AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1999
REGISTRATION NO. 333-72621
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 4 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)
NEVADA 88-0396566
(State of Incorporation) (I.R.S. Employee I.D. No.)
101 CONVENTION CENTER DRIVE, SUITE 850
LAS VEGAS, NEVADA 89109
(702) 949-0056
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------------
DOUGLAS R. MUIR COPY TO:
7800 MCCLOUD ROAD JACK A. MOLENKAMP
GREENSBORO, NORTH CAROLINA 27409-9634 DAVID B. RICH, III
(336) 664-2360 HUNTON & WILLIAMS
(336) 664-3224 (TELECOPY) RIVERFRONT PLAZA, EAST TOWER
(Name, address, including zip code 951 EAST BYRD STREET
number, and telephone including area RICHMOND, VIRGINIA 23219-4074
code, of agent for service) (804) 788-8200
(804) 788-8218 (TELECOPY)
_______________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO
THE PUBLIC: FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF
THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
<TABLE>
<CAPTION>
-----------------------
CALCULATION OF REGISTRATION FEE
====================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED* PER UNIT* OFFERING PRICE* REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pass-Through Certificates $2,500,000,000 100% $2,500,000,000 $695,000**
- --------------------------------------------------------------------------------------------------------------------
Limited Guarantee of
Oakwood Homes Corporation *** *** *** ***
====================================================================================================================
</TABLE>
* Estimated solely for calculating the registration fee pursuant to Rule
457(a).
** Previously paid.
*** No additional consideration will be paid for the Limited Guarantee;
accordingly no separate filing fee is being paid herewith pursuant to
Rule 457(m).
----------------------------------
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.
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 June 25, 1999
[OAKWOOD MORTGAGE INVESTORS LOGO APPEARS HERE]
OMI Trust 1999-C
Issuer
Oakwood Mortgage Investors, Inc.
Depositor
$299,286,000
Senior/Subordinated Pass-Through Certificates
Series 1999-C
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 $320,093,916. 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. .
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.
<TABLE>
<CAPTION>
UNDERWRITING
PRINCIPAL CLASS MONTHLY PRICE TO DISCOUNTS AND PROCEEDS TO
AMOUNT INTEREST RATE PUBLIC COMMISSIONS ISSUER
-------------- ------------------------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
A-1 Certificates $ 72,200,000 One Month Libor + %(*) % % %
A-2 Certificates $174,200,000 % % % %
M-1 Certificates $ 20,808,000 %(*) % % %
M-2 Certificates $ 16,004,000 %(*) % % %
B-1 Certificates $ 16,004,000 %(*) % % %
Total ........... $299,286,000 $ $ $
</TABLE>
* Capped at the weighted average net asset rate.
The price to the public is per certificate, plus accrued interest from
June 1, 1999 in the case of the class A-2, M-1, M-2 and B-1 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 $400,000.
The first monthly distribution date will be July 15, 1999. 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 June 30, 1999, against payment in
immediately available funds.
CREDIT SUISSE FIRST BOSTON
BANC OF AMERICA SECURITIES LLC
FIRST UNION CAPITAL MARKETS CORP.
Prospectus Supplement dated June 1999.
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION WE PRESENT IN THIS 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 securities 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.
Although the underwriters intend to make a secondary market in your
certificates, it is not required to do so. A secondary market for your
certificates may not develop. If one does develop, it may not continue or
provide sufficient liquidity.
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 September all dealers that sell 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
<TABLE>
<CAPTION>
PAGE
PROSPECTUS SUPPLEMENT -----
<S> <C>
Summary of Terms .......................................... S-1
Risk Factors .............................................. S-4
Description of the Offered Certificates ................... S-5
General ................................................ S-5
Book-Entry Certificates ................................ S-6
Collection of Payments on Assets ....................... S-6
Realized Losses on Liquidated Loans .................... S-7
Allocation of Writedown Amounts ........................ S-8
Distributions .......................................... S-8
Subordination of the Subordinated Certificates ......... S-16
The Asset Pool ............................................ S-16
General ................................................ S-16
Fixed Rate Assets ...................................... S-17
Adjustable Rate Assets ................................. S-19
Selected Data .......................................... S-20
Underwriting Guidelines ................................ S-28
Conveyance of Assets ................................... S-28
Maturity and Prepayment Considerations .................... S-30
Weighted Average Lives of the Offered Certificates ..... S-31
Modeling Assumptions and MHP Tables .................... S-31
Factors Affecting Prepayments .......................... S-36
Yield on the Offered Certificates ...................... S-37
The Trust ................................................. S-40
General ................................................ S-40
The Trustee ............................................ S-40
Optional Termination ................................... S-41
Auction Sale ........................................... S-42
Termination of the Agreement ........................... S-42
Voting Rights .......................................... S-43
Reports to Certificateholders .......................... S-43
Servicing of the Assets ................................... S-44
The Servicer ........................................... S-44
Servicing Portfolio .................................... S-45
Delinquency and Loan Loss/Repossession Experience....... S-45
Collection and Other Servicing Procedures .............. S-48
Servicing Compensation and Payment of Expenses ......... S-48
Advances ............................................... S-49
Successors to Servicer, Delegation of Duties ........... S-49
Use of Proceeds ........................................... S-50
Recent Developments ....................................... S-50
Underwriting .............................................. S-50
Legal Matters ............................................. S-52
ERISA Considerations ...................................... S-52
Ratings ................................................... S-55
Legal Investment Considerations ........................... S-55
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 .................... 12
Maturity ............................................... 12
Prepayment Considerations .............................. 12
</TABLE>
<TABLE>
<S> <C>
Yield Considerations ....................................... 13
The Trusts ................................................. 14
General ................................................. 14
The Assets .............................................. 14
Substitution of Contracts or Mortgage Loans ............. 18
Pre-Funding ............................................. 19
Distribution Account .................................... 20
Reserve Funds ........................................... 20
Insurance ............................................... 20
Delivery of Additional Assets ........................... 25
Investment of Funds ..................................... 25
Certificate Guarantee Insurance ......................... 26
Oakwood Homes Guarantee ................................. 26
Alternate Credit Enhancement ............................ 26
Underwriting Policies ...................................... 27
Oakwood's Contract Underwriting Guidelines .............. 27
General Underwriting Standards for Mortgage Loans .......... 28
Sale and Servicing of Contracts and Mortgage Loans ......... 29
Assignment of Contracts and Mortgage Loans .............. 29
Representations and Warranties .......................... 30
Servicing ............................................... 32
Advances ................................................ 34
Compensating Interest ................................... 35
Maintenance of Insurance Policies and Other
Servicing Procedures .................................. 36
The Pooling and Servicing Agreements ....................... 38
The Servicer ............................................ 38
The Trustee ............................................. 38
Reports to Certificateholders ........................... 39
Events of Default ....................................... 39
Certificateholder Rights ................................ 40
Amendment ............................................... 40
Termination ............................................. 41
Legal Aspects of Contracts and Mortgage Loans ........... 41
The Contracts ........................................... 41
The Mortgage Loans ...................................... 47
Environmental Considerations ............................ 51
Enforceability of Considerations ........................ 52
Use of Proceeds ............................................ 53
The Company ................................................ 53
The Servicer ............................................... 53
Federal Income Tax Consequences ............................ 53
General ................................................. 54
REMIC Certificates ...................................... 54
Tax Treatment of Residual Certificates .................. 69
Taxation of Certain Foreign Holders of REMIC
Certificates .......................................... 82
Reporting and Tax Administration ........................ 83
Non-REMIC Certificates .................................. 84
State Tax Considerations ................................... 91
ERISA Considerations ....................................... 91
Available Information ...................................... 94
Incorporation of Certain Documents by Reference ............ 94
Plan of Distribution ....................................... 95
Legal Investment Considerations ............................ 95
Experts .................................................... 96
Legal Matters .............................................. 96
Index of Terms ............................................. 97
</TABLE>
<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 MORE COMPLETELY 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
Your certificates are being offered by OMI trust 1999-C, which will be
established by Oakwood Mortgage Investors, Inc., a Nevada corporation. On May
28, 1999 Oakwood Mortgage merged with Oakwood Mortgage Investors, Inc., a North
Carolina corporation. The Nevada company now possesses all of the rights and
obligations of the North Carolina company. In Oakwood Mortgage's view this
change will have no effect on you. Oakwood Mortgage maintains its principal
office at 101 Convention Center Drive, Suite 850, Las Vegas, Nevada 89109. Its
telephone number is (702) 949-0056. Your trust will acquire contracts and
mortgage loans from Oakwood Mortgage. These contracts and mortgage loans will
secure payment of your certificates.
Only the class A-1, class A-2, class M-1, class M-2 and class B-1 certificates
are being offered by this prospectus supplement.
The trustee is Chase Manhattan Trust Company, National Association. The
trustee's corporate trust office's address is One Liberty Place, Suite 5210,
1650 Market Street, Philadelphia, Pennsylvania 19163. Its telephone number is
(215) 988-1322.
NEITHER YOUR CERTIFICATES NOR THE UNDERLYING ASSETS WILL BE GUARANTEED OR
INSURED BY ANY GOVERNMENT AGENCY OR ANY OTHER INSURER.
Issuance of your certificates is scheduled for June 30, 1999.
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 and A-2 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.
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.
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, if recoverable. Also, the servicer will pay compensating interest on
assets that prepay on a date other than its due date.
Oakwood Acceptance will be entitled to a monthly fee for servicing the assets
equal to 1.00% per annum of the scheduled principal balance of the assets.
S-1
<PAGE>
SEE "SERVICING OF THE ASSETS" IN THIS PROSPECTUS SUPPLEMENT.
THE ASSETS CONTAINED IN YOUR TRUST
The primary assets of your trust are:
o manufactured housing installment sales contracts secured by interests in
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
manufactured homes are permanently affixed.
The total number of assets is 7,485. Their total principal balance is
$320,093,916.36. Of the total number of assets, 7,417 are fixed-rate assets and
68 are variable-rate assets.
SEE "THE ASSET POOL" IN THIS PROSPECTUS SUPPLEMENT.
THE FINAL SCHEDULED DISTRIBUTION DATE
Assuming that there are no prepayments on the assets, that the servicer does
not exercise its right of optional termination, and that otherwise the modeling
assumptions contained in this prospectus supplement occur, the final scheduled
distribution date for each class of offered certificates will be the
distribution date occurring in the following months:
<TABLE>
<S> <C>
class A-1 April, 2010
class A-2 August, 2027
class M-1 August, 2027
class M-2 August, 2027
class B-1 August, 2027
</TABLE>
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.
OPTIONAL TERMINATION OF YOUR TRUST BY THE SERVICER
The servicer may terminate the trust by buying all of the assets on or after
the later of the distribution date occurring in June 2009 and the date on which
the amount of assets outstanding declines to a level at which, in the
reasonable judgement of the servicer, servicing costs become burdensome. 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 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, M-1, M-2, B-1, B-2 and X certificates will be regular interests in the
issuing REMIC. Therefore, your certificates will evidence debt obligations
under the Internal Revenue Code of 1986, as amended, and interest paid or
accrued will be taxable to you. By acceptance of your certificates, 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 by income. The class A-2 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 and B-1 certificates
are variable rate certificates that will be treated as issued with original
issue discount, regardless of their issue prices. We
S-2
<PAGE>
will use 200% of the manufactured housing prepayment model 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
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
certificates.
BECAUSE THE CLASS M-1, M-2 AND B-1 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 AND B-1 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 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.
THE CLASS M-2 AND B-1 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 S&P and Fitch:
<TABLE>
<CAPTION>
S&P FITCH
----- ------
<S> <C> <C>
Class A-1 AAA AAA
Class A-2 AAA AAA
Class M-1 AA AA
Class M-2 A A
Class B-1 BBB BBB-
</TABLE>
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 YOUR Manufactured housing usually
INVESTMENT IF LOSSES AND DELINQUENCIES depreciates in value. Over time, the
ON ASSETS IN THE TRUST ARE HIGH market values of the manufactured
homes could be less than 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. 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
statistical information related to
the loss experience of Oakwood
Acceptance as servicer is available
under "SERVICING OF THE ASSETS" in
this prospectus supplement.
LOSSES WILL AFFECT SUBORDINATED The class M-1, class M-2 and class
CERTIFICATES BEFORE AFFECTING MORE B-1 certificates are subordinated to
SENIOR CERTIFICATES the class A-1 and A-2, 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 and A-2 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 LIBOR based on one-month , 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.
S-4
<PAGE>
YEAR 2000 INFORMATION SYSTEMS The servicer has analyzed the
PROCEDURES potential 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.
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.
Capitalized terms used in this prospectus supplement but not defined will have
the definitions given to them in the accompanying prospectus. SEE "INDEX OF
TERMS" IN THE PROSPECTUS.
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Senior/Subordinated Pass-Through Certificates, Series 1999-C, will
consist of the class A-1, class A-2, 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
M-1, class M-2 and class B-1 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 Chase
Manhattan Trust Company, National Association 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, beginning in July, 1999, 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
S-5
<PAGE>
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 B-2 certificates will have an initial certificate principal
balance of $20,807,916 and will have a pass-through rate set forth in the
pooling and servicing agreement. 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.
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
Oakwood Acceptance Corporation 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
S-6
<PAGE>
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 redeemed 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.
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 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
S-7
<PAGE>
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
INTEREST DEFICIENCY EVENT AND INTEREST DEFICIENCY AMOUNT
With respect to the class M-1, class M-2 and class B-1 certificates, an
interest deficiency occurs on a distribution date if, after the distribution of
the Available Distribution Amount in the order described in this prospectus
supplement, there remains unpaid any current Interest Distribution Amounts,
Interest Distribution Amounts remaining unpaid from prior distribution dates
plus interest on this carryover amount, Writedown Interest Distribution Amounts
or Carryover Writedown Interest Distribution Amounts on these classes (the
"Interest Deficiency Amount"). If an interest deficiency event occurs on a
distribution date, collections received after the end of the related Collection
Period and prior to the related distribution date will be applied, up to a
limited amount determined by the rating agencies, to remedy this deficiency in
order of class seniority. Any remaining deficiency will be carried forward as
shortfall for the next distribution date.
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, if Oakwood Acceptance is the Servicer, 50% of the
Servicing Fees for the related Collection Period for distribution dates
prior to June 2009, and on and after the June 2009 distribution date
income of Oakwood Acceptance's Servicing Fees, 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, the Interest Deficiency Amount
or portion, if any, paid from collections on the preceding distribution
date, and amounts required to reimburse any party for an overpayment of a
Repurchase Price for an asset.
S-8
<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 offered 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".
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 July 14, 1999, 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" the holders of the offered 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-9
<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
Generally, the Floating Rate Determination Date for any Interest Accrual
Period is the second London banking day prior to the Interest Accrual Period.
For the initial Interest Accrual Period the Floating Rate Determination Date is
the closing date. 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.
S-10
<PAGE>
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.
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 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> <C>
January .......... 4.94% 5.60% 5.44% 5.44% 6.09%
February ......... 4.96 5.69 5.44 5.31 6.13
March ............ 4.94 5.69 5.69 5.44 6.13
April ............ 4.90 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
orrepurchased by the Servicer, Oakwood Acceptance or Oakwood Mortgage
during the related Prepayment Period.
S-11
<PAGE>
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 sum of the class A percentage of the
Principal Distribution Amount and the Class A Reallocation Amount, if any.
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,
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 sum of the class M-1 percentage of
the Principal Distribution Amount and the class M-1 Reallocation Amount,
if any.
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 sum of the class M-2 percentage of
the Principal Distribution Amount and the class M-2 Reallocation Amount,
if any.
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 DistributionTests are
not met and the class A certificates and the class M certificates have
been retired, the Principal Distribution Amount,
o on any other distribution date on or after the Cross-over Date but prior
to the June, 2009 distribution date, the Combined Class B Percentage of
the Principal Distribution Amount, or
o on any other distribution date, the sum of the class B-1 percentage of
the Principal Distribution Amount and the Class B-1 Reallocation Amount,
if any.
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 June, 2009
distribution 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,
S-12
<PAGE>
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.
The principal distribution percentage for any class -- other than the
class B-2 certificates -- 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 Pool Scheduled
Principal Balance of the assets immediately prior to this distribution date.
The class B-2 percentage is the percentage derived from the fraction, which
shall not be greater than 1, the numerator of which is the sum of the class B-2
certificate principal balance, as adjusted for write-downs, and the
Overcollateralization Amount, each immediately prior to this distribution date,
and the denominator of which is the Pool Scheduled Principal Balance of the
assets immediately prior to this distribution date.
The "Combined Class B Percentage" for any distribution date, is the
percentage derived from the fraction, which shall not be greater than 1, the
numerator of which is the sum of the certificate principal balance of the class
B-1 certificates as adjusted for write-downs, the certificate principal balance
of the class B-2 certificates, as adjusted for write-downs and the
Overcollateralization Amount, each immediately prior to the distribution date,
and the denominator of which is the Pool Scheduled Principal Balance of the
assets immediately prior to this distribution date.
The "Class A Reallocation Amount" for any distribution date prior to the
June, 2009 distribution date is the class A certificates' Reallocation
Percentage of the Combined Class B Percentage of the Principal Distribution
Amount distributable after the class B-1 certificates have been paid in full,
and on any other distribution date is the class A certificates' Reallocation
Percentage of the class B-2 percentage of the Principal Distribution Amount
distributable after the class B-2 certificates have been paid in full.
The "Class M-1 Reallocation Amount" for any distribution date prior to the
June, 2009 distribution date is the class M-1 certificates' Reallocation
Percentage of the Combined Class B Percentage of the Principal Distribution
Amount distributable after the class B-1 certificates have been paid in full,
and on any other distribution date is the class M-1 certificates' Reallocation
Percentage of the class B-2 percentage of the Principal Distribution Amount
distributable after the class B-2 certificates have been paid in full.
The "Class M-2 Reallocation Amount" for any distribution date prior to the
June, 2009 distribution date is the class M-2 certificates' Reallocation
Percentage of the Combined Class B Percentage of the Principal Distribution
Amount distributable after the class B-1 certificates have been paid in full,
and on any other distribution date is the M-2 certificates' Reallocation
Percentage of the class B-2 percentage of the Principal Distribution Amount
distributable after the class B-2 certificates have been paid in full.
The "Class B-1 Reallocation Amount" for any distribution date prior to the
June, 2009 distribution date is zero, and on any other Distribution Date is the
class B-1 certificates' Reallocation Percentage of the class B-2 percentage of
the Principal Distribution Amount distributable after the class B-2
certificates have been paid in full.
S-13
<PAGE>
The "Reallocation Percentage" for any class of certificates on any
distribution date 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, if any, immediately prior to this
distribution date, and the denominator of which is the sum of the certificate
principal balances of the class A certificates, the class M certificates and
the class B-1 certificates, each as adjusted for write-downs, if any,
immediately prior to this distribution date.
The "Class B-2 Accelerate Principal Distribution Amount" shall equal, for
any distribution date on or after the June 2009 Distribution Date, all amounts
otherwise distributable to the servicer, the class X certificateholders and the
class R certificateholders under paragraphs (12), (13) and (14) under PRIORITY
OF DISTRIBUTIONS, below, and on any other distribution date it shall equal
zero. The Class B-2 Accelerated Principal Distribution Amount shall be
distributed on the class B-2 certificates as an allocation of principal under
paragraph (11) under PRIORITY OF DISTRIBUTIONS, below, in reduction of the
class B-2 certificate principal balance, until reduced to zero.
OVERCOLLATERALIZATION
The "Overcollateralization Amount" for any distribution date is the
positive difference, if any, between the Pool Scheduled Principal Balance of
the assets and the certificate principal balance of all then outstanding
classes of certificates immediately prior to the 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, 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;
(6) sixth, 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; and
o second, to the class A-2 certificates in reduction of its certificate
principal balance, until reduced to zero;
S-14
<PAGE>
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.
(7) seventh, 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;
(8) eighth, 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;
(9) ninth, 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;
(10) tenth, 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;
(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, any related Principal Distribution Amount until the class
B-2 certificate principal balance is reduced to zero, and the class B-2
Accelerated Principal Distribution Amount for the related distribution date, if
any, in reduction of the class B-2 certificate principal balance until reduced
to zero;
(12) twelfth, if Oakwood Acceptance is the servicer, to the servicer in
the following sequential order:
(i) with respect to any distribution date prior to the June 2009
distribution date, sequentially, first 50% of the Servicing Fee
with respect to the related distribution date, and thereafter all
Servicing Fees from previous distribution dates remaining unpaid;
and
(ii) with respect to any other distribution date, sequentially, all of
the Servicing Fee with respect to the related distribution date,
and thereafter all 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 January 2004 and
S-15
<PAGE>
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 and the Overcollateralization Amount for the
related distribution date and the denominator of which is the Pool
Scheduled Principal Balance on the related distribution date, equals or
exceeds 1.75 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 6%;
o the Cumulative Realized Losses as of the related distribution date do not
exceed the following percentages of the original Pool Scheduled Principal
Balance:
<TABLE>
<S> <C>
January 2004 through June 2005 ..... 7%
July 2005 through June 2006 ........ 8%
July 2006 through December 2007 .... 9.5%
January 2008 and after ............. 10.5%
</TABLE>
o the Current Realized Loss Ratio as of the related distribution date does
not exceed 3.25%.
The Average Sixty-Day Delinquency Ratio is, in general, the ratio of the
average of the aggregate principal balances of assets delinquent 60 days or
more for the preceding three Collection Periods to the average Pool Scheduled
Principal Balance for this period. 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.
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 ASSET POOL
GENERAL
The certificates represent the entire beneficial ownership interest in OMI
trust 1999-C. This trust will be established by the pooling and servicing
agreement dated as of June 1, 1999, together with the standard terms, May 1999
Edition, among 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.
S-16
<PAGE>
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 June 1, 1999 (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 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 7,417 Fixed Rate Assets having an aggregate
Scheduled Principal Balance as of the Cut-off Date of $313,708,370.34. 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 interest rate adjustments during their Step-up
Periods, some step-up rate loans will experience 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
S-17
<PAGE>
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 1.03% of the Fixed Rate Assets were
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 16.32% 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 6.90% per annum and not more than 14.56% per annum. The weighted average
asset rate of the Fixed-Rate Assets was approximately 10.26% 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 10 months but not more than 360 months and original
terms to stated maturity of at least 12 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, 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.
S-18
<PAGE>
The Fixed Rate Assets are secured by manufactured homes or mortgaged
properties, or Real Properties, in the case of Land Secured Contracts, located
in 42 states and the District of Columbia. Approximately 19.17% and 15.87% 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 North Carolina and Texas, respectively. As of the
Cut-off Date, no fewer than approximately 79.76% 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 1.80%,
16.30% and 2.14% 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 68 adjustable rate assets having an
aggregate Scheduled Principal Balance as of the Cut-off Date of $6,385,546.02.
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 2.00% per annum. The
weighted average lifetime cap of the adjustable rate assets as of the Cut-off
Date was approximately 13.00% per annum. The adjustable rate assets had Gross
Margins as of the Cut-off Date of at least 3.25% per annum but not more than
4.50% per annum, with a weighted average Gross Margin of approximately 4.35%
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 6.125% per annum and not more than 8.50% per annum. The weighted average
asset rate of the adjustable rate assets was approximately 7.38% 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 239 months but not more than 360
months and original terms to stated maturity of at least 240 months but not
more than 360 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 355 months, and a weighted
average remaining term to stated maturity of approximately 352 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 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%.
S-19
<PAGE>
The adjustable rate assets are secured by mortgaged properties located in
17 states. Approximately 16.61%, 16.28%, 12.27%, and 10.13% of the adjustable
rate assets were secured as of the Cut-off Date by mortgaged properties located
in North Carolina, Kentucky, Colorado and Washington, 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-20
<PAGE>
FIXED RATE ASSETS
GEOGRAPHIC DISTRIBUTION OF MANUFACTURED HOMES -- FIXED RATE ASSETS
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENTAGE OF
FIXED RATE SCHEDULED FIXED RATE ASSET
GEOGRAPHIC LOCATION ASSETS PRINCIPAL BALANCE POOL BY SPB
- ---------------------- ------------ ------------------- -----------------
<S> <C> <C> <C>
Alabama .............. 283 $ 10,319,228 3.29%
Arizona .............. 263 15,421,265 4.92
Arkansas ............. 148 5,930,398 1.89
California ........... 38 2,360,286 0.75
Colorado ............. 81 4,070,989 1.30
Connecticut .......... 1 30,118 0.01
Delaware ............. 52 2,012,030 0.84
Florida .............. 180 7,831,976 2.43
Georgia .............. 361 14,643,691 4.67
Idaho ................ 91 5,197,072 1.66
Illinois ............. 10 349,139 0.11
Indiana .............. 9 263,138 0.08
Iowa ................. 2 56,588 0.02
Kansas ............... 72 3,117,201 0.99
Kentucky ............. 170 6,631,937 2.11
Louisiana ............ 274 10,912,864 3.48
Maryland ............. 22 876,928 0.28
Massachusetts ........ 1 38,480 0.01
Michigan ............. 63 3,305,969 1.05
Minnesota ............ 2 96,022 0.03
Mississippi .......... 281 10,584,016 3.37
Missouri ............. 122 4,663,588 1.49
Montana .............. 2 189,714 0.05
Nevada ............... 35 1,877,289 0.80
New Jersey ........... 5 281,041 0.08
New Mexico ........... 208 8,729,819 2.78
New York ............. 3 118,264 0.04
North Carolina ....... 1,523 60,150,066 19.17
Ohio ................. 86 3,232,359 1.03
Oklahoma ............. 121 4,987,707 1.59
Oregon ............... 73 5,909,362 1.88
Pennsylvania ......... 5 184,089 0.05
South Carolina ....... 598 22,655,059 7.22
South Dakota ......... 1 49,556 0.02
Tennessee ............ 377 14,438,841 4.80
Texas ................ 1,187 49,771,100 15.87
Utah ................. 26 1,419,844 0.45
Virginia ............. 387 14,863,000 4.74
Washington ........... 129 11,570,173 3.89
Washington DC ........ 1 42,991 0.01
West Virginia ........ 129 4,366,667 1.39
Wisconsin ............ 2 121,889 0.04
Wyoming .............. 8 299,876 0.10
----- ------------ ------
Total .............. 7,417 $313,708,370 100.00%
===== ============ ======
</TABLE>
- ---------
Based on the mailing address of the obligor on the related Fixed Rate Asset as
of the Cut-off Date.
S-21
<PAGE>
DISTRIBUTION OF ORIGINAL FIXED RATE ASSET AMOUNTS(1)
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENTAGE OF
FIXED RATE SCHEDULED FIXED RATE ASSET POOL
ORIGINAL FIXED RATE ASSET AMOUNT ASSETS PRINCIPAL BALANCE BY SPB
- ---------------------------------- ------------ ------------------- ----------------------
<S> <C> <C> <C>
$ 4,999 or less.................. 16 $ 61,340 0.02%
$ 5,000 - $ 9,999............... 98 716,418 0.23
$ 10,000 - $ 14,999............... 149 1,847,789 0.59
$ 15,000 - $ 19,999............... 314 5,499,883 1.75
$ 20,000 - $ 24,999............... 643 14,545,486 4.84
$ 25,000 - $ 29,999............... 968 26,721,292 8.52
$ 30,000 - $ 34,999............... 1,163 37,498,918 11.95
$ 35,000 - $ 39,999............... 801 29,810,550 9.50
$ 40,000 - $ 44,999............... 546 23,177,172 7.30
$ 45,000 - $ 49,999............... 582 26,168,828 8.98
$ 50,000 - $ 54,999............... 620 27,212,486 8.67
$ 55,000 - $ 59,999............... 483 27,742,808 8.84
$ 60,000 - $ 64,999............... 317 19,698,340 6.28
$ 65,000 - $ 69,999............... 176 12,017,274 3.83
$ 70,000 - $ 74,999............... 148 10,527,415 3.38
$ 75,000 - $ 79,999............... 108 8,204,211 2.82
$ 80,000 - $ 84,999............... 88 5,573,816 1.78
$ 85,000 - $ 89,999............... 43 3,748,470 1.19
$ 90,000 - $ 94,999............... 48 4,425,557 1.41
$ 95,000 - $ 99,999............... 37 3,598,983 1.15
$100,000 or more.................. 183 22,924,554 7.31
----- ------------ ------
Total .......................... 7,417 $313,708,370 100.00%
===== ============ ======
</TABLE>
- ---------
(1) The highest original Fixed Rate Asset amount was $205,736, which represents
approximately 0.07% of the aggregate principal balance of the Fixed Rate
Assets at origination. The average original principal amount of the Fixed
Rate Assets was approximately $42,296 as of the Cut-off Date.
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS OF FIXED RATE ASSETS(1)
<TABLE>
<CAPTION>
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>
50% or less ........ 66 $ 1,827,209 0.58%
51% - 55% .......... 20 641,586 0.20
56% - 60% .......... 27 863,730 0.28
61% - 65% .......... 45 1,646,507 0.52
66% - 70% .......... 92 3,645,058 1.16
71% - 75% .......... 148 5,697,060 1.82
76% - 80% .......... 281 10,696,896 3.41
81% - 85% .......... 679 24,376,428 7.77
86% - 90% .......... 1,493 56,841,825 18.12
91% - 95% .......... 2,478 105,800,001 33.73
96% - 100% ......... 2,088 101,673,072 32.41
----- ------------ ------
Total ............. 7,417 $313,708,370 100.00%
===== ============ ======
</TABLE>
- ---------
(1) The weighted average original Loan-to-Value Ratio of the Fixed Rate Assets
was approximately 91.62% as of the Cut-off Date.
(2) Rounded to nearest 1%.
S-22
<PAGE>
FIXED RATE ASSET RATES(1)
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENTAGE OF
FIXED RATE SCHEDULED FIXED RATE ASSET
ASSET RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- ------------------------ ------------ ------------------- -----------------
<S> <C> <C> <C>
6.000 - 6.999% ........ 40 $ 2,360,370 0.75%
7.000 - 7.999% ........ 791 53,533,140 17.06
8.000 - 8.999% ........ 973 54,413,406 17.35
9.000 - 9.999% ........ 917 48,890,061 15.58
10.000 - 10.999% ....... 719 31,331,874 9.99
11.000 - 11.999% ....... 1,450 43,680,242 13.92
12.000 - 12.999% ....... 2,281 71,634,771 22.83
13.000 - 13.999% ....... 243 7,805,773 2.49
14.000 - 14.999% ....... 3 58,733 0.02
----- ------------ ------
Total ................ 7,417 $313,708,370 100.00%
===== ============ ======
</TABLE>
- ---------
(1) The weighted average Fixed Rate Asset Rate was approximately 10.26% 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.
YEAR OF ORIGINATION OF FIXED RATE ASSETS(1)
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENTAGE OF
FIXED RATE SCHEDULED FIXED RATE ASSET
YEAR OF ORIGINATION ASSETS PRINCIPAL BALANCE POOL BY SPB
- --------------------- ------------ ------------------- -----------------
<S> <C> <C> <C>
1990 ................ 1 $ 31,413 0.01%
1991 ................ 1 12,475 0.00
1993 ................ 1 15,428 0.00
1995................. 2 34,730 0.01
1996................. 1 17,258 0.01
1997................. 6 332,863 0.11
1998................. 103 5,746,750 1.83
1999................. 7,302 307,517,464 98.03
----- ------------ ------
Total ............. 7,417 $313,708,370 100.00%
===== ============ ======
</TABLE>
- ---------
(1) The weighted average seasoning of the Fixed Rate Assets was approximately 2
months as of the Cut-off Date.
S-23
<PAGE>
REMAINING TERMS TO MATURITY OF FIXED RATE ASSETS (IN MONTHS)(1)
<TABLE>
<CAPTION>
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>
1 - 60 months ............ 125 $ 1,015,625 0.32%
61 - 96 months ............ 124 1,759,689 0.56
97 - 120 months ........... 233 4,505,741 1.44
121 - 156 months ........... 328 7,245,738 2.31
157 - 180 months ........... 750 21,698,775 6.92
181 - 216 months ........... 148 4,469,607 1.42
217 - 240 months ........... 2,178 72,908,268 23.24
241 - 300 months ........... 1,337 58,721,144 18.72
301 - 360 months ........... 2,194 141,385,803 45.07
----- ------------ ------
Total .................... 7,417 $313,708,370 100.00%
===== ============ ======
</TABLE>
- ---------
(1) The weighted average remaining term to maturity of the Fixed Rate Assets
was approximately 293 months as of the Cut-off Date.
ORIGINAL TERMS TO MATURITY OF FIXED RATE ASSETS (IN MONTHS)(1)
<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>
1 - 60 months ........... 124 1,001,756 0.32
61 - 96 months ........... 123 1,743,806 0.58
97 - 120 months .......... 230 4,453,358 1.42
121 - 156 months .......... 329 7,265,221 2.32
157 - 180 months .......... 754 21,761,407 6.94
181 - 216 months .......... 146 4,401,687 1.40
217 - 240 months .......... 2,179 72,939,165 23.25
241 - 300 months .......... 1,338 58,756,147 18.73
301 - 360 months .......... 2,194 141,385,803 45.07
----- ----------- ------
Total ................... 7,417 $313,708,370 100.00%
===== ============ ======
</TABLE>
- ---------
(1) The weighted average original term to maturity of the Fixed Rate Assets was
approximately 295 months as of the Cut-off Date.
S-24
<PAGE>
ADJUSTABLE RATE ASSETS
GEOGRAPHIC DISTRIBUTION OF MANUFACTURED HOMES(1)
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENTAGE OF
FIXED RATE SCHEDULED FIXED RATE ASSET
GEOGRAPHIC LOCATION ASSETS PRINCIPAL BALANCE POOL BY SPB
- ---------------------- ------------ ------------------- -----------------
<S> <C> <C> <C>
Arizona .............. 1 $ 88,402 1.38%
Colorado ............. 7 783,488 12.27
Georgia .............. 1 87,907 1.38
Idaho ................ 2 230,971 3.82
Indiana .............. 1 92,449 1.45
Kansas ............... 2 193,187 3.03
Kentucky ............. 13 1,039,490 16.28
New Mexico ........... 2 182,618 2.86
North Carolina ....... 12 1,060,710 16.61
Ohio ................. 2 156,485 2.45
Oklahoma ............. 2 216,124 3.38
Oregon ............... 6 579,384 9.07
Tennessee ............ 7 575,819 9.02
Texas ................ 1 118,230 1.85
Utah ................. 1 88,422 1.38
Virginia ............. 3 244,970 3.84
Washington ........... 5 646,911 10.13
-- ---------- ------
Total .............. 68 $6,385,646 100.00%
== ========== ======
</TABLE>
Based on the mailing address of the obligor on the related Adjustable Rate
Asset as of the Cut-off Date.
DISTRIBUTION OF ORIGINAL ADJUSTABLE RATE ASSET AMOUNTS(1)
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE ADJUSTABLE
ADJUSTABLE SCHEDULED RATE ASSET
ORIGINAL ADJUSTABLE RATE ASSET AMOUNT RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- --------------------------------------- ------------- ------------------- --------------
<S> <C> <C> <C>
$55,000-$59,999 ..................... 1 $ 55,244 0.87%
$60,000-$64,999 ..................... 1 84,816 1.02
$65,000-$69,999 ..................... 2 138,741 2.17
$70,000-$74,999 ..................... 9 645,307 10.11
$75,000-$79,999 ..................... 5 391,631 6.13
$80,000-$84,999 ..................... 8 651,600 10.21
$85,000-$89,999 ..................... 8 700,414 10.97
$90,000-$94,999 ..................... 4 372,588 5.83
$95,000-$99,999 ..................... 5 485,009 7.60
$100,000 or more ..................... 25 2,880,019 45.10
-- ---------- ------
Total ............................... 68 $6,386,645 100.00%
== ========== ======
</TABLE>
- ---------
(1) The highest original adjustable rate asset amount was $165,401, which
represents approximately 12.59% of the aggregate principal balance of the
adjustable rate assets at origination. The average original principal
amount of the adjustable rate assets was approximately $93,918 as of the
Cut-off Date.
S-25
<PAGE>
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS OF ADJUSTABLE RATE ASSETS(1)
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE ADJUSTABLE
ADJUSTABLE SCHEDULED RATE ASSET
LOAN-TO-VALUE RATIO (2) RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- ------------------------- ------------- ------------------- --------------
<S> <C> <C> <C>
66% - 70% ............. 2 $ 192,402 3.01%
71% - 75% ............. 2 185,074 2.90
76% - 80% ............. 4 315,168 4.94
81% - 85% ............. 4 380,379 5.96
86% - 90% ............. 3 295,818 4.63
91% - 95% ............. 11 971,808 15.22
96% - 100% ............. 42 4,044,897 63.34
-- ---------- ------
Total ................. 68 $6,386,546 100.00%
== ========== ======
</TABLE>
- ---------
(1) The weighted average original Loan-to-Value Ratio of the Adjustable Assets
was approximately 93.92% as of the Cut-off Date.
(2) Rounded to nearest 1%.
ADJUSTABLE RATE CURRENT ASSET RATES(1)
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE ADJUSTABLE
ADJUSTABLE SCHEDULED RATE ASSET
CURRENT ASSET RATE RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- ------------------------ ------------- ------------------- --------------
<S> <C> <C> <C>
6.000% - 6.999% ....... 11 $1,099,319 17.22%
7.000% - 7.999% ....... 43 3,843,004 60.18
8.000% - 8.999% ....... 14 1,443,223 22.60
-- ---------- ------
Total ................ 68 $6,385,546 100.00%
== ========== ======
</TABLE>
- ---------
(1) The weighted average adjustable rate asset rate was approximately 7.38% 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.
DISTRIBUTION OF ADJUSTABLE RATE ASSETS GROSS MARGINS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE ADJUSTABLE
ADJUSTABLE SCHEDULED RATE ASSET
GROSS MARGIN RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- ------------------------ ------------- ------------------- --------------
<S> <C> <C> <C>
3.250% - 3.500% ....... 10 $ 913,361 14.30%
4.250% - 4.500% ....... 58 5,472,185 85.70
-- ---------- ------
Total ................ 68 $6,385,546 100.00%
== ========== ======
</TABLE>
- ---------
(1) The weighted average Gross Margin of the adjustable rate assets was
approximately 4.35% as of the Cut-off Date.
S-26
<PAGE>
MAXIMUM ASSET RATES OF ADJUSTABLE RATE ASSETS
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENTAGE OF
FIXED RATE SCHEDULED FIXED RATE ASSET
MAXIMUM ASSET RATES ASSETS PRINCIPAL BALANCE POOL BY SPB
- -------------------------- ------------ ------------------- -----------------
<S> <C> <C> <C>
13.000% to 13.625% .......
14.000% to 14.625% .......
------------ --------------- ------------
Total .................. $ %
============ =============== ============
</TABLE>
- ---------
(1) The weighted average maximum Asset Rate of the adjustable rate assets was
approximately % per annum as of the Cut-Off Date.
YEAR OF ORIGINATION OF ADJUSTABLE RATE ASSETS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE ADJUSTABLE
ADJUSTABLE SCHEDULED RATE ASSET
YEAR OF ORIGINATION RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- --------------------- ------------- ------------------- --------------
<S> <C> <C> <C>
1998................ 18 $1,775,133 27.80%
1999................ 50 4,610,413 72.20
-- ---------- ------
Total ............. 68 $6,385,546 100.0%
== ========== ======
</TABLE>
- ---------
(1) The weighted average seasoning of the adjustable rate assets was
approximately 3 months as of the Cut-off Date.
REMAINING TERMS TO MATURITY, OF ADJUSTABLE RATE ASSETS (IN MONTHS)(1)
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE ADJUSTABLE
ADJUSTABLE SCHEDULED RATE ASSET
REMAINING TERM TO MATURITY RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- ---------------------------- ------------- ------------------- --------------
<S> <C> <C> <C>
217 - 240 months .......... 2 $ 143,014 2.24%
241 - 300 months .......... 3 252,836 3.96
301 - 360 months .......... 63 5,989,696 93.80
-- ---------- ------
Total ................... 68 $6,385,546 100.00%
== ========== ======
</TABLE>
- ---------
(1) The weighted average remaining term to maturity of the adjustable rate
assets was approximately 352 months as of the Cut-off Date.
ORIGINAL TERMS TO MATURITY, IN MONTHS, OF ADJUSTABLE RATE ASSETS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE ADJUSTABLE
ADJUSTABLE SCHEDULED RATE ASSET
ORIGINAL TERMS TO MATURITY RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- ---------------------------- ------------- ------------------- --------------
<S> <C> <C> <C>
240 months ................ 2 $ 143,014 2.24%
300 months ................ 3 252,836 3.96
360 months ................ 63 5,989,696 93.80
-- ---------- ------
Total .................... 68 $6,385,546 100.00%
== ========== ======
</TABLE>
- ---------
(1) The weighted average original term to maturity of the adjustable rate
assets was approximately 355 months as of the Cut-off Date.
S-27
<PAGE>
DISTRIBUTION OF NEXT CONTRACT RATE CHANGE DATE OF ADJUSTABLE RATE ASSETS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE ADJUSTABLE
ADJUSTABLE SCHEDULED RATE ASSET
NEXT CONTRACT RATE CHANGE DATE RATE ASSETS PRINCIPAL BALANCE POOL BY SPB
- -------------------------------- ------------- ------------------- --------------
<S> <C> <C> <C>
August 1, 1999 ................ 1 $ 99,552 1.56%
December 1, 1999 .............. 1 77,512 1.21
January 1,2000 ................ 8 751,880 11.77
February 1, 2000 .............. 10 1,071,724 16.78
March 1, 2000 ................. 8 794,106 12.44
April 1, 2000 ................. 21 1,938,072 30.35
May 1, 2000 ................... 13 1,161,104 18.18
June 1, 2000 .................. 6 491,614 7.70
-- ---------- ------
Total ........................ 88 $6,385,646 100.00%
== ========== ======
</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, 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 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;
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
S-28
<PAGE>
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 Nevada. 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, 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 "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 qualified 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.
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
S-29
<PAGE>
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 the subject of 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.
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
S-30
<PAGE>
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 same effect as a prepayment of the existing asset in
full. SEE "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 manufactured housing 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
May 1999, and will include 30 days of interest thereon;
o the servicer exercises the right of optional termination at the earliest
possible date;
S-31
<PAGE>
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 June 30,
1999;
o cash distributions will be received by the holders of the certificates on
July 15, 1999 and on the 15th day of each month thereafter until
retirement of the certificates;
o 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.
ASSUMED FIXED RATE ASSET CHARACTERISTICS
<TABLE>
<CAPTION>
SCHEDULED REMAINING
PRINCIPAL BALANCE TERM TO
AS OF THE ASSET MATURITY SEASONING
CUT-OFF DATE RATE (MONTHS) (MONTHS)
LEVEL PAY ASSETS ------------------- ------- ---------- ----------
<S> <C> <C> <C> <C>
1.................
2.................
3.................
4.................
5.................
</TABLE>
STEP-UP RATE ASSETS
<TABLE>
<CAPTION>
SCHEDULED REMAINING
PRINCIPAL BALANCE TERM TO
AS OF THE ASSET MATURITY SEASONING
CUT-OFF DATE RATE (MONTHS) (MONTHS)
------------------- ------- ---------- -----------
<S> <C> <C> <C> <C>
1......
2......
3......
<CAPTION>
MONTHS TO MONTHS TO MONTHS TO FIRST STEP SECOND STEP THIRD STEP
FIRST SECOND THIRD RATE RATE RATE
STEP STEP STEP STEP STEP STEP
----------- ----------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1......
2......
3......
</TABLE>
- ---------
* Not applicable.
ASSUMED ADJUSTABLE RATE ASSET CHARACTERISTICS
<TABLE>
<CAPTION>
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, even
though 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
S-32
<PAGE>
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.
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.
S-33
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL BALANCES OUTSTANDING
<TABLE>
<CAPTION>
CLASS A-1 CERTIFICATES AT THE FOLLOWING CLASS A-2 CERTIFICATES AT THE FOLLOWING
PERCENTAGE OF MHP PERCENTAGE 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>
Initial Percent .......
June 15, 2000 .........
June 15, 2001 .........
June 15, 2002 .........
June 15, 2003 .........
June 15, 2004 .........
June 15, 2005 .........
June 15, 2006 .........
June 15, 2007 .........
June 15, 2008 .........
June 15, 2009 .........
June 15, 2010 .........
June 15, 2011 .........
June 15, 2012 .........
June 15, 2013 .........
June 15, 2014 .........
June 15, 2015 .........
June 15, 2016 .........
June 15, 2017 .........
June 15, 2018 .........
June 15, 2019 .........
June 15, 2020 .........
June 15, 2021 .........
June 15, 2022 .........
June 15, 2023 .........
June 15, 2024 .........
June 15, 2025 .........
June 15, 2026 .........
June 15, 2027 .........
June 15, 2028 .........
June 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>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL BALANCES OUTSTANDING
<TABLE>
<CAPTION>
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>
Initial Percent .......
June 15, 2000 .........
June 15, 2001 .........
June 15, 2002 .........
June 15, 2003 .........
June 15, 2004 .........
June 15, 2005 .........
June 15, 2006 .........
June 15, 2007 .........
June 15, 2008 .........
June 15, 2009 .........
June 15, 2010 .........
June 15, 2011 .........
June 15, 2012 .........
June 15, 2013 .........
June 15, 2014 .........
June 15, 2015 .........
June 15, 2016 .........
June 15, 2017 .........
June 15, 2018 .........
June 15, 2019 .........
June 15, 2020 .........
June 15, 2021 .........
June 15, 2022 .........
June 15, 2023 .........
June 15, 2024 .........
June 15, 2025 .........
June 15, 2026 .........
June 15, 2027 .........
June 15, 2028 .........
June 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-35
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL BALANCES OUTSTANDING
<TABLE>
<CAPTION>
CLASS B-1 CERTIFICATES AT THE FOLLOWING
PERCENTAGE OF MHP
--------------------------------------
0% 100% 150% 200% 250% 300%
<S> <C> <C> <C> <C> <C> <C>
Initial Percent ..........
June 15, 2000 ............
June 15, 2001 ............
June 15, 2002 ............
June 15, 2003 ............
June 15, 2004 ............
June 15, 2005 ............
June 15, 2006 ............
June 15, 2007 ............
June 15, 2008 ............
June 15, 2009 ............
June 15, 2010 ............
June 15, 2011 ............
June 15, 2012 ............
June 15, 2013 ............
June 15, 2014 ............
June 15, 2015 ............
June 15, 2016 ............
June 15, 2017 ............
June 15, 2018 ............
June 15, 2019 ............
June 15, 2020 ............
June 15, 2021 ............
June 15, 2022 ............
June 15, 2023 ............
June 15, 2024 ............
June 15, 2025 ............
June 15, 2026 ............
June 15, 2027 ............
June 15, 2028 ............
June 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.
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.
S-36
<PAGE>
In general, if prevailing interest rates fall significantly below the
interest rates on the assets in your pool, these assets are likely to
experience higher prepayment rates than if prevailing interest rates remained
at or above the rates borne by 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 or after the distribution date
occurring in June 2009 or a date on which the amount of assets outstanding
declines to a level at which, in the reasonable judgement of the servicer,
servicing costs become burdensome, whichever occurs later. 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.
S-37
<PAGE>
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
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 and class A-2 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 -- or the distribution date occurring in June 2009
in the case of the class B-2 certificates -- 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. 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
S-38
<PAGE>
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. Similarly, Realized Losses after the June 2009 distribution date will
reduce the class B-2 Accelerated Principal Distribution Amount and delay the
amortization of the class B-2 certificates.
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.
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, and
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.
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
S-39
<PAGE>
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, May 1999
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 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 Chase Manhattan Trust Company, National Association. Any
notices to the trustee relating to the certificates or the pooling and
servicing agreement should be sent to One Liberty Place, Suite 5210, 1650
Market Street, Philadelphia, Pennsylvania 19103, attention OMI Trust 1999-C.
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 (800) 275-2048.
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
S-40
<PAGE>
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 or after the
distribution date occurring in June 2009 or on a date on which the amount of
assets outstanding declines to a level at which, in the reasonable judgement of
the servicer, servicing costs become burdensome, whichever occurs later. 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 previously unreimbursed 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 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
S-41
<PAGE>
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 AMOUNG 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 CERTIFICATE
HOLDERS -- 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 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.
S-42
<PAGE>
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 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 madeon the related distribution date;
S-43
<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 the aggregate 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; 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 362, as of December 31, 1998, sales centers
located in 28 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-44
<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.
ASSET SERVICING PORTFOLIO
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-----------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total Number of Serviced
Assets
Oakwood Acceptance
Originated ............. 39,273 51,566 67,120 89,411 111,351
Acquired Portfolios ...... 5,773 4,872 4,177 3,602 2,818
Aggregate Outstanding
Principal Balance of
Serviced Assets
Oakwood Acceptance
Originated ............. $ 757,640 $ 1,130,378 $ 1,687,406 $ 2,499,794 $ 3,536,657
Acquired Portfolios ...... $ 85,227 $ 70,853 $ 57,837 $ 47,027 $ 35,882
Average Outstanding
Principal Balance per
Serviced Asset
Oakwood Acceptance
Originated ............. $ 19.3 $ 21.9 $ 25.1 $ 28.0 $ 31.8
Acquired Portfolios ...... $ 14.8 $ 14.5 $ 13.8 $ 13.1 $ 12.7
Weighted Average Interest
Rate of Serviced Assets
Oakwood Acceptance
Originated ............. 12.2% 12.0% 11.5% 11.0% 10.8%
Acquired Portfolios ...... 11.0% 11.3% 11.2% 11.1% 11.0%
<CAPTION>
AT MARCH 31,
-------------------------------
1998 1999
--------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total Number of Serviced
Assets
Oakwood Acceptance
Originated ............. 99,878 117,673
Acquired Portfolios ...... 3,221 2,471
Aggregate Outstanding
Principal Balance of
Serviced Assets
Oakwood Acceptance
Originated ............. $ 2,937,886 $ 3,874,548
Acquired Portfolios ...... $ 40,919 $ 30,532
Average Outstanding
Principal Balance per
Serviced Asset
Oakwood Acceptance
Originated ............. $ 29.4 $ 32.9
Acquired Portfolios ...... $ 12.7 $ 12.4
Weighted Average Interest
Rate of Serviced Assets
Oakwood Acceptance
Originated ............. 11.0% 10.7%
Acquired Portfolios ...... 11.1% 10.9%
</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.
S-45
<PAGE>
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------- ---------- -----------
<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 99,878 117,673
Acquired Portfolios ..................... 5,773 4,872 4,177 3,602 2,818 3,221 2,471
Number of Delinquent Assets
Oakwood Acceptance Originated:
30 to 59 days past due .................. 350 601 835 1,171 2,345 1,445 1,560
60 to 89 days past due .................. 97 185 308 476 906 499 630
90 days or more past due ................ 198 267 492 716 1,222 1,004 1,475
Total Number of Assets
Delinquent ............................ 645 1,053 1,635 2,363 4,473 2,948 3,665
Acquired Portfolios:
30-59 days past due ..................... 127 63 66 90 75 72 32
60-89 days past due ..................... 49 17 23 23 31 31 14
90 days or more past due ................ 98 76 62 75 57 61 59
Total Number of Assets
Delinquent ............................ 274 156 151 188 163 164 105
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% 3.0% 3.1%
Acquired Portfolios ..................... 4.7% 3.2% 3.6% 5.2% 5.8% 5.1% 4.2%
</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.
LOAN LOSS/REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------------------------------------------------------
1994 1995 1996 1997 1998
------------ ------------ -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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%
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED MARCH 31,
-----------------------------
1998 1999
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total Number of Serviced Assets at Period
End .......................................... 103,099 120,144
Average Number of Serviced Assets During
Period ....................................... 98,056 117,157
Number of Serviced Assets Repossessed ......... 2,429 3,810
Serviced Assets Repossessed as a Percentage
of Total Serviced Assets (1) ................. 4.71% 6.34%
Serviced Assets Repossessed as a Percentage
of Average Number of Serviced Assets ......... 4.95% 6.50%
Average Outstanding Principal Balance of
Assets
Oakwood Acceptance Originated ................ $2,677,949 $3,663,991
Acquired Portfolios .......................... $ 20,088 $ 15,721
Net Losses from Asset Liquidations (2):
Total Dollars
Oakwood Acceptance Originated ............... $ 19,767 $ 36,984
Acquired Portfolios ......................... $ 135 $ 105
As a Percentage of Average Outstanding
Principal Balance of Assets (3)
Oakwood Acceptance Originated ................ 1.48% 2.02%
Acquired Portfolios .......................... 1.34% 1.34%
</TABLE>
- ---------
Percentages expressed in the six 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.
S-46
<PAGE>
(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.
Oakwood Acceptance owns few of the assets in the foregoing tables, and
accordingly does not maintain loan loss reserves or charge-off loans. The
policy with respect to the vast majority of loans reflected in these tables,
which Oakwood Acceptance services primarily for the accounts of securitization
trusts, is to reflect credit loss only when an REO Property or a Repo Property
has been finally disposed of and not before. In most cases, disposition occurs
shortly after the asset becomes 90 days delinquent; however it may occur before
this time and it may occur later. This policy exists because only at the final
disposition of the collateral does Oakwood Acceptance know with certainty the
amount of the loss, if any, for reporting purposes.
Oakwood Acceptance's loan loss/repossession experience has shown an
increase since 1994, and its delinquency experience also has generally trended
upward during that time. It is difficult to isolate the reason for that trend,
and it is probably attributable to a number of factors, many of which are
outside the control of Oakwood Acceptance. Although Oakwood Acceptance reviews
and revises its underwriting standards from time to time, Oakwood Acceptance
does not believe that its underwriting standards on the whole have changed
materially since 1994 except that there has been an increase in the
loan-to-value ratios over the past several years. Although Oakwood Acceptance
has not confirmed the matter statistically, there is likely a greater
probability of default as loan-to-value ratios increase. In addition, Oakwood
Acceptance believes that the loan loss/repossession experience and delinquency
experience in 1994 was low when compared to historical averages.
Macroeconomic and social conditions likely are responsible for the trend
to some extent as well, although it is difficult to say for certain. For
example, the U.S. economy has witnessed a general increase in consumer credit
over the past several years, and credit also has been made more generally
available to all economic classes than in the past. Finally, there seems to be
an increased willingness on the part of consumers to seek the protection of
federal bankruptcy laws.
Oakwood Acceptance has advised 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 its dealers. A
replacement servicer may not have similar access and, as a consequence, the
loan loss/repossession experience could be adversely affected.
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 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.
S-47
<PAGE>
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
SUPPLEMENT 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
S-48
<PAGE>
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.
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.
If an asset is liquidated or prepaid in full other than on a due date, the
obligor generally is only required to pay interest to the date of liquidation
or prepayment. In such event, for so long as Oakwood Acceptance is the servicer
of the asset, the servicer is obligated to pay compensating interest to the
next due date, so long as this compensating interest does not exceed the
servicer's aggregate servicing compensation for the month.
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
S-49
<PAGE>
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.
RECENT DEVELOPMENTS
Oakwood Homes, the parent corporation of both Oakwood Acceptance and
Oakwood Mortgage, announced on June 18, 1999 that its board of directors will
be exploring strategic alternatives to enhance shareholder value including a
merger or sale of Oakwood Homes. The board of directors stated that Oakwood
Homes' management was pursuing the possibility of a management lead buyout.
Discussion of these matters is preliminary, and there can be no assurance that
a transaction will result. Oakwood Homes' board of directors will engage a
financial advisor to advise it in its consideration of strategic alternatives.
During November and December, 1998, Oakwood Homes and some of its officers
and directors were named as defendants in lawsuits filed on behalf of
purchasers of Oakwood Homes' common stock between April 11, 1997 and July 21,
1998. These suits were filed in the United States District Court for the Middle
District of North Carolina and in the United States District Court for the
Eastern District of Arkansas. They allege violations of the Exchange Act in
statements made by Oakwood Homes concerning its business and financial
operations. Oakwood Homes intends to defend these suits vigorously. Oakwood
Mortgage believes that these lawsuits will not adversely affect payments to be
made on your certificates.
UNDERWRITING
Oakwood Mortgage and Oakwood Acceptance have entered into an underwriting
agreement dated June , 1999 with Credit Suisse First Boston Corporation, Banc
of America Securities LLC and First Union Capital Markets Corp. (the
"Underwriters"), for whom Credit Suisse First Boston Corporation is acting as
representative (the "Representative"). 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:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
----------- ----------
<S> <C> <C>
Credit Suisse First Boston Corporation ........ $ $
Banc of America Securities LLC ................ $ $
First Union Capital Markets Corp .............. $ $
Total .................................... $ $
</TABLE>
S-50
<PAGE>
<TABLE>
<CAPTION>
CLASS M-1 CLASS M-2 CLASS B-1
----------- ----------- -----------
<S> <C> <C> <C>
Credit Suisse First Boston Corporation ....... $ $ $
Banc of America Securities LLC ............... $ $ $
First Union Capital Markets Corp. ............ $ $ $
Total ................................... $ $ $
</TABLE>
The underwriting agreement provides that there are conditions precedent to
the obligations of the several Underwriters 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.
<TABLE>
<CAPTION>
CONCESSION DISCOUNT
(PERCENT OF (PERCENT OF
PRINCIPAL PRINCIPAL
AMOUNT) AMOUNT)
------------- ------------
<S> <C> <C>
Class A-1 .............. % %
Class A-2 .............. % %
Class M-1 .............. % %
Class M-2 .............. % %
Class B-1 .............. % %
</TABLE>
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-51
<PAGE>
Oakwood Mortgage estimates that its expenses in connection with the
issuance and offering of the certificates will be approximately $400,000. This
information concerning Oakwood Mortgage's fees and expenses is an approximation
and may be changed by future contingencies.
The assets have been the subject of financing provided by a revolving
warehouse financing facility with a multi-seller conduit commercial paper
issuer sponsored by NationsBank, N.A., an affiliate of Banc of America
Securities LLC.
LEGAL MATTERS
Legal matters will be passed upon for Oakwood Mortgage by Hunton &
Williams, Richmond, Virginia, and for the Underwriter by Simpson Thacher &
Bartlett, New York, New York. 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 must follow the requirements of 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 must follow the requirements of 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
Credit Suisse First Boston Corporation (Prohibited Transaction Exemption 89-90;
Exemption Application No. D-6555, 54 Fed. Reg. 42,581 (1989), 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
S-52
<PAGE>
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:
o 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;
o 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;
o 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., Standard & Poor's
Rating Services, a division of The McGraw-Hill Companies, Inc., Fitch
IBCA, Inc. or Duff & Phelps Credit Rating Co. (collectively, the
"Exemption Rating Agencies");
o the trustee of the related trust must not be an affiliate of any other
member of the Restricted Group;
o 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;
o 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
o 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
S-53
<PAGE>
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.
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, Oakwood Mortgage expects that the conditions
set forth in the second, third and fourth bullet points of the fifth paragraph
of this section will be satisfied with respect to the class A certificates.
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 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 96-23, regarding investment decisions by in-house asset managers;
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 84-14, regarding investment decisions made by a qualified plan
asset manager.
Before purchasing class A certificates, a Plan that must follow 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 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 TRANSFERABLE, 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.
S-54
<PAGE>
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
THAT MUST FOLLOW 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 CERTIFICATE 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 S&P and Fitch:
<TABLE>
<CAPTION>
S&P FITCH
----- ------
<S> <C> <C>
Class A-1 ........ AAA AAA
Class A-2 ........ AAA AAA
Class M-1 ........ AA AA
Class M-2 ........ A A
Class B-1 ........ BBB BBB-
</TABLE>
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
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 revised or withdrawn at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
Oakwood Mortgage will request S&P and Fitch 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
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, unless there are state
S-55
<PAGE>
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-1 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. These are significant interpretive uncertainties in determining
the appropriate characterization of the class M-2 and class B-1 certificates
under various legal investment restrictions, and thus the ability of investors
that face legal restrictions to purchase the class M-2 and class B-1
certificates. Any financial institution regulated by 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 that must observe 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 must follow investment, capital or other restrictions. SEE "LEGAL
INVESTMENT CONSIDERATIONS" IN THE PROSPECTUS.
S-56
<PAGE>
PROSPECTUS
OAKWOOD MORTGAGE INVESTORS, INC.
DEPOSITOR
PASS-THROUGH CERTIFICATES, ISSUABLE IN SERIES
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------
o 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.
CONSIDER CAREFULLY THE RISK
FACTORS BEGINNING ON PAGE 1 IN YOUR CERTIFICATES:
------------------
THIS PROSPECTUS.
will be secured by the property of your trust and will be paid
only from your trust's assets;
Your certificates will represent
obligations of your trust only and
will not represent interests in or will be rated in one of the four highest rating categories by at
obligations of Oakwood Mortgage or least one nationally recognized rating organization;
any of its affiliates. Your
certificates are not insured or may have one or more forms of credit enhancement; and
guaranteed by any person. Except
as noted in this prospectus and will be issued as part of a designated series that may include
the accompanying prospectus one or more classes of certificates and credit enhancement.
supplement, the underlying
accounts, contracts, and mortgage INVESTORS:
----------
loans are not insured or
guaranteed by any government will receive interest and principal payments from collections on
agency. the contracts and mortgage loans and their trust's other assets, if
any; and
This prospectus may be used and to
offer and sell any series of are entitled to receive payments from collections on contracts
certificates only if accompanied and mortgage loans and other assets securing their series of
by the prospectus supplement for certificates, but have no entitlement to payments from contracts,
that series. mortgage loans, or other assets.
</TABLE>
- ------------------------------------
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.
JUNE 25, 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 ON YOUR
CERTIFICATES COULD REDUCE THE YIELD TO
MATURITY OF YOUR INVESTMENT
PREPAYMENT.
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
1
<PAGE>
that are allocated to your class of certificates also will reduce your yield.
REGIONAL ECONOMIC DOWNTURNS AND THE DECLINE
IN THE VALUE OF MANUFACTURED HOMES COULD
RESULT IN LOSSES ON YOUR CERTIFICATES.
Downturns in regional or local economic conditions will affect the frequency of
delinquency and amount 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
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 ABILITY TO
SERVICE THE ASSETS IN A MANNER THAT MAXIMIZES
YOUR RETURN
State laws, such as the uniform commercial code and motor vehicle 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.
2
<PAGE>
CONTESTING THE TRUSTEE'S SECURITY INTEREST IN
THE MANUFACTURED HOMES COULD REDUCE OR DELAY
DISTRIBUTIONS
The steps necessary to create and perfect a security interest in the
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 WILL BE
LIMITED
A secondary market for any series of 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 PROTECTION LAWS
MAY BE A LIABILITY TO YOUR TRUST
A failure by Oakwood Acceptance to comply with federal or state 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 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.
3
<PAGE>
CREDIT ENHANCEMENT OFTEN DOES NOT COVER ALL
TYPES OF LOSSES ON YOUR CERTIFICATES
Insurance policies and other forms of credit enhancement only cover the 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 YOUR
CLASS WILL NOT INSULATE YOU FROM LOSS
The fact that some classes are paid after the classes of certificates which you
hold does not 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 PRIOR TO
YOUR RECEIPT OF CASH
Certificates purchased at a discount 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 REDUCTIONS OF
DISTRIBUTIONS ON YOUR CERTIFICATES IF THE
CONSIDERED A SALE IN THE EVENT OF BANKRUPTCY
The acquisition of the contracts and mortgage loans by the trust from Oakwood
Mortgage is intended to be a sale. However, in the event that 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 contains a number of conditions and assumptions and, in any event,
is not binding on any court.
4
<PAGE>
YOUR CERTIFICATES MAY BE REDEEMED AT A PRICE
LESS THAN THEIR PRINCIPAL AMOUNT PLUS ACCRUED
AND UNPAID INTEREST
In the event your certificates are redeemed, the purchase price will equal 100%
of your certificates' 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 unpaid interest.
THE ASSETS MAY CONTAIN VARIOUS PAYMENT
PROVISIONS, WHICH COULD AFFECT PAYMENTS TO YOU
The assets of your trust have various payment provisions. Some 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.
5
<PAGE>
THE RATINGS PROVIDED BY THE RATING AGENCIES
DO NOT PURPORT TO ADDRESS ALL RISKS CONTAINED
IN YOUR INVESTMENT
Your certificates will be rated in one of the four highest rating categories by
one or more rating 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.
6
<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. 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. 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;
7
<PAGE>
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,
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
8
<PAGE>
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;
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.
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). No person acquiring a book-entry
certificate (a "Beneficial Owner" will be entitled to receive a definitive
certificate representing its certificate.
9
<PAGE>
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").
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
10
<PAGE>
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 interests
of the offered certificates. DTC may
11
<PAGE>
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, 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, which is a fictional
principal balance used solely for determining the class' amount of distributions
and other rights. A notional principal amount is determined by reference to the
principal amount of the assets, a subret of the assets, or one or more classes
of certificates. 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
12
<PAGE>
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 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
13
<PAGE>
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, 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.
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 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
14
<PAGE>
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.
Unrealized losses are losses that have not yet been recorded. For example, until
your trust is able to resell a mortgage that it acquired at a foreclosure sale,
it cannot calculate the exact amount of its loss with respect to that mortgage.
For optional redemption or termination purposes, the amount of the loss will be
calculated prior to sale based on the value of the real estate owned as
determined by a licensed appraiser. This appraisal permits the amount of any
loss to be calculated and allocated to the appropriate 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
15
<PAGE>
behalf of a trust pursuant to a repossession, foreclosure or other similar
proceeding in respect of a contract.
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
16
<PAGE>
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.
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
17
<PAGE>
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 or delays
in payment on your certificates. Losses on your certificates will, in turn,
reduce distributions to you. Delays in payment will interrupt the timely
distribution of amounts owed to you. Losses or delays in payment will 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;
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
18
<PAGE>
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. Oakwood Acceptance,
as 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
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;
19
<PAGE>
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
20
<PAGE>
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 "Legal Aspects of Contracts and Mortgage
Loans" in this prospectus.
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
21
<PAGE>
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.
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,
22
<PAGE>
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.
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
23
<PAGE>
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; 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
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.
24
<PAGE>
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 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
25
<PAGE>
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 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.
26
<PAGE>
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 a summary of the material aspects of
hazard insurance. 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. 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.
27
<PAGE>
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.
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
28
<PAGE>
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. 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.
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,
29
<PAGE>
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. 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 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, 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
30
<PAGE>
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 "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.
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;
31
<PAGE>
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
limited by 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.
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
32
<PAGE>
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.
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
33
<PAGE>
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 distributions of principal of and interest on one or more classes of
certificates 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.
34
<PAGE>
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.
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
35
<PAGE>
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.
Notwithstanding the foregoing, Oakwood Acceptance may from time to time accept a
lower down payment than the down payments indicated, and in some circumstances
may require no down payment. In addition, if a borrower uses equity in real
property as all or part of his down payment, the total down payment generally
will 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 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.
36
<PAGE>
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.
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,
37
<PAGE>
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
"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
38
<PAGE>
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 is required to submit to the trustee with each trustee
mortgage loan file a title opinion, 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.
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
contain 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;
39
<PAGE>
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 either a title opinion or 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,
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 if the 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
40
<PAGE>
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 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;
41
<PAGE>
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
42
<PAGE>
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.
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
examined 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 redeemed 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;
43
<PAGE>
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;
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.
44
<PAGE>
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 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
45
<PAGE>
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 are to be deposited into the
certificate account for the related series and may be withdrawn. 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.
46
<PAGE>
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
47
<PAGE>
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 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.
48
<PAGE>
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 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
49
<PAGE>
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 regulated and examined 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
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
50
<PAGE>
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, 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;
51
<PAGE>
o to correct or supplement any provision that may be inconsistent
with any other provision;
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 terminated early 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
52
<PAGE>
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."
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 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.
53
<PAGE>
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 Nevada as necessary
to perfect the trustee's ownership interest in the contracts. 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, Puerto Rico 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 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.
54
<PAGE>
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.
55
<PAGE>
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
56
<PAGE>
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 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
57
<PAGE>
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 certificate-
holders. 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
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
58
<PAGE>
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.
59
<PAGE>
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
60
<PAGE>
underlying mortgaged property is located. A mortgage creates a lien upon the
real property described in the mortgage. There are two parties to a mortgage:
the mortgagor, who is the obligor, and the mortgagee, who is the lender. Under a
first mortgage, the mortgagor delivers to the mortgagee a note or bond
evidencing the loan and the mortgage. Although a deed of trust is similar to a
mortgage, a deed of trust has three parties; the borrower, a lender as
beneficiary, and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid, in
trust, generally with a power of sale, to the trustee to secure payment of the
loan. The trustee's authority under a deed of trust and the mortgagee's
authority under a mortgage are governed by the express provisions of the deed of
trust or mortgage, applicable law, and, in some cases, with respect to the deed
of trust, the directions of the beneficiary.
FORECLOSURE.
Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the mortgaged property. Delays in
completion of the foreclosure occasionally may result from difficulties in
locating necessary parties. When the mortgagee's right to foreclosure is
contested, the legal proceedings necessary to resolve the issue can be
time-consuming. After the completion of a judicial foreclosure proceeding, the
court may issue a judgment of foreclosure and appoint a receiver or other
officer to conduct 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
61
<PAGE>
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.
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
62
<PAGE>
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,
63
<PAGE>
the court may prevent a lender from foreclosing on the home, and, as
part of the debtor's rehabilitation plan, reduce the amount of the secured
indebtedness to the value of the home as it exists at the time of the
proceeding, leaving the lender as a general unsecured creditor for the
difference between that value and the amount of outstanding indebtedness. A
bankruptcy court may grant the debtor a reasonable time to cure a payment
default, and in the case of a mortgage loan not secured by the debtor's
principal residence, also may reduce the monthly payments due under 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
64
<PAGE>
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;
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, but there will be restrictions on its ability to foreclose on the
related mortgaged property and contractual defenses available to the related
obligor.
65
<PAGE>
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 "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
66
<PAGE>
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
Nevada on June 11, 1998 as a wholly-owned, limited purpose finance subsidiary of
Oakwood Acceptance Corporation. Oakwood Mortgage Investors, Inc., a North
Carolina corporation, was merged with and into Oakwood Mortgage on May 28, 1999.
Oakwood Acceptance is a wholly-
67
<PAGE>
owned subsidiary of Oakwood Homes Corporation. Oakwood Mortgage maintains its
principal office at 101 Convention Center Drive, Suite 850, Las Vegas, Nevada
89109. Its telephone number is (702) 949-0056.
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 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.
68
<PAGE>
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 that are given 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 that face 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 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
69
<PAGE>
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 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
70
<PAGE>
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.
71
<PAGE>
ORIGINAL ISSUE DISCOUNT
Certain classes of Regular Certificates may be issued with original
issue discount within the meaning of section 1273(a) of the Code. In general,
such original issue discount will equal the difference between the stated
redemption price at maturity of the Regular Certificate (generally, its
principal amount) and its issue price. Holders of Regular Certificates as to
which there is original issue discount should be aware that they generally must
include original issue discount in income for federal income tax purposes on an
annual basis under a constant yield accrual method that reflects compounding. In
general, original issue discount is treated as ordinary interest income and must
be included in income in advance of the receipt of the cash to which it relates.
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.
72
<PAGE>
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" Aggregation Rule ), under which two or more debt instruments
issued in connection with the same transaction, or related transactions in
certain circumstances, generally are treated as a single debt instrument for
federal income tax accounting purposes if issued by a single issuer to a single
holder, that Rule does not apply if the debt instruments are part of an issue
(i) a substantial portion of which is traded on an established market or (ii) a
substantial portion of which is issued for cash (or property traded on an
established market) to parties who are not related to the issuer or holder and
who do not purchase other debt instruments of the same issuer in connection with
the same transaction or related transactions. In most cases, the Aggregation
Rule will not apply to Regular Certificates of different classes because one or
both of the exceptions to the Aggregation Rule will have been met. Although the
Tax Administrator will apply the Aggregation Rule to all regular interests in a
series REMIC that are held by another REMIC created with respect to the same
series, it generally will not apply the Aggregation Rule to Regular Certificates
for purposes of reporting to certificateholders.
Under a deminimis 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
73
<PAGE>
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
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
74
<PAGE>
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
75
<PAGE>
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.
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.
76
<PAGE>
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 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
77
<PAGE>
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 that are described below. Excess
78
<PAGE>
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
79
<PAGE>
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 (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
80
<PAGE>
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 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
81
<PAGE>
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
82
<PAGE>
"adjusted issue price") will acquire such certificate with market discount. The
purchaser generally will be required to recognize the market discount (in
addition to any original issue discount remaining with respect to the
certificate) as ordinary income. A person who purchases a Regular Certificate at
a price lower than the remaining outstanding Deemed Principal Payments but
higher than its adjusted issue price does not acquire the certificate with
market discount, but will be required to report original issue discount,
appropriately adjusted to reflect the excess of the price paid over the adjusted
issue price. See "Federal Income Tax Consequences -- 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
83
<PAGE>
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 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
84
<PAGE>
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 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
85
<PAGE>
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
86
<PAGE>
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%. 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
87
<PAGE>
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 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 --
88
<PAGE>
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 on the assets underlying a REMIC is
not amortizable,
89
<PAGE>
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
90
<PAGE>
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.
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.
91
<PAGE>
Ownership of Residual Interests by Disqualified Organizations
The Code contains three sanctions that are designed to prevent or
discourage the direct or indirect ownership of a REMIC residual interest (such
as a Residual Certificate) by the United States, any state or political
subdivision thereof, any foreign government, any international organization, any
agency or instrumentality of any of the foregoing, any tax-exempt organization
(other than a farmers' cooperative described in section 521 of the Code) unless
such organization is subject to the tax on UBTI, or any rural electrical or
telephone cooperative (each a "Disqualified Organization"). A corporation is not
treated as an instrumentality of the United States or any state or political
subdivision thereof if all of its activities are subject to tax and, with the
exception of 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 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
92
<PAGE>
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
93
<PAGE>
triggers the information requirement, the servicer or Affiliate thereof may
charge such Residual Certificateholder a reasonable fee for providing the
information.
Special Considerations for Certain Types of Investors
Dealers in Securities. Residual Certificateholders that are dealers in
securities should be aware that, under Treasury regulations (the "Mark-to-Market
Regulations") relating to the mark-to-market accounting provisions under section
475 of the Code dealers in securities are not permitted to mark to market any
REMIC residual interests acquired on or after January 4, 1995. Prospective
purchasers of Residual Certificates should consult with their tax advisors
regarding the possible application of the Mark-to-Market Regulations to such
certificates.
Tax-Exempt Entities. Any excess inclusion income with respect to a Residual
Certificate held by a tax-exempt entity, including a qualified profit-sharing,
pension, or other employee benefit plan, will be treated as UBTI. Although the
legislative history and statutory provisions imply otherwise, the Treasury
conceivably could take the position that, under pre- existing Code provisions,
substantially all income on a Residual Certificate (including non-excess
inclusion income) is to be treated as UBTI. See "Federal Income Tax Consequences
- -- REMIC certificates -- Taxation of Residual Certificateholders" 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.
94
<PAGE>
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.
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
95
<PAGE>
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
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
96
<PAGE>
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
<PAGE>
a manner generally similar to that used in the determination of original issue
discount, as if the Qualified Mortgages had been issued (i) on the date they
were acquired by the REMIC and (ii) for a price equal to the REMIC's initial
basis in the Qualified Mortgages. The same prepayment assumptions used in
pricing the certificates are used to compute the yield to maturity of a REMIC's
Qualified Mortgages.
Premium. Generally, if the basis of a REMIC in its Qualified Mortgages
exceeds the unpaid principal balances of those assets the REMIC will be
considered to have acquired such assets at a premium equal to the amount of such
excess. A REMIC that holds a Qualified Mortgage as a capital asset may elect
under Code section 171 to amortize premium on such asset under a constant
interest method, to the extent such asset was originated, or treated as
originated, after September 27, 1985. The legislative history to the 1986 Act
indicates that, while the deduction for amortization of premium will not be
subject to the limitations on miscellaneous itemized deductions of individuals,
it will be treated as interest expense for purposes of other provisions in the
1986 Act limiting the deductibility of interest for non-corporate taxpayers.
Because substantially all of the obligors on the assets are expected to be
individuals, section 171 of the Code will not be available for the amortization
of premium on such assets to the extent they were originated on or prior to
September 27, 1985. Such premium may be amortizable under more general
provisions and principles of federal income tax law in accordance with a
reasonable method regularly employed by the holder of such assets. The
allocation of such premium pro rata among principal payments should be
considered a reasonable method; however, the Service may argue that such premium
should be allocated in a different manner, such as allocating such premium
entirely to the final payment of principal.
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
98
<PAGE>
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 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
99
<PAGE>
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
100
<PAGE>
or imminent default of a Qualified Mortgage. Foreclosure property may not be
held for more than three taxable years 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.
101
<PAGE>
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 -- 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.
102
<PAGE>
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% 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
103
<PAGE>
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 for payments made after December 31, 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
104
<PAGE>
certificateholder's securities broker with a certified statement, signed under
penalties of perjury, that the taxpayer identification number provided to the
trustee is correct and that the certificateholder is not subject to backup
withholding. Backup withholding applies, under certain circumstances, to a
certificateholder who is a foreign person if the certificateholder fails to
provide the trustee or the certificateholder's securities broker with a Foreign
Person Certification, as described in "Federal Income Tax Consequences -- REMIC
certificates -- Taxation of Certain Foreign Holders of REMIC certificates --
Regular Certificates" 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
105
<PAGE>
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 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.
New Withholding Regulations
The Treasury Department has issued new regulations which make certain
modifications to the withholding, backup withholding and information reporting
rules described above. The new withholding regulations attempt to unify
certification requirements and modify reliance standards. The new withholding
regulations generally will be effective for payments made after December 31,
2000, subject to certain transition rules. Prospective investors are urged to
consult their tax advisors regarding the new withholding regulations.
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
106
<PAGE>
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.
107
<PAGE>
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
108
<PAGE>
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.
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
109
<PAGE>
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
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," " --
110
<PAGE>
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," " -- Variable
Rate Certificates," and " -- Interest Weighted Certificates and Non-VRDI
certificates" in this prospectus.
111
<PAGE>
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 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.
112
<PAGE>
Sale of a Non-REMIC certificate
A sale of a non-REMIC certificate prior to its maturity will result in gain
or loss equal to the difference between the amount received and the holder's
adjusted basis in such certificate. The rules for computing the adjusted basis
of a Non- REMIC certificate are the same as in the case of a Regular
Certificate. See "Federal Income Tax Consequences -- REMIC certificates -- Tax
Treatment of Regular Certificates -- Gain or Loss on Disposition" 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 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
113
<PAGE>
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 must follow the requirements of the DOL regulations set forth in 29 C.F.R.
2510.3-101, as amended from time to time (the "Plan Asset 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;
114
<PAGE>
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 96-23 ("PTCE 96-23"), regarding
investment decisions by in-house asset managers;
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;
115
<PAGE>
o Prohibited Transaction Class Exemption 84-14 ("PTCE 84-14"), regarding
investment decisions made by a qualified plan asset manager;
o Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1"), regarding
acquisitions by Plans of interests in mortgage pools; and
o various individual underwriter exemptions.
Before purchasing any certificates, a Plan that must follow the fiduciary
responsibility provisions of ERISA or described in section 4975(e)(1) of the
Code should consult with its counsel to determine whether the conditions of any
exemption would be met. A purchaser of certificates should be aware, however,
that certain of the exemptions do not apply to the purchase, sale, and holding
of subordinated certificates. In addition, PTCE 83-1 will not apply to
certificates evidencing interests in a trust estate that contains contracts.
Moreover, even if the conditions specified in one or more exemptions are met,
the scope of the relief provided by an exemption might not cover all acts that
might be construed as prohibited transactions.
The Plan Asset Regulations will not apply to a certificate if
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
116
<PAGE>
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 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.
117
<PAGE>
Available Information
Oakwood Mortgage observes the informational requirements of 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
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
118
<PAGE>
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 101 Convention Center Drive, Suite 850, Las Vegas, Nevada 89109
(Telephone (702) 949-0056), 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. 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
119
<PAGE>
SMMEA will be legal investments for persons, trusts, corporations,
partnerships, associations, business trusts and business entities, including
depository institutions, life insurance companies and pension funds, created
pursuant to or existing under the laws of the United States or of any state
whose authorized investments must observe 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 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 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 regulated
investors to purchase these classes of certificates, contains significant
interpretive uncertainties. All investors whose investment authority has 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.
120
<PAGE>
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 PricewaterhouseCoopers
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.
121
<PAGE>
Index of Terms
"1986 Act" ...................................................... 53
"Accretion Class" ............................................... 6
"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
"Code" .......................................................... 47
"Collection Period" .............................................. 10
"Companion Class" ................................................ 6
"Compensating Interest" ......................................... 34
"Complementary Strip Certificates" ............................... 81
"Compound Interest Class" ........................................ 6
122
<PAGE>
"Contingent Payment Obligation" ............................... 59
"Contingent Payment Regulations" .............................. 59
"Convertible Loan" ............................................ 15
"Current Recognition Election" ............................... 60
"Custodian" ................................................... 28
"Cut-off Date" ................................................ 5
"Deemed Principal Payments" .................................. 53
"Depository Participants" .................................... 7
"Disqualified Organization" ................................... 67
"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
123
<PAGE>
"Increasing Payment Loan" ..................................... 14
"Interest Reduction Loan" ..................................... 14
"Interest Weighted Certificate" ............................... 55
"Inverse Floater Certificate" ................................. 59
"IO Certificate" .............................................. 81
"Land Secured Contract" ....................................... 23
"Level Payment Loan" .......................................... 14
"Multiple Rate VRDI Certificate" .............................. 58
"Non-Recoverable Advance" ..................................... 33
"Non-VRDI certificate" ........................................ 55
"NOWA Certificate" ............................................ 55
"OID Regulations" ............................................. 53
"Ordinary Ratio Certificate" .................................. 80
"PAC Class" ................................................... 6
"Parity Price" ................................................ 12
"Participants" ................................................ 7
"Participation Certificate" ................................... 77
"Periodic Rate Cap" ........................................... 18
"Plan" ........................................................ 83
"Plan Asset Regulations" ...................................... 83
"Plan Investor" ............................................... 85
"PO Certificate" .............................................. 77
124
<PAGE>
"Pre-Funded Amount" ............................................. 18
"Pre-Issuance Accrued Interest" ................................. 56
"Pre-Issuance Accrued Interest Rule" ............................ 56
"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
"Ratio Certificate" ............................................. 82
"RCRA" .......................................................... 49
"Realized Loss" ................................................. 9
"REMIC" ......................................................... 6
"Remittance Report" ............................................. 37
"REO Property" .................................................. 11
"Repo Property" ................................................. 11
"Repurchase Price" .............................................. 17
125
<PAGE>
"Residual Certificate" .......................................... 6
"RIC" ........................................................... 51
"Scheduled Principal Balance" ................................... 10
"Servicing Advance" ............................................. 31
"Servicing Fee" ................................................. 32
"Single Rate VRDI Certificate" .................................. 58
"SMMEA" ......................................................... 87
"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
"UBTI" .......................................................... 64
"UCC State" ..................................................... 40
"Variable Rate Certificate" ..................................... 55
"VRDI" .......................................................... 57
"WAM" ........................................................... 53
"Weighted Average Certificate" .................................. 55
126
<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 $2,500,000,000 of the Mortgage Pass-Through Certificates being
registered under this Registration Statement, other than underwriting discounts
and commission:
SEC Registration............................................$ 695,000
Printing and Engraving...................................... 500,000
Legal Fees and Expenses..................................... 1,200,000
Accounting Fees and Expenses................................ 625,000
Trustee Fees and Expenses................................... 150,000
Rating Agency Fees.......................................... 1,200,000
Miscellaneous .............................................. 130,000
TOTAL..............................................$4,000,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada Revised Statues provides in substance that
Nevada corporations shall have the power, under specified circumstances, to
indemnify their directors, officers, employees and agents in connection with
pending, threatened or completed actions, suits or proceedings whether civil,
criminal, administrative, or investigative (except an action by or in right of
the Registrant) 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. Section 78.752 of
the Nevada Revised Statues provides that Nevada corporations may purchase
insurance on behalf of any such director, officer, employee or agent. Section
4.17 of the Registrant's bylaws incorporates the indemnification provisions of
Section 78.751 of the Nevada Revised Statues 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.
II-1
<PAGE>
<TABLE>
<CAPTION>
ITEM 16. EXHIBITS.
<S> <C>
1.1 Underwriting Agreement Standard Provisions, dated May 1999, together
with Form of Underwriting Agreement*
2.1 Plan of Merger, dated May 28, 1999, between Registrant and Oakwood
Mortgage Investors, Inc. (North Carolina)(1)
3.1 Articles of Incorporation of Registrant*
3.2 Restated Articles of Incorporation of Registrant(1)
3.3 By-Laws of Registrant*
3.4 Amended and Restated By-Laws of Registrant(1)
4.1 Form of Pooling and Servicing Agreement*
4.2 Standard Terms to Pooling and Servicing Agreement (May 1999 Edition)*
4.3 Form of Guaranty Agreement*
4.4 Assumption and Amendment Agreement, dated May 28, 1999, among
Registrant, Oakwood Acceptance Corporation as Senior, and Chase
Manhattan Trust Company, National Association, or Trustee(1)
4.5 Assumption and Amendment Agreement, dated May 28, 1999, among
Registrant, Oakwood Acceptance Corporation, as Servicer, and The Bank of
York New, as Trustee(1)
5.1 Legality Opinion of Hunton & Williams*
5.2 Opinion of Kolesar & Leatham, Chtd.*
8.1 Tax Opinion re: Adequacy of Prospectus Disclosure*
8.2 Tax Opinion re: REMIC Certificates*
8.3 Tax Opinion re: Non-REMIC Certificates*
23.1 Consent of Hunton & Williams is contained in their opinions filed as
Exhibits 5.1, 8.1, 8.2 and 8.3*
23.2 Consent of PricewaterhouseCoopers LLP*
23.3 Consent of Kolesar & Leatham, Chtd. is contained in their opinion filed
as Exhibit 5.2*
24.1 Power of Attorney*
99.1 Form of Sales Agreement between the Registrant, as Purchaser, and
Oakwood Acceptance Corporation, as Seller*
* Previously filed.
(1) Incorporated herein by reference to Exhibit to the Registrant's Current
Report on Form 8-K dated May 28, 1999 and filed June 11, 1999.
</TABLE>
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
II-2
<PAGE>
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-3
<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. 4 to the Registrant's
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Las Vegas, State of Nevada, on June 25, 1999.
OAKWOOD MORTGAGE INVESTORS,
INC. (REGISTRANT)
/S/ ZAKLINA MCGREW
-----------------------
Dennis W. Hazelrigg*
President
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>
/s/ ZAKLINA MCGREW Director and President June 25, 1999
- ----------------------------------- (PRINCIPAL EXECUTIVE OFFICER)
Dennis W. Hazelrigg*
/s/ ZAKLINA MCGREW Director, Vice President and June 25, 1999
- ------------------------------------- Treasurer (PRINCIPAL FINANCIAL
Zaklina McGrew OFFICER AND PRINCIPAL ACCOUNTING
OFFICER)
/s/ ZARKLINA MCGREW Director and Secretary June 25, 1999
- -------------------------------------
Monte L. Miller*
- ------------------------------------- Director June __, 1999
Joshua C. Miller
*As attorney-in-fact pursuant to a power-of-attorney previously filed with the
Securities and Exchange Commission
</TABLE>
II-4
