsecured creditor for the
difference between that value and the amount of outstanding indebtedness. A
bankruptcy court may grant the debtor a reasonable time to cure a payment
default, and in the case of a mortgage loan not secured by the debtor's
principal residence, also may reduce the monthly payments due under such
mortgage loan, change the rate of interest
68
<PAGE>
and alter the mortgage loan repayment schedule. Certain court decisions have
applied such relief to claims secured by the debtor's principal residence. If a
court relieves an Obligor's obligation to repay all or any portion of the
amounts otherwise due on a Mortgage Loan, the Servicer will not be required to
advance such amounts, and any loss in respect thereof may reduce amounts
available for distribution on the related Certificates.
Under the terms of the federal Relief Act, an obligor who enters
military service after the origination of such obligor's Mortgage Loan
(including an obligor who is a member of the National Guard or who is in reserve
status at the time of the origination of the Mortgage Loan and is later called
to active duty) may not be charged interest above an annual rate of 6.00% during
the period of such obligor's active duty status, unless a court orders otherwise
upon application of the lender. It is possible that such action could have an
effect, for an indeterminate period of time, on the ability of the Servicer to
collect full amounts of interest on certain of the Mortgage Loans. Any shortfall
in interest collections resulting from the application of the Relief Act, to the
extent not covered by the subordination of a Class of Subordinated Certificates,
could result in losses to Certificateholders. In addition, the Relief Act
imposes limitations which would impair the ability of the Servicer to foreclose
on an affected Mortgage Loan during the obligor's period of active duty status.
Thus, in the event that such a Mortgage Loan goes into default, there may be
delays and losses occasioned by the inability to liquidate the related Mortgaged
Property in a timely fashion.
The Internal Revenue Code of 1986, as amended (the "Code") and the laws
of some states provide priority to certain tax liens over the lien of a mortgage
or deed of trust. Numerous federal and some state consumer protection laws
impose substantive requirements upon mortgage lenders in connection with the
origination, servicing and the enforcement of mortgage loans. These laws include
the federal Truth in Lending Act, Real Property Settlement Procedures Act, Equal
Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act, and
related statutes and regulations. These federal laws and state laws impose
specific statutory liabilities upon lenders who originate or service mortgage
loans and who fail to comply with the provisions of the law. In some cases, this
liability may affect the lender's assignees as to the mortgage loans.
"Due-on-Sale" Clauses. The forms of note, mortgage and deed of trust
relating to conventional Mortgage Loans may contain a "due-on-sale" clause
permitting acceleration of the maturity of a loan if the Mortgagor transfers its
interest in the underlying property. In recent years, court decisions and
legislative actions placed substantial restrictions on the right of lenders to
enforce such clauses in many states. However, effective October 15, 1982,
Congress enacted the Garn-St Germain Act, which purports to pre-empt state laws
that prohibit the enforcement of "due-on-sale" clauses and provides, among other
things, that "due-on-sale" clauses in certain loans (which loans include the
Conventional Mortgage Loans) made after the effective date of the Garn-St
Germain Act are enforceable, within certain limitations as set forth in the
Garn-St Germain Act and the regulations promulgated thereunder.
By virtue of the Garn-St Germain Act, the Servicer may generally be
permitted to accelerate any conventional Mortgage Loan which contains a
"due-on-sale" clause upon transfer by the Obligor of an interest in the property
subject to the related mortgage or deed of trust. With respect to any Mortgage
Loan secured by a residence occupied or to be occupied by the mortgagor, this
ability to accelerate will not apply to certain types of transfers, including
(1) the granting of a leasehold interest which has a term of three years or less
and which does not contain an option to purchase; (2) a transfer to a family
relative resulting from the death of a mortgagor, or a transfer where the spouse
or child(ren) becomes an owner of the property in each case where the
transferee(s) will occupy the property; (3) a transfer resulting from a decree
of dissolution of marriage, legal separation agreement or from an incidental
property settlement agreement by which the spouse of the mortgagor becomes an
owner of the property; (4) the creation of a lien or other encumbrance
subordinate to the lender's security instrument which does not relate to a
transfer of rights of occupancy in the property (provided that such lien or
encumbrance is not created pursuant to a contract for deed); (5) a transfer by
devise, descent or operation of law on the death of a joint tenant or tenant by
the entirety; and (6) other transfers as set forth in the Garn-St Germain Act
and the regulations thereunder. FHA and VA loans do not contain "due-on-sale"
clauses. See "Maturity and Prepayment Considerations" herein.
69
<PAGE>
Adjustable Rate Assets. 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 Trustee under a deed of trust arrangement 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 its ability to
foreclose on the related Mortgaged Property and to certain contractual defenses
available to the related Obligor.
Environmental Considerations
Real property pledged as security to a lender 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 secure recovery of the costs
of clean-up. 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, as amended ("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 securing a mortgage
loan owned by such lender, if agents or employees of the lender have become
sufficiently involved in the operations of the related obligor, regardless of
whether or not the environmental damage or threat was caused by such lender's
obligor or by a prior owner. A lender also risks such liability arising out of
foreclosure of a mortgaged property securing a mortgage loan owned by such
lender. Until recent legislation was adopted, it was uncertain what actions
could be taken by a secured lender in the event of a loan default without it
incurring exposure under CERCLA in the event the property was environmentally
contaminated. The Asset Conservation, Lender Liability and Deposit Insurance Act
of 1996 (the "1996 Lender Liability Act") provides for a safe harbor for secured
lenders from CERCLA liability even though the lender forecloses and sells the
real estate securing the loan, provided the secured lender sells "at the
earliest practicable, commercially reasonable time, at commercially reasonable
terms, taking into account market conditions and legal and regulatory
requirements." Although the 1996 Lender Liability Act provides significant
protection to secured lenders, it has not been construed by the courts, and
there are circumstances in which actions taken could expose a secured lender to
CERCLA liability. And, the transferee from the secured lender is not entitled to
the protections enjoyed by a secured lender. Thus, contamination may decrease
the amount that prospective buyers are willing to pay for a Mortgaged Property
and, thus, decrease the likelihood that the Trust will recover fully on the
Mortgage Loan through foreclosure.
Application of environmental laws other than CERCLA could also result
in the imposition of liability on lenders for costs associated with
environmental hazards. The most significant of these other laws is the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), and state regulatory
programs implemented thereunder. Subtitle I of RCRA imposes cleanup liabilities
on owners or operators of underground storage tanks. Some states also impose
similar liabilities on owners and operators of aboveground storage tanks. The
definition of "owner" under RCRA Subtitle I contains a security interest
exemption nearly identical to the CERCLA security interest exemption. However,
as with CERCLA costs, it is possible that such costs, if imposed in connection
with a Mortgage Loan or a Land Secured Contract included in a Trust Estate,
could become a liability of the related Trust in certain circumstances.
At the time the Mortgage Loans or Land Secured Contracts underlying a
Series were originated, it is possible that no environmental assessment or a
very limited environmental assessment of the related Mortgaged Properties or
Real Properties was conducted. No representations or warranties are made by the
Seller of Mortgage Loans or Contracts (including Land Secured Contracts) as to
the absence or effect of hazardous wastes or hazardous substances on any of the
related Mortgaged Properties or Real Properties. In addition, the Servicer has
not made any representations or warranties or assumed any liability with respect
to the absence or effect of hazardous wastes or hazardous substances on any
Mortgaged Property or Real Property or any casualty resulting from the presence
or effect of hazardous wastes or hazardous substances on any Mortgaged Property
or Real Property, and any loss or liability resulting from the presence or
effect of such hazardous wastes or hazardous substances will reduce the amounts
otherwise available to pay to the holders of the related Certificates.
70
<PAGE>
Pursuant to the Standard Terms, the Servicer is not required to
foreclose on any Mortgaged Property or Real Property if one of its principal
officers has actual knowledge that such property is contaminated with or
affected by hazardous wastes or hazardous substances. If the Servicer does not
foreclose on the Mortgaged Property underlying a defaulted Mortgage Loan or the
Real Property securing a Land Secured Contract, the amounts otherwise available
to pay to the holders of the Certificates may be reduced. The Servicer will not
be liable to the holders of the Certificates if it fails to foreclose on a
Mortgaged Property or Real Property that it believes may be so contaminated or
affected, even if such Mortgaged Property or Real Property is, in fact, not so
contaminated or affected. Similarly, the Servicer will not be liable to the
holders of any Certificates if the Servicer forecloses on a Mortgaged Property
or Real Property and takes title to a Mortgaged Property or Real Property that
is so contaminated or affected.
Enforceability of Certain Provisions
The standard forms of Contract, Note, mortgage and deed of trust used
by the originators of Contracts and Mortgage Loans may contain provisions
obligating the Obligor to pay a late charge if payments are not timely made and
in some circumstances may provide for prepayment fees or penalties if the
obligation is paid prior to maturity. In certain states, there are or may be
specific limitations upon 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. Under each Agreement, late charges and prepayment fees on Assets in the
related Trust Estate (to the extent permitted by law and not waived by the
Servicer) will be retained by the Servicer as additional servicing compensation.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
each Series of Certificates will be used to purchase the Contracts and Mortgage
Loans related to such Series or to reimburse the amounts previously used to
effect such a purchase, the costs of carrying such Contracts and Mortgage Loans
until the sale of the related Certificates and other expenses connected with
pooling the Contracts and Mortgage Loans and issuing the Certificates.
THE COMPANY
Oakwood Mortgage Investors, Inc. (the "Company") was incorporated in
the State of North Carolina on August 26, 1994 as a wholly-owned, limited
purpose finance subsidiary of Oakwood Acceptance Corporation ("Oakwood").
Oakwood is a wholly-owned subsidiary of Oakwood Homes Corporation ("Oakwood
Homes"). The Company maintains its principal office adjacent to those of
Oakwood, at 7800 McCloud Road, Greensboro, North Carolina 27409-9634. Its
telephone number is (336) 664-2400.
As described herein under "The Trusts," "Underwriting Policies," and
"Sale and Servicing of Contracts and Mortgage Loans -- Representations and
Warranties," the only obligations, if any, of the Company with respect to a
Series of Certificates may be pursuant to certain limited representations and
warranties and limited undertakings to repurchase or substitute Contracts or
Mortgage Loans under certain circumstances. The Company will have no ongoing
servicing obligations or responsibilities with respect to any Asset Pool. The
Company does not have, nor is it expected in the future to have, any significant
assets.
Neither the Company nor any Underwriter nor any of their affiliates
will insure or guarantee the Certificates of any Series.
71
<PAGE>
THE SERVICER
Oakwood Acceptance Corporation ("Oakwood" or, in its capacity as
servicer, the "Servicer") was incorporated in 1984 in the State of North
Carolina as a wholly-owned subsidiary of Oakwood Homes. Oakwood is primarily
engaged in the business of underwriting, originating, pooling, selling and
servicing installment sales contracts for the sale of manufactured housing.
Oakwood's principal offices are located at 7800 McCloud Road, Greensboro, North
Carolina 27409-9634 (telephone 336/664-2500).
Oakwood underwrites and funds the origination of manufactured housing
contracts on an individual basis from its principal office and from one or more
additional loan origination offices. Contracts for the financing of sales of
manufactured homes through Oakwood are typically originated in the name of
Oakwood Mobile Homes, Inc., a wholly-owned retailing subsidiary of Oakwood Homes
("OMH"), or by a third party manufactured housing dealer, and are assigned to
Oakwood following origination, although some Contracts are originated directly
in Oakwood's name. Oakwood underwrites all such contracts. From time to time,
Oakwood purchases seasoned portfolios of manufactured housing contracts from
third parties.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the anticipated material
federal income tax consequences of the purchase, ownership and disposition of
the Certificates offered hereunder. The summary is based upon laws, regulations,
rulings, and decisions now in effect, all of which are subject to change.
Because REMIC status may be elected with respect to certain Series of
Certificates, the discussion includes a summary of the federal income tax
consequences to holders of REMIC Certificates.
The discussion does not purport to deal with the federal income tax consequences
to all categories of investors (such as banks, insurance companies and foreign
investors), some of which may be subject to special rules.
The discussion focuses primarily on investors who will hold the
Certificates as "capital assets" (generally, property held for investment)
within the meaning of section 1221 of the Code, although much of the discussion
is applicable to other investors as well. Investors should note that, although
final regulations under the REMIC Provisions have been issued by the Treasury,
no currently effective regulations or other administrative guidance has been
issued with respect to certain provisions of the Code that are or may be
applicable to Certificateholders, particularly the provisions dealing with
market discount and stripped debt instruments. Although the Treasury recently
issued final regulations dealing with original issue discount and premium, those
regulations do not address directly the treatment of Regular Certificates and
certain other types of Certificates. Furthermore, the REMIC Provisions do not
address all of the issues that arise in connection with the formation and
operation of a REMIC. Hence, definitive guidance cannot be provided with respect
to many aspects of the tax treatment of Certificateholders.
Moreover, this summary and the opinion referred to below is based on
current law, and there can be no assurance that the law will not change or that
the Internal Revenue Service (the "Service") will not take positions that would
be materially adverse to investors. Finally, the summary does not purport to
address the anticipated state income tax consequences to investors of owning and
disposing of the Certificates. Consequently, investors should consult their own
tax advisors in determining the federal, state, local, and any other tax
consequences to them of the purchase, ownership, and disposition of the
Certificates.
72
<PAGE>
General
Many aspects of the federal income tax treatment of the Certificates of
a particular Series will depend upon whether an election is made to treat the
Trust, or one or more segregated Asset Pools thereof, as a Series REMIC. The
Prospectus Supplement for each Series will indicate whether a REMIC election or
elections will be made with respect to the related Trust Estate and, if such an
election or elections are to be made, will identify all "regular interests" and
the "residual interest" in each Series REMIC. For each Series with respect to
which one or more REMIC elections are to be made, Hunton & Williams, counsel to
the Company, will deliver a separate opinion generally to the effect that,
assuming timely filing of the REMIC election or elections and compliance with
the related Pooling and Servicing Agreement and certain other documents
specified in the opinion, the Trust (or one or more segregated Asset Pools
thereof) will qualify as one or more Series REMICs. For each Series with respect
to which a REMIC election is not to be made, Hunton & Williams will deliver a
separate opinion generally to the effect that, assuming compliance with the
Pooling and Servicing Agreement and certain other documents, the Trust will be
treated as a grantor trust under subpart E, Part I of subchapter J of the Code
and not as an association taxable as a corporation. Those opinions will be based
on existing law and there can be no assurance that the law will not change or
that contrary positions will not be taken by the Service.
REMIC Certificates
REMIC Certificates will be classified as either Regular Certificates,
which generally are treated as debt for federal income tax purposes, or Residual
Certificates, which generally are not treated as debt for such purposes, but
rather as representing rights and responsibilities with respect to the taxable
income or loss of the related Series REMIC. The Prospectus Supplement for each
Series of Certificates will indicate whether one or more REMIC elections will be
made for that Series and which of the Certificates of such Series will be
designated as Regular Certificates, and which will be designated as Residual
Certificates.
REMIC Certificates held by a REIT generally will qualify as "real
estate assets" within the meaning of section 856(c)(4)(A) of the Code, and
interest on such Certificates generally will be considered Qualifying REIT
Interest, in the same proportion that the assets of the related Series REMIC
would qualify as real estate assets for REIT purposes. Similarly, REMIC
Certificates held by a Thrift Institution taxed as a "domestic building and loan
association" generally will qualify as a "loan secured by an interest in real
property," for purposes of the qualification requirements of domestic building
and loan associations set forth in section 7701(a)(19) of the Code, in the same
proportion that the assets of the related Series REMIC would so qualify.
However, if 95% or more of the assets of a given Series REMIC constitute real
estate assets for REIT purposes, the REMIC Certificates issued by such REMIC
will be treated entirely as such assets and 100% of the interest income derived
from such REMIC will be treated as Qualifying REIT Interest. Similarly, if 95%
or more of the assets of a given Series REMIC constitute loans secured by
interests in real property, the REMIC Certificates will be treated entirely as
such assets for purposes of the qualification requirement of domestic building
and loan associations. REMIC Regular and Residual Certificates held by a
financial institution to which Section 585 of the Code applies will be treated
as evidences of indebtedness for purposes of Section 582(c)(1) of the Code. The
Regular Certificates generally will be "qualified mortgages" within the meaning
of Section 860G(a)(3) of the Code with respect to other REMICs. Regular
Certificates held by a financial asset securitization investment trust (a
"FASIT") generally will qualify for treatment as "permitted assets" within the
meaning of Section 860L(c)(1)(G) of the Code. In the case of a Series for which
two or more REMICs will be created, all such Series REMICs will be treated as a
single REMIC for purposes of determining the extent to which the related
Certificates and the income thereon will be treated as qualifying assets and
income for such purposes. However, REMIC Certificates will not qualify as
"Government securities" for either REIT or RIC qualification purposes.
73
<PAGE>
Tax Treatment of Regular Certificates
Payments received by holders of Regular Certificates generally should
be accorded the same tax treatment under the Code as payments received on other
taxable corporate debt instruments. Except as described below for Regular
Certificates issued with original issue discount or acquired with market
discount or premium, interest paid or accrued on a Regular Certificate will be
treated as ordinary income to the Certificateholder and a principal payment on
such Certificate will be treated as a return of capital to the extent that the
Certificateholder's basis in the Certificate is allocable to that payment.
Holders of REMIC Regular or Residual Certificates must report income from such
Certificates under an accrual method of accounting, even if they otherwise would
have used the cash receipts and disbursements method. The Tax Administrator, the
Servicer or the Trustee will report annually to the Service and to
Certificateholders of record with respect to interest paid or accrued and
original issue discount, if any, accrued on the Certificates.
Under temporary Treasury regulations, holders of Regular Certificates
issued by "single-class REMICs" who are individuals, trusts, estates, or
pass-through entities in which such investors hold interests may be required to
recognize certain amounts of income in addition to interest and discount income.
A single-class REMIC, in general, is a REMIC that (i) would be classified as an
investment trust in the absence of a REMIC election or (ii) is substantially
similar to an investment trust. Under the temporary Treasury regulations, each
holder of a regular or residual interest in a single-class REMIC is allocated
(i) a share of the REMIC's "allocable investment expenses" (i.e., expenses
normally allowable under section 212 of the Code, which may include servicing
and administrative fees and insurance premiums) and (ii) a corresponding amount
of additional income. Section 67 of the Code permits an individual, trust or
estate to deduct miscellaneous itemized expenses (including expenses allowable
under section 212 of the Code) only to the extent that such expenses, in the
aggregate, exceed 2% of its adjusted gross income. Consequently, an individual,
trust or estate that holds a regular interest in a single-class REMIC (either
directly or through a pass-through entity) will recognize additional income with
respect to such regular interest to the extent that its share of allocable
investment expenses, when combined with its other miscellaneous itemized
deductions for the taxable year, fails to exceed 2% of its adjusted gross
income. Any such additional income will be treated as interest income. In
addition, Code section 68 provides that the amount of itemized deductions
otherwise allowable for the taxable year for an individual whose adjusted gross
income exceeds the applicable amount ($100,000, or $50,000 in the case of a
separate return by a married individual within the meaning of Code section 7703
for taxable year 1991 and adjusted for inflation each year thereafter) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over the
applicable amount, or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year. The amount of such additional taxable income
recognized by holders who are subject to the limitations of either section 67 or
section 68 of the Code may be substantial and may reduce or eliminate the
after-tax yield to such holders of an investment in the Certificates of an
affected Series. Where appropriate, the Prospectus Supplement for a particular
Series will indicate that the holders of Certificates of such Series may be
required to recognize additional income as a result of the application of the
limitations of either section 67 or section 68 of the Code. Non-corporate
holders of Regular Certificates evidencing an interest in a single-class REMIC
also should be aware that miscellaneous itemized deductions, including allocable
investment expenses attributable to such REMIC, are not deductible for purposes
of the alternative minimum tax.
Original Issue Discount
Certain Classes of Regular Certificates may be issued with "original
issue discount" within the meaning of section 1273(a) of the Code. In general,
such original issue discount will equal the difference between the "stated
redemption price at maturity" of the Regular Certificate (generally, its
principal amount) and its issue price. Holders of Regular Certificates as to
which there is original issue discount should be aware that they generally must
include original issue discount in income for federal income tax purposes on an
annual basis under a constant yield accrual method that reflects compounding. In
general, original issue discount is treated as ordinary interest income and must
be included in income in advance of the receipt of the cash to which it relates.
74
<PAGE>
The amount of original issue discount required to be included in the
income of the holder of a Regular Certificate in any taxable year will be
computed in accordance with section 1272(a)(6) of the Code, which provides rules
for the accrual of original issue discount under a constant yield method for
certain debt instruments, such as the Regular Certificates, that are subject to
prepayment by reason of the prepayment of the underlying obligations. Under
section 1272(a)(6), the amount and rate of accrual of original issue discount on
a Regular Certificate generally is calculated based on (i) a single constant
yield to maturity and (ii) the Pricing Prepayment Assumptions. No regulatory
guidance currently exists under Code section 1272(a)(6). Accordingly, until the
Treasury issues guidance to the contrary, the Tax Administrator will, except as
otherwise provided herein, base its computations on Code section 1272(a)(6), the
OID Regulations, and certain other guidance, all as described below. There can
be no assurance, however, that the methodology described below represents the
correct manner of calculating original issue discount on the Regular
Certificates. The Tax Administrator will account for income on certain Regular
Certificates that provide for one or more contingent payments as described
herein under "Federal Income Tax Consequences -- REMIC Certificates -- Interest
Weighted Certificates and Non-VRDI Certificates." Prospective purchasers should
be aware that neither the Company, any Servicer, nor the Trustee will make any
representation that the Assets underlying a Series will in fact prepay at a rate
conforming to the Pricing Prepayment Assumptions or at any other rate.
The amount of original issue discount on a Regular Certificate equals
the excess, if any, of the Certificate's "stated redemption price at maturity"
over its "issue price." Under the OID Regulations, a debt instrument's stated
redemption price at maturity is the sum of all payments of principal and
interest provided for on the instrument other than Qualified Stated Interest
(i.e., the sum of its Deemed Principal Payments). Thus, in the case of any
Regular Certificate, the stated redemption price at maturity will equal the
total amount of all Deemed Principal Payments due on that Certificate. Since a
Certificate that is part of an Accretion Class generally will not require
unconditional payments of interest at least annually, the stated redemption
price at maturity of such a Certificate will equal the aggregate of all payments
due, whether designated as principal, accrued interest, or current interest. The
issue price of a Regular Certificate generally will equal the initial price at
which a substantial amount of such Certificates is sold to the public.
Although the OID Regulations contain an aggregation rule (the
"Aggregation Rule"), under which two or more debt instruments issued in
connection with the same transaction (or related transactions in certain
circumstances) generally are treated as a single debt instrument for federal
income tax accounting purposes if issued by a single issuer to a single holder,
that Rule does not apply if the debt instruments are part of an issue (i) a
substantial portion of which is traded on an established market or (ii) a
substantial portion of which is issued for cash (or property traded on an
established market) to parties who are not related to the issuer or holder and
who do not purchase other debt instruments of the same issuer in connection with
the same transaction or related transactions. In most cases, the Aggregation
Rule will not apply to Regular Certificates of different Classes because one or
both of the exceptions to the Aggregation Rule will have been met. Although the
Tax Administrator will apply the Aggregation Rule to all regular interests in a
Series REMIC that are held by another REMIC created with respect to the same
Series, it generally will not apply the Aggregation Rule to Regular Certificates
for purposes of reporting to Certificateholders.
Under a de minimis rule, a Regular Certificate will be considered to
have no original issue discount if the amount of original issue discount on the
Certificate is less than 0.25% of the Certificate's stated redemption price at
maturity multiplied by the Certificate's WAM. Although no Treasury regulations
have been issued under the relevant provisions of the 1986 Act, it is expected
that the WAM of a Regular Certificate will be computed using the Pricing
Prepayment Assumptions. The holder of a Regular Certificate will include de
minimis original issue discount in income on a pro rata basis as stated
principal payments on the Certificate are received or, if earlier, upon
disposition of the Certificate, unless the holder of such Certificate makes the
All OID Election.
Regular Certificates of certain Series may constitute Teaser
Certificates. Under certain
75
<PAGE>
circumstances, a Teaser Certificate may be considered to have a de minimis
amount of original issue discount even though the amount of original issue
discount on such Certificate would be more than de minimis if determined as
described above. If the stated interest on a Teaser Certificate would be
Qualified Stated Interest but for the fact that during one or more accrual
periods its interest rate is below the rate applicable for the remainder of its
term, the amount of original issue discount on such Certificate that is measured
against the de minimis amount of original issue discount allowable on the
Certificate is the greater of (i) the excess of the stated principal amount of
the Certificate over its issue price and (ii) the amount of interest that would
be necessary to be payable on the Certificate in order for all stated interest
to be Qualified Stated Interest.
The holder of a Regular Certificate generally must include in gross
income the sum, for all days during his taxable year on which he holds the
Regular Certificate, of the "daily portions" of the original issue discount on
such Certificate. In the case of an original holder of a Regular Certificate,
the daily portions of original issue discount with respect to such Certificate
generally will be determined by allocating to each day in any accrual period the
Certificate's ratable portion of the excess, if any, of (i) the sum of (a) the
present value of all payments under the Certificate yet to be received as of the
close of such period and (b) the amount of any Deemed Principal Payments
received on the Certificate during such period over (ii) the Certificate's
"adjusted issue price" at the beginning of such period. The present value of
payments yet to be received on a Regular Certificate is computed by using the
Pricing Prepayment Assumptions and the Certificate's original yield to maturity
(adjusted to take into account the length of the particular accrual period), and
taking into account Deemed Principal Payments actually received on the
Certificate prior to the close of the accrual period. The adjusted issue price
of a Regular Certificate at the beginning of the first accrual period is its
issue price. The adjusted issue price at the beginning of each subsequent period
is the adjusted issue price of the Certificate at the beginning of the preceding
period increased by the amount of original issue discount allocable to that
period and decreased by the amount of any Deemed Principal Payments received
during that period. Thus, an increased (or decreased) rate of prepayments
received with respect to a Regular Certificate will be accompanied by a
correspondingly increased (or decreased) rate of recognition of original issue
discount by the holder of such Certificate.
The yield to maturity of a Regular Certificate is calculated based on
(i) the Pricing Prepayment Assumptions and (ii) any contingencies not already
taken into account under the Pricing Prepayment Assumptions that, considering
all of the facts and circumstances as of the issue date, are more likely than
not to occur. Contingencies, such as the exercise of "mandatory redemptions,"
that are taken into account by the parties in pricing the Regular Certificate
typically will be subsumed in the Pricing Prepayment Assumptions and thus will
be reflected in the Certificate's yield to maturity. The Tax Administrator's
determination of whether a contingency relating to a Class of Regular
Certificates is more likely than not to occur is binding on each holder of a
Certificate of such Class unless the holder explicitly discloses on its federal
income tax return that its determination of the yield and maturity of such
Certificate is different from that of the Tax Administrator.
In many cases, Regular Certificates will be subject to optional
redemption before their stated maturity dates. Under the OID Regulations, any
party entitled to redeem Certificates will be presumed to exercise its option to
redeem for purposes of computing the accrual of original issue discount if, and
only if, by using the optional redemption date as the maturity date and the
optional redemption price as the stated redemption price at maturity, the yield
to maturity of the Certificates is lower than it would be if the Certificates
were not redeemed early. If a party entitled to do so is presumed to exercise
its option to redeem the Certificates, original issue discount on such
Certificates will be calculated as if the redemption date were the maturity date
and the optional redemption price were the stated redemption price at maturity.
In cases in which all of the Certificates of a particular Series are issued at
par or at a discount, the Certificates will not be presumed to have been
redeemed because a redemption would not lower the yield to maturity of the
Certificates. If, however, some Certificates of a particular Series are issued
at a premium, a party entitled to redeem Certificates may be able to lower the
yield to maturity of the Certificates by exercising its redemption option. In
determining whether such a party will be presumed to exercise its option to
redeem Certificates when one or more Classes of the Certificates is issued at a
premium, the Tax Administrator will take into
76
<PAGE>
account all Classes of Certificates that are subject to the possibility of
optional redemption to the extent that they are expected to remain outstanding
as of the optional redemption date, based on the Pricing Prepayment Assumptions.
If, determined on a combined weighted average basis, the Certificates of such
Classes were issued at a premium, the Tax Administrator will presume that a
party entitled to redeem such Certificates will exercise its option to do so.
However, the OID Regulations are unclear as to how the redemption presumption
rules should apply to instruments such as the Certificates, and there can be no
assurance that the Service will agree with the Tax Administrator's position.
Under the OID Regulations, the holder of a Regular Certificate
generally may make an All OID Election to include in gross income all stated
interest, original issue discount, de minimis original issue discount, market
discount, and de minimis market discount that accrues on such Certificate
(reduced by any amortizable premium or acquisition premium on such Certificate)
under the constant yield method used to account for original issue discount. To
make an All OID Election, the holder of the Certificate must attach a statement
to its timely filed federal income tax return for the taxable year in which the
holder acquired the Certificate. The statement must identify the instruments to
which the election applies. An All OID Election is irrevocable unless the holder
obtains the consent of the Service. If an All OID Election is made for a debt
instrument with market discount, the holder is deemed to have made an election
to include in income currently the market discount on all of the holder's other
debt instruments with market discount, as described below under "Federal Income
Tax Consequences -- REMIC Certificates -- Tax Treatment of Regular Certificates
- -- Market Discount." In addition, if an All OID Election is made for a debt
instrument with amortizable premium, the holder is deemed to have made an
election to amortize the premium on all of the holder's other debt instruments
with amortizable premium under the constant yield method. See "Federal Income
Tax Consequences -- REMIC Certificates -- Tax Treatment of Regular Certificates
- -- Amortizable Premium" below. Certificateholders should be aware that the law
is unclear as to whether an All OID Election is effective for Interest Weighted
Certificates or Non-VRDI Certificates. See "Federal Income Tax Consequences --
REMIC Certificates -- Tax Treatment of Regular Certificates -- Interest Weighted
Certificates and Non-VRDI Certificates" below.
A Regular Certificate having original issue discount may be acquired in
a transaction subsequent to its issuance for more than its adjusted issue price.
If the subsequent holder's adjusted basis in such a Regular Certificate,
immediately after its acquisition, exceeds the sum of all Deemed Principal
Payments to be received on the Certificate after the acquisition date, the
Certificate will no longer have original issue discount, and the holder may be
entitled to reduce the amount of interest income recognized on the Certificate
by the amount of amortizable premium. See "Federal Income Tax Consequences--
REMIC Certificates -- Tax Treatment of Regular Certificates - Amortizable
Premium" below. If the subsequent holder's adjusted basis in the Certificate
immediately after the acquisition exceeds the adjusted issue price of the
Certificate, but is less than or equal to the sum of the Deemed Principal
Payments to be received under the Certificate after the acquisition date, the
amount of original issue discount on the Certificate will be reduced by a
fraction, the numerator of which is the excess of the Certificate's adjusted
basis immediately after its acquisition over the adjusted issue price of the
Certificate and the denominator of which is the excess of the sum of all Deemed
Principal Payments to be received on the Certificate after the acquisition date
over the adjusted issue price of the Certificate. For that purpose, the adjusted
basis of a Regular Certificate generally is reduced by the amount of any
Qualified Stated Interest that is accrued but unpaid as of the acquisition date.
Alternatively, the subsequent purchaser of a Regular Certificate having original
issue discount may make an All OID Election with respect to the Certificate.
If the First Distribution Period with respect to a Regular Certificate
contains more days than the number of days of stated interest that are payable
on the first Distribution Date, the effective interest rate received by the
holder of such Certificate during the first Distribution Period will be less
than the Certificate's stated interest rate, making such Certificate a Teaser
Certificate. If the amount of original issue discount on the Teaser Certificate
measured under the expanded de minimis test described above exceeds the de
minimis amount of original issue discount allowable on the Certificate, the
amount by which the stated interest on the Certificate exceeds the interest that
would be payable on the Certificate at the effective rate of interest for the
First Distribution Period would be treated as part of the Certificate's stated
redemption price
77
<PAGE>
at maturity. Accordingly, the holder of a Teaser Certificate may be required to
recognize ordinary income arising from original issue discount in addition to
any Qualified Stated Interest that accrues in a period.
Similarly, if the First Distribution Period with respect to a Regular
Certificate is shorter than the interval between subsequent Distribution Dates,
and the holder of such Certificate receives interest on the first Distribution
Date based on a full accrual period, the effective rate of interest payable on
such Certificate during the First Distribution Period will be higher than the
stated rate of interest on such Certificate, making such Certificate a Rate
Bubble Certificate. A Rate Bubble Certificate that otherwise bears Qualified
Stated Interest would be issued with original issue discount unless the
Pre-Issuance Accrued Interest Rule applies or the amount of original issue
discount on the Certificate is de minimis. The amount of original issue discount
on a Rate Bubble Certificate attributable to the First Distribution Period would
be the amount by which the interest payment due on the first Distribution Date
exceeds the amount that would have been payable had the effective rate for that
Period been equal to the stated interest rate. However, if a portion of the
initial purchase price of a Rate Bubble Certificate is allocable to Pre-Issuance
Accrued Interest and such Certificate provides for a payment of stated interest
on the first payment date within one year of its issue date that equals or
exceeds the amount of such Pre-Issuance Accrued Interest, the Tax Administrator
will apply the Pre-Issuance Accrued Interest Rule to such Certificate. Under the
Pre-Issuance Accrued Interest Rule, the Tax Administrator will (i) subtract from
the issue price of a Rate Bubble Certificate an amount of Pre-Issuance Accrued
Interest equal to the excess of (a) the amount of stated interest paid on the
Certificate on the first Distribution Date over (b) the portion of such interest
that is economically allocable to the period after the issue date, which
generally should be an amount equal to the stated interest rate on the
Certificate expressed as a daily percentage times the number of days in the
first payment period (i.e., from the issue date to the first payment date) times
the Certificate's initial principal amount and (ii) treat a portion of the
interest received on the first Distribution Date with respect to such
Certificate as a return of the Pre-Issuance Accrued Interest excluded from the
issue price of such Certificate rather than as a payment on the Certificate.
Thus, where the Pre-Issuance Accrued Interest Rule applies, a Rate Bubble
Certificate will not have original issue discount attributable to the First
Distribution Period, provided that the increased effective interest rate for
that Period is attributable solely to Pre-Issuance Accrued Interest, as
typically will be the case. The Tax Administrator will apply the Pre-Issuance
Accrued Interest Rule as described above to each Rate Bubble Certificate for
which it is available if the Certificate's stated interest otherwise would be
Qualified Stated Interest. If, however, the First Distribution Period for a Rate
Bubble Certificate is longer than subsequent Distribution Periods, the
application of the Pre-Issuance Accrued Interest Rule typically will not prevent
disqualification of the Certificate's stated interest because its effective
interest rate during the First Distribution Period will be less than its stated
interest rate. Thus, a Regular Certificate with a long First Distribution Period
typically will be a Teaser Certificate, as discussed above. The Pre-Issuance
Accrued Interest Rule will not apply to any amount paid at issuance for such a
Teaser Certificate that is nominally allocable to interest accrued under the
terms of such Certificate before its issue date. All amounts paid for such a
Teaser Certificate at issuance, regardless of how designated, will be included
in the issue price of such Certificate for federal income tax accounting
purposes.
It is not entirely clear how income should be accrued with respect to
Interest Weighted Certificates. Unless and until the Service provides contrary
administrative guidance on the income tax treatment of an Interest Weighted
Certificate, the Tax Administrator will take the position that an Interest
Weighted Certificate does not bear Qualified Stated Interest, and will account
for the income thereon as described in "Federal Income Tax Consequences -- REMIC
Certificates -- Interest Weighted Certificates and Non-VRDI Certificates"
herein. Some Interest Weighted Certificates may be Superpremium Certificates.
Superpremium Certificates technically are issued with amortizable premium.
However, because of their close similarity to other Interest Weighted
Certificates it appears more appropriate to account for Superpremium
Certificates in the same manner as for other Interest Weighted Certificates.
Consequently, in the absence of further administrative guidance, the Tax
Administrator will account for Superpremium Certificates in the same manner as
other Interest Weighted Certificates. However, there can be no assurance that
the Service will not assert a position contrary to that taken by the Tax
Administrator, and, therefore, holders of Superpremium Certificates should
consider making a protective election to amortize premium on such Certificates.
78
<PAGE>
In view of the complexities and current uncertainties as to the manner
of inclusion in income of original issue discount on the Regular Certificates,
each investor should consult its own tax advisor to determine the appropriate
amount and method of inclusion in income of original issue discount on such
Certificates for federal income tax purposes.
Variable Rate Certificates
Under the OID Regulations, a Variable Rate Certificate will qualify as
a VRDI Certificate only if (i) the Certificate is not issued at an Excess
Premium; (ii) stated interest on the Certificate compounds or is payable
unconditionally at least annually at (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;" and (iii) the qualified floating rate or
the objective rate in effect during an accrual period is set at a current value
of that rate (i.e., the value of the rate on any day occurring during the
interval that begins three months prior to the first day on which that value is
in effect under the Certificate and ends one year following that day). VRDI
Certificates are subject to the rules applicable to VRDIs in the OID Regulations
that are described below.
Under the OID Regulations, a rate is a qualified floating rate if
variations in the rate reasonably can be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the debt
instrument is denominated. A qualified floating rate may measure contemporaneous
variations in borrowing costs for the issuer of the debt instrument or for
issuers in general. A multiple of a qualified floating rate is considered a
qualified floating rate only if the rate is equal to either (a) the product of a
qualified floating rate and a fixed multiple that is greater than 0.65 but not
more than 1.35 or (b) the product of a qualified floating rate and a fixed
multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate. If a Regular Certificate provides for two or more
qualified floating rates that reasonably can be expected to have approximately
the same values throughout the term of such Certificate, the qualified floating
rates together will constitute a single qualified floating rate. Two or more
qualified floating rates conclusively will be presumed to have approximately the
same values throughout the term of a Certificate if the values of all rates on
the issue date of such Certificate are within 25 basis points of each other.
A variable rate will be considered a qualified floating rate if it is
subject to a Cap, Floor, Governor, or other similar restriction only if: (a) the
Cap, Floor, or Governor is fixed throughout the term of the related Certificate
or (b) the Cap, Floor, Governor, or similar restriction is not reasonably
expected, as of the issue date, to cause the yield on the Certificate to be
significantly less or significantly more than the expected yield on such
Certificate determined without such Cap, Floor, Governor, or similar
restriction, as the case may be. Although the OID Regulations are unclear, it
appears that a VRDI Certificate, the principal rate on which is subject to a
Cap, Floor, or Governor that itself is a qualified floating rate, bears interest
at an objective rate.
An objective rate is a rate (other than a qualified floating rate) that
(i) is determined using a single fixed formula, (ii) is based on objective
financial or economic information, and (iii) is not based on information that
either is within the control of the issuer (or a related party) or is unique to
the circumstances of the issuer (or related party), such as dividends, profits,
or the value of the issuer's (or related party's) stock. That definition would
include, in addition to a rate that is based on one or more qualified floating
rates or on the yield of actively traded personal property, a rate that is based
on changes in a general inflation index. In addition, a rate would not fail to
be an objective rate merely because it is based on the credit quality of the
issuer.
Under the OID Regulations, if interest on a Certificate is stated at a
fixed rate for an initial period of less than one year followed by a variable
rate that is either a qualified floating rate or an objective rate for a
subsequent period, and the value of the variable rate on the issue date is
intended to approximate the fixed rate, the fixed rate and the variable rate
together constitute a single qualified floating rate or objective rate. A
variable rate conclusively will be presumed to approximate an initial fixed rate
if the value of the variable
79
<PAGE>
rate on the issue date does not differ from the value of the fixed rate by more
than 25 basis points.
Under the OID Regulations, all interest payable on a Single Rate VRDI
Certificate is treated as Qualified Stated Interest. The amount and accrual of
OID on a Single Rate VRDI Certificate is determined, in general, by converting
such Certificate into a hypothetical fixed rate certificate and applying the
rules applicable to fixed rate certificates described under "Federal Income Tax
Consequences -- REMIC Certificates -- Original Issue Discount" above to such
hypothetical fixed rate certificate. Qualified Stated Interest or original issue
discount allocable to an accrual period with respect to a Single Rate VRDI
Certificate also must be increased (or decreased) if the interest actually
accrued or paid during such accrual period exceeds (or is less than) the
interest assumed to be accrued or paid during such accrual period under the
related hypothetical equivalent fixed rate certificate.
Except as provided below, the amount and accrual of OID on a Multiple
Rate VRDI Certificate is determined by converting such Certificate into a
hypothetical equivalent fixed rate certificate that has terms that are identical
to those provided under the Multiple Rate VRDI Certificate, except that such
hypothetical equivalent fixed rate certificate will provide for fixed rate
substitutes in lieu of the qualified floating rates or objective rate provided
for under the Multiple Rate VRDI Certificate. A Multiple Rate VRDI Certificate
providing for a qualified floating rate or rates or a qualified inverse floating
rate is converted to a hypothetical equivalent fixed rate certificate by
assuming that each qualified floating rate or the qualified inverse floating
rate will remain at its value as of the issue date. A Multiple Rate VRDI
Certificate providing for an objective rate or rates is converted to a
hypothetical equivalent fixed rate certificate by assuming that each objective
rate will equal a fixed rate that reflects the yield that reasonably is expected
for such Multiple Rate VRDI Certificate. Qualified Stated Interest or original
issue discount allocable to an accrual period with respect to a Multiple Rate
VRDI Certificate must be increased (or decreased) if the interest actually
accrued or paid during such accrual period exceeds (or is less than) the
interest assumed to be accrued or paid during such accrual period under the
related hypothetical equivalent fixed rate certificate.
Under the OID Regulations, the amount and accrual of OID on a Multiple
Rate VRDI Certificate that provides for stated interest at either one or more
qualified floating rates or at a qualified inverse floating rate and in addition
provides for stated interest at a single fixed rate (other than an initial fixed
rate that is intended to approximate the subsequent variable rate), is
determined using the method described in the preceding paragraph except that
prior to its conversion to a hypothetical equivalent fixed rate certificate,
such Multiple Rate VRDI Certificate is treated as if it provided for a qualified
floating rate (or a qualified inverse floating rate) rather than the fixed rate
during the period in which the fixed rate applies. The qualified floating rate
(or qualified inverse floating rate) replacing the fixed rate must be such that
the fair market value of the Multiple Rate VRDI Certificate as of its issue date
would be approximately the same as the fair market value of an otherwise
identical debt instrument that provides for the qualified floating rate (or
qualified inverse floating rate), rather than the fixed rate.
It is not entirely clear how income should be accrued with respect to
Weighted Average Certificates. Under the OID Regulations, Weighted Average
Certificates relating to a Trust (or a designated Asset Pool thereof) whose
Assets are exclusively Adjustable Rate Assets appear to bear interest at an
objective rate provided the Adjustable Rate Assets themselves bear interest at
qualified floating rates. However, Weighted Average Certificates relating to a
Trust (or a designated Asset Pool thereof) whose Assets do not bear interest at
qualified floating rates (i.e., NOWA Certificates), do not bear interest at an
objective or a qualified floating rate and, consequently, do not qualify as VRDI
Certificates described above. Accordingly, unless and until the Service provides
contrary administrative guidance on the income tax treatment of NOWA
Certificates, the Tax Administrator will treat such Certificates as debt
obligations that provide for one or more contingent payments, and will account
for the income thereon as described in "Federal Income Tax Consequences -- REMIC
Certificates -- Interest Weighted Certificates and Non-VRDI Certificates" below.
Under the OID Regulations, Inverse Floater Certificates generally bear
interest at objective rates because their rates either constitute qualified
inverse floating rates under those Regulations or, although not qualified
floating rates themselves, are based on one or more qualified floating rates.
Consequently, if such
80
<PAGE>
Certificates are not issued at an Excess Premium and their interest rates
otherwise meet the test for Qualified Stated Interest, the income on such
Certificates will be accounted for under the rules applicable to VRDI
Certificates described above. However, an Inverse Floater Certificate may have
an interest rate parameter equal to the weighted average of the interest rates
on some or all of the Assets of the related Trust (or designated Asset Pool
thereof) in a case where one or more of the interest rates on such Assets is a
fixed rate or otherwise may not qualify as a VRDI Certificate. Unless and until
the Service provides contrary administrative guidance on the income tax
treatment of such Inverse Floater Certificates, the Tax Administrator will treat
such Certificates as debt obligations that provide for one or more contingent
payments, and will account for the income thereon as described in "Federal
Income Tax Consequences -- REMIC Certificates -- Interest Weighted Certificates
and Non-VRDI Certificates" below.
Interest Weighted Certificates and Non-VRDI Certificates
The treatment of a NOWA Certificate, a Variable Rate Certificate that
is issued at an Excess Premium, any other Variable Rate Certificate that does
not qualify as a VRDI Certificate (each a Non-VRDI Certificate) or an Interest
Weighted Certificate is unclear under current law. The OID Regulations contain
provisions (the "Contingent Payment Regulations") that address the federal
income tax treatment of debt obligations that provide for one or more contingent
payments ("Contingent Payment Obligations").
Under the Contingent Payment Regulations, any variable rate debt
instrument that is not a VRDI is classified as a Contingent Payment Obligation.
However, the Contingent Payment Regulations, by their terms, do not apply to
REMIC regular interests and other instruments that are subject to section
1272(a)(6) of the Code. In the absence of further guidance, the Tax
Administrator will account for Non-VRDI Certificates, Interest Weighted
Certificates, and other Regular Certificates that are Contingent Payment
Obligations in accordance with Code section 1272(a)(6) and the accounting
methodology described in this paragraph. Income will be accrued on such
Certificates based on a constant yield that is derived from a projected payment
schedule as of the Closing Date. The projected payment schedule will take into
account the Pricing Prepayment Assumptions and the interest payments that are
expected to be made based on the value of any relevant indices on the issue
date. To the extent that actual payments differ from projected payments for a
particular taxable year, appropriate adjustments to interest income and expense
accruals will be made for that year. In the case of a Weighted Average
Certificate, the projected payment schedule will be derived based on the
assumption that the principal balances of the Assets that collateralize the
Certificate pay down pro rata.
The method described in the foregoing paragraph for accounting for
Interest Weighted Certificates, Non-VRDI Certificates, and any other Regular
Certificates that are Contingent Payment Obligations is consistent with Code
section 1272(a)(6) and the legislative history thereto. Because of the
uncertainty with respect to the treatment of such Certificates under the OID
Regulations, however, there can be no assurance that the Service will not assert
successfully that a method less favorable to Certificateholders should apply. In
view of the complexities and the current uncertainties as to income inclusions
with respect to Non-VRDI Certificates, Interest Weighted Certificates and any
other Regular Certificates that are Contingent Payment obligations, each
investor should consult his or her own tax advisor to determine the appropriate
amount and method of income inclusion on such Certificates for federal income
tax purposes.
81
<PAGE>
Anti-Abuse Rule
Concerned that taxpayers might be able to structure debt instruments or
transactions, or apply the bright-line or mechanical rules of the OID
Regulations, in a way that produces unreasonable tax results, the Treasury
issued regulations containing an anti-abuse rule. These regulations provide that
if a principal purpose in structuring a debt instrument, engaging in a
transaction, or applying the OID Regulations is to achieve a result that is
unreasonable in light of the purposes of the applicable statutes, the Service
can apply or depart from the OID Regulations as necessary or appropriate to
achieve a reasonable result. A result is not considered unreasonable under the
regulations, however, in the absence of a substantial effect on the present
value of a taxpayer's tax liability.
Market Discount
A subsequent purchaser of a Regular Certificate at a discount from its
outstanding principal amount (or, in the case of a Regular Certificate having
original issue discount, its "adjusted issue price") will acquire such
Certificate with market discount. The purchaser generally will be required to
recognize the market discount (in addition to any original issue discount
remaining with respect to the Certificate) as ordinary income. A person who
purchases a Regular Certificate at a price lower than the remaining outstanding
Deemed Principal Payments but higher than its adjusted issue price does not
acquire the Certificate with market discount, but will be required to report
original issue discount, appropriately adjusted to reflect the excess of the
price paid over the adjusted issue price. See "Federal Income Tax Consequences C
REMIC Certificates - Original Issue Discount" above. A Regular Certificate will
not be considered to have market discount if the amount of such market discount
is de minimis, i.e., less than the product of (i) 0.25% of the remaining
principal amount (or, in the case of a Regular Certificate having original issue
discount, the adjusted issue price of such Certificate), multiplied by (ii) the
WAM of the Certificate remaining after the date of purchase. Regardless of
whether the subsequent purchaser of a Regular Certificate with more than a de
minimis amount of market discount is a cash-basis or accrual-basis taxpayer,
market discount generally will be taken into income as principal payments
(including, in the case of a Regular Certificate having original issue discount,
any Deemed Principal Payments) are received, in an amount equal to the lesser of
(i) the amount of the principal payment received or (ii) the amount of market
discount that has "accrued" (as described below), but that has not yet been
included in income. The purchaser may make a Current Recognition Election, which
generally will apply to all market discount instruments held or acquired by the
purchaser in the taxable year of election or thereafter, to recognize market
discount currently on an uncapped accrual basis. The Service has indicated in
Revenue Procedure 92-67 the manner in which a Current Recognition Election may
be made. The purchaser also may make an All OID Election with respect to a
Regular Certificate purchased with market discount. See "Federal Income Tax
Consequences - REMIC Certificates - Original Issue Discount" above.
Until the Treasury promulgates applicable regulations, the purchaser of
a Regular Certificate with market discount generally may elect to accrue the
market discount either: (i) on the basis of a constant interest rate; (ii) in
the case of a Regular Certificate not issued with original issue discount, in
the ratio of stated interest payable in the relevant period to the total stated
interest remaining to be paid from the beginning of such period; or (iii) 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 total
remaining original issue discount at the beginning of such period. The Service
indicated in Revenue Ruling 92-67 the manner in which an election may be made to
accrue market discount on a Regular Certificate on the basis of a constant
interest rate. Regardless of which computation method is elected, the Pricing
Prepayment Assumptions must be used to calculate the accrual of market discount.
A Certificateholder who has acquired any Regular Certificate with
market discount generally will be required to treat a portion of any gain on a
sale or exchange of the 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 principal payments were received. Moreover, such Certificateholder
generally must defer interest deductions attributable to any
82
<PAGE>
indebtedness incurred or continued to purchase or carry the Certificate to the
extent they exceed income on the Certificate. Any such deferred interest
expense, in general, is allowed as a deduction not later than the year in which
the related market discount income is recognized. If a holder of a Regular
Certificate makes a Current Recognition Election or an All OID Election, the
interest deferral rule will not apply. Under the Contingent Payment Regulations,
a secondary market purchaser of a Non-VRDI Certificate or an Interest Weighted
Certificate at a discount generally would continue to accrue interest and
determine adjustments on such Certificate based on the original projected
payment schedule devised by the issuer of such Certificate. See "Federal Income
Tax Consequences -- REMIC Certificates -- Original Issue Discount -- Interest
Weighted Certificates and Non-VRDI Certificates" herein. The holder of such a
Certificate would be required, however, to allocate the difference between the
adjusted issue price of the Certificate and its basis in the Certificate as
positive adjustments to the accruals or projected payments on the Certificate
over the remaining term of the Certificate in a manner that is reasonable (e.g.,
based on a constant yield to maturity).
Treasury regulations implementing the market discount rules have not
yet been issued, and uncertainty exists with respect to many aspects of those
rules. For example, the treatment of a Regular Certificate subject to optional
redemption that is acquired at a market discount is unclear. It appears likely,
however, that the market discount rules applicable in such a case would be
similar to the rules pertaining to original issue discount. Due to the
substantial lack of regulatory guidance with respect to the market discount
rules, it is unclear how those rules will affect any secondary market that
develops for a given Class of Regular Certificates. Prospective investors in
Regular Certificates should consult their own tax advisors regarding the
application of the market discount rules to those certificates.
Amortizable Premium
A purchaser of a Regular Certificate who purchases the Certificate at a
premium over the total of its Deemed Principal Payments may elect to amortize
such premium under a constant yield method that reflects compounding based on
the interval between payments on the Certificates. The legislative history of
the 1986 Act indicates that premium is to be accrued in the same manner as
market discount. Accordingly, it appears that the accrual of premium on a
Regular Certificate will be calculated using the Pricing Prepayment Assumptions.
Under regulations issued, amortized premium generally would be treated as an
offset to interest income on a Regular Certificate and not as a separate
deduction item. If a holder makes an election to amortize premium on a Regular
Certificate, such election will apply to all taxable debt instruments (including
all REMIC regular interests) held by the holder at the beginning of the taxable
year in which the election is made, and to all taxable debt instruments acquired
thereafter by such holder, and will be irrevocable without the consent of the
Service. Purchasers who pay a premium for the Regular Certificates should
consult their tax advisors regarding the election to amortize premium and the
method to be employed.
Amortizable premium on a Regular Certificate that is subject to
redemption at the option of the Company generally must be amortized as if the
optional redemption price and date were the Certificate's principal amount and
maturity date if doing so would result in a smaller amount of premium
amortization during the period ending with the optional redemption date. Thus, a
Certificateholder would not be able to amortize any premium on a Regular
Certificate that is subject to optional redemption at a price equal to or
greater than the Certificateholder's acquisition price unless and until the
redemption option expires. In cases where premium must be amortized on the basis
of the price and date of an optional redemption, the Certificate will be treated
as having matured on the redemption date for the redemption price and then
having been reissued on that date for that price. Any premium remaining on the
Certificate at the time of the deemed reissuance will be amortized on the basis
of (i) the original principal amount and maturity date or (ii) the price and
date of any succeeding optional redemption, under the principles described
above. Under the Contingent Payment Regulations, a secondary market purchaser of
a Non-VRDI Certificate or an Interest Weighted Certificate at a premium
generally would continue to accrue interest and determine adjustments on such
Certificate based on the original projected payment schedule devised by the
issuer of such Certificate. See "Federal Income Tax Consequences -- REMIC
Certificates -- Interest Weighted Certificates and Non-VRDI Certificates"
herein. The holder of such a Certificate would be required,
83
<PAGE>
however, to allocate the difference between its basis in the Certificate and the
adjusted issue price of the Certificate as negative adjustments to the accruals
or projected payments on the Certificate over the remaining term of the
Certificate in a manner that is reasonable (e.g., based on a constant yield to
maturity).
Consequences of Realized Losses
Under section 166 of the Code, both corporate holders of Regular
Certificates and noncorporate holders that acquire Regular Certificates in
connection with a trade or business should be allowed to deduct, as ordinary
losses, any losses sustained during a taxable year in which their Regular
Certificates become wholly or partially worthless as the result of one or more
Realized Losses on the underlying Assets. However, a noncorporate holder that
does not acquire a Regular Certificate in connection with its trade or business
will not be entitled to deduct a loss under Code section 166 until its Regular
Certificate becomes wholly worthless (i.e., until its outstanding principal
balance has been reduced to zero), and the loss will be characterized as
short-term capital loss.
Each holder of a Regular Certificate will be required to accrue
original issue discount income with respect to such Certificate without giving
effect to any reduction in distributions attributable to a default or
delinquency on the underlying Assets until a Realized Loss is allocated to such
Certificate or until such earlier time as it can be established that any such
reduction ultimately will not be recoverable. As a result, the amount of
original issue discount reported in any period by the holder of a Regular
Certificate could exceed significantly the amount of economic income actually
realized by the holder in such period. Although the holder of a Regular
Certificate eventually will recognize a loss or a reduction in income
attributable to previously included original issue discount that, as a result of
a Realized Loss, ultimately will not be realized, the law is unclear with
respect to the timing and character of such loss or reduction in income.
Accordingly, holders of Regular Certificates should consult with their own tax
advisors with respect to the federal income tax consequences of Realized Losses
on original issue discount.
The Tax Administrator will adjust the accrual of original issue
discount on Regular Certificates in a manner that it believes to be appropriate
to reflect Realized Losses. However, there can be no assurance that the Service
will not contend successfully that a different method of accounting for the
effect of Realized Losses is correct and that such method will not have an
adverse effect upon the holders of Regular Certificates.
Gain or Loss on Disposition
If a Regular Certificate is sold, the Certificateholder will recognize
gain or loss equal to the difference between the amount realized on the sale and
his adjusted basis in the Certificate. The adjusted basis of a Regular
Certificate generally will equal the cost of the Certificate to the
Certificateholder, increased by any original issue discount or market discount
previously includible in the Certificateholder's gross income with respect to
the Certificate, and reduced by the portion of the basis of the Certificate
allocable to payments on the Certificate (other than Qualified Stated Interest)
previously received by the Certificateholder and by any amortized premium.
Similarly, a Certificateholder who receives a scheduled or prepaid principal
payment with respect to a Regular Certificate will recognize gain or loss equal
to the difference between the amount of the payment and the allocable portion of
his adjusted basis in the Certificate. Except to the extent that the market
discount rules apply and except as provided below, any gain or loss on the sale
or other disposition of a Regular Certificate generally will be capital gain or
loss. Such gain or loss will be long-term gain or loss if the Certificate is
held as a capital asset for the applicable long-term capital gain holding
period.
If the holder of a Regular Certificate is a bank, thrift, or similar
institution described in section 582 of the Code, any gain or loss on the sale
or exchange of such Certificate will be treated as ordinary income or loss. In
the case of other types of holders, gain from the disposition of a Regular
Certificate that otherwise would be capital gain will be treated as ordinary
income to the extent that the amount actually includible in income with respect
to the Certificate by the Certificateholder during his holding period is less
than the
84
<PAGE>
amount that would have been includible in income if the yield on that
Certificate during the holding period had been 110% of a specified U.S. Treasury
borrowing rate as of the date that the Certificateholder acquired the
Certificate. Although the legislative history to the 1986 Act indicates that the
portion of the gain from disposition of a Regular Certificate that will be
recharacterized as ordinary income is limited to the amount of original issue
discount (if any) on the Certificate that was not previously includible in
income, the applicable Code provision contains no such limitation.
A portion of any gain from the sale of a Regular Certificate that might
otherwise be capital gain may be treated as ordinary income to the extent that
such Certificate is held as part of a "conversion transaction" within the
meaning of section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in Certificates or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable federal rate" (which rate is computed and
published monthly by the Service) at the time the taxpayer entered into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income from the transaction.
Currently, the highest marginal individual income tax bracket is
39.6%. The alternative minimum tax rate for individuals is 26% with respect to
alternative minimum tax income up to $175,000 and 28% with respect to
alternative minimum tax income over $175,000. The highest marginal federal tax
rate applicable to individuals with respect to net capital gain on assets held
for 18 months or less currently is 28%. However, because the highest marginal
federal tax rate on net capital gains for individuals has been reduced to 20%
for assets held for more than 18 months, and, for taxable years beginning after
December 31, 2000, to 18% for assets held more than 5 years, there can be a
significant marginal tax rate differential between net capital gains and
ordinary income for individuals. The highest marginal corporate tax rate is 35%
for corporate taxable income over $10 million, and the marginal tax rate on
corporate net capital gains is 35%.
Tax Treatment of Residual Certificates
Overview
A Residual Certificate will represent beneficial ownership of a
percentage of the "residual interest" in the Series REMIC to which it relates,
and a Regular Certificate generally will represent beneficial ownership of a
percentage of a "regular interest" in the Series REMIC to which it relates. A
REMIC is an entity for federal income tax purposes consisting of a fixed pool of
mortgages (including manufactured housing installment sales contracts) or other
mortgage-backed assets in which investors hold multiple classes of interests. To
be treated as a REMIC, the Trust (or a segregated Asset Pool thereof) underlying
a Series must meet certain continuing qualification requirements, and a REMIC
election must be in effect. See "Federal Income Tax Consequences -- REMIC
Certificates -- REMIC Qualification" below. A REMIC generally is treated as a
pass-through entity for federal income tax purposes, i.e., as not subject to
entity-level tax. All interests in a REMIC other than the residual interest must
be regular interests. As described in "Federal Income Tax Consequences -- REMIC
Certificates -- Tax Treatment of Regular Certificates" above, a regular interest
has terms analogous to those of a debt instrument and generally is treated as a
debt instrument for all federal income tax purposes. The Regular Certificates
will generate interest and, depending upon the issue price of the Regular
Certificates, original issue discount deductions or income attributable to
premium for the related Series REMIC. As a residual interest, a Residual
Certificate represents the right to (i) the stated principal and interest on
such Certificate, if any, and (ii) such Certificate's pro rata share of the
income generated by the related Series REMIC's assets in excess of the amount
necessary to service that REMIC's regular interests and pay that REMIC's
expenses.
85
<PAGE>
In a manner similar to that employed in the taxation of partnerships,
REMIC taxable income or loss will be determined at the REMIC level, but passed
through to the Residual Certificateholders. Thus, REMIC taxable income or loss
will be allocated pro rata to the related Residual Certificateholders, and each
such Certificateholder will report his share of REMIC taxable income or loss on
his own federal income tax return. Prospective investors in Residual
Certificates should be aware that the obligation to account for the related
Series REMIC's income or loss will continue until all of that REMIC's Regular
Certificates have been retired, which may not occur until well beyond the date
on which the last payments on Residual Certificates are made. In addition,
because of the way in which REMIC taxable income is calculated, a Residual
Certificateholder may recognize "phantom income" (i.e., income recognized for
tax purposes in excess of income as determined under financial accounting or
economic principles) which will be matched in later years by a corresponding tax
loss or reduction in taxable income, but which could lower the yield to Residual
Certificateholders due to the lower present value of such loss or reduction.
A portion of the income of a Residual Certificateholder may be treated
unfavorably in three contexts: (i) it may not be offset by current or net
operating loss deductions; (ii) it will be considered UBTI to tax-exempt
entities; and (iii) it is ineligible for any statutory or treaty reduction in
the 30% withholding tax otherwise available to a foreign Residual
Certificateholder. The concepts presented in this overview are discussed more
fully below.
Taxation of Residual Certificateholders
A Residual Certificateholder will recognize his share of the related
Series REMIC's taxable income or loss for each day during his taxable year on
which he holds the Residual Certificate. The amount so recognized will be
characterized as ordinary income or loss and will not be taxed separately to the
Series REMIC. If a Residual Certificate is transferred during a calendar
quarter, REMIC taxable income or loss for that quarter will be prorated between
the transferor and the transferee on a daily basis.
A REMIC generally determines its taxable income or loss in a manner
similar to that of an individual using a calendar year and the accrual method of
accounting. A REMIC's taxable income or loss generally will be characterized as
ordinary income or loss, and will consist of the REMIC's gross income, including
interest, original issue discount, and market discount income, if any, on the
REMIC's assets (including temporary cash flow investments), premium amortization
on the REMIC's Regular Certificates, income from foreclosure property, and any
cancellation of indebtedness income due to the allocation of realized losses to
the REMIC's Regular Certificates, reduced by the REMIC's deductions, including
deductions for interest and original issue discount expense on the REMIC's
Regular Certificates, premium amortization and servicing fees with respect to
the REMIC's assets, the administrative expenses of the REMIC and the Regular
Certificates, any tax imposed on the REMIC's income from foreclosure property,
and any bad debt deductions with respect to the related Assets. The REMIC may
not take into account any items allocable to a "prohibited transaction." See
"Federal Income Tax Consequences -- REMIC Certificates -- REMIC-Level Taxes"
below. The deduction of REMIC expenses by Residual Certificateholders who are
individuals is subject to certain limitations as described below in "Federal
Income Tax Consequences -- REMIC Certificates -- Special Considerations for
Certain Types of Investors -- Individuals and Pass-Through Entities" below.
The amount of the REMIC's net loss with respect to a calendar quarter that may
be deducted by a Residual Certificateholder is limited to such
Certificateholder's adjusted basis in the Residual Certificate as of the end of
that quarter (or time of disposition of the Residual Certificate, if earlier),
determined without taking into account the net loss for that quarter. A Residual
Certificateholder's basis in its Residual Certificate initially is equal to the
price paid for such Certificate. Such basis is increased by the amount of
taxable income of the REMIC reportable by the Residual Certificateholder with
respect to the Residual Certificate and decreased (but not below zero) by the
amount of distributions made and the amount of net losses recognized with
respect to that Certificate.
86
<PAGE>
The amount of the REMIC's net loss allocable to a Residual
Certificateholder that is disallowed under the basis limitation may be carried
forward indefinitely, but may be used only to offset income with respect to the
related Residual Certificate. The ability of Residual Certificateholders to
deduct net losses with respect to a Residual Certificate may be subject to
additional limitations under the Code, as to which Certificateholders should
consult their tax advisors. A distribution with respect to a Residual
Certificate is treated as a non-taxable return of capital up to the amount of
the Residual Certificateholder's adjusted basis in his Residual Certificate. If
a distribution exceeds the adjusted basis of the Residual Certificate, the
excess is treated as gain from the sale of such Residual Certificate.
Although the law is unclear in certain respects, a Residual
Certificateholder effectively should be able to recover some or all of the basis
in his Residual Certificate as the related REMIC recovers the basis of its
assets through either the amortization of premium on such assets or the
allocation of basis to principal payments received on such assets. A REMIC's
initial aggregate basis in its assets generally will equal the sum of the issue
prices of its Regular Certificates and Residual Certificates. In general, the
issue price of a Regular Certificate of a particular Class is the initial price
at which a substantial amount of the Certificates of such Class is sold to the
public. In the case of a Regular Certificate of a Class not offered to the
public in substantial amounts, the issue price is either the price paid by the
first purchaser of such Certificate or the fair market value of the property
received in exchange for such Certificate, as appropriate. The REMIC's aggregate
basis will be allocated among its assets in proportion to their respective fair
market values.
The assets of certain Series REMICs may have bases that exceed their
principal amounts. Except as indicated in "Federal Income Tax Consequences --
REMIC Certificates - Treatment by the REMIC of Original Issue Discount, Market
Discount, and Amortizable Premium" below, the premium on such assets will be
amortizable under the constant yield method and the same prepayment assumptions
used in pricing the Certificates. The amortized premium will reduce the REMIC's
taxable income or increase its tax loss for each year, which will offset a
corresponding amount of the stated interest or other residual cash flow, if any,
allocable to the Residual Certificateholders. It should be noted, however, that
the law concerning the amortization of premium on Assets is unclear in certain
respects. If the Service were to contend successfully that part or all of the
premium on the assets underlying a REMIC is not amortizable, the holders of the
Residual Certificates in such REMIC would recover the basis attributable to the
unamortizable premium only as principal payments are received on such assets or
upon the disposition or worthlessness of their Residual Certificates. The
inability to amortize part or all of the premium could give rise to timing
differences between the REMIC's income and deductions, creating phantom income
(as described below).
In the first years after the issuance of the Regular Certificates,
REMIC taxable income may include significant amounts of phantom income. Phantom
income arises from timing differences between income on the underlying Assets
and deductions on the Regular Certificates that result from the multiple-class
structure of the Certificates. Since phantom income will arise from timing
differences between income and deductions, it will be matched by a corresponding
loss or reduction in taxable income in later years, during which economic or
financial income will exceed REMIC taxable income. Any acceleration of taxable
income, however, could lower the yield to a Residual Certificateholder, since
the present value of the tax paid on that income will exceed the present value
of the corresponding tax reduction in the later years. The amount and timing of
any phantom income are dependent upon (i) the structure of the particular REMIC
and (ii) the rate of prepayment on the Assets held by the REMIC and, therefore,
cannot be predicted without reference to a particular REMIC.
The assets of certain Series REMICs may have bases that are less than
their principal amounts. In such a case, a Residual Certificateholder will
recover the basis in his Residual Certificate as the REMIC recovers the portion
of its basis in the assets that is attributable to the residual interest. The
REMIC's basis in the assets is recovered as it is allocated to principal
payments received by the REMIC.
A portion of a Series REMIC's taxable income may be subject to special
treatment. That portion (known as "excess inclusion income") generally is any
taxable income beyond that which the Residual Certificateholder would have
recognized had the Residual Certificate been a conventional debt instrument
87
<PAGE>
bearing interest at 120% of the applicable long-term federal rate (based on
quarterly compounding) as of the date on which the Residual Certificate was
issued. Excess inclusion income generally is intended to approximate phantom
income and may result in unfavorable tax consequences for certain investors. See
"Federal Income Tax Consequences -- REMIC Certificates -- Tax Treatment of
Residual Certificates -- Limitations on Offset or Exemption of REMIC Income" and
"-- Special Considerations for Certain Types of Investors" below.
Limitations on Offset or Exemption of REMIC Income
Generally, a Residual Certificateholder's taxable income for any
taxable year may not be less than such Certificateholder's excess inclusion
income for that taxable year. Excess inclusion income is equal to the excess of
REMIC taxable income for the quarterly period for the Residual Certificates over
the product of (i) 120% of the long-term applicable federal rate that would have
applied to the Residual Certificates if they were debt instruments for federal
income tax purposes on the Closing Date and (ii) the adjusted issue price of
such Residual Certificates 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, increased by the
amount of the daily accruals of REMIC income for all prior quarters, and
decreased by any distributions made with respect to such Residual Certificate
prior to the beginning of such quarterly period. If the Residual
Certificateholder is an organization subject to the tax on UBTI imposed by Code
section 511, the Residual Certificateholder's excess inclusion income will be
treated as UBTI. In addition, under Treasury regulations yet to be issued, if a
REIT or a RIC owns a Residual Certificate that generates excess inclusion
income, a pro rata portion of the dividends paid by the REIT or the RIC
generally will constitute excess inclusion income for their shareholders.
Finally, Residual Certificateholders who are foreign persons will not be
entitled to any exemption from the 30% withholding tax or a reduced treaty rate
with respect to their excess inclusion income from the REMIC. See "Federal
Income Tax Consequences -- REMIC Certificates -- Taxation of Certain Foreign
Holders of REMIC Certificates -- Residual Certificates" below.
Non-Recognition of Certain Transfers for Federal Income Tax Purposes
In addition to the limitations specified above, the REMIC Provisions
provide that the transfer of a "noneconomic residual interest" to a United
States person will be disregarded for tax purposes if a significant purpose of
the transfer was to impede the assessment or collection of tax. A Residual
Certificate will constitute a noneconomic residual interest unless, at the time
the interest is transferred, (i) the present value of the expected future
distributions with respect to the Residual Certificate equals or exceeds the
product of the present value of the anticipated excess inclusion income and the
highest corporate tax rate for the year in which the transfer occurs, and (ii)
the transferor reasonably expects that the transferee will receive distributions
from the REMIC in amounts sufficient to satisfy the taxes on excess inclusion
income as they accrue. If a transfer of a residual interest is disregarded, the
transferor would continue to be treated as the owner of the Residual Certificate
and thus would continue to be subject to tax on its allocable portion of the net
income of the related REMIC. 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 (i.e., the
transferor had "improper knowledge"). Under the REMIC Provisions, a transferor
is presumed not to have such improper knowledge if (i) the transferor conducted,
at the time of the transfer, a reasonable investigation of the financial
condition of the transferee and, as a result of the investigation, the
transferor found that the transferee had historically paid its debts as they
came due and found no significant evidence to indicate that the transferee would
not continue to pay its debts as they come due and (ii) the transferee
represents to the transferor that it understands that, as the holder of a
noneconomic residual interest, it may incur tax liabilities in excess of any
cash flows generated by the interest and that it intends to pay the taxes
associated with holding the residual interest as they become due. A similar
limitation exists with respect to transfers of certain residual interests to
foreign investors. See "Federal Income Tax Consequences -- REMIC Certificates --
Taxation of Certain Foreign Holders of REMIC Certificates -- Residual
Certificates" below.
88
<PAGE>
Ownership of Residual Interests by Disqualified Organizations
The Code contains three sanctions that are designed to prevent or
discourage the direct or indirect ownership of a REMIC residual interest (such
as a Residual Certificate) by the United States, any state or political
subdivision thereof, any foreign government, any international organization, any
agency or instrumentality of any of the foregoing, any tax-exempt organization
(other than a farmers' cooperative described in section 521 of the Code) unless
such organization is subject to the tax on UBTI, or any rural electrical or
telephone cooperative (each a "Disqualified Organization"). A corporation is not
treated as an instrumentality of the United States or any state or political
subdivision thereof if all of its activities are subject to tax and, with the
exception of FHLMC, a majority of its board of directors is not selected by such
governmental unit.
First, REMIC status is dependent upon the presence of reasonable
arrangements designed to prevent a Disqualified Organization from acquiring
record ownership of any portion of the REMIC's residual interest. No residual
interest issued pursuant to a Pooling and Servicing Agreement (whether or not
such interest is represented by a Residual Certificate) will be offered for sale
to Disqualified Organizations. Furthermore, (i) the residual interest in each
Series REMIC will be registered as to both principal and any stated interest
with the Trustee (or its agent) and transfer of such residual interest (or a
percentage interest therein) may be effected only (A) by surrender of the old
residual interest instrument and reissuance by the Trustee of a new residual
interest instrument to the new holder or (B) through a book-entry system
maintained by the Trustee; (ii) the applicable Pooling and Servicing Agreement
will prohibit the ownership of residual interests by Disqualified Organizations;
and (iii) each residual interest instrument will contain a legend providing
notice of that prohibition. Consequently, each Series REMIC should be considered
to have made reasonable arrangements designed to prevent the ownership of its
residual interest by Disqualified Organizations.
Second, the Code imposes a one-time tax on the transferor of a residual
interest (including a Residual Certificate or an interest therein) to a
Disqualified Organization. The one-time tax equals the product of (i) the
present value of the total anticipated excess inclusions with respect to the
transferred residual interest for periods after the transfer and (ii) the
highest marginal federal income tax rate applicable to corporations. Under the
REMIC Provisions, the anticipated excess inclusions with respect to a
transferred residual interest must be based on (i) both actual prior prepayment
experience and the prepayment assumptions used in pricing the related REMIC's
interests and (ii) any required or permitted clean up calls, or required
qualified liquidation provided for in the REMIC's organizational documents. The
present value of anticipated excess inclusions is determined using a discount
rate equal to the applicable federal rate that would apply to a debt instrument
that was issued on the date the Disqualified Organization acquired the residual
interest and whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the residual interest. Where a
transferee is acting as an agent for a Disqualified Organization, the transferee
is subject to the one-time tax. For that purpose, the term "agent" includes a
broker, nominee, or other middleman. Upon the request of such transferee or the
transferor, the REMIC must furnish to the requesting party and to the Service
information sufficient to permit the computation of the present value of the
anticipated excess inclusions. The transferor of a residual interest (including
a Residual Certificate or interest therein) will not be liable for the one-time
tax if the transferee furnishes to the transferor an affidavit that states,
under penalties of perjury, 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 one-time tax must be paid by
April 15th of the year following the calendar year in which the residual
interest is transferred to a Disqualified Organization. The one-time tax may be
waived by the Secretary of the Treasury if, upon discovery that a transfer is
subject to the one-time tax, the Disqualified Organization promptly disposes of
the residual interest and the transferor pays any amounts that the Secretary of
the Treasury may require.
Third, the Code imposes an annual tax on any pass-through entity (i.e.,
a RIC, REIT, common trust fund, partnership, trust, estate or cooperative
described in Code section 1381) that owns a direct or indirect interest in a
residual interest (including a Residual Certificate), if record ownership of an
interest in the pass-
89
<PAGE>
through entity is held by one or more Disqualified Organizations. The tax
imposed equals the highest corporate income tax rate multiplied by the share of
any excess inclusion income of the pass-through entity for the taxable year
allocable to interests in the pass-through entity held by Disqualified
Organizations. The same tax applies to a nominee who acquires an interest in a
residual interest (including a Residual Certificate) on behalf of a Disqualified
Organization. For example, a broker that holds an interest in a Residual
Certificate in "street name" for a Disqualified Organization is subject to the
tax. The tax due must be paid by the fifteenth day of the fourth month following
the close of the taxable year of the pass-through entity in which the
Disqualified Organization is a record holder. Any such tax imposed on a
pass-through entity would be deductible against that entity's ordinary income in
determining the amount of its required distributions. In addition, dividends
paid by a RIC or a REIT are not considered preferential dividends within the
meaning of section 562(c) of the Code solely because the RIC or REIT allocates
such tax expense only to the shares held by Disqualified Organizations. A
pass-through entity will not be liable for the annual tax if the record holder
of the interest in the pass-through entity furnishes to the pass-through entity
an affidavit that states, under penalties of perjury, that the record holder is
not a Disqualified Organization, and the pass-through entity does not have
actual knowledge that such affidavit is false.
The REMIC Provisions also require that reasonable arrangements be made
with respect to each REMIC to enable the REMIC to provide the Treasury and the
transferor with information necessary for the application of the one-time tax
described above. Consequently, the applicable Pooling and Servicing Agreement
will provide for the Servicer or an Affiliate thereof to perform such
information services as may be required for the application of the one-time tax.
If a Residual Certificateholder transfers an interest in a Residual Certificate
in violation of the relevant transfer restrictions and triggers the information
requirement, the Servicer or Affiliate thereof may charge such Residual
Certificateholder a reasonable fee for providing the information.
Special Considerations for Certain Types of Investors
Dealers in Securities. Residual Certificateholders that are dealers in
securities should be aware that, under Treasury regulations (the "Mark-to-Market
Regulations") relating to the mark-to-market accounting provisions under section
475 of the Code, dealers in securities are not permitted to mark to market any
REMIC residual interests acquired on or after January 4, 1995. Prospective
purchasers of Residual Certificates should consult with their tax advisors
regarding the possible application of the Mark-to-Market Regulations to such
Certificates.
Tax-Exempt Entities. Any excess inclusion income with respect to a
Residual Certificate held by a tax-exempt entity, including a qualified
profit-sharing, pension, or other employee benefit plan, will be treated as
UBTI. Although the legislative history and statutory provisions imply otherwise,
the Treasury conceivably could take the position that, under pre-existing Code
provisions, substantially all income on a Residual Certificate (including
non-excess inclusion income) is to be treated as UBTI. See "Federal Income Tax
Consequences -- REMIC Certificates -- Taxation of Residual Certificateholders"
above.
Individuals and Pass-Through Entities. A Residual Certificateholder who
is an individual, trust, or estate will be permitted to deduct its allocable
share of the fees or expenses relating to servicing the assets of and
administering the related REMIC under section 212 of the Code only to the extent
that the amount of such fees and expenses, when combined with the Residual
Certificateholder's other miscellaneous itemized deductions for the taxable
year, exceeds 2% of that holder's adjusted gross income. That same limitation
will apply to individuals, trusts, or estates that hold Residual Certificates
indirectly through a grantor trust, a partnership, an S corporation, a common
trust fund, a REMIC, or a nonpublicly offered RIC. A nonpublicly offered RIC is
a RIC other than one whose shares are (i) continuously offered pursuant to a
public offering; (ii) regularly traded on an established securities market; or
(iii) held by no fewer than 500 persons at all times during the taxable year. In
addition, that limitation will apply to individuals, trusts, or estates that
hold Residual Certificates through any other person (i) that is not generally
subject to federal income tax and (ii) the character of whose income may affect
the character of the income generated by that person for its owners
90
<PAGE>
or beneficiaries. Further, Code section 68 provides that the amount of
itemized deductions otherwise allowable for the taxable year for an individual
whose adjusted gross income exceeds the applicable amount ($100,000, or $50,000
in the case of a separate return by a married individual within the meaning of
Code section 7703 for taxable year 1991 and adjusted for inflation each year
thereafter) will be reduced by the lesser of (i) 3% of the excess of adjusted
gross income over the applicable amount, or (ii) 80% of the amount of itemized
deductions otherwise allowable for such taxable year. In some cases, the amount
of additional income that would be recognized as a result of the foregoing
limitations by a Residual Certificateholder who is an individual, trust, or
estate could be substantial. Non-corporate holders of Residual Certificates also
should be aware that miscellaneous itemized deductions, including allocable
investment expenses attributable to the related Series REMIC, are not deductible
for purposes of the alternative minimum tax. Finally, persons holding an
interest in a Residual Certificate indirectly through an interest in a RIC,
common trust fund or one of certain corporations doing business as a cooperative
generally will recognize a share of any excess inclusion allocable to that
Residual Certificate.
Employee Benefit Plans. See "Federal Income Tax Consequences -- REMIC
Certificates -- Special Considerations for Certain Types of Investors --
Tax-exempt entities" above and "ERISA Considerations" below.
REITs and RICs. If a Residual Certificateholder is a REIT and the
related Series REMIC generates excess inclusion income, a portion of REIT
dividends will be treated as excess inclusion income for the REIT's
shareholders, in a manner to be provided by regulations. Thus, shareholders in a
REIT that invests in Residual Certificates could face unfavorable treatment of a
portion of their REIT dividend income for purposes of (i) using current
deductions or net operating loss carryovers or carrybacks; (ii) UBTI in the case
of tax-exempt shareholders; and (iii) withholding tax in the case of foreign
shareholders (see "Federal Income Tax Consequences -- REMIC Certificates --
Special Considerations for Certain Types of Investors -- Foreign
ResidualCertificateholders" below). Moreover, because Residual
Certificateholders may recognize phantom income (see "Federal Income Tax
Consequences -- REMIC Certificates -- Taxation of Residual Certificateholders"
above), a REIT contemplating an investment in Residual Certificates should
consider carefully the effect of any phantom income upon its ability to meet its
income distribution requirements under the Code. The same rules regarding excess
inclusion will apply to a Residual Certificateholder that is a RIC, common trust
fund, or one of certain corporations doing business as a cooperative.
A Residual Certificate held by a REIT will be treated as a real estate
asset for purposes of the REIT qualification requirements in the same proportion
that the related Series REMIC's assets would be treated as real estate assets if
held directly by the REIT, and interest income derived from such Residual
Certificate will be treated as Qualifying REIT Interest to the same extent. If
95% or more of a Series REMIC's assets qualify as real estate assets for REIT
purposes, 100% of that REMIC's regular and residual interests (including
Residual Certificates) will be treated as real estate assets for REIT purposes,
and all of the income derived from such interests will be treated as Qualifying
REIT Interest. The REMIC Provisions provide that payments of principal and
interest on Assets that are reinvested pending distribution to the holders of
the REMIC Certificates constitute real estate assets for REIT purposes. Two
REMICs that are part of a tiered structure will be treated as one REMIC for
purposes of determining the percentage of assets of each REMIC that constitutes
real estate assets. It is expected that at least 95% of the assets of each
Series REMIC will be real estate assets throughout such REMIC's life. The amount
treated as a real estate asset in the case of a Residual Certificate apparently
is limited to the REIT's adjusted basis in the Certificate.
Significant uncertainty exists with respect to the treatment of a
Residual Certificate for purposes of the various asset composition requirements
applicable to RICs. A Residual Certificate should be treated as a "security,"
but probably will not be considered a "Government security" for purposes of
section 851(b)(4) of the Code. Moreover, it is unclear whether a Residual
Certificate will be treated as a "voting security" under that Code section.
Finally, because a Series REMIC will be treated as the "issuer" of the Residual
Certificate for purposes of that section, a RIC would be unable to invest more
than 25% of the value of its total assets in Residual Certificates issued by the
same Series REMIC.
91
<PAGE>
Foreign Residual Certificateholders. Certain adverse tax consequences
may be associated with the holding of certain Residual Certificates by a foreign
person or with the transfer of such Certificates to or from a foreign person.
See "Federal Income Tax Consequences -- REMIC Certificates -- Taxation of
Certain Foreign Holders of REMIC Certificates -- Residual Certificates" below.
Thrift Institutions, Banks, and Certain Other Financial Institutions.
Residual Certificates will be treated as qualifying assets for Thrift
Institutions in the same proportion that the assets of the Series REMIC to which
they relate would be so treated. However, if 95% or more of the assets of a
given Series REMIC are qualifying assets for Thrift Institutions, 100% of that
REMIC's regular and residual interests (including Residual Certificates) would
be treated as qualifying assets. In addition, the REMIC Provisions provide that
payments of principal and interest on Assets included in a REMIC that are
reinvested pending their distribution to the holders of the related REMIC
Certificates will be treated as qualifying assets for Thrift Institutions.
Moreover, two REMICs that are part of a tiered structure will be treated as one
REMIC for purposes of determining the percentage of assets of each REMIC that
constitutes qualifying assets for Thrift Institution purposes. It is expected
that at least 95% of the assets of each Series REMIC will be qualifying assets
for Thrift Institutions throughout such REMIC's life. The amount of a Residual
Certificate treated as a qualifying asset for Thrift Institutions, however,
cannot exceed the holder's adjusted basis in that Residual Certificate.
Generally, gain or loss arising from the sale or exchange of Residual
Certificates held by certain financial institutions will give rise to ordinary
income or loss, regardless of the length of the holding period for the Residual
Certificates. Those financial institutions include banks, mutual savings banks,
cooperative banks, domestic building and loan institutions, savings and loan
institutions, and similar institutions. See "Federal Income Tax Consequences C
REMIC Certificates -- Tax Treatment of Residual Certificates -- Disposition of
Residual Certificates" below.
Disposition of Residual Certificates
Upon the sale or exchange of a Residual Certificate, a Residual
Certificateholder will recognize gain or loss equal to the difference between
the amount realized and its adjusted basis in the Residual Certificate. It is
possible that a disqualification of a Series REMIC (other than an inadvertent
disqualification for which relief may be provided in Treasury regulations) may
be treated as a sale or exchange of a related Residual Certificate. If the
holder has held the Residual Certificate for the applicable long-term capital
gain holding period, gain or loss on its disposition generally will be
characterized as long-term capital gain or loss. In the case of banks, thrifts,
and certain other financial institutions described in section 582 of the Code,
however, gain or loss on the disposition of a Residual Certificate will be
treated as ordinary gain or loss, regardless of the length of the holding
period. See "Federal Income Tax Consequences -- REMIC Certificates -- Special
Considerations for Certain Types of Investors" herein.
A special version of the wash sale rules of the Code applies to
dispositions of Residual Certificates. Under that rule, losses on dispositions
of Residual Certificates generally will be disallowed where, within six months
before or after the disposition, the seller of such Certificates acquires any
residual interest in a REMIC or any interest in a Taxable Mortgage Pool that is
economically comparable to a Residual Certificate. Treasury Regulations
providing for appropriate exceptions to the application of the wash sale rules
have been authorized, but have not yet been promulgated.
92
<PAGE>
Liquidation of the REMIC
A REMIC may liquidate without the imposition of entity-level tax only
in a qualified liquidation. A liquidation is considered a "qualified
liquidation" if the REMIC (i) adopts a plan of complete liquidation; (ii) sells
all of its non-cash assets within 90 days of the date on which it adopts the
plan; and (iii) credits or distributes in liquidation all of the sale proceeds
plus its cash (other than amounts retained to meet claims against it) to its
Certificateholders within that 90-day period. An early termination of a REMIC
caused by the redemption of all outstanding classes of Certificates issued by
such REMIC, and the distribution to the Residual Certificateholders of the
excess, if any, of the fair market value of the REMIC's assets at the time of
such redemption over the unpaid principal balance and accrued and unpaid
interest of such REMIC Certificates (and any administrative costs associated
with such REMIC), will constitute a complete liquidation as described in the
preceding sentence. Under the REMIC Provisions, a plan of liquidation need not
be in any special form. Furthermore, if a REMIC specifies the first day in the
90-day liquidation period in a statement attached to its final tax return, the
REMIC will be considered to have adopted a plan of liquidation on that date.
Treatment by the REMIC of Original Issue Discount, Market Discount, and
Amortizable Premium
Original Issue Discount. Generally, a REMIC's deductions for original
issue discount expense on its REMIC Certificates will be determined in the same
manner as for determining the original issue discount income on such
Certificates as described in "Federal Income Tax Consequences -- REMIC
Certificates -- Tax Treatment of Regular Certificates -- Original Issue
Discount" above, without regard to the de minimis rule described therein.
Market Discount. In general, a REMIC will have market discount income
with respect to its Qualified Mortgages if the basis of the REMIC in such assets
is exceeded by their adjusted issue prices. A REMIC's aggregate initial basis in
its Qualified Mortgages (and any other assets transferred to the REMIC on the
startup day) equals the aggregate of the issue prices of the regular and
residual interests in the REMIC. That basis is allocated among the REMIC's
Qualified Mortgages based on their relative fair market values. Any market
discount that accrues on a REMIC's Qualified Mortgages will be recognized
currently as an item of REMIC ordinary income. The amount of market discount
income to be recognized in any period is determined in a manner generally
similar to that used in the determination of original issue discount, as if the
Qualified Mortgages had been issued (i) on the date they were acquired by the
REMIC and (ii) for a price equal to the REMIC's initial basis in the Qualified
Mortgages. The same prepayment assumptions used in pricing the Certificates are
used to compute the yield to maturity of a REMIC's Qualified Mortgages.
Premium. Generally, if the basis of a REMIC in its Qualified Mortgages
exceeds the unpaid principal balances of those assets the REMIC will be
considered to have acquired such assets at a premium equal to the amount of such
excess. A REMIC that holds a Qualified Mortgage as a capital asset may elect
under Code section 171 to amortize premium on such asset under a constant
interest method, to the extent such asset was originated, or treated as
originated, after September 27, 1985. The legislative history to the 1986 Act
indicates that, while the deduction for amortization of premium will not be
subject to the limitations on miscellaneous itemized deductions of individuals,
it will be treated as interest expense for purposes of other provisions in the
1986 Act limiting the deductibility of interest for non-corporate taxpayers.
Because substantially all of the obligors on the Assets are expected to be
individuals, section 171 of the Code will not be available for the amortization
of premium on such Assets to the extent they were originated on or prior to
September 27, 1985. Such premium may be amortizable under more general
provisions and principles of federal income tax law in accordance with a
reasonable method regularly employed by the holder of such Assets. 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.
93
<PAGE>
REMIC Level Taxes
Income from certain transactions by a REMIC, called prohibited
transactions, will not be part of the calculation of the REMIC's income or loss
that is includible in the federal income tax returns of Residual
Certificateholders, but rather will be taxed directly to the REMIC at a 100%
rate. In addition, net income from one prohibited transaction may not be offset
by losses from other prohibited transactions. Prohibited transactions generally
include: (i) the disposition of Qualified Mortgages other than pursuant to (a)
the repurchase of a defective asset, (b) the substitution for a defective asset
within two years of the closing date, (c) a substitution for any Qualified
Mortgage within three months of the closing date, (d) the foreclosure, default,
or imminent default of a Qualified Mortgage, (e) the bankruptcy or insolvency of
the REMIC, (f) the sale of an adjustable-rate asset the interest rate on which
is convertible to a fixed rate of interest upon its conversion for an amount
equal to the asset's current principal balance plus accrued but unpaid interest
(and provided that certain other requirements are met) or (g) a qualified
liquidation of the REMIC; (ii) the receipt of income from assets that are not
the type of assets or investments that a REMIC is permitted to hold; (iii) the
receipt of compensation for services by a REMIC; and (iv) the receipt of gain
from disposition of cash-flow investments other than pursuant to a qualified
liquidation of the REMIC. A disposition of a Qualified Mortgage or cash flow
investment will not give rise to a prohibited transaction, however, if the
disposition was (i) required to prevent default on a regular interest resulting
from a default on one or more of the REMIC's Qualified Mortgages or (ii) made to
facilitate a clean-up call. The REMIC Provisions define a clean-up call as the
redemption of a class of regular interests when, by reason of prior payments
with respect to those interests, the administrative costs associated with
servicing the class outweigh the benefits of maintaining the class. Under those
regulations, the redemption of a class of regular interests with an outstanding
principal balance of no more than 10% of the original principal balance
qualifies as a clean-up call. The REMIC Provisions also provide that the
modification of an asset generally will not be treated as a disposition of that
asset if it is occasioned by a default or a reasonably foreseeable default, an
assumption of the asset, the waiver of a due-on-sale or encumbrance clause, or
the conversion of an interest rate by an obligor pursuant to the terms of a
convertible adjustable rate asset.
In addition, a REMIC generally will be taxed at a 100% rate on any
contribution to the REMIC after the closing date unless such contribution is a
cash contribution that (i) takes place within the three-month period beginning
on the closing date; (ii) is made to facilitate a clean-up call (as defined in
the preceding paragraph) or a qualified liquidation (as defined in "Federal
Income Tax consequences -- REMIC Certificates -- Liquidation of the REMIC"
above); (iii) is a payment in the nature of a guarantee; (iv) constitutes a
contribution by the holder of the Residual Certificates in the REMIC to a
qualified reserve fund; or (v) is otherwise permitted by Treasury regulations
yet to be issued. The structure and operation of each Series REMIC will be
designed to avoid the imposition of the 100% tax on contributions.
To the extent that a REMIC derives certain types of income from
foreclosure property (generally, income relating to dealer activities of the
REMIC), it will be taxed on such income at the highest corporate income tax
rate. Although the relevant law is unclear, it is not anticipated that any
Series REMIC will receive significant amounts of such income.
The organizational documents governing the Regular and Residual
Certificates of a Series REMIC will be designed to prevent the imposition of the
foregoing taxes on such REMIC in any material amounts. If any of the foregoing
taxes is imposed on a Series REMIC, the Trustee will seek to place the burden
thereof on the person whose action or inaction gave rise to such taxes. To the
extent that the Trustee is unsuccessful in doing so, the burden of such taxes
will be borne by any outstanding subordinated Class of Certificates before it is
borne by a more senior Class of Certificates.
94
<PAGE>
REMIC Qulification
The Trust underlying a Series (or one or more designated Asset Pools
thereof) will qualify under the Code as a REMIC if a REMIC election is in effect
and certain tests concerning (i) the composition of the assets of the REMIC and
(ii) the nature of the Certificateholders' interests in the REMIC are met on a
continuing basis.
Asset Composition
In order for a Trust (or one or more designated Asset Pools thereof) to
be eligible for REMIC status, substantially all of the assets of the Trust (or
the designated Asset Pool) must consist of "qualified mortgages" and "permitted
investments" as of the close of the third month beginning after the closing date
and at all times thereafter. Substantially all of a REMIC's assets will be
deemed to consist of "Qualified Mortgages" and "permitted investments" if no
more than a de minimis amount of its assets (i.e., assets with an aggregate
adjusted basis that is less than 1% of the aggregate adjusted basis of all the
REMIC's assets) are assets other than qualified mortgages and permitted
investments.
A "Qualified Mortgage" is any obligation that is principally secured by
an interest in real property, including a regular interest in another REMIC, and
that is either transferred to the REMIC on the closing date or purchased by the
REMIC pursuant to a fixed price contract within a three-month period thereafter.
Under the REMIC Provisions, a Qualified Mortgage includes any obligation secured
by manufactured housing that qualifies as a "single family residence" within the
meaning of Code section 25(e)(10). Manufactured housing qualifies as a "single
family residence" under Code Section 25(e)(10) if it: (i) is used as a single
family residence; (ii) has a minimum of 400 square feet of living space and a
minimum width in excess of 102 inches; and (iii) is of a kind customarily used
at a fixed location. A Qualified Mortgage also includes a "qualified replacement
mortgage," which is any property that would have been treated as a Qualified
Mortgage if it were transferred to the REMIC on the closing date and that is
received either in exchange for a defective asset within a two-year period
beginning on the closing date or in exchange for any Qualified Mortgage within a
three-month period beginning on that date.
The Mortgage Loans of each Series REMIC will be treated as Qualified
Mortgages. In addition, the Seller will represent and warrant in the related
Pooling and Servicing Agreement or Sales Agreement, as the case may be, that
each Contract will be secured by a Manufactured Home that meets the definition
of "single family residence" in section 25(e)(10) of the Code. Accordingly the
Contracts of each Series REMIC will be treated as Qualified Mortgages.
"Permitted Investments" include cash flow investments, qualified
reserve assets, and foreclosure property. Cash flow investments are investments
of amounts received with respect to Qualified Mortgages for a temporary period
(not to exceed thirteen months) before distribution to holders of regular or
residual interests in the REMIC. Qualified reserve assets are intangible
investment assets (other than REMIC residual interests) that are part of a
qualified reserve fund maintained by the REMIC. A qualified reserve fund is any
reasonably required reserve maintained by a REMIC to provide for full payment of
expenses of the REMIC or amounts due on the regular interests or residual
interest in such REMIC in the event of (i) defaults or delinquencies on the
Qualified Mortgages held by such REMIC; (ii) interest shortfalls on such
Qualified Mortgages caused by prepayments of those assets; (iii) lower than
expected returns on cash-flow investments; or (iv) unanticipated losses or
expenses incurred by the REMIC. A qualified 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 of property held for less than three months, unless such
sale was required to prevent a default on the regular interests caused by a
default on one or more Qualified Mortgages. To the extent that the amount in a
qualified reserve fund exceeds a reasonably required amount, it must be reduced
"promptly and appropriately." Foreclosure property generally is property
acquired by the REMIC in connection with the default or imminent default of a
Qualified Mortgage. Foreclosure property may not be held for more than three
taxable years after the taxable year of acquisition unless it is established to
the satisfaction of the Secretary of the Treasury that an extension of such
period is necessary for the orderly
95
<PAGE>
liquidation of the foreclosure property. The Secretary of the Treasury may grant
one or more extensions, but any such extension shall not extend the grace period
beyond the date which is six years after the date such foreclosure property is
acquired.
Investors' Interests
In addition to the foregoing asset qualification requirements, the
various interests in a REMIC also must meet certain requirements. All of the
interests in a REMIC must be issued on the Closing Date (or within a specified
10-day period) and belong to either of the following: (i) one or more classes of
regular interests; or (ii) a single class of residual interests on which
distributions are made pro rata. For each Series REMIC with respect to which
REMIC Certificates are issued, the Regular Certificates will constitute one or
more classes of "regular interests" in that REMIC and the Residual Certificates
will constitute the single class of "residual interests" in that REMIC.
A REMIC interest qualifies as a regular interest if (i) it is issued on
the startup day with fixed terms; (ii) it is designated as a regular interest;
(iii) it entitles its holder to a specified principal amount; and (iv) if it
pays interest, such interest either (a) constitutes a specified portion of the
interest payable on one or more of the REMIC's Qualified Mortgages, and that
portion does not vary during the period that the regular interest is outstanding
(a "specified nonvarying portion"), (b) is payable at a fixed rate with respect
to the principal amount of the regular interest, or (c) to the extent permitted
under the REMIC Provisions, is payable at a variable rate with respect to such
principal amount. Pursuant to the REMIC Provisions, the following rates are
permissible variable rates for REMIC regular interests: (i) a qualified floating
rate set at a current value as described in "Federal Income Tax Consequences --
REMIC Certificates -- Variable Rate Certificates" above, without regard to the
rules in the OID Regulations limiting the use of Caps, Floors, and Governors
with respect to such a rate; (ii) a rate equal to the highest, lowest, or
average of two or more qualified floating rates (e.g., a rate based on the
average cost of funds of one or more financial institutions); or (iii) a rate
equal to the weighted average of the interest rates on one or more of the
Qualified Mortgages held by the REMIC provided, however, that the Qualified
Mortgages taken into account in determining the weighted average rate bear
interest at a fixed rate or a rate that would be a permissible variable rate for
a REMIC regular interest as described in this sentence. Under the REMIC
Provisions, the presence of a ceiling or floor on the interest payable on a
variable rate regular interest will not prevent such an interest from qualifying
as a regular interest. In addition, a qualifying variable rate may be expressed
as a multiple of, or a constant number of basis points more or less than, one of
the permissible types of variable rates described above. Finally, a limitation
on the amount of interest to be paid on a variable rate regular interest based
on the total amount available for distribution is permissible, provided that it
is not designed to avoid the restrictions on qualifying variable rates. The
REMIC Provisions also provide that the specified principal amount of a REMIC
regular interest may be zero if the interest associated with such regular
interest constitutes a specified nonvarying portion of the interest on one or
more of the REMIC's Qualified Mortgages.
If the interest payable on a REMIC regular interest is
disproportionately high relative to the specified principal amount of that
interest, that interest may be treated, in whole or in part, as a second
residual interest, which could result in the disqualification of the REMIC.
Under the REMIC Provisions, interest payments (or similar amounts) are
considered disproportionately high if the issue price of a regular interest
exceeds 125% of its specified principal amount. Under the REMIC Provisions,
however, interest payable at a disproportionately high rate will not cause a
regular interest to be recharacterized as a residual interest if the interest
payable on that regular interest consists of a specified nonvarying portion of
the interest payable on one or more of the REMIC's Qualified Mortgages. None of
the Regular Certificates will have an issue price that exceeds 125% of their
respective specified principal amounts unless the interest payable on those
Certificates consists of a specified nonvarying portion of the interest payable
on one or more of the REMIC's Qualified Mortgages.
The Code requires certain arrangements to be made with respect to all
REMICs. Those arrangements, which are intended to prevent acquisitions of REMIC
residual interests (including the Residual Certificates) by certain
organizations that are not subject to federal income tax, are described in
96
<PAGE>
"Federal Income Tax Consequences -- REMIC Certificates -- Tax Treatment of
Residual Certificates -- Ownership of Residual Interests by Disqualified
Organizations" above. Each Series REMIC will be structured to provide for such
arrangements.
Consequences of Disqualification
If a Series REMIC fails to comply with one or more of the Code's ongoing
requirements for REMIC status during any taxable year, the Code provides that
its REMIC status may be lost for that year and thereafter. If REMIC status is
lost, the treatment of the former REMIC and the interests therein for federal
income tax purposes is uncertain. The former REMIC might be entitled to
treatment as a grantor trust under Subpart E, Part 1 of Subchapter J of the
Code, in which case no entity-level tax would be imposed on the former REMIC.
Alternatively, the Regular Certificates may continue to be treated as debt
instruments for federal income tax purposes, but the arrangement could be
treated as a Taxable Mortgage Pool. See "Federal Income Tax Consequences --
REMIC Certificates -- Taxable Mortgage Pools" above. If a Series REMIC is
treated as a Taxable Mortgage Pool, any residual income of the former REMIC
(i.e., interest and discount income from the underlying Assets less interest and
original issue discount expense allocable to the Regular Certificates and any
administrative expenses of the REMIC) would be subject to corporate income tax
at the Taxable Mortgage Pool level. On the other hand, the arrangement could be
treated under Treasury regulations as a separate association taxable as a
corporation and the Regular Certificates could be treated as stock interests
therein, rather than debt instruments. In the latter two cases, Residual
Certificates would be treated as stock interests in such Taxable Mortgage Pool
or association, respectively. The Code authorizes the Treasury to issue
regulations that address situations where a failure to meet the requirements for
REMIC status occurs inadvertently and in good faith. Such regulations have not
yet been issued. The conference report accompanying the 1986 Act indicates that
disqualification relief may be accompanied by sanctions, such as the imposition
of a corporate tax on all or a portion of the REMIC's income for the period of
time in which the requirements for REMIC status are not satisfied.
Taxable Mortgage Pools
Corporate income tax can be imposed on the net income of certain
entities issuing non-REMIC debt obligations secured by real estate mortgages
("Taxable Mortgage Pools"). Any entity other than a REMIC or a REIT will be
considered a Taxable Mortgage Pool if (i) substantially all of the assets of the
entity consist of debt obligations and more than 50% of such obligations consist
of "real estate mortgages" (which term, for purposes of this paragraph, includes
Mortgage Loans and Contracts), (ii) such entity is the obligor under debt
obligations with two or more maturities, and (iii) under the terms of the debt
obligations on which the entity is the obligor, payments on such obligations
bear a relationship to payment on the obligations held by the entity.
Furthermore, a group of assets held by an entity can be treated as a separate
Taxable Mortgage Pool if the assets are expected to produce significant cash
flow that will support one or more of the entity's issues of debt obligations.
The Company generally will structure offerings of non-REMIC Certificates to
avoid the application of the Taxable Mortgage Pool rules.
Taxation of Certain Foreign Holders of REMIC Certificates
Regular Certificates
Interest, including original issue discount, paid on a Regular
Certificate to a Foreign Person generally will be treated as "portfolio
interest" and, therefore, will not be subject to any United States withholding
tax, provided that (i) such interest is not effectively connected with a trade
or business in the United States of the Certificateholder, and (ii) the Trustee
(or other person who would otherwise be required to withhold tax) is provided
with a Foreign Person Certification. If the holder of a Regular Certificate does
not provide the Trustee (or other person who would otherwise be required to
withhold tax) with a Foreign Person Certification, interest (including original
issue discount) paid on such a Certificate may be subject to either a 30%
withholding tax or 31% backup withholding. See "Federal Income Tax Consequences
- -- Taxation of Certain Foreign Holders of REMIC Certificates -- Backup
Withholding" below.
97
<PAGE>
Residual Certificates
Amounts paid to Residual Certificateholders who are Foreign Persons are
treated as interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Under temporary Treasury Regulations, non-excess inclusion
income received by Residual Certificateholders who are Foreign Persons generally
would qualify as "portfolio interest" exempt from the 30% withholding tax (as
described in the preceding paragraph) only to the extent that (i) the Assets
held by the related Series REMIC were issued in registered form and (ii) such
Assets were originated after July 18, 1984. Because the Assets held by a Series
REMIC will not be issued in registered form, amounts received by Residual
Certificateholders who are Foreign Persons will not be exempt from the 30%
withholding tax. Such amounts generally will be subject to United States
withholding tax when paid or otherwise distributed (or when the Residual
Certificate is disposed of) under rules similar to those for withholding on debt
instruments that have original issue discount. However, the Code grants the
Treasury authority to issue regulations requiring that those amounts be taken
into account earlier than otherwise provided where necessary to prevent
avoidance of tax (i.e., where the Residual Certificates, as a Class, do not have
significant value). Further, a Residual Certificateholder will not be entitled
to any exemption from the 30% withholding tax or a reduced treaty rate on excess
inclusion income.
Under the REMIC Provisions, the transfer of a Residual Certificate that
has tax avoidance potential to a Foreign Person will be disregarded for all
federal income tax purposes. A Residual Certificate is deemed to have "tax
avoidance potential" under those regulations unless, at the time of the
transfer, the transferor reasonably expects that, for each accrual of excess
inclusion, the REMIC will distribute to the transferee an amount that will equal
at least 30% of the excess inclusion, and that each such amount will be
distributed no later than the close of the calendar year following the calendar
year of accrual. A transferor of a Residual Certificate to a Foreign Person will
be presumed to have had a reasonable expectation at the time of the transfer
that, for each accrual of excess inclusion, the REMIC will distribute to the
transferee an amount that will equal at least 30% of the excess inclusion, and
that each such amount will be distributed no later than the close of the
calendar year following the calendar year of accrual, if such distributions
would be made under all Asset prepayment rates between 50% and 200% of the
Pricing Prepayment Assumption. See "Federal Income Tax Consequences -- REMIC
Certificates -- Tax Treatment of Regular Certificates -- Original Issue
Discount" above. If a Foreign Person transfers a Residual Certificate to a
United States person and the transfer, if respected, would permit avoidance of
withholding tax on accrued excess inclusion income, that transfer also will be
disregarded for federal income tax purposes and distributions with respect to
the Residual Certificate will continue to be subject to 30% withholding as
though the Foreign Person still owned the Residual Certificate. Investors who
are Foreign Persons should consult their own tax advisors regarding the specific
tax consequences to them of owning and disposing of a Residual Certificate.
Effective January 1, 2000, any foreign investor that seeks the protection of an
income tax treaty with respect to the imposition of United States withholding
tax generally will be required to obtain a taxpayer identification number from
the Service in advance and provide verification that such investor is entitled
to the protection of the relevant income tax treaty. Foreign tax-exempt
investors generally will be required to provide verification of their tax-exempt
status. Foreign investors are urged to consult with their tax advisors with
respect to those new withholding rules.
98
<PAGE>
Backup Withholding
Under federal income tax law, a Certificateholder may be subject to
"backup withholding" under certain circumstances. Backup withholding applies to
a Certificateholder who is a United States person if the Certificateholder,
among other things, (i) fails to furnish his social security number or other
taxpayer identification number to the Trustee; (ii) furnishes the Trustee an
incorrect taxpayer identification number; (iii) fails to report properly
interest and dividends; or (iv) under certain circumstances, fails to provide
the Trustee or the Certificateholder's securities broker with a certified
statement, signed under penalties of perjury, that the taxpayer identification
number provided to the Trustee is correct and that the Certificateholder is not
subject to backup withholding. Backup withholding applies, under certain
circumstances, to a Certificateholder who is a foreign person if the
Certificateholder fails to provide the Trustee or the Certificateholder's
securities broker with a Foreign Person Certification (as described in "Federal
Income Tax Consequences -- REMIC Certificates -- Taxation of Certain Foreign
Holders of REMIC Certificates -- Regular Certificates" above). Backup
withholding applies to "reportable payments," which include interest payments
and principal payments to the extent of accrued original issue discount, as well
as distributions of proceeds from the sale of Regular Certificates or REMIC
Residual Certificates. The backup withholding rate for reportable payments made
on or after January 1, 1993 is 31%. Backup withholding, however, does not apply
to payments on Certificates made to certain exempt recipients, such as
tax-exempt organizations, and to certain Foreign Persons. Certificateholders
should consult their tax advisors for additional information concerning the
potential application of backup withholding to payments received by them with
respect to a Certificate.
Reporting and Tax Administration
Regular Certificates
Reports will be made at least annually to holders of record of Regular
Certificates (other than those with respect to whom reporting is not required)
and to the Service as may be required by statute, regulation, or administrative
ruling with respect to (i) interest paid or accrued on the Certificates; (ii)
original issue discount, if any, accrued on the Certificates; and (iii)
information necessary to compute the accrual of any market discount or the
amortization of any premium on the Certificates.
Residual Certificates
For purposes of federal income tax reporting and administration, a
Series REMIC generally will be treated as a partnership, and the related
Residual Certificateholders as its partners. A Series REMIC will file an annual
return on Form 1066 and will be responsible for providing information to
Residual Certificateholders sufficient to enable them to report properly their
shares of the REMIC's taxable income or loss, although it is anticipated that
such information actually will be supplied by the Trustee based upon information
it receives from the Servicer in its monthly reports delivered pursuant to the
Agreement. The REMIC Provisions require reports to be made by a REMIC to its
Residual Certificateholders each calendar quarter in order to permit such
Certificateholders to compute their taxable income accurately. A person that
holds a Residual Certificate as a nominee for another person is required to
furnish those quarterly reports to the person for whom it is a nominee within 30
days of receiving such reports. A REMIC is required to file all such quarterly
reports for a taxable year with the Service as an attachment to the REMIC's
income tax return for that year. As required by the Code, a Series REMIC's
taxable year will be the calendar year.
Residual Certificateholders should be aware that their responsibilities
as holders of the residual interest in a REMIC, including the duty to account
for their shares of the REMIC's income or loss on their returns, continue for
the life of the REMIC, even after the principal and interest on their Residual
Certificates have been paid in full.
The Treasury has issued temporary and final regulations concerning
certain aspects of REMIC tax administration. Under those regulations, a Residual
Certificateholder must be designated as the REMIC's
99
<PAGE>
tax matters person or TMP. The TMP generally has responsibility for overseeing
and providing notice to the other Residual Certificateholders of certain
administrative and judicial proceedings regarding the REMIC's tax affairs,
although other holders of the Residual Certificates of the same Series would be
able to participate in such proceedings in appropriate circumstances. It is
expected that the Servicer or an Affiliate thereof will acquire a portion of the
residual interest in each Series REMIC in order to permit it to be designated as
TMP for the REMIC and will prepare and file the REMIC's federal and state income
tax and information returns.
Treasury regulations provide that a Residual Certificateholder is not
required to treat items on its return consistently with their treatment on the
REMIC's return if the Certificateholder owns 100% of the Residual Certificates
for the entire calendar year. Otherwise, each Residual Certificateholder is
required to treat items on its returns consistently with their treatment on the
REMIC's return, unless the Certificateholder either files a statement
identifying the inconsistency or establishes that the inconsistency resulted
from incorrect information received from the REMIC. The Service may assess a
deficiency resulting from a failure to comply with the consistency requirement
without instituting an administrative proceeding at the REMIC level. A Series
REMIC typically will not register as a tax shelter pursuant to Code section 6111
because it generally will not have a net loss for any of the first five taxable
years of its existence. Any person that holds a Residual Certificate as a
nominee for another person may be required to furnish the related Series REMIC,
in a manner to be provided in Treasury regulations, with the name and address of
such person and other specified information.
Non-REMIC Certificates
Treatment of the Trust for Federal Income Tax Purposes
In the case of Series with respect to which a REMIC election is not
made, the Trust will be classified as a grantor trust under Subpart E, Part I of
subchapter J of the Code and not as an association taxable as a corporation.
Thus, the owner of a Non-REMIC Certificate issued by such a Trust generally will
be treated as the beneficial owner of an appropriate portion of the principal
and interest payments (according to the characteristics of the Certificate in
question) to be received on the Assets assigned to a Trust for federal income
tax purposes.
Treatment of the Non-REMIC Certificates for Federal Income Tax Purposes
Generally
The types of Non-REMIC Certificates offered in a Series may include:
(i) Strip Certificates (i.e., IO Certificates, PO Certificates, and Ratio
Certificates) and (ii) Participation Certificates. The federal income tax
treatment of Strip Certificates will be determined in part by section 1286 of
the Code. Little administrative guidance has been issued under that section and,
thus, many aspects of its operation are unclear, particularly the interaction
between that section and the rules pertaining to discount and premium. Hence,
significant uncertainty exists with respect to the federal income tax treatment
of Strip Certificates, and potential investors should consult their own tax
advisors concerning such treatment.
Several Code sections provide beneficial treatment to certain taxpayers
that invest in certain types of mortgage assets. For purposes of those Code
sections, Participation Certificates will be characterized with reference to the
Assets in the related Trust, but it is not clear whether Strip Certificates will
be so characterized. The Service could take the position that the character of
the Assets is not attributable to Strip Certificates for purposes of those Code
sections. However, because Strip Certificates represent sole ownership rights in
the principal and interest payments on the Assets, Strip Certificates, like
Participation Certificates, should be characterized with reference to the Assets
in the Trust. Accordingly, all Non-REMIC Certificates should be treated as
qualifying assets for Thrift Institutions, and as real estate assets for REITs
in the same proportion that the Assets in the Trust would be so treated.
Similarly, the interest income attributable to Non-REMIC Certificates should be
considered Qualifying REIT Interest for REIT purposes to the extent that the
Assets in the Trust qualify as real estate assets for REIT purposes.
One or more Classes of Non-REMIC Certificates may be subordinated to
one or more other Classes
100
<PAGE>
of Non-REMIC Certificates of the same Series. In general, such subordination
should not affect the federal income tax treatment of either the subordinated
Non-REMIC Certificates or the senior Non-REMIC Certificates. However, to the
extent indicated in "Description of the Certificates -- Allocation of
Distributions from the Assets" herein and to the extent provided in the relevant
Prospectus Supplement, holders of such subordinated Certificates will be
allocated losses prior to their allocation to the holders of more senior Classes
of Certificates. Holders of such subordinated Certificates should be able to
recognize any such losses no later than the taxable year in which they become
Realized Losses. Employee benefit plans subject to ERISA should consult their
own tax advisors before purchasing any subordinated Certificates. See "ERISA
Considerations" herein and in the Prospectus Supplement.
Treatment of Participation Certificates
The holder of a Participation Certificate issued by a Trust generally
will be treated as owning a pro rata undivided interest in each of the Assets
held by such Trust. Accordingly, each holder of a Participation Certificate will
be required to include in income its pro rata share of the entire income from
the Trust's assets, including interest and discount income, if any. Such
Certificateholder generally will be able to deduct from its income its pro rata
share of the administrative fees and expenses incurred with respect to the
Trust's assets (provided that such fees and expenses represent reasonable
compensation for the services rendered). An individual, trust, or estate that
holds a Participation Certificate directly or through a pass-through entity will
be entitled to deduct such fees and expenses under section 212 of the Code only
to the extent that the amount of the fees and expenses, when combined with its
other miscellaneous itemized deductions for the taxable year in question,
exceeds 2% of its adjusted gross income. In addition, Code section 68 provides
that the amount of itemized deductions otherwise allowable for the taxable year
for an individual whose adjusted gross income exceeds the applicable amount
($100,000, or $50,000 in the case of a separate return by a married individual
within the meaning of Code section 7703 for taxable year 1991, adjusted each
year thereafter for inflation) will be reduced by the lesser of (i) 3% of the
excess of adjusted gross income over the applicable amount, or (ii) 80% of the
amount of itemized deductions otherwise allowable for such taxable year. Each
Participation Certificateholder generally will determine its net income or loss
with respect to the Trust in accordance with its own method of accounting,
although income arising from original issue discount must be taken into account
under the accrual method even though the Certificateholder otherwise would use
the cash receipts and disbursements method.
The Code provisions concerning original issue discount, market
discount, and amortizable premium will apply to the Trust assets. The rules
regarding discount and premium that are applicable to Non-REMIC Certificates
generally are the same as those that apply to REMIC Regular Certificates. See
the discussions under "Federal Income Tax Consequences -- REMIC Certificates C
Original Issue Discount," "-- Variable Rate Certificates," "- -Market Discount,"
and "-- Amortizable Premium" above.
For instruments to which it applies, Code section 1272(a)(6) requires
the use of an income tax accounting methodology that utilizes (i) a single
constant yield to maturity and (ii) the Pricing Prepayment Assumptions. Unlike
in the case of Regular Certificates, Code section 1272(a)(6) technically does
not apply to Non-REMIC Certificates. Although the Treasury has authority to
apply that section to certificates such as the Non-REMIC Certificates, it has
not yet done so. Nonetheless, unless and until the release of administrative
guidance to the contrary, the Tax Administrator will account for the Non-REMIC
Certificates as though section 1272(a)(6) applied to them. Thus, the Tax
Administrator will account for a class of Non-REMIC Certificates in the same
manner as it would account for a class of Regular Certificates with the same
terms. There can be no assurance, however, that the Service ultimately will
sanction the Tax Administrator's position.
The original issue discount rules generally apply to residential
mortgage loans originated after March 2, 1984, and the market discount rules
apply to any such loans originated after July 18, 1984. The rules allowing for
the amortization of premium are available with respect to mortgage loans
originated after September 27, 1985. It is anticipated that most or all of the
Assets securing any Series will be subject to the original issue discount,
market discount, and amortizable premium rules. Although most Mortgage Loans
101
<PAGE>
and Contracts nominally are issued at their original principal amounts,
original issue discount could arise from the payment of points or certain other
origination charges by the Obligors if the discount attributable to such
payments exceeds the de minimis amount. If the Trust contains Assets purchased
for prices below their outstanding principal amounts, holders of Participation
Certificates will be required to take into account original issue discount not
previously accrued to the prior holder of such Assets. Moreover, if such Assets
were purchased for less than their adjusted issue prices, Participation
Certificateholders generally will be required to take into account market
discount, unless the amount of such market discount is de minimis under the
market discount rules. Finally, Participation Certificateholders generally may
elect to amortize any premium paid for Assets over the aggregate adjusted issue
price of such Assets. For a more complete elaboration of the rules pertaining to
original issue discount, market discount, and acquisition premium, see the
discussion under "Federal Income Tax Consequences -- REMIC Certificates -- Tax
Treatment of Regular Certificates" above.
Treatment of Strip Certificates
Many aspects of the federal income tax treatment of Strip Certificates
are uncertain. The discussion below describes the treatment that the Company
believes is fair and accurate, but there can be no assurance that the Service
will not take a contrary position. Potential investors, therefore, should
consult their own tax advisors with respect to the federal income tax treatment
of Strip Certificates.
Under section 1286 of the Code, the separation of ownership of the
right to receive some or all of the interest payments on an obligation from
ownership of the right to receive some or all of the principal payments on such
obligation results in the creation of "stripped coupons" with respect to the
separated rights to interest payments and "stripped bonds" with respect to the
principal and any undetached interest payments associated with that principal.
The issuance of IO or PO Certificates effects a separation of the ownership of
the interest and principal payments on some or all of the Assets in the Trust.
In addition, the issuance of Ratio Certificates effectively separates and
reallocates the proportionate ownership of the interest and principal payments
on the Assets. Therefore, Strip Certificates will be subject to section 1286.
For federal income tax accounting purposes, section 1286 treats a
stripped bond or a stripped coupon as a new debt instrument issued (i) on the
date that the stripped interest is purchased and (ii) at a price equal to its
purchase price or, if more than one stripped interest is purchased, the share of
the purchase price allocable to such stripped interest. Each stripped bond or
coupon generally will have original issue discount equal to the excess of its
stated redemption price at maturity (or, in the case of a stripped coupon, the
amount payable on the due date of such coupon) over its issue price. The
Stripping Regulations, however, provide that the original issue discount on a
stripped bond or stripped coupon is zero if the amount of the original issue
discount would be de minimis under rules generally applicable to debt
instruments. For purposes of that determination, (i) the number of complete
years to maturity is measured from the date the stripped bond or stripped coupon
is purchased; (ii) an aggregation approach similar to the Aggregation Rule (as
described in "Federal Income Tax Consequences -- REMIC Certificates -- Original
Issue Discount" above) may be applied; and (iii) unstripped coupons may be
treated as stated interest with respect to the related bonds and, therefore, may
be excluded from stated redemption price at maturity in appropriate
circumstances. In addition, the Stripping Regulations provide that, in certain
circumstances, the excess of a stripped bond's stated redemption price at
maturity over its issue price is treated as market discount, rather than as
original issue discount. See "Federal Income Tax Consequences -- Non-REMIC
Certificates -- Treatment of Strip Certificates -- Determination of Income With
Respect to Strip Certificates" below.
The application of section 1286 to the Strip Certificates is not
entirely clear under current law. It could be interpreted as causing: (i) in the
case of an IO Certificate, each interest payment due on the underlying Assets to
be treated as a separate debt instrument; (ii) in the case of a Ratio
Certificate entitled to a disproportionately high share of principal, each
excess principal amount (i.e., the portion of each principal payment on such
Assets that exceeds the amount to which the Ratio Certificateholder would have
been entitled if he had held an undivided interest in the underlying Assets) to
be treated as a separate debt
102
<PAGE>
instrument; and (iii) in the case of a Ratio Certificate entitled to a
disproportionately high share of interest, each excess interest amount to be
treated as a separate debt instrument. In addition, section 1286 would require
the purchase price of a Strip Certificate to be allocated among each of the
rights to payment on the underlying Assets to which the Certificateholder is
entitled that are treated as separate debt instruments. Despite the foregoing,
it may be appropriate to treat stripped coupons and stripped bonds issued to the
same holder as a single debt instrument under an aggregation approach, depending
on the facts and circumstances surrounding the issuance. Facts and circumstances
considered relevant for this purpose should include the likelihood of the debt
instruments trading as a unit and the difficulty of allocating the purchase
price of the unit among the individual payments. Strip Certificates are designed
to trade as whole investment units and, to the extent that the Underwriter
develops a secondary market for the Strip Certificates, it anticipates that the
Strip Certificates would trade in such market as whole units. In addition,
because no market exists for individual payments on Assets, the proper
allocation of the Certificate's purchase price to each separate payment on the
Assets in the Trust would be difficult and burdensome to determine. Based on
those facts and circumstances, it appears that all payments of principal and
interest to which the holder of a Strip Certificate is entitled should be
treated as a single installment obligation. Although the OID Regulations do not
refer directly to debt instruments that are governed by section 1286 of the
Code, the application of the OID Regulations to such instruments is consistent
with the overall statutory and regulatory scheme. Therefore, the Tax
Administrator will treat each Strip Certificate as a single debt instrument for
income tax accounting purposes.
Determination of Income With Respect to Strip Certificates
For purposes of determining the amount of income on a Strip Certificate
that accrues in any period, the rules described under "Federal Income Tax
Consequences -- REMIC Certificates -- Original Issue Discount," "-- Variable
Rate Certificates," "-- Anti-Abuse Rule," "-- Interest Weighted Certificates and
Non-VRDI Certificates," "-- Market Discount," and "-- Amortizable Premium" will
apply. PO Certificates and certain Classes of Ratio Certificates will be issued
at a price that is less than their stated principal amount and thus generally
will be issued with original issue discount. A Strip Certificate that would meet
the definition of an Interest Weighted Certificate or a Weighted Average
Certificate if it were a Regular Certificate is subject to the same tax
accounting considerations applicable to the Regular Certificate to which it
corresponds. Thus, as described in "Federal Income Tax Consequences -- REMIC
Certificates -- Interest Weighted Certificates and Non-VRDI Certificates,"
certain aspects of the tax accounting treatment of such a Strip Certificate are
unclear. Unless and until the Service provides administrative guidance to the
contrary, the Tax Administrator will account for such a Strip Certificate in the
manner described for the corresponding Regular Certificate. See "Federal Income
Tax Consequences -- REMIC Certificates -- Interest Weighted Certificates and
Non-VRDI Certificates."
If a PO Certificate or a Ratio Certificate that is not considered a
Contingent Payment Obligation (an "Ordinary Ratio Certificate") subsequently is
sold, the purchaser apparently would be required to treat the difference between
the purchase price and the stated redemption price at maturity as original issue
discount. The holder of such a Certificate generally will be required to include
such original issue discount in income as described in "Federal Income Tax
Consequences -- REMIC Certificates -- Original Issue Discount" above. PO
Certificates and Ordinary Ratio Certificates issued at a price less than their
stated principal amount will be treated as issued with market discount rather
than with original issue discount if, after the most recent disposition of the
related Certificate, either (i) the amount of original issue discount on the
Certificate is considered to be de minimis under the Stripping Regulations or
(ii) the annual stated rate of interest payable on the Certificate is no more
than 1% lower than the annual stated rate of interest payable on the Asset from
which the Certificate was stripped. The holders of such Certificates generally
would be required to include market discount in income in the manner described
in "Federal Income Tax Consequences -- REMIC Certificates -- Market Discount"
above. Some Classes of Ordinary Ratio Certificates may be issued at a price that
exceeds their stated principal amount. Subject to the discussion of Superpremium
Certificates in "Federal Income Tax Consequences-- REMIC Certificates --
Original Issue Discount" above, holders of such Ordinary Ratio Certificates
generally should be able to amortize that premium as described in "Federal
Income Tax Consequences -- REMIC Certificates -- Amortizable Premium" above.
103
<PAGE>
IO Certificates do not represent a right to stated principal amounts.
Rather, IO Certificates represent rights only to payments of interest which, as
a result of prepayments on the Assets in the related Trust, may never be made.
The Tax Administrator will account for IO Certificates in the same manner as for
Interest Weighted Certificates. See "Federal Income Tax Consequences -- REMIC
Certificates -- Original Issue Discount," "-- Variable Rate Certificates," and
"-- Interest Weighted Certificates and Non-VRDI Certificates" above.
Purchase of Complementary Classes of Strip Certificates
Complementary Strip Certificates, when held in combination, provide an
aggregate economic effect equivalent to that of a Participation Certificate.
When an investor purchases Complementary Strip Certificates, it appears that,
for federal income tax purposes, each such Certificate should be treated
separately and should be subject to the rules described above. The Service could
assert, however, that Complementary Strip Certificates held in combination
should be treated as a single pass-through type instrument, with the result that
the rules governing stripped bonds and stripped coupons under section 1286 of
the Code would not be applied. Consequently, investors who acquire Complementary
Strip Certificates should consult their own tax advisors as to the proper
treatment of such Certificates.
Possible Alternative Characterizations
The Service could assert that the Strip Certificates should be
characterized for tax purposes in a manner different from that described above.
For example, the Service could contend that each Ratio Certificate whose
interest rate is higher than the related Series Rate is to be treated as being
composed of two certificates: (i) a Participation Certificate of the same
principal amount as the Ratio Certificate but generating interest at the Series
Rate; and (ii) an IO Certificate representing the excess of the rate on the
Ratio Certificate over the Series Rate. Similarly, a Ratio Certificate whose
interest rate is lower than the Series Rate could be treated as composed of a
Participation Certificate with an interest rate equal to the Series Rate and a
PO Certificate. Alternatively, the Service could interpret section 1286 to
require that each individual interest payment with respect to an IO Certificate
or a Ratio Certificate be treated as a separate debt instrument for original
issue discount purposes. The Service also might challenge the manner in which
original issue discount is calculated, contending that (i) the stated maturity
should be used to calculate yield on a Non-REMIC Certificate; (ii) the
Contingent Payment Regulations should not apply to IO Certificates; or (iii) the
Contingent Payment Regulations should apply to the Ordinary Ratio Certificates.
Given the variety of alternative treatments of Strip Certificates and the
different federal income tax consequences that could result from each
alternative, a potential investor is urged to consult its own tax advisor
regarding the proper treatment of such Certificates for federal income tax
purposes.
Limitations on Deductions With Respect to Strip Certificates
The holder of a Strip Certificate will be treated as owning an interest
in each of the Assets of the related Trust and will recognize an appropriate
share of the income and expenses associated with those Assets. Accordingly, an
individual, trust, or estate that holds a Strip Certificate directly or through
a pass-through entity will be subject to the same limitations on deductions with
respect to such Certificate as are applicable to holders of Participation
Certificates. See "Federal Income Tax Consequences -- Non-REMIC Certificates --
Treatment of Participation Certificates" above.
104
<PAGE>
Sale of a Non-REMIC Certificate
A sale of a non-REMIC Certificate prior to its maturity will result in
gain or loss equal to the difference between the amount received and the
holder's adjusted basis in such Certificate. The rules for computing the
adjusted basis of a Non-REMIC Certificate are the same as in the case of a
Regular Certificate. See "Federal Income Tax Consequences -- REMIC Certificates
- -- Tax Treatment of Regular Certificates -- Gain or Loss on Disposition" above.
Gain or loss from the sale or other disposition of a Non-REMIC Certificate
generally will be capital gain or loss to the Certificateholder if the
Certificate is held as a "capital asset" within the meaning of section 1221 of
the Code, and will be long-term or short-term depending on whether the
Certificate has been held for the long-term capital gain holding period
(currently, more than twelve months). Ordinary income treatment, however, will
apply to the extent mandated by the original issue discount and market discount
rules or if the Certificateholder is a financial institution described in
section 582 of the Code. See "Federal Income Tax Consequences -- REMIC
Certificates -- Gain or Loss on Disposition" above.
Taxation of Certain Foreign Holders of Non-REMIC Certificates
Interest, including original issue discount, paid on a Non-REMIC
Certificate to a Foreign Person generally is treated as "portfolio interest"
and, therefore, is not subject to any United States tax, provided that (i) such
interest is not effectively connected with a trade or business in the United
States of the Certificateholder, and (ii) the Trustee (or other person who would
otherwise be required to withhold tax) is provided with Foreign Person
Certification. If the holder of a Non-REMIC Certificate does not provide the
Trustee (or other person who would otherwise be required to withhold tax) with a
Foreign Person Certification, interest (including original issue discount) paid
on such a Certificate may be subject to either a 30% withholding tax or 31%
backup withholding.
In the case of certain Series, portfolio interest treatment will not be
available for interest paid with respect to certain classes of Non-REMIC
Certificates. Interest on debt instruments issued on or before July 18, 1984
does not qualify as "portfolio interest" and, therefore, is subject to United
States withholding tax at a 30% rate (or lower treaty rate, if applicable). IO
Certificates and PO Certificates generally are treated, and Ratio Certificates
generally should be treated, as having been issued when they are sold to an
investor. In the case of Participation Certificates, however, the issuance date
of the Certificate is determined by the issuance date of the underlying Assets.
Thus, to the extent that the interest received by a holder of a Participation
Certificate is attributable to Assets issued on or before July 18, 1984, such
interest will be subject to the 30% withholding tax. Moreover, to the extent
that a Ratio Certificate is characterized as a pass-through type certificate and
the underlying Assets were issued on or before July 18, 1984, interest generated
by the Certificate may be subject to the withholding tax. See "Federal Income
Tax Consequences -- Non-REMIC Certificates -- Treatment of Strip Certificates --
Possible Alternative Characterizations" above. Although recently enacted tax
legislation denies portfolio interest treatment to certain types of contingent
interest, that legislation generally applies only to interest based on the
income, profits, or property values of the debtor. Accordingly, it is not
anticipated that such legislation will apply to deny portfolio interest
treatment to Certificateholders who are Foreign Persons. However, because the
scope of the new legislation is not entirely clear, investors who are Foreign
Persons should consult their tax advisors regarding the potential application of
the legislation before purchasing a Certificate.
Backup Withholding
The application of backup withholding to Non-REMIC Certificates
generally is the same as in the case of REMIC Certificates. See "Federal Income
Tax Consequences -- REMIC Certificates -- Backup Withholding" above.
105
<PAGE>
Reporting and Tax Administration
For purposes of reporting and tax administration, the holders of
Non-REMIC Certificates will be treated in the same fashion as the holders of
Regular Certificates. See "Federal Income Tax Consequences -- REMIC Certificates
- -- Reporting and Tax Administration" above.
DUE TO THE COMPLEXITY OF THE FEDERAL INCOME TAX RULES APPLICABLE TO
CERTIFICATEHOLDERS AND THE CONSIDERABLE UNCERTAINTY THAT EXISTS WITH RESPECT TO
MANY ASPECTS OF THOSE RULES, POTENTIAL INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX TREATMENT OF THE ACQUISITION, OWNERSHIP, AND
DISPOSITION OF THE CERTIFICATES.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described above
under "Federal Income Tax Consequences" above, potential investors should
consider the state income tax consequences of the acquisition, ownership, and
disposition of the Certificates. State income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax laws of any state. Therefore, potential
investors should consult their own tax advisors with respect to the various
state tax consequences of an investment in the Certificates.
ERISA CONSIDERATIONS
In considering an investment in a Certificate of the assets of any
employee benefit plan or retirement arrangement, including individual retirement
accounts and annuities, Keogh plans, and collective investment funds in which
such plans, accounts, annuities or arrangements are invested, that are described
in or subject to the Plan Asset Regulations, ERISA, or corresponding provisions
of the Code (each hereinafter referred to as a Plan), a fiduciary should
consider, among other things, (i) the purposes, requirements, and liquidity
needs of such Plan; (ii) the impact of the plan asset provisions of ERISA and
DOL regulations concerning the definition of plan assets; (iii) whether the
investment satisfies the diversification requirements of section 404(a)(1)(C) of
ERISA; and (iv) whether the investment is prudent, considering the nature of an
investment in a Certificate and the fact that no market in which such fiduciary
can sell or otherwise dispose of Certificates may be created or, if created,
will continue to exist for the life of the Certificates. The prudence of a
particular investment must be determined by the responsible fiduciary (usually
the trustee or investment manager) with respect to each Plan taking into account
all of the facts and circumstances of the investment.
Sections 406 and 407 of ERISA and section 4975 of the Code prohibit
certain transactions that involve (i) a Plan and any "party in interest" or
"disqualified person" with respect to such Plan, and (ii) plan assets. The Plan
Asset Regulations issued by the DOL define "plan assets" to include not only
securities (such as the Certificates) held by a Plan but also the underlying
assets of the issuer of any equity securities, unless one or more exceptions
specified in those Regulations are satisfied. Thus, under the Plan Asset
Regulations, a Plan that acquires a Certificate could be treated for ERISA
purposes as having acquired a direct interest in some or all of the assets in
the related Trust. Such treatment could cause certain transactions with respect
to such assets to be deemed "prohibited transactions" under ERISA and, in
addition, could result in a finding of an improper delegation by the plan
fiduciary of its duty to manage plan assets.
The DOL has issued several exemptions from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of section 4975
of the Code. Those exemptions include, but are not limited to: (1) Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), regarding investments by
insurance company general accounts; (2) Prohibited Transaction Class Exemption
91-38 ("PTCE 91-38"), regarding investments by bank collective investment funds;
(3) Prohibited Transaction Class Exemption 90-1 ("PTCE 90-1"),
106
<PAGE>
regarding investments by insurance company pooled separate accounts; (4)
Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1"), regarding
acquisitions by Plans of interests in mortgage pools; and (5) various
underwriter exemptions. Before purchasing any Certificates, a Plan subject to
the fiduciary responsibility provisions of ERISA or described in section
4975(e)(1) of the Code should consult with its counsel to determine whether the
conditions of any exemption would be met. A purchaser of Certificates should be
aware, however, that certain of the exemptions do not apply to the purchase,
sale, and holding of subordinated certificates. In addition, PTCE 83-1 will not
apply to Certificates evidencing interests in a Trust Estate that contains
Contracts. Moreover, even if the conditions specified in one or more exemptions
are met, the scope of the relief provided by an exemption might not cover all
acts that might be construed as prohibited transactions.
The Plan Asset Regulations will not apply to a Certificate if (1) the
Certificate is registered under the Securities Exchange Act of 1934, is freely
transferable and is part of a class of Certificates that is held by more than
100 unrelated investors (the "Publicly Offered Exception") or (2) immediately
after the most recent acquisition of a Certificate of the same Series, benefit
plan investors do not own 25% or more of the value of any class of Certificates
in that Series (the "Insignificant Participation Exception"). A purchaser of
Certificates should be aware, however, that determining whether the
Insignificant Participation Exception applies is administratively impracticable
in many situations. Prior to purchasing a Certificate, a Plan should consult
with its counsel to determine whether the Publicly Offered Exception, the
Insignificant Participation Exception, or any other exception to the Plan Asset
Regulations would apply to the purchase of the Certificate.
Section 403 of ERISA requires that all plan assets be held in trust.
However, under regulations that became effective on June 17, 1982, even if the
underlying assets of an issuer of securities (such as the Certificates) are
deemed to be plan assets of a Plan investing in such securities, the "holding in
trust" requirement of section 403 of ERISA will be satisfied if such securities
are held in trust on behalf of the Plan.
Because the purchase or holding of Certificates may result in
unfavorable consequences for a Plan or its fiduciaries under the Plan Asset
Regulations or the prohibited transaction provisions of ERISA or the Code, (i)
certain classes of Certificates will not be offered for sale to, and are not
transferable to, any Plan Investor and (ii) certain Classes of Certificates will
not be offered for sale to, and are not transferable to, any Plan Investor
unless such Plan Investor provides the Company with a Benefit Plan Opinion
(i.e., an opinion of counsel satisfactory to the Company and the Servicer (and
upon which the Company, the Servicer, the Trustee, the TMP, and their respective
counsel are authorized to rely) generally to the effect that the ownership of a
Certificate of such class will not (1) cause any of the assets in the related
Trust to be regarded as plan assets for purposes of the Plan Asset Regulations;
(2) give rise to any fiduciary duty under ERISA on the part of the Company, the
Trustee, a Servicer, or the TMP; or (3) be treated as, or result in, a
prohibited transaction under sections 406 and 407 of ERISA or section 4975 of
the Code.) The Prospectus Supplement for an affected Series will indicate which
classes of Certificates are restricted in their availability to benefit plan
investors.
In considering the possible application of the Plan Asset Regulations,
potential Plan Investors should be aware that, with respect to certain Series
and under certain circumstances, the Servicer and the holders of a majority in
interest of the related Residual Certificates may have a right to redeem the
Certificates of such Series, at its option. In such cases, the Servicer's
purpose for the retention of such a redemption right is to enable the Servicer
to terminate its administration obligations with respect to the Certificates in
the event such obligations become unprofitable. The Servicer undertakes no
obligation to consider the interests of Certificateholders in deciding whether
to exercise any redemption right.
As described in "Federal Income Tax Consequences" above, an investment
in a Certificate may produce UBTI for tax-exempt employee benefit plans.
Potential investors also should be aware that ERISA requires that the assets of
a Plan be valued at their fair market value as of the close of the plan year.
Neither the Company, Oakwood, the Servicer nor the Underwriters currently intend
to provide valuations to Certificateholders.
107
<PAGE>
Prospective purchasers of Certificates that are insurance companies
should be aware that the United States Supreme Court interpreted the fiduciary
responsibility rules of ERISA in John Hancock Mutual Life Insurance Co. v.
Harris Bank and Trust. In John Hancock, the Supreme Court ruled that assets held
in an insurance company's general account may be deemed to be "plan assets" for
ERISA purposes under certain circumstances. Prospective purchasers of
Certificates that are insurance companies should consult with their counsel with
respect to the application of the John Hancock case and PTCE 95-6 60 to their
purchase of Certificates, and should be aware that certain restrictions may
apply to their purchase of Certificates.
Due to the complexity of the rules applicable to Plans and Plan
fiduciaries, and the considerable uncertainty that exists with respect to many
aspects of those rules, Plan Investors contemplating the acquisition of
Certificates should consult their legal advisors with respect to the ERISA,
Code, and other consequences of an investment in the Certificates.
PLAN OF DISTRIBUTION
The Company may sell the Certificates offered hereby either directly or
through one or more underwriters or underwriting syndicates. The Prospectus
Supplement with respect to each Series of Certificates will set forth the terms
of the offering of such Series of Certificates and each Class within such
Series, including the name or names of the Underwriter(s), the proceeds to and
their intended use by the Company, and either the initial public offering price,
the discounts and commissions to the Underwriter(s) and any discounts or
concessions allowed or reallowed to certain dealers, or the method by which the
price at which the related Underwriter(s) will sell the Certificates will be
determined.
The Certificates of a Series may be acquired by Underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of any
Underwriters will be subject to certain conditions precedent, and such
Underwriters will be severally obligated to purchase all the Certificates of a
Series offered pursuant to the related Prospectus Supplement, if any are
purchased. If Certificates of a Series are offered otherwise than through
Underwriters, the related Prospectus Supplement will contain information
regarding the nature of such offering and any agreements to be entered into
between the Company and purchasers of Certificates of such Series.
The place and time of delivery for the Certificates of a Series in
respect of which this Prospectus is delivered will be set forth in the related
Prospectus Supplement.
LEGAL INVESTMENT CONSIDERATIONS
The Prospectus Supplement for each Series of Certificates will specify
which, if any, of the Classes of Certificates of such Series will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). If so, Certificates designated as qualifying
as "mortgage related securities" will continue to qualify as such for so long as
they are rated in one of the two highest categories by at least one nationally
recognized statistical rating agency. Classes of Certificates that qualify as
"mortgage related securities" under SMMEA will be legal investments for persons,
trusts, corporations, partnerships, associations, business trusts and business
entities (including depository institutions, life insurance companies and
pension funds) created pursuant to or existing under the laws of the United
States or of any state whose authorized investments are subject to state
regulation to the same extent as, under applicable law, obligations issued by or
guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for any such entities.
Certain states have enacted legislation specifically limiting, to varying
degrees, the legal investment authority of such entities with respect to
"mortgage related securities," in most cases requiring investors to rely solely
upon existing state law and not SMMEA. In any case in which any such legislation
is applicable, the Certificates will constitute legal investments for entities
subject to such legislation only to the extent provided in such state
legislation.
108
<PAGE>
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
"mortgage-related securities;" and national banks may purchase "mortgage-related
securities" for their own account without regard to the limitations generally
applicable to investment securities set forth in 12 U.S.C. ' 24 (Seventh),
subject in each case to such regulations as the applicable federal regulatory
authority may prescribe.
The Federal Financial Institutions Examination Council, The Federal
Deposit Insurance Corporation, the Office of Thrift Supervision, the Office of
the Comptroller of the Currency and the National Credit Union Administration
have proposed or adopted guidelines regarding investment in various types of
mortgage-backed securities. In addition, certain state regulators have taken
positions that may prohibit regulated institutions subject to their jurisdiction
from holding securities representing residual interests, including securities
previously purchased. There may be other restrictions on the ability of certain
investors, including depository institutions, either to purchase Certificates or
to purchase Certificates representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent any particular Certificates constitute
legal investments for such investors.
Certificates that do not constitute "mortgage related securities" under
SMMEA will require registration, qualification or an exemption under applicable
state securities laws in those states that have enacted legislation overriding
SMMEA's provisions pre-empting state "blue sky" laws. In addition, such
Certificates may not be "legal investments" to the same extent as "mortgage
related securities" under SMMEA. The appropriate characterization under various
legal investment restrictions of the Classes of Certificates that do not qualify
as "mortgage related securities" under SMMEA and thus the ability of investors
subject to these restrictions to purchase such Classes of Certificates, may be
subject to significant interpretive uncertainties. All investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether, and to what extent, the Classes of
Certificates that do not qualify as "mortgage related securities" will
constitute legal investments for them.
EXPERTS
The consolidated financial statements of Oakwood Homes Corporation and
its subsidiaries (collectively, "Oakwood Homes Corporation") as of September 30,
1997 and 1996 and for each of the three years in the period ended September 30,
1997 incorporated in this Prospectus by reference to Oakwood Homes Corporation's
Annual Report on Form 10-K for the year ended September 30, 1997, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
Certain legal matters relating to the Certificates and material federal
income tax consequences concerning the Certificates will be passed upon for the
Company by Hunton & Williams, Richmond, Virginia.
109
<PAGE>
GLOSSARY
There follows abbreviated definitions of certain capitalized terms used
in this Prospectus and each Prospectus Supplement, except as may be otherwise
specified in the Prospectus Supplement for a particular Series. The related
Agreement may contain a more complete definition of certain of the terms defined
herein and reference should be made to the Agreement for a more complete
definition of all such terms.
"1986 Act" means the Tax Reform Act of 1986.
"Accounting Date" means, unless otherwise specified in a Prospectus
Supplement, for any Distribution Date, the last day of the preceding calendar
month.
"Accretion Class" means a Compound Interest Class or a Capital
Appreciation Class.
"Additional Assets" means, with respect to any Series, non-recourse
guarantees on Contracts and/or Mortgage Loans, additional Contracts and/or
Mortgage Loans beyond those included in the related Asset Pool, letters of
credit or other Eligible Investments delivered to any Trust in addition to the
related Trust Estate.
"Adjustable Rate Asset" means a Contract or Mortgage Loan bearing
interest at an adjustable rate.
"Advance" means any P&I Advance or Servicing Advance.
"Adjusted Certificate Principal Balance" means with respect to each
Class of Subordinated Certificates on any date of determination, its Certificate
Principal Balance immediately following the most recently preceding Distribution
Date reduced by all Writedown Amounts allocated to such Class on such
Distribution Date.
"Affiliate" means, as to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and Policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have the meanings correlative to the foregoing.
"Aggregation Rule" means the rule in the OID Regulations under which
two or more debt instruments issued in connection with the same transaction (or
related transactions in certain circumstances) are treated as a single debt
instrument for federal income tax accounting purposes if issued by a single
issuer to a single holder.
"Agreement" means the Pooling and Servicing Agreement for a Series,
including the Series Agreement and the Standard Terms.
"All OID Election" means, with respect to a Regular Certificate, an
election to include in gross income all stated interest, original issue
discount, de minimis original issue discount, market discount, and de minimis
market discount that accrues on such Certificate (reduced by any amortizable
premium or acquisition premium on such Certificate) under the constant yield
method used to account for original issue discount.
"Approved Sale" means, as to any Asset, (1) a sale of the related
Manufactured Home or Mortgaged Property acquired by the Insured because of a
default by the borrower if the related Pool Insurer has given prior approval to
such sale, (2) a foreclosure or trustee's sale of the related Manufactured Home
or Mortgaged Property at a price exceeding the maximum amount specified by the
Pool Insurer, (3) the acquisition of the Mortgaged Property under any related
Primary Mortgage Insurance Policy by the related Mortgage Insurer or (4) the
acquisition of the related Manufactured Home or Mortgaged Property by the
110
<PAGE>
Pool Insurer.
"Asset" means a Contract or Mortgage Loan underlying a Series of
Certificates.
"Asset File" means a Contract File or Mortgage Loan File, as
applicable.
"Asset Pool" means, with respect to any Series, the pool of Contracts
and/or Mortgage Loans included in the related Trust Estate.
"Asset Rate" means, with respect to any Asset, the related Contract
Rate or Mortgage Rate, as applicable.
"Asset Schedule" means the schedule which identifies each Asset
supporting a Series (and includes certain other information regarding each such
Asset, including its Cut-off Date Principal Balance, its Asset Rate, its
original principal balance and other information) and appears as an exhibit to
the related Agreement.
"Available Distribution Amount" means, as to any Distribution Date and
any Series, the amount to be distributed on the Certificates of such Series on
such Distribution Date, which will be described in the related Prospectus
Supplement.
"Balloon Payment Loan" means an Asset that does not require any
scheduled amortization of principal prior to its scheduled maturity, or the
principal of which is amortized over a longer period than the Asset's scheduled
term to maturity.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended,
as set forth in Title 11 of the United States Code.
"Beneficial Owner" means, as to any Book-Entry Certificate, the
beneficial owner thereof, whose interest therein is reflected in the records of
a Financial Intermediary.
"Benefit Plan Opinion" means an opinion of counsel satisfactory to the
Company and the Servicer (and upon which the Company, the Servicer, the Trustee,
the TMP, and their respective counsel are authorized to rely) generally to the
effect that the proposed transfer of a Certificate will not (1) cause any of the
assets in the related Trust to be regarded as "plan assets" for purposes of the
Plan Asset Regulations; (2) give rise to any fiduciary duty under ERISA on the
part of the Company, the Trustee, the Servicer, or the TMP; or (3) be treated
as, or result in, a prohibited transaction under section 406 or section 407 of
ERISA or section 4975 of the Code.
"Bi-Weekly Loan" means an Asset that provides for Obligor payments to
be made on a bi-weekly basis.
"Book-Entry Certificates" means Certificates of any Class specified as
such in the Prospectus Supplement for a Series and as to which Definitive
Certificates will not be issued, beneficial interests therein being maintained
through Participants or Indirect Participants in the Depository.
"Buy-Down Fund" means a custodial Eligible Account established by the
Servicer for any Buy-Down Loan, which must comply with the standards applicable
to the related Certificate Account, to be funded with an amount which, together
with projected reinvestment earnings thereon at a rate specified in the related
Prospectus Supplement, will provide funds sufficient to support the payments
required on such Buy-Down Loan on a level debt service basis.
"Buy-Down Loan" means an Asset the amortization of which includes
payments made by the seller of the related Mortgaged Property or Manufactured
Home or by someone else other than the related
111
<PAGE>
Obligor.
"Cap" means a restriction or restrictions on the maximum stated
interest rate on a Certificate.
"Capital Appreciation Class" means a Class of Certificates upon which
interest will accrue but will not be distributed until certain other Classes of
Certificates of the same Series have received their final distributions.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
"Certificate" means any Pass-Through Certificate issued pursuant to an
Agreement.
"Certificate Account" means an account or accounts maintained by the
Servicer for any Series, into which the Servicer must deposit collections in
respect of the related Assets pending remittance thereof to the related
Distribution Account on the applicable Remittance Date.
"Certificate Register" means, for any Series, the register maintained
by or at the direction of the Trustee containing the names and addresses of all
current Holders of Certificates of each Class of such Series, and noting the
Class and denomination of each Certificate of such Series held by each such
holder.
"Certificateholder" means the registered holder of a Certificate.
"Certificate Principal Balance " means the outstanding principal
balance of a Certificate or Class of Certificates.
"Class" means any class of the Certificates of a Series, as specified
in the related Prospectus Supplement.
"Clearing Agency" means an entity registered pursuant to Section 17A of
the Securities Act of 1934, as amended.
"Closing Date" means, for any Series, the date on which such Series is
issued, which will be specified in the related Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Period" means, unless otherwise provided in a related
Prospectus Supplement, with respect to any Distribution Date, the period
commencing on the second day of the calendar 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.
"Commission" means the Securities and Exchange Commission.
"Companion Class" means a Class of Certificates structured to receive
principal payments on the underlying Assets on any Distribution Date only to the
extent those principal payments exceed the principal distribution amounts
scheduled to be made on a related PAC Class on such Distribution Date.
"Company" means Oakwood Mortgage Investors, Inc., a North Carolina
corporation that is a wholly-owned subsidiary of Oakwood.
"Compensating Interest" means, for any Distribution Date, the amount of
all Due Date Interest Shortfalls for the preceding Prepayment Period to the
extent such Shortfalls do not exceed the Servicer's aggregate servicing
compensation in respect of such Prepayment Period.
112
<PAGE>
"Complementary Strip Certificates" means different Classes of Strip
Certificates of the same Series that, when held in combination, provide an
aggregate economic effect equivalent to that of a Participation Certificate.
"Compound Interest Certificate" means a Certificate on which interest
is accrued and is compounded and added to the principal balance thereof
periodically, but which is not unconditionally entitled to distributions of
interest at least annually.
"Compound Interest Class" means a Class of Certificates on which
interest may accrue but not be paid for the period described in the related
Prospectus Supplement.
"Contingent Payment Obligation " means a debt obligation with one or
more contingent payments as defined in the Contingent Payment Regulations.
"Contingent Payment Regulations" means those provisions of the OID
Regulations that address the federal income tax treatment of Contingent Payment
Obligations.
"Contract" means a manufactured housing installment sales contract
including any and all rights to receive payments due thereunder on and after the
Cut-off Date and any security interest in a Manufactured Home purchased with the
proceeds of such contract.
"Contract Documents" means, with respect to each Contract:
(1) the original Contract;
(2) either (a) the original title document for the related
Manufactured Home, a duplicate certified by the appropriate
governmental authority that issued the original thereof or, if such
original is not yet available, a copy of the application filed with the
appropriate governmental authority pursuant to which the original title
document will issue (which copy may be on microfilm or optical disk
maintained by the Servicer in its records separate from the other
related Contract Documents), or (b) if the laws of the jurisdiction in
which the related Manufactured Home is located do not provide for the
issuance of title documents for manufactured housing units, other
evidence of ownership of the related Manufactured Home that is
customarily relied upon in such jurisdiction as evidence of title to a
manufactured housing unit;
(3) unless such Contract is a Land Secured Contract, evidence
of one or more of the following types of perfection of the Seller's or
the Trustee's security interest in the related Manufactured Home
granted by such Contract (or, if such evidence is not yet available, a
copy of the application or other filing used to obtain such security
interest (which copy may be on microfilm or optical disk maintained by
the Servicer in its records separate from the other related Contract
Documents)), as appropriate in the applicable jurisdiction: (a)
notation of such security interest on the title document, (b) a
financing statement meeting the requirements of the UCC, with evidence
of recording indicated thereon, (c) a fixture filing in accordance with
the UCC, with evidence of filing indicated thereon, or (d) such other
evidence of perfection of a security interest in a manufactured housing
unit as is customarily relied upon in the jurisdiction in which the
related Manufactured Home is located;
(4) an original assignment of the Contract from the initial
named payee thereunder to the Seller (unless the Seller is the initial
named payee for such Contract);
(5) originals of any assumption agreements relating to such
Contract, together with originals of any surety or guaranty agreement
relating to such Contract or to any such assumption agreement, payable
to the order of the Trustee, or, if not so payable, endorsed to the
order of, or
113
<PAGE>
assigned to, the Trustee by the holder/payee thereunder without
recourse;
(6) originals of any extension, modification or waiver
agreement(s) relating to such Contract; and
(7) proof of maintenance of a Standard Hazard Insurance Policy
(and a flood insurance policy, if applicable) for the related
Manufactured Home.
In the case of any Land Secured Contract, the related Contract
Documents shall consist of the following documents in lieu of those listed in
clause (3) of the foregoing paragraph: (a) the original recorded Mortgage for
the related Real Property, with evidence of recordation noted thereon or
attached thereto, or a certified copy thereof issued by the appropriate
recording office (or, if the Mortgage is in the process of being recorded, a
photocopy of the Mortgage, which may be on microfilm or optical disk maintained
by the Servicer in its records separate from the other related Contract
Documents); (b) if the Mortgage does not name the related Seller as mortgagee
therein or beneficiary thereof, an original recorded assignment or assignments
of the Mortgage from the Persons named as mortgagee in, or beneficiary of, such
Mortgage, to the related Seller, with evidence of recordation noted thereon or
attached thereto, or a certified copy of each such assignment issued by the
appropriate recording office (or, if such an original assignment is in the
process of being recorded, a photocopy of each such assignment, which may be on
microfilm or optical disk maintained by the Servicer in its records separate
from the other related Contract Documents); (c) a copy of the power of attorney
delivered by the Seller to the Trustee authorizing the Trustee to execute and
record assignments of Mortgages securing Land Secured Contracts from the Seller
to the Trustee in the event that recordation of such assignments becomes
necessary for foreclosure on the related Real Property by or on behalf of the
Trustee; and (d) if such Land Secured Contract's original principal balance was
$40,000 or greater, a copy of the title search report and bring-down thereof (or
evidence of title insurance) with respect to the related Real Property.
"Contract File" means, with respect to any Contract, all of the
related Contract Documents.
"Contract Loan-to-Value Ratio" means, (i) as to each Contract with
respect to which a lien on land is required for underwriting purposes, the
ratio, expressed as a percentage, of the principal amount of such Contract to
the sum of the purchase price of the home (including taxes , insurance and any
land improvements), the tax value or appraised value of the land and the amount
of any prepaid finance charges or closing costs that are financed; and (ii) as
to each other Contract, the ratio, expressed as a percentage, of the principal
amount of such Contract to the purchase price of the home (including taxes,
insurance and any land improvements) and the amount of any prepaid finance
charges or closing costs that are financed.
"Contract Rate" means the annual percentage rate or "APR" specified in
a Contract.
"Contract Schedule" means an Asset Schedule to the extent it identifies
Contracts.
"Conventional Mortgage Loans" means Mortgage Loans that are not insured
by the FHA or partially guaranteed by the VA.
"Convertible Loan" means an Adjustable Rate Asset subject to a
provision pursuant to which, subject to certain limitations, the related Obligor
may exercise an option to convert the adjustable Asset Rate to a fixed Asset
Rate.
"Credit Insurance" means the Primary Mortgage Insurance Policies, FHA
insurance, VA guarantees, and Pool Insurance Policies, if any, obtained with
respect to any Asset Pool.
"Credit Insurer" means a Mortgage Insurer or a Pool Insurer.
114
<PAGE>
"Current Recognition Election" means the election under section 1278(b)
of the Code to recognize market discount on a debt instrument currently on an
uncapped accrual basis.
"Custodial Agreement" means the agreement, if any, among the Company, a
Trustee and a Custodian, by which the Custodian is appointed to hold the
Mortgage Loan Documents for a Trust Estate for the benefit of the Trustee.
"Custodian" means the custodian, if any, appointed pursuant to a
Custodial Agreement to hold the Mortgage Loan Documents for a Trust Estate for
the benefit of the related Trustee.
"Cut-off Date" means, for any Series, the date specified in the related
Prospectus Supplement as the date after which scheduled principal and interest
payments on the related Contracts and Mortgage Loans, and on and after which
unscheduled collections of principal on the related Contracts and Mortgage
Loans, are to be included in the related Trust Estate.
"Cut-off Date Principal Balance" means, as to any Asset, the original
principal amount of such Asset, minus the principal portion of all Monthly
Payments due on such Asset on or before the applicable Cut-off Date and minus
all other payments applied to reduce such original principal amount before the
applicable Cut-off Date.
"Deemed Principal Payments" means all payments of principal and
interest provided for on a debt instrument other than Qualified Stated Interest.
"Definitive Certificate" means any Certificate that will be issued in
fully-registered, certificated form to the owners thereof, or their nominees.
"Depository" means DTC or any successor or other Clearing Agency
selected by the Company as depository for any Book-Entry Certificates.
"Discount Certificate" means a Certificate that has a purchase price
less than its principal amount.
"Disqualified Organization" means either (1) the United States; (2) any
state or political subdivision thereof; (3) any foreign government; (4) any
international organization; (5) any agency or instrumentality of any of the
foregoing; (6) any tax-exempt organization (other than a farmers' cooperative
described in section 521 of the Code) unless such organization is subject to the
tax on UBTI; or (7) any rural electrical or telephone cooperative; provided,
however, that a corporation will not be treated as an instrumentality of the
United States or any state or political subdivision thereof if all of its
activities are subject to tax and, with the exception of FHLMC, a majority of
its board of directors is not selected by such governmental unit.
"Distribution Account" means the account maintained by the Trustee, as
specified in the related Prospectus Supplement, from which distributions are
made on the Certificates.
"Distribution Date" means, with respect to each Series, unless
otherwise provided in the related Prospectus Supplement, the 15th day of each
month (or the next business day if such 15th day is not a business day),
commencing in the month following the month in which the related Closing Date
occurs.
"Distribution Period" means, for any Certificate, the interval between
one Distribution Date and the next Distribution Date.
"DOL" means the United States Department of Labor.
"DTC" means The Depository Trust Company.
"Due Date" means, for any Asset, the date on which a Monthly Payment is
due on such Asset from
115
<PAGE>
the Obligor thereunder (without regard to any grace period).
"Due Date Interest Shortfall" means, for any Asset that is prepaid in
full or liquidated on other than a Due Date for such Asset, the difference
between (1) the amount of interest that would have accrued on such Asset through
the day preceding the first Due Date after such prepayment in full or
liquidation had the Asset not been prepaid in full or liquidated (net of any
other administrative fees payable out of such interest had it accrued and been
paid) and (2) the amount of interest that actually accrued on such Asset prior
to the prepayment in full or liquidation (net of an allocable portion of any
other administrative fees payable from interest payments on such Asset during
the related Collection Period).
"Early Payment": As to any Asset and any Due Date on which the
principal and interest payments on such Asset made with respect to such Due Date
(not including any late fees) exceed the sum of the scheduled Monthly Payment
for such Asset and Due Date plus any unpaid Monthly Payments for previous Due
Dates, if the related Obligor has not sent written notice to the Servicer with
such payment asking that the amount by which such payment exceeds the Monthly
Payment then due be treated as a Principal Prepayment and the Servicer is unable
to determine the Obligor's intended treatment of such excess payment, the Early
Payment shall be the amount by which (1) payments of principal and interest on
such Asset made with respect to such Due Date exceed (2) the scheduled Monthly
Payment for such Asset on such Due Date plus any unpaid Monthly Payments for
previous Due Dates, but only to the extent that the amount of such excess is an
integral multiple of the amount of the scheduled Monthly Payment for such Due
Date. To the extent that the amount of such excess exceeds an integral multiple
of such scheduled Monthly Payment, the excess shall be deemed to be a Principal
Prepayment of such Asset.
"Eligible Account" means, as to any Series, an account which is
maintained (1) at a depository institution organized under the laws of the
United States or any state, the deposits of which are insured to the full extent
permitted by law by the Federal Deposit Insurance Corporation (the "FDIC"),
whose commercial paper or long-term unsecured debt has a rating, as specified in
the related Agreement, sufficient to support the ratings requested on the
Certificates of the related Series, and which institution is subject to
examination by federal or state authorities, (2) in the corporate trust
department of the Trustee or (3) at an institution otherwise acceptable to each
applicable Rating Agency.
"Eligible Investments" means one or more of the investments specified
in an Agreement in which moneys in the related Distribution Account and certain
other accounts are permitted to be invested.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Account" means an account established and maintained by the
Servicer with respect to Mortgage Loans in which Mortgagors under certain
Mortgage Loans are required to deposit amounts sufficient, as applicable, to pay
taxes, assessments, hazard insurance premiums and other comparable items.
"Event of Default" means, with respect to an Agreement, the occurrence
of a default as specified in such Agreement, coupled with the passage of a
period of any cure period specified in the Agreement for a default of such type
without such default having been cured. Events of Default will be as specified
in the Agreements, but will generally include (1) any failure by the Servicer to
remit funds to the Distribution Account as required by the applicable Agreement,
which failure continues unremedied for five days (or such other period specified
in the related Agreement) after the date upon which such remittance was due; (2)
any failure or breach by the Servicer duly to observe or perform in any material
respect any other of its covenants or agreements that materially and adversely
affects the interests of Certificateholders, which, in either case, continues
unremedied for 60 days after the giving of written notice of such failure or
breach to the Servicer by the related Trustee or by the Holders of Certificates
evidencing at least 25% of the Voting Rights for the applicable Series; and (3)
certain events involving insolvency, readjustment of debt, marshalling of assets
116
<PAGE>
and liabilities or similar proceedings regarding the Servicer.
"Excess Premium" means, with respect to a Regular Certificate, a
premium over such Certificate's noncontingent principal amount in excess of the
lesser of (1) .015 multiplied by the product of such noncontingent principal
amount and the WAM of the Certificate or (2) 15% of such noncontingent principal
amount.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHA" means the Federal Housing Administration.
"FHA Contract" or "FHA Mortgage Loan " means a Contract or Mortgage
Loan that is insured by the FHA.
"FHA Prepayment Experience" means certain statistical data compiled by
the Actuarial Division of HUD concerning prepayment rates on FHA mortgage loans,
as set forth in tables which, assuming full mortgage loan prepayments at the
rates experienced by FHA on FHA mortgage loans, set forth the percentages of the
original number of FHA mortgage loans included in pools of Level Payment
Mortgage Loans with varying maturities that will remain outstanding on each
anniversary of the origination date of such mortgage loans (assuming they all
have the same origination date).
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"Final Scheduled Distribution Date" means, for any Class, unless
otherwise provided in the related Prospectus Supplement, the date, based on the
assumptions set forth in the related Prospectus Supplement, on which the
Certificate Principal Balance of all Certificates of such Class is scheduled to
be reduced to zero, assuming no prepayments.
"Financial Intermediary" means a brokerage firm, bank, thrift
institution or any other entity that is a Depository Participant or Indirect
Participant, and that maintains a Beneficial Owner's account for the purpose of
reflecting such Beneficial Owner's interest in a Book-Entry Certificate.
"First Distribution Period" means, with respect to a Certificate, the
interval between its issue date and its first Distribution Date.
"Floor" means a restriction or restrictions on the minimum stated
interest rate on a Certificate.
"FNMA" means the Federal National Mortgage Association.
"Foreign Person" means a an alien individual, that is not a
United States resident for federal income tax purposes, a foreign corporation,
foreign partnership, certain foreign estates or trusts or holders holding on
behalf of any of the foregoing.
"Foreign Person Certification" means a written certification (signed
under penalty of perjury) provided by the beneficial owner of a Certificate that
such owner is, inter alia, a Foreign Person.
"Fraud Loss" means a loss incurred on a Contract or Mortgage Loan with
respect to which there was fraud in connection with the origination of such
Contract or Mortgage Loan or fraud, dishonesty or misrepresentation in
connection with the application for any insurance obtained with respect to such
Contract or Mortgage Loan.
"Full Coverage Insurance Policy" means a Primary Mortgage Insurance
Policy which provides full coverage against any loss maintained by reason of
nonpayments by the related Mortgagor.
117
<PAGE>
"Garn-St Germain Act" means the Garn-St Germain Depository Institutions
Act of 1982, as amended.
"GEM Loan" means a fixed-rate fully-amortizing Asset providing for (1)
Monthly Payments during the first year after origination that are at least
sufficient to pay interest due on the Asset, and (2) an increase in such Monthly
Payments in subsequent years at a predetermined rate generally not more than a
specified percentage of the Monthly Payments due on such Asset during the
preceding year.
"Governor" means a restriction or restrictions on the amount of
increase or decrease in the stated interest rate on a Certificate on any
Interest Adjustment Date.
"GPM Fund" means a custodial Eligible Account established by the
Servicer for any GPM Loan, which must comply with the standards applicable to
the related Certificate Account, to be funded with an amount which, together
with projected reinvestment earnings thereon at a rate specified in the related
Prospectus Supplement, will provide funds sufficient to support the payments
required on such GPM Loan on a level debt service basis.
"GPM Loan" means a "graduated payment" Asset the terms of which provide
for Monthly Payments during the initial years of its term that are less than the
actual amount of principal and interest that would be payable on a level debt
service basis.
"Gross Margin" means, with respect to any Adjustable Rate Asset, the
fixed percentage per annum specified in the related Contract or Mortgage Note
that is added to the applicable Index on each related Interest Adjustment Date
to determine the new Asset Rate for such Adjustable Rate Asset.
"Housing Act" means Section 306(g) of Title III of the National Housing
Act of 1934, as amended.
"HUD" means the United States Department of Housing and Urban
Development.
"Increasing Payment Loan" means an Asset that provides for Obligor
Monthly Payments that are fixed for an initial period of six, 12 or 24 months
following origination, and which increase thereafter at a predetermined rate
expressed as a percentage of the Obligor's Monthly Payment during the preceding
period, subject to any caps on the amount of any single Monthly Payment
increase, for a period not to exceed nine years after origination, after which
the Monthly Payment amount is fixed at a level-payment amount so as to amortize
the Asset fully over its remaining term.
"Index" means, with respect to any Adjustable Rate Asset, the index
specified in the related Contract or Mortgage Note that is added to the related
Gross Margin on each related Interest Adjustment Date to determine the new Asset
Rate for such Adjustable Rate Asset.
"Indirect Participants" means organizations which have indirect access
to a Clearing Agency, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly.
"Insurance Proceeds" means amounts paid or payable (as the context
requires) under any insurance policy maintained with respect to a Series, to the
extent such amounts are not applied to the restoration or repair of the
Manufactured Home or Mortgaged Property in respect of which such amounts were
paid.
"Insured" means the Company and the Trustee, each as assignee of the
Seller.
"Interest Adjustment Rates" means, with respect to any Adjustable Rate
Asset, the dates on which the related Asset Rate changes in accordance with the
terms of the related Contract or Mortgage Note.
"Interest Reduction Loan" means an Asset for which, subject to certain
conditions, the related
118
<PAGE>
Obligor has a one-time option to reduce the interest rate payable with respect
to such Asset.
"Interest Weighted Certificate " means a Regular Certificate, the
payments on which consist entirely or primarily of a specified nonvarying
portion of the interest payable on one or more of the Assets held by the related
Series REMIC.
"Inverse Floater Certificate" means a Regular Certificate that provides
for the payment of interest at a rate determined as the difference between two
interest rate parameters, one of which is a variable rate and the other of which
is a fixed rate or a different variable rate.
"IO Certificate" means a Non-REMIC Certificate evidencing ownership of
a percentage of the interest payments (net of certain fees) on the Assets
assigned to the related Trust.
"Land Secured Contract" means a Contract secured at origination by a
parcel of real estate in addition to a Manufactured Home.
"Level Payment Loan" means an Asset the terms of which provide for
regular level payments of principal and interest throughout its entire term.
"Level Payment Buy-Down Loan" means an Asset that provides for a
reduction in the amount of the related Obligor's Monthly Payments for a period
of up to the first four years following origination of such Asset and as to
which funds have been provided by someone other than the Obligor to cover the
reductions in such Monthly Payments during those years, but for which the
aggregate monthly amount due on such Asset from the Obligor and anyone else are
level for the term of such Asset.
"Liquidated Loan" means a defaulted Contract or Mortgage Loan as to
which all amounts that the Servicer expects to recover through the date of
disposition of the related Manufactured Home or Mortgaged Property have been
received.
"Liquidation Expenses" means all reasonable, out-of-pocket costs and
expenses (exclusive of the Servicer's overhead costs) incurred by the Servicer
in connection with liquidation of any Contract or Mortgage Loan or disposition
of any related Repo Property or REO Property.
"Liquidation Proceeds" means amounts received and retained by the
Servicer in connection with the liquidation of a Liquidated Loan, whether
through foreclosure thereon or repossession and resale of the related
Manufactured Home or otherwise (including Insurance Proceeds collected in
connection with such liquidation).
"Loan-to-Value Ratio" means the Contract Loan-to-Value Ratio or the
Mortgage Loan-to-Value Ratio of an Asset, as applicable.
"Manufactured Home" means a unit of manufactured housing, including all
accessions thereto, securing the indebtedness of the Obligor under the related
Contract.
"Mark-to-Market Regulations" means Treasury regulations relating to the
provisions under section 475 of the Code relating to mark-to-market accounting
for dealers in securities.
"Monthly Payment" means the scheduled monthly payment of principal and
interest on a Contract or Mortgage Loan.
"Mortgage" means the mortgage, deed of trust or other instrument
creating a first lien on a first priority ownership interest in or estate in
feesimple in real property securing a Mortgage Note.
119
<PAGE>
"Mortgage Insurer" means the insurance company or companies which issue
any Primary Mortgage Insurance Policies with respect to any Mortgage Loans.
"Mortgage Loan" means a mortgage loan secured by a first lien on a
one-to four-family residential real property which is sold and assigned by the
Company to a Trustee and included in the Trust Estate for a Series of
Certificates.
"Mortgage Loan Documents" means, with respect to each Mortgage Loan,
the following documents:
(1) the original Mortgage Note bearing a complete chain of
endorsements, if necessary, from the initial payee thereunder to the
Seller, with a further endorsement without recourse from the Seller in
blank or to the Trustee or its Custodian, in a form specified in the
related Sales Agreement, together with all related riders and addenda
and any related surety or guaranty agreement, power of attorney and
buydown agreement;
(2) the original recorded Mortgage (or a copy thereof
certified to be a true and correct reproduction of the original thereof
by the appropriate public recording office) with evidence of
recordation noted thereon or attached thereto, or, if the Mortgage is
in the process of being recorded, a photocopy of the Mortgage,
certified by an officer of the Seller or the originator, the related
title insurance company, the related closing/settlement/escrow agent or
the related closing attorney to be a true and correct copy of the
Mortgage submitted for recordation;
(3) the original recorded assignment of the Mortgage from the
Seller to the Trustee or its Custodian, in a form specified in the
related Sales Agreement (or a copy thereof certified to be a true and
correct reproduction of the original thereof by the appropriate public
recording office) with evidence of recordation noted thereon or
attached thereto, or, if the assignment is in the process of being
recorded, a photocopy of the assignment, certified by an officer of the
Seller to be a true and correct copy of the assignment submitted for
recordation;
(4) each original recorded intervening assignment of the
Mortgage as is necessary to show a complete chain of title from the
original mortgagee (or beneficiary, in the case of a deed of trust) to
the Seller (or a copy of each such assignment certified to be a true
and correct reproduction of the original thereof by the appropriate
public recording office) with evidence of recordation noted thereon or
attached thereto, or, if an assignment is in the process of being
recorded, a photocopy of the assignment, certified by an officer of the
Seller to be a true and correct copy of the assignment submitted for
recordation;
(5) an original Title Insurance Policy or, if such policy has
not yet been issued or is otherwise not available, (a) a written
commitment to issue such policy issued by the applicable title
insurance company and an officer's certificate of the Seller certifying
that all of the requirements specified in such commitment have been
satisfied, (b) a preliminary title report if the related Mortgaged
Property is located in a state in which preliminary title reports are
acceptable evidence of title insurance or (c) a certificate of an
officer of the Seller certifying that a Title Insurance Policy is in
full force and effect as to the related Mortgage and that such Title
Insurance Policy is freely assignable to and will inure to the benefit
of the Trustee (subject to recordation of the related Assignment of
Mortgage); and that such Title Insurance Policy is freely assignable to
and will inure to benefit of the Trustee (subject to recordation of the
related Assignment of Mortgage);
(6) for each Mortgage Loan identified in the related Agreement
as having in place a Primary Mortgage Insurance Policy, a Primary
Mortgage Insurance Policy or a certificate of primary mortgage
insurance issued by the related Mortgage Insurer or its agent
indicating that such a policy is in effect as to such Mortgage Loan or,
if neither a policy nor a certificate of insurance from the related
Mortgage Insurer is available, a certificate of an officer of the
Seller certifying that a Primary Mortgage Insurance Policy is in effect
as to such Mortgage Loan;
120
<PAGE>
(7) each related assumption agreement, modification, written
assurance or substitution agreement, if any; and
(8) proof of the maintenance of a Standard Hazard Insurance Policy (and a flood
insurance policy, if applicable) as to the related Mortgaged Property.
"Mortgage Loan File" means, as to any Mortgage Loan, all the related
Mortgage Loan Documents.
"Mortgage Loan Schedule" means an Asset Schedule to the extent it
identifies Mortgage Loans.
"Mortgage Loan-to-Value Ratio" means, as to a Mortgage Loan, the ratio,
expressed as a percentage, of the principal amount of such Mortgage Loan at the
time of determination, to either (i) the sum of the appraised value of the land
and improvements, and the amount of any prepaid finance charges or closing costs
that are financed. or (ii) the sum of the purchase price of the home (including
taxes, insurance and any land improvements), the appraised value of the land and
the amount of any prepaid finance charges or closing costs that are financed.
"Mortgage Note" means the note or other evidence of indebtedness of a
mortgagor secured by a Mortgage.
"Mortgage Rate" means, with respect to each Mortgage Loan, the interest
rate specified in the related Mortgage Note.
"Mortgaged Property" means the mortgaged property securing a Mortgage
Loan.
"Mortgagor" means the obligor on a Mortgage Note.
"Multiple Rate VRDI Certificate" means a VRDI Certificate that does not
qualify as a Single Rate VRDI Certificate.
"Negative Adjustment" means any reduction in the income accrual on a
Certificate for a period below zero.
"Net Liquidation Proceeds" means the amount of Liquidation Proceeds
received with respect to any Liquidated Loan, net of the amount of any
Liquidation Expenses incurred with respect to such Liquidated Loan and not
previously reimbursed to the Servicer at the time of liquidation.
"Net Rate" means, as to any Asset, the Asset Rate thereon minus
applicable servicing, administration and guarantee fees and insurance premiums,
if any (plus reinvestment income thereon if payable to the related
Certificateholders), expressed as a percentage per annum of the principal
balance of such Asset.
"Non-Recoverable Advance" means any Advance previously made or proposed
to be made in respect of a Contract or Mortgage Loan by the Servicer (or a
Trustee or Pool Insurer) pursuant to the related Agreement, which, in the good
faith judgment of the Servicer (or such Trustee or Pool Insurer), will not or,
in the case of a proposed Advance, would not, be ultimately recoverable by the
Servicer (or such Trustee or Pool Insurer) from Related Proceeds of such
Contract or Mortgage Loan.
"Non-REMIC Certificate" means a Certificate representing an interest in
a Trust Estate as to which no REMIC elections have been made.
"Non-REMIC Strip Certificate" means an IO Certificate, a PO
Certificate, or a Ratio Certificate.
121
<PAGE>
"Non-VRDI Certificate" means a NOWA Certificate, a Variable Rate
Certificate that is issued at an Excess Premium, or any other Variable Rate
Certificate that does not qualify as a VRDl Certificate.
"Notional Principal Amount" means a fictional principal balance that
may be assigned to a Certificate or a Class of Certificates that is to be used
solely for purposes of determining the amount of interest distributions and
certain other rights and obligations of the holder(s) of such Certificate or
Class and does not represent any beneficial interest in principal payments on
the Assets in the related Trust.
"NOWA Certificate" means a Weighted Average Certificate relating to a
Trust (or a designated Asset Pool thereof) whose Assets do not bear interest at
qualified floating rates.
"NVRI" means a residual interest that has negative value because, on
the date it is acquired, the present value of the anticipated tax liabilities
associated with holding the interest exceeds the sum of (1) the present value of
the expected future distributions on the interest and (2) the present value of
the anticipated tax savings associated with holding the interest as the related
REMIC generates losses.
"Oakwood" means Oakwood Acceptance Corporation, a North Carolina
corporation.
"Oakwood Homes" means Oakwood Homes Corporation, a North Carolina
corporation of which Oakwood and OMH are direct wholly-owned subsidiaries and of
which the Company is an indirect (through Oakwood) wholly-owned subsidiary.
"Obligor" means a person who is indebted under a Contract or who has
acquired a Manufactured Home subject to a Contract or a person who is the
mortgagor or borrower under a Mortgage Loan or who has acquired a Mortgaged
Property subject to a Mortgage Loan.
"Obligor Bankruptcy Insurance" means an insurance policy, reserve fund
or other form of credit enhancement that provides protection against losses
resulting from the bankruptcy of an Obligor.
"Obligor Bankruptcy Loss" means, for any Distribution Date as to any
Asset that was the subject of a Principal Cramdown during the preceding
Prepayment Period, the related Principal Cramdown Amount.
"Offered Certificates" means, as to any Series, the Certificates of
Classes of such Series that are offered pursuant to the related Prospectus
Supplement and this Prospectus.
"OID Regulations" means the final regulations governing original issue
discount that were issued by the Treasury.
"OMH" means Oakwood Mobile Homes, Inc., a North Carolina corporation
that is a wholly-owned retailing subsidiary of Oakwood Homes.
"Ordinary Ratio Certificate" means a Ratio Certificate that is not
considered a Contingent Payment Obligation.
"PAC Class" means a "planned amortization" Class of Certificates
structured to receive fixed principal distribution amounts on designated
Distribution Dates so long as principal payments on the
122
<PAGE>
underlying Assets are received at a rate that is within a range of constant
percentages of the prepayment assumption model used (as specified in the related
Prospectus Supplement).
"Parity Price" means the price at which a Certificate will yield its
coupon, after giving effect to any payment delay.
"Participants" means the participating organizations that utilize the
services of the Depository, including securities brokers and dealers, banks and
trust companies and clearing corporations and may include certain other
organizations.
"Participation Certificate" means a Non-REMIC Certificate evidencing
ownership of equal percentages of the principal and interest payments on the
Assets assigned to the related Trust.
"Pass-Through Rate" means, with respect to any Class of Certificates,
the per annum interest rate, if any, which will accrue on the Certificate
Principal Balance of such Class.
"Percentage Interest" means, with respect to a Certificate to which an
initial principal amount is assigned as of the Closing Date, the portion of the
Class of which such Certificate is a part evidenced by such Certificate,
expressed as a percentage, the numerator of which is the denomination
represented by such Certificate and the denominator of which is the initial
Certificate Principal Balance of such Class. With respect to a Certificate to
which an initial principal balance is not assigned as of the Closing Date, the
portion of the Class of which such Certificate is a part evidenced by such
Certificate, expressed as a percentage stated on the face of such Certificate.
"Periodic Rate Cap" means, with respect to any Adjustable Rate Asset,
the limit on the percentage increase that may be made to the related Asset Rate
on any Interest Adjustment Date.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
- ---------
"P&I Advance" means any amount advanced (or required to be advanced, as
the context requires) by the Servicer in respect of a delinquent payment of
principal and interest on a Contract or Mortgage Loan.
"Plan" means any employee benefit plan or retirement arrangement,
including individual retirement accounts and annuities, Keogh plans, and
collective investment funds in which such plans, accounts, annuities or
arrangements are invested, that are described in or subject to the Plan Asset
Regulations, ERISA, or corresponding provisions of the Code.
"Plan Asset Regulations" means the DOL regulations set forth in 29
C.F.R. ' 2510.3-101, as amended from
time to time.
"Plan Investor" means any Plan, any Person acting on behalf of a Plan,
or any Person using the assets of a Plan.
"PO Certificate" means a Non-REMIC Certificate evidencing ownership of
a percentage of the principal payments on some or all of the Assets assigned to
the related Trust.
"Pooling and Servicing Agreement" means, with respect to any Series,
the pooling and servicing agreement pursuant to which the related Trust was
established and the related Certificates were issued, which will be among the
Company, the Servicer and the related Trustee and will consist of a Series
Agreement which incorporates by reference the Standard Terms.
123
<PAGE>
"Pool Insurance Policy" shall have the meaning assigned and shall be as
described herein under "The Trusts -- Insurance -- Credit Insurance."
"Pool Insurer" means the insurer under any Pool Insurance Policy.
"Pool Scheduled Principal Balance" means, on any Distribution Date for
a Series, the aggregate of the Scheduled Principal Balances, immediately prior
to the beginning of the related Collection Period, of the related Assets that
were outstanding at the beginning of such Collection Period, without giving
effect to any principal prepayments, Net Liquidation Proceeds or Repurchase
Prices received (or Realized Losses incurred) on such Assets on the day
preceding the beginning of such Collection Period, plus the aggregate of the
principal components of any Monthly Payments that were due at or prior to the
beginning of such Collection Period on such Assets, but which Monthly Payments
were not collected from a related Obligor or advanced by the Servicer and which
were not reflected in a corresponding reduction of the Certificate Principal
Balance of the Certificates on the related Distribution Date. The Pool Scheduled
Principal Balance as of any date of determination that is not a Distribution
Date shall be the Pool Scheduled Principal Balance for the next upcoming
Distribution Date.
"Pre-Funded Amount" means the amount initially deposited into a
Pre-Funding Account for a Series.
"Pre-Funded Asset" means an Asset acquired by a Trust after the related
Closing Date using funds on deposit in the related Pre-Funding Account.
"Pre-Funding Account" means an account established for the purpose of
enabling a Trust to purchase Pre-Funded Assets, with an aggregate principal
balance not to exceed 25% of the Certificate Principal Balance of Certificates
issued by such Trust during the applicable Pre-Funding Period, as described
herein under "The Trusts -- Pre-Funding Accounts."
"Pre-Funding Period" means any period specified as such in a Prospectus
Supplement not to exceed three months, during which the related Trust may
acquire Pre-Funded Assets using funds on deposit in a related Pre-Funding
Account.
"Pre-Issuance Accrued Interest " means interest that has accrued under
the terms of a Certificate prior to the issue date of such Certificate.
"Pre-Issuance Accrued Interest Rule" means the rule in the OID
Regulations under which a Certificate's issue price may be computed by
subtracting from the issue price the amount of Pre-Issuance Accrued Interest on
the Certificate, and a portion of the interest received on the first
Distribution Date with respect to such Certificate would be treated as a return
of such Pre-Issuance Accrued Interest rather than as a payment on the
Certificate, provided: (i) a portion of the initial purchase price of the
Certificate is allocable to Pre-Issuance Accrued Interest and (ii) the
Certificate provides for a payment of stated interest on the first payment date
within one year of the issue date that equals or exceeds the amount of such
Pre-Issuance Accrued Interest.
"Premium Certificate" means a Certificate that has a purchase price
greater than its principal amount.
"Prepayment Model" means a prepayment standard or model which
represents an assumed rate of prepayment of the Assets in an Asset Pool relative
to the aggregate outstanding principal balance of such Asset Pool from time to
time.
"Prepayment Period" means, unless otherwise provided in a related
Prospectus Supplement, with respect to any Distribution Date, the calendar month
immediately preceding the calendar month in which such Distribution Date occurs.
124
<PAGE>
"Pricing Prepayment Assumptions" means, with respect to a Series of
Certificates, the assumptions concerning the rate and timing of principal
prepayments on the underlying Assets and concerning the reinvestment rate on
amounts held pending distribution that were assumed in pricing such
Certificates.
"Primary Mortgage Insurance" means the insurance provided under any
Primary Mortgage Insurance Policy.
"Primary Mortgage Insurance Policy" means the primary mortgage
insurance policy, if applicable, covering certain Conventional Mortgage Loans
for which the initial Mortgage Loan-to-Value Ratios exceeded 80%.
"Principal Cramdown" means, as to any Asset, either (a) a decree by a
bankruptcy court to the effect that the portion of such Asset that is secured by
the underlying Manufactured Home or Mortgaged Property is less than its Unpaid
Principal Balance due to the fact that the value of such Manufactured Home or
Mortgaged Property is less than such Unpaid Principal Balance or (b) the
permanent forgiveness by a bankruptcy court of some or all of the Unpaid
Principal Balance owed by the related Obligor.
"Principal Cramdown Amount" means, with respect to any Prepayment
Period as to any Asset that has been the subject of a Principal Cramdown, the
amount by which (a) the Unpaid Principal Balance of such Asset exceeds (b) as
applicable, depending upon the type of Principal Cramdown that was applied to
such Asset, either (1) the portion of such Unpaid Principal Balance that remains
secured by the related Manufactured Home or Mortgaged Property after taking the
related Principal Cramdown into account or (2) the Unpaid Principal Balance
after taking into account the permanent forgiveness of debt ordered by the
bankruptcy court in connection with the related Principal Cramdown.
"Principal Distribution Amount" means, for any Series, except as
otherwise defined in the related Agreement, on any Distribution Date other than
the Distribution Date on which the related Trust is to be terminated, the sum of
the following amounts: (1) the sum of the principal components of all Monthly
Payments scheduled to be made on the Due Date occurring during the related
Collection Period on the related Assets that were Outstanding at the opening of
business on such Due Date (regardless of whether such Monthly Payments were
received by the Servicer from the related Obligors), not including any Monthly
Payments due on Liquidated Loans or repurchased Assets; (2) the sum of the
amounts of all Principal Prepayments received by the Servicer on the related
Assets during the related Prepayment Period; (3) with respect to any related
Asset that became a Liquidated Loan during the related Prepayment Period, the
Scheduled Principal Balance thereof on the date of liquidation thereof
(determined without giving effect to such liquidation), plus an amount equal to
the principal components of all Monthly Payments due on or prior to such date on
such Asset but theretofore unpaid by the related Obligors and not advanced by
the Servicer; (4) with respect to any related Asset that was purchased or
repurchased by the Servicer, OAC or OMI pursuant to the related Agreement during
the related Prepayment Period, the Scheduled Principal Balance thereof on the
date of purchase or repurchase thereof (determined without giving effect to such
purchase or repurchase), plus an amount equal to the principal components of all
Monthly Payments due on or prior to such date on such Asset but theretofore
unpaid by the related Obligor and not advanced by the Servicer; and (5) an
amount equal to all Principal Distribution Amounts from previous Distribution
Dates that have not yet been distributed on the Certificates (not including any
portion of such previous Principal Distribution Amounts that is included in
either of the amounts described in clause (3) or clause (4) above) minus the
amount of any Writedown Amounts that have previously been allocated to the Class
of Certificates then entitled to receive the Principal Distribution Amount in
accordance with the related Pooling and Servicing Agreement. On the Distribution
Date on which the Trust is terminated, the Pool Scheduled Principal Balance for
such Distribution Date.
"Principal Prepayment" means, with respect to any Asset, a payment
attributable to principal of such Asset, other than a scheduled principal
payment on such Asset, which may be received (1) from the related Obligor
together with a regular Monthly Payment, (2) from the related Obligor together
with an early
125
<PAGE>
Monthly Payment, or (3) in the form of net Insurance Proceeds received by the
Servicer otherwise than as a component of Liquidation Proceeds.
"Principal-Only Class" means a Class of Certificates representing an
interest only in specified collections of principal on the underlying Assets,
which will have no Pass-Through Rate.
"Qualified Bank" means any domestic bank not affiliated with Oakwood or
OMI (1) having long-term unsecured debt obligations rated in one of the two
highest rating categories (without modifiers) of at least one Rating Agency (and
of any other Rating Agency, if such bank's long-term unsecured debt obligations
are rated by such additional Rating Agency) or short-term unsecured debt
obligations rated at least one Rating Agency's highest applicable rating
category, (and of any other Rating Agency's highest applicable rating category
if such bank's short-term unsecured debt obligations are rated by such
additional Rating Agency), (2) having commercial paper or short-term unsecured
debt obligations rated in at least one Rating Agency's highest applicable rating
category (and in any other Rating Agency's highest applicable rating category if
such bank's commercial paper or short-term unsecured debt obligations are rated
by such additional Rating Agency), or (3) that is otherwise acceptable to each
applicable Rating Agency.
"Qualified Mortgage" has the meaning assigned to such term herein under
"Federal Income Tax Consequences -- REMIC Certificates -- REMIC Qualification --
Asset Composition."
"Qualified Stated Interest" means, in general, stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at (1) a single fixed rate or (2) a variable rate
thatmeets certain requirements set out in the OID Regulations.
"Qualified Substitute Asset" means an Asset substituted by the Company,
the Seller or the Servicer for a Replaced Asset which must, on the date of such
substitution, (1) have an Unpaid Principal Balance not greater than (and not
more than $10,000 less than) the Unpaid Principal Balance of the Replaced Asset,
(2) have an Asset Rate not less than (and not more than one percentage point in
excess of) the Asset Rate of the Replaced Asset, (3) have a Net Rate equal to
the Net Rate of the Replaced Asset, (4) have a remaining term to maturity not
greater than (and not more than one year less than) that of the Replaced Asset,
(5) have a Loan-to-Value Ratio as of the first day of the month in which the
substitution occurs equal to or less than the Loan-to-Value Ratio of the
Replaced Asset as of such date (in each case, using the appraised value at
origination, and after taking into account the Monthly Payment due on such
date), and (6) comply with each representation and warranty set forth in Section
2.05 of the Standard Terms and in the related Sales Agreement. In the event that
more than one Asset is substituted for a Replaced Asset, the amount described in
clause (1) hereof shall be determined on the basis of aggregate Unpaid Principal
Balances, the rates described in clauses (2) and (3) hereof shall be determined
on the basis of weighted average Asset Rates and Net Rates, as the case may be,
and the term described in clause (4) hereof shall be determined on the basis of
weighted average remaining terms to maturity, provided that no Qualified
Substitute Asset may have an original term to maturity beyond the latest
original term to maturity of any Asset assigned to the Trust on the Closing
Date. In the case of a Trust for which a REMIC election has been or will be
made, a Qualified Substitute Asset also shall satisfy the following criteria as
of the date of its substitution for a Replaced Asset: (A) the Obligor shall not
be 90 30 or more days delinquent in payment on the Qualified Substitute Asset,
(B) the Asset File for such Asset shall not contain any material deficiencies in
documentation, and shall include an executed Contract or Mortgage Note, as
applicable, and, if it is a Land Secured Contract or a Mortgage Loan, a recorded
Mortgage; (C) the Loan-to-Value Ratio of the Asset must be 125% or less either
(i) on the date of origination of the Asset, or, if any of the terms of such
Asset were modified other than in connection with a default or imminent default
on such Asset, on the date of such modification, or (ii) on the date of the
substitution, based on an appraisal conducted within the 60 day period prior to
the date of the substitution; (D) no property securing such Asset may be subject
to foreclosure, bankruptcy, or insolvency proceedings; and (E) such Asset, if a
Land Secured Contract or a Mortgage Loan, must be secured by a valid first lien
on the related Real Property or Mortgaged Property. In addition to all other
requirements stated in this paragraph, any Replaced Asset that is a Mortgage
Loan may only be replaced by another Mortgage Loan.
126
<PAGE>
"Qualifying REIT Interest" means interest that is treated as "interest
on obligations secured by mortgages on real property" for REIT qualification
purposes.
"Rate Bubble Certificate" means a Regular Certificate, the effective
interest rate on which is higher during the Certificate's First Distribution
Period than during the remainder of the life of the Certificate.
"Rating Agency" means a nationally-recognized statistical securities
rating organization, such as Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., Moody's investors Service, Inc., Fitch Investors Service,
Inc., and Duff & Phelps Credit Rating Co. With respect to any Series, each
Rating Agency rating any Certificates of such Series offered hereunder will be
identified in the related Prospectus Supplement.
"Ratio Certificate" means a Non-REMIC Certificate evidencing ownership
of a percentage of the interest payments and a different percentage of the
principal payments on the Assets assigned to the related Trust.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended.
"Realized Interest Loss" means a shortfall in interest resulting from
the receipt of Net Liquidation Proceeds in respect of a Contract or Mortgage
Loan in an amount that is insufficient to pay accrued and unpaid interest
thereon.
"Realized Loss" means (1) the amount of any loss realized by a Trust in
respect of any related Liquidated Loan (which may be a Special Hazard Loss or a
Fraud Loss), which shall generally equal (a) the Unpaid Principal Balance of the
Liquidated Loan, plus accrued and unpaid interest on such Liquidated Loan, plus
amounts reimbursable to the Servicer for previously unreimbursed Servicing
Advances, minus (b) Net Liquidation Proceeds in respect of the Liquidated Loan
or (2) any Obligor Bankruptcy Loss.
"Real Property" means a parcel of real estate securing a Land Secured
Contract.
"Record Date" means, for any Distribution Date, the date on which the
identities of the Certificateholders entitled to distributions on the related
Certificates on such Distribution Date are fixed, which shall be the last day
ofthe preceding calendar month unless otherwise specified in the related
Prospectus Supplement.
"Regular Certificate" means a Certificate evidencing a "regular
interest" in a REMIC.
"REIT" means a "real estate investment trust" as defined in the Code.
"Related Proceeds" means, with respect to any Contract or Mortgage Loan
in respect of which an Advance has been or is to be made, future collections in
respect of such Contract or Mortgage Loan (including collections of or from
Insurance Proceeds, Additional Assets or Liquidation Proceeds relating to such
Contract or Mortgage Loan).
"Relief Act" means the federal Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
"REMIC" means a "real estate mortgage investment conduit" as defined in
the Code.
"REMIC Certificate" means a Certificate representing an interest in a
Trust Estate as to which one or more REMIC elections have been made.
"REMIC Provisions" means provisions of the Code relating to REMICs,
which appear at Sections 860A through 860G of the Code, related Code provisions,
regulations (whether in proposed, temporary or
127
<PAGE>
final form), announcements and rulings thereunder, as the foregoing may be in
effect from time to time.
"Remittance Account" shall have the meaning assigned to such term
herein under "Sale and Servicing of Contracts and Mortgage Loans -- Servicing --
Distributions on Certificates."
"Remittance Date" means the business day preceding any monthly
Distribution Date.
"Remittance Report" means, with respect to any Distribution Date, the
monthly statement relating to such Distribution Date which is to be prepared by
the Servicer and furnished by the Trustee to the related Certificateholders, as
more fully described herein under "The Pooling and Servicing Agreements --
Reports to Certificateholders."
"REO Property" means a Mortgaged Property acquired by the Servicer on
behalf of a Trust pursuant to a foreclosure or other similar proceeding in
respect of a related Mortgage Loan.
"Replaced Asset" means an Asset replaced or to be replaced by a
Qualified Substitute Asset.
"Repo Property" means a Manufactured Home (and any related Real
Property) acquired by the Servicer on behalf of a Trust pursuant to a
repossession, foreclosure or other similar proceeding in respect of a related
Contract.
"Repurchase Price" shall, for any Asset, have the meaning assigned in
the related Agreement. Generally, the "Repurchase Price" of an Asset will equal
the Unpaid Principal Balance thereof, plus unpaid interest thereon at the
applicable Asset Rate through the end of the month in which such price is paid
for the Asset.
"Reserve Fund" means a fund established and funded by the Company or
such other party specified in the related Prospectus Supplement to make payments
on certain Certificates to the extent funds are not otherwise available.
"Residual Certificate" means a Certificate evidencing a "residual
interest" in a REMIC.
"RIC" means a "regulated investment company" as defined in the Code.
"Sales Agreement" means, with respect to any Asset, the agreement
pursuant to which the related Seller sold such Asset to the Company.
"Scheduled Principal Balance" means, as of any date of determination
with respect to any Contract, Repo Property, Mortgage Loan or REO Property, (1)
the Cut-off Date Principal Balance of such Contract or Mortgage Loan (or of the
related Contract or Mortgage Loan, in the case of a Repo Property or REO
Property) minus (2) the sum of (a) the principal components of any Monthly
Payments due on such Contract or Mortgage Loan (or on the related Contract or
Mortgage Loan, in the case of a Repo Property or REO Property) after the related
Cut-off Date and on or before such date of determination (regardless of whether
such Monthly Payments were received from the related Obligor) plus (b) all
principal prepayments received by the Servicer on such Contract or Mortgage Loan
(or on the related Contract or Mortgage Loan, in the case of a Repo Property or
REO Property) (including the principal portion of Net Liquidation Proceeds and
the principal portion of all amounts paid by the Seller or another party to
repurchase such Contract or Mortgage Loan) on or after the Cut-off Date and on
or prior to such date of determination, plus (c) all Realized Losses incurred on
such Contract or Mortgage Loan (or the related Contract or Mortgage Loan, in the
case of a Repo Property or REO Property) on or after the Cut-off Date and on or
prior to such date of determination.
"Seller" means, as to any Contract or Mortgage Loan included in the
Trust Estate for a Series, the entity that sold such Contract or Mortgage Loan
to the Company under a Sales Agreement, which will be Oakwood unless otherwise
specified in the related Prospectus Supplement.
128
<PAGE>
"Senior Certificates" means, with respect to each Series of
Certificates, the Class or Classes which have rights to receive distributions or
with respect to allocations of Realized Losses and/or Shortfalls that are
preferential to those of another Class or Classes in such Series.
"Series" means a series of Certificates offered pursuant to this
Prospectus and a Prospectus Supplement thereto.
"Series Agreement" means the Pooling and Servicing Agreement for a
particular Series, not including the Standard Terms.
"Series Rate" means, with respect to a Series, the interest rate equal
to a weighted average of the interest rates on all of the Non-REMIC Certificates
issued in such Series.
"Series REMIC" means a REMIC created with respect to a particular
Series.
"SERVICE" means the Internal Revenue Service.
"Servicer" means Oakwood, in its capacity as servicer of the Mortgage
Loans and/or Contracts underlying a Series of Certificates, or such other entity
specified as the servicer in the related Prospectus Supplement.
"Servicing Advance" means an advance required to be made by the
Servicer in respect of Contracts or Mortgage Loans (other than P&I Advances)
including, but not limited to, advances for the payment of personal property
taxes, real property taxes and premiums for Standard Hazard Insurance Policies.
"Servicing Fee" means the monthly fee paid to the Servicer in respect
of a Series, as specified in the related Prospectus Supplement, which is
typically a fixed percentage of the Pool Scheduled Principal Balance of the
related Asset Pool.
"Shortfall" means, for any month and any Contract or Mortgage Loan, the
amount by which the amount of interest due on such Contract or Mortgage Loan for
such month exceeds the amount of interest collected or advanced in respect of
such Contract, which may be due to Due Date Interest Shortfall or Soldiers' and
Sailors' Shortfall.
"Single Rate VRDI Certificate" means a VRDI Certificate that provides
for stated interest unconditionally payable in cash or property at least
annually at a single qualified floating rate or a single objective rate.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984.
"Soldiers' and Sailors' Shortfall" means a Shortfall in respect of a
Contract or Mortgage Loan resulting from application of the Relief Act.
"Special Hazard Insurance Policy" shall have the meaning assigned and
shall be as described herein under "The Trusts -- Insurance -- Hazard
Insurance-- Special Hazard Insurance Policy."
"Special Hazard Insurer" means the insurer under any Special Hazard
Insurance Policy.
"Special Hazard Loss" means a loss incurred on a Contract or Mortgage
Loan attributable to physical damage to the related Manufactured Home or
Mortgaged Property of a type which is not covered by standard hazard insurance
policies, excluding losses caused by war, nuclear reaction, nuclear or atomic
weapons, insurrection or normal wear and tear.
129
<PAGE>
"Standard Hazard Insurance Policy" shall mean a policy providing
standard hazard insurance coverage with respect to a Manufactured Home or
Mortgaged Property as described herein under "The Trusts -- Insurance -- Hazard
Insurance -- Standard Hazard Insurance Policies."
"Standard Terms" means the Standard Terms to Pooling and Servicing
Agreement, incorporated by reference by any Series Agreement.
"Step-up Rate" means the Asset Rate on a Step-up Rate Loan.
"Step-up Rate Loan" means an Asset which bears interest at an Asset
Rate that increases over time.
"Strip Class" means a Class of Certificates representing an interest
only in a specified portion of interest collections on the underlying Assets,
which may have no principal balance, a nominal principal balance or a Notional
Principal Amount.
"Stripping Regulations" means the regulations issued by the Treasury
under section 1286 of the Code.
"Subordinated Certificates" means, with respect to each Series of
Certificates, the Class or Classes with rights to receive distributions or with
respect to the allocation of Realized Losses and/or Shortfalls that are
subordinate to those of another Class or Classes of such Series.
"Subordination Amount" means a specific amount of subordination
provided by Subordinated Certificates, as specified, if applicable, in the
related Prospectus Supplement.
"Sub-Servicer" means any party, if any, with whom the Servicer has
entered into a Sub-servicing Agreement.
"Sub-Servicing Account" means an Eligible Account established by a
Sub-servicer that must comply with all standards applicable to the related
Certificate Account, into which the Sub-servicer must deposit collections in
respect of the related Assets pending remittance thereof to the related
Certificate Account.
"Sub-Servicing Agreement" means the written contract between the
Servicer and any Sub-servicer relating to servicing and/or administration of
certain Mortgage Loans or Contracts as provided in the Agreement.
"Superpremium Certificate" means a Certificate that provides for a
relatively small amount of principal and for interest that can be expressed as
Qualified Stated Interest at a very high fixed rate with respect to that
principal.
"Taxable Mortgage Pool" means any entity other than a REMIC or a REIT
if (i) substantially all of the assets of the entity consist of debt obligations
and more than 50% of such obligations consist of "real estate mortgages" (which
term, for purposes of this definition, includes Mortgage Loans and Contracts),
(ii) such entity is the obligor under debt obligations with two or more
maturities, and (iii) under the terms of the debt obligations on which the
entity is the obligor, payments on such obligations bear a relationship to
payment on the obligations held by the entity.
"Taxable Mortgage Pool Rules" means the Code sections governing Taxable
Mortgage Pools, and the regulations that were issued by the Treasury thereunder.
"Tax Administrator" means the entity responsible for computing the
amount of original issue discount to be reported to the holders of Regular
Certificates each taxable year, which, unless otherwise provided in the related
Pooling and Servicing Agreement, will be Oakwood or an Affiliate thereof.
130
<PAGE>
"Teaser Certificate" means a Regular Certificate that bears interest
under terms that provide for a teaser rate period, interest holiday, or other
period during which the rate of interest payable on such Certificate is lower
than the rate payable during the remainder of the life of the Certificate.
"Thrift Institution" means a thrift institution taxed as a "mutual
savings bank" or a "domestic building
and loan association."
"Title I" means Title I of the National Housing Act, as amended.
"Title State" means a state in which a lien on a Manufactured Home is
"perfected" under applicable motor vehicle titling statues, either by notation
of the secured party's lien on the related certificate of title or by delivery
of the required documents and payment of a fee to the state motor vehicle
authority to re-register the Manufactured Home.
"Title V" means Title V of the Depository Institutions Deregulation and
Monetary Control Act of 1980, as amended.
"TMP" means the holder of a residual interest in a REMIC that is
designated as the tax matters person of such REMIC.
"Treasury" means the United States Treasury Department.
"Trust" means a trust that issues a Series of Certificates.
"Trustee" means the Trustee for a Series of Certificates specified in
the related Prospectus Supplement.
"Trustee Mortgage Loan File" means, as to any Mortgage Loan, a file
which is required to contain all of the Mortgage Loan Documents for such
Mortgage Loan.
"Trust Estate" means, with respect to each Series of Certificates, the
corpus of the trust created by the related Agreement, to the extent described in
such Agreement, consisting of, among other things, Contracts and/or Mortgage
Loans, such assets as shall from time to time be identified as deposited in the
related Distribution Account, property which secured a Contract or Mortgage Loan
but which has been acquired by the related Trust through repossession or
foreclosure or otherwise, any related insurance policy, any related Reserve Fund
and any related alternate credit enhancement, if any.
"UBTI" means "unrelated business taxable income" as defined in the
Code.
"UCC" means the Uniform Commercial Code.
"UCC State" means a state in which a lien on a Manufactured Home is
"perfected" pursuant to the provisions of the applicable UCC, by filing UCC-3
financing statements or other appropriate transfer instruments with all
appropriate UCC filing offices.
"Underwriter" means any firm that underwrites the purchase of the
Certificates of a Series.
"Unpaid Principal Balance" means the unpaid principal balance of a
particular Contract or Mortgage Loan.
131
<PAGE>
"VA" means the United States Department of Veterans Affairs.
"VA Contract" or "VA Mortgage Loan" means a Contract or Mortgage Loan
that is partially guaranteed by the VA.
"Variable Rate Certificate" means a Regular Certificate that bears
interest at a variable rate.
"Voting Rights" means, with respect to a Certificate, the portion of
the voting rights of all of the Certificates of the related Series which is
allocated to any such Certificate. Unless otherwise provided in the related
Agreement, (1) if any Class of Certificates does not have a Certificate
Principal Balance or has an initial Certificate Principal Balance that is less
than or equal to 1% of the aggregate Certificate Principal Balance of all the
Certificates of its Series, then 1% of the Voting Rights for such Series shall
be allocated to each such Class, and the balance of the Voting Rights for such
Series shall be allocated among the remaining Classes of Certificates of such
Series in proportion to their respective Certificate Principal Balances
following the most recent Distribution Date, and (b) if no Class of Certificates
of such Series has an initial Certificate Principal Balance less than 1% of the
aggregate Certificate Principal Balance of all Certificates of such Series, then
all of the Voting Rights for such Series shall be allocated among all the
Classes of Certificates of such Series in proportion to their respective
Certificate Principal Balances following the most recent Distribution Date.
Voting Rights allocated to each Class of Certificates shall be allocated among
the Certificates of such Class in proportion to the respective Percentage
Interests of the Holders thereof.
"VRDI" means a "variable rate debt instrument" as defined in section
1.1275-5 of the OID Regulations.
"VRDI Certificate" means a Variable Rate Certificate that qualifies as
a VRDI under the OID Regulations.
"WAM" means, with respect to a Regular Certificate, the sum of the
amounts obtained by multiplying the amount of each Deemed Principal Payment on
the Certificate by a fraction, the numerator of which is the number of complete
years from the Certificate's issue date until the payment is made, and the
denominator of which is the Certificate's stated redemption price at maturity.
"Weighted Average Certificate" means a Regular Certificate that
provides for interest based on a weighted average of the interest rates on some
or all of the Assets held by the related REMIC.
"Weighted Average Net Asset Rate" means for any Distribution Date, a
rate equal to (i) the weighted average of the Asset Rates applicable to the
scheduled Monthly Payments that were due in the related Collection Period on
outstanding Assets less (ii) the Servicing Fee Rate.
"Writedown Amount" means with respect to each Distribution Date, the
amount, if any, by which (i) the aggregate Certificate Principal Balance of all
the Certificates, after all distributions have been made on the Certificates on
such Distribution Date, exceeds (ii) the Pool Scheduled Principal Balance of the
Assets for the next Distribution Date.
132
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with
the offering of $1,000,000,000 of the Mortgage Pass-Through Certificates being
registered under this Registration Statement, other than underwriting discounts
and commission:
SEC Registration.......................................$295,000
Printing and Engraving..................................200,000
Legal Fees and Expenses.................................400,000
Accounting Fees and Expenses............................250,000
Trustee Fees and Expenses................................60,000
Rating Agency Fees......................................400,000
Miscellaneous...........................................145,000
----------
TOTAL.................................$1,750,000
==========
Item 15. Indemnification of Directors and Officers.
Article 8 of the North Carolina Business Corporation Act provides in
substance that North Carolina corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with pending or threatened actions, suits or proceedings (whether
civil, criminal, administrative, or investigative and whether formal or
informal) against liability and expenses incurred in any proceeding arising out
of such directors', officers', employees' or agents' status as such or their
activities in any one of the foregoing capacities. The North Carolina Business
Corporation Act also provides that North Carolina corporations may purchase
insurance on behalf of any such director, officer, employee or agent. Article VI
of the Registrant's Articles of Incorporation incorporates the indemnification
provisions of Article 8 of the North Carolina Business Corporation Act to the
fullest extent provided for therein.
Oakwood Homes Corporation carries an insurance policy providing directors'
and officers' liability insurance for any liability its directors or officers or
the directors or officers of any of its subsidiaries, including the Registrant,
may incur in their capacities as such.
Under certain sales agreements entered into by the Registrant (as purchaser)
with Oakwood Acceptance Corporation ("OAC") as seller of collateral, OAC is
obligated to indemnify the Registrant against certain expenses and liabilities.
Reference is made to the form of Underwriting Agreement filed as an exhibit
hereto for provisions relating to the indemnification of directors, officers and
controlling persons of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
Item 16. Exhibits.
1.1 Underwriting Agreement Standard Provisions, dated September 1994,
together with Form of Underwriting Agreement(2)
1.2 Terms Agreement, dated November 16, 1994, among the Registrant,
Oakwood Acceptance Corporation, and CS First Boston Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
Underwriters, relating to the Registrant's Series 1994-A
Pass-Through Certificates(5)
II - 1
<PAGE>
1.3 Terms Agreement, dated June 16, 1995, among the Registrant, Oakwood
Acceptance Corporation, and CS First Boston Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation, as
Underwriters, relating to the Registrant's Series 1995-A
Pass-Through Certificates(6)
1.4 Underwriting Agreement Standard Provisions (June 1995)(6)
1.5 Terms Agreement, dated October 18, 1995, among the Registrant,
Oakwood Acceptance Corporation, and CS First Boston Corporation and
First Union Capital Markets Corp., as Underwriters, relating to the
Registrant's Series 1995-B Pass-Through Certificates(7)
1.6 Terms Agreement, dated February 16, 1996, among the Registrant,
Oakwood Acceptance Corporation, and CS First Boston Corporation,
First Union Capital Markets Corp. and NationsBanc Capital Markets,
Inc. as Underwriters, relating to the Registrant's Series 1996-A
Pass-Through Certificates(10)
1.7 Terms Agreement, dated July 18, 1996, among the Registrant, Oakwood
Acceptance Corporation, and CS First Boston Corporation and
Greenwich Capital Markets, Inc. as Underwriters, relating to the
Registrant's Series 1996-B Pass-Through Certificates(11)
1.8 Terms Agreement, dated October 18, 1996, among the Registrant,
Oakwood Acceptance Corporation, and CS First Boston Corporation and
Goldman, Sachs & Co., as Underwriters, relating to the Registrant's
Series 1996-C Pass-Through Certificates(12)
1.9 Terms Agreement, dated February 21, 1997 among the Registrant,
Oakwood Acceptance Corporation, and Credit Suisse First Boston
Corporation and Goldman, Sachs & Co., as Underwriters, relating to
the Registrant's Series 1997-A Pass-Through Certificates(14)
1.10 Terms Agreement, dated May 15, 1997, among the Registrant, Oakwood
Acceptance Corporation, and Credit Suisse First Boston Corporation
and Goldman, Sachs & Co., as Underwriters, relating to the
Registrant's Series 1997-B Pass-Through Certificates(15)
1.11 Terms Agreement, dated August 14, 1997, among the Registrant,
Oakwood Acceptance Corporation, Credit Suisse First Boston
Corporation and Goldman, Sachs & Co., as Underwriters, relating to
the Registrant's Series 1997-C Pass-Through Certificates(18)
1.12 Terms Agreement, dated November 14, 1997, among the Registrant,
Oakwood Acceptance Corporation, Credit Suisse First Boston
Corporation, as Underwriter, relating to the Registrant's Series
1997-D Pass Through Certificates(19)
1.13 Terms Agreement, dated February 20, 1998, among the Registrant,
Oakwood Acceptance Corporation and Credit Suisse First Boston
Corporation and First Chicago Capital Markets, Inc., as
Underwriters, relating to the Registrant's Series 1998-A
Pass-Through Certificates(20)
1.14 Terms Agreement, dated May 28, 1998, among the Registrant, Oakwood
Acceptance Corporation and Credit Suisse First Boston Corporation
and Prudential Securities Incorporated, as Underwriters, relating
to Registrant's Series 1998-B Pass-Through Certificates(21)
3.1 Articles of Incorporation of Registrant(2)
3.2 By-Laws of Registrant(2)
3.3 Articles of Amendment to the Articles of Incorporation of
Registrant, as filed with the North Carolina Secretary of State on
December 9, 1994(4)
4.1 Form of Pooling and Servicing Agreement(2)
4.2 Standard Terms to Pooling and Servicing Agreement (September 1994
Edition)(5)
4.3 Series 1994-A Pooling and Servicing Agreement, dated as of November
1, 1994, by and among the Registrant, Oakwood Acceptance
Corporation, as Servicer, and NationsBank of Virginia, N.A., as
Trustee (including exhibits)(5)
4.4 Series 1995-A Pooling and Servicing Agreement, dated as of June 1,
1995, by and among the Registrant, Oakwood Acceptance Corporation,
as Servicer, and NationsBank, N.A., as Trustee (including
exhibits)(6)
4.5 Series 1995-B Pooling and Servicing Agreement, dated as of October
1, 1995, by and among the Registrant, Oakwood Acceptance
Corporation, as Servicer, and PNC Bank, National Association, as
Trustee (including exhibits)(7)
4.6 Standard Terms to Pooling and Servicing Agreement (November 1995
Edition)(9)
4.7 Series 1996-A Pooling and Servicing Agreement, dated as of February
1, 1996, by and among the Registrant, Oakwood Acceptance
Corporation, as Servicer, and PNC Bank, National Association, as
Trustee(10)
II - 2
<PAGE>
4.8 Series 1996-B Pooling and Servicing Agreement, dated as of July 1,
1996, by and among the Registrant, Oakwood Acceptance Corporation,
as Servicer, and PNC Bank, National Association, as Trustee(11)
4.9 Series 1996-C Pooling and Servicing Agreement, dated as of October
1, 1996, by and among the Registrant, Oakwood Acceptance
Corporation, as Servicer, and PNC Bank, National Association, as
Trustee(12)
4.10 Series 1997-A Pooling and Servicing Agreement, dated as of February
1, 1997, by and among the Registrant, Oakwood Acceptance
Corporation, as Servicer, and PNC Bank, National Association, as
Trustee(14)
4.11 Series 1997-B Pooling and Servicing Agreement, as amended July 22,
1997, by and among the Registrant, Oakwood Acceptance Corporation,
as Servicer, and PNC Bank, National Association, as Trustee(15)
(17)
4.12 Series 1997-C Pooling and Servicing Agreement, dated as of August
1, 1997, by and among the Registrant, Oakwood Acceptance
Corporation, as Servicer, and PNC Bank, National Association, as
Trustee(18)
4.13 Series 1997-D Pooling and Servicing Agreement, dated as of November
1, 1997, by and among the Registrant, Oakwood Acceptance
Corporation, as Servicer, and PNC Bank, National Association, as
Trustee(19)
4.14 Series 1998-A Pooling and Servicing Agreement, dated as of February
1, 1998, by and among the Registrant, Oakwood Acceptance
Corporation, as Servicer, and PNC Bank, National Association, as
Trustee(20)
4.15 Series 1998-B Pooling and Servicing Agreement, dated as of May 1,
1998, by and among the Registrant, Oakwood Acceptance Corporation,
as Servicer, and PNC Bank National Association, as Trustee(21)
4.16 Standard Terms to Pooling and Servicing Agreement (June 1998
Edition)
4.17 Form of Guaranty Agreement(13)
4.18 Limited Guarantee, dated as of February 1, 1997, by and between
Oakwood Homes Corporation, as Guarantor, and PNC Bank, National
Association, as Trustee(14)
4.19 Limited Guarantee, dated as of May 1, 1997, by and between Oakwood
Homes Corporation, as Guarantor, and PNC Bank, National
Association, as Trustee(15)
4.20 Limited Guarantee, dated as of August 1, 1997, by and between
Oakwood Homes Corporation, as Guarantor, and PNC Bank, National
Association, as Trustee(18)
4.21 Limited Guarantee, dated as of November 1, 1997, by and between
Oakwood Homes Corporation, as Guarantor, and PNC Bank, National
Association, as Trustee(19)
4.22 Limited Guarantee, dated as of May 1, 1998, by and between Oakwood
Homes Corporation, as Guarantor, and PNC Bank, National
Association, as Trustee(21)
5.1 Opinion of Hunton & Williams
8.1 Tax Opinion re: Adequacy of Prospectus Disclosure
8.2 Tax Opinion re: REMIC Certificates
8.3 Tax Opinion re: Non-REMIC Certificates
23.1 Consent of Hunton & Williams is contained in their opinions filed
as Exhibits 5.1, 8.1, 8.2 and 8.3
23.2 Consent of Price Waterhouse LLP
24.1 Power of Attorney (contained on the signature page hereof)
99.1 Form of Prospectus Supplement for Transactions Involving Senior and
Subordinated Pass-Through Certificates(16)
99.2 Form of Sales Agreement between the Registrant, as Purchaser, and
Oakwood Acceptance Corporation, as Seller(2)
- --------------
(1)Incorporated herein by reference to Exhibit to the Registrant's
Registration Statement on Form S-3 (No. 33-83660) filed September 2, 1994.
(2)Incorporated herein by reference to Exhibit to the Registrant's
Pre-Effective Amendment No. 1 to Registration Statement on Form S-3 (No.
33-83660) filed October 21, 1994.
(3)Incorporated herein by reference to Exhibit to the Registrant's
Pre-Effective Amendment No. 2 to Registration Statement on Form S-3 (No.
33-83660) filed November 4, 1995.
II - 3
<PAGE>
(4)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed December 23, 1994.
(5)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed December 7, 1994.
(6)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed June 27, 1995.
(7)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed November 3, 1995.
(8)Incorporated herein by reference to Page II-5 of the Registrant's
Registration Statement on Form S-3 (No. 33-99320) filed November 14, 1995.
(9)Incorporated herein by reference to Exhibit to the Registrant's
Pre-Effective Amendment No. 1 to Registration Statement on Form S-3 (No.
33-99320) filed January 11, 1996.
(10)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed March 5, 1996.
(11)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed August 5, 1996.
(12)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed November 5, 1996.
(13)Incorporated herein by reference to Exhibit to the Registrant's
Post-Effective Amendment No. 2 to Registration Statement on Form S-3 (No.
333-99320) filed February 12, 1997.
(14)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed March 5, 1997.
(15)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed May 23, 1997.
(16)Incorporated herein by reference to Exhibit to the Registrant's
Registration Statement on Form S-3 (No. 333-31441) filed July 17, 1997.
(17)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed July 22, 1997.
(18)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed August 27, 1997.
(19)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed November 21, 1997.
(20)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed Februrary 27, 1998.
(21)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed June 12, 1998.
II - 4
<PAGE>
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change of such information
in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in the
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are
included by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II - 5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Greensboro, County of Guilford, State of North
Carolina, on July 2, 1998.
OAKWOOD MORTGAGE INVESTORS, INC.
(Registrant)
/s/ NICHOLAS J. ST. GEORGE
---------------------------
Nicholas J. St. George
Chairman of the Board
Each person whose signature appears below constitutes and appoints
Nicholas J. St. George, C. Michael Kilbourne, Myles E. Standish and Douglas R.
Muir his true and lawful attorneys-in-fact and agents, each acting alone, with
full powers of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
Signature Capacity Date
--------- -------- ----
/s/ NICHOLAS J. ST. GEORGE Director July 2, 1998
- ---------------------------------
Nicholas J. St. George
/s/ C. MICHAEL KILBOURNE Director, President and July 2, 1998
- ------------------------------ Assistant Secretary
C. Michael Kilbourne (Principal Financial Officer
and Principal Executive Officer)
/s/ DOUGLAS R. MUIR Vice President, Secretary and
- ---------------------------------- Treasurer (Principal Accounting July 2, 1998
Douglas R. Muir Officer)
/s/ WILLIAM G. EDWARDS Director
- ---------------------------------- July 2, 1998
William G. Edwards
- ---------------------------------- Director July __, 1998
Paul Stephanz
</TABLE>
II - 6
Exhibit 4.16
------------
- --------------------------------------------------------------------------------
STANDARD TERMS
TO
POOLING AND SERVICING AGREEMENT
--------------------------------------------------------------
Oakwood Mortgage Investors, Inc.
Pass-Through Certificates
July 1998 Edition
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions............................................................................... 1
ARTICLE II
THE ASSETS
Section 2.01. Assignment of Assets...................................................................... 24
Section 2.02. The Contracts............................................................................. 24
Section 2.03. The Mortgage Loans........................................................................ 26
Section 2.04. Representations and Warranties of the Trustee............................................. 29
Section 2.05. Representations and Warranties as to Assets............................................... 29
Section 2.06. Purchase or Substitution of Certain Assets................................................ 30
ARTICLE III
ADMINISTRATION OF TRUSTS AND SERVICING OF THE ASSETS
Section 3.01. The Servicer.............................................................................. 34
Section 3.02. Maintenance of Records; Inspection of Asset Files......................................... 34
Section 3.03. Collection of Payments on Assets; Servicing Delinquent Accounts........................... 35
Section 3.04. Advances and Compensating Interest........................................................ 35
Section 3.05. Servicing Account......................................................................... 36
Section 3.06. Certificate Account....................................................................... 37
Section 3.07. Withdrawals From Certificate Account; Remittance Amounts.................................. 37
Section 3.08. Realization upon Defaulted Assets......................................................... 38
Section 3.09. Title, Conservation, and Disposition of Repo Property and REO Property.................... 39
Section 3.10. Full Prepayments and Liquidations; Trustee to Cooperate; Release of Mortgage Files........ 41
Section 3.11. Maintenance of Security Interests and Other Liens in Manufactured Homes................... 43
Section 3.12. Due-on-Sale Clauses and Assumption Agreements............................................. 43
Section 3.13. Annual Accountants' Certificate; Annual Statement as to Compliance........................ 43
Section 3.14. Servicing Fees............................................................................ 44
Section 3.15. Late Charges; Prepayment Fees or Other Charges............................................ 44
Section 3.16. Maintenance of Standard Hazard Insurance, Primary Mortgage Insurance, and Errors
and Omissions Coverage.................................................................... 45
(i)
<PAGE>
ARTICLE IV Page
----
REMITTANCE AND REPORTING TO CERTIFICATEHOLDERS
Section 4.01. Remittance Reports........................................................................ 47
Section 4.02. Distribution Account...................................................................... 48
Section 4.03. Allocation of Available Distribution...................................................... 48
Section 4.04. Compliance with Withholding Requirements.................................................. 49
Section 4.05. Reports of Security Principal Balances to the Clearing Agency............................. 49
Section 4.06. Preparation of Regulatory Reports......................................................... 50
ARTICLE V
THE POOLING INTERESTS AND THE CERTIFICATES
Section 5.01. Pooling REMIC Interests................................................................... 51
Section 5.02. The Certificates.......................................................................... 51
Section 5.03. Book-Entry Certificates................................................................... 51
Section 5.04. Registration of Transfer and Exchange of Certificates..................................... 52
Section 5.05. Restrictions on Transfer.................................................................. 53
Section 5.06. Accrual of Interest on the Certificates................................................... 54
Section 5.07. Mutilated, Destroyed, Lost or Stolen Certificates......................................... 55
Section 5.08. Persons Deemed Owners..................................................................... 55
Section 5.09. Appointment of Paying Agent............................................................... 55
ARTICLE VI
OMI AND THE SERVICER
Section 6.01. Liability of OMI and the Servicer......................................................... 55
Section 6.02. OMI's Representations and Warranties...................................................... 55
Section 6.03. Representations, Warranties and Covenants of the Servicer................................. 57
Section 6.04. Corporate Existence....................................................................... 58
Section 6.05. Limitation on Liability of OMI, the Servicer and Others................................... 58
Section 6.06. Servicer Resignation...................................................................... 59
Section 6.07. Assignment or Delegation of Duties by the Servicer and OMI................................ 59
Section 6.08. OMI and Servicer May Own Certificates..................................................... 59
Section 6.09. Protection of Trust Estate................................................................ 59
Section 6.10. Performance of Obligations................................................................ 60
ARTICLE VII
EVENT OF DEFAULT; TERMINATION OF SERVICING ARRANGEMENTS
Section 7.01. Events of Default......................................................................... 60
Section 7.02. Trustee to Act; Appointment of Successor.................................................. 61
Section 7.03. Notifications to Servicer and to Certificateholders....................................... 63
(ii)
<PAGE>
ARTICLE VIII Page
----
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee......................................................................... 63
Section 8.02. Certain Matters Affecting the Trustee..................................................... 64
Section 8.03. Trustee Not Liable for Certificates or Assets............................................. 66
Section 8.04. Trustee May Own Certificates.............................................................. 66
Section 8.05. Trustee's Fees and Expenses............................................................... 66
Section 8.06. Eligibility Requirements for Trustee...................................................... 67
Section 8.07. Resignation and Removal of the Trustee.................................................... 67
Section 8.08. Successor Trustee......................................................................... 67
Section 8.09. Merger or Consolidation of Trustee........................................................ 68
Section 8.10. Appointment of Co-Trustee or Separate Trustee............................................. 68
Section 8.11. Appointment of Custodians................................................................. 69
Section 8.12. Trustee May Enforce Claims Without Possession of Certificates............................. 69
ARTICLE IX
TERMINATION
Section 9.01. Termination Upon Repurchase or Liquidation of All Contracts............................... 69
Section 9.02. Additional Termination Requirements....................................................... 71
ARTICLE X
REMIC TAX PROVISIONS
Section 10.01. REMIC Administration...................................................................... 72
Section 10.02. Prohibited Activities..................................................................... 73
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendments................................................................................ 75
Section 11.02. Recordation of Agreement; Counterparts.................................................... 75
Section 11.03. Limitation on Rights of Certificateholders................................................ 76
Section 11.04. Notices................................................................................... 76
Section 11.05. Severability of Provisions................................................................ 77
Section 11.06. Sale of Contracts......................................................................... 77
Section 11.07. Notice to Rating Agency................................................................... 77
</TABLE>
(iii)
<PAGE>
TABLE OF EXHIBITS
Exhibit 1 Form of Servicer Custodial Certification
Exhibit 2-A Form of Initial Certification
Exhibit 2-B Form of Final Certification
Exhibit 3 Form of Recordation Report
Exhibit 4 Form of Request for Release
Exhibit 5 Form of Rule 144A Agreement
Exhibit 6 Form of Transferee Agreement
Exhibit 7 Form of Benefit Plan Affidavit
Exhibit 8 Form of Residual Transferee Agreement
Exhibit 9 Form of Power of Attorney
(iv)
<PAGE>
RECITALS
Oakwood Mortgage Investors, Inc. ("OMI"), Oakwood Acceptance
Corporation ("OAC") and a banking association or corporation as trustee (the
"Trustee") have entered into a Pooling and Servicing Agreement that provides for
the issuance of manufactured housing contract and/or mortgage pass-through
securities (the "Certificates") that in the aggregate evidence the entire
interest in a pool consisting of retail installment sales contracts for units of
manufactured housing (the "Contracts") and/or mortgage loans secured by first
liens on one- to four-family residential real properties (the "Mortgage Loans,"
and, together with the Contracts, the "Assets") and other property owned by the
Trust (the "Trust") created by such Pooling and Servicing Agreement. These
Standard Terms are a part of, and are incorporated by reference into, such
Pooling and Servicing Agreement.
STANDARD PROVISIONS
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made in the Pooling and Servicing Agreement and
as hereinafter set forth, OMI, OAC and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
Except as otherwise specified herein or in a Pooling and Servicing
Agreement or as the context may otherwise require, whenever used in these
Standard Terms, the following words and phrases shall have the meanings assigned
to them in this Article. Unless otherwise specified, all calculations described
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months.
"Accrual Date": With respect to any Series or Class of Certificates,
the date upon which interest begins accruing on the Certificates of such Series
or Class, which shall be specified in the related Pooling and Servicing
Agreement.
"Adjustable Rate Asset": An "adjustable rate" Contract or Mortgage
Loan, the Asset Rate of which is subject to periodic adjustment in accordance
with the terms of the Contract or the related Mortgage Note.
"Advance": Any Servicing Advance or P&I Advance.
"Affiliate": As to any specified Person, any other Person controlling
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Application for Relief": As defined in Section 4.06 hereof.
"Asset": A Contract or Mortgage Loan.
"Asset Documents": Collectively, Contract Documents and Mortgage Loan
Documents.
-1-
<PAGE>
"Asset File": With respect to any Asset, the related Contract File or
Trustee Mortgage Loan File, as applicable.
"Asset Rate": As to any Asset, the related Contract Rate or Mortgage
Rate, as applicable.
"Asset Schedule": For any Series, the list or lists attached to the
related Pooling and Servicing Agreement consisting of the related Contract
Schedule, if any, and the related Mortgage Loan Schedule, if any.
"Assignment": A document effecting the transfer of all the rights of a
secured party under a Mortgage to a transferee, in recordable form for the
jurisdiction in which the related Mortgaged Property is located.
"Available Distribution Amount": For each Distribution Date for a
Series of Certificates, the amount on deposit in the related Distribution
Account at the commencement of business on such Distribution Date, less the
amounts distributable from the Distribution Account in accordance with clauses
(1) through (4) of Section 4.03(a) hereof.
"Beneficial Owner": With respect to a Book-Entry Certificate, the
Person who is registered as owner of that Certificate in the books of the
Clearing Agency for that Certificate or in the books of a Person maintaining an
account with such Clearing Agency.
"Benefit Plan Affidavit": An affidavit substantially in the form of
Exhibit 7 hereto.
"Benefit Plan Opinion": An Opinion of Counsel to the effect that a
proposed transfer of a Certificate will not (a) cause any of the assets of the
Trust to be regarded as "plan assets" for purposes of the Plan Asset
Regulations, (b) give rise to any fiduciary duty under ERISA on the part of OMI,
the Servicer, the Trustee or the Trust's Tax Matters Person, if any, or (c) be
treated as, or result in, a "prohibited transaction" under section 406 or
section 407 of ERISA or under section 4975 of the Code. The cost of obtaining a
Benefit Plan Opinion shall not be borne by OMI, the Servicer or the Trustee.
"Board of Directors": The Board of Directors of OMI, OAC or any other
Servicer or any committee of that Board duly authorized to act on behalf of that
Board with respect to any matters arising hereunder.
"Book-Entry Certificates": The Classes of Certificates of a Series, if
any, classified as such in the related Pooling and Servicing Agreement.
"Business Day": Any day that is not a Saturday, Sunday, holiday or
other day on which commercial banking institutions in the city and state in
which the Trustee's Corporate Trust Office is located are authorized or
obligated by law or executive order to be closed.
"Certificate Account": An account established pursuant to and described
in Section 3.06 hereof. The Certificate Account will be an asset of the Trust
but not an asset of any related REMIC. Solely for federal income tax purposes,
the Servicer will be the owner of the Certificate Account and, thus, any income
earned by the Certificate Account, or any amounts transferred by any related
REMIC to the Certificate Account, shall be treated as income earned by, or
amounts distributed to, the Servicer.
-2-
<PAGE>
"Certificate Principal Balance": With respect to each Certificate or
Class of Certificates, on any date of determination, the outstanding principal
amount, if any, of such Certificate(s) immediately prior to the most recently
preceding Distribution Date (or in the case of a date of determination on or
before the first Distribution Date, an amount equal to the initial principal
amount of such Certificate(s) as of the Closing Date) net of the amounts, if
any, applied on such preceding Distribution Date to reduce the principal amount
of such Certificate(s) in accordance with Section 4.03 hereof.
"Certificate Register" and "Certificate Registrar": The respective
meanings specified for such terms in Section 5.04 hereof.
"Certificateholder" or "Holder": With respect to any Certificate, the
Person in whose name such Certificate is registered in the Certificate Register.
"Certificates": The certificates authorized by, executed and delivered
under, and issued pursuant to any Pooling and Servicing Agreement.
"Class": With respect to any Series, the classification of different
types of the Certificates within such Series as set forth in the related Pooling
and Servicing Agreement.
"Clearing Agency": The Depository Trust Company, or any successor
organization or any other organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and
the regulations of the Securities and Exchange Commission thereunder.
"Clearing Agency Participant": A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date": With respect to any Series, the date specified as the
"Closing Date" in the related Pooling and Servicing Agreement.
"Code": The Internal Revenue Code of 1986, as amended.
"Collection Period": With respect to each Distribution Date for a
Series, the period commencing on the second day of the calendar month preceding
the month in which such Distribution Date occurs and ending at the close of
business on the first day of the calendar month in which such Distribution Date
occurs.
"Commission": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended.
"Compensating Interest": For any Remittance Date, the amount of all Due
Date Interest Shortfalls for the preceding Collection Period to the extent such
Shortfalls do not exceed the Servicer's aggregate servicing compensation in
respect of such Collection Period.
"Contract": Each retail installment sales contract and security
agreement or installment loan agreement and security agreement relating to the
Contracts (1) that has been executed by an Obligor and pursuant to which such
Obligor (A) purchased the Manufactured Home described therein, (B) agreed to pay
the deferred purchase price or amount borrowed, together with finance charges,
as therein provided in connection with such purchase or loan, (C) granted a
security interest in such Manufactured Home to the originator of such contract
and (D) undertook to perform certain other obligations as specified in such
contract or loan agreement and (2) that has been assigned to the Trustee
pursuant to the Pooling and Servicing Agreement.
-3-
<PAGE>
"Contract Documents": With respect to each Contract:
(a) the original Contract;
(b) either (1) the original title document for the related
Manufactured Home, a duplicate certified by the appropriate
governmental authority that issued the original thereof or, if such
original is not yet available, a copy of the application filed with the
appropriate governmental authority pursuant to which the original title
document will issue (which copy may be on microfilm or optical disk
maintained by the Servicer in its records separate from the other
related Contract Documents), or (2) if the laws of the jurisdiction in
which the related Manufactured Home is located do not provide for the
issuance of title documents for manufactured housing units, other
evidence of ownership of the related Manufactured Home that is
customarily relied upon in such jurisdiction as evidence of title to a
manufactured housing unit;
(c) unless such Contract is a Land Secured Contract, evidence
of one or more of the following types of perfection of the Seller's or
the Trustee's security interest in the related Manufactured Home
granted by such Contract (or, if such evidence is not yet available, a
copy of the application or other filing used to obtain such security
interest (which copy may be on microfilm or optical disk maintained by
the Servicer in its records separate from the other related Contract
Documents)), as appropriate in the applicable jurisdiction: (1)
notation of such security interest on the title document, (2) a
financing statement meeting the requirements of the UCC, with evidence
of recording indicated thereon, (3) a fixture filing in accordance with
the UCC, with evidence of filing indicated thereon, or (4) such other
evidence of perfection of a security interest in a manufactured housing
unit as is customarily relied upon in the jurisdiction in which the
related Manufactured Home is located;
(d) an original assignment of the Contract from the initial
named payee thereunder to the Seller (unless the Seller is the initial
named payee for such Contract);
(e) originals of any assumption agreements relating to such
Contract, together with originals of any surety or guaranty agreement
relating to such Contract or to any such assumption agreement, payable
to the order of the Trustee, or, if not so payable, endorsed to the
order of, or assigned to, the Trustee by the holder/payee thereunder
without recourse;
(f) originals of any extension, modification or waiver
agreement(s) relating to such Contract; and
(g) proof of maintenance of a Standard Hazard Insurance Policy
for the related Manufactured Home.
In the case of any Land Secured Contract, the related Contract
Documents shall consist of the following documents in lieu of those listed in
clause (c) of the foregoing paragraph: (i) the original recorded Mortgage for
the related Real Property, with evidence of recordation noted thereon or
attached thereto, or a certified copy thereof issued by the appropriate
recording office (or, if the Mortgage is in the process of being recorded, a
photocopy of the Mortgage, which may be on microfilm or optical disk maintained
by the Servicer in its records separate from the other related Contract
Documents); (ii) if the Mortgage does not name the related Seller as mortgagee
therein or beneficiary thereof, an original recorded assignment or assignments
of the Mortgage from the Persons named as mortgagee in, or beneficiary of, such
Mortgage, to the related Seller, with evidence of recordation noted thereon or
attached thereto, or a certified copy of each such assignment issued by the
appropriate recording office (or, if such an original assignment is in the
process of being recorded, a photocopy of each such assignment, which may be on
microfilm or optical disk maintained by the Servicer in its records separate
from the other related Contract Documents); (iii) a copy of the power of
attorney delivered by the Seller to the Trustee in the event that recordation of
such assignments becomes necessary for foreclosure on the related Real Property
by or on behalf of the Trustee; and (iv) if such Land Secured Contract's
original principal balance was $40,000 or greater, a copy of the title search
report and bring-down thereof (or evidence of title insurance) with respect to
the related Real Property.
-4-
<PAGE>
"Contract File": With respect to any Contract, a file containing all of
the related Contract Documents.
"Contract Loan-to-Value Ratio": Means, (i) as to each Contract with
respect to which a lien on land is required for underwriting purposes, the
ratio, expressed as a percentage, of the principal amount of such Contract to
the sum of the purchase price of the home (including taxes, insurance and any
land improvements), the tax value or appraised value of the land and the amount
of any prepaid finance charges or closing costs that are financed; and (ii) as
to each other Contract, the ratio, expressed as a percentage, of the principal
amount of such Contract to the purchase price of the home (including taxes,
insurance and any land improvements) and the amount of an prepaid finance
charges or closing costs that are financed.
"Contract Rate": With respect to a Contract, the annual interest rate
required to be paid by an Obligor under the terms of such Contract.
"Contract Schedule": For any Series, the list attached to the related
Pooling and Servicing Agreement identifying each Contract assigned thereunder
(which may be presented together with any related Mortgage Loan Schedule in a
single Asset Schedule), which list shall (a) identify each Contract and (b) set
forth (or describe the method of determining) as to each such Contract (1) the
Cut-off Date Principal Balance thereof, (2) the amount of each Monthly Payment
due from the Obligor thereunder, (3) the Contract Rate thereof, (4) the original
term to maturity thereof, (5) the date of origination thereof, (6) the original
Contract Loan-to-Value Ratio thereof, (7) the state in which the related
Manufactured Home is located, (8) whether the related Manufactured Home is a
used, repossessed, new or transferred home, (9) whether the Contract is a Land
Secured Contract and (10) any other information specified in the related Pooling
and Servicing Agreement.
"Converted Loan": An Adjustable Rate Asset with respect to which the
Obligor has complied with the applicable requirements of the related Contract or
Mortgage Note to convert the related Asset Rate to a fixed rate of interest, and
as to which the Servicer has processed such conversion.
"Corporate Trust Office": The principal corporate trust office of the
Trustee at which at any particular time its corporate trust business under a
Pooling and Servicing Agreement shall be administered.
"Credit Insurer": An insurer under any Primary Mortgage Insurance
Policy or pool insurance policy for a Series.
"Custodian": For any Series, the Trustee or an agent of the trustee
identified in the related Pooling and Servicing Agreement, which agent shall
hold all or part of the Trustee Mortgage Loan Files for some or all of the
related Mortgage Loans.
"Cut-off Date": With respect to any Series, the date or dates (a) after
which all Monthly Payments due in respect of the Assets sold to the Trust (net
of Servicing Fees relating to such Assets) and (b) on and after which all
Principal Prepayments, Net Liquidation Proceeds and Repurchase Prices received
in respect of such Assets, are to be transmitted to the Certificate Account for
the benefit of the Holders of the Certificates. The Cut-off Date for a Series
shall be specified in the related Pooling and Servicing Agreement.
"Cut-off Date Principal Balance": As to any Asset, the original
principal amount of such Asset, minus the principal portion of all Monthly
Payments due on such Asset on or before the Cut-off Date and minus all other
payments applied to reduce such original principal amount before the Cut-off
Date.
"Default": Any occurrence that is, or that with notice or the lapse of
time or both would become, an Event of Default.
-5-
<PAGE>
"Defaulted Contract": A Contract (a) as to which any related Monthly
Payment has been delinquent and remains delinquent 90 days after the Due Date
therefor or (b) as to which the related Obligor has become bankrupt or
insolvent.
"Defect Discovery Date": With respect to an Asset, the date on which
either the Trustee or the Servicer first discovers a Qualification Defect
affecting the Asset.
"Directly Operate": With respect to any REO Property, the furnishing or
rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, the performance of any construction work thereon or any use of such
REO Property in a trade or business conducted by the Trust, in each case other
than through an Independent Contractor; provided, however, that the Servicer on
behalf of the Trustee shall not be considered to Directly Operate an REO
Property solely because the Servicer on behalf of the Trustee establishes rental
terms, chooses tenants, enters into or renews leases, deals with taxes and
insurance, or makes decisions as to repairs or capital expenditures with respect
to such REO Property.
"Disqualified Organization": Either (a) the United States, (b) any
state or political subdivision thereof, (c) any foreign government, (d) any
international organization, (e) any agency or instrumentality of any of the
foregoing, (f) any organization (other than a cooperative described in section
521 of the Code) that is exempt from federal income taxation (including taxation
under the unrelated business taxable income provisions of the Code), (g) any
rural telephone or electrical service cooperative described in section
1381(a)(2)(C) of the Code, or (h) any other entity identified as a disqualified
organization by legislation enacted or administrative pronouncement in effect as
of the date of the most recent transfer of the related Residual Certificate. A
corporation will not be treated as an instrumentality of the United States or
any state or political subdivision thereof if all of its activities are subject
to tax and, with the exception of the Federal Home Loan Mortgage Corporation, a
majority of its board of directors is not selected by such governmental unit.
"Distribution Account": As defined in Section 4.02 hereof.
"Distribution Date": Unless otherwise specified in the Pooling and
Servicing Agreement, the 15th day of any month, or the next Business Day after
such 15th day if such 15th day is not a Business Day, commencing in the month
following the Closing Date and ending on the date on which the Trust is
terminated.
"Due Date": With respect to any Asset, the date on which a Monthly
Payment is due on such Asset from the Obligor thereunder (without regard to any
grace period).
"Due Date Interest Shortfall": For any Asset that is prepaid in full or
liquidated on other than a Due Date for such Asset, the difference between (a)
the amount of interest that would have accrued on such Asset through the day
preceding the Due Date next following the date of such prepayment or liquidation
had the Asset not been prepaid in full or liquidated (net of any other
administrative fees payable out of such interest had it accrued and been paid)
and (b) the amount of interest that actually accrued on such Asset prior to the
prepayment in full or liquidation thereof (net of an allocable portion of any
other administrative fees payable from interest payments on such Asset in
respect of the related Collection Period).
"Early Payment": As to any Asset and any Due Date on which the
principal and interest payments on such Asset made with respect to such Due Date
(not including any late fees) exceed the sum of the scheduled Monthly Payment
for such Asset and Due Date plus any unpaid Monthly Payments for previous Due
Dates, if the related Obligor has not sent written notice to the Servicer with
such payment asking that the amount by which such payment exceeds the Monthly
Payment then due be treated as a Principal Prepayment and the Servicer is unable
to determine the Obligor's intended treatment of such excess payment, the Early
Payment shall be the amount by which (1) payments of principal and interest on
such Asset made with respect to such Due Date exceed (2) the scheduled
-6-
<PAGE>
Monthly Payment for such Asset on such Due Date plus any unpaid Monthly Payments
for previous Due Dates, but only to the extent that the amount of such excess is
an integral multiple of the amount of the scheduled Monthly Payment for such Due
Date. To the extent that the amount of such excess exceeds an integral multiple
of such scheduled Monthly Payment, the excess shall be deemed to be a Principal
Prepayment of such Asset.
"Eligible Account": (1) An account or accounts maintained with a
Qualified Bank, (2) any trust account maintained in the corporate trust
department of a financial institution subject to governmental regulatory
authorities or (3) a non-trust account maintained with the Trustee, so long as
the Trustee's commercial paper or short-term unsecured debt obligations are
rated by each Rating Agency in its highest applicable rating category (without
regard to "plus" or "minus" modifiers of such rating category); provided that
the Servicer shall move any funds in such account to another account which is an
Eligible Account pursuant to clause (1) or (2) of this definition within five
days after any downgrading of the Trustee's commercial paper or short-term
unsecured debt obligations below each Rating Agency's highest applicable rating
category (without regard to "plus" or "minus" modifiers of such rating category)
and shall not deposit funds into any account that is an Eligible Account
pursuant to this clause (3) if such deposit would cause the amount on deposit in
such account to exceed 20% of the aggregate unpaid principal balance of the
Certificates. Eligible Accounts may bear interest.
"Eligible Investments": Any one or more of the following obligations or
securities:
(a) direct obligations of, and obligations fully guaranteed
by, the United States of America;
(b) demand and time deposits in, negotiable certificates of
deposit of, bankers' acceptances issued by, or federal funds sold by,
any Qualified Bank;
(c) commercial paper of any Person other than OMI, the Seller
or any Affiliate of OMI or the Seller rated in the Rating Agency's
highest applicable rating category;
(d) repurchase agreements fully collateralized by possession
of obligations of the type specified in clause (a) above; provided,
however, that investments in such repurchase agreements shall mature
within three days of the acquisition thereof and; provided further,
that such agreements shall be entered into with a Qualified Bank;
(e) money market accounts or money market funds rated in the
highest rating category of the Rating Agency for such money market
funds; and
(f) money market accounts or money market mutual funds
investing primarily in obligations of the United States government, and further
investing exclusively in debt obligations, provided, however, that such money
market accounts or money market mutual funds shall be rated in the highest
rating category sufficient to support the initial ratings assigned to a related
Series of Certificates.
The foregoing notwithstanding, Eligible Investments that are acquired with funds
in the Certificate Account, the Distribution Account or any Reserve Fund shall
include only such obligations or securities that mature on or before the
Business Day immediately preceding the next Distribution Date. The Trustee may
not sell or convert an Eligible Investment if such sale or conversion would
result in a loss on the investment. In no event shall an instrument be an
Eligible Investment if such instrument evidences (1) a right to receive only
interest payments with respect to the obligations underlying such instrument or
(2) both principal and interest payments derived from obligations underlying
such instrument, if the interest and principal payments with respect to such
instrument provide a yield to maturity at the date of investment of greater than
120% of the yield to maturity at par of such underlying obligations.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
-7-
<PAGE>
"ERISA Restricted Certificates": With respect to any Series, any
Certificates of a Class that are subordinated to the Certificates of any other
Class of such Series with respect to the allocation of Writedown Amounts, or, if
the related Pooling and Servicing Agreement does not provide for the allocation
of Writedown Amounts, the Certificates designated as "ERISA Restricted
Certificates" in the related Pooling and Servicing Agreement.
"Event of Default": As defined in Section 7.01 hereof.
"FHA": The Federal Housing Administration.
"FHA Asset": An Asset that is insured by the FHA.
"FHA Insurance": As to any FHA Asset, FHA's agreement to reimburse the
owner of such Asset for the amount of any losses incurred upon the liquidation
of such Asset.
"FHLMC": Federal Home Loan Mortgage Corporation.
"Final Certification": A certification as to the completeness of each
Trustee Mortgage Loan File substantially in the form of Exhibit 2-B hereto
provided by the Trustee (or the Custodian) on or before the first anniversary of
the Closing Date pursuant to Section 2.03(c)(2) hereof.
"Final Scheduled Distribution Date": With respect to any Class of any
Series, the date specified as such in the related Pooling and Servicing
Agreement.
"FNMA": Federal National Mortgage Association.
"Fraud Loss": A loss incurred on a Contract or Mortgage Loan resulting
from a Credit Insurer's failure to pay a claim with respect to such Contract or
Mortgage Loan on the grounds of fraud in connection with the origination of the
Contract or Mortgage Loan or on the grounds of fraud, dishonesty or
misrepresentation in connection with the application for any insurance obtained
with respect to such Contract or Mortgage Loan.
"Independent": When used with respect to any specified Person, another
Person who (a) is in fact independent of OMI, the Seller, the Servicer, any
obligor upon the Certificates or any Affiliate of OMI, the Seller or the
Servicer or such obligor, (b) does not have any direct financial interest or any
material indirect financial interest in OMI, the Seller or the Servicer or in
any such obligor or in an Affiliate of OMI, the Seller or the Servicer or such
obligor, and (c) is not connected with OMI, the Seller or the Servicer or any
such obligor as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions. Whenever it is provided herein
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such Person shall be appointed by OMI, the Seller or the Servicer in
the exercise of reasonable care by OMI, the Seller or the Servicer, as the case
may be, and approved by the Trustee, and such opinion or certificate shall state
that the Person executing the same has read this definition and that such Person
is independent within the meaning thereof.
"Independent Contractor": Either (a) any Person (other than the
Servicer) that would be an "independent contractor" with respect to the Trust
within the meaning of Section 856(d)(3) of the Code if the Trust were a real
estate investment trust (except that, in applying that Section, more than 35% of
the outstanding principal balance of any Class shall be deemed to be more than
35% of the certificates of beneficial interest of the Trust), so long as the
Trust does not receive or derive any income from such Person, the relationship
between such Person and the Trust is at arm's length and such Person is not an
employee of the REMIC, the Trustee or the Servicer, all within the meaning of
Treasury Regulation Section 1.856-4(b)(5), or (b) any other Person (including
the Servicer) upon receipt by the Trustee of an Opinion of Counsel, the expense
of which shall constitute a Servicing Advance if borne by the Servicer, to the
effect that the taking of any action in respect of any REO Property by such
Person, subject
-8-
<PAGE>
to any conditions therein specified, that is otherwise herein contemplated to be
taken by an Independent Contractor will not cause such REO Property to cease to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes of
Section 860D(a) of the Code), or cause any income realized in respect of such
REO Property to fail to qualify as Rents from Real Property.
"Initial Certification": A certification as to the completeness of each
Trustee Mortgage Loan File substantially in the form of Exhibit 2-A hereto
provided by the Trustee (or the Custodian) on the Closing Date pursuant to
Section 2.03(c)(1) hereof.
"Initial Value": As defined in Section 3.16(b) hereof.
"Insurance Policy": Any insurance policy covering any Asset (or the
related Manufactured Home or Mortgaged Property), including, without limitation,
any Standard Hazard Insurance Policy or Primary Mortgage Insurance Policy or FHA
Insurance or VA Guaranty.
"Insurance Proceeds": Amounts paid or payable (as the context requires)
under any Insurance Policy, to the extent such amounts are not applied to the
restoration or repair of the Manufactured Home or Mortgaged Property in respect
of which such amounts were paid.
"Insured Expenses": Expenses incurred by the Servicer in connection
with a Contract or Mortgage Loan under which the Obligor is in default, which
expenses are covered by a Standard Hazard Insurance Policy and are paid by an
insurer under any such policy.
"Interest Accrual Period": With respect to any Distribution Date for a
Series, the calendar month immediately preceding the calendar month in which
such Distribution Date occurs, which period will be assumed to consist of 30
days for the purpose of calculating any interest amounts accrued on the
Certificates of such Series.
"Issuing REMIC": If provided for in a Pooling and Servicing Agreement,
the REMIC composed primarily of Regular Interests in the Pooling REMIC, together
with the Distribution Account.
"Land Secured Contract": A Contract secured at origination by a parcel
of real estate in addition to a Manufactured Home.
"Liquidated Loan": A Defaulted Contract or defaulted Mortgage Loan as
to which all amounts that the Servicer expects to recover through the date of
disposition of the related Manufactured Home or Mortgaged Property have been
received.
"Liquidation Expenses": All reasonable, out-of-pocket costs and
expenses (exclusive of the Servicer's overhead costs) incurred by the Servicer
in connection with liquidation of any Asset or disposition of any related Repo
Property or REO Property, including, but not limited to, the cost of all notices
sent in connection with such liquidation, costs and expenses incurred in
connection with preparation and recordation of assignments of Mortgages relating
to Land Secured Contracts, expenses, including reasonable attorney's fees,
incurred in connection with the commencement and pursuit of Proceedings against
Obligors or guarantors or sureties of Obligors or in the pursuit of foreclosure
or other similar remedies, expenses incurred in repossessing and refurbishing
the related Manufactured Home or preparing the related REO Property for sale and
sales commissions paid in connection with the resale of the related Manufactured
Home or REO Property.
-9-
<PAGE>
"Liquidation Proceeds": Amounts received and retained in connection
with the liquidation of Liquidated Loans, whether through foreclosure thereon or
repossession and resale of the related Manufactured Home, foreclosure on the
related Mortgaged Property or otherwise (including Insurance Proceeds collected
in connection with such liquidation).
"Loan-to-Value Ratio": The Contract Loan-to-Value Ratio or the Mortgage
Loan-to-Value Ratio of an Asset, as applicable.
"Manufactured Home": A unit of manufactured housing (within the meaning
of Code section 25(e)(10)) together with all accessions thereto securing the
indebtedness of the Obligor under any Contract or constituting a portion of the
Mortgaged Property securing the indebtedness of the Obligor under any Mortgage
Loan.
"Monthly Payment": With respect to any Asset, the scheduled monthly
payment of principal and interest thereon due in any month under the terms
thereof.
"Mortgage": A written instrument creating a valid first lien on Real
Property or a Mortgaged Property, in the form of a mortgage, deed of trust, deed
to secure debt or security deed, including any riders or addenda thereto.
"Mortgage Insurer": The insurance company or companies which issue any
Primary Mortgage Insurance Policies with respect to any Mortgage Loans.
"Mortgage Loan": A mortgage loan (not including any Land Secured
Contract) secured by a first lien on a one- to four-family residential real
property (which may be the real estate to which a Manufactured Home is deemed by
the Seller to have become permanently affixed as of the Cut-off Date for the
related Series).
"Mortgage Loan Documents": With respect to each Mortgage Loan, the
following documents:
(a) the original Mortgage Note bearing a complete chain of
endorsements, if necessary, from the initial payee thereunder to the
Seller, with a further endorsement without recourse from the Seller in
blank or to the Trustee or its Custodian, in a form specified in the
related Sales Agreement, together with all related riders and addenda
and any related surety or guaranty agreement, power of attorney and
buydown agreement;
(b) the original recorded Mortgage (or a copy thereof
certified to be a true and correct reproduction of the original thereof
by the appropriate public recording office) with evidence of
recordation noted thereon or attached thereto, or, if the Mortgage is
in the process of being recorded, a photocopy of the Mortgage,
certified by an officer of the related Seller or the originator, the
related title insurance company, the related closing/settlement/escrow
agent or the related closing attorney to be a true and correct copy of
the Mortgage submitted for recordation;
(c) the original recorded assignment of the Mortgage from the
related Seller to the Trustee or its Custodian, in a form specified in
the related Sales Agreement (or a copy thereof certified to be a true
and correct reproduction of the original thereof by the appropriate
public recording office) with evidence of recordation noted thereon or
attached thereto, or, if the assignment is in the process of being
recorded, a photocopy of the assignment, certified by an officer of the
Seller to be a true and correct copy of the assignment submitted for
recordation;
(d) each original recorded intervening assignment of the
Mortgage as is necessary to show a complete chain of title from the
initial mortgagee (or beneficiary, in the case of a deed of trust) to
the related Seller (or a copy of each such assignment certified to be a
true and correct reproduction of the original thereof by the
appropriate public recording office) with evidence of recordation noted
thereon or
-10-
<PAGE>
attached thereto, or, if an assignment is in the process of being
recorded, a photocopy of the assignment, certified by an officer of the
Seller to be a true and correct copy of the assignment submitted for
recordation;
(e) an original Title Insurance Policy or, if such policy has
not yet been issued or is otherwise not available, (1) a written
commitment to issue such policy issued by the applicable title
insurance company and an officer's certificate of the related Seller
certifying that all of the requirements specified in such commitment
have been satisfied, (2) a preliminary title report if the related
Mortgaged Property is located in a state in which preliminary title
reports are acceptable evidence of title insurance or (3) a certificate
of an officer of the Seller certifying that a Title Insurance Policy is
in full force and effect as to the related Mortgage and that such Title
Insurance Policy is freely assignable to and will inure to the benefit
of the Trustee (subject to recordation of the related Assignment of
Mortgage);
(f) for each Mortgage Loan identified in the related Agreement
as having in place a Primary Mortgage Insurance Policy, a Primary
Mortgage Insurance Policy or a certificate of primary mortgage
insurance issued by the related Mortgage Insurer or its agent
indicating that such a policy is in effect as to such Mortgage Loan or,
if neither a policy nor a certificate of insurance from the related
Mortgage Insurer is available, a certificate of an officer of the
related Seller certifying that a Primary Mortgage Insurance Policy is
in effect as to such Mortgage Loan;
(g) each related assumption agreement, modification, written
assurance or substitution agreement, if any; and
(h) proof of the maintenance of a Standard Hazard Insurance
Policy (and a flood insurance policy, if applicable) as to the related
Mortgaged Property.
"Mortgage Loan-to-Value Ratio": Means, as to a Mortgage Loan, the
ratio, expressed as a percentage, of the principal amount of such Mortgage Loan
at the time of determination, to either (i) the sum of the appraised value of
the land and improvements, and the amount of any prepaid finance charges or
closing costs that are financed or (ii) the sum of the purchase price of the
home (including taxes, insurance and any land improvements), the appraised value
of the land and the amount of any prepaid finance charges or closing costs that
are financed.
"Mortgage Loan Schedule": For any Series, the list attached to the
related Pooling and Servicing Agreement identifying each Mortgage Loan assigned
thereunder (which may be presented together with any related Contract Schedule
in a single Asset Schedule), which list shall (a) identify each Mortgage Loan
and (b) set forth (or describe the method of determining) as to each such
Mortgage loan (1) the Cut-off Date Principal Balance thereof, (2) the amount of
each Monthly Payment, (3) the Mortgage Rate thereof, (4) the original term to
maturity thereof, (5) the date of origination thereof, (6) the original Mortgage
Loan-to-Value Ratio thereof, (7) the state in which the related Mortgaged
Property is located, and (8) any other information as may be reasonably
requested by the Trustee prior to the Closing Date.
"Mortgage Note": A manually executed written instrument evidencing a
Mortgagor's promise to repay a stated sum of money, plus interest, to the holder
of such instrument on or before a specific date according to a schedule of
principal and interest payments.
"Mortgage Rate": With respect to each Mortgage Loan, the interest rate
specified in the related Mortgage Note.
"Mortgaged Property": The mortgaged property securing a Mortgage Loan.
"Mortgagor": The obligor on a Mortgage Note.
-11-
<PAGE>
"Net Insurance Proceeds": With respect to any Asset, Insurance Proceeds
received with respect thereto net of (a) any Insured Expenses incurred in
connection therewith, (b) all reasonable out-of-pocket expenses incurred by the
Servicer in connection with the collection of such Insurance Proceeds and (c)
the amount of any Advances made by the Servicer or any other entity with respect
to such Asset and not previously reimbursed to the Servicer or such other entity
as of the time of the Servicer's receipt of such Insurance Proceeds. Amounts
received by the Servicer as Net Insurance Proceeds will be treated for
accounting purposes as payments received on Assets.
"Net Liquidation Proceeds": With respect to any Asset, the amount of
Liquidation Proceeds received with respect thereto (including any Net Insurance
Proceeds recovered in connection with the liquidation of the related
Manufactured Home or Mortgaged Property) net of the amount of any Liquidation
Expenses incurred and not previously reimbursed to the Servicer or such other
entity as of the time of the liquidation of such Asset. Amounts received by the
Servicer as Net Liquidation Proceeds will be treated for accounting purposes as
payments received on Assets.
"Net Rate": As to any Asset, the applicable Asset Rate minus the
Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf of the
Trust, including any lease renewed, modified or extended on behalf of the Trust
(if the Trustee, or the Servicer or its agent, has the right to renegotiate the
terms of such lease).
"Non-Recoverable Advance": As to any Advance that has not yet been
made, any portion of the amount of such prospective Advance which the Servicer
reasonably determines would not ultimately be recoverable from Related Proceeds.
As to any Advance that has been made by the Servicer, any portion of the amount
of such Advance that has subsequently been determined by the Servicer to be not
ultimately recoverable from Related Proceeds. In determining whether an Advance
is or would be a Non-Recoverable Advance, the Servicer need not take into
account the possibility that it might recover any amounts as the result of a
deficiency judgment against the related Obligor.
"Non-U.S. Person": A foreign person within the meaning of Treasury
regulation Section 1.860(G)-3(a)(1) (i.e., a person other than (a) a citizen or
resident of the United States, (b) a corporation or partnership that is
organized under the laws of the United States or any jurisdiction thereof or
therein, (c) an estate that is subject to United States federal income tax
regardless of the source of its income, or (d) a trust if a court within the
United States is able to exercise primary supervision over the administration of
the trust and one or more United States fiduciaries have the authority to
control all substantial decisions of the trust) who would be subject to United
States income tax withholding pursuant to section 1441 or 1442 of the Code on
income derived from a Residual Interest.
"OAC": Oakwood Acceptance Corporation, a North Carolina corporation.
"Obligor": A person who is indebted under a Contract or who has
acquired a Manufactured Home subject to a Contract or a person who is the
Mortgagor or borrower under a Mortgage Loan or who has acquired a Mortgaged
Property subject to a Mortgage Loan.
"Obligor Bankruptcy Loss": With respect to any Distribution Date as to
any Asset that was the subject of a Principal Cramdown during the preceding
Prepayment Period, the related Principal Cramdown Amount.
"Officer": With respect to any corporation, the Chairman of the Board
of Directors, the President, any Vice President or Assistant Vice President, the
Secretary, the Treasurer, or any Assistant Secretary or Assistant Treasurer of
such corporation (or, in the case of the Trustee, any trust officer thereof);
with respect to any partnership, the designated managing partner, if any, who
has been granted authority by the partnership agreement of such partnership to
bind the partnership by his or her signature, or, in any other case, any general
partner of the
-12-
<PAGE>
partnership; with respect to any bank or trust company acting as trustee of an
express trust or as custodian, any trust officer or authorized officer thereof.
"Officer's Certificate": For any Person, a certificate that has been
signed on behalf of that Person by an Officer of that Person or any other
individual authorized to execute the certificate.
"Opinion of Counsel": A written opinion of counsel, which counsel is
satisfactory to the Servicer and the Trustee. Whenever an Opinion of Counsel is
required hereunder, the renderer of such Opinion may rely on other Opinions of
Counsel. Any Opinion of Counsel relating to tax matters must be an opinion of
Independent counsel.
"OMI": Oakwood Mortgage Investors, Inc., a North Carolina corporation.
"Outstanding": (a) With respect to the Certificates, as of any date of
determination, "Outstanding" refers to all Certificates theretofore executed and
delivered under the Pooling and Servicing Agreement except:
(1) Certificates theretofore canceled by the Certificate
Registrar or delivered to the Certificate Registrar for cancellation;
(2) Certificates or portions thereof for which money in the
amount necessary for the making of a final distribution on such
Certificates has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Certificates; provided,
that if such Certificates are to be retired because of termination of
the Trust at the option of the Servicer, notice of such optional
termination has been duly given pursuant to the Pooling and Servicing
Agreement;
(3) Certificates in exchange for which other Certificates have
been executed and delivered pursuant to Section 5.04 hereof; and
(4) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued pursuant to
Section 5.07 hereof unless proof satisfactory to the Trustee has been
presented at or before the time that the determination of those
Certificates that are Outstanding is made that any such Certificates
are held by a holder in due course.
(b) With respect to the Assets as of any date, "Outstanding" refers to
Assets with unpaid principal balances greater than zero and that have not
previously been purchased or repurchased pursuant to Section 2.06 hereof or
become Liquidated Loans.
"Outstanding Certificate Writedown Amount": With respect to any Class
of Certificates, the aggregate amount of all Writedown Amounts that have been
allocated to such Class since the Closing Date for the related Series, minus any
amounts that have been distributed on such Class in reduction of such aggregate
amount in accordance with the related Pooling and Servicing Agreement.
"P&I Advance": As defined in Section 3.04(b) hereof.
"Pass-Through Rate": With respect to any Class of Certificates, the
annual rate at which interest accrues on the Certificates of such Class, which
rate is specified or described for each Class in the related Pooling and
Servicing Agreement.
"Paying Agent": Any Person authorized by OMI and the Trustee to
distribute principal or interest on any Certificates on behalf of the Trustee
and appointed pursuant to Section 5.09 hereof.
-13-
<PAGE>
"Percentage Interest": With respect to a Certificate to which an
initial principal amount is assigned as of the Closing Date, the portion of the
Class of which such Certificate is a part evidenced by such Certificate,
expressed as a percentage, the numerator of which is the denomination
represented by such Certificate and the denominator of which is the initial
Certificate Principal Balance of such Class. With respect to a Certificate to
which an initial principal balance is not assigned as of the Closing Date, the
portion of the Class of which such Certificate is a part evidenced by such
Certificate, expressed as a percentage stated on the face of such Certificate.
"Permitted Encumbrances": In respect of any Mortgaged Property or Real
Property:
(a) the lien of current real property taxes and
assessments not yet due and payable;
(b) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the
date of recording acceptable to prudent mortgage lending
institutions generally and specifically referred to in the
lender's title insurance policy delivered to the related
originator and referred to or otherwise considered in the
appraisal made for the originator; and
(c) other matters to which like properties are
commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the
Mortgage or the use, enjoyment, value or marketability of the
related Mortgaged Property or Real Property.
"Person": Any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan": Any employee benefit plan or retirement arrangement, including
individual retirement accounts and annuities, Keogh plans and collective
investment funds in which such plans, accounts, annuities or arrangements are
invested, that are described in or subject to the Plan Asset Regulations, ERISA
or corresponding provisions of the Code.
"Plan Asset Regulations": The Department of Labor regulations set forth
in 29 C.F.R. ss. 2510.3-101.
"Plan Investor": A Plan, a Person acting on behalf of a Plan or a
Person using the assets of a Plan.
"Pool Scheduled Principal Balance": For any Series, on any Distribution
Date, the aggregate of the Scheduled Principal Balances, immediately prior to
the beginning of the related Collection Period, of the related Assets that were
Outstanding at the beginning of such Collection Period, without giving effect to
any Principal Prepayments, Net Liquidation Proceeds or Repurchase Prices
received (or Realized Losses incurred) on the day preceding the beginning of
such Collection Period, plus the aggregate of the principal components of any
Monthly Payments that were due at or prior to the beginning of such Collection
Period on such Assets, but which Monthly Payments were not collected from a
related Obligor or advanced by the Servicer and which were not reflected in a
corresponding reduction in the aggregate Certificate Principal Balance of the
related Certificates on the related Distribution Date. The Pool Scheduled
Principal Balance as of any date of determination that is not a Distribution
Date shall be the Pool Scheduled Principal Balance for the next upcoming
Distribution Date.
"Pooling and Servicing Agreement": A Pooling and Servicing Agreement
among OMI, OAC and a Trustee, relating to the issuance of Certificates of a
Series, which shall incorporate these Standard Terms by reference.
"Pooling REMIC": If provided for in a Pooling and Servicing Agreement,
the REMIC consisting primarily of the related Assets.
"Pooling REMIC Regular Interest": A Regular Interest in a Pooling
REMIC.
-14-
<PAGE>
"Prepayment Period": With respect to each Distribution Date, the
calendar month immediately preceding the calendar month in which such
Distribution Date occurs.
"Primary Mortgage Insurance": The insurance provided under any Primary
Mortgage Insurance Policy.
"Primary Mortgage Insurance Policy": A primary mortgage insurance
policy, if applicable, covering certain conventional Mortgage Loans for which
the initial Mortgage Loan-to-Value Ratios exceeded 80%.
"Principal Cramdown" means, as to any Asset, either (a) a decree by a
bankruptcy court to the effect that the portion of such Asset that is secured by
the underlying Manufactured Home or Mortgaged Property is less than its Unpaid
Principal Balance due to the fact that the value of such Manufactured Home or
Mortgaged Property is less than such Unpaid Principal Balance or (b) the
permanent forgiveness by a bankruptcy court of some or all of the Unpaid
Principal Balance owed by the related Obligor.
"Principal Cramdown Amount" means, with respect to any Prepayment
Period as to any Asset that has been the subject of a Principal Cramdown, the
amount by which (a) the Unpaid Principal Balance of such Asset exceeds (b) as
applicable, depending upon the type of Principal Cramdown that was applied to
such Asset, either (1) the portion of such Unpaid Principal Balance that remains
secured by the related Manufactured Home or Mortgaged Property after taking the
related Principal Cramdown into account or (2) the Unpaid Principal Balance
after taking into account the permanent forgiveness of debt ordered by the
bankruptcy court in connection with the related Principal Cramdown.
"Principal Distribution Amount": For any Series, except as otherwise
defined in the related Pooling and Servicing Agreement, on any Distribution Date
other than the Distribution Date that is the Termination Date, the sum of the
following amounts: (a) the sum of the principal components of all Monthly
Payments scheduled to be made on the Due Date occurring during the related
Collection Period on the related Assets that were Outstanding at the opening of
business on such Due Date (regardless of whether such Monthly Payments were
received by the Servicer from the related Obligors), not including any Monthly
Payments due on Liquidated Loans or repurchased Assets; (b) the sum of the
amounts of all Principal Prepayments received by the Servicer on the related
Assets during the related Prepayment Period; (c) with respect to any related
Asset that became a Liquidated Loan during the related Prepayment Period, the
Scheduled Principal Balance thereof on the date of liquidation thereof
(determined without giving effect to such liquidation); and (d) with respect to
any related Asset that was purchased or repurchased by the Servicer, the Seller
or OMI pursuant to Section 2.06 hereof during the related Prepayment Period, the
Scheduled Principal Balance thereof on the date of purchase or repurchase
thereof (determined without giving effect to such purchase or repurchase).
"Principal Prepayment": With respect to any Asset, a payment
attributable to principal of such Asset, other than a scheduled principal
payment on such Asset, which may be received (a) from the related Obligor
together with a regular Monthly Payment, (b) from the related Obligor together
with an Early Payment, or (c) in the form of Net Insurance Proceeds received by
the Servicer otherwise than as a component of Liquidation Proceeds.
"Private Certificate": Any Class of Certificates of a Series designated
as such in the related Pooling and Servicing Agreement.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Qualification Defect": With respect to an Asset, (a) a defective
document in the related Asset File, (b) the absence of a document in such Asset
File, or (c) the breach of any representation, warranty, or covenant with
respect to the Asset made by OMI, the Seller or the Servicer, but only if, as a
result of any of the foregoing, the affected Asset would cease to qualify as a
"qualified mortgage" for purposes of the REMIC Provisions. With respect to a
REMIC Regular Interest or a participation certificate described in Code section
860G(a)(3), the failure to qualify as a "qualified mortgage" for purposes of the
REMIC Provisions.
-15-
<PAGE>
"Qualified Bank": Any domestic bank not affiliated with the Seller or
OMI (1) having long-term unsecured debt obligations rated in one of the two
highest rating categories (without modifiers) of each Rating Agency or
short-term unsecured debt obligations rated in each Rating Agency's highest
applicable rating category, (2) having commercial paper or short-term unsecured
debt obligations rated in each Rating Agency's highest applicable rating
category, or (3) that is otherwise acceptable to each applicable Rating Agency.
"Qualified Institutional Buyer": Any "qualified institutional buyer" as
defined in clause (a)(1) of Rule 144A.
"Qualified Insurer": Any insurance company or surety or bonding company
licensed to do business and issue insurance in all relevant jurisdictions
(including, in the case of an insurer under a Standard Hazard Insurance Policy,
the jurisdiction in which each Manufactured Home or Real Property or Mortgaged
Property covered by such policy is located).
"Qualified Substitute Asset": An Asset substituted by OMI or the Seller
for a Replaced Asset which must, on the date of such substitution, (a) have an
Unpaid Principal Balance not greater than (and not more than $10,000 less than)
the Unpaid Principal Balance of the Replaced Asset, (b) have an Asset Rate not
less than (and not more than one percentage point in excess of) the Asset Rate
of the Replaced Asset, (c) have a Net Rate equal to the Net Rate of the Replaced
Asset, (d) have a remaining term to maturity not greater than (and not more than
one year less than) that of the Replaced Asset, (e) have a Loan-to-Value Ratio
as of the first day of the month in which the substitution occurs equal to or
less than the Loan-to-Value Ratio of the Replaced Asset as of such date (in each
case, using the appraised value at origination, and after taking into account
the Monthly Payment due on such date), and (f) comply with each representation
and warranty set forth in Section 2.05 hereof and in the related Sales
Agreement. In the event that more than one Asset is substituted for a Replaced
Asset, the amount described in clause (a) hereof shall be determined on the
basis of aggregate Unpaid Principal Balances, the rates described in clauses (c)
(i), (ii), and (iii) hereof shall be determined on the basis of weighted average
Asset Rates and Net Rates, as the case may be, and the term described in clause
(d) hereof shall be determined on the basis of weighted average remaining terms
to maturity, provided that no Qualified Substitute Asset may have an original
term to maturity beyond the latest original term to maturity of any Asset
assigned to the Trust on the Closing Date. In the case of a Trust for which a
REMIC election has been or will be made, a Qualified Substitute Asset also shall
satisfy the following criteria as of the date of its substitution for a Replaced
Asset: (A) the Obligor shall not be 90 or more days delinquent in payment on the
Qualified Substitute Asset, (B) the Asset File for such Asset shall not contain
any material deficiencies in documentation, and shall include an executed
Contract or Mortgage Note, as applicable, and, if it is a Land Secured Contract
or a Mortgage Loan, a recorded Mortgage; (C) the Loan-to-Value Ratio of the
Asset must be 125% or less either (1) on the date of origination of the Asset,
or, if any of the terms of such Asset were modified other than in connection
with a default or imminent default on such Asset, on the date of such
modification, or (2) on the date of the substitution, based on an appraisal
conducted within the 60 day period prior to the date of the substitution; (D) no
property securing such Asset may be subject to foreclosure, bankruptcy, or
insolvency proceedings; and (E) such Asset, if a Land Secured Contract or a
Mortgage Loan, must be secured by a valid first lien on the related Real
Property or Mortgaged Property.
"Rating Agency": As to any Series, any nationally recognized
statistical rating agency, or its successor, that on the Closing Date rated one
or more Classes of the Certificates of such Series at the request of OMI. If
such agency or a successor is no longer in existence, "Rating Agency" shall be
such nationally recognized statistical rating agency, or other comparable
Person, designated by OMI, notice of which designation shall be given to the
Trustee and the Servicer. References herein to any rating category of a Rating
Agency shall mean such rating category without regard to any plus or minus or
numerical designation.
"Real Property": Land and improvements thereon subject to the lien of
the Mortgage securing a Land Secured Contract.
-16-
<PAGE>
"Realized Interest Loss": A shortfall in interest resulting from the
receipt of Liquidation Proceeds in respect of a Contract or Mortgage Loan in an
amount that is insufficient to pay accrued and unpaid interest thereon.
"Realized Loss": Either (a) with respect to any Liquidated Loan, (1)
the Unpaid Principal Balance of the Liquidated Loan, plus accrued and unpaid
interest on such Liquidated Loan, plus amounts reimbursable to the Servicer for
previously unreimbursed Servicing Advances, minus (2) Net Liquidation Proceeds
collected in respect of the Liquidated Loan or (b) with respect to any Asset
that has been the subject of a Principal Cramdown, an Obligor Bankruptcy Loss
with respect to such Asset.
"Record Date": With respect to each Distribution Date, the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Recordation Report": A report substantially in the form of Exhibit 3
hereto provided by the Trustee (or the Custodian) pursuant to Section 2.03(c)(5)
hereof identifying those Mortgage Loans for which a Mortgage or an Assignment
remains unrecorded.
"Regular Certificate": A Certificate other than a Residual Certificate
and that is a Regular Interest in a REMIC or a combination of Regular Interests
in a REMIC.
"Regular Interests": Interests in a REMIC that are designated as
"regular interests" under the REMIC Provisions.
"Regulations": The regulations promulgated under the Code by the
Treasury.
"Related Proceeds': As defined in Section 3.04(c) hereof.
"REMIC": A "real estate mortgage investment conduit," within the
meaning of the REMIC Provisions. As to a particular Trust, those assets of the
Trust as to which an election is to be made to be treated as a "real estate
mortgage investment conduit," within the meaning of section 860D of the Code. A
REMIC generally is an elective entity for federal income tax purposes that
consists of a fixed pool of qualifying assets in which investors hold multiple
classes of interests. In order to be treated as a REMIC, such pool will be
required to meet ongoing qualification requirements provided by the Code,
Regulations, and binding pronouncements of the Internal Revenue Service, as in
effect from time to time.
"REMIC Loan-to-Value Ratio": The quotient, expressed as a percentage,
obtained by dividing (a) the original unpaid principal balance of an Asset, plus
the full amount of any other indebtedness secured by the related Manufactured
Home or Mortgaged Property which is senior to, or pari passu with, such Asset by
(b) the sale price of the Manufactured Home or Mortgaged Property that secures
such Asset. Alternatively, the REMIC Loan-to- Value Ratio may be determined by
dividing (a) the unpaid principal balance of an Asset as of the Startup Day plus
the full amount of any other indebtedness secured by the related Manufactured
Home or Mortgaged Property which is senior to, or pari passu with, such Asset by
(b) the fair market value of the Manufactured Home or Mortgaged Property that
secures such Asset on the Startup Day.
"REMIC Provisions": Provisions of the Code relating to real estate
mortgage investment conduits, which appear at sections 860A through 860G of the
Code, related Code provisions, and Regulations (whether in proposed, temporary
or final form), announcements and rulings thereunder, as the foregoing may be in
effect from time to time.
"Remittance Amount": With respect to any Remittance Date and related
Distribution Date, the sum of the following amounts:
-17-
<PAGE>
(a) the Monthly Payment that was due on each Outstanding Asset
on the Due Date occurring in the related Collection Period and that was
received by the Servicer from the related Obligor;
(b) all amounts received during the related Collection Period
in respect of any Asset that was Outstanding at the beginning of the
related Collection Period representing late payments of principal and
interest due on such Asset prior to the Due Date occurring in the
related Collection Period, to the extent such amounts exceed
outstanding unreimbursed P&I Advances made by the Servicer with respect
to such Asset;
(c) each Principal Prepayment (whether full or partial) of any
Asset that was Outstanding at the beginning of the related Prepayment
Period received by the Servicer during the related Prepayment Period;
(d) any amounts received by the Servicer during the related
Prepayment Period as Net Liquidation Proceeds with respect to any Asset
that was Outstanding at the beginning of the related Prepayment Period
(net of outstanding unreimbursed P&I Advances made by the Servicer with
respect to such Asset); and
(e) all amounts deposited into the Certificate Account during
the related Prepayment Period as a result of any purchase or repurchase
of any Asset pursuant to Section 2.06 hereof (net of outstanding
unreimbursed P&I Advances made by the Servicer with respect to such
Asset).
"Remittance Date": The Business Day preceding each Distribution Date,
which is the date by which funds must be remitted by the Servicer from the
Certificate Account to the Distribution Account or, if the Certificate Account
is maintained by the Trustee, the date on which the Servicer is to notify the
Trustee of the related Remittance Amount, in either case pursuant to Section
3.07(b) hereof.
"Remittance Report": As defined in Section 4.01 hereof.
"Rents From Real Property": With respect to any REO Property, gross
income of the character described in Code section 856(d) and Treasury
regulations thereunder.
"REO Property": A Mortgaged Property acquired by the Servicer on behalf
of the Certificateholders through foreclosure or deed-in-lieu of foreclosure, as
further described in Section 3.09 hereof.
"REO Property Disposition": The receipt by the Servicer of Insurance
Proceeds and other payments and recoveries (including Liquidation Proceeds)
which the Servicer recovers from the sale or other disposition of an REO
Property.
"Replaced Asset": An Asset replaced or to be replaced by a Qualified
Substitute Asset.
"Repo Property": A Manufactured Home (and any related Real Property)
acquired by the Servicer on behalf of the Trust pursuant to a repossession,
foreclosure, or similar proceeding in connection with a Defaulted Contract.
"Repurchase Price": With respect to any Asset to be purchased or
repurchased pursuant to Section 2.05 hereof, an amount equal to the Unpaid
Principal Balance of such Asset as of the close of business on the date of such
purchase or repurchase, together with all accrued and unpaid interest thereon to
the end of the Collection Period in which such purchase or repurchase occurs.
"Repurchaser": Any Person that repurchases or purchases a Contract from
the Trust pursuant to Section 2.06 hereof.
-18-
<PAGE>
"Request for Release": A release signed by an Officer of the Servicer
in the form attached hereto as Exhibit 4.
"Reserve Fund": Any fund designated as a "Reserve Fund" in a Pooling
and Servicing Agreement.
"Residual Certificate": Any one of the Classes of Certificates of a
Series designated as such in the related Pooling and Servicing Agreement.
"Residual Interest": An interest in a REMIC that is designated as a
"residual interest" under the REMIC Provisions.
"Residual Majority": At any time, the Holders of a majority (by
Percentage Interests) of the Residual Certificates.
"Residual Transferee Agreement": A certification and agreement required
to be executed and delivered by the prospective transferee of a Residual
Certificate pursuant to Section 5.05(c) hereof, which must be substantially in
the form of Exhibit 8 hereto.
"RESPA": The Real Estate Settlement Procedures Act of 1974, as amended.
"Rule 144A": Rule 144A promulgated by the Securities and Exchange
Commission, as the same may be amended from time to time.
"Rule 144A Agreement": An agreement substantially in the form of
Exhibit 5 hereto.
"Rule 144A Certificates": Any Class of Certificates of a Series
designated as such in the related Pooling and Servicing Agreement.
"Sales Agreement": A Sales Agreement pursuant to which OAC (or another
Seller) sells Contracts and/or Mortgage Loans to OMI for inclusion in a Trust.
"Scheduled Principal Balance": As of any date of determination with
respect to any Contract, Repo Property, Mortgage Loan or REO Property, (a) the
Cut-off Date Principal Balance of such Contract or Mortgage Loan (or of the
related Contract or Mortgage Loan, in the case of a Repo Property or REO
Property) minus (b) the sum of (1) the principal components of any Monthly
Payments due on such Contract or Mortgage Loan (or on the related Contract or
Mortgage Loan, in the case of a Repo Property or REO Property) after the related
Cut-off Date and on or before such date of determination (regardless of whether
such Monthly Payments were received from the related Obligor) plus (2) all
principal prepayments received by the Servicer on such Contract or Mortgage Loan
(or on the related Contract or Mortgage Loan, in the case of a Repo Property or
REO Property) (including the principal portion of Net Liquidation Proceeds and
the principal portion of all amounts paid by the Seller or another party to
repurchase such Contract or Mortgage Loan) on or after the Cut-off Date and on
or prior to the end of the Prepayment Period preceding the date of
determination, plus (3) all Realized Losses incurred on such Contract or
Mortgage Loan (or the related Contract or Mortgage Loan, in the case of a Repo
Property or REO Property) on or after the Cut-off Date and on or prior to such
date of determination.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": As to any Contract or Mortgage Loan included in the Trust
Estate for a Series, the entity that sold such Contract or Mortgage Loan to OMI
under a Sales Agreement, which will be OAC unless otherwise specified in the
related Pooling and Servicing Agreement. For purposes of the definitions of
"Contract Documents" and "Mortgage Loan Documents" herein, documents (including,
without limitation, certificates of title, UCC filing instruments, assignments
and endorsements) indicating assignment or endorsement to, or the existence of a
security
-19-
<PAGE>
interest in, a name that is a registered trade name of the Seller in the
relevant jurisdiction shall satisfy any requirement of these Standard Terms that
such documents reflect the name of the "Seller."
"Series": A separate Series of Certificates issued pursuant to a
Pooling and Servicing Agreement, which Series may, as provided therein, be
divided into two or more Classes.
"Servicer": OAC, as servicer of any of the Assets under any Pooling and
Servicing Agreement, and its permitted successors and assigns thereunder.
"Servicer Contract File": As to each Contract, a file maintained by the
Servicer that contains the related loan application and credit report, any
correspondence relating to the Contract, and all other instruments, documents,
papers, ledger cards, accounting records, and computer print-outs maintained by
the Servicer now or hereafter in connection with the servicing of the Contracts,
which may be maintained on microfilm or on computer- readable optical disk or on
any other medium selected by the Servicer.
"Servicer Custodial Certification": A certification executed by an
Officer of the Servicer substantially in the form of Exhibit 1 hereto.
"Servicer File": As to any Asset, the related Servicer Contract File or
Servicer Mortgage Loan File, as applicable.
"Servicer Mortgage Loan File": As to each Mortgage Loan, a file
maintained by the Servicer that contains (1) an original Standard Hazard
Insurance Policy (and flood insurance policy, if required pursuant to Section
3.16 hereof) relating to the underlying Mortgaged Property or a certificate of
insurance issued by the insurer or its agent indicating that a Standard Hazard
Insurance Policy (and a flood insurance policy, if required pursuant to Section
3.16 hereof) is in effect with respect to such Mortgaged Property, (2) originals
or copies of all documents submitted to a Mortgage Insurer for credit and
property underwriting approval, (3) the originals of all RESPA and Regulation Z
disclosure statements executed by the related Mortgagors, (4) the appraisal
report made in connection with the origination of the Mortgage Loan, (5) the
settlement statement for the purchase and/or refinancing of the underlying
Mortgaged Property by the related Mortgagor under the related Mortgage Note and
Mortgage, (6) the originals of any tax service contracts, (7) documentation
relating to any approvals by the Servicer of any modifications of the original
related Mortgage Loan Documents and any releases of collateral supporting the
related Mortgage Loan, together with copies of the documentation effecting any
such modifications or releases, (8) collection notices or form notices sent to
the related Mortgagor, (9) foreclosure correspondence and legal notifications,
if applicable, (10) water and irrigation company stock certificates, if
applicable, and (11) all other documents relating to such Mortgage Loan which
would customarily be maintained in a mortgage loan file by the Servicer in order
to service the mortgage loan properly, as well as any other documents relating
to such Mortgage Loan (other than Mortgage Loan Documents) that come into the
Servicer's possession.
"Servicing Account": As defined in Section 3.05 hereof.
"Servicing Advances": Advances required to be made by the Servicer as
described in Section 3.04(a) hereof, including, but not limited to, advances for
the payment of personal property taxes, real estate taxes and premiums for
Standard Hazard Insurance Policies.
"Servicing Fee": On each Distribution Date, the product obtained by
multiplying (a) one-twelfth of the Servicing Fee Rate by (b) the aggregate
Scheduled Principal Balance of the Assets immediately prior to the preceding
Collection Period (without giving effect to any Principal Prepayments, Net
Liquidation Proceeds and Repurchase Prices received (or Realized Losses
incurred) on the day preceding the beginning of such Collection Period).
-20-
<PAGE>
"Servicing Fee Rate": A per annum rate, to be specified in each Pooling
and Servicing Agreement.
"Shortfall": Due Date Interest Shortfall and Soldiers' and Sailors'
Shortfall.
"Soldiers' and Sailors' Shortfall": Interest losses on a Contract or
Mortgage Loan resulting from application of the Soldiers' and Sailors' Civil
Relief Act of 1940.
"Special Hazard Insurance Policy": An insurance policy covering a
Contract or Mortgage Loan against loss by reason of fire, lightning, explosion,
smoke, windstorm, hail, riot, strike and civil commotion.
"Special Hazard Loss": A loss incurred on a Contract or Mortgage Loan
attributable to physical damage to the related Manufactured Home or Mortgaged
Property of a type which is not covered by standard hazard insurance policies,
excluding losses caused by war, nuclear reaction, nuclear or atomic weapons,
insurrection or normal wear and tear.
"Special Tax Consent": The written consent of the Holder of a Residual
Certificate to any tax (or risk thereof) arising out of a proposed transaction
or activity that may be imposed upon such Holder or that may affect adversely
the value of such Holder's Residual Certificate.
"Special Tax Opinion": An Opinion of Counsel that a proposed
transaction or activity will not (a) affect adversely the status of the REMIC as
a REMIC or the related Regular Certificates as the regular interests therein,
(b) affect the timing or amount of distributions of interest or principal on
such Regular Certificates, or (c) result in the encumbrance of the Contracts by
a tax lien.
"Standard Hazard Insurance Policy": With respect to each Contract, the
policy of fire and extended coverage insurance (and any federal flood insurance,
if applicable) required to be maintained for the related Manufactured Home as
provided herein, which may be a blanket mortgage impairment policy maintained by
the Servicer in accordance with the terms and conditions of the Pooling and
Servicing Agreement.
"Standard Terms": These Standard Terms to Pooling and Servicing
Agreement and all exhibits, schedules and appendices hereto, as amended and
supplemented from time to time.
"Startup Day": The Startup Day (within the meaning of Code section
860G(a)(9)) is the Closing Date.
"Tax Matters Person": The Person or Persons designated from time to
time hereunder to act as tax matters person (within the meaning of the REMIC
Provisions) of the REMIC.
"Terminating Purchase": The purchase of all Contracts and Mortgage
Loans and each Repo Property and REO Property owned by a Trust pursuant to
Section 9.01 hereof.
"Termination Account": An escrow account maintained by the Trustee into
which any Trust funds not distributed on the Distribution Date on which the
earlier of (a) a Terminating Purchase or (b) the final payment or other
liquidation of the last Asset remaining in the Trust or the disposition of the
last Repo Property or REO Property remaining in the Trust is made are deposited.
The Termination Account shall be an Eligible Account.
"Termination Date": Any Distribution Date fixed for termination of the
Trust pursuant to the provisions of Sections 9.01 and 9.02 hereof.
"Termination Price": With respect to any Terminating Purchase, the
greater of (1) the sum of (a) any Liquidation Expenses incurred by the Servicer
in respect of any Asset that has not yet been liquidated, (b) all amounts
required to be reimbursed or paid to the Servicer in respect of previously
unreimbursed Advances, plus
-21-
<PAGE>
(c) the sum of (i) 100% of the aggregate of the Unpaid Principal Balance of each
Asset remaining in the Trust on the day of such purchase, plus accrued interest
thereon at the related Asset Rate through the end of the Interest Accrual Period
relating to the Termination Date, plus (ii) the lesser of (A) the aggregate of
the Unpaid Principal Balances of each Asset relating to any Repo Property or REO
Property remaining in the Trust, plus accrued interest thereon at the related
Asset Rate through the end of the Interest Accrual Period related to the
Termination Date and (B) the current appraised value of any such Repo Property
or REO Property (net of Liquidation Expenses to be incurred in connection with
the disposition of such Repo Property or REO Property, estimated in good faith
by the Servicer), such appraisal to be conducted by an appraiser mutually agreed
upon by the Servicer and the Trustee, plus all previously unreimbursed P&I
Advances made in respect of such Repo Property or REO Property and (2) the
aggregate fair market value of all of the assets of the Trust (as reasonably
determined in good faith by the Servicer as of the close of business on the
third Business Day preceding the date upon which notice of any such purchase is
furnished to Certificateholders pursuant to Section 9.01(c) hereof), plus all
previously unreimbursed P&I Advances made with respect to the Assets. The fair
market value of the assets of the Trust shall be deemed to include accrued
interest through the end of the Interest Accrual Period related to the
Termination Date at the applicable Asset Rate on the unpaid principal balance of
each Asset (including any Asset that became a Repo Property or REO Property,
which Repo Property or REO Property has not yet been disposed of by the
Servicer). The basis for any such valuation shall be furnished by the Servicer
to the Certificateholders upon request.
"Terminator": The Person making a Terminating Purchase or causing such
Terminating Purchase to be made.
"TIN": Taxpayer identification number.
"Title Insurance Policy": For any Mortgage Loan, an American Land Title
Association mortgagee's mortgage loan title policy form 1970, or other form of
mortgagee's title insurance acceptable to FNMA or FHLMC for the jurisdiction in
which the subject property is located, including all riders and endorsements
thereto, insuring that the related Mortgage creates a valid first lien on the
underlying Mortgaged Property subject only to Permitted Encumbrances.
"Transferee Agreement": An agreement substantially in the form of
Exhibit 6 hereto.
"Treasury": The United States Department of the Treasury.
"Trust": The trust created pursuant to the terms of a Pooling and
Servicing Agreement.
"Trust Estate": The segregated pool of assets sold and assigned to a
Trustee by OMI pursuant to the conveyance clause of any Pooling and Servicing
Agreement.
"Trustee": The bank or trust company identified as the trustee under
any Pooling and Servicing Agreement.
"Trustee Mortgage Loan File": As to each Mortgage Loan, a file
containing all of the related Mortgage Loan Documents.
"UCC": The Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Unpaid Principal Balance": With respect to any Asset, the outstanding
principal balance payable by the related Obligor pursuant to the terms of such
Asset.
"U.S. Person": A Person other than a Non-U.S. Person.
"USAP": As defined in Section 3.13 hereof.
-22-
<PAGE>
"VA": The United States Department of Veterans Affairs.
"VA Asset": An Asset guaranteed in whole or in part by the VA.
"VA Guaranty": As to any VA Asset, VA's full or partial guaranty of
payment of amounts due thereunder.
"Voting Rights": With respect to any Certificate, the portion of the
voting rights of all of the Certificates of the related Series which is
allocated to such Certificate. Unless otherwise provided in the related Pooling
and Servicing Agreement, (a) if any Class of Certificates does not have a
Certificate Principal Balance or has an initial Certificate Principal Balance
that is less than or equal to 1% of the aggregate Certificate Principal Balance
of all the Certificates of its Series, then 1% of the Voting Rights for such
Series shall be allocated to each such Class, and the balance of the Voting
Rights for such Series shall be allocated among the remaining Classes of
Certificates of such Series in proportion to their respective Certificate
Principal Balances following the most recent Distribution Date, and (b) if no
Class of Certificates of such Series has an initial Certificate Principal
Balance less than 1% of the aggregate Certificate Principal Balance of all
Certificates of such Series, then all of the Voting Rights for such Series shall
be allocated among all the Classes of Certificates of such Series in proportion
to their respective Certificate Principal Balances following the most recent
Distribution Date. Voting Rights allocated to each Class of Certificates shall
be allocated among the Certificates of such Class in proportion to the
respective Percentage Interests of the Holders thereof.
"Withholding Agent": The Trustee or its designated Paying Agent or
other Person who is liable to withhold federal income tax from a distribution on
a Residual Certificate under sections 1441 or 1442 of the Code and the
Regulations promulgated thereunder.
"Writedown Amount": With respect to any Distribution Date for a Series,
the amount, if any, by which (1) the aggregate Certificate Principal Balance of
all Certificates of such Series, after all distributions have been made on such
Certificates on such Distribution Date, exceeds (2) the Pool Scheduled Principal
Balance of the related Assets for the next Distribution Date.
-23-
<PAGE>
ARTICLE II
THE ASSETS
Section 2.01. Assignment of Assets.
Pursuant to a Pooling and Servicing Agreement, OMI has sold to the
Trustee without recourse all the right, title and interest of OMI in and to the
Assets identified in such Pooling and Servicing Agreement, any and all rights,
privileges and benefits accruing to OMI under the Sales Agreement(s) with
respect to such Assets (except any rights of OMI to fees payable by the Seller
under such Sales Agreement and provided that OMI shall retain its rights to
indemnification from the Seller under such Sales Agreement, but shall also
convey rights to such indemnification to the Trustee as its assignee), including
the rights and remedies with respect to the enforcement of any and all
representations, warranties and covenants under such Sales Agreements and assets
included or to be included in the related Trust for the benefit of the related
Certificateholders as set forth in the conveyance clause of the related Pooling
and Servicing Agreement. Such assignment includes all of OMI's rights to
payments due with respect to the Assets after the Cut-off Date.
Section 2.02. The Contracts.
(a) Servicer's Custody of Contract Files and Servicer Contract Files.
The parties to the Pooling and Servicing Agreement, by their execution thereof,
acknowledge the Servicer's appointment to serve as custodian of the Contract
Files and the Servicer Contract Files as described herein for the benefit of the
Certificateholders and the Trustee. The Servicer, by its execution of the
Pooling and Servicing Agreement, agrees to, and shall, retain possession of the
Contract File and the Servicer Contract File pertaining to each of the Contracts
on behalf of the Certificateholders and the Trustee. Without limiting the
foregoing, the Trustee acknowledges that, with respect to each Contract secured
by a Manufactured Home located in Virginia as to which the Trustee is identified
as first lienor on the related certificate of title, for purposes of Section
46.2-641 of the Virginia Code (as currently in effect), the Servicer is holding
such Contract and the related certificate of title as bailee and agent for the
Trustee as such first lienor.
The Servicer shall hold each Contract and any other documents
constituting each Contract File and each Servicer Contract File that are in the
possession of the Servicer or that at any time come into the possession of the
Servicer in trust as custodian for the Holders of the Certificates, and the
Servicer hereby acknowledges and declares that it holds and will hold or has
agreed to hold such documents as custodian and as the bailee for, and for the
exclusive use and benefit of, the Holders of the Certificates in accordance with
the terms of the Pooling and Servicing Agreement, and shall make disposition
thereof only in accordance with the Pooling and Servicing Agreement. The
Servicer shall segregate and maintain continuous custody of all documents
constituting the Contract Files in its possession in secure and fireproof-rated
locked files or vaults in accordance with customary standards for such custody.
From time to time, OMI or the Seller shall deliver to the Servicer for
inclusion in the appropriate Contract File, the original Contract Documents for
any Contract to the extent that copies of such original documents were initially
included in such Contract File or in the event that only a copy of an
application for an original Contract Document was initially included among the
related Contract Documents. In addition, the Servicer shall add to the
appropriate Contract File any additional original documents received by the
Servicer that evidence a modification of the related Contract approved by OMI.
-24-
<PAGE>
The Servicer shall maintain custody of the Contract Files and Servicer
Contract Files for each Series in its possession at its offices where the
Contract Files and Servicer Contract Files are presently maintained or at such
other offices of the Servicer in the State of North Carolina as the Servicer may
identify to the Trustee by written notice provided at least ten days prior to
the Servicer's change of the location of its custody of the Contract Files and
Servicer Contract Files. The Servicer may not move the location of its custody
of the Contract Files and Servicer Contract Files for any Series outside of the
State of North Carolina without first giving 30 days' prior written notice of
such relocation to each applicable Rating Agency and the Trustee and obtaining
each such Rating Agency's written confirmation that such relocation will not
result in any downgrading of any Certificates of such Series. Notwithstanding
the foregoing, the Servicer may temporarily move individual Contract Files or
any portions thereof without notice to the Trustee or any Rating Agency as may
be necessary for it to conduct collection and other servicing activities in
accordance with its customary practices and procedures. In acting as custodian
of the Contract Files, the Servicer agrees not to assert any ownership interests
in the Contracts or the Contract Files, and to indicate to any third parties,
promptly upon their inquiry to the Servicer, that the Contracts and the Contract
Files have been sold and assigned to the appropriate Trust.
(b) Review of Contract Files. Prior to the Closing Date, the Servicer's
operations department will complete a review of all of the Contract Files
(including the certificates of title to, or other evidence of a perfected
security interest in, the related Manufactured Homes), confirming the accuracy
of the Contract Schedule delivered to the Trustee. On or before the Closing
Date, the Servicer shall deliver to the Trustee a Servicer Custodial
Certification signed by one of its Officers confirming that it is in possession
of the Contract File for each Contract identified on Schedule I to the Pooling
and Servicing Agreement, subject to any exceptions noted in a schedule to such
certificate. Such certification shall be substantially in the form of Exhibit 1
hereto.
In giving its Servicer's Custodial Certification with respect to a
Series, the Servicer shall be under no duty or obligation (A) to inspect, review
or examine any such documents, instruments, securities or other papers to
determine that they or the signatures thereon are genuine, enforceable, or
appropriate for the represented purpose or that they have actually been recorded
or that they are other than what they purport to be on their face or (B) to
determine whether any Contract File should include any assumption agreement,
modification agreement or waiver agreement.
If the Servicer discovers any discrepancy between any Contract and the
Contract Schedule, or that any required Contract Document is defective or
missing from the related Contract File, in either case in a manner that is
materially adverse to the interests of the Certificateholders, it shall
immediately provide written notice to the Seller (unless the Seller is the
Servicer) and the Trustee of such discrepancy, incompleteness or defect. If the
Seller does not cure such discrepancy or such incomplete or defective Contract
File within 90 days after its receipt of written notice of such discrepancy,
incompleteness or defect, the Servicer shall take all steps within its power to
enforce the Trustee's right to require the Seller to repurchase the affected
Contract (or in the alternative to substitute for such Contract, if the
substitution will take place within two years after the Closing Date) pursuant
to the applicable Sales Agreement or, in the alternative (if the discrepancy
consists of an overstatement in the Contract Schedule of the Cut-off Date
Principal Balance of a Contract), to deposit cash into the related Certificate
Account in the amount of such overstatement of the Cut-off Date Principal
Balance of a Contract in the Contract Schedule (as described in the applicable
Sales Agreement).
(c) Security Interests in the Contracts, Manufactured Homes and Real
Property.
(1) Perfection of Trustee's Security Interest in Contracts. On
or prior to the Closing Date, the Servicer shall cause to be filed in
all appropriate UCC filing offices, UCC-1 financing statements
describing the Trust Estate (including the Contracts and payments due
thereon after the Cut-off Date) and proceeds thereof as "collateral"
and (1) naming the Seller as "Debtor," OMI as "Secured Party," and the
Trustee as "Assignee," and (2) naming OMI as "Debtor" and the Trustee
as "Secured Party." Each financing statement shall bear a statement on
the face thereof indicating that the parties intend the financing
-25-
<PAGE>
statement to evidence a true sale of chattel paper, but that if the
transaction is recharacterized as a loan from the Trustee to the Seller
or as involving a loan from the Trustee to OMI or from OMI to the
Seller, the financing statement is to perfect the Trustee's security
interest in the chattel paper. The Servicer shall cause to be filed all
necessary continuation statements for each of the aforementioned UCC-1
financing statements. Within one week after the Closing Date, the
Servicer will stamp the face of each Contract with the following legend
(with the name of the Trustee filled into each blank): "This Contract
has been assigned to ____________________, as Trustee pursuant to a
Pooling and Servicing Agreement among Oakwood Acceptance Corporation,
Oakwood Mortgage Investors, Inc. and ________________."
(2) Perfection of Trustee's Security Interest in Manufactured
Homes. So long as the Contract Documents for each Contract contain
evidence of perfection of either the Seller's, OMI's or the Trustee's
security interest in the related Manufactured Home, neither the Seller
nor OMI shall be required to cause notations to be made on any
certificate or other document of title relating to such Manufactured
Home or to execute any transfer instrument (including, without
limitation, any UCC-3 assignments) relating to such Manufactured Home,
except under the limited circumstances described in Section 2.06(b)
below. Subject to the limitation described in the preceding sentence,
the Servicer shall take all steps necessary, at its own expense, to
maintain perfection of the Trustee's lien on each Manufactured Home to
the extent the Servicer receives notice of relocation, re-registration
or sale thereof.
(3) Real Estate Assignments. The Contract Documents for each
Land Secured Contract are required to contain evidence that the Seller
has record title to the Real Property underlying such Land Secured
Contract. Neither the Seller nor OMI will be required to prepare,
deliver or record any assignments to OMI or the Trustee in recordable
form for the Mortgages related to such Land Secured Contracts. However,
on or before the Closing Date, the Seller shall deliver to the Trustee
an executed power of attorney substantially in the form of Exhibit 9
hereto, authorizing the Trustee to execute and record assignments of
Mortgages securing Land Secured Contracts from the Seller to the
Trustee in the event that recordation of such assignments becomes
necessary for foreclosure on the related Real Property by or on behalf
of the Trustee. Pursuant to such power of attorney, at the Servicer's
instruction, the Trustee shall execute any such assignments as are
provided to the Trustee by the Servicer. After execution of any such
assignments, the Trustee shall redeliver such assignments to the
Servicer at the Servicer's expense. Any expenses incurred by the
Servicer in connection with the foregoing or in connection with its
recordation of assignments in preparation for a foreclosure on a Land
Secured Contract shall constitute Liquidation Expenses.
Section 2.03. The Mortgage Loans.
(a) Custody of Trustee Mortgage Loan Files. In connection with the
transfer and assignment of the Mortgage Loans from OMI to the Trustee, OMI shall
deliver, or cause to be delivered, to the Trustee or its Custodian on or before
the Closing Date, a Trustee Mortgage Loan File containing each of the documents
listed in the definition thereof. If any Mortgage or an Assignment of a Mortgage
to the Trustee or any prior Assignment is in the process of being recorded on
the Closing Date, OMI shall cause each such original recorded document or
certified copy thereof, to be delivered to the Trustee or its Custodian promptly
following its recordation. OMI shall also cause to be delivered to the Trustee
any other original Mortgage Loan Document to be included in the Trustee Mortgage
Loan File if a copy thereof initially was delivered.
In lieu of recording an Assignment of any Mortgage for any Mortgage
Loan, OMI may deliver or cause to be delivered to the Trustee or its Custodian
the Assignment of the Mortgage from the Seller to the Trustee in a form suitable
for recordation, together with an Opinion of Counsel to the effect that
recording is not required to protect the Trustee's right, title and interest in
and to the related Mortgage Loan or, in case a court should recharacterize the
sale of the Mortgage Loans as a financing, to perfect a first priority security
interest in favor of the Trustee in the related Mortgage Loan. In the event that
the Servicer receives notice that recording is required
-26-
<PAGE>
to protect the right, title and interest of the Trustee in and to any such
Mortgage Loan for which recordation of an Assignment has not previously been
required, the Servicer shall promptly notify the Trustee and the Trustee shall
within five Business Days of its receipt of such notice deliver, or cause to be
delivered, each previously unrecorded Assignment to the Servicer for
recordation.
By its execution of the Pooling and Servicing Agreement for a Series,
the Trustee acknowledges and declares that it or the Custodian holds and will
hold or has agreed to hold all documents delivered to it from time to time with
respect to a Mortgage Loan underlying such Series and all other assets delivered
to it or its Custodian and that are included in the definition of "Trust Estate"
in the related Pooling and Servicing Agreement in trust for the exclusive use
and benefit of all present and future Certificateholders.
(b) Custody of Servicer Mortgage Loan Files. The Servicer has in its
possession a Servicer Mortgage Loan File for each Mortgage Loan containing each
of the documents listed in the definition thereof. All such documents shall be
held by the Servicer in trust for the benefit of the Trustee on behalf of the
Certificateholders.
(c) Review of Trustee Mortgage Loan Files.
(1) Initial Certification. The Trustee shall, for the benefit
of the Certificateholders for any Series, review each related Trustee
Mortgage Loan File prior to the related Closing Date to ascertain that
all documents required to be included in the Trustee Mortgage Loan File
are included therein, and shall deliver to OMI and the Servicer on such
Closing Date an Initial Certification with respect to each underlying
Mortgage Loan (except any Mortgage Loan that has been liquidated or
purchased from the related Trust prior to such Closing Date) to the
effect that, except as specifically noted on a schedule of exceptions
thereto, (A) all documents required to be contained in the Trustee
Mortgage Loan File are in its possession, (B) such documents have been
reviewed by it and appear regular on their face and relate to such
Mortgage Loan, and (C) based on its examination and only as to the
foregoing documents, the information set forth on the related Mortgage
Loan Schedule accurately reflects information set forth in the Trustee
Mortgage Loan File.
It is understood that before making the Initial Certification
for any Series, the Trustee shall examine the related Mortgage Loan
Documents to confirm that:
(A) each Mortgage Note and Mortgage bears an original
signature or signatures purporting to be that of the Person or
Persons named as the maker and mortgagor/trustor or, if
photocopies are permitted, that such copies bear a
reproduction of such signature or signatures;
(B) except for the endorsement to the Trustee,
neither the Mortgage nor any Assignment, on the face or the
reverse side(s) thereof, contain evidence of any unsatisfied
claims, liens, security interests, encumbrances or
restrictions on transfer;
(C) the principal amount of the indebtedness secured
by the related Mortgage is identical to the original principal
amount of the related Mortgage Note;
(D) the Assignment of the related Mortgage from the
Seller to the Trustee is in the form required pursuant to
clause (c) of the definition of Trustee Mortgage Loan File,
and bears an original signature of the Seller and any other
necessary party (or signatures purporting to be that of the
Seller and any such other party) or, if photocopies are
permitted, that such copies bear a reproduction of such
signature or signatures;
(E) if intervening Assignments are included in the
Trustee Mortgage Loan File, each such intervening Assignment
bears an original signature of the related mortgagee and/or
the
-27-
<PAGE>
assignee (and any other necessary party) (or signatures
purporting to be that of the Seller and any such other party)
or, if photocopies are permitted, that such copies bear a
reproduction of such signature or signatures;
(F) if either a Title Insurance Policy, a preliminary
title report or a written commitment to issue a Title
Insurance Policy is delivered, the address of the real
property set forth in such policy, report or written
commitment is identical to the real property address contained
in the related Mortgage; and
(G) if any of a Title Insurance Policy, certificate
of title insurance or a written commitment to issue a Title
Insurance Policy is delivered, such policy, certificate or
written commitment is for an amount not less than the original
principal amount of the related Mortgage Note and such Title
Insurance Policy insures that the related Mortgage creates a
first lien, senior in priority to all other deeds of trust,
mortgages, deeds to secure debt, financing statements and
security agreements and to any mechanics' liens, judgment
liens or writs of attachment (or if the Title Insurance Policy
or certificate of title insurance has not been issued, the
written commitment for such insurance obligates the insurer to
issue such policy for an amount not less than the original
principal amount of the related Mortgage Note).
(2) Final Certification. Prior to the first anniversary date
of the Closing Date for a Series, the Trustee shall deliver to OMI and
the Servicer a Final Certification evidencing the completeness of the
Trustee Mortgage Loan File for each Mortgage Loan, with any applicable
exceptions noted on such Final Certification.
(3) Certifications Generally. In giving each of the Initial
Certification and the Final Certification with respect to a Series, the
Trustee shall be under no duty or obligation (A) to inspect, review or
examine any such documents, instruments, securities or other papers to
determine that they or the signatures thereon are genuine, enforceable,
or appropriate for the represented purpose or that they have actually
been recorded or that they are other than what they purport to be on
their face or (B) to determine whether any Trustee Mortgage Loan File
should include any assumption agreement, modification agreement,
written assurance or substitution agreement.
(4) Recordation Report. No later than the fifth Business Day
of each third month, commencing the fourth month following the month in
which the Closing Date for a Series occurs, the Trustee shall deliver
to the Servicer a Recordation Report for such Series, dated as of the
first day of such month, identifying those Mortgage Loans underlying
such Series for which it has not yet received (A) an original recorded
Mortgage or a copy thereof certified to be true and correct by the
public recording office in possession of such Mortgage or (B) an
original recorded Assignment of the Mortgage to the Trustee and any
required intervening Assignments or a copy thereof certified to be a
true and correct copy by the public recording office in possession of
such Assignment; provided, however, that the Trustee shall not be
required to provide a Recordation Report with respect to the
recordation of an Assignment for any Mortgage Loan for which there has
been delivered an Assignment in recordable form pursuant to Section
2.03(a) hereof unless the Trustee has delivered such Assignment to the
Servicer for recordation, in which case, the Trustee shall deliver a
Recordation Report as to the status of such Assignment in accordance
with this paragraph commencing in the fourth month following the
delivery of such Assignment to the Servicer for recordation.
(5) Custodians. In lieu of taking possession of the Trustee
Mortgage Loan Files and reviewing such files itself, the Trustee may,
in accordance with Section 8.11 hereof, appoint one or more Custodians
to hold the Trustee Mortgage Loan Files for a Series on its behalf and
to review them as provided in this Section 2.03. OMI shall, upon notice
of the appointment of a Custodian, deliver or cause to be delivered
-28-
<PAGE>
all documents to the Custodian that would otherwise be deliverable to
the Trustee. In such event, the Trustee shall obtain from each such
Custodian, within the specified times, the Initial and Final
Certifications and the Recordation Reports with respect to those
Mortgage Loans held and reviewed by such Custodian and may deliver such
Certifications and Reports to OMI and the Servicer in satisfaction of
the Trustee's obligation to prepare such Certification and Reports. The
Trustee shall notify the Custodian of any notices delivered to the
Trustee with respect to those Trustee Mortgage Loan Files.
(d) Recordation with Respect to Mortgage Loans. Notwithstanding any
provisions in these Standard Terms to the contrary, OMI shall cause, with
respect to each Mortgage Loan, Assignments of Mortgages to the Trustee to be
prepared and recorded with respect to all Mortgages not later than one-hundred
twenty (120) calendar days following the Closing Date, which recordation shall
be an expense of the Company. For each Mortgage for which an Assignment of
Mortgage is not duly and timely recorded as provided above, the Company shall
repurchase such Mortgage pursuant to the provisions of 2.06 hereof. As evidence
of recordation, the Trustee shall be entitled to rely upon, among other things
(i) a certification from a title insurance company, (ii) an Opinion of Counsel,
(iii) a recorded Assignment or (iv) a clerk's receipt as to the recordation of
any or all of the Assignments.
Section 2.04. Representations and Warranties of the Trustee.
As of the Closing Date, the Trustee represents and warrants that (1) it
acquired the Assets on behalf of the Trust from OMI in good faith, for value,
and without notice or knowledge of any adverse claim, lien, charge, encumbrance
or security interest (including, without limitation, federal tax liens or liens
arising under ERISA), (2) except as permitted in the related Pooling and
Servicing Agreement and these Standard Terms, it has not and will not, in any
capacity, assert any claim or interest in the Assets, and (3) it has not
encumbered or transferred its right, title or interest in the Assets. The
representation and warranty made in clause (1) above with respect to the absence
of any adverse claim, lien, charge, encumbrance or security interest is made by
the Trustee without any independent investigation and without recourse or
warranty, except that the Trustee believes such representation and warranty to
be true.
Section 2.05. Representations and Warranties as to Assets.
OMI represents and warrants to the Trustee, effective as of the Closing
Date, that the following information is true and correct in all material
respects:
(a) The information pertaining to each Asset set forth in the Asset
Schedule was true and correct at the date or dates respecting which such
information was furnished.
(b) OMI is the owner of, or holder of a perfected first priority
security interest in, each Asset.
(c) OMI acquired its ownership of, or security interest in, each such
Asset in good faith without notice of any adverse claim.
(d) Except for the sale to the Trustee, OMI has not assigned any
interest or participation in each such Asset (or, if any such interest or
participation has been assigned, it has been released).
(e) OMI has full right to sell the Trust Estate to the Trustee.
It is understood and agreed that the representations and warranties set
forth in this Section 2.05 shall survive delivery of the respective Contract
Files to the Servicer as custodian for the Trustee and of the respective Trustee
Mortgage Loan Files to the Trustee or its Custodian and shall inure to the
benefit of the Trustee notwithstanding any restrictive or qualified endorsement
or assignment. Upon the discovery by OMI, the Servicer
-29-
<PAGE>
or the Trustee of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written notice
to the other parties to the Pooling and Servicing Agreement. It is understood
and agreed that the obligations of OMI set forth in Section 2.06 to cure,
substitute for or repurchase a Contract constitute the sole remedies available
to the Certificateholders or to the Trustee on their behalf respecting a breach
of the representations and warranties contained in this Section 2.05. It is
further understood and agreed that OMI shall be deemed not to have made the
representations and warranties in this Section 2.05 with respect to, and to the
extent of, representations and warranties made, as to the matters covered in
this Section 2.05, by the Seller in the related Sales Agreement assigned to the
Trustee.
Section 2.06. Purchase or Substitution of Certain Assets.
(a) Breaches of Representations and Warranties and Incomplete or
Defective Asset Files.
(1) Seller Breach. Upon discovery or receipt of notice of any
defective document in an Asset File, or of any breach by the Seller of
any representation, warranty or covenant hereunder or under the Sales
Agreement, which defect or breach materially and adversely affects the
value of any Asset or the interest of the Trust therein (it being
understood that any such defect or breach shall be deemed to have
materially and adversely affected the value of the related Asset or the
interest of the Trust therein if the Trust incurs a loss as a result of
such defect or breach), the Trustee shall promptly notify the Servicer
of such defect or breach and direct the Servicer to request the Seller
of such Asset to cure such defect or breach. The Seller must cure such
defect or breach, or purchase such Asset from the Trustee on behalf of
the Certificateholders, within 90 days after the date on which the
Seller was notified of such defect or breach. In lieu of purchasing any
such Asset as provided above, if so provided in the related Sales
Agreement, the Seller may cause such Asset to be removed from the Trust
(in which case it shall become a Replaced Asset) and substitute one or
more Qualified Substitute Assets in the manner and subject to the
limitations set forth in Section 2.06(g) below. Notwithstanding the
foregoing, however, if such breach is a Qualification Defect and one or
more REMIC elections have been made with respect to the related Trust,
such cure, purchase or substitution must take place within 75 days of
the Defect Discovery Date. It is understood and agreed that enforcement
of the obligation of the Seller to cure or to purchase (or to
substitute for) any Asset as to which a material defect in a
constituent document exists or as to which such a breach has occurred
and is continuing, in addition to the obligation of the Seller to
indemnify OMI and its assignees (including the Trust) for any losses
and damages incurred in respect of any such breach or defect, shall
constitute the sole remedy respecting such defect or breach available
to the Trustee on behalf of the Certificateholders. The Servicer shall
use its best efforts to enforce the Seller's obligations under its
Sales Agreement to repurchase or substitute for Assets affected by
breaches of the Seller's representations and warranties contained in
its Sales Agreement, and to enforce the Seller's obligations to
indemnify the Trust (as the assignee of OMI under the Sales Agreement)
for any losses or damages it incurs as a result of breaches of the
Seller's representations and warranties contained in its Sales
Agreement.
(2) Servicer Breach. In addition to taking any action required
pursuant to Section 7.01 hereof, upon discovery or notice of any breach
by the Servicer of any representation, warranty or covenant hereunder
not covered by Section 2.06(a)(1) above which materially and adversely
affects the value of any Asset or the interest of the Trust therein (it
being understood that any such defect or breach shall be deemed to have
materially and adversely affected the value of the related Asset or the
interest of the Trust therein if the Trust incurs a loss as a result of
such defect or breach), the Trustee promptly shall notify the Servicer
of such breach. Upon receipt of such notification, the Servicer shall
cure such breach or shall purchase such Asset from the Trustee within
90 days after the date on which the Servicer was notified of such
breach. Notwithstanding the foregoing, however, if such breach is a
Qualification Defect and one or more REMIC elections have been made
with respect to the related Trust, such cure or purchase must take
place within 75 days of the Defect Discovery Date.
-30-
<PAGE>
In the event the Seller has breached a representation or
warranty under its Sales Agreement that is substantially identical to a
representation or warranty breached by the Servicer, the Servicer shall
first proceed against the Seller. If the Seller does not within 60 days
after notification of the breach, take steps to cure such breach or
purchase or substitute for the Mortgage Loan, the Servicer shall cure
such breach or purchase the Mortgage Loan from the Trust as provided in
this Section 2.06(a)(2).
(3) OMI Breach. Within 90 days after the earlier of discovery
or receipt of notice by OMI of the breach of any of its representations
or warranties set forth in Section 2.05 above with respect to any
Asset, which breach materially and adversely affects the value of the
Asset or the interest of the Trust therein (it being understood that
any such breach shall be deemed to have materially and adversely
affected the value of the related Asset or the interest of the Trust
therein if the Trust incurs a loss as a result of such defect or
breach), OMI shall (i) cure such breach in all material respects, (ii)
purchase the Asset from the Trustee, or (iii) remove such Asset from
the Trust (in which case it shall become a Replaced Asset) and
substitute one or more Qualified Substitute Assets in the manner and
subject to the limitations set forth in Section 2.06(g) below.
Notwithstanding the foregoing, however, if such breach is a
Qualification Defect and one or more REMIC elections have been made
with respect to the related Trust, such cure, purchase or substitution
must take place within 75 days of the Defect Discovery Date.
(b) Failure to Retitle Manufactured Homes. Upon the occurrence of
either of the following events:
(1) the rendering of judgment by a court of competent
jurisdiction that the Trustee does not have a perfected first-priority
security interest in a particular Manufactured Home because the Seller
has not caused notations to be made on any certificate or other
document of title relating to such Manufactured Home or has not
executed any transfer instrument (including any UCC financing statement
or UCC-3 assignment) relating to such Manufactured Home, or
(2) the Servicer's receipt of written advice of counsel
selected by the Servicer from among the counsel used by the Servicer in
the ordinary course of its business to the effect that a court of
competent jurisdiction sitting in a jurisdiction in which some of the
Manufactured Homes underlying the Contracts are located has held that,
solely because of the failure of a pledgor or assignor of manufactured
housing contracts (whose pledgee or assignee has perfected its security
interest in such contracts) to cause notations to be made on any
certificate or other document of title relating to a manufactured home
underlying the pledged contracts or to execute any transfer instrument
(including any UCC financing statement or UCC-3 assignment) relating to
any such manufactured home, a perfected first-priority security
interest was not created in a manufactured home underlying such
contracts located in such jurisdiction in favor of the pledgee or
assignee,
then the Servicer, at its expense, must complete all appropriate remedial action
with respect to the affected Manufactured Home(s) within 180 days after the
Servicer's receipt of written notice of such judgment or of such written advice.
If the Servicer fails to complete all such remedial action with respect to any
affected Manufactured Home within such 180-day period, the Servicer must
repurchase each related Contract at the Repurchase Price therefor on or before
the last Business Day of the Prepayment Period ending on or immediately after
the expiration of such 180-day period in accordance with Section 2.05(f) below.
In connection with the foregoing obligation, the Servicer shall have no
obligation on an ongoing basis to seek any advice of counsel with respect to the
matters described in clause (2) of the preceding paragraph. However, the
Servicer shall seek advice with respect to such matters whenever information
comes to the attention of any of its executive officers which causes such
executive officer to determine that a holding of the type described in such
clause (2) might exist.
-31-
<PAGE>
(c) Assignment Failure. If an Assignment to the Trustee of the Seller's
interest in a Mortgage securing a Mortgage Loan has not been recorded within one
year after the Closing Date for the related Series of Certificates (or in the
case of Mortgage Loans for which recordation of an Assignment was initially
waived but subsequently required pursuant to Section 2.03(a) hereof, within one
year after the Trustee's delivery of the Assignment to the Servicer for
recordation), the Servicer shall either (1) purchase the related Mortgage Loan
from the Trustee or (2) if there have been no defaults in the Monthly Payments
on such Mortgage Loan, deposit an amount equal to the Repurchase Price therefor
into an escrow account maintained by the Trustee (which account shall not be an
asset of the Trust or any REMIC), or shall enforce the related Seller's
obligation under its Sales Agreement to make such purchase or deposit. Any such
amounts deposited to an escrow account, plus any earnings thereon, shall (A) be
released to the Servicer or Seller, as the case may be, upon receipt by the
Trustee of satisfactory evidence that the Assignment has been recorded in the
name of the Trustee or (B) be applied to purchase the related Mortgage Loan in
the event that the Servicer notifies the Trustee that there has been a default
thereon. Any amounts in the escrow account may be invested in Eligible
Investments at the written direction of the Servicer.
(d) Converted Loans. Upon receipt of written notice from the Servicer
of the conversion of any Adjustable Rate Asset to a Converted Loan, the Trustee
shall direct the Servicer to enforce the related Seller's obligation set forth
in its Sales Agreement to purchase such Converted Loan from the Trustee, or the
Servicer shall repurchase such Converted Loan from the Trustee. In the event the
Servicer or Seller defaults upon its obligation to purchase any Converted Loan,
and, in the case of a Seller default, such default remains unremedied for a
period of five Business Days after written notice of such default shall have
been given by the Servicer to the Seller, then the Servicer shall use its best
efforts to cause such Converted Loan to be sold for settlement on the last day
of any month to any entity which the Servicer may in its sole discretion select.
The Servicer shall not cause a Converted Loan to be sold or otherwise
transferred to a Person other than the Servicer or Seller (or other Person who
has a pre-existing obligation to purchase such loan) unless (i) upon such sale
the Trust would receive a net amount at least equal to the Repurchase Price of
the Converted Loan and (ii) if the Repurchase Price of the Converted Loan
exceeds the related Basis Limit Amount, the Servicer receives an Opinion of
Counsel that such disposition of a Converted Loan will not result in the
imposition of a "prohibited transaction" tax (as such term is defined in the
Code) on any related REMIC or jeopardize its status as a REMIC. Any such
Converted Loan which is not purchased by the Servicer or the Seller and which
the Servicer is unable to sell as described in the second preceding sentence
shall remain in the Trust.
(e) Optional Purchase by Servicer of Defaulted Contracts. At any time
after a Contract has become and remains a Defaulted Contract, the Servicer may,
at its option, purchase such Defaulted Contract from the Trust at the Repurchase
Price therefor in accordance with Section 2.06(f) below.
(f) Manner of Repurchase. Any Asset purchased pursuant to Section
2.05(a), (b), (c), (d) or (e) hereof shall be purchased at the Repurchase Price
for such Asset. The Seller, OMI or the Servicer, as appropriate (any of the
foregoing, a "Repurchaser"), shall deposit into the Certificate Account, on the
date of purchase, the Repurchase Price for each Asset to be purchased. Upon such
deposit and upon being provided by the Repurchaser with appropriate instruments
of transfer or assignment, the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in the Repurchaser any Asset purchased hereunder, and the
Trustee shall deliver to the Repurchaser any Asset Documents relating to the
repurchased Asset that are in the Trustee's possession, whereupon the Trustee
shall have no further responsibility with regard to such Asset. Except as
provided in this Section 2.06(f), if a Repurchaser shall, in accordance with the
foregoing, purchase any Asset required by it to be purchased, neither the
Trustee nor any Certificateholder shall have any other remedy against such
Repurchaser based on any misrepresentation or breach of covenant or warranty of
such Repurchaser with respect to or resulting from any such Asset.
The Servicer will be responsible for determining the Repurchase Price
for any Asset (and the related Basis Limit Amount for any Converted Loan) to be
repurchased pursuant to this Section 2.06 and shall certify such amounts to the
Trustee at the time of any such purchase. If, for whatever reason, the Servicer
shall certify to the Trustee that there is a miscalculation of the amount to be
paid to the Trust, the Trustee shall from monies in the
-32-
<PAGE>
Distribution Account return any overpayment that the Trust received as a result
of such miscalculation to the applicable Repurchaser upon the discovery of such
overpayment, and the Servicer shall collect from the applicable Repurchaser for
payment to the Trustee any underpayment that resulted from such miscalculation
upon the discovery of such underpayment. Recovery may be made either directly or
by set-off of all or any part of such underpayment against amounts owed by the
Trust to such Repurchaser.
Any Repurchaser shall indemnify and hold harmless the Trustee from and
against any and all losses or liabilities incurred by the Trustee (including any
such losses or liabilities arising from third-party claims) with respect to or
resulting from any repurchase hereunder.
(g) Manner of Substitution. Unless otherwise provided in the Pooling
and Servicing Agreement, the right to substitute a Qualified Substitute Asset
for any Replaced Asset that is an asset of the Trust shall be limited to (1) in
the case of substitutions pursuant to Section 2.06(a) or 2.06(c), the two-year
period beginning on the Closing Date and (2) in the case of any other
substitution, the three-month period beginning on the Closing Date.
As to any Replaced Asset for which OMI or the Seller substitutes a
Qualified Substitute Asset or Assets, OMI or the Seller, as the case may be,
shall effect such substitution by delivering to the Trustee for such Qualified
Substitute Asset or Assets a complete Contract File or Trustee Mortgage Loan
File, as appropriate, together with an Officer's Certificate of OMI or the
Seller, as the case may be, to the effect that each such Qualified Substitute
Asset complies with the terms of the Pooling and Servicing Agreement. Monthly
Payments due with respect to Qualified Substitute Assets in the month of
substitution are not part of the Trust and will be retained by OMI or the
Seller, as the case may be. For the month of substitution, distributions to
Certificateholders will reflect the Monthly Payment due on such Replaced Asset
during the month in which the substitution occurs, and OMI or the Seller, as the
case may be, shall thereafter be entitled to retain all amounts subsequently
received in respect of such Replaced Asset. The Servicer shall amend the Asset
Schedule to reflect the removal of such Replaced Asset from the terms of the
Pooling and Servicing Agreement and the substitution of the Qualified Substitute
Asset or Assets. Upon such substitution, such Qualified Substitute Asset or
Assets shall be subject to the terms of the Pooling and Servicing Agreement in
all respects, including, in the case of a substitution effected by the Seller,
the representations and warranties included in the related Sales Agreement, and
in the case of a substitution effected by OMI, the representations and
warranties set forth in Section 2.05 above, in each case as of the date of
substitution. The Trustee shall, within five Business Days of its receipt of the
documents referred to above, effect the reconveyance of such Replaced Asset to
OMI or the Seller, as the case may be, in accordance with the procedures
specified above.
For any month in which OMI or the Seller substitutes one or more
Qualified Substitute Assets for one or more Replaced Assets, the Servicer will
determine and notify the Trustee with respect to the amount (if any) by which
the aggregate Unpaid Principal Balance of all such Qualified Substitute Assets
as of the date of substitution is less than the aggregate Unpaid Principal
Balance of all such Replaced Assets (after application of Monthly Payments due
in the month of substitution) (the "Substitution Shortfall"). On the date of
such substitution, OMI or the Seller, as the case may be, will deliver or cause
to be delivered to the Trustee for deposit from its own funds into the
Distribution Account an amount equal to the Substitution Shortfall.
(h) Qualification Defect. If any Person required to cure, purchase, or
substitute under Section 2.06(a) above for an Asset affected by a Qualification
Defect fails to perform within the time limit set forth in those subsections,
the Trustee shall dispose of such an Asset in such manner and for such price as
the Servicer advises the Trustee are appropriate, provided that the removal of
such Asset occurs no later than the 90th day from the Defect Discovery Date. It
is the express intent of the parties that an Asset affected by a Qualification
Defect be removed from the Trust before the 90th day from the Defect Discovery
Date so that the related REMIC or Pooling REMIC will continue to qualify as a
REMIC. Accordingly, the Trustee is not required to sell an affected Asset for
its fair market value nor shall the Trustee be required to make up any shortfall
resulting from the sale of such Asset. The person failing to perform under
Section 2.06(a) above shall be liable to the Trust for (1) any difference
between (A) the Unpaid Principal Balance plus accrued and unpaid interest
thereon at the applicable Asset Rate to
-33-
<PAGE>
the date of disposition and (B) the net amount received by the Trustee from the
disposition (after the payment of related expenses), (2) interest on such
difference at the Asset Rate from the date of disposition to the date of payment
and (3) any legal and other expenses incurred by or on behalf of the Trust in
seeking such payments. Except where the Servicer is the person failing to
perform, the Servicer shall pursue the legal remedies of the Trust on the
Trust's behalf and the Trust shall reimburse the Servicer for any legal or other
expenses of the Servicer related to such pursuit not recovered from such person.
If the Servicer is the person failing to perform, the Trustee shall pursue the
Trust's legal remedies against the Servicer and the Trust shall reimburse the
Trustee for its related legal or other expenses.
(i) Notices. Any person required under this Section 2.06 to give notice
or to make a request of another person to give notice shall give such notice or
make such request promptly.
ARTICLE III
ADMINISTRATION OF TRUSTS AND SERVICING OF THE ASSETS
Section 3.01. The Servicer.
The Servicer agrees to service the Assets for and on behalf of the
Trustee and its successors and assigns, and otherwise to perform and carry out
the duties, responsibilities and obligations that are to be performed and
carried out by the Servicer under the Pooling and Servicing Agreement. The
Servicer shall service the Contracts in accordance with the customary and usual
procedures of responsible financial institutions that service manufactured
housing retail installment sales contracts and installment loan agreements for
manufactured housing units located in the jurisdictions in which the
Manufactured Homes are located, except as otherwise expressly provided by the
Pooling and Servicing Agreement; provided, however, that the Servicer shall not
release or waive its right to collect the unpaid principal balance of any
Contract. The Servicer shall service the Mortgage Loans (a) generally in
compliance with FNMA standards and (b) in a manner that is consistent with
prudent residential mortgage loan servicing standards generally accepted within
the residential mortgage loan servicing industry. The manner in which the
Servicer services the Assets shall be consistent with the manner in which the
Servicer services all manufactured housing retail installment sales contracts
and residential mortgage loans in its servicing portfolio, except for any
differences specifically required by the Pooling and Servicing Agreement. The
Servicer shall have full power and authority consistent with the aforementioned
standards, acting alone and/or through agents and designees as permitted by
Section 6.07 hereof, to do any and all things it may deem necessary or desirable
in connection with such servicing and administration; provided, however, that to
the extent the Servicer is prohibited by any applicable rule, regulation,
judicial or administrative determination or other order applicable to it from
carrying out any of its obligations or duties provided for herein or in any
document contemplated herein, such failure shall not constitute a breach of this
Agreement.
Section 3.02. Maintenance of Records; Inspection of Asset Files.
(a) The Servicer shall retain all data relating directly to or
maintained in connection with the servicing of the Assets for any Series at the
address of the Servicer set forth in Section 11.04 hereof or at such other place
where the servicing offices of the Servicer are located.
The Servicer shall permit the Trustee or any authorized agent of the
Trustee reasonable access, upon prior written notice to the Servicer, during the
Servicer's normal business hours, to the Asset Files, the Servicer Files, and
the Servicer's other records, if any, relating to the Assets for any related
Series. Any such examination of such files or records will be conducted in a
manner that does not unreasonably interfere with the Servicer's normal
operations or customer or employee relations. Without otherwise limiting the
scope of the examination the Trustee may make, the Trustee or its authorized
agents, using generally accepted audit procedures, may in their discretion
-34-
<PAGE>
verify the status of each Asset and review the records relating thereto for
conformity to Remittance Reports prepared pursuant to Article IV hereof and
compliance with the standards represented to exist as to each Asset in the
Pooling and Servicing Agreement.
(b) At all times during the term hereof, the Servicer shall keep
available a copy of the Asset Schedule at its principal executive office for
inspection by Certificateholders.
(c) On or before the date of the Servicer's delivery of the Remittance
Report to the Trustee in any month, the Servicer will, upon the written request
of the Trustee, provide to the Trustee a list of outstanding Assets, setting
forth the Scheduled Principal Balance of each such Asset as of the preceding
Distribution Date.
(d) Notwithstanding the provisions of this Section 3.02, the Trustee
shall at no time have any duty or obligation to examine any records of the
Servicer or to recalculate or otherwise verify the accuracy of any certificate
or report prepared by the Servicer, and no implied duty to do so shall be
asserted against the Trustee.
(e) On or before the Closing Date for a Series, the Servicer shall
deliver to the Trustee a list of Officers of the Servicer (each a "Servicing
Officer") involved in, or responsible for, the administration and servicing of
the Assets underlying such Series, which list shall be amended from time to time
as necessary by the Servicer by delivery of an amended list of Servicing
Officers to the Trustee.
Section 3.03. Collection of Payments on Assets; Servicing Delinquent Accounts.
(a) Continuously from the Cut-off Date until the earliest to occur of
the following with respect to each Asset sold to the Trust in connection with
the issuance of the Certificates: (i) the principal and interest on such Asset
is paid in full, (ii) such Asset is foreclosed and the related Manufactured Home
or Mortgaged Property is liquidated pursuant to Section 3.08 hereof, (iii) all
of the proceeds of a liquidating claim under the Standard Hazard Insurance
Policy relating to such Asset have been deposited to the Certificate Account, or
(iv) the Liquidation Proceeds relating to such Asset have been deposited to the
Certificate Account, the Servicer will proceed diligently and in a manner
consistent with its standards for servicing Assets described in Section 3.01
above, to collect all payments due under each Asset when such payments become
due and payable and to apply such payments in accordance with Sections 3.05,
3.06 and 3.07 hereof.
(b) The Servicer shall have reasonable discretion to extend appropriate
relief to Obligors who encounter hardship and who are cooperative and
demonstrate proper regard for their obligations. The Servicer may arrange with
such an Obligor to extend the payment schedule for the related Asset; provided,
however, that any such extension must be made in accordance with the Servicer's
standards for servicing Assets described in Section 3.01 above; and provided
further, that no such extensions may be made except to the extent (1) that the
Servicer has determined, in its reasonable judgment, that the Obligor is in
default or that default is reasonably foreseeable with respect to such Asset in
the absence of such relief, (2) that the Due Date for the final Monthly Payment
on such Asset is not extended beyond the latest Final Scheduled Distribution
Date for the related Series and (3) that the grant of such extension is
otherwise permissible under Section 10.02 hereof and the REMIC Provisions as in
effect at the time of such extension, as evidenced by an Opinion of Counsel
delivered by the Servicer to the Trustee. Where the Obligor is in default on an
Asset notwithstanding such relief and the Servicer has exhausted all reasonable
means of inducing the Obligor to pay on a timely basis, the Servicer shall begin
acceleration of the Assets in accordance with its terms and applicable laws.
Section 3.04. Advances and Compensating Interest.
(a) Servicing Advances. If any Obligor is in default in the payment of
premiums on its Standard Hazard Insurance Policy or Policies, the Servicer may
pay such premiums or taxes out of its own funds. If any Obligor is in default in
the payment of premiums on its Standard Hazard Insurance Policy or Policies and
coverage
-35-
<PAGE>
is not provided in respect of the related Asset under a blanket policy
maintained by the Servicer pursuant to Section 3.16(a) below, or if any Obligor
is in default in the payment of personal property taxes or real estate taxes due
in respect of its Manufactured Home or Mortgaged Property, the Servicer shall
pay such premiums or taxes out of its own funds in a timely manner, as Servicing
Advances, unless the Servicer, in its reasonable judgment, determines that any
such Servicing Advance would be a Non-Recoverable Advance. In addition, the
Servicer shall pay in a timely manner, as Servicing Advances, any and all
personal property taxes and real estate taxes due in respect of any Repo
Property or REO Property it holds on behalf of the Trust and all premiums for
any Standard Hazard Insurance Policy maintained for such Repo Property or REO
Property (except as similar coverage may be provided under a blanket policy
maintained by the Servicer pursuant to Section 3.16 below) unless the Servicer,
in its reasonable judgment, determines that any such Servicing Advance would be
a Non-Recoverable Advance.
(b) P&I Advances. If any Obligor fails to make its Monthly Payment by
the Remittance Date, the Servicer shall deposit such amount in the Distribution
Account on or before such Remittance Date, as a "P&I Advance," unless the
Servicer, in its reasonable judgment, determines that any such P&I Advance would
be a NonRecoverable Advance, or such Monthly Payment can be offset by Early
Payments, as provided in Section 3.07(c) hereof. In addition, if the Certificate
Account is maintained with the Trustee, the Servicer may instruct the Trustee to
use any investment earnings on such account to defray its P&I Advance
obligation, and the Trustee shall honor any such instructions (including
standing instructions).
(c) Recovery of Advances. The Servicer shall be entitled to
reimbursement for any Advances made by it in respect of any Asset out of late
collections from the related Obligor or from Insurance Proceeds, Liquidation
Proceeds or a Repurchase Price recovered by it in respect of such Asset
("Related Proceeds") and shall be entitled to reimburse itself for unreimbursed
Advances made that have become Non-Recoverable Advances in accordance with
Section 3.07(a)(1) below.
(d) Non-Recoverable Advances. If the Servicer does not make an Advance
on the grounds that it is a Non-Recoverable Advance, or if an Advance previously
made by the Servicer is determined by the Servicer to have become a
Non-Recoverable Advance, then the Servicer shall provide the Trustee with an
Officer's Certificate stating this fact and stating the basis upon which the
Servicer determined that such Advance would be or was a NonRecoverable Advance.
The Trustee shall not be responsible for determining whether any such
determination was reasonable.
(e) Compensating Interest. So long as OAC is the Servicer of any
Assets, OAC as Servicer shall deposit into the Distribution Account for the
related Series on or before each Remittance Date an amount equal to Compensating
Interest for such month. Compensating Interest shall not be considered a
Non-Recoverable Advance, and the Servicer shall not be entitled to any recovery
or reimbursement from the Trustee or the Certificateholders for any Compensating
Interest.
Section 3.05. Servicing Account.
Within one Business Day after the Servicer's receipt of any amounts
collected on any Asset in its lock box maintained for the collection of amounts
payable under contracts serviced by it (including Net Liquidation Proceeds,
Insurance Proceeds and Repurchase Prices in respect thereof), the Servicer shall
deposit such collections, or cause such collections to be deposited, into a
clearing account established by the Servicer (the "Servicing Account"), which
shall be an Eligible Account. The Servicer may use the Servicing Account for
collection of payments on Assets underlying more than one Series and for assets
that are not the subject of any transaction covered by a Pooling and Servicing
Agreement; provided, that in any such event, the Servicer shall cause separate
accounting and records to be maintained within the Servicing Account with
respect to the Assets underlying each separate Series. Furthermore, the parties
hereto agree that all amounts deposited into the Servicing Account in respect of
the Assets, other than amounts payable to the Servicer as servicing compensation
under the Pooling and Servicing Agreement, are to be held in trust for the
exclusive use and benefit of the related Trust.
-36-
<PAGE>
Section 3.06. Certificate Account.
(a) On or before the Closing Date, the Trustee shall establish a
collection account or accounts (the "Certificate Account"), which must be an
Eligible Account. The Certificate Account is to be held by or for the benefit of
the Trustee on behalf of the Certificateholders, and shall be either in the
Trustee's name or designated in a manner that reflects the custodial nature of
the account and that all funds in such account are held for the benefit of the
Trustee. The Trustee may elect to use a single Certificate Account for more than
one Series of Certificates provided, that in any such event, the Servicer shall
cause separate accounting and records to be maintained within the Certificate
Account with respect to each separate Series.
(b) The Servicer shall deposit into the appropriate Certificate Account
on a daily basis, and in no event later than two Business Days following deposit
thereof to the Servicing Account after the Servicer's collection thereof, all
payments and collections received by it on each Outstanding Asset on or after
the effective date of the related Pooling and Servicing Agreement (including Net
Liquidation Proceeds, Insurance Proceeds and Repurchase Prices in respect
thereof), except amounts collected in respect of Monthly Payments due on or
prior to the Cut-off Date. On or prior to the Closing Date, the Servicer shall
deposit into the Certificate Account all installments of principal and interest
due on the Assets after the Cut-off Date and received by the Servicer prior to
the Closing Date, plus each Principal Prepayment of any Asset (including any
related payment of interest) received by the Servicer on or after the Cut-off
Date but prior to the Closing Date.
(c) Amounts on deposit in the Certificate Account may be invested at
the direction of the Servicer in Eligible Investments, and earnings on amounts
deposited in such account shall be credited to the account of the Servicer as
servicing compensation in addition to the Servicing Fee and shall offset P&I
Advances due from the Servicer in respect of the Distribution Date next
succeeding the date on which such earnings were made or, in the alternative at
the Servicer's option, may be released to the Servicer on such Distribution
Date. The amount of any losses incurred in respect of any such investments shall
be deposited in the Certificate Account by the Servicer out of its own funds
immediately upon realization of any such losses.
Section 3.07. Withdrawals From Certificate Account; Remittance Amounts.
(a) Withdrawals from Certificate Account. The Servicer may withdraw
funds on deposit in the Certificate Account for the following purposes:
(1) to reimburse itself for any Advances previously made by
the Servicer, which Advances remain unreimbursed to the Servicer, out
of Related Proceeds or, if such Advances have been determined by the
Servicer to have become Non-Recoverable Advances, out of any funds on
deposit in the Certificate Account;
(2) to pay any Servicing Fees and other servicing compensation
provided for herein due to the Servicer; provided, however, that if OAC
is the Servicer, it shall only be entitled to withdraw its Servicing
Fee in respect of any Distribution Date from the Certificate Account in
accordance with this clause to the extent the amounts on deposit in the
Certificate Account and attributable to the Available Distribution
Amount for such Distribution Date exceed the sum of all amounts to be
distributed on the Certificates of the related Series on such
Distribution Date prior to the distribution to OAC of its Servicing
Fees as described in the related Pooling and Servicing Agreement in the
Section thereof entitled "Distributions"; and
(3) to enable the Servicer to remit the Remittance Amount to
the Trustee on each Remittance Date, as described in Section 3.07(b)
below.
-37-
<PAGE>
(b) Remittance Dates. On or prior to the Remittance Date for any
Distribution Date, the Servicer shall remit the Remittance Amount for such
Distribution Date to the Trustee, from and to the extent of the funds in the
Certificate Account, plus all required P&I Advances, by wire transfer or
otherwise, in immediately available funds, for deposit into the Distribution
Account. If the Certificate Account is maintained by the Trustee, on each
Remittance Date, the Servicer shall notify the Trustee as to the amount of the
related Remittance Amount and the amount of all required P&I Advances to be
covered by investment earnings on the Certificate Account, and the Trustee shall
transfer such amount from the Certificate Account to the Distribution Account on
the related Distribution Date. In such event, the Servicer shall still remit any
P&I Advances not covered by investment earnings on the Certificate Account to
the Trustee for deposit into the Distribution Account on the Remittance Date.
Notwithstanding the foregoing, if a Terminating Purchase is to be made
on such Distribution Date, and the Servicer shall have received the Termination
Price or shall be the Terminator, the Servicer shall remit the Termination Price
rather than the Remittance Amount to the Trustee for deposit into the
Distribution Account.
(c) Treatment of Early Payments. Early Payments received by the
Servicer shall be retained in the Certificate Account and transferred to the
Distribution Account when and as if such Early Payments had otherwise been
received by the Servicer as scheduled payments under the Assets. However, Early
Payments on any Assets for a Series on deposit in the Certificate Account that
are not yet due to be passed through to Certificateholders on any Distribution
Date may be remitted to the Distribution Account to offset delinquencies on
other Assets for the same Series. If Early Payments on any Asset are used to
offset delinquencies on other Assets, subsequent late recoveries of such
delinquent amounts on such other Assets shall be treated by the Servicer as a
restoration of the Early Payments used to offset such delinquent amounts and
shall be deposited into the Certificate Account in accordance with Section
3.06(a) hereof. The Servicer shall maintain records with respect to its
application of Early Payments.
Section 3.08. Realization upon Defaulted Assets.
(a) The Servicer shall repossess, foreclose upon or otherwise
comparably convert the ownership of any Manufactured Home and any related Real
Property and any Mortgaged Property securing an Asset that comes into and
continues in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 3.03 hereof. In
connection with such repossession, foreclosure or other conversion, the Servicer
shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual for responsible holders of retail
installment sales contracts and installment loan agreements for manufactured
housing (in the case of defaulted Contracts) and for responsible holders of
residential, one- to four-family mortgage loans (in the case of defaulted
Mortgage Loans) and as shall be in compliance with all applicable laws;
provided, that such practices and procedures shall be, in all circumstances,
undertaken with a view toward maximizing the amount of principal and interest
recovered on the Assets.
(b) The Servicer may commence and prosecute any Proceedings in respect
of any Asset in default in its own name on behalf of the Trustee or, if the
Servicer deems it necessary, in the name of the Trustee. If the Servicer elects
to commence a Proceeding to enforce an Asset, the act of commencement shall be
deemed to entail an automatic assignment of the Asset to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding in which the Servicer seeks to collect payments due on any Asset, it
is held that the Servicer lacks standing to enforce an Asset (or otherwise is
not permitted to enforce an Asset) on the grounds that it is not a real party in
interest or a holder entitled to enforce the Asset, the Trustee, on behalf of
the Certificateholders, shall take such steps as the Servicer deems necessary to
enforce the Asset, including bringing suit in its name or in the names of the
Certificateholders. Any such action by the Trustee shall be taken at the
Servicer's expense, but such expenses (including, without limitation, attorneys'
fees) shall be deemed Liquidation Expenses which the Servicer shall have no
obligation to incur to the extent it makes a good faith determination that such
Liquidation Expenses will not be recoverable out of Liquidation Proceeds of the
related Asset.
-38-
<PAGE>
(c) In seeking to enforce the Assets, the Servicer may exercise any
rights of recourse against guarantors or sureties of any Obligor's obligations
(or against any other third parties against whom any rights of recourse exist in
connection with any Asset).
(d) The Servicer's obligations under this Section are subject to the
proviso that, in the case of damage to a Manufactured Home or a Real Property or
a Mortgaged Property, the Servicer shall not be required to expend its own funds
in making Liquidation Expenses to restore such property unless it shall
determine, in its reasonable judgment, (1) that such restoration will increase
the proceeds of liquidation of the related Asset, after reimbursement to the
Servicer for such expenses, and (2) that such Liquidation Expenses, if made,
will be recoverable out of Liquidation Proceeds of such Asset. If the Servicer
recovers any Insurance Proceeds or Liquidation Proceeds in respect of any Asset,
the Servicer may deduct the amount of any Insured Expenses and unreimbursed
Liquidation Expenses incurred by it in respect of such Asset from such gross
Insurance Proceeds and Liquidation Proceeds, respectively, prior to deposit of
such proceeds into the Certificate Account.
(e) Notwithstanding any of the foregoing, the Servicer shall not
repossess, foreclose upon or otherwise comparably convert the ownership of any
Manufactured Home, Real Property or Mortgaged Property securing an Asset in
cases where the Servicer has actual knowledge that the Manufactured Home, Real
Property or Mortgaged Property is situated on a toxic waste site as determined
by the United States Environmental Protection Agency or other comparable federal
or state agency and where, in the good faith judgment of the Servicer, the
liabilities that would be imposed upon the Trust with respect to such toxic
waste site would exceed the Net Liquidation Proceeds that could be realized upon
liquidation of the related Asset. The Servicer shall have no affirmative duty or
obligation to determine whether any Manufactured Home, Real Property or
Mortgaged Property is situated on a toxic waste site.
Section 3.09. Title, Conservation, and Disposition of Repo Property and REO
Property.
(a) The Servicer shall maintain, protect, and insure any Repo Property
or REO property acquired pursuant to Section 3.08 hereof, on behalf of the
Trust, in accordance with standard industry practice solely for the purpose of
its prompt disposition and sale and with a view toward maximizing the amount of
principal and interest recovered on the Assets. During any period in which the
Trust holds a Repo Property or REO Property, the Servicer shall not (1) lease
the Repo Property or REO Property, (2) authorize or permit any construction on
the Repo Property or REO Property, other than the completion of a building or
improvement thereon, and then only if more than 10% of the construction of such
building or other improvement was completed before default on the related Asset
became imminent, all within the meaning of section 856(e)(4)(B) of the Code, or
(3) allow the Repo Property or REO Property to be used in any trade or business
conducted by the Trust. If one or more REMIC elections are made with respect to
the assets of the Trust, the Servicer shall use its best efforts to dispose of
such Repo Property or REO Property for its fair market value by the end of the
tenth month of the third calendar year following the end of the calendar year in
which the Repo Property or REO Property was acquired by the Trust (the "REO
Holding Period"), pursuant to the Servicer's ordinary commercial practices. If
the Servicer is unable to sell such Repo Property or REO Property in the course
of its ordinary commercial practices within the REO Holding Period, the Servicer
shall (a) purchase such Repo Property or REO Property at a price equal to such
Repo Property's or REO Property's fair market value or (b) auction such Repo
Property or REO Property to the highest bidder in an auction reasonably designed
to produce a fair price (an "Auction") that takes place within one month after
the end of the REO Holding Period. If the Servicer and the Trustee either (1)
receive an Opinion of Counsel indicating that, under then-current law, the REMIC
may hold Repo Property or REO Property associated with a REMIC Asset for a
period longer than the REO Holding Period without threatening the REMIC status
of any related REMIC or causing the imposition of a tax upon any such REMIC or
(2) the Servicer applies for and is granted an extension of the REO Holding
Period pursuant to Code sections 860G(a)(8) and 856(e)(3) (the applicable period
provided pursuant to such Opinion of Counsel or such Code section being referred
to herein as an "Extended Holding Period"), upon the direction of OMI or the
Trustee, the Servicer shall continue to attempt to sell such Repo Property or
REO Property pursuant to its ordinary commercial practices until the date two
months prior to the
-39-
<PAGE>
expiration of the Extended Holding Period. If no REMIC election has been made or
is to be made with respect to the assets of the Trust, the REO Holding Period
for disposing of any Repo Property or REO Property as described in the preceding
two sentences shall be an eleven-month period. The Servicer shall either sell
any Repo Property or REO Property remaining after such date in an Auction or
purchase such Repo Property or REO Property (at the price set forth in this
paragraph) before the end of the Extended Holding Period. In the event of any
such sale of a Repo Property or REO Property, the Trustee shall, at the written
request of the Servicer and upon being supplied with appropriate forms therefor,
within five Business Days after its receipt of the proceeds of such sale or
auction, instruct the Servicer to release to the purchaser the related Contract
File and Servicer Contract File (in the case of a Repo Property), and the
Trustee shall release to the purchaser the related Trustee Mortgage Loan File
and shall instruct the Servicer to release to the purchaser the related Servicer
Mortgage Loan File (in the case of a Mortgage Loan), and in any event the
Trustee shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as shall be necessary to vest in the auction
purchaser title to the Repo Property or REO Property, and shall deliver to such
purchaser any Asset Documents relating to such Contract that are in the
Trustee's possession, whereupon the Trustee shall have no further responsibility
with regard to any related Asset File or Servicer File. Neither the Trustee nor
the Servicer, acting on behalf of the Trust, shall provide financing from such
Trust to any purchaser of a Repo Property or REO Property.
(b) In the event that title to any Real Property or REO Property is
acquired, the deed or certificate of sale shall be issued to the Trustee for the
benefit of the Certificateholders. The Servicer shall, in accordance with
Section 3.09(a), use its reasonable efforts to sell any Repo Property or REO
Property as expeditiously as possible, but in all events within the time period,
and subject to the conditions set forth in Section 3.09(a) hereof. Pursuant to
its efforts to sell such Repo Property or REO Property, the Servicer shall
either itself or through an agent selected by the Servicer protect and conserve
such Repo Property or REO Property in the same manner and to such extent as it
customarily does in connection with its own repossessed manufactured homes or
mortgaged properties (as applicable), incident to its conservation and
protection of the interests of the Certificateholders.
(c) The Servicer shall deposit all net funds collected and received in
connection with the operation of any Repo Property or REO Property in the
applicable Certificate Account no later than the second Business Day following
receipt of such funds.
(d) The Servicer, upon the final disposition of any Repo Property or
REO Property, shall be entitled to reimbursement of any related unreimbursed
Advances related to the Asset for such Repo Property or REO Property as well as
any unpaid Servicing Fees from Liquidation Proceeds received in connection with
the final disposition of such Repo Property or REO Property, the latter in
accordance with the Sections of the related Pooling and Servicing Agreement that
are entitled "Distributions" and "Limited Right of Servicer to Retain Servicing
Fees from Collections."
(e) The final disposition of any Repo Property or REO Property shall be
carried out by the Servicer at the Repo Property's or REO Property's fair market
value under the circumstances existing at the time of disposition and upon such
terms and conditions as the Servicer shall deem necessary or advisable, and as
are in accordance with accepted servicing practices and in accordance with
Section 3.09(a) above.
(f) The Liquidation Proceeds from the final disposition of any Repo
Property or REO Property shall be deposited into the Certificate Account
promptly following receipt of such Liquidation Proceeds and, subject to such
withdrawals as may be permitted by Section 3.07(a) above, shall be transferred
to the Distribution Account pursuant to Section 3.07(b) above.
(g) The Servicer shall prepare and file reports of foreclosure and
abandonment in accordance with section 6050J of the Code.
(h) Notwithstanding any other provision of this Agreement, the
Servicer, acting on behalf of the Trustee hereunder, shall not rent, lease, or
otherwise earn income or take any action on behalf of the Trust with
-40-
<PAGE>
respect to any REO Property that might (i) cause such REO Property to fail to
qualify as "foreclosure property" within the meaning of section 860G(a)(8) of
the Code or (ii) result in the receipt by any related REMIC of any "income from
non-permitted assets" within the meaning of section 860F(a)(2) of the Code or
any "net income from foreclosure property" within the meaning of section
860G(c)(2) of the Code, both of which types of income are subject to tax under
the REMIC Provisions, unless the Trustee has received an Opinion of Counsel at
the Trust's expense (the costs of which shall be recoverable out of the
applicable Certificate Account), to the effect that, under the REMIC Provisions
and any relevant proposed legislation, any income generated for any related
REMIC by the REO Property would not result in the imposition of a tax upon such
REMIC.
Without limiting the generality of the foregoing, the Servicer
shall not:
(i) enter into, renew or extend any New Lease with respect to
any REO Property, if the New Lease by its terms will give rise to any
income that does not constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under any New
Lease other than amounts that will constitute Rents from Real Property;
(iii) authorize or permit any construction on any REO
Property, other than the completion of a building or other improvement
thereon, and then only if more than ten percent of the construction of
such building or other improvement was completed before default on the
related Mortgage Loan became imminent, all within the meaning of
section 856(e)(4)(B) of the Code; or
(iv) Directly Operate, or allow any other Person (other than
an Independent Contractor) to Directly Operate, any REO Property on any
date more than 90 days after its acquisition date;
unless, in any such case, the Servicer has requested and received the Opinion of
Counsel described in the preceding sentence, in which case the Servicer may take
such actions as are specified in such Opinion of Counsel.
(i) The Servicer shall not acquire any personal property relating to
any Asset (other than the related Manufactured Home in connection with a
Contract) pursuant to this Section 3.09 unless either:
(1) such personal property is incident to real property (or to
the related Manufactured Home, in the case of a Contract) (within the
meaning of section 856(e)(1) of the Code) so acquired by the Servicer;
or
(2) the Servicer shall have requested and received an Opinion
of Counsel, at the expense of the Trust (recoverable out of the
Certificate Account), to the effect that the holding of such personal
property by the related REMIC will not cause the imposition of a tax
under the REMIC Provisions on any REMIC related to the Trust or cause
any such REMIC to fail to qualify as a REMIC at any time that any
Certificate is outstanding.
Section 3.10. Full Prepayments and Liquidations; Trustee to Cooperate; Release
of Mortgage Files.
(a) Contracts. The Servicer shall determine when a Contract has been
paid in full. Upon the liquidation of any Contract, the Servicer shall remit the
proceeds thereof to the related Certificate Account in accordance with Sections
3.05 and 3.06 above.
The Servicer is authorized to execute an instrument in satisfaction of
any Contract that is the subject of a Principal Prepayment in full, final
liquidation or other payment in full (as well as an instrument in satisfaction
of any related Mortgage) and do such other acts and execute such other documents
as the Servicer deems necessary to discharge the Obligor thereunder and
eliminate the security interest in the Manufactured Home and any Real
-41-
<PAGE>
Property related thereto. Upon the Servicer's request, the Trustee shall, at the
expense of the Servicer, perform such other acts as are reasonably requested by
the Servicer (including, without limitation, the execution of documents) and
otherwise cooperate with the Servicer in enforcement of rights and remedies with
respect to Contracts. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to a Certificate
Account or Distribution Account.
(b) Mortgage Loans. Upon the liquidation of any Mortgage Loan, the
Servicer shall remit the proceeds thereof to the related Certificate Account in
accordance with Sections 3.05 and 3.06 above and shall deliver to the Trustee a
Request for Release requesting that the Trustee execute such instrument of
release or satisfaction as is necessary to release the related Mortgaged
Property from the lien of the related Mortgage. The Trustee shall, within five
Business Days of its receipt of such a Request for Release, release, or cause
the Custodian to release, the related Trustee Mortgage Loan File to the
Servicer. No expenses incurred in connection with any instrument of satisfaction
or deed of reconveyance shall be chargeable to a Certificate Account or
Distribution Account.
From time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, including but not limited to, collection under any Title
Insurance Policy, Primary Mortgage Insurance Policy, flood insurance policy or
Standard Hazard Insurance Policy or to effect a partial release of any Mortgaged
Property from the lien of the related Mortgage, the Servicer shall deliver to
the Trustee a Request for Release. The Trustee shall, within five Business Days
after its receipt of such Request for Release, release, or cause the Custodian
to release, the related Trustee Mortgage Loan File to the Servicer. Any such
Request for Release shall obligate the Servicer to return each and every
document previously requested from the Trustee Mortgage Loan File to the Trustee
by the twenty-first day following the release thereof, unless (a) the Mortgage
Loan has been liquidated and the Liquidation Proceeds relating to the Mortgage
Loan have been deposited in the related Certificate Account or Distribution
Account or the Trustee Mortgage Loan File or such document has been delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non-judicially, and
the Servicer has delivered to the Trustee a certificate of the Servicer
certifying as to the name and address of the Person to which such Trustee
Mortgage Loan File or such document was delivered and the purpose or purposes of
such delivery. Upon receipt of an Officer's certificate of the Servicer stating
that such Mortgage Loan was liquidated and that all amounts received or to be
received in connection with such liquidation which are required to be deposited
into the applicable Certificate Account or the Distribution Account have been so
deposited, or that such Mortgage Loan has become an REO Property, the Request
for Release shall be released by the Trustee to the Servicer.
(c) Trustee's Execution of Documents in connection with Foreclosures.
Upon written certification of the Servicer, the Trustee shall execute and
deliver to the Servicer court pleadings, requests for trustee's sale or other
documents necessary to the foreclosure or trustee's sale in respect of a
Mortgaged Property or Real Property or to any legal action brought to obtain
judgment against any Obligor on a Mortgage Note, Land Secured Contract or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights provided by such Mortgage Note, Land Secured Contract or Mortgage or
otherwise available at law or in equity. Each such certification shall include a
request that such pleadings or documents be executed by the Trustee and a
statement as to the reason such documents or pleadings are required and that the
execution and delivery thereof by the Trustee will not invalidate or otherwise
affect the lien of the related Mortgage, except for the termination of such a
lien upon completion of the foreclosure proceeding or trustee's sale. Upon the
request of the Servicer, the Trustee shall execute and deliver to the Servicer
one or more limited powers of attorney that constitutes and appoints the
Servicer as the Trustee's true and lawful attorney-in-fact and agent with
respect to the commencement of certain actions, in the name and on behalf of the
Trustee, for the benefit of the Certificateholders, pursuant to the provisions
hereof and to execute and deliver, in the Trustee's name, place and stead such
papers as reasonably necessary or desirable to carry out the foregoing, at all
times consistent with the Pooling and Servicing Agreement.
-42-
<PAGE>
Section 3.11. Maintenance of Security Interests and Other Liens in Manufactured
Homes.
At its own expense, the Servicer shall take such steps as are necessary
to maintain perfection of the security interest in the Seller, OMI or the
Trustee and the validity of any other lien created by each Contract in the
related Manufactured Home to the extent it receives notice of sale or
reregistration of such Manufactured Home. The Trustee hereby authorizes the
Servicer to take such steps as are necessary to reperfect such security interest
in the event of the relocation of a Manufactured Home or for any other reason;
provided, that nothing in this Section 3.11 shall be construed to limit the
Servicer's obligations under Section 3.12 below.
Section 3.12. Due-on-Sale Clauses and Assumption Agreements.
Upon learning of any conveyance or prospective conveyance of a
Manufactured Home or Real Property securing any Contract or of a Mortgaged
Property securing any Mortgage Loan, the Servicer may exercise its rights,
subject to state law, under any "due-on-sale" clause of the Contract, Mortgage
Note or Mortgage relating to such Manufactured Home or Mortgaged Property to
demand immediate payment in full of all amounts due under such Contract or
Mortgage Loan. With respect to Mortgage Loans, the Servicer will exercise such
rights to the extent, under the circumstances, and in the manner in which the
Servicer enforces such clauses with respect to other Mortgage Loans held in its
portfolio, but will not exercise such rights if prohibited by law from doing so.
If the Servicer determines not to enforce a "due-on-sale" clause with
respect to an Asset, the Servicer will enter into an assumption and/or
modification agreement with the person to whom the Manufactured Home or
Mortgaged Property has been conveyed in a form that is customary or appropriate
in the Servicer's reasonable business judgment pursuant to which such person
becomes liable under the Asset and pursuant to which, to the extent permitted by
applicable law and deemed appropriate by the Servicer in its reasonable
judgment, the original Obligor remains liable on such Asset; provided, that (a)
the Servicer reasonably determines that permitting such assumption by such
person will not increase materially the risk of nonpayment of amounts due under
the related Asset, (b) such action is not prohibited by law and will not affect
adversely or jeopardize any coverage under any Insurance Policy required to be
maintained with respect to such Asset pursuant to the Pooling and Servicing
Agreement, (c) neither the Unpaid Principal Balance nor the Asset Rate of the
related Asset may be reduced and (d) if one or more REMIC elections have been
made with respect to the assets of the Trust, no other material term of the
related Asset (including, without limitation, the amortization schedule or any
other term affecting the amount or timing of payments on such Asset) may be
modified without an Opinion of Counsel to the effect that such modification will
not be treated, under the REMIC Provisions, as an acquisition of the modified
Asset by the REMIC in exchange for the unmodified Asset on the date the
modification occurs. The Servicer shall follow its customary underwriting
procedures prior to entering into any such assumption agreement, including,
without limitation, a satisfactory credit review of any Person assuming such
Asset.
Section 3.13. Annual Accountants' Certificate; Annual Statement as to
Compliance.
(a) The Servicer shall deliver to the Trustee, on or before December 30
of each year, with respect to each Pooling and Servicing Agreement that the
Servicer entered into on or before the preceding September 30, an Officer's
Certificate signed by the President or any Vice President of the Servicer, dated
as of September 30 of the preceding year, stating that (1) a review of the
activities of the Servicer during the preceding 12-month period (or since the
Cut-off Date in the case of the first such Officer's Certificate relating to any
Trust) and of its performance under the Pooling and Servicing Agreement has been
made under such Officer's supervision and (2) to the best of such Officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under the Pooling and Servicing Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such Officer and the nature and status thereof. A copy of such
certificate may be obtained by any other Holder who makes a request in writing
to the Trustee addressed to the Corporate Trust Office.
-43-
<PAGE>
(b) In addition, on or before December 30 of each year, the Servicer,
at its expense, shall cause a firm of Independent public accountants which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Trustee and each applicable Rating Agency to the effect that
(1) such firm has audited the financial statements of the Servicer for the
Servicer's most recently ended fiscal year and issued its report thereon; (2)
such audit included tests of the records and documents relating to manufactured
housing installment sale contracts and mortgage loans serviced by the Servicer
for others in accordance with the requirements of the Uniform Single Attestation
Program for Mortgage Bankers, or any successor program promulgated by the
accounting profession ("USAP"); and (3) such other statements as are
contemplated under USAP, including, if called for under USAP, a statement as to
whether the Servicer's management's written assertion to such firm (which shall
be attached to the statement of such firm) that its servicing during the
applicable fiscal year complied with USAP's minimum servicing standards in all
material respects is fairly stated in all material respects. The audit tests
referred to in clause (2) of the preceding sentence shall be applied to
manufactured housing installment sale contracts and mortgage loans serviced
under the Pooling and Servicing Agreement and/or, in the sole discretion of such
firm, manufactured housing installment sale contracts and mortgage loans
serviced under pooling and servicing agreements, trust agreements or indentures
substantially similar to the Pooling and Servicing Agreement (hereinafter
referred to as "Pooling Agreements"). For purposes of such statement, such firm
may assume conclusively that all Pooling Agreements under which the Servicer is
the servicer of manufactured housing installment sale contracts and mortgage
loans for a trustee relating to certificates evidencing an interest in
manufactured housing installment sale contracts and mortgage loans are
substantially similar to one another except for any such Pooling Agreement which
by its terms specifically states otherwise.
Section 3.14. Servicing Fees.
As compensation for the services provided for a Series (including
servicing of the related Assets and administration of the related Trust) and
ordinary expenses incurred by the Servicer under the Pooling and Servicing
Agreement, on each Distribution Date the Servicer shall be entitled to receive
the Servicing Fee on each Asset from amounts collected on such Asset. Except as
otherwise expressly provided in the Pooling and Servicing Agreement, the
Servicer shall perform all of the obligations to be performed by it under the
Pooling and Servicing Agreement at its expense and without cost or charge to the
Trustee. The Servicing Fee relating to any Asset shall be payable solely from
the interest portion of each Monthly Payment or other payment of or in respect
of interest collected by the Servicer in respect of such Asset, whether from the
proceeds of any judgment, writ of attachment or levy against the related Obligor
or its assets, or from funds received by the Servicer in connection with any
Principal Prepayment in full, from Insurance Proceeds or Liquidation Proceeds or
in connection with any purchase or repurchase of an Asset; provided, however,
that the Servicing Fee with respect to an Asset in any month shall be payable to
the Servicer out of amounts paid by the related Obligor toward the Monthly
Payment due on such Asset during such month only if the related Obligor has
remitted the entire amount of such Monthly Payment. The Servicer also shall be
entitled to additional servicing compensation as specified in Sections 3.06(c)
and 3.15 hereof. Unless otherwise provided in the Pooling and Servicing
Agreement for a Series, the Servicer may retain its Servicing Fee and any other
servicing compensation provided for in such Pooling and Servicing Agreement from
gross interest collections on the related Assets prior to depositing such
collections into the related Certificate Account.
Section 3.15. Late Charges; Prepayment Fees or Other Charges.
To the extent permitted by law, the Pooling and Servicing Agreement and
the terms of any Asset, the Servicer may collect and retain as additional
compensation any late charges, extension fees or similar fees provided for in
the Asset.
To the extent reasonable and permitted by the terms of any Asset and by
law, the Servicer may collect from the Obligors, and retain as additional
compensation, prepayment fees, assumption fees or any fees imposed in connection
with the replacement by such Obligor of the related Standard Hazard Insurance
Policy.
-44-
<PAGE>
Notwithstanding any other provisions of the Pooling and Servicing
Agreement, the Servicer shall not charge or impose upon any Obligor, nor seek to
charge or impose upon any Obligor, or assert a right to receive from any
Obligor, any fee, charge, premium or penalty that, if charged or collected,
would violate or contravene any law, including usury laws, or the terms of the
related Asset.
Section 3.16. Maintenance of Standard Hazard Insurance, Primary Mortgage
Insurance, and Errors and Omissions Coverage.
(a) Standard Hazard Insurance. Except as otherwise provided in this
Section 3.16(a), the Servicer shall cause to be maintained with respect to each
Contract and Mortgage Loan and each Repo Property and REO Property one or more
Standard Hazard Insurance Policies that provide, at a minimum, the same coverage
as that provided by a standard form fire and extended coverage insurance policy
that is customary for manufactured housing or residential real property (as
applicable) and which shall include flood insurance coverage issued by a
Qualified Insurer, providing coverage in an amount at least equal to the lesser
of (1) the maximum insurable value of the related Manufactured Home or Mortgaged
Property or (2) the principal balance due from the Obligor under such Contract
or Mortgage Loan; provided, however, that in any event the amount of coverage
provided by each Standard Hazard Insurance Policy must be sufficient to avoid
the application of any co-insurance clause contained therein. As part of its
collection responsibilities, the Servicer shall proceed to collect the premiums
due on the Standard Hazard Insurance Policies from the Obligors in accordance
with the degree of skill and care that is customarily used for such purpose in
the manufactured home loan servicing industry (in the case of Contracts) and the
residential mortgage loan servicing industry (in the case of Mortgage Loans).
Each Standard Hazard Insurance Policy caused to be maintained by the Servicer
shall contain a standard loss payee clause in favor of the Servicer and its
successors and assigns. Any amounts received under any such policies shall be
deposited initially into the related Certificate Account and then deposited into
the related Distribution Account pursuant to Sections 3.06 and 3.07 hereof,
within the respective time frames specified in such Sections.
In lieu of causing individual Standard Hazard Insurance Policies to be
maintained with respect to each Manufactured Home and Mortgaged Property
pursuant to subsection (a) of this Section 3.16, the Servicer may maintain one
or more blanket insurance policies, each issued by a Qualified Insurer, covering
losses on the Obligors' interests in the Assets relating to such Manufactured
Homes and Mortgaged Properties resulting from the absence or insufficiency of
such individual Standard Hazard Insurance Policies. The Servicer shall pay the
premium for any such policy on the basis described therein and shall pay any
deductible amount with respect to claims under such policy relating to the
Assets covered thereby. All amounts collected by the Servicer under any such
blanket policy and any payments by the Servicer of deductible amounts
thereunder, in each case relating to an Asset covered thereby, shall be
deposited initially into the Certificate Account pursuant to Sections 3.05 and
3.06 hereof (within the respective time frames specified in such Sections),
after payment to (or retention by) the Servicer of all Insured Expenses and
Liquidation Expenses incurred by it with respect to the Manufactured Home or
Mortgaged Property to which such recovery relates, as well as the amount of any
Advances made by the Servicer with respect to the related Asset that have not
been reimbursed to the Servicer.
(b) Primary Mortgage Insurance. The Servicer must maintain a Primary
Mortgage Insurance Policy in full force and effect on each Mortgage Loan, if
any, which is identified in the related Sales Agreement as being covered by a
Primary Mortgage Insurance Policy. Any such Primary Mortgage Insurance Policy
must insure the portion of the Unpaid Principal Balance of the related Mortgage
Loan that exceeds 75% of the value of the related Mortgaged Property (as set
forth in the appraisal obtained in connection with origination of the Mortgage
Loan) (the Mortgaged Property's "Initial Value") unless such Primary Mortgage
Insurance coverage has been waived in writing by OMI at the time it purchases
the Mortgage Loan or such Primary Mortgage Insurance is canceled under the
circumstances described below. If a covered Mortgage Loan provides for negative
amortization or the potential for negative amortization, the Primary Mortgage
Insurance Policy must also insure any increase in the Unpaid Principal Balance
of the Mortgage Loan from the original principal balance of the related Mortgage
Note. In the event that the rating assigned by any Rating Agency for any of the
related Certificates to the claims-paying ability of any
-45-
<PAGE>
related Mortgage Insurer is reduced subsequent to the issuance of the related
Certificates, the Servicer will use its best efforts to replace each Primary
Mortgage Insurance Policy issued by the downgraded Mortgage Insurer with a new
Primary Mortgage Insurance Policy issued by an insurer whose claims-paying
ability is acceptable to OMI. The premium for any replacement policy shall not
exceed the premium for any replaced policy.
The Servicer may cancel the Primary Mortgage Insurance Policy
maintained with respect to any Mortgage Loan at the related Mortgagor's request
if the following conditions are met:
(1) The current Mortgage Loan-to-Value Ratio of the mortgage
Loan must be 80% or less. The current Mortgage Loan-to-Value Ratio must
be calculated by dividing the Unpaid Principal Balance of the Mortgage
Loan by the Initial Value of the related Mortgaged Property;
(2) The Mortgage Loan may not have been 30 days or more
delinquent at any time within the preceding twelve months; and
(3) There nay not have been any other default under the terms
of the Mortgage Loan at any time during the preceding twelve months.
The Servicer must take all steps necessary to ensure the payment by
each Mortgage Insurer of the maximum benefits available under the terms of the
related Primary Mortgage Insurance Policy. The Servicer must work diligently
with the Mortgage Insurer to determine whether such insurer will settle a claim
under a Primary Mortgage Insurance Policy by taking title to the related
Mortgaged Property or in some other manner. Upon receipt of any proceeds of a
Primary Mortgage Insurance Policy, the Servicer must deposit such proceeds into
the applicable Certificate Account in accordance with Sections 3.05 and 3.06
above.
(c) Errors and Omissions Coverage; Fidelity Bond. The Servicer shall
keep in force throughout the term of the Pooling and Servicing Agreement a
policy or policies of insurance issued by a Qualified Insurer covering errors
and omissions in the performance of its obligations as Servicer hereunder,
including failure to maintain insurance as required by the Pooling and Servicing
Agreement, and a fidelity bond covering the Servicer's performance under the
Pooling and Servicing Agreement. Such policy or policies and bond shall be in
such form and amount as is generally customary among Persons that service a
portfolio of manufactured housing installment sales contracts and installment
loans having an aggregate principal amount of $100 million or more and which
Persons are generally regarded as servicers acceptable to institutional
investors.
-46-
<PAGE>
ARTICLE IV
REMITTANCE AND REPORTING TO CERTIFICATEHOLDERS
Section 4.01. Remittance Reports.
On or before the third Business Day prior to each Distribution Date,
the Servicer shall prepare a statement containing the information specified
below as to such Distribution Date (a "Remittance Report") and deliver such
statement to the Trustee. The Trustee shall forward such report to the
Certificateholders on the related Distribution Date, by mail to the addresses of
such Certificateholders as listed in the Certificate Register on the preceding
Record Date. A Remittance Report for a Distribution Date for a Series shall
identify the following items:
(1) the aggregate amount of each of the following, stated
separately, with respect to the related Assets: (A) the amount of all
scheduled principal payments on the Assets relating to such
Distribution Date, (B) the principal components and interest components
of all Monthly Payments made by the Obligors on the Assets during the
related Collection Period, (C) Principal Prepayments (including related
Net Insurance Proceeds) received by the Servicer during the related
Prepayment Period, (D) Liquidation Proceeds (including related
Insurance Proceeds) and Net Liquidation Proceeds (including related Net
Insurance Proceeds) received during the related Prepayment Period, (E)
the amount of any Repurchase Price paid by OMI, the Seller or the
Servicer with respect to any of the Contracts purchased by OMI, the
Seller or the Servicer pursuant to Section 2.06 hereof during the
related Prepayment Period, (F) the aggregate number of Repo Properties
and the aggregate number of REO Properties in the Trust as of the end
of the related Prepayment Period and the aggregate of the unpaid
principal balances of the related Contracts and of the related Mortgage
Loans, respectively, (G) the aggregate number and the aggregate Unpaid
Principal Balance of Outstanding Contracts and Outstanding Mortgage
Loans, stated separately, that are (i) delinquent one month (i.e., 30
to 59 days) as of the end of the related Prepayment Period, (ii)
delinquent two months (i.e., 60 to 89 days) as of the end of the
related Prepayment Period, (iii) delinquent three months (i.e., 90 days
or longer) as of the end of the related Prepayment Period and (iv) as
to which repossession, foreclosure or other comparable proceedings have
been commenced as of the end of the related Prepayment Period, (H) the
amount of Realized Losses incurred on the Assets during the related
Prepayment Period and on a cumulative basis since the Cut-off Date (the
latter expressed as a dollar amount and as a percentage of the
aggregate Cut-off Date Principal Balance) (separately identifying any
Obligor Bankruptcy Losses, Special Hazard Losses and Fraud Losses, if
they are separately allocated to the related Certificates), (I) the
aggregate Scheduled Principal Balance of the Contracts and the Mortgage
Loans, stated separately, and the number of Outstanding Contracts and
Mortgage Loans, stated separately, in each case at the end of the
related Collection Period, (J) the aggregate number and the aggregate
Unpaid Principal Balance of Outstanding Contracts and Outstanding
Mortgage Loans, stated separately, for which the Obligor is also a
debtor, whether voluntary or involuntary, in a proceeding under the
Bankruptcy Code; and (K) the aggregate number and the aggregate Unpaid
Principal Balance of Outstanding Contracts and Outstanding Mortgage
Loans for which the Obligor is also a debtor, whether voluntary or
involuntary, in a proceeding under the Bankruptcy Code, stated
separately, that are (i) delinquent one month (i.e., 30 to 59 days) as
of the end of the related Prepayment Period, (ii) delinquent two months
(i.e., 60 to 89 days) as of the end of the related Prepayment Period,
and (iii) delinquent three months (i.e., 90 days or longer) as of the
end of the related Prepayment Period;
(2) the Available Distribution Amount for such Distribution
Date;
(3) the amount of funds in the Distribution Account, if any,
to be allocated to pay Servicing Fees, to reimburse the Servicer for
Advances made, to reimburse OMI or the Servicer for expenses pursuant
to Section 6.05 hereof, and to refund any overpayment of a Repurchase
Price for an Asset pursuant to Section 2.06(f) hereof;
-47-
<PAGE>
(4) the amount of the Servicing Fee for the related Collection
Period;
(5) the aggregate amount of P&I Advances required to be made
by the Servicer with respect to such Distribution Date, together with a
statement of the amount, if any, of such required P&I Advances that the
Servicer will not make in respect of such Distribution Date and of any
P&I Advances that will not be made because they are Non-Recoverable
Advances;
(6) the aggregate deposits into the Certificate Account
relating to such Distribution Date and the aggregate withdrawals from
the Certificate Account for each category of withdrawal specified in
Section 3.07(a) hereof relating to such Distribution Date;
(7) in the case of a Trust (or designated assets thereof) for
which a REMIC election has been or will be made, any other information
required to be provided to Certificateholders by the REMIC Provisions;
and
(8) any items relating to a specific Series of Certificates
specified in the related Pooling and Servicing Agreement.
The Trustee shall maintain a telephone number which investors may call
to ascertain, on each Distribution Date, the Certificate Principal Balance of
each Class of Certificates and the then-current Pass-Through Rate applicable to
each such Class. Such number for any Series shall initially be as specified in
the Prospectus Supplement for such Series and may only be changed after the
Trustee notes the change in such number in writing on the Remittance Report it
sends to Certificateholders.
Within a reasonable period of time after the end of each calendar year,
the Trustee shall prepare and furnish a statement, from information provided by
the Servicer, containing the information concerning the amount of distributions
of interest and principal on the Regular Certificates and the amount of
distributions on the Residual Certificates, as well as any other information as
may be required by the Code or Regulations and that customarily would be
provided by a Trustee to Certificateholders in order to enable such
Certificateholders to prepare their federal income tax returns, to each Person
who at any time during the calendar year was a Certificateholder that
constituted a retail investor or other Certificateholder that requests such
statement, aggregated for such calendar year or portion thereof during which
such Person was a Certificateholder. 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.
Section 4.02. Distribution Account.
The Trustee shall establish and maintain a Distribution Account for the
benefit of the Certificateholders and shall deposit therein funds received with
respect to the Remittance Amount for each Distribution Date immediately upon
receipt thereof from the Servicer in accordance with Section 3.07(b) hereof. The
Distribution Account shall be an Eligible Account and shall be either held in
the Trustee's name or designated in a manner that reflects the custodial nature
of the account and that all funds in such account are held in trust for the
benefit of the Trustee.
The Servicer shall keep and maintain separate accounting, on an
Asset-by-Asset basis, for the purpose of justifying any payment to and from the
Distribution Account.
Section 4.03. Allocation of Available Distribution Amount.
On each Distribution Date for a Series, the Trustee shall withdraw all
monies on deposit in the related Distribution Account in accordance with the
related Remittance Report and shall distribute such amounts in the following
order of priority:
-48-
<PAGE>
(1) if OAC is not the Servicer, to pay the Servicer its
monthly Servicing Fee, to the extent not previously retained or
withdrawn from the Certificate Account by such Servicer or, if OAC is
the Servicer, to pay OAC its monthly Servicing Fee in respect of a
Distribution Date, but only to the extent that the amounts on deposit
in the Certificate Account and attributable to the Available
Distribution Amount for such Distribution Date exceed the sum of all
amounts to be distributed on the Certificates of the related Series on
such Distribution Date prior to the distribution to OAC of its
Servicing Fee, as described in the related Pooling and Servicing
Agreement in the Section thereof entitled "Distributions";
(2) to reimburse the Servicer from any amounts on deposit in
the Distribution Account for any Advance previously made which has
become a Non-Recoverable Advance, or to reimburse the Servicer for any
other Advance out of Related Proceeds on deposit in the Distribution
Account, in either case to the extent not previously retained or
withdrawn from the Certificate Account by the Servicer;
(3) to reimburse OMI or the Servicer for expenses incurred by
or reimbursable to them pursuant to Section 6.05 hereof;
(4) to refund any overpayment of a Repurchase Price for an
Asset pursuant to Section 2.06(f) hereof; and
(5) to distribute to the Certificateholders (or, if more than
one REMIC election has been made with respect to the Trust, to
distribute to the holders of the Regular Interests and the Residual
Interest in the Pooling REMIC), the Available Distribution Amount in
accordance with the applicable Pooling and Servicing Agreement.
Section 4.04. Compliance with Withholding Requirements.
Notwithstanding any other provisions of the Pooling and Servicing
Agreement, the Trustee shall comply with all federal withholding requirements
respecting payments of interest or principal to the extent of accrued original
issue discount on Certificates to each Holder of such Certificates who (a) is
not a "United States person," within the meaning of Code section 7701(a)(30),
(b) fails to furnish its TIN to the Trustee, (c) furnishes the Trustee an
incorrect TIN, (d) fails to report properly interest and dividends, or (e) under
certain circumstances, fails to provide the Trustee or the Certificateholder's
securities broker with a certified statement, signed under penalties of perjury,
that the TIN provided by such Certificateholder to the Trustee or such broker is
correct and that the Certificateholder is not subject to backup withholding. The
consent of such a Certificateholder shall not be required for such withholding.
In the event the Trustee does withhold the amount of any otherwise required
distribution from interest payments on the Assets (including principal payments
to the extent of accrued original issue discount) or P&I Advances thereof to any
Certificateholder pursuant to federal withholding requirements, the Trustee
shall indicate with any payment to such Certificateholders the amount withheld.
In addition, if any United States federal income tax is due at the time a
Non-U.S. Person transfers a Residual Certificate, the Trustee or other
Withholding Agent may (1) withhold an amount equal to the taxes due upon
disposition of such Residual Certificate from future distributions made with
respect to such Residual Certificate to the transferee thereof (after giving
effect to the withholding of taxes imposed on such transferee), and (2) pay the
withheld amount to the Internal Revenue Service unless satisfactory written
evidence of payment by the transferor of the taxes due has been provided to the
Trustee or such Withholding Agent. Moreover, the Trustee or other Withholding
Agent may (1) hold distributions on a Residual Certificate, without interest,
pending determination of amounts to be withheld, (2) withhold other amounts, if
any, required to be withheld pursuant to United States federal income tax law
from distributions that otherwise would be made to such transferee on each
Residual Certificate that it holds, and (3) pay to the Internal Revenue Service
all such amounts withheld.
Section 4.05. Reports of Security Principal Balances to the Clearing Agency.
-49-
<PAGE>
If and for so long as any Certificate is held by the Clearing Agency,
on the second Business Day before each Distribution Date, the Trustee shall give
oral notice to the Clearing Agency (and shall promptly thereafter confirm in
writing) the following: (a) the amount of interest and principal to be
distributed on the Certificates of such Class on the upcoming Distribution Date,
as reported in the related Remittance Report, (b) the Record Date for such
distribution, (c) the Distribution Date for such distribution and (d) the
aggregate Certificate Principal Balance of each Class of Certificates reported
pursuant to clause (10) of Section 4.01 hereof in such month.
Section 4.06. Preparation of Regulatory Reports.
(a) Subject to the provisions of subsections (b) and (c) of this
Section 4.06, the Servicer shall prepare or cause to be prepared, on behalf of
the Trust, such supplementary and periodic information, documents and reports
(such information, documents or reports are referred to hereinafter as "Periodic
Reports") as may be required pursuant to Section 12(g) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), by the rules
and regulations of the Commission thereunder or as a condition to approval of
any application for relief ("Application for Relief") hereinafter referred to
and, in connection therewith, shall prepare such applications and requests for
exemption and other relief from such provisions as it may deem appropriate. The
Servicer shall be deemed to certify as to each Periodic Report that it conforms
in all material respects to applicable reporting requirements imposed by the
Exchange Act or is otherwise in form and content appropriate for filing with the
Commission. The Servicer is hereby authorized to and shall execute all such
Periodic Reports or Applications for Relief on the Trustee's behalf and file the
same with the Commission and other required filing offices, if any, on behalf of
the Trust.
(b) Within 30 days after the beginning of the first fiscal year of any
Trust during which its obligation to file Periodic Reports pursuant to the
Exchange Act shall have been suspended, the Servicer shall prepare, or cause to
be prepared, a notice on Commission Form 15 ("Form 15") and is hereby authorized
to and shall execute such Form 15 on the related Trustee's behalf; provided,
however, that the Servicer shall be under no obligation to prepare such notice
if the number of Certificateholders exceeds 300. The Servicer shall file any
notice on Form 15 with the Commission in accordance with the provisions of Rule
15d-6 under the Exchange Act.
(c) Notwithstanding any other provision of the Pooling and Servicing
Agreement, the Trustee has not assumed, and shall not by its performance
hereunder be deemed to have assumed, any of the duties or obligations of OMI or
any other Person with respect to (1) the registration of the Certificates
pursuant to the Securities Act, (2) the issuance or sale of the Certificates, or
(3) compliance with the provisions of the Securities Act, the Exchange Act, or
any applicable federal or state securities or other laws including, without
limitation, any requirement to update the registration statement or prospectus
relating to the Certificates in order to render the same not materially
misleading to investors.
(d) In connection with the Servicer's preparation of any Form 15 or of
any Periodic Report, the Trustee shall provide it with information which it may
reasonably request concerning the number and identity of the Holders appearing
on the Certificate Register maintained by the Certificate Registrar, but the
Trustee shall have no duty or obligation to provide information which does not
appear on the Certificate Register, including any information concerning the
ownership of Persons for whom a nominee is the Holder of record.
-50-
<PAGE>
ARTICLE V
THE POOLING INTERESTS AND THE CERTIFICATES
Section 5.01. Pooling REMIC Interests.
If an election has been made to treat certain assets of the Trust as a
Pooling REMIC, the Pooling and Servicing Agreement will set forth the terms of
the Regular Interests and Residual Interest of the Pooling REMIC. Unless
otherwise specified in the Pooling and Servicing Agreement, (a) the Pooling
REMIC Regular Interests will be "regular interests" for purposes of the REMIC
Provisions but will not constitute securities or certificates of interest in the
Trust; and (b) the Trustee will be the owner of any such Regular Interests,
which may not be transferred to any person other than a successor trustee
appointed pursuant to Section 8.08 hereof unless the party desiring the transfer
obtains a Special Tax Opinion.
Section 5.02. The Certificates.
The Certificates shall be designated in the Pooling and Servicing
Agreement. The Certificates in the aggregate will represent the entire
beneficial ownership interest in the Trust Estate (or in the Issuing REMIC, if
any). On the Closing Date, unless otherwise specified in the related Pooling and
Servicing Agreement, the aggregate Certificate Principal Balance of the
Certificates will not be less than the aggregate Unpaid Principal Balance of the
underlying Assets as of the Cut-off Date, after application of principal
payments due on or before such date, whether or not received. The Certificates
will be substantially in the forms annexed to the Pooling and Servicing
Agreement. Unless otherwise provided in the Pooling and Servicing Agreement, the
Certificates of each Class will be issuable in registered form. Each Certificate
will share ratably in all rights of the related Class.
Upon original issue, the Certificates shall be executed and delivered
by the Trustee and the Trustee shall cause the Certificates to be authenticated
by the Certificate Registrar to or upon the order of OMI upon receipt by the
Trustee of the Servicer Custodial Certification required by Section 2.02 hereof.
The Certificates shall be executed and attested by manual or facsimile signature
on behalf of the Trustee by an authorized Officer under its seal imprinted
thereon. Certificates bearing the manual or facsimile signatures of individuals
who were at any time the proper Officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall
represent entitlement to any benefit under the Pooling and Servicing Agreement
or be valid for any purpose, unless there appears on such Certificate a
certificate of authentication substantially in the form provided in the Pooling
and Servicing Agreement (in the forms of Certificates attached thereto as
Exhibits) executed by the Certificate Registrar by manual signature, and such
certificate of authentication shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their execution, except
that those Certificates delivered on the Closing Date may be dated the Accrual
Date.
Section 5.03. Book-Entry Certificates.
(a) The Book-Entry Certificates will be represented initially by one or
more certificates registered in the name of CEDE & Co., as nominee of the
Clearing Agency. OMI, the Servicer and the Trustee may for all intents and
purposes (including the making of payments on the Book-Entry Certificates) deal
with the Clearing Agency as the authorized representative of the Beneficial
Owners of the Book-Entry Certificates for as long as those Certificates are
registered in the name of the Clearing Agency. The rights of Beneficial Owners
of the Book-Entry Certificates shall be limited to those established by law and
agreements between such Beneficial Owners and the Clearing Agency and Clearing
Agency Participants. The Beneficial Owners of the Book-Entry Certificates shall
not be entitled to certificates for the Book-Entry Certificates as to which they
are the Beneficial Owners, except as provided in subsection (c) below. Requests
and directions from, and votes of, the Clearing Agency, as Holder, shall
-51-
<PAGE>
not be deemed to be inconsistent if they are made with respect to different
Beneficial Owners. Without the consent of OMI, the Servicer and the Trustee, a
Book-Entry Certificate may not be transferred by the Clearing Agency except to
another Clearing Agency that agrees to hold the Book-Entry Certificate for the
account of the respective Clearing Agency Participants and Beneficial Owners.
(b) Neither OMI, the Servicer nor the Trustee will have any liability
for any aspect of the records relating to or payment made on account of
Beneficial Owners of the Book-Entry Certificates held by the Clearing Agency,
for monitoring or restricting any transfer of beneficial ownership in a
Book-Entry Certificate or for maintaining, supervising or reviewing any records
relating to such Beneficial Owners.
(c) The Book-Entry Certificates will be issued in fully-registered,
certificated form to Beneficial Owners of Book-Entry Certificates or their
nominees, rather than to the Clearing Agency or its nominee, only if (1) OMI
advises the Trustee in writing that the Clearing Agency is no longer willing or
able to discharge properly its responsibilities as depository with respect to
the Book-Entry Certificates and OMI is unable to locate a qualified successor
within 30 days or (2) OMI, at its option, elects to terminate the book-entry
system operating through the Clearing Agency. Upon the occurrence of either such
event, the Trustee shall notify the Clearing Agency, which in turn will notify
all Beneficial Owners of Book-Entry Certificates through Clearing Agency
Participants, of the availability of certificated Certificates. Upon surrender
by the Clearing Agency of the certificates representing the Book-Entry
Certificates and receipt of instructions for re-registration, the Trustee will
reissue the Book-Entry Certificates as certificated Certificates to the
Beneficial Owners identified in writing by the Clearing Agency. Such
certificated Certificates shall not constitute Book-Entry Certificates. All
reasonable costs associated with the preparation and delivery of certificated
Certificates shall be borne by OMI.
Section 5.04. Registration of Transfer and Exchange of Certificates.
The Trustee shall cause to be kept at its Corporate Trust Office a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Trustee will
initially serve as Certificate Registrar for the purpose of registering
Certificates and transfers and exchanges of Certificates as herein provided.
If a Person other than the Trustee is appointed by the Trustee as
Certificate Registrar, such Person will give the Trustee prompt written notice
of the location, and any change in the location, of the Certificate Register,
and the Trustee shall have the right to inspect the Certificate Register at all
reasonable times and to obtain copies thereof, and the Trustee shall have the
right to rely upon a certificate executed on behalf of the Certificate Registrar
by an Officer thereof as to the names and addresses of the Holders of the
Certificates and the principal amounts and numbers of such Certificates.
Subject to Section 5.05 below, upon surrender for registration of
transfer of any Certificate at the Corporate Trust Office of the Trustee or at
any other office or agency of the Trustee maintained for such purpose, the
Trustee shall execute and the Certificate Registrar shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates of the same Class of a like aggregate Percentage Interest.
At the option of the Certificateholders, each Certificate may be
exchanged for other Certificates of the same Class with the same and authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any such office or agency. Whenever any
Certificates are so surrendered for exchange, the Trustee shall execute and
cause the Certificate Registrar to authenticate and deliver the Certificates
which the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trustee) be duly endorsed by, or be accompanied by a written
instrument of transfer in the form satisfactory to the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing.
-52-
<PAGE>
No service charge to the Certificateholders shall be made for any
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
All Certificates surrendered for transfer and exchange shall be
destroyed by the Certificate Registrar.
The Trustee will (or will cause the Certificate Registrar to) provide
notice to the Trustee of each transfer of a Certificate, and will provide the
Trustee and Servicer with an updated copy of the Certificate Register on January
1 and July 1 of each year (or at such other time as the Servicer may request).
Section 5.05. Restrictions on Transfer.
(a) Securities Law Compliance. No transfer of any Private Certificate
shall be made unless that transfer is made pursuant to an effective registration
statement under the Securities Act and effective registration or qualification
under applicable state securities laws, or is made in a transaction that does
not require such registration or qualification. Any Holder of a Private
Certificate shall, and, by acceptance of such Certificate, does agree to,
indemnify OMI, the Trustee and the Servicer against any liability that may
result if any transfer of such Certificates by such Holder is not exempt from
registration under the Securities Act and all applicable state securities laws
or is not made in accordance with such federal and state laws. Neither OMI, the
Trustee nor the Servicer is obligated to register or qualify any Private
Certificate under the Securities Act or any other securities law or to take any
action not otherwise required under these Standard Terms or the related Pooling
and Servicing Agreement to permit the transfer of such Certificates without such
registration or qualification. The Trustee shall not register any transfer of a
Private Certificate (other than a Residual Certificate) unless and until the
prospective transferee provides the Trustee with a Transferee Agreement or, if
the Certificate to be transferred is a Rule 144A Certificate, a Rule 144A
Agreement certifying to facts which, if true, would mean that the proposed
transferee is a Qualified Institutional Buyer, and unless and until the transfer
otherwise complies with the provisions of this Section 5.05. If a proposed
transfer does not involve a Rule 144A Certificate or the transferee's Rule 144A
Agreement does not certify to facts which, if true, would mean that the
transferee is a Qualified Institutional Buyer, (i) the Servicer and the Trustee
shall require that the transferor and transferee certify as to the factual basis
for the registration exemption(s) relied upon and (ii) if such transfer is made
within three years after the acquisition thereof by a non- Affiliate of OMI from
OMI or an Affiliate of OMI, the Servicer or the Trustee may also may require an
Opinion of Counsel that such transfer may be made without registration or
qualification under the Securities Act and applicable state securities laws,
which Opinion of Counsel shall not be obtained at the expense of OMI, the
Trustee or the Servicer. Notwithstanding the foregoing, no Rule 144A Agreement,
Transferee Agreement or Opinion of Counsel shall be required in connection with
the initial transfer of the Private Certificates and no Opinion of Counsel shall
be required in connection with the transfer of the Private Certificates by a
broker or dealer, if such broker or dealer was the initial transferee.
OMI shall provide to any transferee Holder of a Rule 144A Certificate
and any prospective transferee designated by such Holder information regarding
the related Certificates and the related Assets and such other information as
shall be necessary to satisfy the condition to eligibility set forth in Rule
144A(d)(4) for transfer of any such Certificate without registration thereof
under the Securities Act pursuant to the registration exemption provided by Rule
144A, upon the request for such information by such Holder.
(b) ERISA Compliance.
(1) Book-Entry Certificates. No transfer of all or any portion
of any Class of Book-Entry Certificates that are ERISA Restricted
Certificates shall be made to a transferee that is a Plan Investor
unless such Plan Investor qualifies for an exemption from Sections 406
and 407 of ERISA and Section 4975 of the Code, and each Beneficial
Owner of such a Certificate shall be deemed to have represented, by
virtue of its acquisition of such a Certificate, either (i) that it is
not a Plan Investor or (ii) that an exemption
-53-
<PAGE>
from Sections 406 and 407 of ERISA and Section 4975 of the Code will
apply to the acquisition, holding and resale of such Certificates by
the Beneficial Owner thereof.
(2) Certificated Certificates. No transfer of all or any
portion of any Class of Certificates that (A) are not Book-Entry
Certificates and (B) are ERISA Restricted Certificates shall be made
unless and until the prospective transferee provides the Trustee and
the Servicer with a properly completed and executed Benefit Plan
Affidavit, together with a Benefit Plan Opinion if required in order to
comply with such Affidavit. Notwithstanding anything else to the
contrary herein, any purported transfer of such a Certificate to or on
behalf of a Plan Investor without delivery of a Benefit Plan Opinion
shall be null and void.
(c) Residual Certificates. The Trustee shall not register any transfer
of a Residual Certificate (including any beneficial interest therein) unless it
shall have received the written consent of the Servicer. No Residual Certificate
may be transferred to a Disqualified Organization. The Servicer will not consent
to any proposed transfer or sale of a Residual Certificate (1) to any investor
that it knows is a Disqualified Organization or (2) if the transfer involves
less than an entire interest in a Residual Certificate, unless (A) the interest
transferred is an undivided interest or (B) the transferor or the transferee
provides the Servicer with an Opinion of Counsel obtained at its own expense to
the effect that the transfer will not jeopardize the REMIC status of any REMIC
consisting of assets of the Trust. The Servicer's consent to any transfer is
further conditioned upon the Servicer's receipt from the proposed transferee of
(x) a Residual Transferee Agreement, (y) a Benefit Plan Affidavit, and (z)
either (A) if the transferee is a Non-U.S. Person, an affidavit of the proposed
transferee in substantially the form attached as Exhibit 8-A to Exhibit 8 hereto
and a certificate of the transferor stating whether the Residual Certificate has
"tax avoidance potential" as defined in Treasury Regulations Section
1.860G-3(a)(2), or (B) if the transferee is a U.S. Person, an affidavit in
substantially the form attached as Exhibit 8-B to Exhibit 8 hereto. In addition,
if a proposed transfer involves a Private Certificate, the transfer shall be
subject to the additional restrictions set forth in Section 5.05(a) above.
Notwithstanding the foregoing, no Opinion of Counsel shall be required in
connection with the initial transfer of the Residual Certificates or their
transfer by a broker or dealer, if such broker or dealer was the initial
transferee. Notwithstanding the fulfillment of the prerequisites described
above, the Servicer may withhold its consent to, or the Trustee may refuse to
recognize, a transfer of a Residual Certificate, but only to the extent
necessary to avoid a risk of disqualification as a REMIC of a REMIC consisting
of Trust assets or the imposition of a tax upon a REMIC. Any attempted transfer
in violation of the foregoing restrictions shall be null and void and shall not
be recognized by the Trustee.
If a tax or a reporting cost is borne by a REMIC consisting of Trust
assets as a result of the transfer of a Residual Certificate or any beneficial
interest therein in violation of the restrictions set forth in this Section, the
transferor shall pay such tax or cost and, if such tax or cost is not so paid,
the Trustee, upon notification from the Servicer, shall pay such tax or cost or
may pay such tax or reporting cost with amounts that otherwise would have been
paid to the transferee of the Residual Certificate (or beneficial interest
therein). In that event, neither the transferee nor the transferor shall have
any right to seek repayment of such amounts from OMI, the Trustee, the REMIC,
the Servicer, or the other Holders of any of the Certificates, and none of such
parties shall have any liability for payment of any such tax or reporting cost.
In the event that a Residual Certificate is transferred to a Disqualified
Organization, the Servicer shall make, or cause to be made, available the
information necessary for the computation of the excise tax imposed under
section 860E(e) of the Code.
Section 5.06. Accrual of Interest on the Certificates.
Certificates entitled to receive interest in accordance with the
related Pooling and Servicing Agreement shall accrue interest at the applicable
Pass-Through Rates on the basis of a 360-day year consisting of twelve 30-day
months and on the assumption that each Interest Accrual Period consists of 30
days.
-54-
<PAGE>
Section 5.07. Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the Trustee or the
Certificate Registrar, or the Trustee and the Certificate Registrar receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Trustee and the Certificate
Registrar such security or indemnity as may be required by them to save each of
them harmless (the unsecured agreement of an institutional holder being
sufficient for such purpose), then, in the absence of notice to the Trustee or
the Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
the same Class, tenor and denomination or Percentage Interest. Upon the issuance
of any new Certificate under this Section, the Trustee may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other reasonable expenses (including the
fees and expenses of the Trustee and the Certificate Registrar) connected
therewith. Every new Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued on the Closing Date, regardless of whether any destroyed, lost
or stolen Certificate in lieu of which such new Certificate was issued shall be
found at any time.
Section 5.08. Persons Deemed Owners.
Prior to due presentment for registration of transfer of any
Certificate, the Servicer, the Trustee and any agent of the Servicer or of the
Trustee may treat the Person in whose name any Certificate is registered on the
Certificate Register as the owner of such Certificate for the purpose of
receiving distributions on such Certificate and for all other purposes
whatsoever (whether or not such Certificate is overdue), and neither the
Servicer, the Trustee nor any agent of the Servicer or the Trustee shall be
affected by notice to the contrary.
Section 5.09. Appointment of Paying Agent.
The Trustee, at its own expense, may appoint a Paying Agent approved by
OMI for the purpose of making distributions to Certificateholders. The Trustee
shall cause such Paying Agent to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee that such
Paying Agent will hold all sums held by it for the payment to Certificateholders
in an Eligible Account in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders. All
funds remitted by the Trustee to any such Paying Agent for the purpose of making
distributions shall be paid to Certificateholders on each Distribution Date and
any amounts not so paid shall be returned on such Distribution Date to the
Trustee.
ARTICLE VI
OMI AND THE SERVICER
Section 6.01. Liability of OMI and the Servicer.
OMI and the Servicer each shall be liable in accordance with the terms
of the Pooling and Servicing Agreement only to the extent of the obligations
specifically imposed by the Pooling and Servicing Agreement and undertaken
hereunder by OMI or the Servicer, respectively.
Section 6.02. OMI's Representations and Warranties.
OMI represents and warrants to the Trustee, as of the date of a Pooling
and Servicing Agreement and as of the related Closing Date, as follows:
-55-
<PAGE>
(a) OMI has been duly incorporated and is validly existing as a
corporation under the laws of the State of North Carolina and is in good
standing under such laws, with full power and authority to own its properties
and conduct its business as now conducted by it and to enter into and perform
its obligations under the Pooling and Servicing Agreement, and has duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction wherein it conducts any material business or in
which the performance of its duties under the Pooling and Servicing Agreement
would require such qualification.
(b) OMI has all requisite corporate power and authority to own its
properties and to conduct any and all business required or contemplated by the
Pooling and Servicing Agreement to be conducted by OMI and to perform the
covenants and obligations to be performed by it hereunder; the execution and
delivery by OMI of the Pooling and Servicing Agreement are within the corporate
power of OMI and have been duly authorized by all necessary corporate action on
the part of OMI; and neither the execution and delivery of the Pooling and
Servicing Agreement by OMI, nor the consummation by OMI of the transactions
herein contemplated, nor compliance with the provisions hereof by OMI, will (1)
conflict with or result in a breach of, or will constitute a default under, any
of the provisions of the articles of incorporation or by-laws of OMI or any law,
governmental rule or regulation, or any judgment, decree or order binding on OMI
or its properties, or any of the provisions of any indenture, mortgage, deed of
trust, contract or other instrument to which OMI is a party or by which it is
bound or (2) result in the creation or imposition of any lien, charge or
encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, deed of trust, contract or other instrument.
(c) The Pooling and Servicing Agreement and all other documents and
instruments required or contemplated hereby to be executed or delivered by OMI
under the Pooling and Servicing Agreement have been duly authorized, executed
and delivered by OMI and, assuming due authorization, execution and delivery
thereof by all other parties thereto, constitute legal, valid and binding
agreements enforceable against OMI in accordance with their terms, subject, as
to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency
or other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity.
(d) No consent, approval, order or authorization of, or registration,
qualification or declaration with, any state, federal or other governmental
authority by OMI is required in connection with the authorization, execution or
delivery of the Pooling and Servicing Agreement or the performance by OMI of the
covenants and obligations to be performed by it hereunder.
(e) As of the Closing Date, no Proceedings are pending or, to the best
of OMI's knowledge, threatened against OMI that would prohibit its entering into
the Pooling and Servicing Agreement or performing its obligations under the
Pooling and Servicing Agreement, including assisting in the issuance of the
Certificates.
(f) OMI has obtained or made all necessary consents, approvals, waivers
and notifications of stockholders, creditors, lessors and other nongovernmental
persons, in each case, in connection with the execution and delivery of the
Pooling and Servicing Agreement, and the consummation of all the transactions
herein contemplated.
(g) OMI does not believe, nor does it have any reason or cause to
believe, that it cannot perform its obligations under the Pooling and Servicing
Agreement.
Upon discovery by any of OMI, the Servicer or the Trustee of a breach
of any of the foregoing representations, warranties and covenants that
materially and adversely affects the interest of the Certificateholders in any
underlying Asset, the party discovering such breach shall give prompt written
notice thereof (but in no event later than two Business Days following such
discovery) to the other parties hereto.
-56-
<PAGE>
Section 6.03. Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents, warrants and covenants to the Trustee,
as of the date hereof and as of the Closing Date, as follows:
(a) The Servicer has been duly incorporated and is validly existing as
a corporation under the laws of the State of North Carolina (or the state of its
incorporation, if the Servicer is not OAC) and is in good standing under such
laws, with full power and authority to own its properties and conduct its
business as now conducted by it and to enter into and perform its obligations
under the Pooling and Servicing Agreement, and has duly qualified to do business
as a foreign corporation and is in good standing under the laws of each
jurisdiction wherein it conducts any material business or in which the
performance of its duties under the Pooling and Servicing Agreement would
require such qualification, except where the failure so to qualify would not
have a material adverse effect on the performance of its obligations under the
Pooling and Servicing Agreement. The Servicer holds all material licenses,
certificates, franchises, and permits from all governmental authorities
necessary for the conduct of its business and will have received no notice of
proceedings relating to the revocation of any such license, certificate or
permit, that, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would affect materially and adversely the conduct
of the business, results of operations, net worth or condition (financial or
otherwise) of the Servicer.
(b) The Servicer has all requisite corporate power and authority to own
its properties and to conduct any and all business required or contemplated by
the Pooling and Servicing Agreement to be conducted by the Servicer and to
perform the covenants and obligations to be performed by it hereunder; the
execution and delivery by the Servicer of the Pooling and Servicing Agreement
are within the corporate power of the Servicer and have been duly authorized by
all necessary corporate action on the part of the Servicer; and neither the
execution and delivery of the Pooling and Servicing Agreement by the Servicer,
nor the consummation by the Servicer of the transactions herein contemplated,
nor compliance with the provisions hereof by the Servicer, will (1) conflict
with or result in a breach of, or will constitute a default under, any of the
provisions of the articles of incorporation or by-laws of the Servicer or any
law, governmental rule or regulation, or any judgment, decree or order binding
on the Servicer or its properties, or any of the provisions of any indenture,
mortgage, deed of trust, contract or other instrument to which the Servicer is a
party or by which it is bound or (2) result in the creation or imposition of any
lien, charge or encumbrance upon any of its property pursuant to the terms of
any such indenture, mortgage, deed of trust, contract or other instrument.
(c) The Pooling and Servicing Agreement and all other documents and
instruments required or contemplated hereby to be executed or delivered by the
Servicer under the Pooling and Servicing Agreement have been duly authorized,
executed and delivered by the Servicer and, assuming due authorization,
execution and delivery thereof by all other parties thereto, constitute legal,
valid and binding agreements enforceable against the Servicer in accordance with
their terms, subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of equity.
(d) No consent, approval, order or authorization of, or registration,
qualification or declaration with, any federal, state or other governmental
authority by the Servicer is required in connection with the authorization,
execution or delivery of the Pooling and Servicing Agreement or the performance
by the Servicer of the covenants and obligations to be performed by it
hereunder.
(e) No Proceedings are pending or, to the best of the Servicer's
knowledge, threatened against the Servicer that would prohibit its entering into
the Pooling and Servicing Agreement or performing its obligations under the
Pooling and Servicing Agreement, including assisting in the issuance of the
Certificates.
-57-
<PAGE>
(f) The Servicer maintains an errors and omissions policy and fidelity
bond that covers the Servicer's performance under the Pooling and Servicing
Agreement and such policy and bond are in full force and effect.
(g) The Servicer has obtained or made all necessary consents,
approvals, waivers and notifications of stockholders, creditors, lessors and
other nongovernmental persons, in each case, in connection with the execution
and delivery of the Pooling and Servicing Agreement, and the consummation of all
the transactions herein contemplated.
(h) The Servicer does not believe, nor does it have any reason or cause
to believe, that it cannot perform its obligations under the Pooling and
Servicing Agreement.
Upon discovery by any of OMI, the Servicer or the Trustee of a breach
of any of the foregoing representations, warranties and covenants that
materially and adversely affects the interest of the Certificateholders in any
underlying Asset, the party discovering such breach shall give prompt written
notice thereof (but in no event later than two Business Days following such
discovery) to the other parties hereto.
Section 6.04. Corporate Existence.
Subject to the provisions of the following paragraph, OMI and the
Servicer each will keep in full effect its existence, rights and franchises as a
corporation under the laws of the jurisdiction in which it is incorporated and
will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Pooling and
Servicing Agreement, any Certificates or any of the Assets included in the Trust
Estate, and to perform its duties under the Pooling and Servicing Agreement.
Any Person (a) into which OMI or the Servicer may be merged or
consolidated, (b) that may result from any merger, conversion or consolidation
to which OMI or the Servicer shall be a party, (c) that may succeed to the
business of OMI or the Servicer, or (d) to which OMI or the Servicer may
transfer all of its assets, shall be the successor to OMI or the Servicer
hereunder, respectively, without the execution or filing of any document or any
further act by any of the parties to the Pooling and Servicing Agreement,
anything herein to the contrary notwithstanding; provided, that any such
successor to the Servicer must agree in writing to be bound by each of the
Servicer's obligations hereunder and that each applicable Rating Agency must
deliver to the Trustee a letter to the effect that such successorship shall not
result in a downgrading of the rating initially assigned by the Rating Agency to
any Class of Certificates as to which OMI has requested a rating from such
Rating Agency.
Section 6.05. Limitation on Liability of OMI, the Servicer and Others.
Neither OMI, the Servicer nor any of the directors, officers, employees
or agents of any of OMI or the Servicer shall be under any liability to the
Trust or the Certificateholders and all such Persons shall be held harmless for
any action taken or for refraining from the taking of any action in good faith
pursuant to the Pooling and Servicing Agreement, or for errors in judgment;
provided, however, that this provision shall not protect any such Person against
any breach of warranties or representations made herein or against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations and duties hereunder. OMI, the Servicer and any of the directors,
officers, employees or agents of either OMI or the Servicer may rely in good
faith on any document of any kind which, prima facie, is properly executed and
submitted by any Person respecting any matters arising hereunder. Neither OMI
nor the Servicer shall be under any obligation to appear in, prosecute or defend
any legal action unless such action is related to its respective duties under
the Pooling and Servicing Agreement and such action in its opinion does not
involve it in any expense or liability, except as provided in Section 10.01(b)
hereof; provided, however, that OMI or the Servicer may each in its discretion
undertake any such action that it deems necessary or desirable with respect to
the Pooling and Servicing Agreement and the rights and duties of the parties
thereto and
-58-
<PAGE>
the interests of the Certificateholders thereunder if the Certificateholders
offer to OMI or the Servicer, as the case may be, reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby.
Section 6.06. Servicer Resignation.
The Servicer shall not resign from the obligations and duties imposed
on it under the Pooling and Servicing Agreement, except (a) upon appointment of
a successor servicer and receipt by the Trustee of a letter from each applicable
Rating Agency that such a resignation and appointment will not, in and of
itself, result in a downgrading of any rated Certificates or (b) upon
determination by its Board of Directors that the performance of its duties under
the Pooling and Servicing Agreement is no longer permissible under applicable
law. Any such determination permitting the resignation of the Servicer shall be
evidenced by a resolution of its Board of Directors and an Opinion of Counsel to
such effect delivered to the Trustee. No such resignation shall become effective
until the Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 7.02
hereof.
Section 6.07. Assignment or Delegation of Duties by the Servicer and OMI.
(a) The Servicer may at any time without notice or consent delegate
certain computational, data processing, collection and foreclosure duties
hereunder to any entity. No such delegation shall relieve the Servicer in any
respect of its responsibility with respect to such duties.
(b) Neither the Servicer nor OMI may assign the Pooling and Servicing
Agreement or any of its rights, power, duties or obligations hereunder (except
as provided in Section 6.07(a) above), provided that the Servicer and OMI may
assign the Pooling and Servicing Agreement in connection with a consolidation,
merger, conveyance, transfer or lease made in compliance with Section 6.04
hereof.
(c) Except as provided in Sections 6.04 and 6.06 hereof, the duties and
obligations of the Servicer and OMI under the Pooling and Servicing Agreement
shall continue until the Pooling and Servicing Agreement shall have been
terminated as provided in Section 9.01 hereof, and shall survive the exercise by
the Trustee of any right or remedy under the Pooling and Servicing Agreement, or
the enforcement by the Trustee of any provisions of the Pooling and Servicing
Agreement.
Section 6.08. OMI and Servicer May Own Certificates.
OMI, the Servicer and any Affiliate of the foregoing may in its
individual or any other capacity become the owner or pledgee of Certificates
with the same rights as it would have if it were not OMI, the Servicer or an
Affiliate of OMI or the Servicer.
Section 6.09. Protection of Trust Estate.
Except as limited by Section 2.02(c)(2), Section 2.02(c)(3) or Section
2.03(a) above, the Servicer will execute and deliver from time to time all
amendments to the Pooling and Servicing Agreement and all financing statements,
continuation statements, instruments of further assurance and other instruments
necessary or advisable in order to, and will take such other action as the
Trustee deems necessary or advisable in order to:
(a) grant to the Trustee more effectively all or any portion of the
Trust Estate;
(b) preserve and defend the Trust's title to the Trust Estate and the
rights therein of the Trustee and the Holders of Certificates against the claims
of all persons and parties;
-59-
<PAGE>
(c) maintain or preserve the lien (and the priority thereof) created by
the Pooling and Servicing Agreement or to carry out more effectively the
purposes hereof (including the filing of continuation statements under the UCC
as necessary);
(d) perfect, publish notice of, or protect the validity of any grant
made or to be made pursuant to the Pooling and Servicing Agreement; or
(e) enforce any of the related Asset Documents.
OMI and the Servicer each hereby designates the Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Section 6.09; provided, that the
Trustee shall have no duty to determine whether the filing of any financing
statement shall be necessary or to file such statements except upon written
request of OMI or the Servicer. After execution of any continuation statement or
other instrument pursuant to this Section, the Trustee shall deliver such
instrument to the Servicer for filing. Promptly after filing any such instrument
or causing any such instrument to be filed, the Servicer shall deliver an
Officer's Certificate, signed by an Officer of the Servicer, to the Trustee
stating that such continuation statement or other instrument has been filed.
The Servicer shall pay or cause to be paid, on behalf of the Trust, any
taxes levied on the account of the ownership by the Trust of the related Assets.
Section 6.10. Performance of Obligations.
The Servicer shall not take any action, and will use its best efforts
not to permit any action to be taken by others, that would release any Person
from any of such Person's covenants or obligations under any of the related
Asset Documents or under any instrument included in the Trust Estate, or that
would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the related
Asset Documents or any such instrument, except as expressly provided in the
Pooling and Servicing Agreement or such Asset Documents or other instrument or
unless such action will not adversely affect the interests of the Holders of the
Certificates.
ARTICLE VII
EVENT OF DEFAULT; TERMINATION OF SERVICING ARRANGEMENTS
Section 7.01. Events of Default.
Any of the following acts or occurrences shall constitute an Event of
Default by the Servicer:
(a) any failure by the Servicer to remit funds in the Certificate
Account to the Distribution Account or to make a required P&I Advance that is
not deemed by the Servicer to be a Non-Recoverable Advance, in either case as
required by Section 3.07(b) hereof, and the continuance of such failure
unremedied for a period of five days after the date upon which such deposit,
payment or remittance was due;
(b) any failure on the part of the Servicer duly to observe or perform
in any material respect any of the covenants or agreements on the part of the
Servicer (other than covenants referred to in clause (a) above) contained in the
Certificates or in the Pooling and Servicing Agreement, which failure continues
unremedied for a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee, or to the Servicer and the Trustee by the Holders of
Certificates of a Series entitled to at least 25% of the related Voting Rights;
-60-
<PAGE>
(c) the issuance of a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises in an involuntary case
under any present or future federal or state bankruptcy, insolvency or similar
law or appointing a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, against the
Servicer, and the remaining of such decree or order in force undischarged or
unstayed for a period of 60 consecutive days;
(d) the Servicer's consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings of, or relating to, the Servicer
or of, or relating to, all or substantially all of the property of the Servicer;
or
(e) the Servicer's (1) admission in writing of its inability to pay its
debts generally as they become due, (2) filing of a petition to take advantage
of, or commence a voluntary case under, any applicable insolvency or
reorganization statute, (3) making of an assignment for the benefit of its
creditors, or (4) voluntarily suspending payment of its obligations.
If an Event of Default concerning the Servicer shall occur hereunder,
then, and in each and every such case, so long as such Event of Default shall
not have been remedied or waived, the Trustee may, and at the direction of the
Holders of Certificates evidencing greater than 50% of the Voting Rights, shall,
by notice then given in writing to the Servicer, terminate all of the rights and
obligations of the Servicer as servicer. On and after the receipt by the
Servicer of any such written notice, all authority and power of the Servicer
hereunder, whether with respect to the Certificates (except its rights as a
Holder thereof) or the Contracts or otherwise, shall pass to and be vested in
the Trustee pursuant to and under this Section 7.01 (provided, however, that the
Servicer shall continue to be entitled to receive all amounts accrued and owing
to it as Servicer under the Pooling and Servicing Agreement on or prior to the
occurrence of a Event of Default specified in Section 7.01(a) above or, in the
case of any other Event of Default, on or prior to the date of such
termination); and, without limitation, the Trustee hereby is authorized and
empowered on behalf of the Servicer, as attorney-in-fact or otherwise, to
execute and deliver any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Contracts and related documents or otherwise.
The Servicer shall cooperate with the Trustee in effecting the
termination of the responsibilities and rights of the Servicer hereunder,
including, without limitation, (1) transferring to the Trustee for
administration by it of all cash amounts that shall be held at the time by the
Servicer for deposit, shall have been deposited by the Servicer into the
Servicing Account, the Certificate Account or the Distribution Account, or shall
be received thereafter with respect to a Contract, and (2) the prompt provision
to the Trustee (in no event later than ten Business Days subsequent to its
receipt of such notice of termination) of all documents and records, electronic
and otherwise, reasonably requested by the Trustee or its designee in order for
the Trustee or its designee to assume and carry out the duties and obligations
that otherwise were to have been performed and carried out by the Servicer under
the Pooling and Servicing Agreement but for the termination of the Servicer.
Upon any termination of the Servicer pursuant to this Section, the
Trustee or its designee shall pay over to the Servicer that portion of any
future proceeds of the related Assets that, if it were acting hereunder at such
future time, it would be permitted to retain or withdraw from the Certificate
Account or Distribution Account in consideration of, or in reimbursement for,
previous services performed, or advances made, by it or for other matters for
which it is entitled to reimbursement pursuant hereto or to the terms of the
Pooling and Servicing Agreement. Prior to appointment of any successor Servicer,
the Trustee must notify the Rating Agency in writing of the identity of such
prospective successor.
Section 7.02. Trustee to Act; Appointment of Successor.
-61-
<PAGE>
On and after the time the Servicer receives a notice of termination
pursuant to Section 7.01 hereof or resigns pursuant to Section 6.06 hereof, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as servicer under the Pooling and Servicing Agreement and in connection with the
transactions provided for herein and shall be subject to all the
responsibilities, duties and liabilities placed on the Servicer by the terms and
provisions hereof. As compensation therefor, the Trustee, except as provided in
Section 7.01 hereof, shall be entitled to such compensation (whether payable out
of the Distribution Account or otherwise) as the Servicer would have been
entitled to receive hereunder if no such notice of termination had been given,
as well as all protections and indemnification afforded the Servicer pursuant to
Section 6.05 above. Notwithstanding the above, the Trustee may, if it shall be
unwilling so to act, or shall, if it is legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, any established housing
finance institution having a net worth of not less than $40,000,000 and the
regular business of which shall have included, for at least one year prior to
such appointment, the servicing of a portfolio of manufactured housing
receivables of not less than $100,000,000, as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder. No appointment of a successor to the
Servicer shall be effective until the assumption by the successor of all future
responsibilities, duties and liabilities of the Servicer under the Pooling and
Servicing Agreement. Pending appointment of a successor to the Servicer
hereunder, unless the Trustee is prohibited by law from so acting, the Trustee
or an Affiliate of the Trustee shall act as Servicer hereunder as provided
above. Notwithstanding any of the foregoing, the successor Servicer shall not be
required to purchase any Assets from the Trust pursuant to these Standard Terms
except (i) under Section 2.06(a)(2) hereof to the extent the obligation to
repurchase arose out of a breach of a representation, warranty or covenant by
the successor Servicer and (ii) under Section 2.06(b) hereof to the extent the
Servicer's obligation to effect remedial action as described in such Section
arose after the successor Servicer began serving as Servicer. It is understood
that any predecessor Servicer shall remain liable for any breaches of
representations, warranties and covenants that it committed while it was the
Servicer, and shall remain responsible for effecting remedial actions described
in Section 2.06(b) hereof (and for repurchasing Assets pursuant to such Section
2.06(b)) to the extent the obligation to undertake such remedial action arose
while such predecessor Servicer was the Servicer hereunder.
In connection with the appointment of a successor Servicer, the Trustee
may make such arrangements for the compensation of such successor servicer out
of payments on the related Assets as it and such successor shall agree;
provided, however, that no such compensation shall be in excess of that
permitted the Servicer under the terms of the Pooling and Servicing Agreement.
The Trustee and such successor servicer shall take such action, consistent with
the Pooling and Servicing Agreement, as shall be necessary to effectuate any
such succession.
Any successor to the Servicer shall maintain in force during the term
of its service as Servicer the policy or policies that the Servicer is required
to maintain pursuant to Section 3.16(c) hereof.
Upon any Event of Default described hereunder, the Trustee, in addition
to the rights specified in this Section, shall have the right, in its own name
and as "Trustee," to take all actions now or hereafter existing at law, in
equity or by statute to enforce its rights and remedies and to protect the
interests of the Certificateholders, and enforce the rights and remedies of the
Certificateholders (including the institution and prosecution of all judicial,
administrative and other proceedings and the filings of proofs of claim and debt
in connection therewith). No remedy provided for by the Pooling and Servicing
Agreement shall be exclusive of any other remedy, and each and every remedy
shall be cumulative and in addition to any other remedy and no delay or omission
to exercise any right or remedy shall impair any such right or remedy or shall
be deemed to be a waiver of any Event of Default. Amounts payable to the Trustee
to reimburse it for any expenses it incurs in connection with any actions taken
by it pursuant to this paragraph are intended to constitute administrative
expenses. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Certificateholder any plan of reorganization, arrangement, adjustment or
composition affecting the Certificates or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any
Certificateholder in any such Proceeding.
-62-
<PAGE>
For the purposes of this Section 7.02 and Section 7.03 hereof, the
Trustee shall not be deemed to have knowledge of a Default or an Event of
Default hereunder unless an Officer of the Trustee having direct responsibility
for the administration of the Pooling and Servicing Agreement has actual
knowledge thereof or unless written notice of any Event of Default is received
by the Trustee and such notice references the Certificates or the Trust.
Section 7.03. Notifications to Servicer and to Certificateholders.
(a) Upon obtaining actual knowledge of any Default, the Trustee shall
promptly notify the Servicer and each Certificateholder (at their respective
addresses appearing in the Certificate Register) thereof.
(b) Upon any termination of, or appointment of a successor to, the
Servicer pursuant to Section 7.02 hereof, the Trustee shall give prompt written
notice thereof to the Certificateholders at their respective addresses appearing
in the Certificate Register.
(c) As soon as practicable after the Trustee's obtaining knowledge of
the occurrence of an Event of Default, the Trustee shall transmit by certified
mail to all Holders of the Certificates (at their respective addresses appearing
in the Certificate Register) notice of such Event of Default or occurrence known
to the Trustee, unless such Event of Default shall have been cured or waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee.
If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by the Pooling and
Servicing Agreement, and shall use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs. Prior to the occurrence of an Event of Default or
after all Events of Default which may have occurred have been cured or waived,
the Trustee shall exercise such of the rights and powers vested in it by the
Pooling and Servicing Agreement, and shall use the same degree of care and skill
in their exercise, as a corporate trustee would exercise or use under the
circumstances in the administration of a corporate trust agreement.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of the Pooling and Servicing Agreement, shall examine them to determine whether
they conform to the requirements of the Pooling and Servicing Agreement;
provided, however, that the Trustee shall be under no duty to recalculate,
verify or recompute the information provided to it hereunder by OMI or the
Servicer. If any such instrument is found not to conform to the requirements of
the Pooling and Servicing Agreement in a material manner, the Trustee shall take
action as it deems appropriate to have the instrument corrected, and if the
instrument is not corrected to the Trustee's satisfaction, the Trustee will
provide notice thereof to the related Certificateholders.
No provision of the Pooling and Servicing Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however, that:
(a) prior to the occurrence of an Event of Default with
respect to the Servicer of which the Trustee has notice or knowledge,
and after the curing or waiver of any such Event of Default, the duties
and obligations of the Trustee shall be determined solely by the
express provisions of the Pooling and Servicing Agreement, the Trustee
shall not be liable except for the performance of such duties and
-63-
<PAGE>
obligations as are specifically set forth in the Pooling and Servicing
Agreement, no implied covenants or obligations shall be read into the
Pooling and Servicing Agreement against the Trustee and, in the absence
of bad faith on the part of the Trustee, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished
to the Trustee that conform to the requirements of the Pooling and
Servicing Agreement;
(b) the Trustee shall not be liable in its individual capacity
for any error of judgment made in good faith by an Officer of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(c) the Trustee shall not be liable in its individual capacity
with respect to any action taken, suffered or omitted to be taken by it
in good faith in accordance with the direction of the Holders of
Certificates of a Series entitled to at least 25% of the related Voting
Rights relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under the Pooling and
Servicing Agreement;
(d) Any determination of negligence or bad faith of the
Trustee shall be made only upon a finding that there is clear and
convincing evidence (and not upon the mere preponderance of evidence)
thereof in a proceeding before a court of competent jurisdiction in
which the Trustee has had an opportunity to defend; and
(e) in no event shall the Trustee be held liable for the
actions or omissions of the Servicer or OMI (excepting the Trustee's
own actions as Servicer), and in connection with any action or claim or
recovery sought against the Trustee based upon facts involving the acts
or omissions of the Servicer or OMI, or involving any allegation or
claim of liability or recovery against the Trustee by the Servicer or
by OMI, the Trustee shall not be held to a greater standard of care
than the Servicer or OMI would be held in such situation.
Except as specifically required herein, the Trustee shall not be
required to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it, unless such risk or liability
relates to its ordinary services hereunder.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01 hereof:
(1) In the absence of bad faith, the Trustee may rely, and
shall be protected in acting or refraining from acting in reliance
upon, any resolution, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties. Further, the Trustee may accept a copy of the vote of the
Board of Directors of any party certified by its clerk or assistant
clerk or secretary or assistant secretary as conclusive evidence of the
authority of any person to act in accordance with such vote, and such
vote may be considered as in full force and effect until receipt by the
Trustee of written notice to the contrary.
(2) The Trustee may rely, in the absence of bad faith on its
part, upon a certificate of an Officer of the appropriate Person
whenever in the administration of the Pooling and Servicing Agreement
the Trustee shall deem it desirable that a matter be proved or
established (unless other evidence be prescribed herein specifically)
prior to taking, suffering or omitting any action hereunder.
-64-
<PAGE>
(3) The Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance
with such written advice or Opinion of Counsel.
(4) The Trustee shall 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 hereunder
or in relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of the Pooling and
Servicing Agreement, unless such Certificateholders shall have offered
to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby.
(5) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in
writing to do so by the Holders of Certificates of a Series entitled to
at least 25% of the related Voting Rights; provided, however, that if
the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation, in the opinion of the Trustee, is not assured to
the Trustee by the security afforded to it by the terms of the Pooling
and Servicing Agreement, the Trustee may require indemnity against such
expense or liability as a condition to taking any such action. The
expense of every such examination shall be paid by the Servicer or, if
paid by the Trustee, shall be repaid by the Servicer upon demand.
(6) The Trustee may execute any of the trusts or powers under
the Pooling and Servicing Agreement or perform any duties hereunder
either directly or by or through agents, attorneys or co-trustees and
the Trustee shall not be responsible for any misconduct or negligence
on the part of any agent or attorney appointed with due care by it
under the Pooling and Servicing Agreement.
(7) Whenever the Trustee is authorized herein to require acts
or documents in addition to those required to be provided it in respect
of any matter, it shall be under no obligation to make any
determination as to whether such additional acts or documents should be
required unless obligated to do so under Section 8.01 hereof.
(8) The Trustee shall not be deemed to have notice or
knowledge of any matter, including, without limitation, any Event of
Default, unless one of its Officers having direct responsibility for
the administration of the Pooling and Servicing Agreement has actual
knowledge or record thereof or unless written notice thereof is
received by the Trustee at the Corporate Trust Office and such notice
references the Certificates generally, OMI, the Trust or the Pooling
and Servicing Agreement.
(9) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by the Pooling and Servicing Agreement.
(10) The permissive right or authority of the Trustee to take
any action enumerated in the Pooling and Servicing Agreement shall not
be construed as a duty or obligation.
Certificateholders shall have rights to institute suits, actions or
proceedings in equity or at law upon or under or with respect to the Pooling and
Servicing Agreement only under the circumstances described in the third
paragraph of Section 11.03 hereof.
-65-
<PAGE>
(b) All rights of action under the Pooling and Servicing Agreement or
under any of the Certificates enforceable by the Trustee may be enforced by it
without the possession of any of the Certificates, or the production thereof at
the trial or other Proceeding relating thereto, and any such suit, action or
Proceeding instituted by the Trustee shall be brought in its name for the
benefit of all the Holders of the Certificates, subject to the provisions of the
Pooling and Servicing Agreement.
Section 8.03. Trustee Not Liable for Certificates or Assets.
The recitals contained in the Pooling and Servicing Agreement and in
the Certificates (other than the signature and countersignature of the Trustee
on the Certificates) shall be taken as the statements of OMI or the Servicer and
the Trustee assumes no responsibility for their correctness. The Trustee makes
no representations or warranties as to the validity or sufficiency of the
Pooling and Servicing Agreement or of the Certificates (other than the signature
and countersignature of the Trustee on the Certificates) or of any underlying
Asset or related document. The Trustee shall not be accountable for the use or
application by OMI of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Servicer in
respect of the underlying Assets or deposited in or withdrawn from the Servicing
Account, the Certificate Account or the Distribution Account other than any
funds held by or on behalf of the Trustee in accordance with the Pooling and
Servicing Agreement.
Section 8.04. Trustee May Own Certificates.
The Trustee, in its individual capacity or any other capacity, may
become the owner or pledgee of Certificates with the same rights it would have
if it were not Trustee.
Section 8.05. Trustee's Fees and Expenses.
The Servicer shall pay to the Trustee from time to time, pursuant to
the Pooling and Servicing Agreement or a separate fee agreement, reasonable
compensation (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) for all services rendered by
it in the execution of the trusts created under the Pooling and Servicing
Agreement and in the exercise and performance of any of the powers and duties
hereunder of the Trustee, and shall reimburse the Trustee for all reasonable
expenses, disbursements and advances (other than any expenses incurred by the
Trustee in connection with its assumption of the obligations of the Servicer
pursuant to Section 7.02 hereof) incurred or made by the Trustee in accordance
with any of the provisions of the Pooling and Servicing Agreement (including but
not limited to the reasonable compensation and the expenses and disbursements of
its counsel and of all persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
The Trustee and any director, officer, employee or agent of the Trustee shall be
indemnified by the Servicer and held harmless against any loss, liability or
expense, including reasonable attorney's fees, incurred as a result of or in
connection with the Pooling and Servicing Agreement or the Certificates,
including, but not limited to, any such loss, liability, or expense incurred in
connection with any legal action against the Trust or the Trustee or any
director, officer, employee or agent thereof, or the performance of any of the
Trustee's duties under the Pooling and Servicing Agreement other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of duties under the Pooling and Servicing
Agreement or by reason of reckless disregard of obligations and duties under the
Pooling and Servicing Agreement. Any payment hereunder made by the Servicer to
the Trustee shall be from the Servicer's own funds without any right to
reimbursement therefor. The obligations of the Servicer under this Section 8.05
shall survive the termination of the Trust and the resignation or removal of the
Trustee.
-66-
<PAGE>
Section 8.06. Eligibility Requirements for Trustee.
The Trustee shall at all times be a corporation or national banking
association that is not an Affiliate of OMI or the Servicer, organized and doing
business under the laws of any state or the United States of America, authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 (or qualifying as a Qualified Bank) and
subject to supervision or examination by federal or state regulatory
authorities. If such corporation or association publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section the
combined capital and surplus of such corporation or association shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
conditions so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.07
hereof.
Section 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the trusts
created pursuant to the Pooling and Servicing Agreement by giving written notice
of such resignation to OMI, the Servicer and to all related Certificateholders.
Upon receiving such notice of resignation, OMI shall promptly appoint a
successor Trustee by written instrument, in duplicate, which instrument shall be
delivered to the resigning Trustee and to the successor Trustee. A copy of such
instrument shall be delivered to the Certificateholders and to the Servicer by
OMI. If no successor Trustee shall have been so appointed and have accepted
appointment within 30 days after the resigning Trustee's 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 in accordance
with the provisions of Section 8.06 hereof and shall fail to resign after
written request therefor by OMI, 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 thereof, then OMI may
remove the Trustee and appoint a successor Trustee by written instrument, in
duplicate, which instrument shall be delivered to the Trustee so removed and to
the successor Trustee. A copy of such instrument shall be delivered to the
Certificateholders and to the Servicer by OMI.
The Holders of Certificates entitled to at least 51% of the Voting
Rights may remove the Trustee at any time and appoint a successor Trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered to OMI, one complete set to the Trustee so removed and one
complete set to the successor so appointed. A copy of such instrument shall be
delivered to the Certificateholders and to the Servicer by OMI. If the Holders
remove the Trustee otherwise than for reasonable cause based upon the Trustee's
failure to continue to meet the eligibility requirements set forth in Section
8.06 above or the Trustee's failure to perform its duties as described herein,
then the Holders so removing the Trustee shall bear any and all costs and
expenses arising from such removal and substitution.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 8.08 hereof.
Section 8.08. Successor Trustee.
Any successor Trustee appointed as provided in Section 8.07 hereof
shall execute, acknowledge and deliver to OMI, the Servicer and to its
predecessor Trustee an instrument accepting such appointment under the Pooling
-67-
<PAGE>
and Servicing Agreement and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor Trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as Trustee herein. The predecessor Trustee
shall deliver to the successor Trustee all related Asset Documents and related
documents and statements held by it under the Pooling and Servicing Agreement
and OMI, the Servicer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as reasonably may be required for more
fully and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 8.06 hereof.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, OMI shall mail notice of the succession of such Trustee under the
Pooling and Servicing Agreement to all Holders of the Certificates at their
addresses as shown in the Certificate Register. If OMI fails to mail such notice
within ten days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of OMI.
Section 8.09. Merger or Consolidation of Trustee.
Any corporation or association into which the Trustee may be merged or
converted or with which it may be consolidated or any corporation or association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or association succeeding to the business
of the Trustee, shall be the successor of the Trustee under the Pooling and
Servicing Agreement provided such corporation or association shall be eligible
under the provisions of Section 8.06 hereof, without the execution or filing of
any paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. Prior to any such merger, conversion or
consolidation, the Trustee shall notify each applicable Rating Agency in writing
of the pendency of such merger, conversion or consolidation.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
For the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Trust Estate or property securing the same may be
located at any time, OMI, the Servicer and the Trustee, acting jointly, shall
have the power and shall execute and deliver all instruments necessary to
appoint one or more Persons approved by the Trustee to act as co-Trustee or
co-Trustees, jointly with the Trustee, or separate Trustee or Trustees, of all
or any part of the Trust Estate, and to vest in such Person or Persons, in such
capacity, such title to the Trust Estate or any part thereof, and, subject to
the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as OMI, the Servicer and the Trustee may consider necessary or
desirable. If OMI or the Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request so to do, the Trustee alone
shall have the power to make such appointment. No co-Trustee or separate
Trustee(s) hereunder shall be required to meet the terms of eligibility as a
successor Trustee under Section 8.06 hereof and no notice to Holders of
Certificates of the appointment of co-Trustee(s) or separate Trustee(s) shall be
required under Section 8.08 hereof.
In the case of any appointment of a co-Trustee or separate Trustee
pursuant to this Section 8.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate Trustee or co-Trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee under the
Pooling and Servicing Agreement or as successor to the Servicer pursuant to
Section 7.02 hereof), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Estate or any portion thereof in
any such jurisdiction) shall be exercised and performed by such separate Trustee
or co-Trustee at the direction of the Trustee.
-68-
<PAGE>
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate Trustees and co-Trustees,
as effectively as if given to each of them. Every instrument appointing any
separate Trustee or co-Trustee shall refer to the Pooling and Servicing
Agreement and the conditions of this Article VIII. Each separate Trustee and
co-Trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of the Pooling and Servicing Agreement, specifically
including every provision of the Pooling and Servicing Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the Trustee.
Every such instrument shall be filed with the Trustee.
Any separate Trustee or co-Trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of the
Pooling and Servicing Agreement on its behalf and in its name. If any separate
Trustee or co-Trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
Section 8.11. Appointment of Custodians.
The Trustee may, with the consent of the Servicer, appoint one or more
Custodians to hold all or a portion of the Trustee Mortgage Loan Files as agent
for the Trustee, by entering into a custodial agreement. The appointment of any
Custodian may at any time be terminated and a substitute Custodian appointed
therefor by the Trustee. The Trustee shall terminate the appointment of any
Custodian and appoint a substitute custodian upon the request of the Servicer to
the Trustee. Subject to this Article VIII, the Trustee agrees to comply with the
terms of each custodial agreement and to enforce the terms and provisions
thereof against the Custodian for the benefit of the Certificateholders. Each
Custodian shall be a depository institution or trust company subject to
supervision by federal or state authority, shall have combined capital and
surplus of at least $10,000,000 and shall be qualified to do business in the
jurisdiction in which it holds any Trustee Mortgage Loan File. Any such
Custodian may not be an affiliate of OMI or any Seller with respect to the
applicable Trust.
Section 8.12. Trustee May Enforce Claims Without Possession of Certificates.
All rights of action and claims under the Pooling and Servicing
Agreement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto and any such proceeding instituted by the
Trustee shall be brought in its own name or in its capacity as Trustee. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Certificateholders in respect of
which such judgment has been recovered.
ARTICLE IX
TERMINATION
Section 9.01. Termination Upon Repurchase or Liquidation of All Contracts.
(a) The respective obligations and responsibilities of OMI, the
Servicer and the Trustee under the Pooling and Servicing Agreement (other than
the obligations of the Trustee to make distributions to Certificateholders, to
reimburse the Servicer for outstanding Advances, to pay the Servicer accrued and
previously unpaid Servicing Fees or to provide tax information as provided in
Section 4.01(a) hereof and other than the obligations of the Servicer under
Article X hereof) shall terminate upon distribution to the Certificateholders of
all amounts held by or on behalf of the Trustee and required hereunder to be so
distributed on the Distribution Date coinciding with or following the earlier to
occur of (1) a Terminating Purchase for an amount equal to the
-69-
<PAGE>
Termination Price and (2) the final payment or other liquidation (or any advance
with respect thereto) of the last Asset remaining in the Trust or the
disposition of the last Repo Property or REO Property remaining in the Trust;
provided, however, that in no event shall the Trust created hereby continue
beyond the expiration of 21 years after the death of the last survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.
(b) Unless otherwise provided in the Pooling and Servicing Agreement,
the Servicer or the Holders of the majority of the Percentage Interest in the
Residual Certificates of a REMIC (or, in the case of a double REMIC Series, the
Pooling REMIC) (the "Residual Majority") may, at their respective options, make,
or cause a Person to make, a Terminating Purchase on any Distribution Date on or
after the earlier to occur of (1) the Servicer's determination, based upon an
Opinion of Counsel, that the REMIC status of any REMIC related to the Trust has
been lost or that a substantial risk exists that such REMIC status will be lost
for the then-current taxable year, or (2) the Distribution Date on which, after
taking into account distributions of principal to be made on such Distribution
Date, the sum of the Certificate Principal Balances of the Certificates is less
than 10% of the sum of the original Certificate Principal Balances of the
Certificates.
(c) The Servicer or the Residual Majority shall notify the Trustee and
the Certificate Registrar in writing of its election to make or to cause a
Terminating Purchase no later than the Distribution Date preceding the
Distribution Date on which the Certificates will be retired as a result of such
Terminating Purchase. The Servicer shall advise the Trustee and the Certificate
Registrar of the final payment or other liquidation of the last Asset remaining
in the Trust or the disposition of the last Repo Property or REO Property
remaining in the Trust at least two Business Days prior to the Remittance Date
in the month in which the Trust will terminate as a result thereof.
Notice of any termination of the Trust shall be given promptly by the
Trustee by letter sent to the Certificateholders by certified mail (1) in the
event such notice is given in connection with a Terminating Purchase, not
earlier than the fifth day of the month preceding the month of such termination
and not later than the first day of the month of such termination or (2)
otherwise not later than the Remittance Date preceding the final Distribution
Date, in each case specifying (A) the Distribution Date upon which the Trust
will terminate and that final payment of the Certificates will be made on such
Distribution Date and (B) the amount of any such final distribution. The Trustee
shall give such notice to the Certificate Registrar at the time such notice is
given to Certificateholders. In the event such notice is given in connection
with a Terminating Purchase, the Terminator shall deliver to the Trustee for
deposit into the Distribution Account on the Business Day immediately preceding
the Distribution Date on which the Terminating Purchase is to take place an
amount in next day funds equal to the Termination Price. Notwithstanding the
foregoing, if the Terminator is the Servicer, the Terminator, upon notice to the
Trustee, shall be entitled to remit the Termination Price net of amounts owed to
the Terminator in respect of unreimbursed outstanding Advances made by such
Terminator or amounts required to be reimbursed or paid to such Terminator
hereunder.
(d) On the final Distribution Date, the Trustee shall distribute to the
Certificateholders as of the related Record Date the amount otherwise
distributable on the Certificates on such Distribution Date (if such final
Distribution Date is not the result of a Terminating Purchase).
Upon any termination of the Trust as the result of a Terminating
Purchase, the Trustee shall distribute the Termination Price as though it were
the amount on deposit in the Distribution Account in accordance with Section
4.03(a) hereof and in accordance with the related Pooling and Servicing
Agreement.
Following such final distribution, the Servicer and the Trustee shall
promptly release to the Terminator the related Asset Files or portions thereof
in their respective possessions for the remaining Assets, Repo Properties and
REO Properties, and the Trustee shall execute all assignments, endorsements and
other instruments necessary to effectuate transfer of such Asset Files to such
Terminator, whereupon the Trust shall terminate.
-70-
<PAGE>
(e) In the event that all of the Certificateholders shall not surrender
their Certificates within six months after the date specified in the
above-mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates and receive
the final distribution with respect thereto, net of the cost of such second
notice. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the amounts otherwise payable on such
Certificates. Any funds payable to Certificateholders that are not distributed
on the final Distribution Date shall be deposited in a Termination Account, as
the case may be, each of which shall be an Eligible Account, to be held for the
benefit of Certificateholders not presenting and surrendering their Certificates
in the aforesaid manner, and shall be disposed of in accordance with this
Section.
Section 9.02. Additional Termination Requirements.
(a) In the event of a Terminating Purchase as provided in Section 9.01
hereof, the Trust shall be terminated in accordance with the following
additional requirements, unless the Servicer, OMI, and the Trustee receive (1) a
Special Tax Opinion and (2) a Special Tax Consent from each of the Holders of
the Residual Certificates (unless the Special Tax Opinion specifically provides
that no REMIC-level tax will result from such Terminating Purchase).
(1) Within 90 days prior to the time of the making of the
final payment on the Certificates, OMI on behalf of each related REMIC
shall adopt a plan of complete liquidation meeting the requirements set
forth in the REMIC Provisions for a qualified liquidation (which plan
may be adopted by the Trustee's attachment of a statement specifying
the first day of the 90-day liquidation period to the REMIC's final
federal income tax return) and the REMIC will sell all of its assets
(other than cash).
(2) At the time of the making of the final payment on the
Regular Certificates or the deposit to the Termination Account, the
Trustee shall distribute or credit, or cause to be distributed or
credited, pro rata, to the Holders of the Residual Certificates, all
remaining cash on hand relating to the REMIC after such final payment
(other than cash retained to meet claims against the Trust) and the
REMIC shall terminate at that time.
(3) In no event may the final payment on the Regular
Certificates or the final distribution or credit to the Holders of the
Residual Certificates be made after the 90th day after the date on
which the plan of complete liquidation relating thereto is adopted. A
payment into the Termination Account with respect to any Certificate
pursuant to Section 9.01 hereof shall be deemed a final payment on, or
final distribution with respect to, such Certificate for the purposes
of this Section 9.02(a)(3).
(b) By their acceptance of Residual Certificates, the Holders thereof
agree (1) to authorize such action as may be necessary to adopt a plan of
complete liquidation of any related REMIC and (2) to take such action as may be
necessary to adopt a plan of complete liquidation of any related REMIC upon the
written request of the Servicer, which authorization shall be binding upon all
successor Holders of such Residual Certificates.
-71-
<PAGE>
ARTICLE X
REMIC TAX PROVISIONS
Section 10.01. REMIC Administration.
Unless otherwise specified in the related Pooling and Servicing
Agreement, an election will be made to treat the Assets and the Distribution
Account underlying a Series as one or more REMICs under the Code. Each Holder of
a Residual Certificate in each REMIC shall, in its Residual Transferee
Agreement, designate the Servicer or an Affiliate of the Servicer, as its agent,
to act as the Tax Matters Person for such REMIC. The Servicer agrees that it or
one of its Affiliates will serve as such Tax Matters Person for each REMIC, and
also will perform various tax administration functions for each REMIC, as its
agent, as set forth in this Section 10.01.
(a) The Trustee shall elect (on behalf of each REMIC to be created) to
have the Trust (or designated assets thereof) treated as a REMIC on Form 1066 or
other appropriate federal tax or information return for the taxable year ending
on the last day of the calendar year in which the Certificates are issued as
well as on any corresponding state tax or information return necessary to have
such assets treated as a REMIC under relevant state law.
(b) The Servicer shall pay any and all tax related expenses (not
including taxes) of the Trust and each related REMIC, including but not limited
to any professional fees or expenses related to audits or any administrative or
judicial proceedings with respect to each such REMIC that involve the Internal
Revenue Service or state tax authorities or related to the adoption of a plan of
complete liquidation.
(c) The Servicer shall prepare any necessary forms for election as well
as all of the Trust's and each related REMIC's federal and state tax and
information returns. At the request of the Servicer, the Trustee shall sign and
file such returns on behalf of each such REMIC. The expenses of preparing and
filing such returns shall be borne by the Servicer.
(d) The Servicer shall perform all reporting and other tax compliance
duties that are the responsibility of the Trust and the REMIC under the REMIC
Provisions or state or local tax law. Among its other duties, if required by the
REMIC Provisions, the Servicer, acting as agent of the REMIC, shall provide (1)
to the Treasury or to other governmental authorities such information as is
necessary for the application of any tax relating to the transfer of a Residual
Certificate to any Disqualified Organization and (2) to the Trustee such
information as is necessary for the Trustee to discharge its obligations under
the REMIC Provisions to report tax information to the Certificateholders.
(e) OMI, the Servicer, the Trustee (to the extent the Trustee has been
instructed by OMI or the Servicer), and the Holders of Residual Certificates
shall take any action or cause each related REMIC to take any action necessary
to create or maintain the status of each such REMIC as a REMIC under the REMIC
Provisions and shall assist each other as necessary to create or maintain such
status.
(f) OMI, the Servicer, the Trustee (to the extent the Trustee has been
instructed by OMI or the Servicer), and the Holders of the Residual Certificates
shall not take any action or fail to take any action, or cause each related
REMIC to take any action or fail to take any action that, if taken or not taken,
could endanger the status of each such REMIC as a REMIC unless the Trustee and
the Servicer have received an Opinion of Counsel (at the expense of the party
seeking to take or to omit to take such action) to the effect that the
contemplated action or failure to act will not endanger such status.
(g) Any taxes that are imposed upon the Trust or any related REMIC by
federal or state (including local) governmental authorities (other than taxes
paid by a party pursuant to Section 10.02 hereof or as provided
-72-
<PAGE>
in the following sentence) shall be allocated to the Certificates (including,
for this purpose, the regular interests in any Pooling REMIC) in the same manner
as Writedown Amounts are so allocated; provided, however, that if the related
Pooling and Servicing Agreement does not provide for the allocation of Writedown
Amounts, such taxes shall be payable out of the Available Distribution Amount
before any distributions are made on the related Certificates on the related
Distribution Date. Any state or local taxes imposed upon the Trust, any related
REMIC or any related Certificateholder that would not have been imposed on the
Trust, such REMIC or such Certificateholder in the absence of any legal or
business connection between the Trustee and the state or locality imposing such
taxes (including any federal, state or local taxes imposed on such Trust, such
REMIC or such Certificateholder as a result of such Trust, such REMIC or such
Certificateholder being deemed to have received income as a result of the
Trustee's payment of state or local taxes) shall be paid by the Trustee, and,
notwithstanding anything to the contrary in these Standard Terms, such taxes
shall be deemed to be part of the Trustee's cost of doing business and shall not
be reimbursable to the Trustee.
(h) If the Servicer (or an Affiliate thereof) is unable for any reason
to fulfill its duties as Tax Matters Person, then the holder of the largest
Percentage Interest of the Residual Certificates, without compensation, shall
become the successor Tax Matters Person for each related REMIC; provided,
however, that in no event shall the Trustee be required to act as Tax Matters
Person (regardless of whether the Trustee is acting as successor Servicer).
Section 10.02. Prohibited Activities.
Except as otherwise provided elsewhere in the Pooling and Servicing
Agreement, neither OMI, the Servicer, the Holders of Residual Certificates, nor
the Trustee shall engage in, nor shall the Trustee permit, any of the following
transactions or activities unless it has received (1) a Special Tax Opinion and
(2) a Special Tax Consent from each of the Holders of the Residual Certificates
(unless the Special Tax Opinion specially provides that no REMIC-level tax will
result from the transaction or activity in question):
(a) the sale or other disposition of, or substitution for, any
of the underlying Assets except pursuant to (1) a foreclosure or
default with respect to such an Asset, (2) a purchase or repurchase
pursuant to Section 2.06 hereof, (3) the bankruptcy or insolvency of
any related REMIC, or (4) the termination of any related REMIC pursuant
to Article IX hereof;
(b) the acquisition of any Assets for the Trust after the
related Closing Date except (1) during the three-month period beginning
on the Closing Date pursuant to a fixed-price contract in effect on the
Closing Date that has been reviewed and approved by tax counsel
acceptable to the Servicer or (2) a substitution in accordance with
Section 2.06 hereof;
(c) the sale or other disposition of any investment in the
Distribution Account at a gain;
(d) the acceptance of any contribution to the Trust except the
following cash contributions: (1) a cash contribution received during
the three-month period beginning on the Closing Date; (2) a cash
contribution to facilitate a Terminating Purchase that is made within
the 90-day period beginning on the date on which a plan of complete
liquidation is adopted pursuant to Section 9.02(a)(1) hereof; (3) a
contribution to a Reserve Fund owned by a related REMIC that is made
pro rata by the Holders of the Residual Certificates; or (4) any other
contribution approved by the Servicer after consultation with tax
counsel;
(e) except in the case of an Asset that is in default, or as
to which, in the reasonable judgment of the Servicer, default is
reasonably foreseeable, neither the Trustee nor the Servicer shall
permit any modification of any material term of an Asset (including,
but not limited to, the interest rate, the principal balance, the
amortization schedule (except as provided in the Pooling and Servicing
Agreement), the remaining term to maturity, or any other term affecting
the amount or timing of payments
-73-
<PAGE>
on the Asset) unless the Trustee and Servicer have received an Opinion
of Counsel (at the expense of the party seeking to modify the Asset) to
the effect that such modification would not be treated as giving rise
to a new debt instrument for REMIC purposes;
(f) any other transaction or activity that is not contemplated
by the Pooling and Servicing Agreement;
(g) the sale or other disposition of any asset held in a
Reserve Fund for a period of less than three months (a "Short-Term
Reserve Fund Investment") if such sale or disposition would cause 30%
or more of a related REMIC's income from all of its Reserve Funds for
the taxable year to consist of gain from the sale or disposition of
Short-Term Reserve Fund Investments; or
(h) the withdrawal of any amounts from any Reserve Fund except
(A) for the distribution pro rata to the Holders of the Residual
Certificates or (B) to provide for the payment of Trust expenses or
amounts payable on the Certificates in the event of defaults or late
payments on the related Assets or lower than expected returns on funds
held in the Distribution Account, as provided under section 860G(a)(7)
of the Code.
Any party causing the Trust to engage in any of the activities prohibited in
this Section shall be liable for the payment of any tax imposed on the Trust
pursuant to Code section 860F(a)(1) or 860G(d) as a result of the Trust engaging
in such activities.
-74-
<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendments.
The Pooling and Servicing Agreement may be amended or supplemented from
time to time by OMI, the Servicer and the Trustee without the consent of any of
the Certificateholders (a) to cure any ambiguity herein, (b) to correct or
supplement any provisions herein that may be inconsistent with any other
provisions herein, (c) to modify, eliminate or add to any of its provisions to
such extent as shall be necessary or appropriate to maintain the qualification
of any related REMIC as a REMIC under the Code at all times that any
Certificates are outstanding or (d) to make any other provisions with respect to
matters or questions arising under the Pooling and Servicing Agreement or
matters arising with respect to the Trust that are not covered by the Pooling
and Servicing Agreement; provided, that such action shall not affect adversely
the interests of any Certificateholder, as evidenced by an opinion of counsel
independent from OMI, the Servicer and the Trustee or a letter from each Rating
Agency from whom OMI requested a rating of any of the related Certificates
stating that such action will not result in a downgrading of the rating of any
of the related Certificates rated by such Rating Agency at the request of OMI.
Promptly after the execution of any such amendment, the Trustee shall furnish a
copy of such amendment to each Holder of Certificates.
The Pooling and Servicing Agreement also may be amended from time to
time by OMI, the Servicer and the Trustee with the consent of the Holders
entitled to at least a majority of the Voting Rights of each Class of
Certificates that would be affected by such amendment 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; provided, however, that no such amendment
shall (a) reduce in any manner the amount of, or delay the timing of, payments
received on Contracts or Mortgage Loans that are required to be distributed on
any Certificate without the consent of the Holder of such Certificate, (b)
affect adversely in any material respect the interests of the Holders of any
Class of Certificates in a manner other than described in clause (a) of this
paragraph, without the consent of the Holders of Certificates of such Class
evidencing at least 66 2/3% of the Voting Rights with respect to such Class, or
(c) reduce the aforesaid percentage of Certificates the Holders of which are
required to consent to any such amendment, without the consent of such Holders
of all Certificates then outstanding.
It shall not be necessary for the consent of Certificateholders under
this Section 11.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
Section 11.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, the Pooling and Servicing
Agreement is subject to recordation in all appropriate public offices for real
property records in all the counties or other comparable jurisdictions in which
any or all of the Real Property or Mortgaged Properties included in the Trust
Estate and subject to the related Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer and at its expense, but only upon direction of the
Trustee accompanied by an Opinion of Counsel to the effect that such recordation
is necessary to protect the interests of the Certificateholders. The Trustee
shall not be responsible for determining whether the Pooling and Servicing
Agreement should be recorded in any such office.
For the purpose of facilitating the recordation of the Pooling and
Servicing Agreement as herein provided and for other purposes, the Pooling and
Servicing Agreement may be executed simultaneously in any number of
-75-
<PAGE>
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
Section 11.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate to
terminate the Pooling and Servicing Agreement or the Trust, nor will such death
or incapacity entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or proceeding in any court for a
partition or winding up of the Trust, nor shall it otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided for herein) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to the Pooling and Servicing Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision of
the Pooling and Servicing Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to the Pooling and Servicing
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Certificates entitled to at least 25%
of the Voting Rights allocated to the Certificates shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee under the Pooling and Servicing Agreement and shall have offered
to the Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trustee, for
15 days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding. It
is understood and intended, and expressly covenanted by each Certificateholder
with every other Certificateholder and the Trustee, that no one or more Holders
of Certificates shall have any right in any manner whatever by virtue of any
provision of the Pooling and Servicing Agreement to affect, disturb or prejudice
the rights of the Holders of any other of such Certificates, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right under the Pooling and Servicing Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Holders of Certificates. For the protection and enforcement of the provisions of
this Section, each and every Certificateholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.
Section 11.04. Notices.
All demands and notices under the Pooling and Servicing Agreement shall
be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service, to (a) in the case of OMI, 7800 McCloud Road, Greensboro, NC
27425-7081, Attention: Treasurer, telecopy number (336) 664-3224, or such other
address or telecopy number as may hereafter be furnished to each party to the
Pooling and Servicing Agreement in writing by OMI, (b) in the case of OAC or the
Servicer, 7800 McCloud Road, Greensboro, NC 27425-7081, Attention: Treasurer,
telecopy number (336) 664-3224, or such other address or telecopy number as may
subsequently be furnished to each party to the Pooling and Servicing Agreement
in writing by the Servicer and (c) in the case of the Trustee, at its address
set forth in the Pooling and Servicing Agreement or such other address or
telecopy number as may subsequently be furnished to each party to the Pooling
and Servicing Agreement in writing by the Trustee. Any notice required or
permitted to be mailed to a Certificateholder shall be given by registered mail,
postage prepaid, or by express delivery service, at the address of such Holder
as shown in the Certificate Register. Any notice so mailed within the time
prescribed in the Pooling and Servicing Agreement shall be conclusively presumed
to have been duly given, whether or not the Certificateholder receives such
notice. A copy of any notice required to be telecopied hereunder also shall be
mailed
-76-
<PAGE>
to the appropriate party in the manner set forth above. A copy of any notice
given hereunder to any other party shall be delivered to the Trustee.
Section 11.05. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
the Pooling and Servicing Agreement shall be held invalid for any reason
whatsoever, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of the
Pooling and Servicing Agreement and shall in no way affect the validity or
enforceability of the other provisions of the Pooling and Servicing Agreement or
of the Certificates or the rights of the Holders thereof.
Section 11.06. Sale of Contracts.
It is the express intent of OMI and the Trustee that the conveyance of
the Assets underlying a Series by OMI to the Trustee pursuant to the related
Pooling and Servicing Agreement be construed as a sale of such Assets by OMI to
the Trustee. It is, further, not the intention of OMI or the Trustee that such
conveyance be deemed a pledge of such Assets by OMI to the Trustee to secure a
debt or other obligation of OMI. However, in the event that, notwithstanding the
intent of the parties, such Assets are held to continue to be property of OMI,
then (a) the Pooling and Servicing Agreement also shall be deemed to be a
security agreement within the meaning of Article 9 of the applicable UCC; (b)
the conveyance by OMI provided for in the Pooling and Servicing Agreement shall
be deemed to be a grant by OMI to the Trustee of a security interest in all of
OMI's right, title and interest in and to the Assets and all amounts payable to
the holders of the Assets in accordance with the terms thereof and all proceeds
of the conversion, voluntary or involuntary, of the foregoing into cash,
instruments, securities or other property, including without limitation all
amounts, other than investment earnings, from time to time held or invested in
the related Certificate Account or Distribution Account, whether in the form of
cash, instruments, securities or other property, and including without
limitation all amounts from time to time held or invested in any related Reserve
Fund; (c) the possession by the Trustee or its agent (including the Servicer
pursuant to Section 2.02(a) hereof) of items of property that constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-305 of the applicable UCC; and (d) notifications
to persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law. OMI and the Trustee (to the extent
the Trustee has been instructed by OMI or the Servicer) shall take, to the
extent consistent with the Pooling and Servicing Agreement, such actions as may
be necessary to ensure that, if the Pooling and Servicing Agreement were deemed
to create a security interest in the related Assets, such security interest
would be deemed to be a perfected security interest of first priority under
applicable law and will be maintained as such throughout the term of the Pooling
and Servicing Agreement.
Section 11.07. Notice to Rating Agency.
(a) The Trustee shall use its best efforts promptly to provide notice
to each applicable Rating Agency and each Certificateholder with respect to each
of the following of which it has actual knowledge, except that no notice
specified below need be sent to any such Certificateholder or each applicable
Rating Agency if already sent pursuant to other provisions of the Pooling and
Servicing Agreement:
(1) any amendment to the Pooling and Servicing Agreement or
any agreement assigned to the Trust;
(2) the occurrence of any Event of Default involving the
Servicer that has not been cured or waived;
-77-
<PAGE>
(3) the resignation, termination or merger of OMI, the
Servicer or the Trustee;
(4) the purchase or repurchase or substitution of Contracts
pursuant to Section 2.06 hereof;
(5) the final payment to the Certificateholders;
(6) any change in the location of the related Certificate
Account or the Distribution Account;
(7) any event that would result in the inability of the
Servicer to make Advances regarding the related Assets;
(8) any change in applicable law that would require an
assignment of a Mortgage, not previously recorded, to be recorded in
order to protect the right, title and interest of the Trustee in and to
the related Real Property or Mortgaged Property or, in case a court
should recharacterize the sale of the related Asset as a financing, to
perfect a first priority security interest in favor of the Trustee in
the related Asset or the occurrence of either of the circumstances
described in clause (1) or (2) of Section 2.06(b) hereof relating to
the retitling of Manufactured Homes; or
(9) any change in OMI's or the Servicer's name or place of
business or the relocation of the Contract Files or Servicer Contract
Files or the Servicer Mortgage Loan Files to a location outside the
State of North Carolina or the relocation of the Trustee Mortgage Loan
Files to a location outside of the state where they are originally held
by the Trustee or its Custodian.
(b) The Servicer shall promptly notify the Trustee of any of the events
listed in Section 11.07(a) hereof of which it has actual knowledge. In addition,
the Trustee shall furnish promptly to each Rating Agency, at its address set
forth in the Pooling and Servicing Agreement, copies of the following:
(i) Each Remittance Report; and
(ii) Each Officer's Certificate supplied by the Servicer to
the Trustee and the Certificateholders pursuant to Section 3.13 hereof.
(c) Any notice pursuant to this Section 11.07 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid or by express delivery service to each Rating
Agency at its address specified in the Pooling and Servicing Agreement.
-78-
<PAGE>
EXHIBIT 1
FORM OF SERVICER'S CUSTODIAL CERTIFICATION
[DATE]
[NAME AND ADDRESS
OF TRUSTEE]
Pooling and Servicing Agreement, dated
as of ____________, among
Oakwood Mortgage Investors, Inc. ("OMI"),
Oakwood Acceptance Corporation and
___________________ , as Trustee
Ladies and Gentlemen:
In accordance with Section 2.02(b) of OMI's Standard Terms to Pooling
and Servicing Agreement (July 1998 Edition), which are incorporated by reference
into the above-referenced Pooling and Servicing Agreement (the "Agreement"),
Oakwood Acceptance Corporation, as Servicer under the Agreement, hereby confirms
that it is in possession of a complete Contract File for each of the Contracts
identified on Schedule I to the Agreement, subject to those exceptions
identified on the schedule attached hereto. Capitalized terms used and not
otherwise defined herein shall have the respective meanings assigned to such
terms in the Agreement.
OAKWOOD ACCEPTANCE CORPORATION
By:____________________________
Name:_________________________
Title:__________________________
Exhibit 1 - Page 1
<PAGE>
EXHIBIT 2-A
FORM OF INITIAL CERTIFICATION
[Date]
Oakwood Mortgage Investors, Inc.
7800 McCloud Road
Greensboro, North Carolina 27409
Attention: [_______________]
Oakwood Acceptance Corporation
7800 McCloud Road
Greensboro, North Carolina 27409
Attention: [________________]
Re: Pooling and Servicing Agreement, dated as of ___ 1, ___,
among Oakwood Mortgage Investors, Inc.,
Oakwood Acceptance Corporation, as Servicer,
and _______________, as Trustee,
Pass-Through Certificates, __________________
OMI Trust _______-_____.
Gentlemen:
In accordance with Section 2.03 of OMI's Standard Terms to Pooling and
Servicing Agreement (July 1998 Edition) (the "Standard Terms"), which are
incorporated by reference into the above-referenced Pooling and Servicing
Agreement, the undersigned, as Trustee, hereby certifies that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule to the Pooling and Servicing
Agreement (other than any Mortgage Loan paid in full or listed on the attachment
hereto) it, or a Custodian on its behalf, has reviewed the Trustee Mortgage Loan
File and has determined that, except as noted on the Schedule of Exceptions
attached hereto: (i) all documents required to be included in the Trustee
Mortgage Loan File (as set forth in the definition of "Trustee Mortgage Loan
File" in the Standard Terms) are in its possession or in the possession of a
Custodian on its behalf; (ii) such documents have been reviewed by it, or a
Custodian on its behalf, and appear regular on their face and relate to such
Mortgage Loan; and (iii) based on examination by it, or by a Custodian on its
behalf, and only as to such documents, the information set forth on the Mortgage
Loan Schedule to the Pooling and Servicing Agreement accurately reflects the
information set forth in the Trustee Mortgage Loan File. The undersigned further
certifies that the Trustee's review, or the review of its Custodian, of each
Trustee Mortgage Loan File included each of the procedures listed in Section
2.03(c)(2) of the Standard Terms.
Except as described herein, neither the Trustee, nor any Custodian on
its behalf, has made an independent examination of any documents contained in
any Trustee Mortgage Loan File. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any
documents contained in any Trustee Mortgage Loan File for any of the Mortgage
Loans listed on the Mortgage Loan Schedule to the Pooling and Servicing
Agreement, (ii) the collectibility, insurability, effectiveness or suitability
of any such Mortgage Loan or (iii) whether any Trustee Mortgage Loan File should
include any assumption agreement, modification agreement, written assurance or
substitution agreement.
Exhibit 2-A - Page 1
<PAGE>
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement").
[TRUSTEE]
By:___________________________
Its:__________________________
Exhibit 2-A - Page 2
<PAGE>
EXHIBIT 2-B
FORM OF FINAL CERTIFICATION
[Date]
Oakwood Mortgage Investors, Inc.
7800 McCloud Road
Greensboro, North Carolina 27409
Attention: [_______________]
Oakwood Acceptance Corporation
7800 McCloud Road
Greensboro, North Carolina 27409
Attention: [________________]
Re: Pooling and Servicing Agreement, dated as of ___ 1, ____,
among Oakwood Mortgage Investors, Inc.,
Oakwood Acceptance Corporation, as Servicer,
and _______________, as Trustee,
Pass-Through Certificates, __________________
OMI Trust _______-_____.
Gentlemen:
In accordance with Section 2.03 of OMI's Standard Terms to Pooling and
Servicing Agreement (July 1998 Edition) (the "Standard Terms"), which are
incorporated by reference into the above-referenced Pooling and Servicing
Agreement, the undersigned, as Trustee, hereby certifies that, except as noted
on the Schedule of Exceptions attached hereto, for each Mortgage Loan listed in
the Mortgage Loan Schedule to the Pooling and Servicing Agreement (other than
any Mortgage Loan paid in full or listed on the attachment hereto) it, or a
Custodian on its behalf, has received a complete Trustee Mortgage Loan File
which includes each of the documents required to be included in the Trustee
Mortgage Loan File as set forth in the definition of "Trustee Mortgage Loan
File" in the Standard Terms.
Neither the Trustee nor any Custodian on its behalf has made an
independent examination of any documents contained in any Trustee Mortgage Loan
File beyond the review specifically required in the above captioned Pooling and
Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in any Trustee Mortgage Loan File or any of the Mortgage
Loans listed on the Mortgage Loan Schedule, (ii) the collectibility,
insurability, effectiveness or suitability of any such Mortgage Loan or (iii)
whether any Trustee Mortgage Loan File should include any assumption agreement,
modification agreement, written assurance or substitution agreement.
Exhibit 2-B - Page 1
<PAGE>
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement").
[TRUSTEE]
By:___________________________
Its:__________________________
Exhibit 2-B - Page 2
<PAGE>
EXHIBIT 3
FORM OF RECORDATION REPORT
[Date]
Oakwood Acceptance Corporation
7800 McCloud Road
Greensboro, North Carolina 27409
Attention: [________________]
Re: Pooling and Servicing Agreement, dated as of _____ 1, ___,
among Oakwood Mortgage Investors, Inc.,
Oakwood Acceptance Corporation, as Servicer,
and _______________, as Trustee,
Pass-Through Certificates, __________________
OMI Trust _______-_____.
Gentlemen:
In accordance with Section 2.03 of OMI's Standard Terms to Pooling and
Servicing Agreement (July 1998 Edition) (the "Standard Terms"), which are
incorporated by reference into the above-referenced Pooling and Servicing
Agreement, the undersigned, as Trustee hereby notifies you, that as of the date
hereof with respect to the following Mortgage Loans it has not received the
indicated documents:
Mortgage Loans Documents Not Received
- -------------- ----------------------
Original Recorded
Original Recorded Assignment of
Mortgage Mortgage
or certified copy or certified copy
OAC Loan Number thereof thereof (1)
- ---------------
[TRUSTEE]
as Trustee
By:___________________________
Its:__________________________
- --------
(1) Not required for Mortgage Loans for which OMI has waived recordation of
Assignments.
Exhibit 3 - Page 1
<PAGE>
EXHIBIT 4
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
TO: [Name and Address of Trustee or Custodian]
RE: Pooling and Servicing Agreement, dated as of __________ 1,
--__, among Oakwood Mortgage Investors, Inc. ("OMI"), Oakwood
Acceptance Corporation, as Servicer, and ____________________,
as Trustee, which incorporates by reference OMI's Standard
Terms to Pooling and Servicing Agreement (July 1998 Edition)
(collectively, the "Pooling and Servicing Agreement")
In connection with the administration of the Mortgage Loans held by you
as the Trustee or Custodian, we request the release and acknowledge receipt, of
the Trustee Mortgage Loan File [specify documents if only a partial Trustee
Mortgage Loan File is being released]) for the Mortgage Loan described below,
for the reason indicated.
Mortgagor's Name and Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
___ 1. Mortgage Loan Paid in Full. (The Servicer hereby certifies
that all amounts received in connection therewith have been
deposited into the applicable Certificate Account as provided
in the Pooling and Servicing Agreement.)
___ 2. Mortgage Loan Liquidated by _________________. (The Servicer
hereby certifies that all proceeds of foreclosure, insurance,
condemnation or other liquidation have been finally received.)
___ 3. Mortgage Loan in Foreclosure.
___ 4. Other (explain). _______________________________
If item 1 or 2 above is checked, and if all or part of the Trustee
Mortgage Loan File was previously released to us, please release to us our
previous request and receipt on file with you, as well as any additional
documents in your possession relating to the specified Mortgage Loan.
If item 3 or 4 above is checked, upon our return of all of the above
documents to you as the Trustee or Custodian, please acknowledge your receipt by
signing in the space indicated below, and returning this form.
Exhibit 4 - Page 1
<PAGE>
Capitalized terms used herein but not defined herein have the meanings
ascribed to them in the Pooling and Servicing Agreement.
OAKWOOD ACCEPTANCE CORPORATION,
as Servicer
By:______________________________
Name:____________________________
Title:___________________________
Acknowledgment of Documents returned to the Trustee or Custodian:
[NAME OF TRUSTEE OR CUSTODIAN]
By:______________________________
Name:____________________________
Title:___________________________
Exhibit 4 - Page 2
<PAGE>
EXHIBIT 5
RULE 144A AGREEMENT--QIB CERTIFICATION
OAKWOOD MORTGAGE INVESTORS, INC., SERIES ____-_
PASS-THROUGH CERTIFICATES, CLASS ___
----------------
(DATE)
[Name and Address of
the Trustee]
Oakwood Mortgage Investors, Inc.
Oakwood Acceptance Corporation
7800 McCloud Road
Greensboro, NC 27409
Ladies and Gentlemen:
In connection with the purchase on the date hereof of the captioned
securities (the "Purchased Certificates"), the undersigned (the "Transferee")
hereby certifies and covenants to the transferor, Oakwood Mortgage Investors,
Inc. ("OMI"), the Servicer, the Trustee and the Trust as follows:
1. The Transferee is a "qualified institutional buyer" as that term is
defined in Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933,
as amended (the "1933 Act") and has completed the form of certification to that
effect attached hereto as Annex A1 (if the Transferee is not a registered
investment company) or Annex A2 (if the Transferee is a registered investment
company). The Transferee is aware that the sale to it is being made in reliance
on Rule 144A.
2. The Transferee understands that the Purchased Certificates have not
been registered under the 1933 Act or registered or qualified under any state
securities laws and that no transfer may be made unless the Purchased
Certificates are registered under the 1933 Act and under applicable state law or
unless an exemption from such registration is available. The Transferee further
understands that neither OMI, the Servicer, the Trustee nor the Trust is under
any obligation to register the Purchased Certificates or make an exemption from
such registration available.
3. The Transferee is acquiring the Purchased Certificates for its own
account or for the account of a "qualified institutional buyer" (as defined in
Rule 144A, a "QIB"), and understands that such Purchased Certificates may be
resold, pledged or transferred only (a) to a person reasonably believed to be
such a QIB that purchases for its own account or for the account of a QIB to
whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A, or (b) pursuant to another exemption from registration
under the 1933 Act and under applicable state securities laws. In addition, such
transfer may be subject to additional restrictions, as set forth in Section 5.05
of the Standard Terms to the Pooling and Servicing Agreement (the "Standard
Terms") referred to below. By its execution of this agreement, the Transferee
agrees that it will not resell, pledge or transfer any of the Purchased
Certificates to anyone otherwise than in strict compliance with Rule 144A, or
pursuant to another exemption from registration under the 1933 Act and all
applicable state securities laws, and in strict compliance with the transfer
restrictions set forth in Section 5.05 of the Standard Terms. The Transferee
will
Exhibit 4 - Page 3
<PAGE>
not attempt to transfer any or all of the Purchased Certificates pursuant to
Rule 144A unless the Transferee offers and sells such Certificates only to QIBs
or to offerees or purchasers that the Transferee and any person acting on behalf
of the Transferee reasonably believe (as described in paragraph (d)(l) of Rule
144A) is a QIB.
4. The Transferee has been furnished with all information that it
requested regarding (a) the Purchased Certificates and distributions thereon and
(b) the Pooling and Servicing Agreement referred to below.
5. If applicable, the Transferee has complied, will comply in all
material respects with applicable regulatory guidelines relating to the
ownership of mortgage derivative products.
All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of _____________ 1, ____, which incorporates by reference the Standard
Terms thereto (July 1998 Edition), among Oakwood Mortgage Investors, Inc.,
Oakwood Acceptance Corporation and ____________________, as Trustee, pursuant to
which the Purchased Certificates were issued.
IN WITNESS WHEREOF, the undersigned has caused this Rule 144A Agreement
to be executed by its duly authorized representative as of the day and year
first above written.
[TRANSFEREE]
By:_____________________________
Name:___________________________
Title:___________________________
Exhibit 4 - Page 4
<PAGE>
Annex A1 to Exhibit 5
TRANSFEREES OTHER THAN REGISTERED INVESTMENT COMPANIES
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Transferee.
2. The Transferee is a "qualified institutional buyer" as that term is
defined in Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933,
as amended (the "1933 Act"), because (a) the Transferee owned and/or invested on
a discretionary basis at least $____________ in securities [Note to reviewer -
the amount in the previous blank must be at least $100,000,000 unless the
Transferee is a dealer, in which case the amount filled in the previous blank
must be at least $10,000,000.] (except for the excluded securities referred to
in paragraph 3 below) as of _______________ [specify a date on or since the end
of the Transferee's most recently ended fiscal year] (such amount being
calculated in accordance with Rule 144A) and (b) the Transferee meets the
criteria listed in the category marked below.
_____ Corporation, etc. The Transferee is an organization described
in Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, a corporation (other than a bank as defined in
Section 3(a)(2) of the 1933 Act or a savings and loan
association or other similar institution referenced in Section
3(a)(5)(A) of the Act), a partnership, or a Massachusetts or
similar business trust.
_____ Bank. The Transferee (a) is a national bank or banking
institution as defined in Section 3(a)(2) of the 1933 Act and
is organized under the laws of a state, territory or the
District of Columbia. The business of the Transferee is
substantially confined to banking and is supervised by the
appropriate state or territorial banking commission or similar
official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as
demonstrated in its latest annual financial statements as of a
date not more than 16 months preceding the date of this
certification in the case of a U.S. bank, and not more than 18
months preceding the date of this certification in the case of
a foreign bank or equivalent institution, a copy of which
financial statements is attached hereto.
_____ Savings and Loan. The Transferee is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution referenced in
Section 3(a)(5)(A) of the 1933 Act. The Transferee is
supervised and examined by a state or federal authority having
supervisory authority over any such institutions or is a
foreign savings and loan association or equivalent institution
and has an audited net worth of at least $25,000,000 as
demonstrated in its latest annual financial statements as of a
date not more than 16 months preceding the date of this
certification in the case of a U.S. savings and loan
association or similar institution, and not more than 18
months preceding the date of this certification in the case of
a foreign savings and loan association or equivalent
institution, a copy of which financial statements is attached
hereto.
_____ Broker-dealer. The Transferee is a dealer registered pursuant
to Section 15 of the Certificates Exchange Act of 1934, as
amended (the "1934 Act").
Exhibit 4 - Page 5
<PAGE>
_____ Insurance Company. The Transferee is an insurance company as
defined in Section 2(13) of the 1933 Act, whose primary and
predominant business activity is the writing of insurance or
the reinsuring of risks underwritten by insurance companies
and which is subject to supervision by the insurance
commissioner or a similar official or agency of a state,
territory or the District of Columbia.
_____ State or Local Plan. The Transferee is a plan established and
maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees.
_____ ERISA Plan. The Transferee is an employee benefit plan within
the meaning of Title I of the Employee Retirement Income
Certificate Act of 1974, as amended.
_____ Investment Adviser. The Transferee is an investment adviser
registered under the Investment Advisers Act of 1940, as
amended.
_____ Other. The Transferee qualifies as a "qualified institutional
buyer" as defined in Rule 144A on the basis of facts other
than those listed in any of the entries above. If this
response is marked, the Transferee must certify on additional
pages, to be attached to this certification, to facts that
satisfy the Servicer that the Transferee is a "qualified
institutional buyer" as defined in Rule 144A.
3. The term "securities" as used herein does not include (a) securities
of issuers that are affiliated with the Transferee, (b) securities constituting
the whole or part of an unsold allotment to or subscription by the Transferee,
if the Transferee is a dealer, (c) bank deposit notes and certificates of
deposit, (d) loan participations, (e) repurchase agreements, (f) securities
owned but subject to a repurchase agreement and (g) currency, interest rate and
commodity swaps.
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Transferee, the Transferee used
the cost of such securities to the Transferee and did not include any of the
securities referred to in the preceding paragraph. Further, in determining such
aggregate amount, the Transferee may have included securities owned by
subsidiaries of the Transferee, but only if such subsidiaries are consolidated
with the Transferee in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Transferee's direction. However, such
securities were not included if the Transferee is a majority-owned, consolidated
subsidiary of another enterprise and the Transferee is not itself a reporting
company under the 1934 Act.
5. The Transferee acknowledges that it is familiar with Rule 144A and
understands that the Transferor and other parties related to the Purchased
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Transferee may be made in reliance on Rule
144A.
6. Will the Transferee be purchasing ______ _____
the Purchased Certificates only YES NO
for the Transferee's own account?
If the answer to the foregoing question is "NO", the Transferee agrees
that, in connection with any purchase of securities sold to the Transferee for
the account of a third party (including any separate account) in reliance on
Rule 144A, the Transferee will only purchase for the account of a third party
that at the time is a "qualified institutional buyer" within the meaning of Rule
144A. In addition, the Transferee agrees that the Transferee will not purchase
securities for a third party unless the Transferee has obtained a current
representation
Exhibit 4 - Page 6
<PAGE>
letter from such third party or taken other appropriate steps contemplated by
Rule 144A to conclude that such third party independently meets the definition
of "qualified institutional buyer" set forth in Rule 144A.
7. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Transferee's purchase of the Purchased
Certificates will constitute a reaffirmation of this certification as of the
date of such purchase. In addition, if the Transferee is a bank or savings and
loan as provided above, the Transferee agrees that it will furnish to such
parties updated annual financial statements promptly after they become
available.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
executed by its duly authorized representative this ____ day of ___________,
______.
______________________________________
Print Name of Transferee
By:__________________________________
Name:________________________________
Title:________________________________
Exhibit 4 - Page 7
<PAGE>
Annex A2 to Exhibit 5
REGISTERED INVESTMENT COMPANIES
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Purchased Certificates (the "Transferee") or, if the Transferee is part of a
Family of Investment Companies (as defined in paragraph 3 below), is an officer
of the related investment adviser (the "Adviser").
2. The Transferee is a "qualified institutional buyer" as that term is
defined in Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933,
as amended (the "1933 Act"), because (a) the Transferee is an investment company
(a "Registered Investment Company") registered under the Investment Company Act
of 1940, as amended (the "1940 Act") and (b) as marked below, the Transferee
alone, or the Transferee's Family of Investment Companies, owned at least
$___________ [Note to reviewer - the amount in the previous blank must be at
least $100,000,000] in securities (other than the excluded securities referred
to in paragraph 4 below) as of ________________ [specify a date on or since the
end of the Transferee's most recently ended fiscal year]. For purposes of
determining the amount of securities owned by the Transferee or the Transferee's
Family of Investment Companies, the cost of such securities to the Transferee or
the Transferee's Family of Investment Companies was used.
_____ The Transferee owned $____________ in securities (other than the
excluded securities referred to in paragraph 4 below) as of the end of
the Transferee's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
_____ The Transferee is part of a Family of Investment Companies which owned
in the aggregate $____________ in securities (other than the excluded
securities referred to in paragraph 4 below) as of the end of the
Transferee's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means two
or more Registered Investment Companies except for a unit investment trust whose
assets consist solely of shares of one or more Registered Investment Companies
(provided that each series of a "series company," as defined in Rule 18f-2 under
the 1940 Act, shall be deemed to be a separate investment company) that have the
same investment adviser (or, in the case of a unit investment trust, the same
depositor) or investment advisers (or depositors) that are affiliated (by virtue
of being majority-owned subsidiaries of the same parent or because one
investment adviser is a majority-owned subsidiary of the other).
4. The term "securities" as used herein does not include (a) securities
of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (b) bank deposit notes and
certificates of deposit, (c) loan participations, (d) repurchase agreements, (e)
securities owned but subject to a repurchase agreement and (f) currency,
interest rate and commodity swaps.
5. The Transferee is familiar with Rule 144A and understands that the
parties to which this certification is being made are relying and will continue
to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
Exhibit 4 - Page 8
<PAGE>
6. The undersigned will notify the parties to which this certification
is made of any changes in the information and conclusions herein. Until such
notice, the Transferee's purchase of the Purchased Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
executed by its duly authorized representative this ____ of ____________,
______.
[Print Name of Transferee or
Adviser]
By:_________________________________________
Name:______________________________________
Title:______________________________________
IF AN ADVISER:
[Print Name of Transferee]
Date:_______________________________________
Exhibit 4 - Page 9
<PAGE>
EXHIBIT 6
FORM OF TRANSFEREE AGREEMENT
OAKWOOD MORTGAGE INVESTORS, INC., SERIES _____-___
PASS-THROUGH CERTIFICATES
CLASS __
---------------
[Name of Transferee]
----------------
(DATE)
[NAME AND ADDRESS OF TRUSTEE]
Oakwood Mortgage Investors, Inc.
Oakwood Acceptance Corporation
7800 McCloud Road
Greensboro, North Carolina 27409
Re: Oakwood Mortgage Investors, Inc., Series _____-____
Pass-Through Certificates, Class __, representing a
[___% Percentage Interest][$ denomination]
Ladies and Gentlemen:
The undersigned (the "Transferee") proposes to purchase all or some of
the Class __, Class __, Class __ and Class __ Certificates (the "Purchased
Certificates"), issued by the Trust established pursuant to a pooling and
servicing agreement, dated as of ____________ (the "Series Agreement"), among
Oakwood Mortgage Investors, Inc. ("OMI"), Oakwood Acceptance Corporation ("OAC")
and _____________________________, as Trustee, which incorporates by reference
OMI's Standard Terms to Pooling and Servicing Agreement (July 1998 Edition) (the
"Standard Terms," and, collectively with the Series Agreement, the "Agreement").
In doing so the Transferee hereby acknowledges and agrees as follows:
Section 1. Definitions. Each capitalized term used herein and not
otherwise defined herein shall have the meaning ascribed to it in the Agreement.
Section 2. Representations and Warranties of the Transferee. In
connection with the proposed transfer of the Purchased Certificates, the
Transferee represents and warrants to OMI, OAC, the Servicer, the Trustee and
the Trust as follows:
Exhibit 6 - Page 1
<PAGE>
(a) The Transferee is purchasing the Purchased Certificates
for its own account as principal for investment purposes and not with a
view to the distribution of the Purchased Certificates, in whole or in
part, in violation of Section 5 of the Securities Act of 1933, as
amended (the "Act").
(b) The Transferee has knowledge in financial and business
matters and is capable of evaluating the merits and risks of an
investment in the Purchased Certificates; the Transferee has sought
such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision; and the Transferee is able to
bear the economic risk of an investment in the Purchased Certificates
and can afford a complete loss of such investment.
(c) The Transferee confirms that OMI and the Servicer have
made available to the Transferee the opportunity to ask questions of,
and receive answers from, OMI and the Servicer concerning OMI, the
Servicer, the Trust, the purchase by the Transferee of the Purchased
Certificates and all matters relating thereto, and to obtain additional
information relating thereto that OMI or the Servicer possesses or can
acquire without unreasonable effort or expense.
(d) The Transferee is an "accredited investor" as defined in
paragraph (1), (2), (3) or (7) of Rule 501(a) under the Act.
Section 3. Covenants of the Transferee. In consideration of the
proposed transfer, the Transferee covenants with each of OMI, OAC, the Servicer,
the Trustee and the Trust as follows:
(a) The Transferee will not make a public offering of the
Purchased Certificates, and will not reoffer or resell the Purchased
Certificates in a manner that would render the issuance and sale of the
Purchased Certificates, whether considered together with the resale or
otherwise, a violation of the Act or any state securities or "Blue Sky"
laws or require registration pursuant thereto.
(b) The Transferee agrees that, in its capacity as a holder of
the Purchased Certificates, it will assert no claim or interest in the
Contracts by reason of owning the Purchased Certificates other than
with respect to amounts that may be properly and actually payable to
the Transferee pursuant to the terms of the Pooling and Servicing
Agreement and the Purchased Certificates.
(c) The Transferee hereby agrees to abide by the terms of the
Agreement that will be applicable to it as a Certificateholder,
including, without limitation, the indemnification provisions contained
in the second sentence of Section 5.05(a) of the Agreement.
(d) If applicable, the Transferee will comply in all material
respects with applicable regulatory guidelines relating to the
ownership of mortgage derivative products.
Section 4. Transfer of Purchased Certificates.
(a) The Transferee understands that the Purchased Certificates have not
been registered under the Act or any state securities laws and that no transfer
may be made unless the Purchased Certificates are registered under the Act and
under applicable state law or unless an exemption from such registration is
available. If requested by the Servicer or the Trustee, the Transferee and the
Holder of Purchased Certificates who desires to effect this transfer have
certified to the Trustee, OMI and the Servicer as to the factual basis for the
registration or qualification exemption relied upon. The Transferee further
understands that neither OMI, OAC, the Servicer, the Trustee nor the Trust is
under any obligation to register the Purchased Certificates or make an exemption
from such registration available.
Exhibit 6 - Page 2
<PAGE>
(b) In the event that the transfer is to be made within three years of
the date the Purchased Certificates were acquired by a non-Affiliate of OMI from
OMI or an Affiliate of OMI, the Servicer or the Trustee may require an Opinion
of Counsel (which shall not be an expense of OMI, OAC, the Servicer or the
Trustee) that such transfer is not required to be registered under the Act or
state securities laws.
(c) Any Certificateholder desiring to effect a transfer shall, and does
hereby agree to, indemnify OMI, the Servicer and the Trustee against any
liability that may result if the transfer is not exempt under federal or
applicable state securities laws.
(d) The transfer of the Purchased Certificates may be subject to
additional restrictions, as set forth in Section 5.05 of the Standard Terms of
the Pooling and Servicing Agreement, a copy of which is attached hereto as Annex
A.
All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Transferee
Certification and Agreement to be validly executed by its duly authorized
representative this ____ day of ___________, ____.
-------------------,
By:________________________________
Name:______________________________
Its:________________________________
Exhibit 6 - Page 3
<PAGE>
Annex A to Exhibit 6
ATTACH COPY OF SECTION 5.05 OF THE
STANDARD TERMS TO POOLING AND SERVICING AGREEMENT
Exhibit 6 - Page 4
<PAGE>
EXHIBIT 7
BENEFIT PLAN AFFIDAVIT
Re: Oakwood Mortgage Investors, Inc., OMI
Trust ______ (the "Trust") Pass-
Through Certificates, Class ___,
Class __ and Class __
)
) ss:
)
Under penalties of perjury, I, the undersigned, declare that, to the
best of my knowledge and belief, the following representations are true,
correct, and complete.
1. That I am a duly authorized officer of __________________________, a
_________ corporation (the "Purchaser"), whose taxpayer identification number is
__________, and on behalf of which I have the authority to make this affidavit.
2. That the Purchaser is acquiring the Class ______ Certificates ("the
Purchased Certificates"), each representing an interest in the Trust, for
certain assets of which one or more real estate mortgage investment conduit
("REMIC") elections are to be made under Section 860D of the Internal Revenue
Code of 1986, as amended (the "Code").
3. The Purchaser either:
(i) (A) is not a plan ("Plan") described in or subject to the
Department of Labor regulations set forth in 29 C.F.R. ss. 2510.3-101
(the "Plan Asset Regulations"), a person acting on behalf of a Plan, or
a person using the assets of a Plan and (B) either (I) is not an
insurance company or (II) is an insurance company, in which case none
of the funds used by the Purchaser in connection with its purchase of
the Purchased Certificates constitute plan assets as defined in the
Plan Asset Regulations ("Plan Assets") and its purchase of the
Purchased Certificates shall not result in the certificates issued by
or the assets of the Trust being deemed to be Plan Assets;
(ii) is an insurance company and (A) the Purchaser is
acquiring the Purchased Certificates with funds held in an "insurance
company general account" (as defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), as published in 60
Fed. Reg. 35925 (July 12, 1995)), (B) there is no Plan with respect to
which the amount of such general account's reserves and liabilities for
all contracts held by or on behalf of such Plan and all other Plans
maintained by the same employer, or its affiliates (as defined in
Section V(a)(1) of PTCE 95-60), or by the same employee organization
exceeds or will exceed 10% of the total of all reserves and liabilities
of such general account (as such amounts are determined under Section
I(a) of PTCE 95-60) at the date of acquisition, (C) the purchase of the
Purchased Certificates is not part of an agreement, arrangement, or
understanding designed to benefit a party in interest, and (D) the
conditions of Prohibited Transaction Exemption __________ [INSERT
SPECIFIC UNDERWRITER'S EXEMPTION OR PTE 83-1] (except for the
conditions stated in section II(A)(2) and (3) thereof) are met; or
Exhibit 7 - Page 1
<PAGE>
(iii) has provided a "Benefit Plan Opinion," obtained at the
Purchaser's expense, satisfactory to OMI, the Servicer, and the
Trustee. A Benefit Plan Opinion is an opinion of counsel to the effect
that the proposed transfer will not (a) cause the assets of the Trust
to be regarded as Plan Assets, (b) give rise to a fiduciary duty under
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), on the part of OMI, the Servicer, or the Trustee, or (c) be
treated as, or result in, a prohibited transaction under Section 406 or
407 of ERISA or Section 4975 of the Code.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Pooling and Servicing Agreement, dated as
of ____________ __, _______, which incorporates by reference the Standard Terms
thereto (July 1998 Edition), among OMI, Oakwood Acceptance Corporation, and
_________________________, as Trustee.
Exhibit 7 - Page 2
<PAGE>
IN WITNESS WHEREOF, the Purchaser has caused this instrument to be duly
executed on its behalf, by its duly authorized officer this ____ day of
___________, ____.
-----------------------------
[Name of Purchaser]
By:________________________________
Name:______________________________
Its:________________________________
Personally appeared before me ________________, known or proved to me
to be the same person who executed the foregoing instrument and to be a
_________________________ of the Purchaser, and acknowledged to me that he
executed the same as his or her free act and deed and as the free act and deed
of the Purchaser.
Subscribed and sworn before me this ______ day of ___________, ____.
- -----------------------------------
Notary Public
My commission expires:______________________________.
Exhibit 7 - Page 3
<PAGE>
EXHIBIT 8
FORM OF RESIDUAL TRANSFEREE AGREEMENT
OAKWOOD MORTGAGE INVESTORS INC., SERIES ____-_______
PASS-THROUGH CERTIFICATES,
CLASS __
RESIDUAL TRANSFEREE
-----------------
[Name of Transferee]
----------------
(DATE)
[NAME AND ADDRESS OF TRUSTEE]
Oakwood Mortgage Investors, Inc.
Oakwood Acceptance Corporation
7800 McCloud Road
Greensboro, North Carolina 27409
Re: Oakwood Mortgage Investors, Inc., Series ____-____,
Pass-Through Certificates, Class __, representing a
[___% Percentage Interest][$ denomination]
Ladies and Gentlemen:
The undersigned (the "Transferee") proposes to purchase all or some of
the captioned Certificates (the "Residual Certificates"), issued by the Trust
established pursuant to a pooling and servicing agreement dated as of
__________________, ____ (the "Series Agreement"), among Oakwood Mortgage
Investors, Inc. ("OMI"), Oakwood Acceptance Corporation ("OAC"), and
_____________________________, as Trustee, which incorporates by reference the
Standard Terms thereto, July 1998 Edition (the "Standard Terms" and,
collectively with the Series Agreement, the "Agreement"). In doing so the
Transferee hereby acknowledges and agrees as follows:
Section 1. Definitions. Each capitalized term used herein and not
otherwise defined herein shall have the meaning ascribed to it in the Agreement.
Section 2. Representations and Warranties of the Transferee. In
connection with the proposed transfer of the Purchased Certificates, the
Transferee represents and warrants to OMI, OAC, the Servicer, the Trustee and
the Trust as follows:
Exhibit 8 - Page 1
<PAGE>
(a) The Transferee has knowledge in financial and business
matters and is capable of evaluating the merits and risks of an
investment in the Residual Certificates; the Transferee has sought such
accounting, legal and tax advice as it has considered necessary to make
an informed decision; and the Transferee is able to bear the economic
risk of an investment in the Residual Certificates and can afford a
complete loss of such investment.
(b) The Transferee represents that (i) it understands that
each of the Residual Certificates represents for federal income tax
purposes a "residual interest" in a real estate mortgage investment
conduit (a "REMIC") and that, as the holder of the Residual
Certificates, it will be required to take into account, in determining
its taxable income, its pro rata share of the taxable income of the
REMIC, (ii) it understands that it may incur federal income tax
liabilities with respect to the Residual Certificates in excess of any
cash flows generated by the Residual Certificates and (iii) it has
historically paid its debts as they became due and has the financial
wherewithal and intends to continue to pay its debts as they come due
in the future, including any tax imposed on the income that it derives
from the Residual Certificates as such taxes become due.
*(c) The Transferee is acquiring the Residual Certificates for
its own account as principal and not with a view to the resale or
distribution thereof, in whole or in part, in violation of Section 5 of
the Securities Act of 1933, as amended (the "Act").
*(d) The Transferee confirms that OMI has made available to
the Transferee the opportunity to ask questions of, and receive answers
from, OMI concerning OMI, the Trust, the purchase by the Transferee of
the Residual Certificates and all matters relating thereto, and to
obtain additional information relating thereto that OMI possesses or
can acquire unreasonable effort or expense.
Section 3. Covenants. The Transferee covenants:
(a) The Transferee will not make a public offering of the
Residual Certificates, and will not reoffer or resell the Residual
Certificates in a manner that would render the issuance and sale of the
Residual Certificates whether considered together with the resale or
otherwise, a violation of the Act, or any state securities or "Blue
Sky" laws or require registration pursuant thereto.
(b) The Transferee agrees that, in its capacity as a holder of
the Residual Certificates, it will assert no claim or interest in the
Contracts by reason of owning the Residual Certificates other than with
respect to amounts that may be properly and actually payable to the
Transferee pursuant to the terms of the Pooling and Servicing Agreement
and the Certificates.
(c) If applicable, the Transferee will comply with respect to
the Residual Certificates in all material respects with applicable
regulatory guidelines relating to the ownership of mortgage derivative
products.
(d) Upon notice thereof, the Transferee agrees to any future
amendment to the provisions of the Pooling and Servicing Agreement
relating to the transfer of the Residual Certificates (or any interest
therein) that counsel to OMI or the Trust may deem necessary to ensure
that any such transfer will not result in the imposition of any tax on
the Trust.
* These representations and covenants are to be deleted if the Residual
Securities are not Private Securities.
Exhibit 8 - Page 2
<PAGE>
(e) The Transferee hereby agrees that the Servicer or an
affiliate thereof will (i) supervise or engage in any action necessary
or advisable to preserve the status of the REMIC as a REMIC, (ii) be,
and perform the functions of, the REMIC's tax matters person ("TMP"),
and (iii) employ on a reasonable basis counsel, accountants, and
professional assistance to aid in the preparation of tax returns or the
performance of the above.
(f) The Transferee hereby agrees to cooperate with the TMP and
to take any action required of it by the REMIC Provisions in order to
create or maintain the REMIC status of the REMIC.
(g) The Transferee hereby agrees that it will not take any
action that could endanger the REMIC status of any related REMIC or
result in the imposition of tax on any such REMIC unless counsel for,
or acceptable to, the TMP has provided an opinion that such action will
not result in the loss of such REMIC status or the imposition of such
tax, as applicable.
Section 4. Additional Transfer Restrictions.
(a) No transfer of the Residual Certificates shall be made
unless the Servicer has consented in writing to such transfer. No
Residual Certificate may be transferred to a Disqualified Organization.
The Servicer will not consent to any proposed transfer (i) to any
investor that it knows is a Disqualified Organization or (ii) if the
transfer involves less than an entire interest in a Residual
Certificate unless (A) the interest transferred is an undivided
interest or (B) the transferor or the transferee provides the Servicer
with an Opinion of Counsel obtained at its own expense to the effect
that the transfer will not jeopardize the REMIC status of any related
REMIC. The Servicer's consent to any transfer is further conditioned
the Servicer's receipt from the proposed transferee of (x) a Residual
Transferee Agreement, (y) a Benefit Plan Affidavit, and (z) either (A)
if the transferee is a Non-U.S. Person, an affidavit of the proposed
transferee in substantially the form attached as Exhibit 8-A to Exhibit
8 to the Standard Terms and a certificate of the transferor stating
whether the Class R Certificate has "tax avoidance potential" as
defined in Treasury Regulations Section 1.860G-3(a)(2), or (B) if the
transferee is a U.S. Person, an affidavit in substantially the form
attached as Exhibit 8-B to Exhibit 8 to the Standard Terms. In
addition, if a proposed transfer involves a Private Certificate, (1)
the Servicer or the Trustee shall require that the transferor and
transferee certify as to the factual basis for the registration or
qualification exemption(s) relied upon to exempt the transfer from
registration under the Act and all applicable state securities or "blue
sky" laws, and (2) if the transfer is to be made within three years
after the acquisition thereof by a non-Affiliate of OMI from OMI or an
Affiliate of OMI, the Servicer or the Trustee also may require an
Opinion of Counsel that such transfer may be made without registration
or qualification under the Act and applicable state securities laws,
which Opinion of Counsel shall not be obtained at the expense of OMI,
the Trustee or the Servicer. Notwithstanding the foregoing, no Opinion
of Counsel shall be required in connection with the initial transfer of
the Residual Certificates or their transfer by a broker or dealer, if
such broker or dealer was the initial transferee. Notwithstanding the
fulfillment of the prerequisites described above, the Servicer may
withhold its consent to, or the Trustee may refuse to recognize, a
transfer of a Residual Certificate, but only to the extent necessary to
avoid a risk of disqualification of a related REMIC as a REMIC or the
imposition of a tax upon any such REMIC. Any attempted transfer in
violation of the foregoing restrictions shall be null and void and
shall not be recognized by the Trustee.
(b) If a tax or a reporting cost is borne by a related REMIC
as a result of the transfer of the Residual Certificates or any
beneficial interest therein, in violation of the restrictions
referenced herein, the Transferor shall pay such tax or cost and, if
such tax or costs are not so paid, the Trustee, upon notification from
the Servicer, shall pay such tax or reporting cost with amounts that
otherwise would have been paid to the transferee of such Residual
Certificates. In that event, neither the Transferee nor the transferor
shall have any right to seek repayment of such amounts from OMI, the
Servicer, the Trustee, the Trust, the REMIC or the holders of any other
Certificates, and none of such parties shall have any
Exhibit 8 - Page 3
<PAGE>
liability for payment of any such tax or reporting cost. In the event
that a Residual Certificate is transferred to a Disqualified
Organization, the Servicer shall make, or cause to be made, available
the information necessary for the computation of the excise tax imposed
under section 860E(e) of the Code.
Section 5. Acknowledgments.
(a) The Transferee acknowledges that, if the Residual
Certificates are Private Certificates, the Residual Certificates have
not been registered under the Act or registered or qualified under any
state securities laws and that no transfer may be made unless the
Purchased Certificates are registered under the Act and under
applicable state law or unless an exemption from such registration is
available. The Transferee further understands that neither OMI, the
Servicer nor the Trust is under any obligation to register the
Certificate or make an exemption from such registration available.
(b) The Transferee acknowledges that if any United States
federal income tax is due at the time a Non-U.S. Person transfers a
Residual Certificate, the Trustee or its designated Paying Agent or
other person who is liable to withhold federal income tax from a
distribution on a Residual Certificate under sections 1441 and 1442 of
the Code and the regulations thereunder (the "Withholding Agent") may
(i) withhold an amount equal to the taxes due upon disposition of the
Certificate from future distributions made with respect to the
Certificate to the transferee (after giving effect to the withholding
of taxes imposed on such transferee), and (ii) pay the withheld amount
to the Internal Revenue Service unless satisfactory written evidence of
payment of the taxes due by the transferor has been provided to the
Withholding Agent. Moreover, the Withholding Agent may (x) hold
distributions on a Certificate, without interest, pending determination
of amounts to be withheld, (y) withhold other amounts required to be
withheld pursuant to United States federal income tax law, if any, from
distributions that otherwise would be made to such transferee on each
Certificate it holds, and (z) pay to the Internal Revenue Service all
such amounts withheld.
(c) The Transferee acknowledges that the transfer of all or
part of the Residual Certificates that have "tax avoidance potential"
(as defined in Treasury Regulations section 1.860G-3(a)(2) or any
successor provision) to a Non-U.S. Person will be disregarded for all
federal income tax purposes.
(d) The Transferee acknowledges that the transfer of the
Residual Certificates to a U.S. Person will be disregarded for all
federal income tax purposes if a significant purpose of the transfer is
to impede the assessment or collection of the taxes and expenses
associated with the security within the meaning of Treasury regulation
section 1.860E-1(c)(1).
IN WITNESS WHEREOF, the undersigned has caused the Pooling and
Servicing Agreement be validly executed by its duly authorized representative as
of the day and year first above written.
[Name of Transferee]
By: _______________________
Its: ________________________
Exhibit 8 - Page 4
<PAGE>
EXHIBIT 8-A
OAKWOOD MORTGAGE INVESTORS, INC.
FOREIGN PERSON AFFIDAVIT
AND AFFIDAVIT PURSUANT TO SECTIONS
860D(a)(6)(A) and 860E(e)(4)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
Re: Oakwood Mortgage Investors, Inc.
Series __________ Trust (the "Trust")
Pass-Through Certificates, Class __
STATE OF ___________ )
) ss.:
COUNTY OF __________ )
Under penalties of perjury, I, the undersigned, declare that to the
best of my knowledge and belief, the following representations are true,
correct, and complete:
1. I am a duly authorized officer of ___________________ (the
"Transferee"), and on behalf of which I have the authority to make this
affidavit.
2. The Transferee is acquiring all or a portion of the securities (the
"Residual Certificates"), which represent a residual interest in one or more
real estate mortgage investment conduits (each, a "REMIC") for which elections
are to be made under Section 860D of the Internal Revenue Code of 1986, as
amended (the "Code").
3. The Transferee is a foreign person within the meaning of Treasury
Regulation Section 1.860G- 3(a)(1) (i.e., a person other than (i) a citizen or
resident of the United States, (ii) a corporation or partnership that is
organized under the laws of the United States or any jurisdiction thereof or
therein, or (iii) an estate or trust that is subject to United States federal
income tax regardless of the source of its income) who would be subject to
United States income tax withholding pursuant to Section 1441 or 1442 of the
Code on income derived from the Residual Certificates (a "Non-U.S. Person").
4. The Transferee agrees that it will not hold the Residual
Certificates in connection with a trade or business in the United States, and
the Transferee understands that it will be subject to United States federal
income tax under sections 871 and 881 of the Code in accordance with section
860G of the Code and any Treasury regulations issued thereunder on "excess
inclusions" that accrue with respect to the Residual Certificates during the
period the Transferee holds the Residual Certificates.
5. The Transferee understands that the federal income tax on excess
inclusions with respect to the Residual Certificates may be withheld in
accordance with section 860G(b) of the Code from distributions that otherwise
would be made to the Transferee on the Residual Certificates and, to the extent
that such tax has not been imposed previously, that such tax may be imposed at
the time of disposition of any such Residual Certificate pursuant to section
860G(b) of the Code.
6. The Transferee agrees (i) to file a timely United States federal
income tax return for the year in which disposition of a Residual Certificate it
holds occurs (or earlier if required by law) and will pay any United States
federal income tax due at that time and (ii) if any tax is due at that time, to
provide satisfactory written evidence of payment to the Trustee or its
designated paying agent or other person who is liable to withhold federal
Exhibit 8-A - Page 1
<PAGE>
income tax from a distribution on the Residual Certificates under sections 1441
and 1442 of the Code and the regulations thereunder (the "Withholding Agent").
7. The Transferee understands that, until such written notice is
provided, the Withholding Agent may (i) withhold an amount equal to the taxes
due upon disposition of a Residual Certificates from future distributions made
with respect to the Residual Certificate to subsequent transferees (after giving
effect to the withholding of taxes imposed on such subsequent transferees), and
(ii) pay the withheld amount to the Internal Revenue Service.
8. The Transferee understands that (i) the Withholding Agent may
withhold other amounts required to be withheld pursuant to United States federal
income tax law, if any, from distributions that otherwise would be made to such
transferee on each Residual Certificates it holds and (ii) the Withholding Agent
may pay to the Internal Revenue Service amounts withheld on behalf of any and
all former holders of each Residual Certificate held by the Transferee.
9. The Transferee understands that if it transfers a Residual
Certificate (or any interest therein) to a United States Person (including a
foreign person who is subject to net United States federal income taxation with
respect to such Residual Certificate), the Withholding Agent may disregard the
transfer for federal income tax purposes if the transfer would have the effect
of allowing the Transferee to avoid tax on accrued excess inclusions and may
continue to withhold tax from future distributions as though the Residual
Certificate were still held by the Transferee.
10. The Transferee understands that a transfer of a Residual
Certificate (or any interest therein) to a Non-U.S. Person (i.e., a foreign
person who is not subject to net United States federal income tax with respect
to such Residual Certificate) will not be recognized unless the Withholding
Agent has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same agreements and representations.
11. The Transferee understands that distributions on a Residual
Certificate may be delayed, without interest, pending determination of amounts
to be withheld.
12. The Transferee is not a "Disqualified Organization" (as defined
below), and the Transferee is not acquiring a Residual Certificate for the
account of, or as agent or nominee of, or with a view to the transfer of direct
or indirect record or beneficial ownership to, a Disqualified Organization. For
the purposes hereof, a Disqualified Organization is any of the following: (i)
the United States, any State or political subdivision thereof, any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing; (ii) any organization (other than a farmer's cooperative
as defined in Section 521 of the Code) that is exempt from federal income
taxation (including taxation under the unrelated business taxable income
provisions of the Code); (iii) any rural telephone or electrical service
cooperative described in Section 1381(a)(2)(C) of the Code; or (iv) any other
entity so designated by Treasury rulings or regulations promulgated or otherwise
in effect as of the date hereof. In addition, a corporation will not be treated
as an instrumentality of the United States or of any state or political
subdivision thereof if all of its activities are subject to tax and, with the
exception of the Federal Home Loan Mortgage Corporation, a majority of its board
of directors is not selected by such governmental unit.
13. The Transferee agrees to consent to any amendment of the Pooling
and Servicing Agreement that shall be deemed necessary by OMI (upon the advice
of counsel to OMI) to constitute a reasonable arrangement to ensure that no
interest in a Residual Certificate will be owned directly or indirectly by a
Disqualified Organization.
14. The Transferee acknowledges that Section 860E(e) of the Code would
impose a substantial tax on the transferor or, in certain circumstances, on an
agent for the transferee, with respect to any transfer of any interest in any
Residual Certificate to a Disqualified Organization.
Exhibit 8-A - Page 2
<PAGE>
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Pooling and Servicing Agreement, dated as of
_______________, ____, which incorporates by reference the Standard Terms
thereto (July 1998 Edition), among Oakwood Mortgage Investors, Inc., Oakwood
Acceptance Corporation, and ____________________, as Trustee.
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
duly executed on its behalf, by its duly authorized officer as of the _______
day of _____________, ____.
[Name of Transferee]
By: _______________________
Its: ______________________
Personally appeared before me ___________________________, known or
proved to me to be the same person who executed the foregoing instrument and to
be a ______________________ of the Transferee, and acknowledged to me that he or
she executed the same as his or her free act and deed and as the free act and
deed of the Transferee.
Subscribed and sworn before me this ______ day of __________, ____.
-------------------------------------------------------
Notary Public
My commission expires the _____ day of ________________, ____.
Exhibit 8-A - Page 3
<PAGE>
EXHIBIT 8-B
OAKWOOD MORTGAGE INVESTORS, INC.
AFFIDAVIT PURSUANT TO SECTIONS
860D(a)(6)(A) and 860E(e)(4)
OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED
Re: Oakwood Mortgage Investors, Inc.
Series ________ Trust (the "Trust")
Pass-Through Certificates, Class ___
STATE OF __________________________ )
COUNTY OF _________________________ )
Under penalties of perjury, I, the undersigned declare that, to the
best of my knowledge and belief, the following representations are true, correct
and complete:
1. I am a duly authorized officer of ______________________ (the
"Transferee"), on behalf of which I have the authority to make this affidavit.
2. The Transferee is acquiring all or a portion of the securities (the
"Residual Certificates"), which represent a residual interest in one or more
real estate mortgage investment conduits (each, a "REMIC") for which elections
are to be made under Section 860D of the Internal Revenue Code of 1986, as
amended (the "Code").
3. The Transferee either is (i) a citizen or resident of the United
States, (ii) a domestic partnership or corporation, (iii) an estate or trust
that is subject to United States federal income tax regardless of the source of
its income, or (iv) a foreign person who would be subject to United States
income taxation on a net basis on income derived from the Residual Certificates
(a "U.S. Person").
4. The Transferee is a not a "Disqualified Organization" (as defined
below), and the Transferee is not acquiring a Residual Certificate for the
account of, or as agent or nominee of, or with a view to the transfer of direct
or indirect record or beneficial ownership to, a Disqualified Organization. For
the purposes hereof, a Disqualified Organization is any of the following: (i)
the United States, any State or political subdivision thereof, any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing; (ii) any organization (other than a farmer's cooperative
as defined in Section 521 of the Code) that is exempt from federal income
taxation (including taxation under the unrelated business taxable income
provisions of the Code); (iii) any rural telephone or electrical service
cooperative described in ss. 1381(a)(2)(C) of the Code; or (iv) any other entity
so designated by Treasury rulings or regulations promulgated or otherwise in
effect as of the date hereof. In addition, a corporation will not be treated as
an instrumentality of the United States or of any state or political subdivision
thereof if all of its activities are subject to tax and, with the exception of
the Federal Home Loan Mortgage Corporation, a majority of its board of directors
is not selected by such governmental unit.
5. The Transferee agrees to consent to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by the Issuer (upon advice of
counsel to the Issuer) to constitute a reasonable arrangement to ensure that no
interest in a Residual Certificate will be owned directly or indirectly by a
Disqualified Organization.
Exhibit 8-B - Page 1
<PAGE>
6. The Transferee acknowledges that Section 860E(e) of the Code would
impose a substantial tax on the transferor or, in certain circumstances, on an
agent for the transferee, with respect to any transfer of any interest in any
Residual Certificate to a Disqualified Organization.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Pooling and Servicing Agreement, dated as of
_______________, ____, which incorporates by reference the Standard Terms
thereto (July 1998 Edition), among Oakwood Mortgage Investors, Inc., the
Servicer, and ____________________, as Trustee.
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
duly executed on its behalf by its duly authorized officer this ____ day of
______, ____.
[Name of Transferee]
By: ___________________
Its: _________________
Personally appeared before me ___________________, known or proved to
me to be the same person who executed the foregoing instrument and to be a
_______________ of the Transferee, and acknowledged to me that he or she
executed the same as his or her free act and deed and as the free act and deed
of the Transferee.
Subscribed and sworn before me this ____ day of ________, ____.
------------------------------------------------
Notary Public
My commission expires the ____ day of ____________________, ____.
Exhibit 8-B - Page 2
<PAGE>
EXHIBIT 9
FORM OF POWER OF ATTORNEY
Oakwood Acceptance Corporation ("OAC"), pursuant to the Pooling and
Servicing Agreement, dated as of ______________________, _______, among Oakwood
Mortgage Investors, Inc. ("OMI"), OAC, and _____________________________, as
Trustee (the "Trustee"), which incorporates by reference OMI's Standard Terms to
Pooling and Servicing Agreement (July 1998 Edition) (the "Standard Terms"),
hereby irrevocably constitutes and appoints the Trustee its true and lawful
attorney-in-fact and agent, to execute, acknowledge, verify, swear to, deliver,
record and file, in its name, place and stead, assignments of Mortgages relating
to Loan Secured Contracts from OAC to the Trustee as contemplated by Section
2.02 of the Standard Terms. If required, OAC shall execute and deliver to the
Trustee, upon the Trustee's request therefor, such further designations, powers
of attorney or other instruments as the Trustee may reasonably deem necessary
for the purposes hereof.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings assigned to them in the Agreement.
OAKWOOD ACCEPTANCE CORPORATION
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
Acknowledged and Agreed:
[Name of Trustee]
By: ___________________________
Name: _________________________
Title: ________________________
Exhibit 9 - Page 1
[Hunton & Williams Letterhead]
File Number: 40944.000233
Direct Dial: 804/788-8200
Exhibit 5.1
July 2, 1998
Oakwood Mortgage Investors, Inc.
7800 McCloud Road
Greensboro, North Carolina 27409-9634
Dear Sirs:
We have acted as counsel to Oakwood Mortgage Investors, Inc., a North
Carolina corporation (the "Company"), in connection with the Company's
registration statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
with respect to the proposed sale by the Company of up to $1,000,000,000 in
aggregate principal amount of Pass-Through Certificates, issuable by separate
trusts in one or more series (the "Certificates"). In this capacity, we have
examined the Registration Statement, the Company's Articles of Incorporation and
Bylaws, the form of Pooling and Servicing Agreement, including Standard Terms
thereto, among the Company, the trustee to be named therein and Oakwood
Acceptance Corporation, as servicer (the "Pooling and Servicing Agreement"), and
such other materials as we have deemed necessary to the issuance of this
opinion.
On the basis of the foregoing, we are of the opinion that:
1. The Company has been duly organized and is validly existing as a
corporation under the laws of the State of North Carolina.
2. When each Pooling and Servicing Agreement has been duly authorized
by all necessary corporate action and has been duly executed and delivered by
the parties thereto, it will constitute a valid, legal and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and to general
principles of equity, regardless of whether enforcement is sought in a
proceeding in equity or at law.
<PAGE>
Oakwood Mortgage Investors, Inc.
July 2, 1998
Page 2
3. When the Certificates have been duly authorized for sale by all
necessary corporate action, and when the Certificates have been duly issued,
executed and authenticated in accordance with the provisions of the related
Pooling and Servicing Agreement and delivered to and paid for by the purchasers
thereof, the Certificates will be legally and validly issued and the holders of
the Certificates will be entitled to the benefits provided by the Pooling and
Servicing Agreement pursuant to which such Certificates were issued.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
Very truly yours,
/s/ HUNTON & WILLIAMS
[Hunton & Williams Letterhead]
File Number: 40944.000233
Direct Dial: 804/788-8200
Exhibit 8.1
July 2, 1998
Oakwood Mortgage Investors, Inc.
7800 McCloud Road
Greensboro, North Carolina 27409-9634
Ladies and Gentlemen:
We have acted as counsel to Oakwood Mortgage Investors, Inc.,
a North Carolina corporation (the "Seller"), in connection with the Seller's
Registration Statement on Form S-3 (the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), for the registration under the Act of $1,000,000,000
aggregate principal amount of Pass-Through Certificates (the "Certificates")
representing interests in one or more trusts (each a "Trust") to be established
by the Seller. The Certificates of each Trust will be issued pursuant to a form
of Pooling and Servicing Agreement, including Standard Terms thereto, among the
Seller, a trustee to be named therein, and Oakwood Acceptance Corporation, a
North Carolina Corporation, as servicer (a "Pooling and Servicing Agreement").
We have reviewed the originals or copies of (i) the Articles
of Incorporation, By-laws, and other organizational documents of the Seller;
(ii) certain resolutions of the Board of Directors of the Seller; (iii) the
Pooling and Servicing Agreement, including the forms of the Certificates annexed
thereto; (iv) the Registration Statement and the prospectus included therein;
and (v) such other documents as we have deemed necessary or appropriate as a
basis for the opinion set forth below.
<PAGE>
Oakwood Mortgage Investors, Inc.
July 2, 1998
Page 2
Based on the foregoing, we are of the opinion that the legal
conclusions contained in the Registration Statement under the caption "Federal
Income Tax Consequences" are correct in all material respects, and the
discussion thereunder does not omit any material provision with respect to the
matters covered. You should be aware that this opinion represents our
conclusions as to the application of existing law to a transaction as described
above. There can be no assurance that contrary positions will not be taken by
the Internal Revenue Service or that the law will not change.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. We also consent to the references to Hunton &
Williams under the caption "Federal Income Tax Consequences" in the Prospectus.
In giving this consent, we do not admit that we are in the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
No opinion has been sought and none has been given concerning
the tax treatment of the issuance and sale of the Certificates under the laws of
North Carolina or any other state.
Very truly yours,
/s/ HUNTON & WILLIAMS
[Hunton & Williams Letterhead]
File Number: 40944.000233
Direct Dial: 804/788-8200
Exhibit 8.2
July 2, 1998
Oakwood Mortgage Investors, Inc.
7800 McCloud Road
Greensboro, North Carolina 27409-9636
Ladies and Gentlemen:
We have acted as counsel to Oakwood Mortgage Investors, Inc.,
a North Carolina corporation (the "Seller"), in connection with the preparation
of the Seller's Registration Statement on Form S-3 (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), for the registration under the
Act of $1,000,000,000 aggregate principal amount of Pass-Through Certificates
(the "Certificates") representing interests in one or more trusts (each a
"Trust") to be established by the Seller. The Certificates of each Trust will be
issued pursuant to a form of Pooling and Servicing Agreement, including Standard
Terms thereto, among the Seller, a trustee to be named therein, and Oakwood
Acceptance Corporation, a North Carolina corporation, as servicer (a "Pooling
and Servicing Agreement").
We have reviewed the originals or copies of (i) the Articles of
Incorporation, By-laws, and other organizational documents of the Seller; (ii)
certain resolutions of the Board of Directors of the Seller; (iii) the Pooling
and Servicing Agreement, including the forms of the Certificates annexed
thereto; (iv) the Registration Statement and the prospectus included therein;
and (v) such other documents as we have deemed necessary or appropriate as a
basis for the opinions set forth below.
<PAGE>
Oakwood Mortgage Investors, Inc.
July 2, 1998
Page 2
Based on the foregoing, we are of the opinion that the legal
conclusions contained in the Registration Statement under the caption "Federal
Income Tax Consequences" are correct in all material respects, and the
discussion thereunder does not omit any material provision with respect to the
matters covered. We also are of the opinion that, with respect to the issuance
of the Certificates of a Trust for which an election to be treated as a real
estate mortgage investment conduit ("REMIC") is to be made, if (i) the Seller,
the Trustee, and the other parties to the issuance transaction comply (without
waiver) with all of the provisions of the Pooling and Servicing Agreement and
certain other documents to be prepared and executed in connection with such
transaction, (ii) the Certificates are issued and sold as described in the
Registration Statement and the prospectus supplement to be issued in connection
with the Trust, and (iii) an election is properly made and filed for the Trust
(or designated assets thereof) to be treated as one or more REMICs pursuant to
Section 860D of the Internal Revenue Code of 1986, as amended (the "Code"), the
Trust (or designated assets thereof) will qualify as one or more REMICs, and the
Certificates relating to the Trust will be considered to be "regular interests"
or the "residual interest" in a REMIC (as designated in the relevant prospectus
supplement) on the date of issuance thereof and thereafter, assuming continuing
compliance with the REMIC provisions of the Code and any regulations thereunder.
You should be aware that the above opinions represent our conclusions
as to the application of existing law to a transaction as described above. There
can be no assurance that contrary positions will not be taken by the Internal
Revenue Service or that the law will not change.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the references to Hunton & Williams
under the caption "Federal Income Tax Consequences" in the Prospectus. In giving
this consent, we do not admit that we are in the category of persons whose
consent is required by Section 7 of the Act or the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
No opinion has been sought and none has been given concerning the tax
treatment of the issuance and sale of the Certificates under the laws of North
Carolina or any other state.
Very truly yours,
/s/ HUNTON & WILLIAMS
[Hunton & Williams Letterhead]
File Number: 40944.000233
Direct Dial: 804/788-8200
Exhibit 8.3
July 2, 1998
Oakwood Mortgage Investors, Inc.
7800 McCloud Road
Greensboro, North Carolina 27409-9636
Ladies and Gentlemen:
We have acted as counsel to Oakwood Mortgage Investors, Inc.,
a North Carolina corporation (the "Seller"), in connection with the preparation
of the Seller's Registration Statement on Form S-3 (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), for the registration under the
Act of $1,000,000,000 aggregate principal amount of Pass-Through Certificates
(the "Certificates") representing interests in one or more trusts (each a
"Trust") to be established by the Seller. The Certificates of each Trust will be
issued pursuant to a form of Pooling and Servicing Agreement, including Standard
Terms thereto, among the Seller, a trustee to be named therein, and Oakwood
Acceptance Corporation, a North Carolina corporation, as servicer (a "Pooling
and Servicing Agreement").
We have reviewed the originals or copies of (i) the Articles
of Incorporation, By-laws, and other organizational documents of the Seller;
(ii) certain resolutions of the Board of Directors of the Seller; (iii) the
Pooling and Servicing Agreement, including the forms of the Certificates annexed
thereto; (iv) the Registration Statement and the prospectus included therein;
and (v) such other documents as we have deemed necessary or appropriate as a
basis for the opinions set forth below.
<PAGE>
Oakwood Mortgage Investors, Inc.
July 2, 1998
Page 2
Based on the foregoing, we are of the opinion that the legal
conclusions contained in the Registration Statement under the caption "Federal
Income Tax Consequences" are correct in all material respects, and the
discussion thereunder does not omit any material provision with respect to the
matters covered. We also are of the opinion that, with respect to the issuance
of the Certificates of a Trust for which no election to be treated as a real
estate mortgage investment conduit is to be made, if (i) the Seller, the
Trustee, and the other parties to the issuance transaction comply (without
waiver) with all of the provisions of the Pooling and Servicing Agreement and
certain other documents to be prepared and executed in connection with such
transaction and (ii) the Certificates are issued and sold as described in the
Registration Statement and the prospectus supplement to be issued in connection
with the Trust, the Trust will be classified as a grantor trust under Subpart E,
Part 1 of subchapter J of the Internal Revenue Code of l986, as amended (the
"Code"), and not as an association taxable as a corporation.
You should be aware that the above opinions represent our
conclusions as to the application of existing law to the transaction described
above. There can be no assurance that contrary positions will not be taken by
the Internal Revenue Service or that the law will not change.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. We also consent to the references to Hunton &
Williams under the caption "Federal Income Tax Consequences" in the Prospectus.
In giving this consent, we do not admit that we are in the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
No opinion has been sought and none has been given concerning
the tax treatment of the issuance and sale of the Certificates under the laws of
North Carolina or any other state.
Very truly yours,
/s/ HUNTON & WILLIAMS
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Oakwood Mortgage
Investors, Inc. of our report dated November 3, 1997 which appears on page 36 of
Oakwood Homes Corporation's ("OHC") 1997 Annual Report to Shareholders, which is
incorporated by reference in OHC's Annual Report on Form 10-K for the year ended
September 30, 1997. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Greensboro, North Carolina
June 30, 1998
