AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1999
REGISTRATION NO. 333-72621
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
ON FORM S-3+
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)
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<S> <C> <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)
-----------------------------
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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|
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT TO BE MAXIMUM MAXIMUM
BEING REGISTERED REGISTERED* OFFERING AGGREGATE AMOUNT OF
PRICE OFFERING REGISTRATION
PER UNIT* PRICE* FEE
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<S> <C> <C> <C> <C>
Pass-Through Certificates $1,000,000 100% $1,000,000 $278**
================================== =============== ============= =============== ==============
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* Estimated solely for calculating the registration fee.
** Previously paid.
The within Prospectus and related Prospectus Supplements cover the $1,000,000 in
principal amount of Pass-Through Certificates being registered hereunder, plus
the $3,500,000,000 in principal amount of Pass-Through Certificates registered
by the Registrant under Registration Statements No. 333-58497 on Form S-3,
$255,998,141 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. 333-58497 relating to those Pass-Through Certificates
in the aggregate of $970,444.10.
----------------------------------
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. 2 to Registration Statement 333-58497
on Form S-3 (filed by Registrant on July 2, 1998).
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 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 Supplement to Prospectus dated April 16, 1999
[Logo]
OMI Trust 1999-___, Issuer
Oakwood Mortgage Investors, Inc., Depositor
$________________
Senior/Subordinated Pass-Through Certificates, Series 1999-___
Oakwood Acceptance Corporation, Seller and Servicer
-------------------------
The trust initially will consist of contracts and mortgage loans secured by
manufactured homes and related real estate with an aggregate principal balance
of approximately $___________. An election will be made to treat a portion
of the assets of the trust as one or more REMICs under the Internal Revenue
Code, and the offered certificates will be "regular interests" in one of the
REMICs. The underlying accounts, contracts, and mortgage loans are not
insured or guaranteed by any governmental agency. [Oakwood Homes will guaranty
some collections on the contracts and mortgage loans.]
Investing in the certificates involves risks. See "Risk Factors" on page S-4 of
this prospectus supplement and page 1 of the prospectus.
Neither the SEC nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus supplement or the
prospectus to which it relates is truthful or complete.
Any representation to the contrary is a criminal offense.
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Underwriting
Principal Class Monthly Price to Discounts and Proceeds to
Amount Interest Rate Public Commissions Issuer
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A-1 Certificates..... $__________ (1) __________% ______% __________%
A-2 Certificates..... $__________ ______% __________% ______% __________%
A-3 Certificates..... $__________ ______% __________% ______% __________%
A-4 Certificates..... $__________ ______% __________% ______% __________%
A-5 Certificates..... $__________ ______% __________% ______% __________%
M-1 Certificates..... $__________ ______%(2) __________% ______% __________%
M-2 Certificates..... $__________ ______%(2) __________% ______% __________%
B-1 Certificates..... $__________ ______%(2) __________% ______% __________%
B-2 Certificates..... $__________ ______%(2) __________% ______% __________%
Total................ $__________ $___________ $_________ $____________
</TABLE>
<PAGE>
(1) The lesser of one-month LIBOR plus ______% and the weighted average net
asset rate.
(2) The lesser of the stated rate per annum and the weighted average net asset
rate.
The price to the public is per certificate, plus accrued interest from _____
1, 199___ in the case of the class A-2, A-3, A-4, A-5, M and B certificates
and from the date the certificates are issued, in the case of the class A-1
certificates.
Proceeds to issuer has been calculated before deducting expenses payable by
Oakwood Mortgage, estimated to be approximately $__________.
The first monthly distribution date will be __________ 15, 199__. The record
date for each distribution date will be the last business day of the month
preceding a distribution date.
Delivery of the certificates will be made through The Depository Trust Company
on or about _________ __, 199___, against payment in immediately available
funds.
[Underwriters]
Prospectus Supplement dated _______________.
<PAGE>
Important notice about the information we present in this
prospectus prospectus supplement and in the
accompanying prospectus.
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
We provide information to you about the certificates in two separate
documents that progressively provide more detail: the accompanying prospectus,
which provides general information, some of which may not apply to your
certificates and this prospectus supplement, which describes the specific terms
of your certificates.
Your certificates will not be listed on any trading exchange.
This prospectus supplement and the accompanying prospectus include
cross-references to captions in these materials where you can find further
related discussions. The following table of contents and the table of contents
included in the accompanying prospectus provide the pages on which these
captions are located.
[We have filed preliminary information regarding the trust's assets and
the certificates with the SEC. The information contained in this document
supersedes all of that preliminary information, which was prepared by the
underwriters for prospective investors.]
Until ____________ all dealers that effect transactions in the offered
certificates, whether or not participating in this offering, may be required to
deliver a prospectus and prospectus supplement. This requirement is in addition
to the dealer's obligation to deliver a prospectus and prospectus supplement
when acting as underwriters with respect to their unsold allotments or
subscriptions.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Summary of Terms..........................................S-1
Risk Factors..............................................S-4
Description of the Offered Certificates...................S-5
General...............................................S-5
[Book-Entry Certificates..............................S-5
Collection of Payments on Assets......................S-6
Realized Losses on Liquidated Loans...................S-7
Allocation of Writedown Amounts.......................S-7
Distributions.........................................S-7
Subordination of the Subordinated Certificates .......S-14
[The Limited Guarantee................................S-14
The Asset Pool............................................S-15
General...............................................S-15
Fixed Rate Assets.....................................S-15
Adjustable Rate Assets................................S-17
Selected Data.........................................S-17
Underwriting Guidelines...............................S-24
Conveyance of Assets..................................S-24
[Conveyance of Subsequent Assets and Pre-Funding
Account ........................................S-26
Maturity and Prepayment Considerations....................S-27
Weighted Average Lives of the Offered Certificates ...S-27
Modeling Assumptions and MHP Tables...................S-28
[Pre-Funding..........................................S-33
Factors Affecting Prepayments.........................S-33
Yield on the Offered Certificates.........................S-34
The Trust.................................................S-36
General...............................................S-36
The Trustee...........................................S-37
Optional Termination..................................S-37
Auction Sale..........................................S-38
Termination of the Agreement..........................S-38
Voting Rights.........................................S-38
Reports to Certificateholders.........................S-39
Servicing of the Assets...................................S-40
The Servicer..........................................S-40
Servicing Portfolio...................................S-40
Delinquency and Loan Loss/Repossession Experience ....S-41
Collection and Other Servicing Procedures.............S-43
Servicing Compensation and Payment of Expenses........S-43
Advances..............................................S-43
Successors to Servicer, Delegation of Duties..........S-44
Use of Proceeds...........................................S-44
Underwriting..............................................S-44
Legal Matters.............................................S-46
ERISA Considerations......................................S-46
Ratings...................................................S-48
Legal Investment Considerations...........................S-49
PROSPECTUS
Page
Risk Factors.................................................1
Description of the Certificates..............................5
General....................................................5
Book-Entry Procedures......................................7
Allocation of Collections from the Assets..................9
Optional Redemption or Termination........................10
Maturity and Prepayment Considerations......................11
Maturity..................................................11
Prepayment Considerations.................................11
Yield Considerations........................................12
The Trusts..................................................13
General...................................................13
The Assets................................................13
Substitution of Contracts or Mortgage Loans...............17
Pre-Funding...............................................18
Distribution Account......................................19
Reserve Funds.............................................19
Insurance.................................................19
Delivery of Additional Assets.............................24
Investment of Funds.......................................24
Certificate Guarantee Insurance...........................25
Oakwood Homes Guarantee...................................25
Alternate Credit Enhancement..............................25
Underwriting Policies.......................................25
Oakwood's Contract Underwriting Guidelines................25
General Underwriting Standards for Mortgage Loans ........27
Sale and Servicing of Contracts and Mortgage Loans ........27
Assignment of Contracts and Mortgage Loans................27
Representations and Warranties............................29
Servicing.................................................30
Advances..................................................33
Compensating Interest.....................................34
Maintenance of Insurance Policies and Other Servicing
Procedures ............................................34
The Pooling and Servicing Agreements........................36
The Servicer..............................................36
The Trustee...............................................36
Reports to Certificateholders.............................37
Events of Default.........................................37
Certificateholder Rights..................................38
Amendment.................................................38
Termination...............................................39
Certain Legal Aspects of Contracts and Mortgage Loans ......39
The Contracts.............................................39
The Mortgage Loans............................. ..........44
Environmental Considerations..............................48
Enforceability of Considerations..........................49
Use of Proceeds............................................49
The Company.................................................50
The Servicer................................................50
Federal Income Tax Consequences.............................50
General...................................................51
REMIC Certificates........................................51
Tax Treatment of Residual Certificates....................64
Taxation of Certain Foreign Holders of REMIC Certificates.75
Reporting and Tax Administration..........................76
Non-REMIC Certificates....................................77
State Tax Considerations....................................83
ERISA Considerations........................................83
Available Information.......................................85
Incorporation of Certain Documents by Reference.............86
Plan of Distribution........................................86
Legal Investment Considerations.............................87
Experts ..................................................88
Legal Matters...............................................88
Index of Terms ............................................89
<PAGE>
SUMMARY OF TERMS
o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF THE
CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE PROSPECTUS.
o THIS SUMMARY PROVIDES AN OVERVIEW OF CALCULATIONS, CASH FLOWS AND OTHER
INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THIS INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS.
INFORMATION ABOUT YOUR TRUST
The certificates are being offered by OMI trust 1999-___, which will be
established by Oakwood Mortgage Investors, Inc. Oakwood Mortgage maintains its
principal office at 7800 McCloud Road, Greensboro, North Carolina 27409-9634.
Its telephone number is (336) 664-2400. The trust will acquire contracts and
mortgage loans from Oakwood Mortgage. The contracts and mortgage loans will
secure payment of the certificates.
Only the class A-1, class A-2, class A-3, class A-4, class A-5, class M-1, class
M-2, class B-1 and class B-2 certificates are being offered by this prospectus
supplement. The trust will also issue the class X and class R certificates,
which are not offered hereby.
Oakwood Acceptance Corporation will be responsible for servicing the contracts
and mortgage loans.
The trustee is _______________________________________. The trustee's corporate
trust office's address is _________________________________________________. Its
telephone number is ______________________.
INFORMATION ABOUT YOUR CERTIFICATES
The certificates will be issued pursuant to a pooling and servicing agreement
among Oakwood Mortgage, Oakwood Acceptance and the trustee. The proceeds from
the issuance of certificates will be used to purchase the contracts and mortgage
loans and to pay the costs of issuing the certificates and pooling the contracts
and mortgage loans.
SEE "THE POOLING AND SERVICING AGREEMENTS" IN THE PROSPECTUS.
The certificates will not be listed on any exchange. Although the underwriter
intends to make a secondary market in the certificates, it is not required to do
so. A secondary market for the certificates may not develop. If one does
develop, it may not continue or provide sufficient liquidity.
NEITHER YOUR CERTIFICATES NOR THE UNDERLYING ASSETS WILL BE GUARANTEED OR
INSURED BY ANY GOVERNMENT AGENCY [OR ANY OTHER INSURER].
Issuance of the certificates is scheduled for _______________.
CREDIT ENHANCEMENT AND SUBORDINATION
The subordination of the class M-1, M-2, B-1, B-2, X and R certificates provides
credit support for the class A-1, A-2, A-3, A-4 and A-5 certificates. The
subordination of the class M-2, B-1, B-2, X and R certificates provides credit
support for the class M-1 certificates. The subordination of the class B-1, B-2,
X and R certificates provides credit support for the class M-2 certificates. The
subordination of the class B-2, X and R certificates provides credit support for
the class B-1 certificates. The subordination of the class X and R certificates
[and the limited guarantee of Oakwood Homes] provide credit support for the
class B-2 certificates.
SEE "DESCRIPTION OF THE OFFERED CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL
In the ordinary course, monies received on the contracts and mortgage loans will
be applied first to distributions of interest on each class of certificates in
the order of their priority, and then to principal. Until the occurrence of
events described in this prospectus supplement, principal distributions will be
applied first to the class A certificates, and only thereafter to the other
classes of certificates. If performance criteria are met, a portion of principal
may be distributed to subordinated classes simultaneously with principal
distributions on the class A certificates.
SEE "DESCRIPTION OF THE OFFERED CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT.
Distributions on the certificates of a particular class will be made in
proportion to their percentage interests.
SEE "DESCRIPTION OF THE OFFERED CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT.
S-1
<PAGE>
SERVICING OF THE ASSETS OF YOUR TRUST
Oakwood Acceptance will act as servicer for the assets. It will make advances in
respect of delinquent payments on the assets and in respect of liquidation
expenses and taxes and insurance premiums not paid by an obligor on a timely
basis, to the extent it considers the advances to be recoverable out of
liquidation proceeds.
Oakwood Acceptance will be entitled to a monthly fee with respect to the assets
equal to 1.00% per annum on the scheduled principal balance of the assets.
SEE "SERVICING OF THE ASSETS" IN THIS PROSPECTUS SUPPLEMENT.
THE ASSETS CONTAINED IN YOUR TRUST
The primary assets of the trust consist of
o manufactured housing installment sales contracts secured by security
interests in the manufactured homes and, in some cases, by liens on the real
estate on which the manufactured homes are located, and
o mortgage loans secured by first liens on the real estate on which the
manufactured homes are permanently affixed.
The total number of assets is ______. Their total principal balance is
approximately $______. Of the total number of assets, ______ are fixed-rate
assets and ______ are variable-rate assets.
SEE "THE ASSET POOL" IN THIS PROSPECTUS SUPPLEMENT.
The assets may be prepaid at any time without penalty. The yield on the
certificates may not match your expectations if these prepayments are faster or
slower than expected.
SEE "DESCRIPTION OF THE OFFERED CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT.
[YOUR TRUST CONTAINS A PRE-FUNDING ACCOUNT
A portion of the trust's initial assets will consist of cash in a pre-funding
account. The pre-funded amount initially will equal the difference between the
principal balance of the certificates and the principal balance of the initial
assets. Funds in the pre-funding account may be used to purchase additional
manufactured housing installment sales contracts and mortgage loans during the
[first 3 months] following the closing date. These additional assets will have
characteristics very similar to the existing assets. If all of the pre-funded
amount is not used to acquire pre-funded assets, then amounts left in the
pre-funding account after the [3-month] period will be distributed to you as a
principal prepayment. Interest income earned on the pre-funded amount during the
pre-funding period will not be allocated to you, but will belong to Oakwood
Mortgage.
SEE "THE ASSET POOL - CONVEYANCE OF ASSETS" AND " - CONVEYANCE OF SUBSEQUENT
ASSETS AND PRE-FUNDING" IN THIS PROSPECTUS SUPPLEMENT.]
THE FINAL SCHEDULED DISTRIBUTION DATE
The final scheduled distribution date for each class of offered certificates is
the distribution date occurring in ________. This was determined by adding three
months to the maturity date of the asset with the latest stated maturity.
Because the rate of principal distributions on the certificates will depend upon
the rate of principal payments, including prepayments, on the assets, the actual
final distribution on the classes of certificates could occur significantly
earlier than this date. We can provide no assurance as to the actual payment
experience of the assets.
[LIMITED GUARANTEE ON THE CLASS B-2 CERTIFICATES
[Oakwood Homes will provide a limited guarantee of collections on the contracts
and mortgage loans for the benefit of the class B-2 certificates. This limited
guarantee will not be available to support any other class of certificates.
SEE "DESCRIPTION OF THE OFFERED CERTIFICATES -- THE LIMITED GUARANTEE" IN THIS
PROSPECTUS SUPPLEMENT.]
OPTIONAL TERMINATION OF YOUR TRUST BY THE SERVICER
The servicer may terminate the trust by buying all of the assets at any time
when the current aggregate principal balance of all certificates is less than
______% of their original amount. THE TERMINATION PRICE PAID FOR YOUR TRUST'S
ASSETS DURING AN OPTIONAL TERMINATION MAY, IN SOME CIRCUMSTANCES, BE LESS THAN
THE OUTSTANDING PRINCIPAL BALANCE AND UNPAID INTEREST OF THE CERTIFICATES.
The servicer may also terminate the trust if it determines that there is a
substantial risk that either the pooling REMIC or the issuing REMIC will lose
its REMIC status.
SEE "THE TRUST--OPTIONAL TERMINATION" IN THIS PROSPECTUS SUPPLEMENT.
AUCTION SALE OF YOUR TRUST'S ASSETS
If the servicer does not exercise its optional termination rights when it is
initially permitted to do so, the trustee will solicit bids on the assets
remaining in the trust. THE TERMINATION PRICE
S-2
<PAGE>
PAID FOR YOUR TRUST'S ASSETS DURING AN AUCTION SALE MAY, IN SOME CIRCUMSTANCES,
BE LESS THAN THE OUTSTANDING PRINCIPAL BALANCE AND UNPAID INTEREST OF THE
CERTIFICATES.
SEE "THE TRUST -- AUCTION SALE" IN THIS PROSPECTUS SUPPLEMENT.
FEDERAL INCOME TAX CONSEQUENCES TO YOU
The assets of the trust will be treated as a pooling REMIC for federal income
tax purposes. The "regular interests" of the pooling REMIC will be treated as a
different REMIC, an issuing REMIC, for federal income tax purposes. Class A-1,
A-2, A-3, A-4, A-5, M-1, M-2, B-1, B-2 and X certificates will be "regular
interests" in the issuing REMIC. Therefore, the certificates will evidence debt
obligations under the Internal Revenue Code of 1986, as amended, and interest
paid or accrued thereon will be taxable to certificateholders. By acceptance of
this certificate, you will be deemed to have agreed to treat your certificate as
a debt instrument for purposes of federal and state income tax, franchise tax,
and any other tax measured in whole or in part by income. The class A-2, A-3,
A-4 and A-5 certificates earn interest at a fixed rate and will be issued with
original issue discount only if their stated principal amount exceeds their
issue prices. The class A-1, M-1, M-2, B-1 and B-2 certificates are non-VRDI
certificates and will be treated as issued with original issue discount as
described in the prospectus. We will use ______% MHP as the prepayment
assumption to calculate the accrual rate of original issue discount, if any.
However, there is no assurance as to what the rate of prepayment will be.
SEE "FEDERAL INCOME TAX CONSEQUENCES" IN THE PROSPECTUS.
ERISA CONSIDERATIONS FOR PLANS AND PLAN INVESTORS
Fiduciaries of employee benefit plans and certain other retirement plans that
are subject to ERISA or corresponding provisions of the Internal Revenue Code
who propose to cause a plan to acquire any of the offered certificates should
consult with their own counsel to determine whether the purchase or holding of
the offered certificates could give rise to a transaction that is prohibited
either under ERISA or the Internal Revenue Code. Certain prohibited transaction
exemptions may be applicable to the purchase and holding of the class A-1, A-2,
A-3, A-4 and A-5 certificates.
BECAUSE THE CLASS M-1, M-2, B-1 AND B-2 CERTIFICATES ARE SUBORDINATED TO OTHER
CLASSES OF CERTIFICATES, THE REQUIREMENTS OF CERTAIN PROHIBITED TRANSACTION
EXEMPTIONS WILL NOT BE SATISFIED. AS A RESULT, THE PURCHASE OR HOLDING OF ANY OF
THESE CERTIFICATES BY A PLAN INVESTOR MAY CONSTITUTE A NON-EXEMPT PROHIBITED
TRANSACTION OR RESULT IN THE IMPOSITION OF EXCISE TAXES OR CIVIL PENALTIES.
ACCORDINGLY, THE CLASS M-1, M-2, B-1 AND B-2 CERTIFICATES ARE NOT OFFERED TO OR
TRANSFERABLE TO PLAN INVESTORS UNLESS THE PLAN INVESTOR MEETS CERTAIN
REQUIREMENTS.
SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS.
YOUR CERTIFICATES MAY BE LEGAL INVESTMENTS FOR REGULATED ORGANIZATIONS
The class A-1, A-2, A-3, A-4, A-5 and M-1 certificates will be "mortgage related
securities" for purposes of SMMEA as long as they are rated in one of the two
highest rating categories by one or more nationally recognized statistical
rating organizations.
[If pre-funding account is used, classes become "mortgage related securities"
for SMMEA after pre-funded amount is reduced to zero.]
THE CLASS M-2, B-1 AND B-2 CERTIFICATES WILL NOT BE "MORTGAGE RELATED
SECURITIES" FOR PURPOSES OF SMMEA BECAUSE THEY ARE NOT RATED IN ONE OF THE TWO
HIGHEST RATING CATEGORIES.
SEE "LEGAL INVESTMENT CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE
PROSPECTUS.
THE RATINGS ASSIGNED TO YOUR CERTIFICATES
It is a condition to the issuance of the certificates that the classes of
certificates obtain the following ratings by _____________ and
_____________________________:
Class A-1 ____ ____
Class A-2 ____ ____
Class A-3 ____ ____
Class A-4 ____ ____
Class A-5 ____ ____
Class M-1 ____ ____
Class M-2 ____ ____
Class B-1 ____ ____
Class B-2 ____ ____
SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT.
S-3
<PAGE>
RISK FACTORS
In addition to the risk factors in the prospectus, you should note the
following:
You May Experience A Loss on Manufactured housing usually depreciates
Your Investment If Losses and in value. Over time, the market values of
Delinquencies On Assets in The the manufactured homes could be less than
Trust Are High the loans they secure. This may cause
delinquencies and may increase the amount of
loss following default. In this event,
your trust may not be able to recover
the full amount owed, which may result in a
loss on your certificates. The
statistical information related to the loss
experience of Oakwood Acceptance as servicer
is available under "Servicing of the
Assets" in this prospectus supplement. We
can provide you with no assurance that the
performance of your trust's assets will
be similar to the statistical information
provided, in part because the values of
manufactured homes can be sharply affected
by downturns in regional or local economic
conditions. Generally, the statistical
information provided reflects higher
delinquencies and loan losses since 1994.
[The Limited Guarantee Will [The limited guarantee is an unsecured
Provide Credit Enhancement for the obligation of Oakwood Homes, and will
Class B-2 Certificates Only] not be supported by any credit
arrangement. The limited guarantee will not
benefit any class other than the class
B-2 certificates.]
Losses Will Affect Subordinated The class M-1, class M-2, class B-1 and
Certificates before Affecting More class B-2 certificates are subordinated to
Senior Certificates the class A-1, A-2, A-3, A-4 and A-5
certificates. Losses in excess of the credit
support provided by the class X and R
certificates will be experienced first by
the class B-2 certificates, next by the
class B-1 certificates, next by the class
M-2 certificates, and next by the class M-1
certificates. Thereafter, losses on the
assets exceeding the amount of the
subordinated certificates could result in a
loss being realized by the class A-1, A-2,
A-3, A-4 and A-5 certificates.
Prepayments May Cause Cash Obligors are not required to pay
Shortfalls interest on their assets after the date
of a full prepayment of principal. As a
result, a full prepayment may reduce the
amount of interest received from
obligors during that collection period to
less than one month's interest on the
assets. If a sufficient number of assets
are prepaid in full, then interest payable
on the assets during that collection period
may be less than the interest due on the
certificates.
[Class A-1 Certificates Have An [Class A-1 certificates bear interest
Uncertain Yield] based on one-month LIBOR, which is variable
and which changes differently than do other
indices. In addition, regardless of the
level of one-month LIBOR, the interest
rate of the class A-1 certificates may not
exceed the weighted average net asset rate.]
[Year 2000 Information Systems [The servicer has analyzed the potential
Procedures] effects of year 2000 issues on the computer
systems that support its business. This
review included issues associated with the
servicer's internally developed software and
software licensed from others. The servicer
also is in the process of reviewing year
2000 issues faced by significant third
parties with whom it conducts business.
S-4
<PAGE>
The servicer has begun remediation of
internally developed software to resolve
year 2000 compliance issues. The costs
incurred by the servicer to date have not
been material, and the servicer does not
anticipate that the expected remaining costs
will be material. Based upon its assessment
of internally developed and licensed
software and the status of remediation
undertaken to date, the servicer believes
that all of its significant computer systems
will be year 2000 compliant before January
1, 2000. The servicer continues to test and
monitor year 2000 compliance issues, and
this testing may or may not be successful.
You may experience losses or delays in
payment if the servicer does not achieve
year 2000 compliance. ]
Description of the Offered Certificates
General
The Senior/Subordinated Pass-Through Certificates, Series 1999-___,
will consist of the class A-1, class A-2, class A-3, class A-4, class A-5, class
M-1, class M-2, class B-1, class B-2, class X and class R certificates. Only the
class A-1, class A-2, class A-3, class A-4, class A-5, class M-1, class M-2,
class B-1 and class B-2 certificates are offered by this prospectus supplement.
The class M-1, class M-2, class B-1, class B-2, class X and class R certificates
will be subordinated to the class A certificates in respect of distributions of
principal and interest. The offered certificates will be issued in book-entry
form only, in denominations of $1,000 and integral multiples of $1 in excess of
this amount. Definitive certificates, if issued, will be transferable and
exchangeable at the corporate trust office of ______________ (the "Trustee") at
its Corporate Trust Department. No service charge will be made for any
registration of exchange or transfer, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge incurred in
connection with the exchange or transfer.
Distributions of principal and interest on the offered certificates will
be made on the 15th day of each month, or, if this day is not a business day, on
the next succeeding business day (a "Distribution Date"), beginning in
____________, to the persons in whose names the certificates are registered on
the "Record Date", which is the close of business on the last business day of
the month preceding the month in which the Distribution Date occurs. Each
distribution with respect to a book-entry certificate will be paid to the
Depository, which will credit the amount of this distribution to the accounts of
its Participants in accordance with its normal procedures. Each Participant will
be responsible for disbursing this distribution to the Beneficial Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm will be responsible for disbursing funds to the Beneficial Owners that it
represents. All credits and disbursements with respect to book-entry
certificates are to be made by the Depository and the Participants in accordance
with the Depository's rules.
The class X certificates are interest-only securities that have no
stated certificate principal balance, but are entitled to receive a distribution
on each Distribution Date of certain interest amounts, as more fully set forth
in the pooling and servicing agreement. The class R certificates will have no
stated certificate principal balance or Pass-Through Rate, and will represent
the beneficial ownership of the "residual interest" in each of the REMICs.
[Book-Entry Certificates
The offered certificates will be book-entry certificates as described in
the prospectus under "Description of the Certificates -- Book-Entry Procedures."
The offered certificates will initially be registered in the name of Cede & Co.,
the nominee of the Depository Trust Company.
Unless and until the offered certificates are issued in certificated,
fully-registered form, it is anticipated that the only "certificateholder" of
the offered certificates will be Cede & Co., as nominee of DTC. Beneficial
Owners will not be certificateholders as that term is used in the pooling and
servicing agreement. Beneficial Owners are only permitted to exercise the rights
of certificateholders indirectly through Depository Participants and DTC.
S-5
<PAGE>
DTC management is aware that some computer applications, systems, and
the like for processing data that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000 problems."
DTC has informed its Participants and other members of the financial community
that it has developed and is implementing a program so that its systems, as the
same relate to the timely payment of distributions, including principal and
income payments, to certificateholders, book-entry deliveries, and settlement of
trades within DTC continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. DTC has informed the industry that it is
contacting, and will continue to contact, third party vendors from whom DTC
acquires services to:
o impress upon them the importance of these services being Year 2000
compliant; and
o determine the extent of their efforts for Year 2000 remediation --- and,
as appropriate, testing --- of their services.
In addition, DTC is in the process of developing contingency plans as it deems
appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.]
Collection of Payments on Assets
Oalwood Acceptance Corporation (in this capacity, the "Servicer") will
establish and maintain the Certificate Account for the benefit of the Trustee.
The Certificate Account must be an Eligible Account. The Certificate Account is
to be held in trust 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
this account are held for the benefit of the Trustee. A single Certificate
Account may be maintained for more than one series of certificates provided that
in this event, the Servicer shall cause separate accounting and records to be
maintained within the Certificate Account with respect to each separate series.
Funds in the Certificate Account will be invested in Eligible Investments that
will mature or be subject to redemption not later than the business day
preceding the applicable monthly Distribution Date. Earnings on amounts
deposited into the Certificate Account shall be credited to the account of the
Servicer as servicing compensation in addition to the Servicing Fee and may be
used to offset P&I Advances due from the Servicer in respect of the Distribution
Date next succeeding the date on which these earnings were made or, at the
Servicer's option, may be released to the Servicer on the related Distribution
Date. The amount of any losses incurred in respect of any of these investments
shall be deposited into the Certificate Account by the Servicer out of its own
funds promptly after any of these losses are incurred.
All payments in respect of principal and interest on the assets received
by the Servicer on or after the Cut-off Date, exclusive of collections relating
to scheduled payments due on or prior to the Cut-off Date, including principal
prepayments and net liquidation proceeds, will be deposited into the Certificate
Account no later than the second business day following the Servicer's receipt.
Amounts collected as late payment fees, extension fees, assumption fees or
similar fees will be retained by the Servicer as part of its servicing
compensation. In addition, amounts paid by Oakwood Acceptance for assets
repurchased as a result of breach of a representation or warranty under the
pooling and servicing agreement and amounts required to be deposited upon
substitution of a qualified substitute asset because of a breach of a
representation or warranty, as described under "The Asset Pool -- Conveyance of
Assets" in this prospectus supplement, will be paid into the Certificate
Account.
Subject to the following sentence, on or prior to the business day
before each Distribution Date, the Servicer will remit all scheduled payments of
principal and interest due on the assets during the Collection Period and
collected by the Servicer and all unscheduled collections in respect of
principal and interest on the assets received during the related Prepayment
Period, in each case to the extent these collections comprise part of the
Available Distribution Amount for the upcoming Distribution Date, together with
the amount of any required Advances to the Trustee for deposit into the
Distribution Account. If, however, the Certificate Account is maintained by the
Trustee, the Trustee may withdraw this amount, and any
S-6
<PAGE>
portion of the P&I Advance to be covered by investment earnings on the
Certificate Account, from the Certificate Account on the applicable Distribution
Date and deposit it into the Distribution Account. In such event, the Servicer
will remit the portion, if any, of the required P&I Advance that is not to be
covered by investment earnings on the Certificate Account to the Trustee on
business day preceding the Distribution Date for deposit into the Distribution
Account. The Distribution Account shall be an Eligible Account established and
maintained by the Trustee.
The Trustee or its Paying Agent will withdraw funds from the
Distribution Account, but only to the extent of the Available Distribution
Amount, to make distributions to certificateholders as specified under " --
Distributions -- Priority of Distributions" in this prospectus supplement.
From time to time, as provided in the pooling and servicing agreement,
the Servicer will also withdraw funds from the Certificate Account for other
purposes as permitted by the pooling and servicing agreement.
Realized Losses on Liquidated Loans
The Principal Distribution Amount for any Distribution Date is intended
to include the Scheduled Principal Balance of each asset that became a
liquidated loan during the related Prepayment Period. A Realized Loss will be
incurred on a liquidated loan in the amount, if any, by which the net
liquidation proceeds from the liquidated loan are less than the unpaid principal
balance of the liquidated loan, plus accrued and unpaid interest thereon, plus
amounts reimbursable to the Servicer for previously unreimbursed Servicing
Advances. To the extent that the amount of the Realized Loss is in excess of
interest collected on the nondefaulted assets in excess of certain interest
payments due to be distributed on the offered certificates and any portion of
this interest required to be paid to a Servicer other than Oakwood Acceptance as
servicing compensation ("Excess Interest"), then the amount of this shortfall
will be allocated to the subordinated certificates as a Writedown Amount. See "
- -- Allocation of Writedown Amounts".
Allocation of Writedown Amounts
Any Writedown Amount on a Distribution Date will be allocated to reduce
to zero the certificate principal balance of a class, as adjusted for
write-downs, in the following order:
o first, to the class B-2 certificates;
o second, to the class B-1 certificates;
o third, to the class M-2 certificates; and
o fourth, to the class M-1 certificates.
Distributions
Available Distribution Amount
The "Available Distribution Amount" for a Distribution Date will include
o Monthly Payments of principal and interest due on the assets during
the related Collection Period, regardless of whether these payments
were actually collected from the obligors or advanced by the
Servicer and unscheduled payments received with respect to the
assets during the related Prepayment Period, including principal
prepayments, proceeds of repurchases, net liquidation proceeds and
net insurance proceeds, less
o if Oakwood Acceptance is not the Servicer, Servicing Fees for the
related Collection Period, amounts required to reimburse the
Servicer for previously unreimbursed Advances in accordance with
the pooling and servicing agreement, amounts required to reimburse
Oakwood Mortgage or the Servicer for reimbursable expenses in
accordance with the pooling and servicing agreement and amounts
required to reimburse any party for an overpayment of a Repurchase
Price for an asset.
S-7
<PAGE>
Distributions
Distributions will be made on each Distribution Date to holders of
record on the preceding Record Date. Distributions on a class of certificates
will be allocated among the certificates of the class in proportion to their
percentage interests.
Interest
On each Distribution Date, holders of the class A certificates will be
entitled to receive, to the extent of the Available Distribution Amount:
o interest accrued on their class during the related Interest Accrual
Period at the then-applicable Pass-Through Rate on the certificate
principal balance of their class immediately prior to the
Distribution Date (the "Interest Distribution Amount"), plus
o any interest amounts remaining unpaid from a previous Distribution
Date, plus interest accrued on this amount during the related
Interest Accrual Period, at the then applicable Pass-Through Rate.
On each Distribution Date, holders of the subordinated certificates will
be entitled to receive, to the extent of the Available Distribution Amount and
on a subordinated basis as described under " -- Priority of Distributions" [and,
in the case of the class B-2 certificates, the extent of any Limited Guarantee
Payment Amounts]
o interest accrued on their class during the related Interest Accrual
Period at the then-applicable Pass-Through Rate on the certificate
principal balance immediately following the most recently preceding
Distribution Date, reduced by all Writedown Amounts allocated on
that Distribution Date, of their class immediately prior to the
Distribution Date (the "Interest Distribution Amount"), plus
o any interest amounts remaining unpaid from a previous Distribution
Date, plus interest accrued on this amount during the related
Interest Accrual Period, at the then applicable Pass-Through Rate.
"Interest Accrual Period" shall mean, with respect to each Distribution
Date
o for the class A-1 certificates, the period commencing on the 15th
day of the preceding month through the 14th day of the month in
which this Distribution Date is deemed to occur, except that the
first Interest Accrual Period for the class A-1 certificates will
be the period from the closing date through ______________, and
o for the other classes of offered certificates, the calendar month
preceding the month in which the Distribution Date occurs.
Interest on the class A-1 certificates will be calculated on the basis of a
360-day year and the actual number of days elapsed in the applicable Interest
Accrual Period. Interest on the other classes of offered certificates will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
The Pass-Through Rate for the classes of offered certificates on any
Distribution Date will be the per annum rates set forth on the cover page of
this prospectus supplement.
In addition, on each Distribution Date, to the extent of the Available
Distribution Amount and on a subordinated basis as described under " -- Priority
of Distributions" [and, in the case of the class B-2 certificates, the extent of
any Limited Guarantee Payment Amounts] the holders of the subordinated
certificates will be entitled to receive
o interest accrued during the related Interest Accrual Period at the
applicable Pass-Through Rate on any related Writedown Amount (the
class' "Writedown Interest Distribution Amount"), plus
S-8
<PAGE>
o any interest amounts remaining unpaid from a previous Distribution
Date, plus interest accrued on this amount during the related
Interest Accrual Period at the then applicable Pass-Through Rate
(the class' "Carryover Writedown Interest Distribution Amount").
See " -- Realized Losses on Liquidated Loans."
[Floating Rate Determination
[On each Floating Rate Determination Date, the Servicer will determine
the arithmetic mean of the LIBOR quotations for one-month Eurodollar deposits
("One-Month LIBOR") for the succeeding Interest Accrual Period on the basis of
the Reference Banks' offered LIBOR quotations provided to the Servicer as of
11:00 a.m., London time, on the Floating Rate Determination Date. With respect
to a Floating Rate Determination Date, "Reference Banks" means leading banks
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market with an established place of business in London, whose quotations appear
on the Bloomberg Screen US0001M Index page on the Floating Rate Determination
Date in question and which have been designated as such by the Servicer and are
able and willing to provide these quotations to the Servicer on each Floating
Rate Determination Date; and "Bloomberg Screen US0001M Index Page" means the
display designated as page "US0001M" on the Bloomberg Financial Markets
Commodities News, or another page as may replace this page on that service for
the purpose of displaying LIBOR quotations of major banks. If any Reference Bank
should be removed from the Bloomberg Screen US0001M Index Page or in any other
way fails to meet the qualifications of a Reference Bank, the Servicer may, in
its sole discretion, designate an alternative Reference Bank.
o On each Floating Rate Determination Date, One-Month LIBOR for the
next succeeding Interest Accrual Period will be established by the
Servicer as follows:
o if, on any Floating Rate Determination Date, two or more of the
Reference Banks provide offered One-Month LIBOR quotations on the
Bloomberg Screen US0001M Index Page, One-Month LIBOR for the next
applicable Interest Accrual Period will be the arithmetic mean of
the offered quotations, rounding the arithmetic mean, if necessary,
to the nearest five decimal places.
o if, on any Floating Rate Determination Date, only one or none of
the Reference Banks provides offered quotations, One-Month LIBOR
for the next applicable Interest Accrual Period will be the higher
of:
o One-Month LIBOR as determined on the previous Floating Rate
Determination date, and
o the Reserve Interest Rate.
The "Reserve Interest Rate" will be the rate per annum that the Servicer
determines to be either
o the arithmetic mean, rounding the arithmetic mean upwards if
necessary to the nearest five decimal places, of the one-month
Eurodollar lending rate that New York City banks selected by the
Servicer are quoting, on the relevant Floating Rate Determination
Date, to the principal London offices of at least two leading banks
in the London interbank market, or
o in the event that the Servicer can determine no arithmetic mean, the
lowest one-month Eurodollar lending rate that the New York City banks
selected by the Servicer are quoting on the Floating Rate
Determination Date to leading European banks.
If, on any Floating Rate Determination Date, the Servicer is required but is
unable to determine the Reserve Interest Rate in the manner provided, One-Month
LIBOR for the next applicable Interest Accrual Period will be One-Month LIBOR as
determined on the previous Floating Rate Determination Date.
Notwithstanding the foregoing, One-Month LIBOR for an Interest Accrual
Period shall not be based on One-Month LIBOR for the previous Interest Accrual
Period for two consecutive Floating Rate Determination Dates. If One-Month LIBOR
for an Interest Accrual Period would be based on One-Month LIBOR for the
previous Floating Rate Determination Date for the second consecutive Floating
Rate Determination Date, the Servicer shall select an alternative index over
which the
S-9
<PAGE>
Servicer has no control used for determining one-month Eurodollar lending rates
that is calculated and published or otherwise made available by an independent
third party.
The establishment of One-Month LIBOR, or an alternative index, by the
Servicer and the Servicer's subsequent calculation of the Pass-Through Rate on
the class A-1 certificates for the relevant Interest Accrual Period, in the
absence of manifest error, will be final and binding.
This table provides you with monthly One-Month LIBOR rates on the last
day of the related calendar month beginning in 1995, as published by Bloomberg.
The following does not purport to be a prediction of the performance of
One-Month LIBOR in the future.
<TABLE>
<CAPTION>
MONTH 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January................. 5.60% 5.44% 5.44% 6.09%
February................ 5.69 5.44 5.31 6.13
March................... 5.69 5.69 5.44 6.13
April................... 5.66 5.69 5.44 6.06
May..................... 5.66 5.69 5.43 6.06
June.................... 5.66 5.69 5.47 6.13
July.................... 5.66 5.63 5.46 5.88
August.................. 5.63 5.66 5.44 5.88
September............... 5.38 5.66 5.43 5.88
October................. 5.25 5.65 5.38 5.83
November................ 5.62 5.97 5.56 5.98
December................ 5.06 5.72 5.50 5.69]
</TABLE>
Principal
The "Principal Distribution Amount" for any Distribution Date will equal
the sum of the following amounts:
o 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 assets that were outstanding at the
opening of business on this Due Date, regardless of whether such
Monthly Payments were received by the Servicer from the obligors,
not including any Monthly Payments due on liquidated loans or
repurchased assets;
o the sum of the amounts of all principal prepayments received by the
Servicer on the assets during the related Prepayment Period;
o the Scheduled Principal Balance of any asset that became a
liquidated loan during the related Prepayment Period; and
o the Scheduled Principal Balance of any asset that was purchased or
repurchased by the Servicer, Oakwood Acceptance or Oakwood Mortgage
during the related Prepayment Period.
The "Class A Principal Distribution Amount" for any Distribution Date
will equal
o prior to the Cross-over Date, the Principal Distribution Amount,
o on any Distribution Date as to which the Principal Distribution
Tests are not met, the Principal Distribution Amount, or
o on any other Distribution Date, the class A percentage of the
Principal Distribution Amount.
The "Class M-1 Principal Distribution Amount" for any Distribution Date
will equal
o as long as any class A certificates remain outstanding and prior to
the Cross-over Date, zero,
o on any Distribution Date as to which the Principal Distribution
Tests are not met and any class A certificates remain outstanding,
zero,
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<PAGE>
o on any Distribution Date as to which the Principal Distribution
Tests are not met and the class A certificates have been retired,
the Principal Distribution Amount, or
o on any other Distribution Date, the class M-1 percentage of the
Principal Distribution Amount.
The "Class M-2 Principal Distribution Amount" for a Distribution Date
will equal
o as long as any class A certificates or any class M-1 certificates
remain outstanding and prior to the Cross-over Date, zero;
o on any Distribution Date as to which the Principal Distribution
Tests are not met and any class A certificates or any class M-1
certificates remain outstanding, zero,
o on any Distribution Date as to which the Principal Distribution
Tests are not met and the class A certificates and the class M-1
certificates have been retired, the Principal Distribution Amount,
or
o on any other Distribution Date, the class M-2 percentage of the
Principal Distribution Amount.
The "Class B-1 Principal Distribution Amount" for any Distribution Date
will equal
o as long as any class A certificates or any class M certificates
remain outstanding and prior to the Cross-over Date, zero,
o on any Distribution Date as to which the Principal Distribution
Tests are not met and any class A certificates or any class M
certificates remain outstanding, zero,
o on any Distribution Date as to which the Principal Distribution
Tests are not met and the class A certificates and the class M
certificates have been retired, the Principal Distribution Amount,
or
o on any other Distribution Date, the class B-1 percentage of the
Principal Distribution Amount.
The "Class B-2 Principal Distribution Amount" for any Distribution Date
will equal
o as long as any class A certificate, any class M certificates or any
class B-1 certificates remain outstanding and prior to the
Cross-over Date, zero,
o on any Distribution Date as to which the Principal Distribution
Tests are not met and any class A certificates, any class M
certificate or any class B-1 certificates remain outstanding, zero,
o on any Distribution Date as to which the Principal Distribution
Tests are not met and the class A certificates, the class M
certificates and the class B-1 certificates have been retired, the
Principal Distribution Amount, or
o on any other Distribution Date, the class B-2 percentage of the
Principal Distribution Amount.
For any Distribution Date, if the Principal Distribution Amount for a
class exceeds the certificate principal balance of that class, less any
Principal Distribution Amounts remaining unpaid from previous Distribution
Dates, with respect to this class and Distribution Date, then these amounts
shall be allocated to the Principal Distribution Amount of the relatively next
junior class of certificates. If the class A, class, class M and class B
certificates have not been reduced to zero on or before a Distribution Date,
then amounts then allocable to the Class B-2 Principal Distribution Amount shall
be allocated first to the Class B-1 Principal Distribution Amount, next to the
Class M-2 Principal Distribution Amount, next to the Class M-1 Principal
Distribution Amount, next to the Class A Principal Distribution Amount, and
finally to the Class B-2 Principal Distribution Amount, to the extent that
allocation of these amounts to the Class B-2 Principal Distribution Amount would
reduce the class B-2 certificate principal balance below the Class B-2 Floor
Amount.
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<PAGE>
The principal distribution "percentage" for any class is the percentage
derived from the fraction, which shall not be greater than 1, the numerator of
which is the certificate principal balance of the class, as adjusted for
write-downs, immediately prior to the related Distribution Date, and the
denominator is the sum of the aggregate certificate principal balances, as
adjusted for write-downs, of all other classes of certificate immediately prior
this Distribution Date.
Priority of Distributions
On each Distribution Date the Available Distribution Amount will be
distributed in the following amounts and in the following order of priority:
(1) first, concurrently, to each class of the class A certificates,
their Interest Distribution Amount for that Distribution Date pro rata among the
class A certificates based on their respective Interest Distribution Amounts and
then any Interest Distribution Amounts remaining unpaid from any previous
Distribution Date, plus interest on this carryover amount, if any, for that
Distribution Date, pro rata among the classes of class A certificates based on
their respective carryover amounts;
(2) second, to the class M-1 certificates, their Interest Distribution
Amount for that Distribution Date and then any Interest Distribution Amounts
remaining unpaid from any previous Distribution Date, plus interest on this
carryover amount, if any, for that Distribution Date;
(3) third, to the class M-2 certificates, their Interest Distribution
Amount for that Distribution Date and then any Interest Distribution Amounts
remaining unpaid from any previous Distribution Date, plus interest on this
carryover amount, if any, for that Distribution Date;
(4) fourth, to the class B-1 certificates, their Interest Distribution
Amount for that Distribution Date and then any Interest Distribution Amounts
remaining unpaid from any previous Distribution Date, plus interest on this
carryover amount, if any, for that Distribution Date;
(5) fifth, to the class B-2 certificates, their Interest Distribution
Amount for that Distribution Date and then any Interest Distribution Amounts
remaining unpaid from any previous Distribution Date, plus interest on this
carryover amount, if any, for that Distribution Date;
(6) sixth, concurrently, to each class of the class A certificates, any
Principal Distribution Amounts remaining unpaid previous Distribution Dates, to
be allocated among the class A certificates pro rata based on their respective
unpaid Principal Distribution Amounts;
(7) seventh, to the class A certificates, the Class A Principal
Distribution Amount, allocated in the following sequential order:
o first, to the class A-1 certificates in reduction of its
certificate principal balance, until reduced to zero;
o second, to the class A-2 certificates in reduction of its
certificate principal balance, until reduced to zero;
o third, to the class A-3 certificates in reduction of its
certificate principal balance, until reduced to zero;
o fourth, to the class A-4 certificates in reduction of its
certificate principal balance, until reduced to zero; and
o fifth, to the class A-5 certificates in reduction of its
certificate principal balance, until reduced to zero;
provided, however, that on any Distribution Date on which the Pool Scheduled
Principal Balance is less than the aggregate certificate principal balance of
the class A certificates immediately prior to the related Distribution Date, the
Class A Principal Distribution Amount will be allocated among the class A
certificates pro rata based upon their respective certificate principal
balances.
S-12
<PAGE>
(8) eighth, to the class M-1 certificates, any related Writedown
Interest Distribution Amount for the related Distribution Date, any related
Carryover Writedown Interest Distribution Amount for the related Distribution
Date, any related Principal Distribution Amounts remaining unpaid from previous
Distribution Dates, and any related Principal Distribution Amount until the
class M-1 certificate principal balance is reduced to zero;
(9) ninth, to the class M-2 certificates, any related Writedown Interest
Distribution Amount for the related Distribution Date, any related Carryover
Writedown Distribution Amount for the related Distribution Date, any related
Principal Distribution Amounts remaining unpaid from previous Distribution
Dates, and any related Principal Distribution Amount until the class M-2
certificate principal balance is reduced to zero;
(10) tenth, to the class B-1 certificates, any related Writedown
Interest Distribution Amount for the related Distribution Date, any related
Carryover Writedown Interest Distribution Amount for the related Distribution
Date, any related Principal Distribution Amounts remaining unpaid from previous
Distribution Dates, and any related Principal Distribution Amount until the
class B-1 certificate principal balance is reduced to zero;
(11) eleventh, to the class B-2 certificates, any related Writedown
Interest Distribution Amount for the related Distribution Date, any related
Carryover Writedown Interest Distribution Amount for the related Distribution
Date, any related Principal Distribution Amounts remaining unpaid from previous
Distribution Dates, and any related Principal Distribution Amount until the
class B-2 certificate principal balance is reduced to zero;
(12) twelfth, if Oakwood Acceptance is the Servicer, to the Servicer in
the following sequential order:
(i) the Servicing Fee with respect to the related Distribution Date;
and
(ii) any Servicing Fees from previous Distribution Dates remaining
unpaid;
(13) thirteenth, to the class X certificates, in the following
sequential order:
(i) the current Class X Strip Amount; and
(ii) any Class X Strip Amounts from previous Distribution Dates
remaining unpaid; and
(14) finally, any remainder to the class R certificates.
The "Cross-over Date" will be the later to occur of
o the Distribution Date occurring in _________ and
o the first Distribution Date on which the percentage equivalent of a
fraction, which shall not be greater than 1, the numerator of which
is the aggregate certificate principal balance as adjusted for
write-downs of the subordinated certificates for the related
Distribution Date and the denominator of which is the Pool
Scheduled Principal Balance on the related Distribution Date,
equals or exceeds ____ times the percentage equivalent of a
fraction, which shall not be greater than 1, the numerator of which
is the initial aggregate certificate principal balance as adjusted
for write-downs of the subordinated certificates and the
denominator of which is the Pool Scheduled Principal Balance as of
the Cut-off Date.
The "Principal Distribution Tests" are met in respect of a Distribution
Date if the following conditions are satisfied:
o the Average Sixty Day Delinquency Ratio as of the related
Distribution Date does not exceed ___%; (2) the Average Thirty-Day
Delinquency Ratio as of the related Distribution Date does not
exceed ___%;
o the Cumulative Realized Losses as of the related Distribution Date
do not exceed a specified percentage of the original Pool Scheduled
Principal Balance, depending on the year in which the related
Distribution Date occurs; and
S-13
<PAGE>
o the Current Realized Loss Ratio as of the related Distribution Date
does not exceed ___%.
The Average Sixty-Day Delinquency Ratio and the Average Thirty-Day
Delinquency Ratio are, in general, the ratios of the average of the aggregate
principal balances of assets delinquent 60 days or more and 30 days or more,
respectively, for the preceding three Collection Periods to the average Pool
Scheduled Principal Balance for these periods. Cumulative Realized Losses are,
in general, the aggregate Realized Losses incurred in respect of liquidated
loans since the Cut-off Date. The Current Realized Loss Ratio is, in general,
the ratio of the aggregate Realized Losses incurred on liquidated loans for the
periods specified in the pooling and servicing agreement to an average Pool
Scheduled Principal Balance specified in the pooling and servicing agreement.
With respect to any Distribution Date the "Class B-2 Floor Amount" will
mean
o ____% of the Pool Scheduled Principal Balance as of the Cut-off
Date, if the class A, class M and class B-1 certificates have not
been reduced to zero immediately prior to the related Distribution
Date, and
o zero, if the class A, class M and class B-1 certificates have been
reduced to zero immediately prior to the related Distribution Date.
Subordination of the Subordinated Certificates
The primary credit support for the class A certificates is the
subordination of the subordinated certificates, effected by the allocation of
Writedown Amounts as described in this prospectus supplement and by the
preferential application of the Available Distribution Amount to the class A
certificates relative to the subordinated certificates to the extent described
in this prospectus supplement. See " -- Distributions -- Priority of
Distributions" in this prospectus supplement.
[The Limited Guarantee
The class B-2 certificateholders will have the benefit of a limited
guarantee (the "Limited Guarantee") provided by Oakwood Homes of collections on
the assets. The Limited Guarantee will not be available to support the other
classes of certificates. Pursuant to the Limited Guarantee, the Trustee shall be
entitled to receive on each Distribution Date for application on the class B-2
certificates the "Limited Guarantee Payment Amount," if any, for the related
Distribution Date. The "Limited Guarantee Payment Amount" for any Distribution
Date after giving effect to the allocation of the Available Distribution Amount
for this date will equal the amount of shortfalls in collections on the assets
otherwise distributable on the related Distribution Date, but will not exceed
the sum of any unpaid Interest Distribution Amount and carryover amounts payable
pursuant to clause (5) under " -- Priority of Distributions" in this prospectus
supplement, and any unpaid Writedown Interest Distribution Amount, Carryover
Writedown Interest Distribution Amount, any Principal Distribution Amounts
remaining unpaid from previous Distribution Dates, and Principal Distribution
Amount payable on the related Distribution Date pursuant to clause (11) under "
- -- Priority of Distributions" in this prospectus supplement.
The Limited Guarantee will be an unsecured general obligation of Oakwood
Homes and will not be supported by any letter of credit or other credit
enhancement arrangement. Payments under the Limited Guarantee will be allocated
only to the class B-2 certificates and these payments will not benefit in any
way, or result in any payment to, the other classes of certificates.
The consolidated financial statements of Oakwood Homes and its
subsidiaries as of September 30, ____ and ____ and for each of the three years
in the period ended September 30, ____, included in the Annual Report on Form
10-K of Oakwood Homes for the year ended September 30, ____, are incorporated by
reference into the prospectus and this prospectus supplement and shall be deemed
to be a part of the prospectus and this prospectus supplement. Any statement
contained in a document incorporated by reference in the prospectus and this
prospectus supplement shall be modified or superseded for purposes of the
prospectus and this prospectus supplement to the extent that a statement
contained in the prospectus or this prospectus supplement, or in any other
subsequently filed document which also is incorporated by reference in the
prospectus or this prospectus supplement, modifies or supersedes the statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of the prospectus or this
prospectus supplement.
S-14
<PAGE>
All financial statements of Oakwood Homes and its subsidiaries included
in the documents filed by Oakwood Homes pursuant to Section 13(a), 13(d), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date
of this prospectus supplement and prior to the termination of the offering of
the offered certificates shall be deemed to be incorporated by reference into
this prospectus supplement and to be a part hereof from the respective dates of
filing those documents.
This table presents selected financial information of Oakwood Homes and
its subsidiaries:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
(in thousands, except per share data)
<S> <C> <C> <C>
Net sales................................ $_______ $________ $________
Total revenues........................... $_______ $________ $________
Net income............................... $_______ $________ $________
Earnings per common share
Basic................................. $_______ $________ $________
Diluted............................... $_______ $________ $________
Total assets............................. $_______ $________ $________
Notes and bonds payable.................. $_______ $________ $________]
</TABLE>
The Asset Pool
General
The certificates represent the entire beneficial ownership interest in
OMI trust 1999-___. This trust will be established by the pooling and servicing
agreement dated as of __________, together with the standard terms, July 1998
Edition, among the Oakwood Mortgage Investors, Inc., the Servicer and the
Trustee. Oakwood Mortgage will acquire the assets from Oakwood Acceptance under
a sales agreement on the closing date. Oakwood Acceptance will have funded the
origination of each asset, either in its own name or in the name of Oakwood
Mobile Homes, Inc. or another manufactured housing dealer. Each asset not
originated directly in Oakwood Acceptance's name will have been assigned to
Oakwood Acceptance immediately after its origination. Each asset will be either
an installment sales contract secured by a unit of manufactured housing or a
residential mortgage loan secured by a lien on the real estate on which the
manufactured home is deemed permanently affixed. You will find a description of
Oakwood Acceptance's general practices with respect to the origination of
manufactured housing contracts and mortgage loans in the prospectus under
"Underwriting Policies."
Under the pooling and servicing agreement, the manufactured homes
securing the assets are required to comply with federal law requirements. These
statutes require that the manufactured homes have a minimum of 400 square feet
of living space, a minimum width of 102 inches and be of a kind customarily used
at a fixed location. These statutes also require that the manufactured homes be
transportable in one or more sections, be built on a permanent chassis and
designed to be used as dwellings, with or without permanent foundations, when
connected to the required utilities. The manufactured homes include the
plumbing, heating, air conditioning and electrical systems. Oakwood Acceptance's
management estimates that in excess of 90% of the manufactured homes are used as
primary residences by the obligors.
The pooling and servicing agreement requires the Servicer to maintain or
cause to be maintained standard hazard insurance policies with respect to each
manufactured home and mortgaged property. Generally, no other insurance will be
maintained with respect to the manufactured homes, the mortgaged properties or
the assets. See "The Trusts -- Insurance -- Hazard Insurance -- Standard Hazard
Insurance Policies" in the prospectus.
Oakwood Mortgage will convey to the Trustee the assets and all
rights to receive payments due after _________ 1, 19___ (the "Cut-off
Date"), including scheduled payments due after the Cut-off Date but received
prior to this date, and prepayments and other unscheduled collections on
the assets received on or after the Cut-off Date. The right to payments that
were due on or prior to the Cut-off Date but which are received later will
not be conveyed to Oakwood Mortgage by Oakwood Acceptance, and these
payments will be the property of Oakwood Acceptance when collected. The Servicer
will retain physical possession of the contract documents. Except to the
extent required to service a mortgage loan, the Trustee
S-15
<PAGE>
will maintain physical possession of the mortgage loan documents. See " --
Conveyance of Assets" in this prospectus supplement.
Fixed Rate Assets
The assets will consist of ________ Fixed Rate Assets having
Scheduled Principal Balance as of the Cut-off Date of approximately
$______________. A total of _______ Fixed Rate Assets, representing
approximately ____% of the Fixed Rate Assets, are step-up rate loans.
The remainder of the Fixed Rate Assets are Level Payment Loans. Step-up rate
loans are assets that provide for periodic increases of 0.50%, 0.75%, 1.00%,
1.25% or 1.50% in the applicable asset rates at the end of intervals of
twelve months during the first five years following origination (the "Step-up
Periods"), after which the asset rates are fixed. The total amount and the
principal portion of each Monthly Payment on any step-up rate loan
during any period is determined on a basis that would cause the asset to be
fully amortized over its term if the asset were to bear interest during its
entire term at the asset rate applicable during this period and as if
the asset were to provide for level payments over its entire term based on
the asset rate. In addition to being subject to interest rate adjustments
during their Step-up Periods, some step-up rate loans will be subject to a
one-time increase in their asset rates with respect to their final Monthly
Payments. The statistical information concerning the Fixed Rate Assets sets
forth only the asset rates borne by these assets as of the Cut-off Date. See
"The Trust -- The Assets" in the prospectus.
Except in the case of the step-up rate loans during their
Step-up Periods, each Fixed Rate Asset bears interest at a fixed annual
percentage rate and provides for level payments over the term of the
asset that fully amortize the principal balance of the asset. All of the
Fixed Rate Assets are actuarial obligations. The portion of each Monthly Payment
for any Fixed Rate Asset allocable to principal is equal to the total amount of
the Monthly Payment less the portion allocable to interest. The portion
of each Monthly Payment due in a particular month that is allocable to interest
is a precomputed amount equal to one month's interest on the principal balance
of the Fixed Rate Asset, which principal balance is determined by reducing the
initial principal balance by the principal portion of all Monthly Payments that
were due in prior months, regardless of whether the Monthly Payments were
made in a timely fashion, and all prior partial principal prepayments. Thus,
each scheduled Monthly Payment on an asset will be applied to interest and
to principal in accordance with the precomputed allocation regardless of
whether the Monthly Payment was received in advance of or subsequent to its
Due Date. See "Servicing of the Assets -- Collection and Other Servicing
Procedures" in this prospectus supplement.
As of the Cut-off Date, approximately _____% of the Fixed Rate Assets
were mortgage loans or Land Secured Contracts. For each Land Secured
Contract, the originator financed the purchase of the related manufactured
home and either took as additional security a mortgage on the property on
which the manufactured home is located or took a mortgage on the
property on which the manufactured home is located in lieu of all or a
portion of the obligor's required down payment. As of the Cut-off Date,
approximately _____% of the Fixed Rate Assets were mortgage loans.
As of the Cut-off Date, each Fixed-Rate Asset had an asset rate of
at least ________% per annum and not more than _____% per annum. The weighted
average asset rate of the Fixed-Rate Assets was approximately ____% per
annum, without giving effect to any subsequent increase in the asset
rates of the step-up rate loans. The Fixed Rate Assets had remaining
terms to stated maturity as of the Cut-off Date of at least ___ months but not
more than 360 months and original terms to stated maturity of at least ___
months but not more than 360 months. Each Fixed Rate Asset was originated on or
after ___________. As of the Cut-off Date, the Fixed Rate Assets had a weighted
average original term to stated maturity of approximately ____ months, and a
weighted average remaining term to stated maturity of approximately ____ months.
The remaining term to stated maturity of an asset is calculated as the
number of Monthly Payments scheduled to be made on the asset over its term
less the number of Monthly Payments made or scheduled to have been made on or
before the Cut-off Date. The average Scheduled Principal Balance of the Fixed
Rate Assets as of the Cut-off Date was approximately $_________ and the
Scheduled Principal Balance of the Fixed Rate Assets as of the Cut-off Date
ranged from $______ to $________.
Approximately ________% of the Fixed Rate Assets have Loan-to-Value
Ratios greater than 95%. Oakwood Acceptance computes each Contract Loan-to-Value
Ratio with respect to which a lien on land has been granted in lieu of a cash
down payment by determining the ratio of the principal amount of the related
contract to the sum of the purchase price of the home, including taxes,
insurance and any land improvements, the tax value or the appraised value of
the land and the amount of any prepaid finance charges or closing costs that are
financed. Oakwood Acceptance computes each Contract Loan-to-Value Ratio for all
other contracts by determining the ratio of the principal amount of
the contract to the purchase price of the home,
S-16
<PAGE>
including taxes, insurance and any land improvements, and the amount of any
prepaid finance charges or closing costs that are financed. Oakwood Acceptance
computes each Mortgage Loan-to-Value Ratio by determining the ratio of the
principal amount of the mortgage loan to either
o 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
o 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.
Manufactured homes, unlike site-built homes, usually depreciate in
value. Consequently, at any time after origination it is possible, especially in
the case of assets with high Loan-to-Value Ratios at origination, that the
market value of a manufactured home may be lower than the asset's principal
amount outstanding.
The Fixed Rate Assets are secured by manufactured homes or mortgaged
properties, or Real Properties, in the case of Land Secured Contracts,
located in ___ states. Approximately [>10]% and [>10]% of the Fixed Rate Assets
were secured as of the Cut-off Date by mortgaged properties or manufactured
homes, or Real Properties, in the case of Land Secured Contracts, located in
______ and _______, respectively. As of the Cut-off Date, no fewer than
approximately _____% of the Fixed Rate Assets were secured by manufactured
homes which were new at the time the related assets were originated. As of
the Cut-off Date, no more than approximately ____%, ____% and ____% of the Fixed
Rate Assets were secured by manufactured homes which were used, repossessed
or transferred to an assignee of the original obligor, respectively, at the
time the related assets were originated.
Adjustable Rate Assets
The asset pool will consist of ___ Adjustable Rate Assets having an
aggregate Scheduled Principal Balance as of the Cut-off Date of approximately
$________.
Each Adjustable Rate Asset has an asset rate that adjusts annually
based on __________, and provides for [level] payments over the term of the
asset that fully amortize the principal balance of the asset. All of the
Adjustable Rate Assets are actuarial obligations.
Each Adjustable Rate Asset has an annual cap of ___% per annum. The
weighted average lifetime cap of the Adjustable Rate Assets as of the Cut-off
Date was approximately ___% per annum. The Adjustable Rate Assets had Gross
Margins as of the Cut-off Date of at least ___% per annum but not more than ___%
per annum, with a weighted average Gross Margin of approximately ___% per annum.
The portion of each Monthly Payment for any Adjustable Rate Asset allocable to
principal is equal to the total amount of the Monthly Payment less the
portion allocable to interest. The portion of each Monthly Payment due in a
particular month that is allocable to interest is a precomputed amount equal to
one month's interest on the principal balance of the Adjustable Rate Asset,
which principal balance is determined by reducing the initial principal balance
by the principal portion of all Monthly Payments that were due in prior
months, regardless of whether the Monthly Payments were made in a timely
fashion, and all prior partial principal prepayments. Thus, each scheduled
Monthly Payment on an asset will be applied to interest and to principal in
accordance with the precomputed allocation regardless of whether the
Monthly Payment was received in advance of or subsequent to its Due Date. As
of the Cut-off Date all of the Adjustable Rate Assets were mortgage loans.
See "Servicing of the Assets -- Collection and Other Servicing Procedures" in
this prospectus supplement.
As of the Cut-off Date, each Adjustable Rate Asset had an asset rate
of at least ____% per annum and not more than ____% per annum. The weighted
average asset rate of the Adjustable Rate Assets was approximately ____% per
annum, without giving effect to any subsequent adjustment in the asset
rates of the Adjustable Rate Loans. The Adjustable Rate Assets had remaining
terms to stated maturity as of the Cut-off Date of at least ____ months but not
more than ____ months and original terms to stated maturity of ____ months. Each
Adjustable Rate Asset was originated on or after ____________. As of the Cut-off
Date, the Adjustable Rate Assets had a weighted average original term to stated
maturity of approximately ______ months, and a weighted average remaining term
to stated maturity of approximately ____ months. The remaining term to stated
maturity of an asset is calculated as the number of Monthly Payments
scheduled to be made on the asset over its term less the number of Monthly
Payments made or scheduled to have been made on or before the Cut-off Date. The
average Scheduled Principal Balance of
S-17
<PAGE>
the Adjustable Rate Assets as of the Cut-off Date was approximately $________
and the Scheduled Principal Balance of the Adjustable Rate Assets as of the
Cut-off Date ranged from $________ to $________. Approximately ____% of the
Adjustable Rate Assets have Loan-to-Value Ratios greater than 95%.
The Adjustable Rate Assets are secured by mortgaged properties
located in ____ states. Approximately [ >10 ]%, [ >10 ]%, [ >10 ]%, [ >10 ]% and
[ >10 ]% of the Adjustable Rate Assets were secured as of the Cut-off Date by
mortgaged properties located in __________, __________, __________,
__________ and __________, respectively.
Selected Data
It is possible that some of the assets may be repaid in full or in
part, or otherwise removed from the asset pool. In this event, other assets
may be transferred to the trust. Consequently, the actual asset pool may
vary slightly from the presentation in this prospectus supplement.
Whenever reference is made to a percentage of the assets, or to
a percentage of the Scheduled Principal Balance of the assets, the
percentage is calculated based on the Scheduled Principal Balances of the
assets as of the Cut-off Date. In addition, numbers in any columns in
these tables may not sum exactly to the total number at the bottom of the
column due to rounding.
S-18
<PAGE>
<TABLE>
<CAPTION>
Fixed Rate Assets
Geographic Distribution of Manufactured Homes -- Fixed Rate Assets
Percentage of
Number of Aggregate Fixed Rate
Fixed Rate Scheduled Asset Pool
Geographic Location Assets Principal Balance By SPB
- -------------------- ------ ----------------- -------
<S> <C> <C> <C> <C>
Alabama............................. _____ _________ ____
Arizona............................. _____ _________ ____
Arkansas............................ _____ _________ ____
California.......................... _____ _________ ____
Colorado............................ _____ _________ ____
Delaware............................ _____ _________ ____
Florida............................. _____ _________ ____
Georgia............................. _____ _________ ____
Idaho............................... _____ _________ ____
Illinois............................ _____ _________ ____
Indiana............................. _____ _________ ____
Kansas.............................. _____ _________ ____
Kentucky............................ _____ _________ ____
Louisiana........................... _____ _________ ____
Maine............................... _____ _________ ____
Maryland............................ _____ _________ ____
Michigan............................ _____ _________ ____
Minnesota........................... _____ _________ ____
Mississippi......................... _____ _________ ____
Missouri............................ _____ _________ ____
Montana............................. _____ _________ ____
Nevada.............................. _____ _________ ____
New Jersey.......................... _____ _________ ____
New Mexico.......................... _____ _________ ____
New York............................ _____ _________ ____
North Carolina...................... _____ _________ ____
Ohio................................ _____ _________ ____
Oklahoma............................ _____ _________ ____
Oregon.............................. _____ _________ ____
Pennsylvania........................ _____ _________ ____
South Carolina...................... _____ _________ ____
Tennessee........................... _____ _________ ____
Texas............................... _____ _________ ____
Utah................................ _____ _________ ____
Virginia............................ _____ _________ ____
Washington.......................... _____ _________ ____
West Virginia....................... _____ _________ ____
Wisconsin........................... _____ _________ ____
Wyoming............................. _____ _________ ____
Total.......................... $ %
</TABLE>
- ------------
Based on the mailing address of the obligor on the related Fixed Rate
Asset as of the Cut-off Date.
S-19
<PAGE>
<TABLE>
<CAPTION>
Distribution of Original Fixed Rate Asset Amounts
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Original Fixed Rate Asset Amount Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
$4,999 or less...................... _____ _________ ____
$5,000 - $9,999.................... _____ _________ ____
$10,000 - $14,999................... _____ _________ ____
$15,000 - $19,999................... _____ _________ ____
$20,000 - $24,999................... _____ _________ ____
$25,000 - $29,999................... _____ _________ ____
$30,000 - $34,999................... _____ _________ ____
$35,000 - $39,999................... _____ _________ ____
$40,000 - $44,999................... _____ _________ ____
$45,000 - $49,999................... _____ _________ ____
$50,000 - $54,999................... _____ _________ ____
$55,000 - $59,999................... _____ _________ ____
$60,000 - $64,999................... _____ _________ ____
$65,000 - $69,999................... _____ _________ ____
$70,000 - $74,999................... _____ _________ ____
$75,000 - $79,999................... _____ _________ ____
$80,000 - $84,999................... _____ _________ ____
$85,000 - $89,999................... _____ _________ ____
$90,000 - $94,999................... _____ _________ ____
$95,000 - $99,999................... _____ _________ ____
$100,000 or more................... _____ $________ ____%
Total .....................
<CAPTION>
The highest original Fixed Rate Asset amount was $_________, which
represents approximately _____% of the aggregate principal balance of the Fixed
Rate Assets at origination. The average original principal amount of the Fixed
Rate Assets was approximately $______ as of the Cut-off Date.
Distribution of Original Loan-to-Value Ratios of Fixed Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Loan-to-Value Ratio Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
50% or less...................... _____ _________ ____
51% - 55%........................ _____ _________ ____
56% - 60%........................ _____ _________ ____
61% - 65%........................ _____ _________ ____
66% - 70%........................ _____ _________ ____
71% - 75%........................ _____ _________ ____
76% - 80%........................ _____ _________ ____
81% - 85%........................ _____ _________ ____
86% - 90%........................ _____ _________ ____
91% - 95%........................ _____ _________ ____
96% - 100%....................... _____ _________ ____
101%-110%........................ _____ _________ ____
Total.................... $________ ___%
</TABLE>
The weighted average original Loan-to-Value Ratio of the Fixed Rate
Assets was approximately ____% as of the Cut-off Date.
Rounded to nearest 1%.
S-20
<PAGE>
<TABLE>
<CAPTION>
Fixed Rate Asset Rates
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Asset Rate Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
6.000 - 6.999% ............... _____ _________ ____
7.000 - 7.999% ............... _____ _________ ____
8.000 - 8.999% ............... _____ _________ ____
9.000 - 9.999% ............... _____ _________ ____
10.000 - 10.999%............... _____ _________ ____
11.000 - 11.999%............... _____ _________ ____
12.000 - 12.999%............... _____ _________ ____
13.000 - 13.999%............... _____ _________ ____
14.000 - 14.999%............... _____ _________ ____
Total.......................... $ %
The weighted average Fixed Rate Asset Rate was approximately _____1% per
annum as of the Cut-off Date. This table reflects the Fixed Rate Asset Rates of
the step-up rate loans as of the Cut-off Date and does not reflect any
subsequent increases in the Rates of the step-up rate loans.
<CAPTION>
Year of Origination of Fixed Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Year of Origination Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
1996........................... _____ _________ ____
1997........................... _____ _________ ____
1998........................... _____ _________ ____
Total.......................... $ %
The weighted average seasoning of the Fixed Rate Assets was approximately
___ months as of the Cut-off Date.
<CAPTION>
Remaining Terms to Maturity, in months, of Fixed Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Remaining Term to Maturity Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
1 - 60 months...................... _____ _________ ____
61 - 96 months...................... _____ _________ ____
97 - 120 months..................... _____ _________ ____
121 - 156 months..................... _____ _________ ____
157 - 180 months..................... _____ _________ ____
181 - 216 months..................... _____ _________ ____
217 - 240 months..................... _____ _________ ____
241 - 300 months..................... _____ _________ ____
301 - 360 months..................... _____ _________ ____
Total.......................... $ %
</TABLE>
The weighted average remaining term to maturity of the Fixed Rate Assets
was approximately ____ months as of the Cut-off Date.
S-21
<PAGE>
Original Terms to Maturity, in months, of Fixed Rate Assets
<TABLE>
<CAPTION>
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Original Term to Maturity Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
1 - 60 months..................... _____ _________ ____
61 - 96 months..................... _____ _________ ____
97 - 120 months.................... _____ _________ ____
121 -156 months.................... _____ _________ ____
157 -180 months.................... _____ _________ ____
181 -216 months.................... _____ _________ ____
217 -240 months.................... _____ _________ ____
241 -300 months.................... _____ _________ ____
301 -360 months.................... _____ _________ ____
Total............................ $ %
</TABLE>
The weighted average original term to maturity of the Fixed Rate Assets was
approximately ___ months as of the Cut-off Date.
<TABLE>
<CAPTION>
Adjustable Rate Assets
Geographic Distribution of Manufactured Homes - Adjusted Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Geographic Location Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
Arizona...................... _____ _________ ____
California................... _____ _________ ____
Colorado..................... _____ _________ ____
Florida...................... _____ _________ ____
Georgia...................... _____ _________ ____
Idaho........................ _____ _________ ____
Kentucky..................... _____ _________ ____
New Mexico................... _____ _________ ____
North Carolina............... _____ _________ ____
Oregon....................... _____ _________ ____
South Carolina............... _____ _________ ____
Tennessee.................... _____ _________ ____
Virginia..................... _____ _________ ____
Washington................... _____ _________ ____
Total........................ $ %
</TABLE>
Based on the mailing address of the obligor on the related Adjustable
Rate Asset as of the Cut-off Date.
S-22
<PAGE>
<TABLE>
<CAPTION>
Distribution of Original Adjustable Rate Asset Amounts
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Original Adjustable Rate Asset Amount Assets Principal Balance Pool By SPB
- ------------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
$45,000 -$49,999....................... _____ _________ ____
$55,000 -$59,999....................... _____ _________ ____
$60,000 -$64,999....................... _____ _________ ____
$65,000 -$69,999....................... _____ _________ ____
$70,000 -$74,999....................... _____ _________ ____
$75,000 -$79,999....................... _____ _________ ____
$80,000 -$84,999....................... _____ _________ ____
$85,000 -$89,999....................... _____ _________ ____
$90,000 -$94,999....................... _____ _________ ____
$95,000 -$99,999....................... _____ _________ ____
$100,000 or more....................... _____ _________ ____
Total ...................... $ %
</TABLE>
The highest original Adjustable Rate Asset amount was $__________, which
represents approximately _____% of the aggregate principal balance of the
Adjustable Rate Assets at origination. The average original principal amount of
the Adjustable Rate Assets was approximately $_______ as of the Cut-off Date.
<TABLE>
<CAPTION>
Distribution of Original Loan-to-Value Ratios of Adjustable Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Loan-to-Value Ratio Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
51% -- 55%....................... _____ _________ ____
66% -- 70%....................... _____ _________ ____
71% -- 75%....................... _____ _________ ____
76% -- 80%....................... _____ _________ ____
81% -- 85%....................... _____ _________ ____
86% -- 90%....................... _____ _________ ____
91% -- 95%....................... _____ _________ ____
96% --100%....................... _____ _________ ____
101% --105%...................... _____ _________ ____
Total ......................... $ %
</TABLE>
The weighted average original Loan-to-Value Ratio of the Adjustable Assets was
approximately _____% as of the Cut-off Date.
Rounded to nearest 1%.
<TABLE>
<CAPTION>
Current Asset Rates of Adjustable Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Asset Rate Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
7.000% - 7.999%.................. _____ _________ ____
8.000% - 8.999%.................. _____ _________ ____
9.000% - 9.999%.................. _____ _________ ____
Total........................ $ %
</TABLE>
The weighted average Adjustable Rate Asset Rate was approximately _____% per
annum as of the Cut-off Date. This table reflects the Asset Rates of the
Adjustable Rate Assets as of the Cut-off Date and does not reflect any
subsequent adjustments in the Asset Rates of the Adjustable Rate Assets.
S-23
<PAGE>
<TABLE>
<CAPTION>
Distribution of Gross Margins of Adjustable Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Gross Margin Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
3.250% - 3.500%................... _____ _________ ____
4.500% - 4.750%................... _____ _________ ____
Total.......................... $ %
</TABLE>
The weighted average Gross Margin of the Adjustable Rate Assets was
approximately ____% per annum as of the Cut-off Date.
<TABLE>
<CAPTION>
Maximum Asset Rates of Adjustable Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Maximum Asset Rates Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
13.000% to 13.625%.................. _____ _________ ____
14.000% to 14.625%.................. _____ _________ ____
Total............................ $ %
</TABLE>
The weighted average maximum Asset Rate of the Adjustable Rate Assets was
approximately ______% per annum as of the Cut-Off Date.
<TABLE>
<CAPTION>
Year of Origination of Adjustable Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Year of Origination Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
1997.......................... _____ _________ ____
1998.......................... _____ _________ ____
Total...................... $ %
</TABLE>
The weighted average seasoning of the Adjustable Rate Assets was
approximately ___ months as of the Cut-off Date.
<TABLE>
<CAPTION>
Remaining Terms to Maturity, in months, of Adjustable Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Remaining Term to Maturity Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
348 - 360 months.................... _____ _________ ____
Total............................ $ %
</TABLE>
The weighted average remaining term to maturity of the Adjustable Rate
Assets was approximately ____ months as of the Cut-off Date.
S-24
<PAGE>
<TABLE>
<CAPTION>
Original Terms to Maturity, in months, of Adjustable Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Original Terms to Maturity Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
360 months..................... _____ _________ ____
Total....................... $ %
</TABLE>
The weighted average original term to maturity of the Adjustable Rate Assets
was approximately ___ months as of the Cut-off Date.
<TABLE>
<CAPTION>
Date of Next Asset Rate Adjustment of Adjustable Rate Assets
Number of Aggregate Percentage of
Fixed Rate Scheduled Fixed Rate Asset
Date of Next Asset Rate Adjustment Assets Principal Balance Pool By SPB
- -------------------------------- ------ ----------------- -----------
<S> <C> <C> <C> <C>
April 1, 1999........................ _____ _________ ____
April 15, 1999....................... _____ _________ ____
May 1, 1999.......................... _____ _________ ____
June 1, 1999......................... _____ _________ ____
August 1, 1999....................... _____ _________ ____
August 15, 1999...................... _____ _________ ____
October 1, 1999...................... _____ _________ ____
November 1, 1999..................... _____ _________ ____
December 1, 1999..................... _____ _________ ____
January 1, 2000...................... _____ _________ ____
Total............................. $ %
</TABLE>
Underwriting Guidelines
The assets were underwritten by Oakwood Acceptance and were
underwritten and originated substantially in accordance with the guidelines
described in the prospectus under "Underwriting Policies."
Conveyance of Assets
On the date of issuance of the certificates [or on each Subsequent
Transfer Date], Oakwood Mortgage will transfer to the Trustee, without
recourse, all of its right, title and interest in and to the assets,
including all principal and interest received on or with respect to the
assets, not including principal and interest due on the assets on or before
the Cut-off Date and any other amounts collected on the assets before the
Cut-off Date other than early collections of Monthly Payments that were due
after the Cut-off Date, and all rights under the standard hazard
insurance policies maintained with respect to the related manufactured
homes, Real Properties and mortgaged properties. [The pooling and servicing
agreement permits the trust to purchase Subsequent Assets on one or more dates
through the close of business on ________ (each, a "Subsequent Transfer Date").
The asset schedule will identify the Scheduled Principal Balance of each
asset, the amount of each Monthly Payment due on each asset, and the
asset rate on each asset, in each case as of the Cut-off Date. Prior to the
conveyance of the assets to the Trustee, Oakwood Acceptance'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 manufactured homes and the mortgages relating to the
Land Secured Contracts to check the accuracy of the contract schedule
delivered to the Trustee. The Trustee will complete a review of the mortgage
loan files to check the accuracy of the mortgage loan schedule.
Oakwood Mortgage will represent and warrant only that:
o the information set forth in the asset schedule was true and
correct as of the date or dates on which the information was
furnished;
o Oakwood Mortgage is the owner of, or holder of a first-priority
security interest in, each asset;
S-25
<PAGE>
o Oakwood Mortgage acquired its ownership of, or security
interest in, each asset in good faith without notice of any
adverse claim;
o except for the sale of the assets to the Trustee, Oakwood
Mortgage has not assigned any interest or participation in any
asset that has not been released; and
o Oakwood Mortgage has the full right to sell the trust
estate to the Trustee.
The Servicer, on behalf of the certificateholders, will hold the
original contracts and copies of documents and instruments relating to each
contract and the security interest in the manufactured home and any Real
Property relating to each contract. In order to provide notice of the
assignment of the assets to the Trustee, UCC-1 financing statements
identifying the Trustee as the secured party or purchaser and identifying all
the assets as collateral will be filed in the appropriate offices in the
State of North Carolina. Despite these filings, 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 or after each Subsequent
Transfer Date, as applicable, the contracts will be stamped or otherwise
marked to reflect their assignment to the Trustee. The Trustee, on behalf of
the certificateholders, will hold the original mortgage notes and
mortgages, and copies of documents and instruments relating to each mortgage
loan. See "Certain Legal Aspects of Contracts and Mortgage Loans" in the
prospectus.
Oakwood Acceptance will make representations and warranties
regarding the assets in the sales agreement. These representations and
warranties are detailed in the prospectus under the heading "Sale and Servicing
of the Contracts and Mortgage Loans --- Representations and Warranties."
Under the terms of the pooling and servicing agreement and the sales
agreement, and subject to Oakwood Acceptance's option to effect a
substitution as described in the next paragraph, Oakwood Acceptance will be
obligated to repurchase any asset for its Repurchase Price within 90
days after Oakwood Acceptance's discovery, or receipt of written notice from
the Trustee or the Servicer, of a breach of any representation or warranty made
by Oakwood Acceptance in the sales agreement that materially and adversely
affects the Trustee's interest in any asset, if the breach has not been
cured by the 90th day. The "Repurchase Price" for any asset will be the
unpaid principal balance of the asset at the close of business on the date
of repurchase, plus accrued and unpaid interest thereon to the next Due Date
for the asset following the repurchase. Prior to being distributed to
certificateholders, this Repurchase Price will be used to reimburse the
Servicer for any previously unreimbursed Advances made by the Servicer in
respect of the repurchased asset and, if the repurchaser is the Servicer,
the Repurchase Price may be remitted net of reimbursement amounts.
In lieu of repurchasing an asset as specified in the preceding
paragraph, during the two-year period following the date of the initial issuance
of the certificates, Oakwood Acceptance may, at its option, substitute a
qualified substitute asset for any asset to be replaced. A "qualifed substitute
asset" is any asset that, on the date of substitution,
o has an unpaid principal balance not greater than, and not more
than $10,000 less than, the unpaid principal balance of the
replaced asset,
o has an asset rate not less than, and not more than one percentage
point in excess of, the asset rate of the replaced asset,
o has a net rate at least equal to the net rate of the replaced
asset,
o has a remaining term to maturity not greater than, and not more
than one year less than, that of the replaced asset,
o has 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 this date, and
o complies with each representation and warranty in Section 2.05 of
the pooling and servicing agreement and in the sales agreement.
S-26
<PAGE>
In the event that more than one asset is substituted for a replaced asset, the
unpaid principal balances may be determined on an aggregate basis, and the asset
rate, net rate and term on a weighted average basis, 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 made, a
qualified substitute asset also shall satisfy the following criteria as of the
date of its substitution for a replaced asset:
o the asset shall not be 30 or more days delinquent,
o 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;
o the Loan-to-Value Ratio of the asset must be 125% or less either 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 on the date of the substitution, based on an appraisal conducted
within the 60 day period prior to the date of the substitution;
o no property securing such asset may be subject to foreclosure,
bankruptcy, or insolvency proceedings; and
o 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, any replaced asset that is a mortgage loan may only be
replaced by another mortgage loan.
Oakwood Acceptance will deposit cash into the Certificate Account in the
amount, if any, by which the aggregate of the unpaid principal balances of any
replaced assets exceeds the aggregate of the unpaid principal balances of the
assets being substituted for the replaced assets. Also, if it is discovered that
the actual Scheduled Principal Balance of an asset is less than the Scheduled
Principal Balance identified for the asset on the asset schedule, Oakwood
Acceptance may, at its option, deposit the amount of the discrepancy into the
Certificate Account instead of repurchasing the asset. Any deposit will be
treated as a partial principal prepayment.
In addition, Oakwood Acceptance is required to indemnify Oakwood
Mortgage and its assignees, including the trust, against losses and
damages they incur as a result of breaches of Oakwood Acceptance's
representations and warranties. Oakwood Acceptance's obligation to
repurchase or substitute for an asset affected by a breach of a
representation or warranty and to indemnify Oakwood Mortgage and its
assignees for losses and damages caused by a breach constitute the sole
remedies available to the Trustee and the certificateholders for a breach of
a representation or warranty under the pooling and servicing agreement or
the sales agreement with respect to the assets.
[Conveyance of Subsequent Assets and Pre-Funding Account
A Pre-Funding Account will be established by the Trustee and
funded by Oakwood Mortgage on the closing date to provide the trust
with funds to purchase Subsequent Assets. The Subsequent Assets will be
purchased by the trust during the Pre-Funding Period, which will begin on
the closing date and end on ______ __, 1999. The Pre-Funded Amount will
initially equal the difference between the aggregate certificate principal
balance of the offered certificates on the closing date and the aggregate
Scheduled Principal Balance of the initial assets as of the Cut-Off Date. In
the event that the trust is unable to acquire sufficient qualifying assets
by _______, any amounts remaining in the Pre-Funding Account will be applied as
a partial principal prepayment to certificateholders entitled to the
payment on the first date distributions are made. The Pre-Funding Account
will be part of the trust but not part of the Pooling REMIC or the Issuing
REMIC. Any investment income earned on amounts on deposit in the Pre-Funding
Account will be paid to Oakwood Mortgage and will not be available for
distribution to certificateholders.
Under the pooling and servicing agreement, the trust will be
obligated to purchase Subsequent Assets from Oakwood Mortgage during the
Pre-Funding Period, subject to their availability. Subsequent Assets will be
transferred to the trust pursuant to subsequent transfer instruments between
Oakwood Mortgage and the trust. Each Subsequent Asset will have been
underwritten in accordance with Oakwood Mortgage's standard underwriting
criteria. In connection with the purchase of
S-27
<PAGE>
Subsequent Assets on each Subsequent Transfer Date, the trust will be
required to pay to Oakwood Mortgage from amounts on deposit in the
Pre-Funding Account a cash purchase price of 100% of the Scheduled Principal
Balance of the Subsequent Assets as of the related Cut-Off Date. Any
conveyance of Subsequent Assets on a Subsequent Transfer Date must satisfy
conditions including, but not limited to:
o each Subsequent Asset must satisfy the representations and
warranties specified in the related subsequent transfer instrument
and the pooling and servicing agreement;
o Oakwood Mortgage will not select Subsequent Assets in a manner that
it believes is adverse to the interests of the certificateholders;
o each Subsequent Asset must not be more than 30 days
delinquent as of its Cut-off Date;
o as a result of the purchase of the Subsequent Assets, the
certificates will not receive from _______ or ________ a lower
credit rating than the rating assigned at the initial issuance of
the certificates; and
o an independent accountant will provide a letter stating whether or
not the characteristics of the Subsequent Assets conform to the
characteristics described in this prospectus supplement.
Following the end of the Pre-Funding Period, the asset pool must satisfy the
following criteria:
o the weighted average asset rate must not be less than ____%
or more than ____%;
o the weighted average remaining term to stated maturity must not
be less than ____ months or more than ____ months;
o the weighted average Loan-to-Value Ratio must not be greater
than ____%;
o not less than ____% of the asset pool, by Scheduled
Principal Balance, must be attributable to loans to purchase new
manufactured homes;
o not more than ____%, ____% and ____% of the assets located in
_______________, ______________, or any other individual state,
respectively, and
o not less than ____% of the assets will be either Land Secured
Contracts or mortgage loans.
Information regarding Subsequent Assets comparable to the disclosure
regarding the initial assets provided in this prospectus supplement will be
filed on a report on Form 8-K with the SEC within 15 days following the end of
the Pre-Funding Period.]
Maturity and Prepayment Considerations
The assets had terms to maturity at origination ranging from ___ months
to 360 months, but may be prepaid in full or in part at any time. The prepayment
experience of the assets, including prepayments due to liquidations of
defaulted assets, will affect the weighted average life of each class of
the certificates. Based on Oakwood Acceptance's experience with the
portfolio of conventional manufactured housing contracts it services,
Oakwood Mortgage anticipates that a number of assets will be liquidated or
prepaid in full prior to their respective maturities. A number of factors,
including homeowner mobility, general and regional economic conditions and
prevailing interest rates may influence prepayments. In addition, any
repurchases of assets on account of breaches of representations and
warranties will have the same effect as prepayments of the assets and
accordingly will affect the life of the certificates. Natural disasters may
also influence prepayments. Most of the assets contain provisions that
prohibit the obligors from selling an underlying manufactured home or
mortgaged property without the prior consent of the holder of the asset.
These provisions may not be enforceable in some states. The Servicer's
policy is to permit most sales of manufactured homes and mortgaged
properties without accelerating the assets where the proposed buyer meets
Oakwood Acceptance's then-current underwriting standards and either enters
into an assumption agreement or executes a new contract for the unpaid balance
of the existing asset. The execution of a new contract or mortgage note and
mortgage would have the
S-28
<PAGE>
same effect as a prepayment of the existing asset in full. See "Certain
Legal Aspects of Contracts and Mortgage Loans" in the prospectus.
Weighted Average Lives of the Offered Certificates
The following information is given solely to illustrate the effect of
prepayments of the assets on the weighted average life of each class of
the offered certificates under the stated assumptions and is not a
prediction of the prepayment rate that might actually be experienced with
respect to the assets.
Weighted average life refers to the average amount of time that will
elapse from the date of issuance of a security until each dollar of principal of
the security will be repaid to the investor. The weighted average lives of
the offered certificates will be affected by the rate at which principal on
the assets is paid. Principal payments on assets may be in the form of
scheduled amortization or prepayments --- for this purpose, the term
"prepayment" includes any voluntary prepayment by an obligor, the receipt of
Liquidation Proceeds upon disposition of the property securing any defaulted
asset and the receipt of the Repurchase Price for any asset upon its
repurchase by Oakwood Acceptance as a result of any breaches of its
representations and warranties. Prepayments on contracts and mortgage loans
may be measured relative to a prepayment standard or model. The Prepayment Model
(the "MHP") is based on an assumed rate of prepayment each month of the then
unpaid principal balance of a pool of new manufactured housing installment sales
contracts and mortgage loans. A prepayment assumption of 100% MHP assumes
constant prepayment rates of 3.7% per annum of the then unpaid principal balance
of the contracts and mortgage loans in the first month of the life of the
contracts and mortgage loans and an additional 0.1% per annum in each month
thereafter until the 24th month. Beginning in the 24th month and in each month
thereafter during the life of all of the contracts and mortgage loans, 100% MHP
assumes a constant prepayment rate of 6.0% per annum each month.
As used in the following tables "0% MHP" assumes no prepayments on the
assets; "100% MHP" assumes the assets will prepay at rates equal to 100%
of the MHP assumed prepayment rates; "200% MHP" assumes the assets will
prepay at rates equal to 200% of the MHP assumed prepayment rates; and so on.
There is no assurance, however, that the rate of prepayments of the
assets will conform to any level of the MHP model, and no representation is made
that the assets will prepay at the prepayment rates shown or any other
prepayment rate. Oakwood Mortgage makes no representations as to the
appropriateness of the MHP model.
Modeling Assumptions and MHP Tables
The manufactured housing prepayment tables (the "MHP Tables")
were prepared based upon the assumptions that there are no delinquencies on the
assets and that there will be a sufficient Available Distribution Amount
to distribute all accrued interest and the Principal Distribution Amount due
(collectively, the "Modeling Assumptions").
The percentages and weighted average lives in the following tables were
determined assuming that
o scheduled interest and principal payments on the assets
will be received each month on their Due Dates and full
prepayments on and liquidations of the assets will be received
on the last day of each month, commencing in ________ 1999, and
will include 30 days of interest thereon;
o the Servicer exercises the right of optional termination at
the earliest possible date;
o the assets have the characteristics set forth in the two tables
provided;
o the initial certificate principal balance and Pass-Through
Rate of each class of the offered certificates are as
described in this prospectus supplement;
o no Due Date Interest Shortfalls will arise in connection with
prepayments in full or liquidations of the assets;
o no losses will be experienced on any assets included in the
asset pool;
o the closing date for the issuance of the certificates will be
_________________;
S-29
<PAGE>
o cash distributions will be received by the holders of the
certificates on ____________ and on the 15th day of each month
thereafter until retirement of the certificates;
o 1 year CMT is assumed to be ____% per annum, and One-Month LIBOR is
assumed to be ____% per annum; and
o the assets will prepay monthly at the percentages of MHP
indicated in the MHP Tables.
No representation is made that the assets will experience delinquencies or
losses at the respective rates assumed or at any other rates.
S-30
<PAGE>
<TABLE>
<CAPTION>
Assumed Fixed Rate Asset Characteristics
Scheduled Remaining
Principal Balance Term to
As of the Maturity Seasoning
Cut-off-Date Asset Rate (Months) (Months)
------------ ---------- -------- --------
Level Pay Assets
<S> <C> <C> <C> <C> <C>
1...................... ____________ _________ ____ _____
2...................... ____________ _________ ____ _____
3...................... ____________ _________ ____ _____
4...................... ____________ _________ ____ _____
5...................... ____________ _________ ____ _____
<CAPTION>
Step-Up Rate Assets
Scheduled Remaining
Principal Balance Term to Months to Months to Months to First Step Second Step Third Step
As of the Asset Maturity Seasoning First Second Third Rate Rate Rate
Cut-off Date Rate (Months) (Months) Step Step Step Step Step Step
------------ ---- ------ ------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1... __________ ______ ____ ___ ___ ___ ___ _____ ____ ____
2... __________ ______ ____ ___ ___ ___ ___ _____ ____ ____
3... __________ ______ ____ ___ ___ ___ ___ _____ ____ ____
- ----------
* Not applicable.
<CAPTION>
Assumed Adjustable Rate Asset Characteristics
Scheduled Remaining
Principal Balance Term to Months to Lifetime Periodic Reset
As of the Asset Maturity Seasoning Gross Next Rate Rate Rate Frequency
Cut-off Date Rate (Months) (Months) Margin Change Cap Cap Index Months
----------- ---- ------ ------ ------ ------ ------- --- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1... $____________ ___% ___ __ ___% ___ ____% ____% 1 year CMT ___
</TABLE>
There will be discrepancies between the assets actually included in
the trust and the assumptions made as to the characteristics of the
assets in preparing the MHP Tables. There is no assurance that prepayment of
the assets will conform to any of the constant percentages of MHP described
in the MHP Tables or any other constant rate. Among other things, the MHP Tables
assume that the assets prepay at the indicated constant percentages of MHP,
notwithstanding the fact that the assets may vary substantially as to
asset rates and original terms to maturity. Variations in actual prepayment
experience for the assets will increase or decrease the percentages of
initial principal balances and weighted average lives shown in the MHP
Tables. Assuming no prepayments, the step-up rate loans and the
Adjustable Rate Loans will cause the Weighted Average Net Asset Rate for the
assets to rise from approximately _____% per annum at the Cut-off Date to a
maximum of approximately _____% per annum, as the asset rates on the
step-up rate loans and the Adjustable Rate Loans increase. "Weighted Average
Net Asset Rate" means for any Distribution Date, a rate equal to
o 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
o the Servicing Fee Rate.
The MHP Tables indicate the weighted average life of each class of
the offered certificates and set forth the percentage of the initial
certificate principal balance of each class of the offered certificates
that would be outstanding after each of the dates shown assuming prepayments of
the assets occur at various percentages of MHP. The weighted average
life of each class set forth in the MHP Tables has been determined by
multiplying the amount of each principal payment on the class by the number
of years from the date of delivery of the certificates of the class to the
related Distribution Date, summing the results and dividing the sum by the total
principal to be paid on the certificates of the class. See "Maturity and
Prepayment Considerations" in the prospectus.
S-31
<PAGE>
Please make your investment decisions on a basis that includes
your determination as to anticipated prepayment rates based on your own
assumptions as to the matters discussed in this prospectus supplement.
<TABLE>
<CAPTION>
Percentage of Initial Certificate Principal Balances Outstanding
Class A-1 Certificates at the following Class A-2 Certificates at the following
Percentages of MHP Percentages of MHP
---------------------------------------- -----------------------------------------
0% 100% 150% 200% 250% 300% 0% 100% 150% 200% 250% 300%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent.___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2000..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2001..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2002..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2003..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2004..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2005..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2006..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2007..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2008..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2009..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2010..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2011..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2012..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2013..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2014..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2015..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2016..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2017..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2018..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2019..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2020..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2021..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2022..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2023..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2024..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2025..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2026..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2027..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2028..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2029..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
Avg Life In Years: ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
- ---
</TABLE>
These MHP Tables have been prepared based on the Modeling
Assumptions, including the assumptions regarding the characteristics and
performance of the assets, which will differ from their actual
characteristics and performance, and should be read in conjunction with
these assumptions.
S-32
<PAGE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Principal Balances Outstanding
Class A-3 Certificates Class A-4 Certificates Class A-5 Certificates
at the following at the following at the following
percentages of MHP percentages of MHP percentages of MHP
--------------------------- --------------------------- ---------------------------
0% 100% 150% 200% 250% 300% 0% 100% 150% 200% 250% 300% 0% 100% 150% 200% 250% 300%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2000. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2001. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2002. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2003. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2004. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2005. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2006. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2007. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2008. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2009. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2010. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2011. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2012. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2013. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2014. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2015. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2016. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2017. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2018. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2019. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2020. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2021. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2022. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2023. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2024. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2025. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2026. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2027. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2028. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2029. ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
Avg Life In Years: ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
</TABLE>
These MHP Tables have been prepared based on the Modeling
Assumptions, including the assumptions regarding the characteristics and
performance of the assets, which will differ from their actual
characteristics and performance, and should be read in conjunction with
these assumptions.
S-33
<PAGE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Principal Balances Outstanding
Class M-1 Certificates at the following Class M-2 Certificates at the following
Percentages of MHP Percentages of MHP
----------------------------------------- -----------------------------------------
0% 100% 150% 200% 250% 300% 0% 100% 150% 200% 250% 300%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent.___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2000..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2001..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2002..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2003..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2004..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2005..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2006..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2007..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2008..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2009..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2010..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2011..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2012..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2013..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2014..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2015..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2016..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2017..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2018..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2019..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2020..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2021..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2022..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2023..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2024..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2025..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2026..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2027..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2028..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2029..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
Avg Life In Years: ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
- ---
</TABLE>
These MHP Tables have been prepared based on the Modeling
Assumptions, including the assumptions regarding the characteristics and
performance of the assets, which will differ from their actual
characteristics and performance, and should be read in conjunction with
these assumptions.
S-34
<PAGE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Principal Balances Outstanding
Class B-1 Certificates at the following Class B-2 Certificates at the following
Percentages of MHP Percentages of MHP
----------------------------------------- ------------------------------------------
0% 100% 150% 200% 250% 300% 0% 100% 150% 200% 250% 300%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent.___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2000..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2001..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2002..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2003..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2004..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2005..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2006..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2007..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2008..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2009..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2010..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2011..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2012..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2013..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2014..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2015..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2016..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2017..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2018..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2019..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2020..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2021..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2022..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2023..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2024..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2025..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2026..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2027..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2028..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
_____ 15, 2029..___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
Avg Life In Years: ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
- ---
</TABLE>
These MHP Tables have been prepared based on the Modeling
Assumptions, including the assumptions regarding the characteristics and
performance of the assets, which will differ from their actual
characteristics and performance, and should be read in conjunction with
these assumptions.
[Pre-Funding
The certificates will be prepaid in part on the first Distribution
Date after the Pre-Funding Period if any Pre-Funding Amount remains in the
Pre-Funding Account on this Distribution Date. These amounts will be
treated as a partial principal prepayment. It is expected that substantially
all of the Pre-Funded Amount will be used to acquire Subsequent Assets. It is
unlikely, however, that the aggregate Scheduled Principal Balance of the
Subsequent Assets purchased by the trust will be identical to the Pre-Funded
Amount, and consequently, certificateholders will likely receive some
prepayment of principal.]
Factors Affecting Prepayments
The rate of principal payments on pools of manufactured housing
contracts and mortgage loans is influenced by a variety of economic, geographic,
social and other factors, including the prevailing level of interest rates from
time to time and the rate at which owners of manufactured homes sell their
manufactured homes or default on their contracts or mortgage loans. Other
factors affecting prepayment of manufactured housing contracts and mortgage
loans include changes in obligors' housing needs, job transfers, unemployment
and obligors' net equity in the manufactured homes and mortgaged properties.
In general, if prevailing interest rates fall significantly
below the interest rates on the assets in your pool, these assets are likely
to be subject to higher prepayment rates than if prevailing interest rates
remained at or above the rates borne by
S-35
<PAGE>
these assets, because the obligors may refinance and obtain new loans
with lower interest rates and lower monthly payments. Conversely, if prevailing
interest rates rise above the interest rates on these assets, the rate
of prepayment would be expected to decrease because new loans would bear
higher interest rates and require higher monthly payments. The outstanding
principal balances of manufactured housing contracts tend to be smaller than
mortgage loan balances and the original terms to maturity of the contracts
are generally shorter than those of mortgage loans. As a result, changes in
interest rates will not affect the monthly payments on available new
manufactured housing contracts to the same degree that changes in interest
rates will affect the monthly payments on available new mortgage loans.
The assets may be prepaid by the obligors at any time without
imposition of any prepayment fee or penalty. In addition, defaults on assets
leading to repossession, and foreclosure in the case of Land Secured
Contracts and mortgage loans, and the ultimate liquidation of the related
manufactured homes and mortgaged properties and Real Properties, in the case
of Land Secured Contracts, may occur with greater frequency during their
early years. Prepayments, liquidations and repurchases of the assets will
result in distributions of principal to certificateholders of amounts that
would otherwise have been distributed over the remaining terms of the
assets. See "Yield on the Offered Certificates" in this prospectus
supplement.
Oakwood Acceptance, as seller under the sales agreement, may be
required to repurchase assets if it breaches its representations and
warranties contained in the sales agreement, including those relating to the
qualification of the assets for REMIC purposes. Any repurchase of an
asset will have the same effect as a prepayment in full of the asset and
will affect your yield to maturity. See "The Asset Pool -- Conveyance of
Contracts" in this prospectus supplement.
The Servicer has the option to terminate the trust, thereby
causing the retirement of all outstanding certificates, on any Distribution
Date on or after the Distribution Date on which the sum of the certificate
principal balance of the certificates is less than ___% of the sum of
their original certificate principal balance. If the Servicer does not exercise
its optional termination rights within 90 days after becoming eligible to do so,
the Trustee shall solicit bids for the purchase of all assets, REO
properties and repo properties remaining in the trust. This purchase, if
consummated, would likewise cause the retirement of all outstanding
certificates. See "The Trust" in this prospectus supplement.
Yield on the Offered Certificates
Distributions of interest on the offered certificates, other than
the class A-1 certificates, on any Distribution Date will include
interest accrued thereon through the last day of the month preceding the month
in which this Distribution Date occurs. Because interest will not be
distributed on the certificates until the 15th day, or, if this day
is not a business day, then on the next succeeding business day, of the month
following the month in which this interest accrues, the effective yield
to the holders of the classes of offered certificates will be lower than the
yield otherwise produced by the Pass-Through Rate and purchase price.
The yield to maturity of, and the amount of distributions on, each
class of the offered certificates will be related to the rate and timing
of principal payments on the assets. The rate of principal payments on the
assets will be affected by the amortization schedules of the assets and
by the rate of principal prepayments, including for this purpose payments
resulting from refinancings, liquidations of the assets due to defaults,
casualties, condemnations and repurchases by or on behalf of Oakwood
Mortgage or Oakwood Acceptance, as the case may be. No assurance can be given
as to the rate of principal payments or on the prepayments on the assets.
Delinquencies on assets could produce payment delays and could lead
to repossessions of manufactured homes and foreclosures in the case of Land
Secured Contracts and mortgage loans. Repossession of a manufactured
home or foreclosure on a Real Property or mortgaged property and the
subsequent resale of the home securing a contract or a property securing a
mortgage loan may produce net liquidation proceeds that are less than
the Scheduled Principal Balance of the related asset plus interest accrued
and the expenses of sale. This shortfall upon repossession and
disposition of a manufactured home or foreclosure on a Real Property or
mortgaged property would result in a Realized Loss on the asset.
The timing of changes in the rate of prepayments and defaults on the
assets may affect an investor's actual yield to maturity significantly, even if
the average rate of principal payments and defaults experienced over time is
consistent with an investor's expectations. In general, the earlier a prepayment
of principal of or a default on an asset, the greater will be the effect on
the investor's yield to maturity. As a result, the effect on an investor's yield
of principal payments or defaults occurring at a rate higher ---
S-36
<PAGE>
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 or defaults.
If a purchaser of certificates of a class calculates its anticipated
yield based on an assumed rate of default and an assumed amount of Realized
Losses that are lower than the default rate and amount of Realized Losses
actually incurred and the amount of Realized Losses actually incurred is not
entirely covered by Excess Interest or by the subordination of the
certificates of classes subordinated to the purchaser's class, the
purchaser's actual yield to maturity will be lower than that so calculated. The
timing of Realized Losses on liquidated loans will also affect an investor's
actual yield to maturity, even if the rate of defaults and severity of losses
are consistent with an investor's expectations. There can be no assurance that
the delinquency or repossession experience set forth in this prospectus
supplement under the heading "Servicing of the Assets -- Delinquency and Loan
Loss/Repossession Experience" will be representative of the results that may be
experienced with respect to the assets. There can be no assurance as to the
delinquency, repossession, foreclosure or loss experience with respect to the
assets.
If the purchaser of a certificate offered at a discount from its
Parity Price calculates its anticipated yield to maturity based on an
assumed rate of payment of principal that is faster than that actually
experienced on the assets, the actual yield to maturity will be lower than
that so calculated. Similarly, if the purchaser of a certificate offered at
a premium above its Parity Price calculates its anticipated yield to maturity
based on an assumed rate of payment of principal that is slower than that
actually experienced on the assets, the actual pre-tax yield to maturity
will be lower than that so calculated. "Parity Price" is the price at which a
security will yield its coupon.
Generally, a class A certificate will not receive principal until each
class of class A certificates with a lower numerical designation has been paid
in full. The allocation of distributions will have the effect of amortizing the
class A-1, class A-2, class A-3, class A-4 and class A-5 certificates,
particularly the class A-1 certificates, at a faster rate than the rate at which
the certificates would have been amortized if the Principal Distribution Amount
were required to be allocated among the classes of the certificates pro rata
prior to the Cross-over Date.
The holders of the offered subordinated certificates will not be
entitled to receive any distributions of principal on any Distribution Date
unless either the Cross-over Date has occurred and the Principal Distribution
Tests are satisfied for this Distribution Date or the certificate principal
balance of the class A certificates has been reduced to zero. Further, payments
of principal will be made on the class B-2 certificates only if tests with
respect to the class B-2 Floor Amount are met. It is not possible to predict
with certainty the timing of the date, if any, on which the Cross-over Date will
occur, or whether the Principal Distribution Tests will be met as to any
Distribution Date. A high level of Realized Losses or delinquencies could result
in the Principal Distribution Tests not being met for one or more Distribution
Dates. This would delay the amortization of the offered subordinated
certificates, particularly the class B-2 certificates, beyond what would
otherwise be the case.
While partial prepayments of principal on the assets are applied on Due
Dates for the assets, obligors are not required to pay interest on the assets
after the date of a full prepayment of principal. As a result, full prepayments
of assets in advance of their Due Dates during the Collection Period will reduce
the amount of interest received from obligors during that Collection Period to
less than one month's interest on all the assets. If a sufficient number of
assets are prepaid in full during the Prepayment Period in advance of their
respective Due Dates, then interest payable on all of the assets during the
related Collection Period may be less than the interest payable on all of the
certificates with respect to the Collection Period. If the level of Due Date
Interest Shortfalls was large enough, these shortfalls could result in a
Writedown Amount being allocated to the subordinated certificates. A "Writedown
Amount" is, with respect to each Distribution Date, the amount, if any, by which
the aggregate certificate principal balance of all the certificates, after all
distributions have been made on the certificates on that Distribution Date,
exceeds the Pool Scheduled Principal Balance of the assets for the next
Distribution Date. See "Description of the Offered Certificates" in this
prospectus supplement.
[Investors in the class A-1 certificates should understand that the
Pass-Through Rate of the class A-1 certificates will not exceed the
Weighted Average Net Asset Rate. Investors in this class should also
consider the risk that lower than anticipated levels of One-Month LIBOR could
result in actual yields to investors that are lower than anticipated
yields.]
[Investors in the class A-1 certificates should understand that
the timing of changes in the level of One-Month LIBOR may affect the actual
yields to investors even if the average level is consistent with the
investor's expectations. Each investor must make an independent decision as to
the appropriate One-Month LIBOR assumption to be used in deciding whether to
purchase a class A-1 certificate.]
S-37
<PAGE>
Because the Pass-Through Rate on the offered subordinated
certificates may vary on the basis of the Weighted Average Net Asset Rate,
the Pass-Through Rate and the yield on these certificates could be affected
by disproportionate collections of principal in respect of assets with
different asset rates, including obligor prepayments and collections
resulting from liquidations and repurchases of assets. Accordingly:
o the yield to maturity of the class M-1 certificates will be
lower than that which would otherwise result if all or a
substantial portion of the assets with net rates higher
than _____% per annum prepaid prior to those with net rates
lower than _____% per annum,
o the yield to maturity of the class M-2 certificates will be
lower than that which would otherwise result if all or a
substantial portion of the assets with net rates higher
than _____% per annum prepaid prior to those with net rates
lower than _____% per annum,
o the yield to maturity of the class B-1 certificates will be
lower than that which would otherwise result if all or a
substantial portion of the assets with net rates higher
than _____% per annum prepaid prior to those with net rates
lower than _____% per annum, and
o the yield to maturity of the class B-2 certificates will be
lower than that which would otherwise result if all or a
substantial portion of the assets with net rates higher
than _____% per annum prepaid prior to those with net rates
lower than _____% per annum.
The aggregate amount of distributions and the yield to maturity of the
offered certificates will also be affected by early payments of principal on
the assets resulting from any purchases of assets not conforming to
representations and warranties of Oakwood Acceptance and by the exercise by the
Servicer of its option to purchase the assets and other assets of the
trust, thereby effecting early retirement of any outstanding classes of
offered certificates. If the Servicer does not exercise its optional termination
right within 90 days after it first becomes eligible to do so, the Trustee shall
solicit bids for the purchase of all assets, REO Properties and Repo
Properties remaining in the trust. The Trustee shall sell these assets,
REO Properties and Repo Properties only if the net proceeds to the trust
from the sale would at least equal the Termination Price The net proceeds
from the sale will be distributed first to the Servicer to reimburse it for
all previously unreimbursed Liquidation Expenses paid and Advances made by, and
not previously reimbursed to, it with respect to the assets and second to
the Holders of the certificates and the Servicer. Accordingly, it is
possible that your certificates could be redeemed at a price less than their
outstanding principal amount plus accrued and unpaid interest.
If the net proceeds from the sale would not at least equal the
Termination Price, the Trustee shall decline to sell the assets, REO
Properties and Repo Properties and shall not be under any obligation to solicit
any further bids or otherwise negotiate any further sale of the assets, REO
Properties and Repo Properties.
The Trust
General
The certificates will be issued pursuant to the pooling and
servicing agreement. This summary of the provisions of the pooling and
servicing agreement does not purport to be complete. Reference is made to
the prospectus for important information in addition to that set forth
in this prospectus supplement regarding the terms and conditions of the
offered certificates. A copy of the standard terms to pooling and servicing
agreement, July 1998 Edition, has been filed with the SEC as an exhibit to
Oakwood Mortgage's Registration Statement on Form S-3 of which the
prospectus is a part. A copy of the pooling and servicing agreement
relating to the certificates, in the form in which it was executed by
Oakwood Mortgage, the Servicer and the Trustee, without exhibits, will be
filed with the SEC in a Current Report on Form 8-K within 15 days after the
closing date.
The trust created pursuant to the pooling and servicing
agreement will consist of the assets, including all rights to receive
payments due on the assets after the Cut-off Date; assets as from time
to time are identified as deposited in any account held for the benefit of
certificateholders, including the Certificate Account and the Distribution
Account; any manufactured home, Real Property or mortgaged property
acquired on behalf of certificateholders by repossession, foreclosure or by
deed in lieu of foreclosure; the rights of the Trustee to receive the proceeds
of any standard hazard insurance policies maintained with
S-38
<PAGE>
respect to the manufactured homes and mortgaged properties in accordance
with the pooling and servicing agreement and of any FHA insurance maintained
with respect to the assets; and certain rights of Oakwood Mortgage
relating to the enforcement of representations and warranties made by Oakwood
Acceptance relating to the assets.
The Trustee
The Trustee is _______________________________________. Any notices to
the Trustee relating to the certificates or the pooling and servicing
agreement should be sent to___________________________________________________
________________________.
Investors may contact the Trustee's corporate trust office by telephone
to ascertain the certificate principal balance of each class of offered
certificates and the then current Pass-Through Rate applicable to each class
of the offered certificates. The telephone number currently maintained by the
Trustee for the purpose of reporting this information is (___) ___________.
Oakwood Mortgage will file a Current Report on Form 8-K with the SEC within
15 days following the closing date. This Current Report on Form 8-K will
specify the initial principal amount of each class of the certificates.
The Trustee may resign at any time, in which event Oakwood Mortgage
will be obligated to appoint a successor Trustee. Oakwood Mortgage may also
remove the Trustee if the Trustee ceases to be eligible to continue as such
under the pooling and servicing agreement or if the Trustee becomes
insolvent. In these circumstances, Oakwood Mortgage will also be
obligated to appoint a successor Trustee. Any resignation or removal of the
Trustee and appointment of a successor Trustee will not become effective until
acceptance of the appointment by the successor Trustee.
The pooling and servicing agreement requires the Trustee to
maintain, at its own expense, an office or agency where certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee and the Certificate Registrar in respect of the
certificates pursuant to the pooling and servicing agreement may be
served.
Optional Termination
The Servicer may terminate the trust by purchasing all
assets, REO Properties and Repo Properties remaining in the trust on any
Distribution Date (the "Call Option Date") occurring on or after the
Distribution Date on which the sum of the Certificate Balance of the
certificates is less than ____% of the sum of the original certificate
principal balance of the certificates. The trust also may be terminated
and the certificates retired on any Distribution Date upon the
Servicer's determination, based on an opinion of counsel, that the REMIC status
of either the Pooling REMIC or the Issuing REMIC has been lost or that a
substantial risk exists that this status will be lost for the then current
taxable year. See "Description of the Certificates -- Optional Redemption or
Termination" in the prospectus.
The "Termination Price" will equal the greater of
o the sum of
o any Liquidation Expenses incurred by the Servicer in
respect of any asset that has not yet been liquidated;
o all amounts required to be reimbursed or paid to the
Servicer in respect of previousl unreimbur- sed Advances;
and
o the sum of
o the aggregate unpaid principal balance of the
assets, plus accrued and unpaid interest thereon at
the asset rates borne by your assets through the
end of the Interest Accrual Period in respect of
the date of the terminating purchase, plus
o the lesser of
o the aggregate unpaid principal balance of
each asset that had been secured by any REO
Property or Repo Property remaining in the
trust, plus accrued interest thereon at the
S-39
<PAGE>
asset rates borne by assets through the end
of the month preceding the month of the
terminating purchase, and
o the current appraised value of any REO
Property or Repo Property, net of Liquidation
Expenses to be incurred in connection with
the disposition of this property estimated in
good faith by the Servicer, the 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 the REO Property or Repo
Property, and
o the aggregate fair market value of the assets of the trust, as
determined by the Servicer, plus all previously unreimbursed P&I
Advances made with respect to the assets.
The fair market value of the assets of the trust as determined for purposes
of a terminating purchase shall be deemed to include accrued interest at the
applicable asset rate on the unpaid principal balance of each asset,
including any asset that has become a REO Property or a Repo Property, which
REO Property or Repo Property has not yet been disposed of by the Servicer,
through the end of the month preceding the month of the terminating purchase.
Accordingly, it is possible that your certificates could be redeemed by an
optional termination at a price less than their outstanding principal amount
plus accrued and unpaid interest. The basis for a valuation shall be furnished
by the Servicer to the certificateholders upon request. See "Description of
the Certificates -- Optional Redemption or Termination" in the prospectus.
On the date of any termination of the trust, the Termination Price
shall be distributed first to the Servicer to reimburse it for all
previously unreimbursed Liquidation Expenses paid and Advances made by and not
previously reimbursed to the Servicer with respect to the assets and
second to the certificateholders in accordance with the distribution
priorities set forth under " -- Distributions -- Priority of Distributions"
in this prospectus supplement. The Termination Price shall be deemed to be a
principal prepayment in full, together with related interest, received during
the related Prepayment Period for purposes of determining the allocation of
the distributions. Upon the termination of the trust and payment of all
amounts due on the certificates and all administrative expenses associated
with the trust, any remaining assets of the REMICs shall be sold and the
proceeds distributed pro rata to the holders of the class R certificates.
See "Description of the Certificates -- Optional Redemption or Termination" in
the prospectus.
Auction Sale
If the Servicer does not exercise its optional termination right within
90 days after it first becomes eligible to do so, the Trustee shall solicit bids
for the purchase of all assets, REO Properties and Repo Properties remaining
in the trust. The Trustee shall sell the assets, REO Properties and Repo
Properties only if the net proceeds to the trust from the sale would at
least equal the Termination Price, and the net proceeds from the sale will
be distributed first to the Servicer to reimburse it for all previously
unreimbursed Liquidation Expenses paid and Advances made by, and not previously
reimbursed to, it with respect to the assets and second to the
certificateholders and the Servicer in accordance with the distribution
priorities set forth under "Description of the Offered Certificateholders --
Distributions -- Priority of Distributions" in this prospectus supplement.
Accordingly, it is possible that your certificates could be redeemed by reason
of an auction sale at a price less than their outstanding principal amount plus
accrued and unpaid interest. If the net proceeds from the sale would not at
least equal the Termination Price, the Trustee shall decline to sell the
assets, REO Properties and Repo Properties and shall not be under any obligation
to solicit any further bids or otherwise negotiate any further sale of the
assets, REO Properties and Repo Properties.
Termination of the Agreement
The pooling and servicing agreement will terminate upon the last
action required to be taken by the Trustee on the final Distribution Date
following the later of the purchase by the Servicer of all assets and
all property acquired in respect of any asset remaining in the trust
estate, as described under " -- Optional Termination" and "Auction Sale" in
this prospectus supplement and the final payment or other liquidation, or any
related advance, of the last asset remaining in the trust estate or
the disposition of all property acquired upon repossession of any
manufactured home or foreclosure on any mortgaged property.
Upon presentation and surrender of the certificates, the Trustee
shall cause to be distributed, to the extent of available funds, to the
certificateholders on the final Distribution Date the amounts due them in
accordance with the pooling and servicing agreement. The amount remaining on
deposit in the Certificate Account, other than amounts retained to meet
claims, after all
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<PAGE>
required distributions have been made to the holders of the offered
certificates and the X certificates, or to the Termination Account, will be paid
to the class R certificateholders pro rata, based upon the holders'
respective percentage interests, in accordance with the provisions of the
pooling and servicing agreement.
Voting Rights
The voting rights of the trust will be allocated 0.5% to the
class R certificates, 0.5% to the class X certificates and 99% to the other
certificates in proportion to their respective certificate principal
balances. For a description of the limited matters on which the
certificateholders may vote, see "The Pooling and Servicing Agreements" in the
prospectus.
Reports to Certificateholders
The Trustee will furnish the certificateholders with monthly
statements prepared by the Servicer (each, a "Remittance Report") containing
information with respect to principal and interest distributions on the
certificates and Realized Losses on the assets. Any financial information
contained in these reports will not have been examined or reported upon by
an independent public accountant. Copies of the monthly statements and any
annual reports prepared by the Servicer evidencing the status of its compliance
with the provisions of a pooling and servicing agreement will be furnished
to related certificateholders upon request addressed to the Trustee.
A Remittance Report for a Distribution Date will identify the following
items:
o the Available Distribution Amount for the related Distribution
Date;
o the Interest Distribution Amount and the carryover amounts, as
well as any Writedown Interest Distribution Amount and any
Carryover Writedown Interest Distribution Amount, for each
class of the certificates for the related Distribution Date,
and the amount of interest of each category to be distributed
on each class based upon the Available Distribution Amount for
the related Distribution Date;
o the amount to be distributed on the related Distribution Date
on each class of the certificates to be applied to reduce
the certificate principal balance of each class, separately
identifying any portion of the amount attributable to
prepayments, and the aggregate of any Principal Distribution
Amounts remaining unpaid from previous Distribution Dates for each
class of the certificates for the related Distribution Date, and
the amount to be distributed to reduce any Principal
Distribution Amounts remaining unpaid from previous
Distribution Dates on each class based upon the Available
Distribution Amount for the related Distribution Date;
o the aggregate amount of P&I Advances required to be made by the
Servicer with respect to the related Distribution Date;
o the amount of any Realized Losses incurred on the assets during
the related Prepayment Period and in the aggregate since the
Cut-off Date and the amount of any Writedown Amount to be allocated
to any class of the subordinated certificates;
o [the amount of the Limited Guarantee Payment Amount, if any, for
the related Distribution Date and the aggregate amount of any
unpaid Limited Guarantee Payment Amounts for any previous
Distribution Date; ]
o the certificate principal balance of each class of the
certificates and the certificate principal balance as adjusted for
write-downs of each class of the subordinated certificates after
giving effect to the distributions to be made, and any Writedown
Amounts to be allocated, on the related Distribution Date;
o the aggregate Interest Distribution Amount remaining unpaid, if
any, and the aggregate carryover amount remaining unpaid, if
any, for each class of certificates, after giving effect to
the distributions to be made on the related Distribution Date;
o the aggregate Writedown Interest Distribution Amount remaining
unpaid, if any, and the aggregate Carryover Writedown Interest
Distribution Amount remaining unpaid, if any, for each class of
certificates, after giving effect to the distributions to be
made on the related Distribution Date;
S-41
<PAGE>
o the aggregate of any Principal Distribution Amounts remaining
unpaid from previous Distribution Dates, if any, for each class
of certificates, after giving effect to the distributions to be
made on the related Distribution Date;
o the amount of the aggregate Servicing Fee in respect of the
related Distribution Date;
o theaggregate number and the aggregate of the unpaid principal
balances of outstanding assets that are delinquent one
month --- 30 to 59 days --- as of the end of the related
Prepayment Period, delinquent two months --- 60 to 89 days
--- as of the end of the related Prepayment Period,
delinquent three months --- 90 days or longer --- as of the
end of the related Prepayment Period and as to which
repossession, foreclosure or other comparable proceedings have been
commenced as of the end of the related Prepayment Period;
o 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 the aggregate number and the aggregate
Unpaid Principle 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 delinquent one
month --- 30 to 59 days --- as of the end of the related
Prepayment Period, delinquent two months --- 60 to 89 days
--- as of the end of the related Prepayment Period, and
delinquent three months --- 90 days or longer --- as of the
end of the related Prepayment Period;
o the Pre-Funded Amount, if any, in the Pre-Funding Account on
the related Distribution Date, the amount of funds, if any, used to
purchase Subsequent Assets during the Pre-Funding Period and the
amount of funds, if any allocated as a prepayment of principal at
the end of the Pre-Funding Period; and
o any other information required to be provided to
certificateholders by the REMIC Provisions.
In the case of information furnished pursuant to the second and third
bullet points, the amounts shall be expressed, with respect to any
certificate, as a dollar amount per $1,000 denomination.
Servicing of the Assets
The Servicer
Oakwood Acceptance was incorporated in 1984 in the state of North
Carolina as a wholly-owned subsidiary of Oakwood Homes. Oakwood Acceptance
is primarily engaged in the business of underwriting, originating, pooling,
selling and servicing installment sales contracts for sales of manufactured
housing units. Oakwood Acceptance's principal offices are located at 7800
McCloud Road, Greensboro, North Carolina 27409-9634, telephone (336)
664-2500.
Oakwood Homes is a vertically-integrated manufacturer and retailer of
manufactured homes. Homes manufactured by Oakwood Homes are sold primarily at
retail through its approximately ____, as of _________________, sales
centers located in ___ states. Oakwood Homes also sells manufactured homes
purchased from other manufacturers at its sales centers.
Oakwood Acceptance underwrites and funds the origination of manufactured
housing contracts and residential mortgage loans, secured by a lien on the real
estate on which the related manufactured home is deemed permanently affixed, on
an individual basis from its principal office and from additional loan
origination offices in Austin, Texas, Mesa, Arizona and Tallahassee, Florida.
Contracts for the financing of sales of manufactured homes at Oakwood
Acceptance's sales centers as well as mortgage loans are typically originated in
the name of Oakwood Mobile, a wholly-owned retailing subsidiary of Oakwood
Homes, or in the name of a third party manufactured housing dealer, in either
case using funds provided by Oakwood Acceptance, and are assigned to Oakwood
Acceptance following origination, although some assets are originated directly
in Oakwood Acceptance's name. Oakwood Acceptance underwrites all of
these assets. From time to time, Oakwood Acceptance purchases seasoned
portfolios of manufactured housing contracts from third parties.
S-42
<PAGE>
Servicing Portfolio
Oakwood Acceptance services all of the manufactured housing contracts it
originates or purchases --- except for some contract portfolios which it
sells on a servicing-released basis --- collecting loan payments, insurance
premiums and other payments from borrowers and remitting principal and interest
payments to the holders of the contracts. The following table shows the
composition of Oakwood Acceptance's servicing portfolio of manufactured
housing contracts and residential mortgage loans, secured by a lien on the real
estate on which the related manufactured home is deemed permanently affixed, on
the dates indicated.
S-43
<PAGE>
<TABLE>
<CAPTION>
Asset Servicing Portfolio
At September 30, At December 31,
- ------------------------------------------------------------------------------------------------- ---------------------
1994 1995 1996 1997 1998 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Total Number of Serviced
Assets
Oakwood Acceptance Originated........ 39,273 51,566 67,120 89,411 111,351 94,570 114,697
Acquired Portfolios................... 5,773 4,872 4,177 3,602 2,818 3,404 2,635
Aggregate Outstanding Principal Balance
of Serviced Assets
Oakwood Acceptance Originated.........$757,640 $1,130,378 $1,687,406 $2,499,794 $3,536,657 $2,724,953 $3,692,078
Acquired Portfolios................... $85,227 $70,853 $57,837 $47,027 $35,882 $43,689 $32,734
Average Outstanding Principal Balance
per Serviced Asset
Oakwood Acceptance Originated......... $19.3 $21.9 $25.1 $28.0 $31.8 $28.8 $32.2
Acquired Portfolios................... $14.8 $14.5 $13.8 $13.1 $12.7 $12.8 $12.4
Weighted Average Interest Rate of Serviced
Assets
Oakwood Acceptance Originated......... 12.2% 12.0% 11.5% 11.0% 10.8% 11.0% 10.7%
Acquired Portfolios................... 11.0% 11.3% 11.2% 11.1% 11.0% 11.1% 11.1%
</TABLE>
Delinquency and Loan Loss/Repossession Experience
The following tables set forth information concerning the
delinquency experience and the loan loss and repossession experience of the
portfolio of manufactured housing installment sales contracts and residential
mortgage loans, secured by a lien on the real estate on which the related
manufactured home is deemed permanently affixed, serviced by Oakwood Acceptance,
in each case for each of Oakwood Acceptance's fiscal years from 1994 through
1998. Because delinquencies, losses and repossessions are affected by a variety
of economic, geographic and other factors, there can be no assurance that the
delinquency and loss experience of the assets will be comparable to that set
forth.
<TABLE>
<CAPTION>
Delinquency Experience
At September 30, At December 31,
--------------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Number of Serviced Assets
Oakwood Acceptance Originated.......39,273 51,566 67,120 89,411 111,351 94,570 114,697
Acquired Portfolios................. 5,773 4,872 4,177 3,602 2,818 3,404 2,635
Number of Delinquent Assets
Oakwood Acceptance Originated:
30 to 59 days past due.............. 350 601 835 1,171 2,345 2,342 2,695
60 to 89 days past due.............. 97 185 308 476 906 598 973
90 days or more past due............ 198 267 492 716 1,222 880 1,474
Total Number of Assets Delinquent... 645 1,053 1,635 2,363 4,473 3,820 5,142
Acquired Portfolios:
30-59 days past due................. 127 63 66 90 75 85 52
60-89 days past due................. 49 17 23 23 31 20 19
90 days or more past due............ 98 76 62 75 57 69 53
Total Number of Assets Delinquent... 274 156 151 188 163 174 124
Total Delinquencies as a Percentage of Serviced
Assets, by Number of Assets
Oakwood Acceptance Originated....... 1.6% 2.0% 2.4% 2.6% 4.0% 4.0% 4.5%
Acquired Portfolios................. 4.7% 3.2% 3.6% 5.2% 5.8% 5.1% 4.7%
</TABLE>
- --------------
Assets that are already the subject of repossession or foreclosure
procedures are not included in "delinquent assets" for purposes of this table.
The period of delinquency is based on the number of days payments are
contractually past due, assuming 30-day months. Consequently, a payment
due on the first day of a month is not 30 days delinquent until the first day of
the following month.
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<PAGE>
LOAN LOSS/REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
============================================================================================================================
AT SEPTEMBER 30,
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Total Number of Serviced Assets at Period End ........ 45,046 56,438 71,297 93,013 114,169
Average Number of Serviced Assets During Period ...... 37,788 50,742 63,868 82,155 103,591
Number of Serviced Assets Repossessed ................ 1,241 1,718 2,746 3,885 5,411
Serviced Assets Repossessed as a Percentage of Total
Serviced Assets (1) .............................. 2.75% 3.04% 3.85% 4.18% 4.74%
Serviced Assets Repossessed as a Percentage of Average
Number of
Serviced Assets .................................. 3.28% 3.39% 4.30% 4.73% 5.22%
Average Outstanding Principal Balance of Assets
Oakwood Acceptance Originated .................... $ 701,875 $ 976,905 $1,409,467 $2,065,033 $2,978,235
Acquired Portfolios .............................. $ 30,432 $ 30,235 $ 27,351 $ 22,943 $ 19,179
Net Losses from Asset Liquidations (2):
Total Dollars
Oakwood Acceptance Originated .................... $ 4,630 $ 7,303 $ 14,248 $ 26,872 $ 45,189
Acquired Portfolios .............................. $ 203 $ 473 $ 592 $ 528 $ 220
As a Percentage of Average Outstanding Principal
Balance of Assets(3)
Oakwood Acceptance Originated .................... 0.66% 0.75% 1.01% 1.30% 1.52%
Acquired Portfolios .............................. 0.67% 1.56% 2.16% 2.30% 1.15%
AT OR FOR THE
=============
THREE MONTHS
==================================================================================
ENDED DECEMBER 31,
------------------------
1997 1998
---- ----
Total Number of Serviced Assets at Period End ........ 97,974 117,332
Average Number of Serviced Assets During Period ...... 95,494 115,751
Number of Serviced Assets Repossessed ................ 1,208 1,865
Serviced Assets Repossessed as a Percentage of Total
Serviced Assets (1) .............................. 4.93% 6.36%
Serviced Assets Repossessed as a Percentage of Average
Number of
Serviced Assets .................................. 5.06% 6.44%
Average Outstanding Principal Balance of Assets
Oakwood Acceptance Originated .................... $2,570,959 $3,573,337
Acquired Portfolios .............................. $ 20,659 $ 16,276
Net Losses from Asset Liquidations (2):
Total Dollars
Oakwood Acceptance Originated .................... $ 7,865 $ 14,266
Acquired Portfolios .............................. $ 35 $ 34
As a Percentage of Average Outstanding Principal
Balance of Assets(3)
Oakwood Acceptance Originated .................... 1.22% 1.60%
Acquired Portfolios .............................. 0.68% 0.84%
</TABLE>
Percentages expressed in the three month tables are annualized.
(1) Total number of serviced assets repossessed during the applicable period
expressed as a percentage of the total number of serviced assets at the end
of the applicable period.
(2) Net losses represent all losses incurred on Oakwood Acceptance-serviced
portfolios. Such amounts include estimates of net losses with respect to
certain defaulted assets. The length of the accrual period for the amount of
accrued and unpaid interest included in the calculation of the net loss
varies depending upon the period in which the loss was charged and whether
the asset was owned by an entity other than Oakwood Acceptance.
(3) Total net losses incurred on assets liquidated during the applicable period
expressed as a percentage of the average outstanding principal balance of
all assets.
[NOTE THAT DATA PRESENTED IN THE FOREGOING TABLES IN ANY PROSPECTUS SUPPLEMENT
WILL BE AS OF A DATE NO MORE THAN 135 DAYS PRIOR TO THE DATE OF SUCH PROSPECTUS
SUPPLEMENT.]
Oakwood Acceptance has informed Oakwood Mortgage that Oakwood Acceptance
believes that its historical loss experience has been favorably affected by its
ability to resell repossessed units through Oakwood Mobile and dealers
supervised by Oakwood Mobile, and its engagement of Oakwood Mobile to make
needed repairs on repossessed units through the facilities of these dealers,
rather than having to hire unaffiliated parties to perform these services at
higher rates. If Oakwood Acceptance is replaced as Servicer of the assets, the
successor Servicer will not have access to Oakwood Mobile or its network of
dealers and, as a consequence, the loss experience on the assets, particularly
the contracts, may be adversely affected. The September 30, 1998 delinquency
information provided in this prospectus supplement notes a material increase
over year-end 1997 results. A continuation likely would cause losses higher than
historical credit losses. SEE "RISK FACTORS -- YOU MAY EXPERIENCE A LOSS ON YOUR
INVESTMENT IF LOSSES ANd DELINQUENCIES ON ASSETS IN THE TRUST ARE HIGH" IN THIS
PROSPECTUS SUPPLEMENT.
The data in the foregoing tables are presented for illustrative purposes
only, and there is no assurance that the delinquency, loan loss and repossession
experience of the assets will be similar to that set forth. The delinquency,
loan loss and repossession experience of manufactured housing contracts
historically has been sharply affected by downturns in regional or local
economic conditions. For instance, a downturn was experienced in areas dependent
on the oil and gas industry in the 1980s, causing increased levels of
delinquencies, repossessions and loan losses on manufactured housing installment
sales contracts in the affected areas. The asset pool consists primarily of
contracts. Regional and local economic conditions are often volatile, and no
predictions can be made regarding their effects on future economic losses upon
repossessions or as to the levels of losses that will be incurred as a result of
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<PAGE>
any repossessions of or foreclosures on assets. SEE "RISK FACTORS -- YOU MAY
EXPERIENCE A LOSS ON YOUr INVESTMENT IF LOSSES AND DELINQUENCIES ON ASSETS IN
THE TRUST ARE HIGH" IN THIS PROSPECTUS SUPPLEMENT.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will administer, service and make collections on the
assets, exercising the degree of care that the Servicer exercises with respect
to similar contracts serviced by the Servicer.
Except for the step-up rate loans during their Step-up Periods, each
Fixed Rate Asset bears interest at a fixed annual percentage rate and provides
for level payments over the term of the asset that fully amortize the principal
balance of the asset. All payments received on the assets --- other than
payments allocated to items other than principal and interest or payments
sufficient to pay the outstanding principal balance of and all accrued and
unpaid interest on the assets --- will be applied when received first to any
previously unpaid scheduled Monthly Payments, and then to the currently due
Monthly Payment, in the chronological order of occurrence of the Due Dates for
the Monthly Payments. Any payments on an asset that exceed the amount necessary
to bring the asset current are applied to the partial prepayment of principal of
the asset if the Servicer determines, based on specific directions from the
obligor as to the payment or on a course of dealing with the obligor, that the
obligor intended the payment as a partial principal prepayment. If the Servicer
cannot determine the obligor's intent with respect to any excess payment, the
Servicer will apply the excess payment as an early payment of scheduled Monthly
Payments for subsequent Due Dates to the extent the excess payment is an
integral multiple of the obligor's scheduled Monthly Payment, and will apply the
remainder of the excess payment as a partial principal prepayment.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
On each Distribution Date, the Servicer will be entitled to receive a
monthly Servicing Fee equal to 1.00% per annum (the "Servicing Fee Rate")
multiplied by the aggregate Scheduled Principal Balance of the assets at the
beginning of the related Collection Period, without giving effect to any
principal prepayments, net liquidation proceeds and Repurchase Prices received
(or Realized Losses incurred, during the related Prepayment Period). If Oakwood
Acceptance is the Servicer, the Servicing Fee in respect of a Distribution Date
will be paid pursuant to clause (12) under "DESCRIPTION OF THE OFFERED
CERTIFICATES --DISTRIBUTIONS" IN THIS PROSPECTUS SUPPLEMENT and only to the
extent of funds available pursuant to clause (12), except that it may retain its
Servicing Fee out of collections on the assets to the extent that the amount
already on deposit in the Certificate Account for the related Distribution Date
will allow the full distribution of all amounts required to be distributed
pursuant to clauses (1) through (11) under "DESCRIPTION OF THE OFFERED
CERTIFICATES -- DISTRIBUTIONS -- PRIORITY OF DISTRIBUTIONS" IN THIS PROSPECTus
on the related Distribution Date. If Oakwood Acceptance is not the Servicer, the
Servicing Fee in respect of each asset may be retained by the Servicer at the
time of the related collection on the asset or may be withdrawn from the
Certificate Account at a later time, in which case the amount will not be part
of the Available Distribution Amount.
The Servicing Fee provides compensation for customary manufactured
housing contract third-party servicing activities to be performed by the
Servicer for the trust and for additional administrative services performed by
the Servicer on behalf of the trust. Customary servicing activities include
collecting and recording payments, communicating with obligors, investigating
payment delinquencies, providing billing and tax records to obligors and
maintaining internal records with respect to each asset. Administrative services
performed by the Servicer on behalf of the trust include calculating
distributions to certificateholders and providing related data processing and
reporting services for certificateholders and on behalf of the Trustee. Expenses
incurred in connection with servicing of the assets and paid by the Servicer
from its monthly Servicing Fee include, without limitation, payment of fees and
expenses of accountants, payment of all fees and expenses incurred in connection
with the enforcement of contracts or mortgage loans, except Liquidation
Expenses, and payment of expenses incurred in connection with distributions and
reports to certificateholders. The Servicer will be reimbursed out of the
Liquidation Proceeds of a defaulted asset for all reasonable, out-of-pocket
Liquidation Expenses incurred by it in repossessing, foreclosing on and
liquidating the related manufactured home or mortgaged property.
As part of its servicing fees, the Servicer will also be entitled to
retain, as compensation for the additional services provided in connection with
the pooling and servicing agreement, any late payment fees made by obligors,
extension fees paid by obligors for the extension of scheduled payments and
assumption fees paid in connection with permitted assumptions of assets by
purchasers of the related manufactured homes and mortgaged properties, as well
as investment earnings on funds in the Certificate Account.
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<PAGE>
ADVANCES
On or prior to the business day preceding each Distribution Date, the Servicer
will either
o deposit from its own funds the related aggregate P&I Advance into the
Certificate Account;
o cause appropriate entries to be made in the records of the
Certificate Account that funds in the Certificate Account that are
not part of the Available Distribution Amount for the related
Distribution Date have been used to make the aggregate P&I Advance;
o if the Certificate Account is maintained by the Trustee, instruct the
Trustee to use investment earnings on the Certificate Account to
defray the Servicer's P&I Advance obligation; or
o make or cause to be made the aggregate P&I Advance through any
combination of the methods described.
Any funds held for future distribution and used in accordance with the second
bullet point must be restored by the Servicer from its own funds or from early
payments collected on the assets when they become part of a future Available
Distribution Amount. The aggregate required P&I Advance for a Distribution Date
is the sum of delinquent scheduled Monthly Payments due in the related
Collection Period, exclusive of all Non-Recoverable Advances.
P&I Advances are intended to maintain a regular flow of scheduled
interest and principal payments to certificateholders rather than to guarantee
or insure against losses.
The Servicer will also be obligated to make advances ("Servicing
Advances"), to the extent the Servicer deems the Advances recoverable out of
Liquidation Proceeds of, or from collections on, the related contract or
mortgage loan, in respect of Liquidation Expenses and taxes and insurance
premiums not paid by an obligor on a timely basis.
The Servicer may reimburse itself for Servicing Advances out of
collections of the late payments in respect of which the Advances were made and,
upon the determination that a Non-recoverable Advance has been made in respect
of an asset or upon an asset becoming a liquidated loan, out of Funds in the
Certificate Account for unreimbursed amounts advanced by it in respect of the
asset. In addition, the Servicer may reimburse itself out of funds in the
Certificate Account for unreimbursed amounts advanced by it in respect of P&I
Advances.
SUCCESSORS TO SERVICER, DELEGATION OF DUTIES
Any entity with which the Servicer is merged or consolidated, or any
entity resulting from any merger, conversion or consolidation to which the
Servicer is a party, or any entity succeeding to the business of the Servicer,
will be the successor to the Servicer under the pooling and servicing agreement
so long as each Rating Agency has delivered to the Trustee a letter to the
effect that the successorship will not result in a downgrading of the rating
then assigned by the Rating Agency to any class of the certificates. The
Servicer may delegate computational, data processing, collection and
foreclosure, including repossession, duties under the pooling and servicing
agreement without any notice to or consent from Oakwood Mortgage or the Trustee,
provided that the Servicer will remain fully responsible for the performance of
these duties.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the certificates will be used to purchase the assets and to pay other expenses
connected with pooling the assets and issuing the certificates.
UNDERWRITING
Oakwood Mortgage and Oakwood Acceptance have entered into an
underwriting agreement dated ______________________ with
_________________________________ and _______________________________________
(the "Underwriters"), for whom __________________________________ is acting as
representative (the "Representative"). Subject to the terms and conditions set
forth in the underwriting agreement, Oakwood Mortgage has agreed to sell to the
Underwriters, and the Underwriters have agreed to purchase, the principal amount
of the offered certificates set forth opposite each of their names:
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5
[Underwriter]....................... $_________ $_________ $_________ $__________ $_________
[Underwriter]....................... $_________ $_________ $_________ $__________ $_________
Total.......................... $_________ $_________ $_________ $__________ $_________
CLASS M-1 CLASS M-2 CLASS B-1 CLASS B-2
[Underwriter]................................. $_________ $_________ $__________ $_________
[Underwriter]................................. $_________ $_________ $__________ $_________
Total.................................... $_________ $_________ $__________ $_________
</TABLE>
The underwriting agreement provides that the obligations of the several
Underwriters are subject to conditions precedent and that the Underwriters will
be obligated to purchase all of the offered certificates if any of the offered
certificates are purchased. In the event of default by any Underwriter, the
underwriting agreement provides that, in some circumstances, the purchase
commitments of the nondefaulting Underwriter may be increased or the
underwriting agreement may be terminated.
Oakwood Mortgage has been advised by the Representative that the several
Underwriters propose to offer the offered certificates to the public initially
at the respective public offering prices set forth on the cover page of this
prospectus supplement, and to dealers at such prices less a concession not in
excess of the amount set forth for each class. The Underwriters and dealers may
allow a discount not in excess of the amount set forth for each class to other
dealers. After the initial public offering of the offered certificates, the
public offering prices and concessions and discounts to dealers may be changed
by the Representative.
CONCESSION DISCOUNT
(PERCENT OF (PERCENT OF
PRINCIPAL PRINCIPAL
AMOUNT) AMOUNT)
Class A-1..................... _____% _____%
Class A-2..................... _____% _____%
Class A-3..................... _____% _____%
Class A-4..................... _____% _____%
Class A-5..................... _____% _____%
Class M-1..................... _____% _____%
Class M-2..................... _____% _____%
Class B-1..................... _____% _____%
Class B-2..................... _____% _____%
The Underwriters and any dealers that participate with the Underwriters
in the distribution of the offered certificates may be deemed to be
underwriters, and any discounts, concessions or commissions received by them,
and any profit on the resale of the offered certificates purchased by them, may
be deemed to be underwriting discounts and commissions under the Securities Act
of 1933, as amended (the "Act").
Oakwood Mortgage and Oakwood Acceptance have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Act, or contribute to payments which the Underwriters may be required to make.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the offered
certificates in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the Underwriters
to reclaim a selling concession from a syndicate member when the offered
certificates originally sold by syndicate member are purchased in a syndicate
covering transaction to cover syndicate short positions. Stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the offered certificates to be higher than it would otherwise be in the
absence of these transactions. These transactions, if commenced, may be
discontinued at any time.
S-48
<PAGE>
Oakwood Mortgage estimates that its expenses in connection with the
issuance and offering of the certificates will be approximately $________. This
information concerning Oakwood Mortgage's fees and expenses is an approximation
and is subject to future contingencies.
LEGAL MATTERS
Legal matters will be passed upon for Oakwood Mortgage by Hunton &
Williams, Richmond, Virginia, and for the Underwriter by
______________________________________________________. The material federal
income tax consequences of the offered certificates will be passed upon for
Oakwood Mortgage by Hunton & Williams.
ERISA CONSIDERATIONS
Fiduciaries of employee benefit plans and certain other retirement plans
and arrangements, including individual retirement accounts and annuities, Keogh
plans, and collective investment funds in which such plans, accounts, annuities
or arrangements are invested, that are subject to ERISA or corresponding
provisions of the Code (collectively, "Plans"), persons acting on behalf of a
Plan, or persons using the assets of a Plan ("Plan Investors") should carefully
review with their legal advisors whether the purchase or holding of any
certificates could result in unfavorable consequences for the Plan or its
fiduciaries under the Plan Asset Regulations or the prohibited transaction rules
of ERISA or the Code. Prospective investors should be aware that, although
exceptions from the application of the Plan Asset Regulations and the prohibited
transaction rules exist, there can be no assurance that any such exception will
apply with respect to the acquisition of a certificate. SEE "ERISA
CONSIDERATIONS" IN THE PROSPECTUS.
Sections 406 and 407 of ERISA and Section 4975 of the Code prohibit
certain transactions that involve
o a Plan that is subject to ERISA and any party in interest or
disqualified person with respect to the Plan and
o plan assets.
The Plan Asset Regulations 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 (the "Look-Through Rule"), unless one or more
exceptions specified in the regulations are satisfied. The offered certificates
will be treated as equity securities for purposes of the Plan Asset Regulations.
The Look-Through Rule would not apply to the offered certificates if one or more
of the exceptions specified in the Plan Asset Regulations are satisfied.
However, based on the information available to the Underwriters at the time of
the printing of the prospectus, there can be no assurance that either the
Publicly Offered Exception or the Insignificant Participation Exception will
apply to the initial or any subsequent purchases of the offered certificates.
SEE "ERISA CONSIDERATIONS" IN THE PROSPECTUS.
The U.S. Department of Labor has granted an administrative exemption to
_____________________________ (Prohibited Transaction Exemption ____; Exemption
Application No. ____, ____Fed. Reg. ____ (____), referred to in this prospectus
supplement as the "Exemption") from certain of the prohibited transaction rules
of ERISA and the related excise tax provisions of Section 4975 of the Code with
respect to the initial purchase, the holding and the subsequent resale by Plans
of certificates in pass-through trusts that consist of receivables, loans, and
other obligations and that meet the conditions and requirements of the
Exemption. The receivables covered by the Exemption include manufactured housing
installment sales contracts such as the contracts and mortgage loans such as the
mortgage loans.
Among the general conditions that must be satisfied for the Exemption to
apply are the following:
(1) the acquisition of the certificates by a Plan is on terms, including
the price for the certificates, that are at least as favorable to the Plan as
they would be in an arm's-length transaction with an unrelated party;
(2) the rights and interests evidenced by the certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by other
certificates of the related trust;
(3) the certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest generic rating
categories from either Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Rating Services, a division of The
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McGraw-Hill Companies, Inc. ("S&P"), Fitch IBCA, Inc. ("Fitch") or Duff & Phelps
Credit Rating Co. ("D&P") (collectively, the "Exemption Rating Agencies");
(4) the trustee of the related trust must not be an affiliate of any
other member of the Restricted Group;
(5) the sum of all payments made to and retained by the Underwriters in
connection with the distribution of the certificates represents not more than
reasonable compensation for underwriting the certificates;
(6) the sum of all payments made to and retained by Oakwood Mortgage
pursuant to the assignment of the loans to the trust represents not more than
the fair market value of such loans; and
(7) the sum of all payments made to and retained by the Servicer
represents not more than reasonable compensation for such person's services
under any servicing agreement and reimbursement of the Servicer's reasonable
expenses.
The Exemption defines the term "reasonable compensation" by reference to
DOL Regulation ss.2550.408c-2, 29 C.F.R. ss.2550.480c-2, which states that
whether compensation is reasonable depends upon the particular facts and
circumstances of each case. Each fiduciary of a Plan considering the purchase of
an offered certificate should satisfy itself that all amounts paid to or
retained by the Underwriters, Oakwood Mortgage and the Servicer represent
reasonable compensation for purposes of the Exemption. In addition, it is a
condition to application of the Exemption that the Plan investing in the
certificates is an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the SEC under the Act. Furthermore, in order for its
certificates to qualify under the Exemption, a trust must meet the following
requirements:
o the corpus of the trust must consist solely of assets of the type
that have been included in other investment pools;
o certificates in such other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's, D&P or
Fitch for at least one year prior to the Plan's acquisition of
certificates; and
o certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of certificates.
The Exemption does not apply to Plans sponsored by Oakwood Mortgage, the
Underwriters, Oakwood Acceptance, the Trustee, the Servicer and any obligor with
respect to assets included in the trust constituting more than five percent of
the aggregate unamortized principal balance of the assets in the trust, or any
affiliate of such parties (the "Restricted Group"). Moreover, the Exemption
provides certain Plan fiduciaries relief from certain self-dealing/conflict of
interest prohibited transactions only if, among other requirements,
o in the case of an acquisition in connection with the initial issuance
of certificates, at least 50% of each class of certificates in which
Plans have invested is acquired by persons independent of the
Restricted Group and at least 50% of the aggregate interest in the
trust is acquired by persons independent of the Restricted Group;
o such fiduciary or its affiliate is an obligor with respect to five
percent or less of the fair market value of the obligations contained
in the trust;
o the Plan's investment in certificates of any class does not exceed
25% of all of the certificates of that class outstanding at the time
of the acquisition; and
o immediately after the acquisition, no more than 25% of the assets of
the Plan with respect to which such person is a fiduciary is invested
in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity.
o The Exemption may apply to the acquisition and holding of the class A
certificates by Plans provided that all conditions to application of
the Exemption are met. Based upon information provided to Oakwood
Mortgage by members of the Restricted Group, it is expected that the
conditions set forth in the second, third and fourth bullet points
will be satisfied. Prospective investors should be aware, however,
that even if all of the conditions specified in the Exemption are
met, the scope of the relief provided by the Exemption might not
cover all acts that might be construed as
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prohibited transactions. However, one or more alternative exemptions
may be available with respect to certain prohibited transactions to
which the Exemption is not applicable, depending in part upon the
class of certificate to be acquired, the type of Plan fiduciary that
is making the decision to acquire such certificate and the
circumstances under which such decision is made, including, but not
limited to,
o PTCE 95-60, regarding investments by insurance company general
accounts;
o PTCE 91-38, regarding investments by bank collective investment
funds;
o PTCE 90-1, regarding investments by insurance company pooled separate
accounts; or
o PTCE 83-1, regarding acquisitions by Plans of interests in mortgage
pools.
Before purchasing class A 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 to
application of the Exemption or any other exemptions would be met. In addition,
any Plan Investor contemplating an investment in the class A certificates should
note that the duties and obligations of the Trustee and the Servicer are limited
to those expressly set forth in the pooling and servicing agreement, and such
specified duties and obligations may not comport with or satisfy the provisions
of ERISA setting forth the fiduciary duties of Plan fiduciaries.
BECAUSE THE OFFERED SUBORDINATED CERTIFICATES ARE SUBORDINATED
SECURITIES, AND THE CLASS B CERTIFICATES ARE NOT EXPECTED TO BE RATED IN ONE OF
THE THREE HIGHEST RATING CATEGORIES BY THE RATING AGENCIES, THE EXEMPTION AND
CERTAIN OF THE ALTERNATIVE EXEMPTIONS NOTED WILL NOT APPLY TO THE PURCHASE, SALE
OR HOLDING OF THE OFFERED SUBORDINATE CERTIFICATES. ACCORDINGLY, THE OFFERED
SUBORDINATED CERTIFICATES WILL NOT BE OFFERED FOR SALE, AND ARE NOT
TRANSFERRABLE, TO PLAN INVESTORS UNLESS SUCH PLAN INVESTOR PROVIDES OAKWOOD
ACCEPTANCE AND THE TRUSTEE WITH A BENEFIT PLAN OPINION, OR THE CIRCUMSTANCES
DESCRIBED IN CLAUSE (II) BELOW ARE SATISFIED. A BENEFIT PLAN OPINION IS AN
OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OF AN OFFERED SUBORDINATED
CERTIFICATE WILL NOT (A) CAUSE THE ASSETS OF THE TRUST TO BE REGARDED AS PLAN
ASSETS FOR PURPOSES OF THE PLAN ASSET REGULATIONS, (B) GIVE RISE TO A FIDUCIARY
DUTY UNDER ERISA ON THE PART OF OAKWOOD ACCEPTANCE, THE SERVICER OR THE TRUSTEE
OR (C) BE TREATED AS, OR RESULT IN, A PROHIBITED TRANSACTION UNDER SECTIONS 406
OR 407 OF ERISA OR SECTION 4975 OF THE CODE. UNLESS THIS OPINION IS DELIVERED,
EACH PERSON ACQUIRING AN OFFERED SUBORDINATED CERTIFICATE WILL BE DEEMED TO
REPRESENT TO THE TRUSTEE, OAKWOOD ACCEPTANCE AND THE SERVICER THAT EITHER (I)
SUCH PERSON IS NOT A PLAN INVESTOR SUBJECT TO ERISA OR SECTION 4975 OF THE CODE
OR (II) SUCH PERSON IS AN INSURANCE COMPANY THAT IS PURCHASING AN OFFERED
SUBORDINATED CERTIFICATE WITH FUNDS FROM ITS "GENERAL ACCOUNT" AND THE
PROVISIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 WILL APPLY TO EXEMPT
THE ACQUISITION AND HOLDING OF THE OFFERED SUBORDINATED CERTIFICATES AND THE
TRANSACTIONS IN CONNECTION WITH THE SERVICING, MANAGEMENT AND OPERATION OF THE
TRUST FROM THE PROHIBITED TRANSACTION RULES OF ERISA AND THE CODE.
RATINGS
It is a condition to the issuance of the certificates that each class of
offered certificates obtain the following ratings by _____ and ______:
[Rating Agencies]
Class A-1 _____ _____
Class A-2 _____ _____
Class A-3 _____ _____
Class A-4 _____ _____
Class A-5 _____ _____
Class M-1 _____ _____
Class M-2 _____ _____
Class B-1 _____ _____
Class B-2 _____ _____
The ratings on asset-backed pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions on the
underlying assets to which they are entitled. Rating opinions address the
structural, legal and issuer-related aspects associated with the securities,
including the nature of the underlying assets. Ratings on pass-through
certificates do not represent any assessment of the likelihood that principal
prepayments will be made by borrowers with respect to the underlying assets or
of the degree to which the rate of prepayments might differ from that originally
anticipated. As a result, the ratings do not address the possibility
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that holders of the offered certificates purchased at a premium might suffer a
lower than anticipated yield in the event of rapid prepayments of the assets or
in the event that the trust is terminated prior to the Final Scheduled
Distribution Date for the certificates.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each security rating should be evaluated
independently of any other security rating.
Oakwood Mortgage will request _______ and _______ to rate the offered
certificates. There can be no assurance as to whether any rating agency not
requested to rate the offered certificates will nonetheless issue a rating and,
if so, what the rating would be. A rating assigned to the offered certificates
by a rating agency that has not been requested by Oakwood Mortgage to do so may
be lower than the rating assigned by a Rating Agency pursuant to Oakwood
Mortgage's request.
LEGAL INVESTMENT CONSIDERATIONS
[If pre-funding account is used, classes become "mortgage related
securities" for SMMEA after pre-funded amount is reduced to zero.] The class A
certificates and the class M-1 certificates will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984 for so long as they are rated in one of the two highest rating categories
by one or more nationally recognized statistical rating organizations. As
"mortgage related securities," the class A certificates and the class M-1
certificates will be legal investments for entities to the extent provided in
SMMEA, subject to state laws overriding SMMEA. A number of states have enacted
legislation overriding the legal investment provisions of SMMEA. SEE "LEGAL
INVESTMENT CONSIDERATIONS" IN THE PROSPECTUS.
THE CLASS M-2 AND CLASS B CERTIFICATES WILL NOT CONSTITUTE "MORTGAGE
RELATED SECURITIES" FOR PURPOSES OF SMMEA BECAUSE THEY ARE NOT RATED IN ONE OF
THE TWO HIGHEST RATING CATEGORIES BY A NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATION. The appropriate characterization of the class M-2 and class B
certificates under various legal investment restrictions, and thus the ability
of investors subject to legal restrictions to purchase the class M-2 and class B
certificates, is subject to significant interpretive uncertainties. Any
financial institution that is subject to the jurisdiction of the Comptroller of
the Currency, the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Office of Thrift Supervision, the National
Credit Union Administration, any state insurance commission or any other federal
or state agency with similar authority should review any applicable rules,
guidelines and regulations prior to purchasing any certificates. Financial
institutions should review and consider the applicability of the Federal
Financial Institutions Examination Counsel Supervisory Policy Statement on the
Selection of Securities Dealers and Unsuitable Investment Practices, to the
extent adopted by their respective federal regulators, which, among other
things, sets forth guidelines for investing in certain types of mortgage related
securities and prohibits investment in "high-risk" mortgage securities.
Oakwood Mortgage makes no representations as to the proper
characterization of any class of the offered certificates for legal investment
or other purposes, or as to the legality of investment by particular investors
in any class of the offered certificates under applicable legal investment
restrictions. Accordingly, all institutions whose investment activities are
subject to legal investment laws and regulations, regulatory capital
requirements or review by regulatory authorities should consult with their own
legal advisors in determining whether and to what extent the offered
certificates constitute legal investments under SMMEA or are subject to
investment, capital or other restrictions. SEE "LEGAL INVESTMENT CONSIDERATIONS"
IN THE PROSPECTUS.
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PROSPECTUS
OAKWOOD MORTGAGE INVESTORS, INC.
DEPOSITOR
PASS-THROUGH CERTIFICATES, ISSUABLE IN SERIES
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 1 IN THIS PROSPECTUS.
Your certificates will represent obligations of your trust only and will not
represent interests in or obligations of Oakwood Mortgage or any of its
affiliates. Your certificates are not insured or guaranteed by any person.
Except as noted in this prospectus and the accompanying prospectus supplement,
the underlying accounts, contracts, and mortgage loans are not insured or
guaranteed by any government agency.
This prospectus may be used and to offer and sell any series of certificates
only if accompanied by the prospectus supplement for that series.
YOUR TRUST:
-----------
will issue certificates backed by contracts and mortgage loans in one or
more series with one or more classes; and
will own contracts and mortgage loans and other property described on the
cover page of the accompanying prospectus supplement.
YOUR CERTIFICATES:
------------------
will be secured by the property of your trust and will be paid only from
your trust's assets;
will be rated in one of the four highest rating categories by at least
one nationally recognized rating organization;
may have one or more forms of credit enhancement; and
will be issued as part of a designated series that may include one or
more classes of certificates and credit enhancement.
INVESTORS:
o will receive interest and principal payments from collections on the
contracts and mortgage loans and their trust's other assets, if any;
and
o are entitled to receive payments from collections on contracts and
mortgage loans and other assets securing their series of
certificates, but have no entitlement to payments from contracts,
mortgage loans, or other assets.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
APRIL 16, 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about your investment in two separate
documents that progressively provide more detail: this prospectus, which
provides general information, some of which may not apply to your series of
certificates and the accompanying prospectus supplement, which will describe the
specific terms of your series of certificates, including:
o the timing of interest and principal payments;
o statistical and other information about the contracts and mortgage
loans; o information about credit enhancement for each class;
o the ratings for each class; and
o the method for selling your certificates.
You should rely only on the information provided in this prospectus and
the accompanying prospectus supplement, including the information incorporated
by reference. We have not authorized anyone to provide you with different
information. Your certificates are not offered in any state where the offer is
not permitted.
We have included cross-references in this prospectus and in the
accompanying prospectus supplement to captions in these materials where you can
find further related discussions. The table of contents included in the
accompanying prospectus supplement provides the pages on which these captions
are located.
ii
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to purchase
the certificates.
THE TIMING AND AMOUNT OF PREPAYMENTS PREPAYMENT.
ON YOUR CERTIFICATES COULD REDUCE THE
YIELD TO MATURITY OF YOUR INVESTMENT Prepayment levels are affected by a
variety of economic, geographic,
tax, legal, and other factors,
including defaults on the assets,
required repurchases of the assets
and current interest rates. The
assets may be prepaid at any time.
When interest rates are going down,
home buyers are more likely to
prepay so that they may obtain lower
alternative financing on their
homes. In this event, you may not be
able to reinvest the proceeds of
prepayments in another investment of
similar credit risk and yield.
Conversely, prepayments are likely
to decline if interest rates rise
and you could reinvest prepayment
proceeds in investments of similar
credit risk and higher yield.
YIELD.
In general, if you purchased your
certificates at a price greater than
their par value, your investment
will become less valuable if
prepayments are higher than you
anticipate and will become more
valuable if prepayments are lower
than you anticipate. Conversely, if
you purchased your certificates at a
price less than their par value,
your investment will become more
valuable if prepayments are higher
than you anticipate and will become
less valuable if prepayments are
lower than you anticipate. Your
certificates' sensitivity to
prepayments will be magnified by any
disproportionate allocation of
principal or interest. You could
fail to recover your initial
investment if your certificates
receive a disproportionate amount of
principal or interest, and if
prepayments occur differently than
you anticipate. Your yield also may
be reduced by the fact that payments
of interest to fixed-rate
certificateholders are made in the
month following the month in which
such certificates accrue interest.
Losses on assets that are allocated
to your class of certificates also
will reduce your yield.
REGIONAL ECONOMIC DOWNTURNS AND THE Downturns in regional or local
DECLINE IN THE VALUE OF MANUFACTURED economic conditions will affect the
HOMES COULD RESULT IN LOSSES ON YOUR frequency of delinquency and amount
CERTIFICATES. of losses on the assets in your
trust. If the residential real
estate market experiences a decline
and the outstanding balances of the
assets exceed the value of the
manufactured homes and mortgaged
properties, the rates of
delinquencies, foreclosures and
losses on the assets could increase.
Contracts may experience a higher
level of delinquencies than
conventional mortgage loans because
these borrowers are usually more
severely affected by economic,
social and other factors that
diminish their ability to repay.
Losses
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<PAGE>
incurred upon repossession of
manufactured homes tend to be higher
than on corresponding mortgage loans
on stationary homes because, unlike
stationary homes, manufactured homes
generally loose value over time.
This may result in losses to you if
the losses on homes are too great to
be absorbed by classes of
certificates that are subordinated
to the certificates held by you and
other credit enhancement features.
You will have to look primarily to
the value of the manufactured homes
and mortgaged properties for
recovery of the outstanding
principal of and unpaid interest on
the defaulted mortgage loans not
covered by credit enhancement.
SEE "THE TRUSTS -- THE ASSETS -- THE
MORTGAGE LOANS" IN THIS PROSPECTUS.
STATE LAW MAY LIMIT THE SERVICER'S State laws, such as the uniform
ABILITY TO SERVICE THE ASSETS IN A commercial code and motor vehicle
MANNER THAT MAXIMIZES YOUR RETURN titling statutes, may limit the
servicer's ability to repossess,
foreclose, or liquidate the assets
in order to pay off certificates.
State law may also limit the amount
the servicer may collect in a
liquidation to less than the amount
due on any particular asset. For
example, state laws regulate how a
repossession can be conducted and
whether the servicer may obtain a
deficiency judgment if the proceeds
of foreclosure are not sufficient to
repay the loan.
CONTESTING THE TRUSTEE'S SECURITY The steps necessary to create and
INTEREST IN THE MANUFACTURED HOMES perfect a security interest in the
COULD REDUCE OR DELAY DISTRIBUTIONS manufactured homes differ from state
to state. Because of the expense
involved, the servicer will not take
any steps to name the company or the
trustee, on behalf of the trust, as
the lien-holders of any manufactured
home. As a consequence, a person may
contest the security interest of the
trustee. Whether successful or
unsuccessful, any contest of the
security interest could reduce or
delay distributions to you.
YOUR ABILITY TO RESELL CERTIFICATES A secondary market for any series of
WILL BE LIMITED certificate may not develop. If a
secondary market does develop, it
might not continue or it might not
be sufficiently liquid to allow you
to resell any of your certificates.
Also, ERISA plans may be prohibited
from purchasing your certificates,
if noted in the prospectus
supplement.
THE ENFORCEMENT OF CONSUMER A failure by Oakwood Acceptance to
PROTECTION LAWS MAY BE A LIABILITY TO comply with federal or state
YOUR TRUST consumer protection laws could
create liabilities on behalf of your
trust for amounts due under the
assets. These liabilities could
include a reduction in the amount
payable under the assets, the
inability to foreclose on the
manufactured home or mortgaged
property, or liability of your trust
to an obligor. Oakwood Acceptance
will warrant that the origination of
each asset materially 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 asset
and that each asset is enforceable
2
<PAGE>
against the related obligor in
accordance with its terms. A breach
of any warranty that materially and
adversely affects your trust's
interest in any asset would create
an obligation on the part of Oakwood
Acceptance to repurchase or
substitute for the asset unless the
breach is cured. However, the
failure of Oakwood Acceptance to
repurchase the defective asset or
pay the liability could expose your
trust to losses.
CREDIT ENHANCEMENT OFTEN DOES NOT Insurance policies and other forms
COVER ALL TYPES OF LOSSES ON YOUR of credit enhancement only cover the
CERTIFICATES matters expressly addressed by their
terms and detailed in your
prospectus supplement, and will not
provide protection against all risks
of loss.
SEE "THE TRUSTS -- INSURANCE" IN
THIS PROSPECTUS.
THE SUBORDINATION OF OTHER CLASSES TO The fact that some classes are paid
YOUR CLASS WILL NOT INSULATE YOU FROM after the classes of certificates
LOSS which you hold does not LOSS protect
you from all risks. If losses cannot
be absorbed by the subordinated
certificates or other items of
credit support, like a reserve fund,
then you may have losses on your
certificates.
YOU MAY HAVE INCOME FOR TAX PURPOSES Certificates purchased at a discount
PRIOR TO YOUR RECEIPT OF CASH and other classes of certificates
purchased at a premium that are
deemed to have original issue
discount may incur tax liabilities
prior to a holder's receiving the
related cash payments.
SEE "FEDERAL INCOME TAX
CONSEQUENCES" IN THIS PROSPECTUS.
YOU WILL EXPERIENCE DELAYS OR The acquisition of the contracts and
REDUCTIONS OF DISTRIBUTIONS ON YOUR mortgage loans by the trust from
CERTIFICATES IF THE TRANSFER OF Oakwood Mortgage is intended to be a
ASSETS TO THE TRUST IS NOT CONSIDERED sale. However, in the event that
A SALE IN THE EVENT OF BANKRUPTCY Oakwood Mortgage or one of its
affiliates becomes insolvent, a
court may decide that this
acquisition was a loan and not a
sale. This could delay or reduce
distributions to you. Likewise, if
an affiliate of Oakwood Mortgage
becomes insolvent, a court might
decide to consolidate the assets and
liabilities of Oakwood Mortgage and
its affiliates. This could also
delay or reduce distributions to
you. On the closing date for your
series, counsel to Oakwood Mortgage
will provide a legal opinion that,
in the event the servicer were to
become bankrupt or insolvent, a
court properly presented with this
issue would not consolidate Oakwood
Mortgage or the trust with the
servicer and would regard the
transfer as a sale. However, this
opinion is subject to a number of
conditions and assumptions and, in
any event, is not binding on any
court.
YOUR CERTIFICATES MAY BE SUBJECT TO In the event your certificates are
REDEMPTION AT A PRICE LESS THAN THEIR redeemed, the purchase price will
PRINCIPAL AMOUNT PLUS ACCRUED AND equal 100% of your certificates'
UNPAID INTEREST 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 the certificate.
Accordingly, if unreimbursed
advances and losses are too high,
your certificates could be redeemed
at a price less than their
outstanding principal amount plus
accrued and
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<PAGE>
unpaid interest.
THE ASSETS MAY CONTAIN VARIOUS The assets of your trust are subject
PAYMENT PROVISIONS, WHICH COULD to various payment provisions. Some
AFFECT PAYMENTS TO YOU may have changing monthly payments,
some may begin with lower payments
followed by higher payments, and
still others may have unusually
large payments due at maturity.
There is a higher risk of default on
these assets than on level payment
assets. The likelihood that you will
have a loss is greater with respect
to these assets than with respect to
level payment assets.
The interest rates on adjustable
rate assets will adjust
periodically. They will equal the
sum of an index, for example,
one-month LIBOR, and a margin. When
an index adjusts, the amount of
obligor's monthly payments likely
will change. As a result, obligors
on adjustable rate assets may be
more likely to default on their
obligations than obligors on assets
bearing interest at fixed rates.
The seller of convertible loans may
be required to repurchase
convertible loans if the obligor
elects to convert the asset rate
from an adjustable rate to a fixed
rate. This repurchase of a
convertible loan will have the same
effect on you as a repayment in full
of the asset. You certificates may
experience a higher rate of
prepayment than would otherwise be
the case if the your trust includes
convertible loans and a repurchase
obligation.
THE RATINGS PROVIDED BY THE RATING Your certificates will be rated in
AGENCIES DO NOT PURPORT TO ADDRESS one of the four highest rating
ALL RISKS CONTAINED IN YOUR categories by one or more rating
INVESTMENT agencies. A rating is not a
recommendation to buy, sell or hold
your certificates and may be revised
or withdrawn at any time. You may
obtain further details with respect
to any rating on your certificates
from the rating agency that issued
the rating. A rating generally is
based on the credit quality of the
underlying assets, and will
represent only an assessment of the
likelihood of receipt by you of
payments with respect to the assets.
The rating is not an assessment of
the prepayment experience, and does
not rate the possibility that you
may fail to recover your initial
investment if you purchase your
certificates at a premium over par.
Security ratings assigned to the
certificates representing a
disproportionate entitlement to
principal or interest on the assets
should be evaluated independently of
similar security ratings assigned to
other kinds of securities.
4
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of certificates will be issued pursuant to a pooling and
servicing agreement among Oakwood Mortgage, as seller of the certificates,
Oakwood Acceptance or another servicer, as the Servicer, and the trustee named
in the prospectus supplement (the "Trustee"). A copy of the form of the pooling
and servicing agreement, together with standard terms, 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 pooling and
servicing agreement relating to a series that differ materially from the form of
the pooling and servicing agreement filed as an exhibit to the Registration
Statement.
Oakwood Mortgage may sell to investors one or more classes of a series
of certificates in transactions not 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 a
nationally-recognized statistical securities 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., and Duff & Phelps
Credit Rating Co. (each, a "Rating Agency"). The following summaries describe
provisions common to each series of certificates. The summaries do not purport
to be complete. When particular provisions or terms used in the pooling and
servicing agreement are referred to, the actual provisions are incorporated by
reference.
The certificates of each series will represent interests in a separate
trust created pursuant to the related pooling and servicing 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 the assets transferred under the pooling and
servicing agreement from time to time, including, as described in the prospectus
supplement:
o assets as from time to time are identified as deposited in any
account held for the benefit of the certificateholders, including
the "Certificate Account," which is an account maintained by the
Servicer, into which the Servicer must deposit collections in
respect of the related assets; and the "Distribution Account,"
which is the account maintained by the Trustee from which
distributions are made on the certificates;
o manufactured housing installment sales contracts and mortgage
loans, including all rights to receive payments due on and after
the "Cut-off Date," which is the date specified in the prospectus
supplement as the date after which scheduled principal and interest
payments on the assets, and on and after which unscheduled
collections of principal on the related contracts and mortgage
loans;
o with respect to the assets;
o the standard hazard insurance policies maintained with respect
to the underlying manufactured homes and mortgaged properties,
o the related pool insurance policy, if any,
o the related special hazard insurance policy, if any,
o the related obligor bankruptcy insurance, if any,
o any primary mortgage insurance policies, FHA insurance and VA
guarantees,
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o the buy-down fund, if any, and
o the "GPM fund", which is a custodial Eligible Account
established by the Servicer for any GPM Loan, to be funded with
an amount which, together with projected reinvestment earnings
at a rate specified in the prospectus supplement, will provide
funds sufficient to support the payments required on such GPM
Loan on a level debt service basis, and a "GPM Loan" means a
"graduated payment" asset the terms of which provide for
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, if any;
o any reserve fund established and funded to make payments on the
certificates to the extent funds are not otherwise available, if
any;
o 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;
o a Pre-Funding Account, if any;
o other property as may be specified in the related prospectus
supplement; and
o proceeds of any of the foregoing, as specified in the prospectus
supplement.
The pooling and servicing agreement for a series will provide that
certificates may be issued up to the aggregate principal amount authorized by
Oakwood Mortgage. Each series will consist of one or more classes of
certificates and may include:
o one or more classes of senior certificates entitled to preferential
rights to distributions of principal and interest;
o one or more classes of subordinated certificates;
o one or more "Strip Classes" of certificates, which represent 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 fictional principal balance that
may be assigned to a certificate or class that is used solely for
purposes of determining the amount of interest distributions and
certain other rights (a "Notional Principal Amount");
o one or more classes of certificates representing an interest only
in specified payments of principal on the assets ("Principal Only
Classes");
o one or more classes of certificates upon which interest will accrue
but will not be distributed until 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
o one or more classes of certificates entitled to fixed principal
payments under identified 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. A "Residual Certificate" is a
certificate evidencing a "residual interest" in a REMIC. A "REMIC" is a "real
estate mortgage investment conduit" as defined in the Internal Revenue Code.
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The certificates of each series will be issued in fully-registered
certificated or book-entry form in authorized denominations for each class as
specified in the 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 the
certificate is registered as of the close of business on the Record Date for the
distribution at the address appearing in the Certificate Register, except that
the final distributions in retirement of each certificated certificate will be
made only upon presentation and surrender of the certificate at the corporate
trust office of the Trustee. The "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, and
noting the class and denomination of each certificate of the series held by each
holder.
BOOK-ENTRY PROCEDURES
The prospectus supplement for a series may specify that some classes of
certificates initially will be issued as book-entry certificates in the
authorized denominations specified in the prospectus supplement. Each book-entry
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 (together with any successor or other depository
selected by Oakwood Mortgage, "DTC"). 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, including
their representatives, own DTC. "Participants" means the participating
organizations that utilize the services of DTC, including securities brokers and
dealers, banks and trust companies and clearing corporations and may include
certain other organizations. 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 DTC 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 a book-entry certificate will be reflected
in the records of DTC, or of a participating firm that acts as agent for the
Financial Intermediary whose interest in turn will be reflected in the records
of DTC, 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 DTC 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 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 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 other
organizations. Indirect access to the DTC system is also available to others
like banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Depository Participant, either directly or
indirectly ("indirect participants").
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Distributions of principal and interest on the book-entry certificates
will be made to DTC. DTC will be responsible for crediting the amount of these
distributions to the accounts of the applicable Depository Participants in
accordance with DTC's normal procedures. Each Depository Participant will be
responsible for disbursing these 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 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,
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 Participants to transfer the offered certificates, by book-entry
transfer, through DTC for the account of the purchasers of certificates, which
account is maintained with the 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 DTC,
participating organizations, indirect participants and banks, the ability of a
Beneficial Owner of a book-entry certificate to pledge a certificate to persons
or entities that are not Depository Participants, or otherwise to take actions
in respect of a certificate, may be limited due to the lack of a physical
certificate representing the certificate. Issuance of the book-entry
certificates in book-entry form may reduce the liquidity of your 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 book-entry certificates or their
nominees, rather than to DTC or its nominee, only if
o Oakwood Mortgage advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities
as depository with respect to the book-entry certificates and
Oakwood Mortgage is unable to locate a qualified successor within
30 days or
o Oakwood Mortgage, at its option, elects to terminate the book-entry
system maintained through DTC.
Upon the occurrence of either event described in the preceding sentence, the
Trustee is required to notify DTC, which in turn will notify all Beneficial
Owners of book-entry certificates through Depository Participants, of the
availability of certificated certificates. Upon surrender of DTC 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, they 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 Oakwood Mortgage and the Trustee that, unless and until
the offered certificates are issued in certificated, fully-registered form under
the circumstances described, DTC will take any action permitted to be taken by a
certificateholder under the pooling and servicing agreement only at the
direction of one or more Participants to whose DTC accounts the certificates are
credited. DTC has advised Oakwood Mortgage that DTC will take this action with
respect to any percentage interests of the offered certificates only at the
direction of and on behalf of Participants with respect to percentage
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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 Oakwood Mortgage, Oakwood Acceptance, 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 DTC, or for maintaining, supervising or reviewing any
records relating to beneficial ownership interests.
ALLOCATION OF COLLECTIONS FROM THE ASSETS
The prospectus supplement will specify the Available Distribution Amount
for a series, which in general will be equal to the amount of principal and
interest paid on the assets with respect to the due date in the current month
and the amount of principal prepaid during the preceding month, 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 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 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 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. Classes of
certificates may have a Notional Principal Amount. Interest distributions on the
certificates generally will include interest accrued through the accounting date
preceding the Distribution Date . 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 the amount of interest
due on the assets exceeds the amount of interest collected or advanced, which
may be due to Due Date Interest Shortfall or Soldiers' and Sailors' Shortfall on
the assets. "Soldiers' and Sailors' Shortfall" means a shortfall in respect of
an asset resulting from application of the federal Soldiers' and Sailors' Civil
Relief Act of 1940, as amended. 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.
"Realized Loss" means
o 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 the unpaid principal balance of the
liquidated loan, plus accrued and unpaid interest on such liquidated
loan, plus amounts
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reimbursable to the Servicer for previously unreimbursed Servicing
Advances, minus net liquidation proceeds in respect of the liquidated
loan or
o the amount of any principal cramdown in connection with any asset
that was the subject of a principal cramdown in bankruptcy during the
the calendar month immediately preceding the month in which the
related Distribution Date occurs (a "Prepayment Period") preceding a
Distribution Date. The amount of any principal cramdown is the amount
by which the unpaid principal balance of the asset exceeds, as
applicable, depending upon the type of principal cramdown that was
applied to the asset, either the portion of the unpaid principal
balance that remains secured by the manufactured home or mortgaged
property after taking the principal cramdown into account or the
unpaid principal balance after taking into account the permanent
forgiveness of debt ordered by the bankruptcy court in connection
with the principal cramdown.
"Due Date Interest Shortfall" means, for any asset that is prepaid in
full or liquidated on other than a Due Date for the asset, the difference
between the amount of interest that would have accrued on the asset through the
day preceding the first Due Date after the 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 the amount of interest that actually accrued on the asset prior to the
prepayment in full or liquidation, net of an allocable portion of any other
administrative fees payable from interest payments on the asset during the
period commencing on the second day of the calendar month preceding the month in
which the Distribution Date occurs and ending on the first day of the month in
which the Distribution Date occurs (each, a "Collection Period").
Principal and interest distributable on a class of certificates may be
distributed among the certificates of a class pro rata in the proportion that
the outstanding principal or notional amount of each certificate of the class
bears to the aggregate outstanding principal or notional amount of all
certificates of the class, or in another manner as may be detailed in the
related prospectus supplement. Interest distributable on a class of certificates
will be allocated among the certificates of the class pro rata in the proportion
that the outstanding principal or notional amount of each certificate of the
class bears to the aggregate outstanding principal or notional amount of all
certificates of the class, or in another 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, as defined in the prospectus
supplement.
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 Oakwood Mortgage, the
Servicer or another party as specified in the related prospectus supplement by
purchase of the outstanding certificates of the series. The right so to redeem
the certificates of a series may be conditioned upon
o the passage of a date specified in the prospectus supplement,
o 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, and
o 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.
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"Scheduled Principal Balance" means, as of any date of determination
with respect to any contract, Repo Property, mortgage loan or REO Property, the
principal balance as of the Cut-off Date of the asset, or of the related asset,
in the case of a Repo Property or REO Property, minus the sum of
o the principal components of the scheduled monthly payments of
principal and interest due on the asset (the "Monthly Payment"), or
on the related asset, in the case of a Repo Property or REO Property,
after the Cut-off Date and on or before the date of determination,
regardless of whether the Monthly Payments were received from the
obligor, plus
o all principal prepayments received by the Servicer on the asset, or
on the related asset, 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 Oakwood Acceptance or
another party to repurchase the asset, on or after the Cut-off Date
and on or prior to the date of determination, plus
o all Realized Losses incurred on the asset, or the related asset, in
the case of a Repo Property or REO Property, on or after the Cut-off
Date and on or prior to the date of determination.
The percentage balances of the aggregate Scheduled Principal Balance of
the assets and the aggregate certificate principal balance of a class in order
to trigger optional redemption or termination 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 certificate
principal balance, plus accrued and unpaid interest thereon at the applicable
Pass-Through Rate, less any unreimbursed principal or interest advances or other
advances by the Servicer, and unrealized losses allocable to the certificates.
ACCORDINGLY, IT IS POSSIBLE THAT YOUR CERTIFICATES COULD BE REDEEMED AT A PRICE
LESS THAN THEIR OUTSTANDING PRINCIPAL AMOUNT PLUS ACCRUED AND UNPAID INTEREST.
Notice of the redemption of the certificates will be given to certificateholders
as provided in the related pooling and servicing agreement.
In addition, Oakwood Mortgage 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 the
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 the class or classes at the closing date.
The termination price for a trust will be specified in the related
pooling and servicing agreement.
The fair market value of the assets of a trust as determined for
purposes of a terminating purchase shall be deemed to include accrued interest
through the accounting date preceding the date of the 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 valuation shall be furnished
by the Servicer to the certificateholders upon request.
"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 mortgage loan. "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
contract.
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On the date set for termination of a trust, the termination price shall
be distributed 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 second to the certificateholders in accordance
with the payment priorities that apply on each Distribution Date as described in
the related prospectus supplement. "Advances" means any P&I Advance or Servicing
Advance.
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
o the average life of the related certificates and each class thereof
issued by the related trust;
o the timing of the final distribution for each class, and whether the
final distribution occurs prior to its Final Scheduled Distribution
Date; and
o the effective yield on each class of 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
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 may be prepaid in full or in part without
penalty. Oakwood Mortgage 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
experience higher prepayment rates than if prevailing interest rates remain at
or above the interest rates borne by the 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 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 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.
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.
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YIELD CONSIDERATIONS
Distributions of interest on the certificates generally will include
interest accrued through the accounting date, which is, for any Distribution
Date, the last day of the preceding calendar month for certificates that pay
interest at a fixed rate, and the 14th day of the same calendar month for
certificate that pay at a floating rate. Your effective yield will be lower than
the yield otherwise produced by the applicable Pass-Through Rate and purchase
price for your certificates, because distributions to you will not be made until
the Distribution Date following the accounting date, which causes a delay in
distributions.
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", which is the price at which a certificate will yield its coupon, after
giving effect to any payment delay, calculates the anticipated yield to maturity
of a 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 a 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.
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" IN THIS PROSPECTUS.
The yield on your certificates also will be affected by Realized Losses
or shortfalls allocated to your certificates. If Realized Losses and shortfalls
are not absorbed by certificates subordinated to your certificates or other
items of credit support, like a reserve fund, then you may have losses on your
certificates. Losses on your certificates will, in turn, reduce distributions to
you and reduce your yield.
THE TRUSTS
GENERAL
A trust estate may include contracts and mortgage loans. Each trust
estate also may include
o assets as from time to time are identified as deposited in accounts
held for the benefit of the certificateholders, including the
Certificate Account and the Distribution Account;
o any manufactured home or "Real Property" --- which is a parcel of
real estate securing a Land Secured Contract --- which initially
secured a related contract and which is acquired by repossession,
foreclosure or otherwise;
o any property which initially secured a related mortgage loan and
which is acquired by foreclosure or deed in lieu of foreclosure or
otherwise;
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o any related reserve fund;
o any related Pre-Funding Account;
o 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 the trust
estate that is required to be maintained pursuant to the related
pooling and servicing agreement; and
o 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 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.
Oakwood Mortgage will acquire the underlying contracts and mortgage
loans from Oakwood Acceptance, which may have originated the contracts and
mortgage loans or may have acquired them in the open market or in privately
negotiated transactions. 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 this information is not fully
provided in the related prospectus supplement, in a Current Report on Form 8-K
to be filed with the SEC within fifteen days after the initial issuance of the
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.
Whenever in this prospectus terms like "asset pool," "trust estate,"
"pooling and servicing agreement" or "Pass-Through Rate" are used, those terms
apply, unless the context otherwise indicates, to one specific asset pool, trust
estate, pooling and servicing agreement and the Pass-Through Rates applicable to
the related series of certificates.
For each series of certificates, Oakwood Mortgage 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, as servicer (the "Servicer"), the parent of Oakwood
Mortgage, will service the contracts and mortgage loans and administer the
certificates, either exclusively or through other servicing institutions. With
respect to those contracts and mortgage loans serviced by the Servicer through a
subservicer, the Servicer will remain liable for its servicing obligations under
the pooling and servicing agreement as if the Servicer alone were servicing the
contracts and mortgage loans. The Servicer may delegate computational, data
processing, collection and foreclosure, including repossession, duties under any
pooling and servicing agreement without appointing a subservicer and without any
notice to or consent from Oakwood Mortgage or the Trustee, provided that the
Servicer remains fully responsible for the performance of these duties. SEE
"SALE AND SERVICING OF THE CONTRACTS AND MORTGAGE LOANS -- SERVICING" In THIS
PROSPECTUS.
TYPES OF ASSETS
The assets included in the trust for a series may contain various
payment provisions. The assets may consist of
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o "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;
o "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;
o "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 a period after origination of the assets;
o "Increasing Payment Loans," which provide for monthly payments to
increase over the life of the loan, resulting in a shorter term;
o "Interest Reduction Loans," which provide for the one-time reduction
of the interest rate payable thereon;
o "GEM loans," which provide for
o Monthly Payments during the first year after origination that
are at least sufficient to pay interest due thereon, and
o an increase in Monthly Payments in subsequent years at a
predetermined rate resulting in full repayment over a shorter
term than the initial amortization terms of the assets;
o "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 their
unpaid principal balances, and which unpaid interest will be added to
the principal balances of the assets and will be paid, together with
interest, in later years;
o "step-up rate loans," which provide for asset rates that increase
over time;
o "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 an amortization period, but
require all remaining principal to be paid at the end of a shorter
period;
o "Convertible Loans," which are Adjustable Rate Assets that have
provisions pursuant to which the related obligors generally may
exercise an option to convert the adjustable asset rate to a fixed
asset rate; and
o "Bi-Weekly Loans," which provide for obligor payments to be made on a
bi-weekly basis.
"DUE-ON-SALE" CLAUSES
A contract or the mortgage note or the mortgage, deed of trust or other
instrument creating a first lien on a first priority ownership interest in or
estate in fee simple in real property securing the mortgage note used in
originating a conventional mortgage loan secured by a first lien on a one- to
four-family residential real property included in your trust 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.
Enforcement of a "due-on-sale" clause applicable to a contract or mortgage loan
will have the same effect on certificates backed by a contract or mortgage loan
as a prepayment in full of the contract or mortgage loan. SEE "CERTAIN LEGAL
ASPECTS OF CONTRACTS AND MORTGAGE LOANS" IN THIS PROSPECTUS.
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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 the certificates. SEE "MATURITY AND
PREPAYMENT CONSIDERATIONS" AND "YIELD CONSIDERATIONS" IN THIS PROSPECTUS 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 the
series may be expected to be longer than would have been the case had the assets
contained "due-on-sale" clauses and had the Servicer enforced these 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 in the next paragraph. 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 the mortgage loan under any applicable
"due-on-sale" clause to the extent, under the circumstances, and in the manner
in which the Servicer enforces the 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
these 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 a "due-on-sale" clause, the
Servicer will be required to enter into an assumption or modification agreement
with the person to whom the property has been conveyed or is proposed to be
conveyed, pursuant to which this 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 the
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 some classes of certificates of the series
anticipated to be outstanding on 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 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 table.
THE CONTRACTS
The contracts supporting a series of certificates will consist of
manufactured housing installment sales contracts originated by Oakwood
Acceptance, which may have been originated in the name of Oakwood Mobile or
another manufactured housing dealer with funds provided by Oakwood Acceptance,
or originated by other originators not affiliated with Oakwood Acceptance, 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 or at an asset rate which steps up on a
particular date.
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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 secured by mortgages or deeds of
trust or other similar security instruments creating first liens on one-to
four-family residential 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. Oakwood Mortgage expects that the mortgage loans will have been
originated by FHA-approved mortgagees or Fannie Mae/Freddie Mac-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 or at an asset rate which steps up on a particular date, 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 interest collected on the underlying mortgage loans.
INFORMATION IN PROSPECTUS SUPPLEMENT REGARDING CONTRACTS AND MORTGAGE
LOANS
With respect to the assets expected to be contained in an asset pool,
the prospectus supplement will specify, to the extent known,
o the range of dates of origination of the assets;
o the range of asset rates on the contracts and mortgage loans and the
weighted average asset rate as of the Cut-off Date, and in the case
of Adjustable Rate Assets, the range of initial adjustable rates, the
index, if any, used to determine the adjustable rate and the range of
maximum permitted adjustable rates, if any, and the range of
then-current adjustable mortgage rates
o the range of contract loan-to-value ratios, which means, 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 the 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 as to
each other contract, the ratio, expressed as a percentage, of the
principal amount of the 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;
and the range of mortgage loan-to-value ratios, which is the ratio,
expressed as percentage, of the principal amount of a mortgage loan
at the time of determination, to either 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 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;
o the minimum and maximum outstanding principal balances of the assets
as of the Cut-off Date and the weighted average outstanding principal
balance of the assets as of the Cut-off Date;
o the range of original terms to maturity of the assets, the range of
remaining terms to maturity of the assets and the last maturity date
of the assets;
o the geographic distribution of the underlying manufactured homes and
mortgaged properties; and
o the range of original principal balances of the assets.
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SUBSTITUTION OF CONTRACTS OR MORTGAGE LOANS
Oakwood Mortgage 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 the series. In addition, if there is
a breach of any representation or warranty made as to an asset by Oakwood
Mortgage or Oakwood Acceptance, or there is defective or incomplete
documentation with respect to an asset, which breach, defect or incompleteness
is not cured within 90 days after the breaching party's receipt of notice of the
breach, defect or incompleteness, the breaching party generally must repurchase
the affected asset for its Repurchase Price, but generally may, as an
alternative to 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. The "Repurchase Price" for an asset will equal
the unpaid principal balance of the asset, plus unpaid interest thereon at the
applicable asset rate through the end of the month of purchase. In general, any
substitute asset must, on the date of substitution:
o have an unpaid principal balance not greater than --- and not more
than $10,000 less than --- the unpaid principal balance of the
replaced asset;
o have an asset rate not less than, and not more than one percentage
point in excess of, the asset rate of the replaced asset;
o have a net rate equal to the net rate of the replaced asset;
o have a remaining term to maturity not greater than --- and not more
than one year less than --- that of the replaced asset; and
o comply with each representation and warranty relating to the replaced
asset.
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 this date, 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 the date of substitution. 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
o have a minimum lifetime asset rate that is not less than the minimum
lifetime asset rate on the replaced Adjustable Rate Asset;
o have a maximum lifetime asset rate that is not less than the maximum
lifetime asset rate on the replaced Adjustable Rate Asset;
o 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;
o have a Gross Margin not less than the Gross Margin of the replaced
Adjustable Rate Asset;
o have a Periodic Rate Cap equal to the Periodic Rate Cap on the
replaced Adjustable Rate Asset;
o 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
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o 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.
"Gross Margin" means, for any Adjustable Rate Asset, the fixed percentage per
annum specified in the related contract or mortgage note that is added to the
index on each interest adjustment date to determine its new asset rate.
"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. "Mortgage loan documents" has the meaning assigned 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 (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,
the 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. The "Distribution Date" will be the 15th day of each month,
or the next business day if the 15th day is not a business day, commencing in
the month following the closing date.
During any Pre-Funding Period, Oakwood Mortgage 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 the Pre-Funding
Period. Additional contracts or mortgage loans will be required to satisfy
eligibility criteria more fully set forth in the related prospectus supplement.
This eligibility criteria will be consistent with the eligibility criteria of
the contracts or mortgage loans included in the trust as of the closing date,
but exceptions may expressly be stated in the prospectus supplement.
Use of a Pre-Funding Account with respect to any issuance of
certificates will be conditioned upon the following general conditions:
o the Pre-Funding Period will not exceed three months from the related
closing date,
o the additional assets to be acquired during the Pre-Funding Period
will satisfy 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,
o the Pre-Funded Amount will be not exceed 25% of the principal amount
of the certificates issued pursuant to a particular offering,
o 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
o 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 prepayment of principal would
have an adverse effect on the yield to maturity of certificates purchased at a
premium, and
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would expose certificateholders to the risk that alternative investments of
equivalent value may not be available at a later time.
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 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 the series. 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 the 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 the series in the manner described in the
related prospectus supplement.
RESERVE FUNDS
If so stated in the prospectus supplement for a series, Oakwood Mortgage
will establish one or more reserve funds, 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. Oakwood Mortgage may
fund a reserve fund by depositing cash, certificates of deposit or letters of
credit on the closing date, or a reserve fund may be funded by the Trustee's
deposit 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.
Oakwood Mortgage may have rights on any Distribution Date to cause the Trustee
to make withdrawals from the reserve fund for a series and to pay these amounts
in accordance with the instructions of Oakwood Mortgage to the extent that funds
are no longer required to be maintained for the certificateholders.
INSURANCE
The trust estate for any series may be supported by insurance policies
or alternate forms of credit enhancement.
HAZARD INSURANCE
The following descriptions are general and do not purport to be
complete. In general, coverage under standard hazard insurance policies and
special hazard insurance policies varies among insurers.
STANDARD HAZARD INSURANCE POLICIES. The obligor of each asset is
required to maintain a hazard insurance policy with respect to the related
manufactured home or mortgaged property. The insurers under standard hazard
insurance policies are selected by the related obligors and are generally not
required to meet any credit rating criteria. With respect to contracts, each of
these policies 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 the 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
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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, the 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 policies typically will not cover any
physical damage resulting from war, revolution, governmental actions, floods and
other water-related causes, earth movement, earthquakes, landslides, mudflows,
nuclear reaction, wet or dry rot, vermin, rodents, insects or domestic animals,
theft and, in some cases, vandalism. The foregoing list is merely indicative of
some uninsured risks and is not intended to be all-inclusive. When a
manufactured home or mortgaged property is located 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 the manufactured home or mortgaged property, to the extent such
coverage is available.
To the extent permitted by applicable law and if so specified in the
related prospectus supplement, the Servicer may require obligors on assets
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.
Each standard hazard insurance policy must provide coverage in an amount
at least equal to the lesser of the maximum insurable value of the manufactured
home or Mortgage Property or 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.
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, sturctures 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, this clause will
provide that the insurer's liability in the event of partial loss will not
exceed the lesser of the actual cash value of the dwellings, structures and
other improvements damaged or destroyed or the 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.
Each standard hazard insurance policy 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 may pay these premiums out of its own
funds, and may add these premium to the obligor's obligation as provided by the
contract or mortgage loan, but may not add these 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 this
blanket policy and shall pay any deductible amount with respect to claims under
this blanket policy.
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If the Servicer repossesses a manufactured home or forecloses on a
mortgaged property on behalf of the Trustee, the Servicer shall either maintain
at its expense hazard insurance with respect to the manufactured home or
mortgaged property, or indemnify the Trustee against any damage to the
manufactured home or mortgaged property prior to resale, foreclosure sale, or
other disposition.
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 the losses are not covered by the
special hazard insurance policy for a series, affect payments to holders of
certificates of the series.
SPECIAL HAZARD INSURANCE POLICY. To the extent provided in the related
prospectus supplement, a special hazard insurance policy will be obtained from
the insurer or insurers specified in the related prospectus supplement. Subject
to limitations described in the next sentence, a special hazard insurance policy
will insure against loss by reason of damage to manufactured homes or mortgaged
properties underlying defaulted assets caused by 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 the contracts or mortgage loans and loss from
partial damage to the manufactured homes or mortgaged properties securing these
defaulted assets 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, extreme governmental actions, nuclear reaction and 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 asset and this
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 the cost of repair of the property or upon transfer of the property to the
special hazard insurer, the unpaid principal amount of the asset at the time of
the acquisition of the property, plus accrued interest to the date of claim
settlement, excluding late charges and penalty interest, and other limited
expenses incurred in respect of the property. No claim may be validly presented
under a special hazard insurance policy unless the standard hazard insurance
policy covering the manufactured home or mortgaged property securing the asset
has been kept in force and other reimbursable protection, preservation and
foreclosure expenses have been paid and 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 an
asset, plus some 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 the 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 the same
amount.
The pooling and servicing agreement with respect to a series will, with
limited exception, require the Servicer to maintain any special hazard insurance
policy for the series in full force and effect. 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 the claims. SEE "SALE AND
SERVICING OF THE MORTGAGE LOANS -- MAINTENANCe OF INSURANCE POLICIES AND OTHER
SERVICING PROCEDURES -- PRESENTATION OF CLAIMS" IN THIS PROSPECTUS.
To the extent provided in the related prospectus supplement, in lieu 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 Rating Agency. This 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.
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Special hazard losses may also be allocated to the certificates of a series on
the terms and in light of the conditions and limitations set forth in the
related prospectus supplement.
A special hazard insurance policy, if any, securing a series may insure
against losses on assets 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 Oakwood Mortgage 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 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
Contracts and mortgage loans underlying a series may, to the extent
described in the related prospectus supplement, be supported by primary
insurance, FHA insurance, VA guarantees or one or more pool insurance policies
or any combination, whereby the insurer would, subject to the conditions of its
policy, be obligated to pay all or a portion of the principal balance of the
asset if the obligor failed to do so.
Mortgage loans underlying a series of certificates may, to the extent
described in the related prospectus supplement, be covered by primary mortgage
insurance policies. 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 the
mortgage loan is reduced to 80% of the 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 the mortgage loan has
declined to 80% or less based upon the current fair market value of the related
mortgaged property.
Other mortgage loans may also be covered by primary mortgage insurance
policies. Primary mortgage insurance policies may, to the extent required by the
related prospectus supplement, and subject to their provisions and to conditions
and exclusions described in the next paragraph, provide full coverage against
any loss sustained by reason of nonpayments by the related mortgagor.
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
losses sustained in the event of a personal bankruptcy of the mortgagor under a
mortgage loan These losses may be covered to the extent provided by the obligor
bankruptcy insurance, if any, for the series. . SEE "CERTAIN LEGAL ASPECTS OF
CONTRACTS AND MORTGAGE LOANS -- THE MORTGAGE LOANS -- ANTI-DEFICIENCY
LEGISLATION AND OTHER LIMITATIONS ON LENDERS" IN THIS PROSPECTUS.
The credit insurance policies will not provide coverage against hazard
losses. Some 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" IN THIS PROSPECTUS.
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 these losses are not covered by the pool
insurance policy for the related series of certificates, if any, these losses
would affect payments to holders of related certificates.
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A more complete description of any pool insurance policy or the primary
mortgage insurance for the assets of a particular series will be provided in the
prospectus supplement, where applicable.
FHA INSURANCE AND VA GUARANTEES ON CONTRACTS
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
o 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;
o 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;
o costs paid to a dealer or other third party to repossess or
preserve the related manufactured home;
o the amount of any sales commission paid to a dealer or other third
party for the resale of the property;
o with respect to any "Land Secured Contract" --- which is a contract
secured at origination by a parcel of real estate in addition to a
manufactured home --- property taxes, special assessments and other
similar charges and hazard insurance premiums, prorated to the date
of disposition of the property;
o uncollected court costs;
o legal fees, not to exceed $1,000; and
o expenses for recording the assignment of the lien on the collateral
to the United States, in each case in light of applicable caps as
set by regulations governing the FHA from time to time.
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 Acceptance, 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
o the lesser of $20,000 and 40% of the principal amount of the
contract and
o the maximum amount of guaranty entitlement available to the obligor
veteran, which may range from $20,000 to zero.
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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 these 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.
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, Oakwood Mortgage 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.
Oakwood Mortgage may also assign or undertake to deliver other assets to any
trust by other means as may be specified in the related prospectus supplement.
These other assets may consist of additional contracts or mortgage loans,
letters of credit or other Eligible Investments.
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
"Eligible Investments", which include
o obligations of the United States or any agency thereof provided
these obligations are backed by the full faith and credit of the
United States;
o within 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;
o commercial paper which is then rated in the commercial paper rating
category required to support the then applicable ratings assigned
to that series;
o 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 a 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;
o 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 FDIC;
o 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;
o repurchase agreements relating to United States government
securities; and
o money market mutual funds investing primarily in the obligations of
the United States; PROVIDED that these mutual funds are rated in a
rating category sufficient to support the initial ratings assigned
to that series.
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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 the series. Any income, gain or loss from
these investments for a series will be credited or charged to the appropriate
fund or account for the 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 pooling and servicing 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.
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. 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
SEC 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 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 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 SEC as an
exhibit to a Current Report on Form 8-K within 15 days of issuance of the
certificates.
ALTERNATE CREDIT ENHANCEMENT
From time to time with respect to a series of certificates, Oakwood
Mortgage or the Servicer may obtain or cause to be obtained further or other
liquidity enhancement, insurance policies, guarantees, letters of credit, or
surety bonds to provide for the enhancement of the credit rating of the
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 of
these items or in addition to these items, a description will be included in the
prospectus supplement.
UNDERWRITING POLICIES
OAKWOOD'S CONTRACT UNDERWRITING GUIDELINES
Contracts included in an asset pool will have been underwritten by
Oakwood Acceptance. These contracts may have been originated in the name of
Oakwood Mobile Homes, Inc., 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 Acceptance, or may have been originated directly
in Oakwood Acceptance's name. The following is a description of the underwriting
practices generally followed by Oakwood Acceptance in connection with the
origination of contracts funded by Oakwood Acceptance.
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A customer desiring to obtain financing for the purchase of a
manufactured home through Oakwood Acceptance must complete a loan application
form at a participating sales center. Loan applications are forwarded
electronically or by facsimile by sales centers to Oakwood Acceptance's credit
department for consideration.
Upon receipt of a loan application, Oakwood Acceptance evaluates the
ability of the loan applicant to make the prospective required monthly payments
and to pay related charges. Oakwood Acceptance utilizes a credit scoring system
to evaluate credit applicants. Oakwood Acceptance's underwriting guidelines
require that each applicant's credit history, residence history, employment
history and debt-to-income ratios be examined. Oakwood Acceptance's credit
officers review the information relating to these factors provided by the
applicant on his loan application and obtain credit reports and contact
employers and other references to verify credit, residence and
employment-related information. Oakwood Acceptance'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 this applicant. An applicant's
overall credit score is the sum of his credit scores in various areas of the
credit review. Each credit officer is authorized to approve applicants within
his lending authority who are assigned overall credit scores and credit report
scores above a specified minimum score, who have acceptable debt-to-income
ratios and 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, his
total monthly fixed debt obligations, including the monthly payment on the
contract applied for, monthly payments to acquire the land on which the home is
located or rental fees and hazard insurance premiums relating to the home
(collectively, the "Home Payments"), should not exceed 50% of his gross monthly
income and the proposed Home Payments should not exceed 35% of his gross monthly
income, however, more stringent standards generally apply to prospective
borrowers with relatively lower monthly incomes or relatively higher
loan-to-value ratios. Oakwood Mortgage 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 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 mortgage loans. 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 mortgage loans.
Loan applicants who do not meet the objective criteria may be approved,
on a case-by-case basis, by higher-level management in Oakwood Acceptance'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
Acceptance requires a down payment in the form of cash, the trade-in equity in a
previously owned manufactured home, 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 the lesser of 80% of such estimated value and its
appraised tax value. Generally, Oakwood Acceptance 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, $499 for purchases of repossessed single-section homes, $999
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
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 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
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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 Acceptance are written on
forms provided by Oakwood Acceptance. 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.
GENERAL UNDERWRITING STANDARDS FOR MORTGAGE LOANS
Mortgage loans underwritten by Oakwood Acceptance will be underwritten
substantially according to the underwriting guidelines Oakwood Acceptance uses
to underwrite contracts. 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 Acceptance, Oakwood Mortgage expects that the originator will have
underwritten and originated the 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 a land-only 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 properties.
SALE AND SERVICING OF CONTRACTS AND MORTGAGE LOANS
ASSIGNMENT OF CONTRACTS AND MORTGAGE LOANS
Pursuant to the applicable pooling and servicing agreement, Oakwood
Mortgage will cause the assets comprising the trust estate to be sold, assigned
and transferred to the Trustee, together with all principal and interest
payments due on the assets after the date specified in the related prospectus
supplement (the "Cut-off Date") and all prepayments of principal collected on or
after the Cut-off Date. In exchange for the assets assigned to the Trustee, the
Trustee will deliver certificates of the related series in authorized
denominations, registered in the names as Oakwood Mortgage may request,
representing the beneficial ownership interest in the related trust estate, to
Oakwood Mortgage or its designee. Each asset included in a trust estate will be
identified in an asset schedule appearing as an exhibit to the related pooling
and servicing agreement. The asset schedule will contain information as to the
principal balance of each asset as of the Cut-off Date and its asset rate,
original principal balance and other information concerning each asset.
CONVEYANCE OF CONTRACTS.
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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 Oakwood Acceptance's interest in the related Real
Property. Any contract discovered not to agree with the 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
Oakwood Acceptance at the related Repurchase Price or replaced with another
contract if the discrepancy, incompleteness or defect is not cured within 90
days after notice of the discrepancy, incompleteness or defect is delivered to
Oakwood Acceptance, 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, Oakwood Acceptance may deposit cash in the Certificate Account in
an amount sufficient to offset the discrepancy. "Contract documents" has the
meaning identified in the pooling and servicing agreement.
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" IN THIS
PROSPECTUS.
CONVEYANCE OF MORTGAGE LOANS.
On or prior to the date of conveyance of the mortgage loans to the
Trustee, Oakwood Mortgage 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 endorsed in blank or to the order of the
Trustee, an original or a certified copy of the related mortgage, evidence of
title insurance, and evidence of primary mortgage insurance, if any. Following
the closing date Oakwood Mortgage will, as to each mortgage loan, deliver to the
Trustee or a Custodian acting on its behalf an assignment of the 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. Within one year after the closing date for a series, Oakwood
Mortgage 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, Oakwood
Mortgage may deliver or cause to be delivered to the Trustee an opinion of local
counsel to the effect that recording is not necessary to protect the right,
title and interest of the Trustee in the related mortgage loans. In addition,
Oakwood Acceptance 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, Oakwood
Acceptance 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 the
files are released to the Servicer or a subservicer for servicing purposes in
accordance with the terms of the related pooling and servicing agreement.
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The Trustee or the Custodian will review the trustee mortgage loan files
relating to a series. If any document required to be included in a trustee
mortgage loan file is missing or is found to be defective in any material
respect, and Oakwood Acceptance does not cure the defect within 90 days after
its receipt of notice of the missing document or document defect, Oakwood
Acceptance will be required to repurchase the mortgage loan at the related
Repurchase Price or replace the mortgage loan with a substitute mortgage loan as
described under "THE TRUSTS -- SUBSTITUTION OF CONTRACTS OR MORTGAGE LOANS" IN
THIs PROSPECTUS. 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
Oakwood Mortgage will make representations and warranties with respect
to the assets for each series. Oakwood Mortgage make representations and
warranties regarding the assets as described in the prospectus supplement. In
addition, Oakwood Acceptance 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 Oakwood Mortgage,
including representations and warranties as to the accuracy in all material
respects of information furnished to Oakwood Mortgage and the Trustee in respect
of each contract and mortgage loan.
In addition, Oakwood Acceptance will have represented, among other
things, that
o immediately prior to the transfer and assignment of the contracts
and mortgage loans to Oakwood Mortgage, Oakwood Acceptance 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
Oakwood Acceptance;
o as of the date of transfer, the contracts and mortgage loans are
subject to no offsets, defenses or counterclaims;
o 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;
o as of the date of transfer, each contract creates a valid first
lien on the related manufactured home and the manufactured home is
free of material damage and is in good repair;
o as of the date of 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;
o 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 pooling
and servicing agreement and that all premiums now due on the
insurance have been paid in full;
o a lender's policy of title insurance was issued on the date of the
origination of each mortgage loan and each policy is valid and
remains in full force and effect;
o as of the date of transfer, each mortgage evidences a valid first
lien on the related mortgaged property, subject only to
o the lien of current real property taxes and assessments,
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o covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date
of the recording of the mortgage, 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
o 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 the
property is free of material damage and is in good repair;
o 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 to the availability of flood
insurance under the National Flood Insurance Act of 1968, as
amended, the manufactured home or mortgaged property is covered by
flood insurance, if applicable regulations at the time the contract
or mortgage loan was originated required that flood insurance
coverage be obtained;
o for any trust for which a REMIC election is to be made, each
related asset is a Qualified Mortgage; and
o 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 asset is in full force and effect.
Oakwood Acceptance will make representations and warranties concerning
the assets in order to ensure the accuracy in all material respects of
information furnished to the Trustee in respect of each asset. Upon a breach of
any representation that materially and adversely affects the interests of the
certificateholders in an asset, Oakwood Acceptance will be obligated to cure the
breach in all material respects within 90 days after Oakwood Acceptance's
discovery of or receipt of written notice of the breach or, in the alternative,
either to repurchase the asset from the trust, or to substitute another asset.
In addition, Oakwood Acceptance will be required to indemnify Oakwood Mortgage
and its assignees, including the trust, against losses and damages they incur as
a result of breaches of Oakwood Acceptance's representations and warranties.
Oakwood Acceptance's obligations to repurchase or substitute for an asset
affected by a breach of a representation or warranty and to indemnify Oakwood
Mortgage and its assignees for losses and damages caused by the breach
constitute the sole remedies available to the certificateholders or the Trustee
for a breach of representation by Oakwood Acceptance. "THE TRUSTS --SUBSTITUTION
OF CONTRACTS OR MORTGAGE LOANS."
Neither Oakwood Mortgage nor the Servicer will be obligated to
repurchase or substitute for a contract or mortgage loan if Oakwood Acceptance
defaults on its obligation to repurchase or substitute for the asset, except to
the extent that Oakwood Acceptance is both Servicer and asset seller, and no
assurance can be given that Oakwood Acceptance 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.
The Servicer will be required to perform diligently all services and
duties specified in the related pooling and servicing 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
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manufactured homes and mortgaged properties are located or as otherwise
specified in the pooling and servicing agreement. The Servicer may delegate some
or all of its duties to a subservicer, and in this event the subservicer will
service the assets and the Servicer will monitor the subservicer's performance
and will have the right to remove a subservicer at any time if it considers
removal to be in the best interest of the related certificateholders. The duties
to be performed by the Servicer, directly or through a subservicer, with respect
to a series will include
o collection and remittance of principal and interest payments on the
assets;
o administration of any mortgage escrow accounts;
o collection of insurance claims;
o if necessary, repossession of manufactured homes or foreclosure on
mortgaged properties; and
o if necessary, the obligation to advance funds to the extent
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
asset.
The Servicer shall also provide information on a periodic basis to
Oakwood Mortgage and the Trustee concerning the contracts and mortgage loans,
and shall file required reports with the SEC concerning the trusts as required
by the pooling and servicing agreements.
The Servicer shall keep in force throughout the term of each pooling and
servicing agreement a policy or policies of insurance covering errors and
omissions with respect to its duties under each pooling and servicing agreement,
and a fidelity bond. This policy or policies and fidelity bond shall be in a
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.
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 delinquent tax or charge to the extent it determines that it will be able to
recover the advance from the related obligor or from liquidation proceeds of the
related contract or mortgage loan.
COLLECTION PROCEDURES.
The Servicer, directly or through subservicers, will make reasonable
efforts to collect all payments called for under the contracts or mortgage loans
and, consistently with the pooling and servicing agreement and any insurance
policy or will follow the collection procedures as it follows with respect to
assets serviced by it that are comparable to the contracts or mortgage loans.
The Servicer will repossess, foreclose upon or otherwise convert the
ownership of properties that secure a defaulted asset if no satisfactory
arrangements can be made for collection of delinquent payments. In connection
with repossession, foreclosure or other conversion, the Servicer will follow the
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 that restoration or repossession will increase the proceeds of
liquidation of the related contract or mortgage loan to the certificateholders
after reimbursement to itself for these expenses and that these expenses will be
recoverable to it either through liquidation proceeds or through insurance.
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To the extent permitted by law, the Servicer 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 terminate the Escrow Account. The Servicer will be responsible
for the administration of the Escrow Account and will be obligated to make
advances to this account when a deficiency exists, so long as it determines that
this 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, which will be maintained 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 FDIC, whose
commercial paper or long-term unsecured debt has a rating, as specified in the
related pooling and servicing 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; in the corporate trust
department of the Trustee; or at an institution otherwise acceptable to each
applicable Rating Agency (an "Eligible Account"). Funds in the Certificate
Account will be invested in Eligible Investments that will mature or be subject
to redemption not later than two business days preceding the monthly
Distribution Date. Earnings on amounts deposited into a Certificate Account
shall be credited to the account of the Servicer as servicing compensation in
addition to the monthly fee paid to the Servicer, as specified in the prospectus
supplement, which typically will be a fixed percentage of the pool scheduled
principal balance (the "Servicing Fee").
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. These payments shall include the following:
o all obligor payments in respect of principal, including principal
prepayments, on the contracts and mortgage loans;
o 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;
o all "net liquidation proceeds" received with respect to any
liquidated loan, net of the amount of any liquidation expenses
incurred with respect to the liquidated loan and not previously
reimbursed to the Servicer at the time of liquidation;
o 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 proceeds that are to be
applied to the restoration or repair of the related manufactured
home or mortgaged property or released to the obligor;
o any condemnation awards or settlements which are not released to
obligors in accordance with normal servicing procedures;
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o all amounts received from credit enhancement provided with respect
to a series of certificates;
o all proceeds of any contract or mortgage loan, or property acquired
in respect of any asset, that is repurchased by the related seller
or by a terminating party; and
o all amounts, if any, required to be transferred to the Certificate
Account from a reserve fund pursuant to the pooling and servicing
agreement.
In those cases where a subservicer is servicing assets, the subservicer
will establish and maintain an Eligible Account that will comply with the
standards for the Certificate Account and which is otherwise acceptable to the
Servicer. The subservicer will be 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 subservicer, less
its servicing compensation. On the date specified in the related prospectus
supplement, the subservicer shall remit to the Servicer all funds held in the
sub-servicing account with respect to each related contract or mortgage loan.
The subservicer, 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 and GPM Loan, the Servicer will
deposit into a custodial Eligible Account, which may be interest-bearing,
complying with the requirements for the Certificate Account an amount which,
together with investment earnings thereon, will provide funds sufficient to
support the payments on the Buy-Down Loan or GPM 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 or GPM Loans in which event distributions to the
certificateholders may be affected.
DISTRIBUTIONS ON CERTIFICATES.
On the business day preceding a Distribution Date, the Servicer will
withdraw from the applicable Certificate Account and remit to the Trustee for
deposit into the Distribution Account all scheduled payments of principal and
interest due on the assets during the Collection Period and collected by the
Servicer and all unscheduled collections in respect of principal and interest on
the assets received during the Prepayment Period, in each case to the extent
these collections comprise part of the Available Distribution Amount for the
upcoming Distribution Date. In addition, on the business day preceding each
Distribution 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.
ADVANCES
The Servicer will be required to advance funds to cover delinquent
payments of principal and interest on related contracts and mortgage loans ("P&I
Advances") and 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 the 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 (a "Non-Recoverable Advance"). The Servicer may offset the otherwise
applicable P&I Advance for any business day preceding a Distribution Date by the
amount of Early Payments made with respect to the related Due Date. A "Due Date"
is the date on which a Monthly Payment is due on an asset from the obligor
thereunder, without regard to any grace period. "Early Payment" means, for any
asset and any Due Date on which the principal and interest payments made, not
including any late fees, exceed the sum of the scheduled Monthly Payment plus
any unpaid Monthly Payments for previous Due Dates, if the obligor has not sent
written notice to the Servicer with this payment
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asking that the amount by which this 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 the excess payment, Early Payment is the
amount by which these payments of principal and interest exceed the scheduled
Monthly Payment for the asset plus any unpaid Monthly Payments for previous Due
Dates, but only to the extent that the amount of the excess is an integral
multiple of the amount of the scheduled Monthly Payment due. To the extent that
the amount of this excess exceeds an integral multiple of the scheduled Monthly
Payment, the excess will be a principal prepayment.
The failure of the Servicer to make any required Advances under a
pooling and servicing agreement constitutes a default under the pooling and
servicing 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 pooling and servicing agreement, be required to make Advances, provided
that, in its reasonable discretion, it deems the Advances not to be
Non-Recoverable Advances. Oakwood Mortgage 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 an endorsement to the extent the obligor fails to make the
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 an
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 the 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 the
contract or mortgage loan. If an Advance made by the Servicer or a Trustee or a
pool insurer later proves to be unrecoverable from these sources, 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 the 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 this event, if provided in the
prospectus supplement, for so long as Oakwood Acceptance 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 this
amount does not exceed the Servicer's servicing compensation for the related
month ("Compensating Interest").
MAINTENANCE OF INSURANCE POLICIES AND OTHER SERVICING PROCEDURES
PRESENTATION OF CLAIMS.
The Servicer, on behalf of itself, the Trustee and the
certificateholders, will present claims to the issuer of each insurance policy,
including the FHA and the VA, and will take reasonable steps as are necessary to
permit recovery under the insurance policies respecting defaulted contracts or
mortgage loans that are the subject of bankruptcy proceedings. All collections
by the Servicer under any insurance policy
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are to be deposited into the Certificate Account for the related series and are
subject to withdrawal. With respect to a mortgage loan or contract that is
serviced by a subservicer, the subservicer, 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 that the
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 that these 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 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 this difference plus the aggregate of expenses incurred by
the Servicer in connection with the proceedings.
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 expenses incurred
in connection with the servicing of the contracts and mortgage loans included in
a trust estate. It also is obligated to pay the fees and expenses of the Trustee
and any expenses incurred in enforcing the obligations of any subservicers.
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 a portion of its
expenses incurred in connection with the liquidation of defaulted contracts or
mortgage loans. The related trust will suffer no loss by reason of these
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, this 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 a review of the
activities of the Servicer and any subservicers during the
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preceding calendar year and of the Servicer's performance under the related
pooling and servicing agreement has been made, and to the best of this officer's
knowledge, the Servicer has fulfilled all its obligations under the pooling and
servicing agreement throughout such year, and, to the best of this officer's
knowledge, based on this review, each subservicer has fulfilled its obligations
throughout the related year, or, if there has been a default in the fulfillment
of any obligation, specifying each default known to the officer and the nature
and status thereof. This officer's certificate shall be accompanied by a
statement by a firm of independent public accountants to the effect that the
firm has audited the financial statements of the Servicer for the Servicer's
most recently ended fiscal year and issued its report thereon; 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 any 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 this firm, which shall be attached
to the statement of the 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 the
second clause 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 or, in the sole
discretion of this 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. For
purposes of this statement, the firm may assume conclusively that all pooling
and servicing 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 pooling and servicing agreement which by its terms
specifically states otherwise.
THE POOLING AND SERVICING AGREEMENTS
The following discussion describes the material provisions of each
pooling and servicing agreement, including the standard terms to pooling and
servicing agreement that is incorporated by reference into each pooling and
servicing agreement. When particular provisions or terms used in a pooling and
servicing agreement are referred to, the actual provisions, including
definitions of terms, are incorporated by reference in this discussion.
THE SERVICER
The Servicer shall not resign from the obligations and duties imposed on
it under a pooling and servicing agreement, except 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 upon determination by the Servicer's
Board of Directors that the performance of its duties under the pooling and
servicing agreement are no longer permissible under applicable law. No
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 pooling and servicing 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 of these 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 person shall be protected from liability
for actions or omissions resulting from willful misfeasance, bad faith or gross
negligence in the performance of his duties or by reason of reckless disregard
of his obligations and duties under the pooling and servicing agreement or for
breaches of representations or warranties made by him in the pooling and
servicing 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 a pooling and servicing agreement. The Servicer shall
be under no obligation to appear in, prosecute or defend
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any legal action unless the action is related to its duties under a pooling and
servicing agreement and the action in its opinion does not involve it in any
expense or liability, except as otherwise explicitly provided in the pooling and
servicing agreement; PROVIDED, HOWEVER, that the Servicer may in its discretion
undertake any action that it deems necessary or desirable with respect to a
pooling and servicing agreement if the certificateholders offer to the Servicer
reasonable security or indemnity against the costs, expenses and liabilities.
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 Oakwood Mortgage will be obligated to attempt to appoint a successor
Trustee. Oakwood Mortgage may remove a Trustee if the Trustee ceases to be
eligible to continue as Trustee under the applicable pooling and servicing
agreement or upon the occurrence of bankruptcy or insolvency related events with
respect to the Trustee. The Trustee for a series will also may be removed at any
time by the holders of certificates of the series evidencing at least 51% of the
voting rights of the series, as specified in the related pooling and servicing
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 pooling and servicing
agreement or the Trustee's failure to perform its duties, then the
certificateholders so removing the Trustee shall bear any and all costs and
expenses arising from removal and substitution. Any resignation or removal of
the Trustee and appointment of a successor Trustee will not become effective
until acceptance by Oakwood Mortgage 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 also must 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. A "Qualified Bank" is any domestic bank not
affiliated with Oakwood Acceptance or Oakwood Mortgage 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 the bank's long-term unsecured debt obligations are rated by an additional
Rating Agency, or short-term unsecured debt obligations rated in 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, 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 the bank's commercial paper or short-term
unsecured debt obligations are rated by an additional Rating Agency, or that is
otherwise acceptable to each Rating Agency. Although a Trustee may not be an
affiliate of Oakwood Mortgage or the Servicer, either Oakwood Mortgage or the
Servicer may maintain normal banking relations with the Trustee if the Trustee
is a depository institution.
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 the series and the assets of the related trust. Any
financial information contained in these reports will not have been examined or
reported upon by an independent public accountant. Copies of monthly statements
and any annual reports prepared by the Servicer evidencing the status of its
compliance with the provisions of a pooling and servicing agreement will be
furnished to related certificateholders upon request addressed to the Trustee.
The contents of the Remittance Report for any series will be described in the
prospectus supplement for that series.
EVENTS OF DEFAULT
"Events of Default" by the Servicer under any pooling and servicing
agreement will include
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o any failure by the Servicer to remit funds to the Distribution
Account as required by the applicable pooling and servicing
agreement, which failure continues unremedied for five days, or
another period specified in the related pooling and servicing
agreement, after the date upon which the remittance was due,
o 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 the 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
o 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 the series, shall,
terminate all of the rights and obligations of the Servicer under the related
pooling and servicing 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 pooling and servicing agreement and the 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 pooling and servicing
agreement. Pending this appointment, the Trustee is obligated to act as
successor Servicer unless prohibited by law from doing so. The Trustee and the
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 pooling and servicing agreement. "Event of Default" means the
occurrence of a default noted in the pooling and servicing agreement, along with
the passage of a period of any cure period without the default having been
cured.
CERTIFICATEHOLDER RIGHTS
No certificateholder will have any right under the related pooling and
servicing agreement to institute any proceeding with respect to any pooling and
servicing agreement unless the holder previously has provided the Trustee with
written notice of a default and unless the holders of certificates evidencing at
least 25% of the voting rights for the applicable series requested the Trustee
in writing to institute the proceeding in its own name as Trustee and have
offered to the Trustee reasonable indemnity, and the Trustee for 15 days has
neglected or refused to institute any proceeding. The Trustee will be under no
obligation to take any action or to institute, conduct or defend any litigation
under the related pooling and servicing agreement at the request, order or
direction of any of the holders of certificates, unless the certificateholders
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which the Trustee may incur.
AMENDMENT
A pooling and servicing agreement may be amended by Oakwood Mortgage,
the Servicer, and the related Trustee without the consent of the related
certificateholders,
o to cure any ambiguity;
o to correct or supplement any provision that may be inconsistent
with any other provision;
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o to maintain the REMIC status of the trust and to avoid the
imposition of taxes on any related REMIC, if applicable; or
o to make any other provisions with respect to matters or questions
arising under the pooling and servicing agreement that are not
covered by the pooling and servicing agreement, provided that the
action will not adversely affect in any material respect the
interests any holder of certificates of the related series, as
evidenced by an opinion of counsel independent of Oakwood Mortgage,
the Servicer and the Trustee or a letter from each Rating Agency
from whom Oakwood Mortgage requested a rating of any of the
certificates of the series stating that the proposed amendment will
not result in a downgrading of the rating of any of the
certificates of the series rated by any Rating Agency.
A pooling and servicing agreement may also be amended by Oakwood Mortgage, 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, the pooling and servicing agreement, or for the
purpose of modifying in any manner the rights of the certificateholders;
PROVIDED, HOWEVER, that no amendment that
o 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
o otherwise materially adversely affects the rights of any
certificateholder; or
o reduces the percentage of certificateholders required to consent to
any amendment of the related pooling and servicing agreement
may be effective without the consent of the holder of each related certificate.
TERMINATION
The obligations created by each pooling and servicing agreement will
terminate upon the date calculated as specified in the pooling and servicing
agreement, generally upon 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 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 pooling and servicing agreement. In
addition, a trust may be subject to early termination at the option of Oakwood
Mortgage, the Servicer or the holders of a majority in interest of any related
Residual Certificates and if so specified in the related prospectus supplement,
the certificates of a series shall be redeemed by Oakwood Mortgage, the Servicer
or any other party specified in the related prospectus supplement. SEE
"DESCRIPTION OF THE CERTIFICATES --OPTIONAL REDEMPTION OR TERMINATION."
CERTAIN LEGAL ASPECTS OF CONTRACTS AND MORTGAGE LOANS
The following discussion contains the material legal aspects of
manufactured housing installment sales contracts and mortgage loans. Because
legal aspects are governed by state law, which laws may differ substantially
from state to state, this discussion does not purport 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 located.
Contracts differ from mortgage loans in 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
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applied to borrowers under many conventional residential first-lien mortgage
loans. 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 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. 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
under " -- THE CONTRACTS," whereas realization on defaulted mortgage loans is
generally accomplished through foreclosure on the underlying mortgaged
properties or similar proceedings, as described under " -- THE MORTGAGE LOANS."
Realization on defaulted Land Secured Contracts may involve a combination of
repossession and foreclosure-related procedures. Certificates evidencing
interests in contracts may also face other risks that are not present in the
case of certificates evidencing interests in mortgage loans.
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
the obligation of the obligor to repay the loan evidenced thereby, and the grant
of a security interest in the related manufactured home to secure repayment of
the loan.
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 pooling and servicing 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 these filings, if, through negligence, fraud or otherwise, a
subsequent purchaser from Oakwood Mortgage 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 the 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 Oakwood Mortgage 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 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. Oakwood Mortgage 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
Acceptance nor any other seller are
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expected to amend any certificate of title to change the lienholder from Oakwood
Acceptance or Oakwood Acceptance to the Trustee, deliver any documents or pay
fees to re-register any manufactured home, or file any UCC transfer instruments,
and neither Oakwood Acceptance nor Oakwood Mortgage will deliver any certificate
of title to the Trustee or note 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 the 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 Oakwood Acceptance's rights as the
secured party as to the 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 this event,
the assignment of the security interest created by a contract in the related
manufactured home may not be effective against creditors of Oakwood Mortgage or
Oakwood Acceptance or a trustee in bankruptcy of Oakwood Mortgage or Oakwood
Acceptance.
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. These filings must be made in the real estate
records office of the jurisdiction in which the home is located. Neither Oakwood
Acceptance 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. 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 may be subordinated to the
interests of others that may claim an interest in the manufactured home 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 in the home, in
either case without notice to the Trustee's adverse interest in the 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 Acceptance on the related
certificate of title or delivery of the required documents and fees necessary to
register the home in the name of Oakwood Acceptance or the public filing of
appropriate transfer instruments reflecting the lien of Oakwood Acceptance, 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, because they will be on notice of the existing interest in the
home.
Some of the contracts ("Land Secured Contracts") will be secured by real
estate as well as a manufactured home. Oakwood Acceptance 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 the contract, together with originals or certified copies of a chain
of recorded assignments of the mortgage sufficient to reflect Oakwood Acceptance
as the record holder of the mortgage and the lien it evidences on the related
real estate. Assignments in recordable form for the mortgages naming the Trustee
as assignee will not be prepared by the Servicer or any seller. However, Oakwood
Acceptance will deliver to the Trustee a power of attorney entitling the Trustee
to prepare, execute and record the assignments of mortgages, in the event that
recordation thereof becomes necessary to enable the Servicer to foreclose on the
related real property.
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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 the home would continue automatically for four
months after relocation, during which time the security interest must be
re-perfected in the new state in order to remain perfected after this four-month
period. Generally, a security interest in a manufactured home may be
re-perfected after the expiration of this 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 the state within the
four-month period after the move in order for Oakwood Acceptance'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 the 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
the 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 the 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 the 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, Oakwood Acceptance 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 the manufactured home in the name of the owner thereof or the owner's
transferee without noting Oakwood Acceptance's lien on the related certificate
of title, whether because the 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 the home was moved or failed to notify Oakwood Acceptance of
re-registration and failed to note Oakwood Acceptance's lien on the new
certificate of title issued upon re-registration or the manufactured home was
moved from a state that is not a Title State, re-registration could defeat the
perfection of Oakwood Acceptance's lien in the manufactured home. In addition,
re-registration of a manufactured home, whether due to a transfer or relocation,
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 Oakwood
Acceptance's lien.
If Oakwood Acceptance and the Servicer are not the same entity, Oakwood
Acceptance will be required to report to the Servicer any notice it receives of
any re-registration of a manufactured home. The Servicer will take all necessary
steps, at its own expense, to maintain perfection of the Trustee's security
interests in each manufactured homes if it receives notice of relocation, sale
or re-registration of the manufactured home. As long as Oakwood Acceptance
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 Acceptance as the lienholder or legal titleholder. However, the
Servicer has no independent obligation to monitor the status of Oakwood
Acceptance'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. These 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 this lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN MANUFACTURED HOMES.
The Servicer, on behalf of the Trustee, to the extent required by the
related pooling and servicing agreement, may take action to enforce the
Trustee's security interest with respect to contracts in default by
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repossession and resale of the manufactured homes securing 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" 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, prior to
commencement of any repossession action. The UCC and consumer protection laws in
most states place restrictions on repossession sales; among other things, laws
require prior notice to the debtor and commercial reasonableness in effecting 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 resale. In the event of repossession and resale of a manufactured home,
the Trustee would be entitled to receive the net proceeds of resale up to the
amount of the unpaid principal balance of the related contract plus all accrued
and unpaid interest thereon at the related asset 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 the debtor's loan. However, obtaining
and collecting deficiency judgments is seldom economically feasible and, for
that reason, Oakwood Acceptance generally has not attempted to obtain deficiency
judgments. In addition, some states impose prohibitions or limitations on
deficiency judgments, and other statutory provisions, including federal and
state bankruptcy and insolvency laws and general equitable principles, the
Soldiers' and Sailors' Civil 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 proceedings under the United States Bankruptcy Code, as amended, as
set forth in Title 11 of the United States Code (the "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 the contract, change the rate of interest and alter
the repayment schedule. Court decisions have applied 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 these amounts, and any loss of this
nature may reduce amounts available for distribution on the related
certificates.
Under the terms of the federal Soldiers' and Sailors' Civil Relief Act,
an obligor who enters military service after the origination of the 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 the obligor's active duty status, unless a court orders
otherwise upon application of the lender. It is possible that this action could
have an effect, for an indeterminate period of time, on the ability of the
Servicer to collect full amounts of interest on the contracts. Any shortfall in
interest collections resulting from the application of the Soldiers' and
Sailors' Civil 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 Soldiers' and Sailors' Civil 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 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 the REMIC provisions of the Code, 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 it acquires the manufactured home,
or a longer period as permitted by the pooling and servicing agreement, the
Servicer will auction the home to the highest bidder, which may
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be the Servicer, in an auction reasonably designed to produce a fair price.
There can be no assurance that the price for any manufactured home would not be
substantially lower than the unpaid principal balance of the contract relating
thereto. In fact, manufactured homes, unlike site-built homes, generally
depreciate in value, and it has been Oakwood Acceptance'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. 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 foreclosure,
are identical to the requirements and restrictions that would apply to
foreclosure of any mortgage loan. 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
Oakwood Acceptance has not perfected its security interest in a manufactured
home under applicable real estate laws, Oakwood Acceptance's security interest
in the 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 related lenders and assignees from transferring the contract
free of claims by the debtor thereunder against Oakwood Acceptance. 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 Oakwood
Acceptance under the contract. Assignee liability under this rule 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 a contract as a
defense against a claim brought by the assignee of the contract against the
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 Real Estate Settlement
Procedures Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act,
the Fair Credit Reporting 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 the contract. However, Oakwood
Acceptance will be required to represent and warrant that each contract it sells
to Oakwood Mortgage complied, at the time of its origination, with all
requirements of law and will be required to make 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 representation
or warranty that materially and adversely affects a Trust's interest in any
contract would create an obligation on the part of Oakwood Acceptance to use its
best efforts to cure the breach to the satisfaction of the Trustee or to
repurchase the contract. Nevertheless, this requirement may not eliminate the
Trust's liability to an obligor.
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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 permit the
acceleration of the maturity of the contracts by the Servicer upon any 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
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 this
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. A delinquent borrower may transfer
his manufactured home in order to avoid a repossession proceeding with respect
to the manufactured home.
APPLICABILITY OF USURY LAWS.
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended ("Title V"), generally provides 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 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 this type of 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 are distinct from Land Secured Contracts, which are
discussed under " -- THE CONTRACTS -- FORECLOSURE UNDER REAL PROPERTY LAWS" IN
THIS PROSPECTUS. 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, 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.
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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 the sale of the property. In some states, mortgages may also
be foreclosed by advertisement, pursuant to a power of sale provided in the
mortgage. Foreclosure of a mortgage by advertisement is essentially similar to
foreclosure of a deed of trust by non-judicial power of sale.
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust that
authorizes the trustee to sell the property to a third party upon any default by
the borrower under the terms of the related note or the deed of trust.
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" IN THIS PROSPECTUS.
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 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" IN THIS PROSPECTUS.
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.
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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 costs and expenses incurred by or on behalf of the lender
in attempting to enforce the obligor's obligation. Certain state laws control
the 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 the foreclosed junior lienors are given a
statutory period in which to redeem the related property from the foreclosure
sale. In 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.
Some 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 other states, the lender has the option of bringing a personal
action against the obligor on the debt without first exhausting the security;
however, in some of these states, the lender, following judgment on a personal
action, may be deemed to have elected a remedy and may be precluded from
exercising other remedies. 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 the 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 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
Soldiers' and Sailors' Civil 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 some 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
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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 the mortgage
loan, change the rate of interest and alter the mortgage loan repayment
schedule. Court decisions have applied this 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 these amounts, and any loss in respect
thereof may reduce amounts available for distribution on the related
certificates.
Under the terms of the federal Soldiers' and Sailors' Civil Relief Act,
an obligor who enters military service after the origination of the 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 his active duty status, unless a court orders
otherwise. It is possible that this action could have an effect, for an
indeterminate period of time, on the ability of the Servicer to collect full
amounts of interest on the mortgage loans. Any shortfall in interest collections
resulting from the application of the Soldiers' and Sailors' Civil 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
Soldiers' and Sailors' Civil 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 this type of
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 Estate Settlement Procedures 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 these 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 loans, which loans include the
conventional mortgage loans, made after the effective date of the Garn-St
Germain Act are enforceable, within 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 some transfers, including
o the granting of a leasehold interest which has a term of three
years or less and which does not contain an option to purchase;
o 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;
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o 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;
o 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 the lien or
encumbrance is not created pursuant to a contract for deed;
o a transfer by devise, descent or operation of law on the death of a
joint tenant or tenant by the entirety; and
o 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" IN THIS PROSPECTUS.
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 this
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 this type of
mortgage note subject to restrictions on its ability to foreclose on the related
mortgaged property and to contractual defenses available to the related obligor.
ENVIRONMENTAL CONSIDERATIONS
Real property pledged as security to a lender may face 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, this lien has priority over the lien of an existing mortgage
against the 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
the 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 the lender's obligor or by a
prior owner. A lender also risks liability arising out of foreclosure of a
mortgaged property securing a mortgage loan owned by the 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
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"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 these 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.
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
Oakwood Acceptance 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 hazardous wastes or hazardous
substances will reduce the amounts otherwise available to pay to the holders of
the related certificates.
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 the 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 the 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 MATERIAL PROVISIONS OF THE OBLIGORS' AGREEMENTS
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. States also limit the amounts that a lender
may collect from a borrower as an additional charge if the loan is prepaid.
Under each pooling and servicing 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 that series or to reimburse the amounts previously used to
effect the 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. 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 is a wholly-owned
subsidiary of Oakwood Homes Corporation. Oakwood Mortgage maintains its
principal office
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adjacent to those of Oakwood Acceptance, at 7800 McCloud Road, Greensboro, North
Carolina 27409-9634. Its telephone number is (336) 664-2400.
The only obligations, if any, of Oakwood Mortgage with respect to a
series of certificates may be pursuant to limited representations and warranties
and limited undertakings to repurchase or substitute contracts or mortgage loans
under certain circumstances. Oakwood Mortgage will have no ongoing servicing
obligations or responsibilities with respect to any asset pool. Oakwood Mortgage
does not have, nor is it expected in the future to have, any significant assets.
Neither Oakwood Mortgage nor any underwriter nor any of their affiliates
will insure or guarantee the certificates of any series.
Oakwood Mortgage expects to be merged with and into Oakwood Mortgage
Investors, Inc., a Nevada corporation, during 1999. It is expected that the
surviving corporation will succeed to all of Oakwood Mortgage's rights and
obligations under the registration statement of which this prospectus is a part.
THE SERVICER
Oakwood Acceptance Corporation (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 Acceptance is primarily
engaged in the business of underwriting, originating, pooling, selling and
servicing installment sales contracts for the sale of manufactured housing.
Oakwood Acceptance's principal offices are located at 7800 McCloud Road,
Greensboro, North Carolina 27409-9634 (telephone 336/664-2500).
Oakwood Acceptance 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 Acceptance are typically originated
in the name of Oakwood Mobile, a wholly-owned retailing subsidiary of Oakwood
Homes, or by a third party manufactured housing dealer, and are assigned to
Oakwood Acceptance following origination, although some contracts are originated
directly in Oakwood Acceptance's name. Oakwood Acceptance underwrites all of
these contracts. From time to time, Oakwood Acceptance purchases seasoned
portfolios of manufactured housing contracts from third parties.
FEDERAL INCOME TAX CONSEQUENCES
The following is the opinion of Hunton & Williams regarding the material
federal income tax consequences of the purchase, ownership and disposition of
the offered certificates. This opinion is based upon laws, regulations, rulings,
and decisions now in effect, all of which may change. Because REMIC status may
be elected with respect to any series of certificates, this opinion includes a
summary of the federal income tax consequences to holders of REMIC certificates.
This opinion does not purport to deal with the federal income tax
consequences that may affect particular investors in light of their individual
circumstances, nor with certain categories of investors subject to special
treatment under the federal income tax laws, such as banks, insurance companies,
thrift institutions, tax-exempt organizations, foreign investors, certain
regulated entities, real estate investment trusts, investment companies and
certain other organizations subject to special rules. This opinion 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 of the Code 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", which are
certificates evidencing "regular interests" in a
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REMIC, and certain other types of certificates. Furthermore, the REMIC
provisions of the Code 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 opinion 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, this opinion does not purport to address the anticipated
state income tax consequences to investors of owning and disposing of the
certificates. Consequently, we suggest that investors 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.
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
Oakwood Mortgage, 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 in
the trust, 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. In the case of a series for which two or more
REMICs will be created, all such series REMICs
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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. A "RIC" is a "regulated investment company" as defined in the Code.
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. The "Tax
Administrator" is the party responsible for computing the amount of original
issue discount to be reported to the holders of Regular Certificates each
taxable year, which will be Oakwood Acceptance or an Affiliate.
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.
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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.
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. The "Pricing
Prepayment Assumptions" are the assumptions concerning the rate and timing of
principal prepayments on the assets and concerning the reinvestment rate on
amounts held pending distribution that were assumed in pricing. 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. "OID
Regulations" are the final regulations governing original issue discount that
were issued by the Treasury. 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 Oakwood
Mortgage, 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). "Qualified Stated Interest"
means stated interest that is unconditionally payable in cash or property, other
than debt instruments of the issuer, at least annually at a single fixed rate or
a variable rate that meets certain requirements set out in the OID Regulations.
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. "Deemed Principal Payments" means all
payments of principal and interest provided for on a debt instrument other than
Qualified Stated Interest.
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.
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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. "WAM" means the sum of the amounts
obtained by multiplying the amount of each Deemed Principal Payment on a Regular
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.
Although no Treasury regulations have been issued under the relevant provisions
of the Tax Reform Act of 1986 (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. An "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.
Regular Certificates of certain series may bears interest under terms
that provide for a teaser rate period, interest holiday, or other period during
which the rate of interest payable on the crtificate is lower than the rate
payable during the remainder of its life ("Teaser Certificates"). Under certain
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 the excess of the stated principal amount of the
certificate over its issue price and 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
the Pricing Prepayment Assumptions and 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
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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 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" IN THIS PROSPECTUS. 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. "Interest Weighted
Certificates" 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. "Non-VDRI
Certificates" 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 VRDI certificate. "NOWA Certificate" means a Weighted Average
Certificate relating to a trust, or a designated asset pool, whose assets do not
bear interest at qualified floating rates. "Variable Rate Certificate" means a
Regular Certificate that bears interest at a variable rate. "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
REMIC. SEE "FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- Tax
TREATMENT OF REGULAR CERTIFICATES -- INTEREST WEIGHTED CERTIFICATES AND NON-VRDI
CERTIFICATES" IN THIS PROSPECTUS.
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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" IN THIS PROSPECTUS. 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 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.
A "Distribution Period" is the interval between one Distribution Date and the
next Distribution Date. The "First Distribution Period" is the interval between
the closing date and its first Distribution Date.
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. "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 the certificate would be treated as
a return of Pre-Issuance Accrued Interest rather than as a payment on the
certificate, provided that a portion of the initial purchase price of the
certificate is allocable to Pre-Issuance Accrued Interest and 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. "Pre-Issuance Accrued Interest" means interest that has
accrued under the terms of a certificate prior to its issue date. 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
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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. A "Rate Bubble Certificate" is a Regular Certificate with an
effective interest rate higher during the certificate's First Distribution
Period than during the remainder of its term. 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" IN
THIS PROSPECTUS. Some Interest Weighted Certificates may be certificates that
provide 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
principal ("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.
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 "variable rate debt instruments" as
defined in section 1.1275-5 of the OID Regulations ("VRDIs"). VRDIs in the OID
Regulations
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that are described below. "Excess Premium" means, with respect to a Regular
Certificate, a premium over the 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.
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.
A "Cap" is a restriction or restrictions on the maximum stated interest
rate on a certificate. A "Floor" is a restriction or restrictions on the minimum
stated interest rate on a certificate. A "Governor" is a restriction or
restrictions on the amount of increase or decrease in the stated interest rate
on a certificate on any interest adjustment date.
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 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. "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. 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" IN THIS
PROSPECTUS 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
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(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"
is a VRDI certificate that does not qualify as a Single 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 in the trust, 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" IN
THIS PROSPECTUS.
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. An
"Inverse Floater Certificate" is 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. Consequently, if such 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 in the trust, in a case where one or
more of the
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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" IN THIS PROSPECTUS.
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 own tax advisor to determine the appropriate amount
and method of income inclusion on such certificates for federal income tax
purposes.
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
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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 -- REMIC CERTIFICATES --
ORIGINAL ISSUE DISCOUNT" IN THIS PROSPECTUS. 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", 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. A "Current Recognition Election" is the election under
section 1278(b) of the Code to recognize market discount on a debt instrument
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" IN THIS PROSPECTUS.
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 Procedure 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 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" IN THIS PROSPECTUS. 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
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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 Treasury regulations, 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 Oakwood Mortgage 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" IN
THIS PROSPECTUS. The holder of such a certificate would be required, 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
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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 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 one year or less generally is 28%.
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Accordingly, 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 in the trust,
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" in THIS PROSPECTUS . 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" IN
THIS PROSPECTUS, 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.
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 "unrelated business
taxable income" as defined in the Code ("UBTI"). 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
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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" IN
THIS PROSPECTUS. 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" IN THIS
PROSPECTUS.
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. 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" IN THIS PROSPECTUS, 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
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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.
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
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" IN THIS PROSPECTUS.
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" IN THIS PROSPECTUS.
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NON-RECOGNITION OF CERTAIN TRANSFERS FOR FEDERAL INCOME TAX PURPOSES
In addition to the limitations specified above, the REMIC provisions of
the Code 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 of the Code, 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" IN THIS PROSPECTUS.
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 Freddie Mac, 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) 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 of the Code, the anticipated excess inclusions with respect to
a transferred residual interest must be
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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-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 of the Code 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. "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. 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
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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"
IN THIS PROSPECTUS.
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 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" AND "ERISA CONSIDERATIONS" IN THIS PROSPECTUS.
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 RESIDUAL
CERTIFICATEHOLDERS" IN THIS PROSPECTUS. Moreover, because Residual
Certificateholders may recognize phantom income --- SEE "FEDERAL INCOME TAX
CONSEQUENCES -- REMIC CERTIFICATES -- TAXATION OF RESIDUAL CERTIFICATEHOLDERS"
IN THIS PROSPECTUS --- 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.
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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. "Qualifying REIT Interest" means interest that is treated as
"interest on obligations secured by mortgages on real property" for REIT
qualification purposes. The REMIC provisions of the Code 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.
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" IN THIS
PROSPECTUS.
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 of the Code
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 --
REMIC CERTIFICATES -- TAX TREATMENT OF RESIDUal CERTIFICATES -- DISPOSITION OF
RESIDUAL CERTIFICATES" IN THIS PROSPECTUS.
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
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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" IN THIS PROSPECTUS.
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.
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 of the Code, 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" IN THIS PROSPECTUS, 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
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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.
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 of the Code 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 of the Code 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" IN
THIS PROSPECTUS); (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
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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.
REMIC QUALIFICATION
The trust underlying a series, or one or more designated asset pools in
the trust, 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 in the
trust, to be eligible for REMIC status, substantially all of its assets 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 of the Code, 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, Oakwood Acceptance 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
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after the close of 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 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 of the Code, is payable at a variable rate with
respect to such principal amount. Pursuant to the REMIC provisions of the Code,
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" IN
THIS PROSPECTUS, 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 of the Code, 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 of the Code 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 of the Code, 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 of
the Code, 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
"FEDERAL INCOME TAX CONSEQUENCES --
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REMIC CERTIFICATES -- TAX TREATMENT OF RESIDUAL CERTIFICATES -- OWNERSHIP OF
RESIDUAL INTERESTS BY DISQUALIFIED ORGANIZATIONS" IN THIS PROSPECTUS. 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" IN THis PROSPECTUS. 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.
Oakwood Mortgage 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 such interest is not effectively connected with a trade or
business in the United States of the certificateholder, and the Trustee, or
other person who would otherwise be required to withhold tax, is provided with a
Foreign Person Certification. "Foreign Person" means 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 the person is, INTER ALIA, a Foreign
Person. 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%
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backup withholding. SEE "FEDERAL INCOME TAX CONSEQUENCES -- TAXATION OF CERTAIN
FOREIGN HOLDERS OF REMIC CERTIFICATES -- BACKUP WITHHOLDING" IN THIS PROSPECTUS.
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 of the Code, 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" IN THIS PROSPECTUS. 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.
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
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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" IN
THIS PROSPECTUS. 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
pooling and servicing agreement. The REMIC provisions of the Code 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 tax matters person (the
"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
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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. "Participation Certificates"
means a non-REMIC certificate evidencing ownership of equal percentages of the
principal and interest payments on the assets assigned to the trust. "PO
Certificates" means a non-REMIC certificate evidencing ownership of a percentage
of the principal payments on some or all of the assets assigned to the trust.
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 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" IN THIS PROSPECTUS 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" IN THIS PROSPECTUS AND IN
THE PROSPECTUS SUPPLEMENT.
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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 -- ORIGINAL ISSUE
DISCOUNT," " -- VARIABLE RATE CERTIFICATES," " -- MARKET DISCOUNT," AND "
- -- AMORTIZABLE PREMIUM" IN THIS PROSPECTUS.
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 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" IN THIS PROSPECTUS.
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TREATMENT OF STRIP CERTIFICATES
Many aspects of the federal income tax treatment of Strip Certificates
are uncertain. The discussion describes the treatment that Oakwood Mortgage
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
regulations issued by the Treasury under section 1286 of the Code (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" IN THis PROSPECTUS) 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" IN THIS PROSPECTUS.
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 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
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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" IN THIS
PROSPECTUS. 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" IN THIS PROSPECTUs. 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" IN
THIS PROSPECTUS, 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" IN THIS PROSPECTUS.
"IO Certificates" means a non-REMIC certificate evidencing ownership of
a percentage of the interest payments, net of certain fees, on the assets
assigned to a related trust. 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," " -- sVARIABLE
RATE CERTIFICATES," AND " -- INTEREST WEIGHTED CERTIFICATES AND NON-VRDI
CERTIFICATES" IN THIS PROSPECTUS.
PURCHASES 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.
"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. 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
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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" IN THIS PROSPECTUS.
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" IN THIS
PROSPECTUS. 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 applicable long-term capital gain holding
period. 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" IN THIS PROSPECTUS.
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
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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. "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. SEE "FEDERAL INCOME TAX CONSEQUENCES -- NON-REMIC CERTIFICATES
- --TREATMENT OF STRIP CERTIFICATES -- POSSIBLE ALTERNATIVE CHARACTERIZATIONS" IN
THIS PROSPECTUS. 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" IN THIS
PROSPECTUS.
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" IN THIS PROSPECTUS.
DUE TO THE COMPLEXITY OF THE FEDERAL INCOME TAX RULES APPLICABLE TO YOU AND THE
CONSIDERABLE UNCERTAINTY THAT EXISTS WITH RESPECT TO MANY ASPECTS OF THOSE
RULES, WE SUGGEST THAT YOU CONSULT YOUR OWN TAX ADVISOR 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 under
"FEDERAL INCOME TAX CONSEQUENCES", 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
these plans, accounts, annuities or arrangements are invested, that are
described in or subject to the DOL regulations set forth in 29 C.F.R.
2510.3-101, as amended from time to time (the "Plan Asset
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Regulations"), ERISA, or corresponding provisions of the Code (a "Plan"), a
fiduciary should consider, among other things,
o the purposes, requirements, and liquidity needs of the Plan;
o the impact of the plan asset provisions of ERISA and DOL regulations
concerning the definition of plan assets;
o whether the investment satisfies the diversification requirements of
section 404(a)(1)(C) of ERISA; and
o whether the investment is prudent, considering the nature of an
investment in a certificate and the fact that no market in which the
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
o a Plan and any "party in interest" or "disqualified person" with respect
to the Plan, and
o plan assets.
The Plan Asset Regulations issued by the DOL define "plan assets" to include not
only securities, like 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 the 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:
o Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), regarding
investments by insurance company general accounts;
o Prohibited Transaction Class Exemption 91-38 ("PTCE 91-38"), regarding
investments by bank collective investment funds;
o Prohibited Transaction Class Exemption 90-1 ("PTCE 90-1"), regarding
investments by insurance company pooled separate accounts;
o Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1"), regarding
acquisitions by Plans of interests in mortgage pools; and
o 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
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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
o 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
o 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, like the certificates, are deemed
to be plan assets of a Plan investing in the securities, the "holding in trust"
requirement of section 403 of ERISA will be satisfied if the 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,
o certain classes of certificates will not be offered for sale to, and are
not transferable to, any Plan Investor and
o certain classes of certificates will not be offered for sale to, and are
not transferable to, any Plan Investor unless the Plan Investor provides
Oakwood Mortgage with a Benefit Plan Opinion.
A "Plan Investor" is any Plan, any person acting on behalf of a Plan, or any
person using the assets of a Plan. A "Benefit Plan Opinion" is an opinion of
counsel satisfactory to Oakwood Mortgage and the Servicer, and upon which
Oakwood Mortgage, 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 cause any of the assets in the related trust
to be regarded as "plan assets" for purposes of the Plan Asset Regulations; give
rise to any fiduciary duty under ERISA on the part of Oakwood Mortgage, the
Trustee, the Servicer, or the TMP; or be treated as, or result in, a prohibited
transaction under section 406 or section 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 the series, at its option. In these cases, the Servicer's
purpose for the retention of this redemption right is to enable the Servicer to
terminate its administration obligations with respect to the certificates in the
event these 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", 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
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assets of a Plan be valued at their fair market value as of the close of the
plan year. Neither Oakwood Mortgage, Oakwood Acceptance, the Servicer nor the
underwriters currently intend to provide valuations to certificateholders.
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 95-60 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.
AVAILABLE INFORMATION
Oakwood Mortgage observes the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and files
reports and other information with the SEC. Reports and other information filed
by Oakwood Mortgage with the SEC can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the SEC 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 this
material can be obtained from the Public Reference Section of the SEC at its
principal office in Washington, D.C., at prescribed rates. The SEC maintains a
web site that contains reports, proxy and information statements and other
information regarding registrants, including Oakwood Mortgage, that file
electronically with the SEC at http://www.sec.gov.
This prospectus does not contain all the information set forth in the
Registration Statement and exhibits relating thereto which Oakwood Mortgage has
filed with the SEC in Washington, D.C. Copies of the information and the
exhibits are on file at the offices of the SEC and may be obtained, upon payment
of the fee prescribed by the SEC, or may be examined without charge at the
offices of the SEC. Copies of the pooling and servicing agreement for a series
will be filed by Oakwood Mortgage with the SEC, without exhibits, on a Current
Report on Form 8-K within 15 days after the applicable closing date.
Each trust will fill periodic reports with the SEC in compliance with
the requirements of the Exchange Act.
Oakwood Mortgage and the Servicer are not obligated with respect to the
certificates. Accordingly, Oakwood Mortgage has determined that financial
statements of Oakwood Mortgage and the Servicer are not material to the offering
made hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Oakwood Homes has filed the following documents with the SEC for each
class of certificates that is supported by a guarantee of Oakwood Homes pursuant
to the Exchange Act. These documents are incorporated in this prospectus by
reference and are made a part of this prospectus and any prospectus supplement:
o the Oakwood Homes Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1998 and March 31, 1999, and
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o the Oakwood Homes Annual Report on Form 10-K for the fiscal year
ended September 30, 1998.
All documents filed by Oakwood Mortgage or Oakwood Homes pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of the offering of the certificates
shall be deemed, in the case of Oakwood Mortgage, to be incorporated by
reference into this prospectus and, in the case of Oakwood Homes, 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, from the dates of filing of these documents. Any statement contained in
this prospectus or in a document all or any portion of which is incorporated or
deemed to be incorporated by reference in this prospectus 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 in this
prospectus or in the prospectus supplement or in any other subsequently filed
document which also is or deemed to be incorporated by reference in this
prospectus or in the prospectus supplement modifies or supersedes that
statement. Any modified or superseded statement shall not be deemed, except as
modified or superseded, to constitute a part of this prospectus and the related
prospectus supplement.
We will provide you without charge, on your request, a copy of any of
the documents incorporated in this prospectus by reference, other than the
exhibits to those documents, unless the exhibits are specifically incorporated
by reference. 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.
PLAN OF DISTRIBUTION
Oakwood Mortgage 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 the series of certificates and each class within
the series, including the name or names of the underwriter(s), the proceeds to
and their intended use by Oakwood Mortgage, 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 the
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 the offering and any agreements to be entered into
between Oakwood Mortgage and purchasers of certificates of the series.
The place and time of delivery for the certificates of a series in
respect of which this prospectus is delivered will be described in the
prospectus supplement.
LEGAL INVESTMENT CONSIDERATIONS
The prospectus supplement for each series of certificates will specify
which, if any, of the classes of certificates of the 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 for as 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
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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 of its agencies or instrumentalities
constitute legal investments for these entities. Some states have enacted
legislation specifically limiting, to varying degrees, the legal investment
authority of these 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 this legislation is applicable, the certificates
will constitute legal investments for entities subject to this legislation only
to the extent provided in the legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage-related
securities" without limitation as to the percentage of their assets represented
thereby; federal credit unions may invest in "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. ss. 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, 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 some
investors, including depository institutions, either to purchase certificates or
to purchase certificates representing more than a specified percentage of the
investor's assets. We suggest that investors consult their own legal advisors in
determining whether and to what extent any particular certificates constitute
legal investments for them.
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, these
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 these 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,
1998 and 1997 and for each of the three years in the period ended September 30,
1998, incorporated in this prospectus by reference to Oakwood Homes
Corporation's Annual Report on Form 10-K for the year ended September 30, 1998,
have been so incorporated in reliance on the report of Pricewaterhouse Coopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
LEGAL MATTERS
Legal matters relating to the certificates and material federal income
tax consequences concerning the certificates will be passed upon for Oakwood
Mortgage by Hunton & Williams, Richmond, Virginia.
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INDEX OF TERMS
"1986 ACT" ..................................................................53
"ACCRETION CLASS".............................................................6
"ADJUSTABLE RATE ASSET" .....................................................14
"ADVANCE" ....................................................................11
"AFFILIATE"...................................................................68
"AGGREGATION RULE"............................................................53
"ALL OID ELECTION" ..........................................................54
"BALLOON PAYMENT LOAN" ......................................................15
"BANKRUPTCY CODE".............................................................42
"BENEFICIAL OWNER" ............................................................7
"BENEFIT PLAN OPINION"........................................................85
"BI-WEEKLY LOAN" .............................................................15
"BUY-DOWN LOAN" ..............................................................14
"CAP".........................................................................58
"CAPITAL APPRECIATION CLASS"...................................................6
"CERCLA"......................................................................48
"CERTIFICATE ACCOUNT"..........................................................5
"CERTIFICATE REGISTER".........................................................7
"CODE" ......................................................................47
"COLLECTION PERIOD" ..........................................................10
"COMPANION CLASS"..............................................................6
"COMPENSATING INTEREST"......................................................34
"COMPLEMENTARY STRIP CERTIFICATES"............................................81
"COMPOUND INTEREST CLASS"......................................................6
"CONTINGENT PAYMENT OBLIGATION"...............................................59
"CONTINGENT PAYMENT REGULATIONS"..............................................59
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"CONVERTIBLE LOAN" ..........................................................15
"CURRENT RECOGNITION ELECTION" ..............................................60
"CUSTODIAN" ..................................................................28
"CUT-OFF DATE".................................................................5
"DEEMED PRINCIPAL PAYMENTS" .................................................53
"DEPOSITORY PARTICIPANTS" ....................................................7
"DISQUALIFIED ORGANIZATION" ..................................................67
"DISTRIBUTION ACCOUNT" ........................................................5
"DISTRIBUTION DATE"...........................................................18
"DISTRIBUTION PERIOD".........................................................56
"EARLY PAYMENT"..............................................................33
"ELIGIBLE ACCOUNT" ..........................................................32
"ESCROW ACCOUNT".............................................................31
"EVENT OF DEFAULT" ...........................................................37
"EXCESS PREMIUM"..............................................................57
"FINAL SCHEDULED DISTRIBUTION DATE" .........................................10
"FINANCIAL INTERMEDIARY" ......................................................7
"FIRST DISTRIBUTION PERIOD" ..................................................56
"FLOOR" ......................................................................58
"FOREIGN PERSON" ............................................................75
"FOREIGN PERSON CERTIFICATION" ...............................................75
"GOVERNOR" ..................................................................58
"GROSS MARGIN"...............................................................18
"INCREASING PAYMENT LOAN".....................................................14
"INTEREST REDUCTION LOAN"....................................................14
"INTEREST WEIGHTED CERTIFICATE"...............................................55
"INVERSE FLOATER CERTIFICATE".................................................59
92
<PAGE>
"IO CERTIFICATE" .............................................................81
"LAND SECURED CONTRACT".......................................................23
"LEVEL PAYMENT LOAN"..........................................................14
"MONTHLY PAYMENT".............................................................10
"MULTIPLE RATE VRDI CERTIFICATE" ............................................58
"NON-RECOVERABLE ADVANCE"....................................................33
"NON-VRDI CERTIFICATE" ......................................................55
"NOTIONAL PRINCIPAL AMOUNT"....................................................6
"NOWA CERTIFICATE" ...........................................................55
"OID REGULATIONS" ...........................................................53
"ORDINARY RATIO CERTIFICATE" ................................................80
"PAC CLASS" ...................................................................6
"PARITY PRICE" ...............................................................12
"PARTICIPANTS".................................................................7
"PARTICIPATION CERTIFICATE" ..................................................77
"PASS-THROUGH RATE" ...........................................................9
"PERIODIC RATE CAP" ..........................................................18
"PLAN" ......................................................................83
"PLAN ASSET REGULATIONS" .....................................................83
"PLAN INVESTOR"...............................................................85
"PO CERTIFICATE"..............................................................77
"PRE-FUNDED AMOUNT" .........................................................18
"PRE-FUNDING ACCOUNT" ........................................................18
"PRE-FUNDING PERIOD" .........................................................18
"PRE-ISSUANCE ACCRUED INTEREST" ..............................................56
"PRE-ISSUANCE ACCRUED INTEREST RULE"..........................................56
"PREPAYMENT MODEL"............................................................16
93
<PAGE>
"PREPAYMENT PERIOD" ...........................................................9
"PRICING PREPAYMENT ASSUMPTIONS"..............................................53
"PRINCIPAL-ONLY CLASS" ........................................................6
"QUALIFIED BANK"..............................................................36
"QUALIFIED MORTGAGE" .........................................................72
"QUALIFIED STATED INTEREST" ..................................................53
"QUALIFYING REIT INTEREST" ...................................................69
"RATE BUBBLE CERTIFICATE" ....................................................57
"RATING AGENCY" .........................................................../...5
"RATIO CERTIFICATE"...........................................................82
"RCRA" .......................................................................49
"REALIZED LOSS" ..............................................................9
"REAL PROPERTY" ..............................................................13
"REGULAR CERTIFICATE" ........................................................50
"REMIC" ......................................................................6
"REMITTANCE REPORT"..........................................................37
"REO PROPERTY" ...............................................................11
"REPO PROPERTY"...............................................................11
"REPURCHASE PRICE" ...........................................................17
"RESIDUAL CERTIFICATE" .......................................................6
"RIC".........................................................................51
"SCHEDULED PRINCIPAL BALANCE" ................................................10
"SERVICE" ....................................................................51
"SERVICING ADVANCE" ..........................................................31
"SERVICING FEE" ..............................................................32
"SINGLE RATE VRDI CERTIFICATE"................................................58
"SMMEA" ......................................................................87
94
<PAGE>
"SOLDIERS' AND SAILORS' CIVIL RELIEF ACT"......................................9
"SOLDIERS' AND SAILORS' SHORTFALL" ............................................9
"STRIP CLASS" ................................................................6
"STRIPPING REGULATIONS" ......................................................79
"SUPERPREMIUM CERTIFICATE" ..................................................57
"TAXABLE MORTGAGE POOL" ......................................................74
"TAX ADMINISTRATOR" ..........................................................52
"TEASER CERTIFICATE" .........................................................54
"TITLE STATE" ................................................................40
"TITLE V".....................................................................44
"TMP" ........................................................................77
"TRUSTEE" ....................................................................5
"UBTI" ......................................................................64
"UCC STATE" .................................................................40
"VARIABLE RATE CERTIFICATE"...................................................55
"VRDI" ......................................................................57
"WAM" ........................................................................53
"WEIGHTED AVERAGE CERTIFICATE"................................................55
95
<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 of the Mortgage Pass-Through Certificates being
registered under this Registration Statement, other than underwriting discounts
and commission:
SEC Registration.............................................$278
Printing and Engraving........................................(*)
Legal Fees and Expenses.......................................(*)
Accounting Fees and Expenses..................................(*)
Trustee Fees and Expenses.....................................(*)
Rating Agency Fees............................................(*)
Miscellaneous ................................................(*)
TOTAL................................................$(*)
(*)To be filed by amendment.
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, nd 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)
1.15 Terms Agreement, dated August 20, 1998, among the Registrant, Oakwood
Acceptance Corporation and Credit Suisse First Boston Corporation and
First Chicago Capital Markets, Inc., as Underwriters, relating to
Registrant's Series 1998-C Pass-Through Certificates(22)
1.16 Terms Agreement, dated November 3, 1998, among the Registrant,
Oakwood Acceptance Corporation and Credit Suisse First Boston
Corporation, as Underwriter, relating to Registrant's Series 1998-D
Pass Through Certificates(23)
1.17 Terms Agreement, dated January 14, 1999, among the Registrant,
Oakwood Acceptance Corporation and Credit Suisse First Boston
Corporation and NationsBanc Montgomery Securities LLC, as
Underwriters, relating to Registrant's Series 1999-A Pass Through
Certificates(24)
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)
II-2
<PAGE>
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)
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 Series 1998-C Pooling and Servicing Agreement, dated as of August 1,
1998, by and among the Registrant, Oakwood Acceptance Corporation, as
Servicer, and PNC Bank, National Association, as Trustee(22)
4.17 Series 1998-D Pooling and Servicing Agreement, dated as of October 1,
1998, by and among the Registrant, Oakwood Acceptance Corporation, as
Servicer, and PNC Bank, National Association, as Trustee(23)
4.18 Series 1999-A Pooling and Servicing Agreement, dated as of January 1,
1999, by and among the Registrant, Oakwood Acceptance Corporation, as
Servicer, and Chase Manhattan Trust Company, National Association, as
Trustee(24)
4.19 Standard Terms to Pooling and Servicing Agreement (June 1998
Edition)(22)
4.20 Form of Guaranty Agreement(13)
4.21 Limited Guarantee, dated as of February 1, 1997, by and between
Oakwood Homes Corporation, as Guarantor, and PNC Bank, National
Association, as Trustee(14)
4.22 Limited Guarantee, dated as of May 1, 1997, by and between Oakwood
Homes Corporation, as Guarantor, and PNC Bank, National Association,
as Trustee(15)
4.23 Limited Guarantee, dated as of August 1, 1997, by and between Oakwood
Homes Corporation, as Guarantor, and PNC Bank, National Association,
as Trustee(18)
4.24 Limited Guarantee, dated as of November 1, 1997, by and between
Oakwood Homes Corporation, as Guarantor, and PNC Bank, National
Association, as Trustee(19)
4.25 Limited Guarantee, dated as of May 1, 1998, by and between Oakwood
Homes Corporation, as Guarantor, and PNC Bank, National Association,
as Trustee(21)
4.26 Limited Guarantee, dated as of January 1, 1999, by and between
Oakwood Homes Corporation, as Guarantor, and Chase Manhattan Trust
Company, as Trustee(24)
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(*)
II-3
<PAGE>
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 Pricewaterhouse Coopers LLP (*)
24.1 Power of Attorney
99.1 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.
(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.
(22)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed August 31, 1998.
(23)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed November 10, 1998.
II-4
<PAGE>
(24)Incorporated herein by reference to Exhibit to the Registrant's
Current Report on Form 8-K filed January 25, 1999.
(*)To be filed by amendment.
(**) Previously filed.
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 (including the security rating requirement)
and has duly caused this Pre-Effective Amendment No. 1 to the Registrant's
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 April 16, 1999.
OAKWOOD MORTGAGE INVESTORS,
INC. (REGISTRANT)
/S/ DOUGLAS R. MUIR*
----------------------------
Nicholas J. St. George
Chairman of the Board
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>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ DOUGLAS R. MUIR* Director April 16, 1999
- -------------------------------
Nicholas J. St. George
/s/ DOUGLAS R. MUIR* Director and President April 16, 1999
- ----------------------------------- (PRINCIPAL FINANCIAL OFFICER
William G. Edwards AND PRINCIPAL EXECUTIVE OFFICER)
/s/ DOUGLAS R. MUIR Vice President, Secretary April 16, 1999
- ------------------------------------------ and Treasurer
Douglas R. Muir (PRINCIPAL ACCOUNTING OFFICER)
_______________________________ Director April __, 1999
Paul Stephanz
</TABLE>
*Attorney-in-Fact, pursuant to a
power of attorney previously filed
with the Securities and Exchange
Commission.
II-6
