Prospectus Supplement to Prospectus dated March 28, 2000
OMI Trust 2000-A
Issuer
Oakwood Mortgage Investors, Inc. [GRAPHIC]
Depositor
$298,060,000
Senior/Subordinated Pass-Through Certificates
Series 2000-A
Oakwood Acceptance Corporation
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 $328,440,850. 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" BEGINNING
ON PAGE S-4 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 1 OF THE PROSPECTUS.
<TABLE>
<CAPTION>
UNDERWRITING
PRINCIPAL CLASS PRICE TO DISCOUNTS AND PROCEEDS TO
AMOUNT INTEREST RATE (1) PUBLIC (2) COMMISSIONS ISSUER (4)
-------------- ---------------------------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
A-1 Certificates..... $ 65,000,000 One Month Libor + 0.150% 100.000000% 0.125% 99.875000%
A-2 Certificates..... $ 23,000,000 7.765% 100.000000% 0.200% 99.800000%
A-3 Certificates..... $ 14,000,000 7.945% 100.000000% 0.250% 99.750000%
A-4 Certificates..... $ 25,000,000 8.150% 99.625000% 0.400% 99.225000%
A-5 Certificates..... $125,078,000 8.160% 99.984375% 0.250% 99.734375%
M-1 Certificates..... $ 20,527,000 8.300% 98.234375% 0.625% 97.609375%
M-2 Certificates..... $ 12,317,000 8.250% 92.500000% 0.875% 91.625000%
B-1 Certificates..... $ 13,138,000 8.250% (3)
Total ............... $298,060,000 $283,522,502 $811,013 $282,711,489
</TABLE>
(1) The class interest rate on each class of certificates is capped at the
weighted average net asset rate.
(2) The price to the public is per certificate, plus accrued interest from the
date the certificates are issued, in the case of the class A-1 certificates, and
from March 1, 2000 in the case of all other classes of offered certificates.
(3) Credit Suisse First Boston Corporation and Banc of America Securities LLC
will offer the class B-1 certificates at varying prices from time to time.
(4) Proceeds to issuer have been calculated before deducting expenses payable by
Oakwood Mortgage, estimated to be approximately $400,000.
Delivery of the certificates will be made in book-entry form only on or
about March 30, 2000.
The first monthly distribution date will be April 17, 2000. The record date
for each distribution date will be the business day preceding that distribution
date, in the case of the class A-1 certificates, and will be the last business
day of the month preceding a distribution date in the case of all other classes
of offered certificates.
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.
Joint Bookrunners
CREDIT SUISSE FIRST BOSTON BANC OF AMERICA SECURITIES LLC
Prospectus Supplement dated March 28, 2000.
<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, they are 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 June 28, 2000, 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
----
<S> <C> <C> <C>
PROSPECTUS SUPPLEMENT Yield Considerations .................................... 13
Summary of Terms ........................................ S-1 The Trusts .............................................. 14
Risk Factors ............................................ S-4 General .............................................. 14
Description of the Offered Certificates ................. S-5 The Assets ........................................... 14
General .............................................. S-5 Substitution of Contracts or Mortgage Loans .......... 18
Book-Entry Certificates .............................. S-6 Pre-Funding .......................................... 19
Collection of Payments on Assets ..................... S-6 Distribution Account ................................. 20
Realized Losses on Liquidated Loans .................. S-7 Reserve Funds ........................................ 20
Allocation of Writedown Amounts ...................... S-7 Insurance ............................................ 20
Distributions ........................................ S-8 Delivery of Additional Assets ........................ 25
Subordination of the Subordinated Certificates ....... S-16 Investment of Funds .................................. 25
The Asset Pool .......................................... S-16 Certificate Guarantee Insurance ...................... 26
General .............................................. S-16 Oakwood Homes Guarantee .............................. 26
The Assets ........................................... S-17 Alternate Credit Enhancement ......................... 26
Selected Data ........................................ S-19 Underwriting Policies ................................... 27
Underwriting Guidelines .............................. S-23 Oakwood's Contract Underwriting Guidelines ........... 27
Conveyance of Assets ................................. S-23 General Underwriting Standards for Mortgage Loans ....... 28
Maturity and Prepayment Considerations .................. S-26 Sale and Servicing of Contracts and Mortgage Loans ...... 29
Weighted Average Lives of the Offered Certificates ... S-26 Assignment of Contracts and Mortgage Loans ........... 29
Modeling Assumptions and MHP Tables .................. S-27 Representations and Warranties ....................... 30
Factors Affecting Prepayments ........................ S-33 Servicing ............................................ 32
Yield on the Offered Certificates .................... S-33 Advances ............................................. 34
The Trust ............................................... S-36 Compensating Interest ................................ 35
General .............................................. S-36 Maintenance of Insurance Policies and Other
The Trustee .......................................... S-37 Servicing Procedures ............................... 36
Optional Termination ................................. S-37 The Pooling and Servicing Agreements .................... 38
Auction Sale ......................................... S-38 The Servicer ......................................... 38
Termination of the Agreement ......................... S-39 The Trustee .......................................... 38
Voting Rights ........................................ S-39 Reports to Certificateholders ........................ 39
Reports to Certificateholders ........................ S-39 Events of Default .................................... 39
Servicing of the Assets ................................. S-40 Certificateholder Rights ............................. 40
The Servicer ......................................... S-40 Amendment ............................................ 40
Servicing Portfolio .................................. S-41 Termination .......................................... 41
Delinquency and Loan Loss/Repossession Experience..... S-41 Legal Aspects of Contracts and Mortgage Loans ........ 41
Collection and Other Servicing Procedures ............ S-44 The Contracts ........................................ 41
Servicing Compensation and Payment of Expenses ....... S-45 The Mortgage Loans ................................... 47
Advances ............................................. S-45 Environmental Considerations ......................... 51
Successors to Servicer, Delegation of Duties ......... S-46 Enforceability of Considerations ..................... 52
Use of Proceeds ......................................... S-46 Use of Proceeds ......................................... 53
Recent Developments ..................................... S-46 The Company ............................................. 53
Underwriting ............................................ S-47 The Servicer ............................................ 53
Legal Matters ........................................... S-48 Federal Income Tax Consequences ......................... 53
ERISA Considerations .................................... S-48 General .............................................. 54
Ratings ................................................. S-51 REMIC Certificates ................................... 54
Legal Investment Considerations ......................... S-52 Tax Treatment of Residual Certificates ............... 68
Taxation of Certain Foreign Holders of REMIC
PROSPECTUS PAGE Certificates ....................................... 82
---- Reporting and Tax Administration ..................... 84
Risk Factors ............................................ 1 Non-REMIC Certificates ............................... 85
Description of the Certificates ......................... 5 State Tax Considerations ................................ 91
General .............................................. 5 ERISA Considerations .................................... 92
Book-Entry Procedures ................................ 7 Available Information ................................... 94
Allocation of Collections from the Assets ............ 9 Incorporation of Certain Documents by Reference ......... 95
Optional Redemption or Termination ................... 10 Plan of Distribution .................................... 95
Maturity and Prepayment Considerations .................. 12 Legal Investment Considerations ......................... 96
Maturity ............................................. 12 Experts ................................................. 97
Prepayment Considerations ............................ 12 Legal Matters ........................................... 97
Index of Terms .......................................... 98
</TABLE>
<PAGE>
(This page left blank intentionally)
<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 2000-A, which will be
established by Oakwood Mortgage Investors, Inc., a Nevada corporation. On May
28, 1999, Oakwood Mortgage Investors, Inc., a North Carolina corporation, was
merged into Oakwood Mortgage and the Nevada company now possesses all of the
rights and obligations of the North Carolina company. 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 A-3, class A-4, class A-5, class M-1, class
M-2 and class B-1 certificates are being offered by this prospectus supplement.
The trust will also issue the class B-2, class X and class R certificates, which
are not offered hereby.
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 March 30, 2000.
CREDIT ENHANCEMENT -- SUBORDINATION AND OVERCOLLATERALIZATION
The subordination of the class M-1, M-2, B-1, B-2, X and R certificates and
overcollateralization provides credit support for the class A-1, A-2, A-3, A-4
and A-5 certificates. The subordination of the class M-2, B-1, B-2, X and R
certificates and overcollateralization provides credit support for the class M-1
certificates. The subordination of the class B-1, B-2, X and R certificates and
overcollateralization provides credit support for the class M-2 certificates.
The subordination of the class B-2, X and R certificates and
overcollateralization 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 certain 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, 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 their due date.
S-1
<PAGE>
Oakwood Acceptance, as the servicer, 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.
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 6,620. Their total principal balance is
approximately $328,440,850. All of the assets bear interest at a fixed rate.
Approximately 0.64% of the assets, having an aggregate scheduled principal
balance on the cut-off date of approximately $2,113,423, were originated by
IndyMac, Inc., which transferred these assets to Oakwood Acceptance, which then
transferred them to Oakwood Capital prior to Oakwood Capital's sale of the
assets to Oakwood Mortgage.
SEE "THE ASSET POOL" IN THIS PROSPECTUS SUPPLEMENT.
THE FINAL SCHEDULED DISTRIBUTION DATE
For each class of the class A certificates, the final scheduled distribution
dates were determined based on the assumption that there are no prepayments on
the assets, that the servicer does not exercise its rights of optional
termination and the auction referred to below does not succeed. For the classes
of offered certificates other than the class A certificates, the final scheduled
distribution dates were determined by the maturity date of the asset with the
latest stated maturity. The final scheduled distribution date for each class of
offered certificates will be the distribution date occurring in the following
months:
class A-1 December, 2010
class A-2 May, 2017
class A-3 March, 2022
class A-4 September, 2029
class A-5 September, 2029
class M-1 April, 2030
class M-2 April, 2030
class B-1 April, 2030
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 at any time
when the current aggregate principal balance of all certificates is less than
10% of their original amount. THE TERMINATION PRICE PAID FOR YOUR TRUST'S ASSETS
DURING AN OPTIONAL TERMINATION MAY, IN SOME CIRCUMSTANCES, BE LESS THAN THE
OUTSTANDING PRINCIPAL BALANCE AND UNPAID INTEREST OF THE CERTIFICATES.
The servicer may also terminate the trust if it determines that there is a
substantial risk that either the pooling REMIC or the issuing REMIC will lose
its REMIC status.
SEE "THE TRUST -- OPTIONAL TERMINATION" IN THIS PROSPECTUS SUPPLEMENT.
AUCTION SALE OF YOUR TRUST'S ASSETS
If the servicer does not exercise its optional termination rights within 90 days
after it becomes eligible 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.
S-2
<PAGE>
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. The class
A-1, A-2, A-3, A-4, A-5, M-1, M-2, B-1, B-2 and X certificates will be regular
interests in the issuing REMIC, and will evidence debt obligations under the
Internal Revenue Code of 1986, as amended. Interest paid or accrued on your
certificates will be taxable to you, and must be included in your income under
an accrual method of tax accounting, even if you otherwise are a cash method
taxpayer. By acceptance of your certificate, you will be deemed to have agreed
to treat your certificate as a debt instrument for purposes of federal and state
income tax, franchise tax, and any other tax measured by income. Although the
treatment of certificates such as the class A-1, A-2, A-3, A-4, A-5, M-1, M-2
and B-1 certificates is not entirely clear under current law, the issuer intends
to treat those certificates as contingent payment obligations that are issued
with original issue discount regardless of their issue prices. See "FEDERAL
INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- INTEREST WEIGHTED CERTIFICATES
AND NON-VRDI CERTIFICATES" IN THE PROSPECTUS. We will use 200% of the
manufactured housing prepayment model as the prepayment assumption to calculate
the accrual rate of original issue discount. 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 and
entities that are deemed to hold the assets of such plans that propose to
acquire or 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 and to consider the consequences
if the underlying assets of the trust are deemed to be plan assets of investing
plans. Certain prohibited transaction exemptions may be applicable to the
purchase and holding of the class A-1, A-2, A-3, A-4 and A-5 certificates.
BECAUSE THE CLASS M-1, M-2 AND B-1 CERTIFICATES ARE SUBORDINATED TO THE CLASS
A-1, A-2, A-3, A-4 AND A-5 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-1, A-2, A-3, A-4, A-5 and M-1 certificates will be mortgage related securities
for purposes of SMMEA as long as they are rated in one of the two highest rating
categories by one or more nationally recognized statistical rating
organizations.
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:
S&P FITCH
----- ------
Class A-1 AAA AAA
Class A-2 AAA AAA
Class A-3 AAA AAA
Class A-4 AAA AAA
Class A-5 AAA AAA
Class M-1 AA AA
Class M-2 A A
Class B-1 BBB BBB
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:
<TABLE>
<CAPTION>
<S> <C>
YOU MAY EXPERIENCE A LOSS ON YOUR Manufactured housing usually depreciates in
INVESTMENT IF LOSSES AND DELINQUENCIES value. Over time, the market values of the
ON ASSETS IN THE TRUST ARE HIGH manufactured homes could be less than the
amount of 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 the
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, and because
past performance does not guarantee or
predict future performance. Generally, the
statistical information provided reflects
higher delinquencies and loan losses since
1995. 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 B-1
CERTIFICATES BEFORE AFFECTING MORE certificates are subordinated to the class A
SENIOR CERTIFICATES certificates. Losses in excess of the credit
support provided by the class B-2, class X,
and class R certificates will be experienced
first 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
certificates.
PREPAYMENTS MAY CAUSE CASH Obligors are not required to pay interest on
SHORTFALLS their assets after the date of a full
prepayment of principal. As a result, to the
extent that this interest shortfall exceeds
the servicing fee for the related period --
which is the maximum amount that the servicer
must cover -- or the servicer defaults in its
obligation to pay compensating interest, 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 The class A-1 certificates bear interest
UNCERTAIN YIELD based on one-month LIBOR, which is variable
and which changes differently than do other
indices. SEE "DESCRIPTION OF THE
</TABLE>
S-4
<PAGE>
OFFERED CERTIFICATES-DISTRIBUTIONS --
FLOATING RATE DETERMINATION." In addition,
regardless of the level of one-month LIBOR,
the interest rate of the class A-1
certificates, like the interest rates of the
other classes of offered certificates, may
not exceed the weighted average net asset
rate.
LOSSES AND DELINQUENCIES ON THE IndyMac, Inc. originated approximately 0.64%
INDYMAC ASSETS MAY BE HIGHER THAN of the assets, having an aggregate scheduled
THOSE OF ASSETS ORIGINATED BY principal balance on March 1, 2000 of
OAKWOOD ACCEPTANCE approximately $2,113,423. Oakwood Acceptance
acquired these assets from IndyMac, Inc. in a
single bulk loan sale. IndyMac, Inc. did not
use Oakwood Acceptance's underwriting
guidelines in originating these assets. The
historic loss and delinquency experience of
assets originated by IndyMac according to its
guidelines differs from that of assets
originated by Oakwood Acceptance according to
its guidelines. We cannot assure you that the
IndyMac assets in the trust will perform in a
manner as favorable to you as Oakwood
Acceptance originated assets have
historically performed. Losses on the IndyMac
assets in the trust that are not fully
covered by credit enhancement will be
allocated to the certificates in the same
manner as losses on the assets originated by
Oakwood Acceptance.
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 2000-A, will
consist of the class A-1, class A-2, class A-3, class A-4, class A-5, class M-1,
class M-2, class B-1, class B-2, class X and class R certificates. Only the
class A-1, class A-2, class A-3, class A-4, class A-5, class M-1, class M-2 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 April, 2000, to the persons in
whose names the certificates are registered on the record date, which is the
close of business on the business day immediately preceding that distribution
date, in the case of the class A-1 certificate and the last business day of the
month preceding the month in which the distribution date occurs, in the case of
all other classes of certificates. Each distribution with respect to a
S-5
<PAGE>
book-entry certificate will be paid to the Depository, which will credit the
amount of this distribution to the accounts of its Participants in accordance
with its normal procedures. Each Participant will be responsible for disbursing
this distribution to the Beneficial Owners that it represents and to each
indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm will be
responsible for disbursing funds to the Beneficial Owners that it represents.
All credits and disbursements with respect to book-entry certificates are to be
made by the Depository and the Participants in accordance with the Depository's
rules.
The class B-2 certificates will have an initial certificate principal
balance of $18,885,000 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.
COLLECTION OF PAYMENTS ON ASSETS
Oakwood Acceptance will establish and maintain the certificate account for
the benefit of the trustee. The certificate account must be an Eligible Account.
The certificate account is to be held in trust for the benefit of the trustee on
behalf of the certificateholders, and shall be either in the trustee's name or
designated in a manner that reflects the custodial nature of the account and
that all funds in this account are held for the benefit of the trustee. A single
certificate account may be maintained for more than one series of certificates
provided that in this event, the servicer shall cause separate accounting and
records to be maintained within the certificate account with respect to each
separate series. Funds in the certificate account will be invested in Eligible
Investments that will mature or be 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
S-6
<PAGE>
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 and any compensating
interest payment 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 or any portion of the
compensating interest payment 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 or compensating
interest payment that is not to be covered by investment earnings on the
certificate account to the trustee on the business day preceding the
distribution date for deposit into the distribution account. The distribution
account shall be an Eligible Account established and maintained by the trustee.
The trustee or its Paying Agent will withdraw funds from the distribution
account, but only to the extent of the Available Distribution Amount, to make
distributions to certificateholders as specified under " -- DISTRIBUTIONS --
PRIORITY OF DISTRIBUTIONS" IN THIS PROSPECTUS SUPPLEMENT.
From time to time, as provided in the pooling and servicing agreement, the
servicer will also withdraw funds from the certificate account for other
purposes as permitted by the pooling and servicing agreement.
REALIZED LOSSES ON LIQUIDATED LOANS
The Principal Distribution Amount for any distribution date is intended to
include the Scheduled Principal Balance of each asset that became a liquidated
loan during the related Prepayment Period. A Realized Loss will be incurred on a
liquidated loan in the amount, if any, by which the net liquidation proceeds
from the liquidated loan are less than the unpaid principal balance of the
liquidated loan, plus accrued and unpaid interest thereon, plus amounts
reimbursable to the servicer for previously unreimbursed Servicing Advances. To
the extent that the amount of the Realized Loss is in excess of the sum of (a)
interest collected on the nondefaulted assets reduced by (i) certain interest
payments due to be distributed on the offered certificates, and (ii) any portion
of this interest required to be paid to a servicer other than Oakwood Acceptance
as servicing compensation ("Excess Interest") and (b) the Current
Overcollateralization Amount, 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.
S-7
<PAGE>
DISTRIBUTIONS
INTEREST DEFICIENCY EVENT AND INTEREST DEFICIENCY AMOUNT
With respect to the class M-1, class M-2, class B-1 and class B-2
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, Compensating Interest,
proceeds of repurchases, net liquidation proceeds and net insurance
proceeds, less
o if Oakwood Acceptance is not the servicer, Servicing Fees for the related
Collection Period, amounts required to reimburse the servicer for previously
unreimbursed Advances in accordance with the pooling and servicing
agreement, amounts required to reimburse Oakwood Mortgage or the servicer
for reimbursable expenses in accordance with the pooling and servicing
agreement, 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.
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 each class of the class A
certificates will be entitled to receive, to the extent of the Available
Distribution Amount:
o interest accrued on their class during the related Interest Accrual Period
at the then-applicable pass-through rate on the certificate principal
balance of their class immediately prior to the distribution date (the
"Interest Distribution Amount"), plus
o any interest amounts remaining unpaid from a previous distribution date,
plus interest accrued on this amount during the related Interest Accrual
Period, at the then applicable pass-through rate.
On each distribution date, holders of the subordinated certificates will be
entitled to receive, to the extent of the Available Distribution Amount and on a
subordinated basis as described under " -- PRIORITY OF DISTRIBUTIONS":
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
S-8
<PAGE>
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 the
distribution date occurs, except that the first Interest Accrual Period for
the class A-1 certificates will be the period from the closing date through
April 16, 2000, 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
o any of these 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. 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.
S-9
<PAGE>
o On each Floating Rate Determination Date, One-Month LIBOR for the next
succeeding Interest Accrual Period will be established by the servicer as
follows:
o if, on any Floating Rate Determination Date, two or more of the
Reference Banks provide offered One-Month LIBOR quotations on the
Bloomberg Screen US0001M Index Page, One-Month LIBOR for the next
applicable Interest Accrual Period will be the arithmetic mean of the
offered quotations, rounding the arithmetic mean, if necessary, to the
nearest five decimal places.
o if, on any Floating Rate Determination Date, only one or none of the
Reference Banks provides offered quotations, One-Month LIBOR for the
next applicable Interest Accrual Period will be the higher of:
o One-Month LIBOR as determined on the previous Floating Rate
Determination date, and
o the Reserve Interest Rate.
The Reserve Interest Rate will be the rate per annum that the servicer
determines to be either:
o the arithmetic mean, rounding the arithmetic mean upwards if necessary to
the nearest five decimal places, of the one-month Eurodollar lending rate
that New York City banks selected by the servicer are quoting, on the
relevant Floating Rate Determination Date, to the principal London offices
of at least two leading banks in the London interbank market, or
o in the event that the servicer can determine no arithmetic mean, the lowest
one-month Eurodollar lending rate that the New York City banks selected by
the Servicer are quoting on the Floating Rate Determination Date to leading
European banks.
If, on any Floating Rate Determination Date, the servicer is required but is
unable to determine the Reserve Interest Rate in the manner provided, One-Month
LIBOR for the next applicable Interest Accrual Period will be One-Month LIBOR as
determined on the previous Floating Rate Determination Date.
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 1996, as published by Bloomberg. The
following does not purport to be a prediction of the performance of One-Month
LIBOR in the future.
S-10
<PAGE>
<TABLE>
<CAPTION>
MONTH 2000 1999 1998 1997 1996
- ------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
January ......... 5.89% 4.94% 5.60% 5.44% 5.44%
February ........ 5.92 4.96 5.69 5.44 5.31
March ........... 4.94 5.69 5.69 5.44
April ........... 4.90 5.66 5.69 5.44
May ............. 4.94 5.66 5.69 5.43
June ............ 5.24 5.66 5.69 5.47
July ............ 5.19 5.66 5.63 5.46
August .......... 5.38 5.63 5.66 5.44
September ....... 5.40 5.38 5.66 5.43
October ......... 5.41 5.25 5.65 5.38
November ........ 6.48 5.62 5.97 5.56
December ........ 5.82 5.06 5.72 5.50
</TABLE>
PRINCIPAL
The Principal Distribution Amount for any distribution date will equal the
sum of the following amounts:
o the sum of the principal components of all monthly payments scheduled to be
made on the Due Date occurring during the related Collection Period on the
assets that were outstanding at the opening of business on this Due Date,
regardless of whether such monthly payments were received by the servicer
from the obligors, not including any monthly payments due on liquidated
loans or repurchased assets;
o the sum of the amounts of all principal prepayments received by the servicer
on the assets during the related Prepayment Period;
o the Scheduled Principal Balance of any asset that became a liquidated loan
during the related Prepayment Period; and
o the Scheduled Principal Balance of any asset that was purchased or
repurchased by the servicer or Oakwood Capital during the related Prepayment
Period; less
o the Overcollateralization Reduction Amount, if any, for such distribution
date.
The Class A Principal Distribution Amount for any distribution date will
equal
o prior to the Cross-over Date, the Principal Distribution Amount,
o on any distribution date as to which the Principal Distribution Tests are
not met, the Principal Distribution Amount, or
o on any other distribution date, the class A percentage of the Principal
Distribution Amount.
The Class M-1 Principal Distribution Amount for any distribution date will
equal
o as long as any class A certificates remain outstanding and prior to the
Cross-over Date, zero,
o on any distribution date as to which the Principal Distribution Tests are
not met and any class A certificates remain outstanding, zero,
o on any distribution date as to which the Principal Distribution Tests are
not met and the class A certificates have been retired, the Principal
Distribution Amount, or
o on any other distribution date, the class M-1 percentage of the Principal
Distribution Amount.
The Class M-2 Principal Distribution Amount for a distribution date will
equal
S-11
<PAGE>
o as long as any class A certificates or any class M-1 certificates remain
outstanding and prior to the Cross-over Date, zero;
o on any distribution date as to which the Principal Distribution Tests are
not met and any class A certificates or any class M-1 certificates remain
outstanding, zero,
o on any distribution date as to which the Principal Distribution Tests are
not met and the class A certificates and the class M-1 certificates have
been retired, the Principal Distribution Amount, or
o on any other distribution date, the class M-2 percentage of the Principal
Distribution Amount.
The Class B-1 Principal Distribution Amount for any distribution date will
equal
o as long as any class A certificates or any class M certificates remain
outstanding and prior to the Cross-over Date, zero,
o on any distribution date as to which the Principal Distribution Tests are
not met and any class A certificates or any class M certificates remain
outstanding, zero,
o on any distribution date as to which the Principal Distribution Tests are
not met and the class A certificates and the class M certificates have been
retired, the Principal Distribution Amount, or
o on any other distribution date, the class B-1 percentage of the Principal
Distribution Amount.
The Class B-2 Principal Distribution Amount for any distribution date will
equal
o as long as any class A certificates, any class M certificates or any class
B-1 certificates remain outstanding and prior to the Cross-over Date, zero,
o on any distribution date as to which the Principal Distribution Tests are
not met and any class A certificates, any class M certificates or any class
B-1 certificates remain outstanding, zero,
o on any distribution date as to which the Principal Distribution Tests are
not met and the class A certificates, the class M certificates and the class
B-1 certificates have been retired, the Principal Distribution Amount, or
o on any other distribution date, the class B-2 percentage of the Principal
Distribution Amount.
For any distribution date, if the Principal Distribution Amount for a class
exceeds the certificate principal balance of that class, less any Principal
Distribution Amounts remaining unpaid from previous distribution dates, with
respect to this class and distribution date, then these amounts shall be
allocated to the Principal Distribution Amount of the relatively next junior
class of certificates.
If the certificate principal balances of each of the class A-1, class A-2,
class A-3, class A-4, class A-5, class M-1, class M-2 and class B-1 certificates
have not been reduced to zero on or before any distribution date, then amounts
otherwise allocable to the Class B-2 Principal Distribution Amount shall be
allocated sequentially to the principal distribution amounts of the class B-1,
class M-2, class M-1, class A and finally to the class B-2 certificates, to the
extent that allocation of these amounts to the Class B-2 Principal Distribution
Amount would reduce the class B-2 certificate principal balance below the Class
B-2 Floor Amount.
If the certificate principal balance of the class A-1, class A-2, class
A-3, class A-4, class A-5, class M-1, class M-2 and class B-1 certificates have
not been reduced to zero on or before any distribution date, then amounts
otherwise allocable to the Class B-2 Principal Distribution Amount shall be
allocated sequentially to the principal distribution amounts of the class B-1,
class M-2, class M-1, class A, and finally to the class B-2 certificates, to the
extent that allocation of these amounts to the Class B-2 Principal Distribution
Amount would reduce the sum of the class B-2 certificate principal balance and
the Current Overcollateralization Amount below the Total Floor Amount.
S-12
<PAGE>
The principal distribution percentage for any class is the percentage
derived from the fraction, which shall not be greater than 1, the numerator of
which is the certificate principal balance of the class, as adjusted for
write-downs, immediately prior to the related distribution date, and the
denominator of which is the sum of the outstanding certificate principal
balances for all of the classes, as adjusted for write-downs, of the assets
immediately prior to this distribution date.
OVERCOLLATERALIZATION
The "Accelerated Principal Distribution Amount" for any distribution date
shall be the positive difference, if any, between the Target
Overcollateralization Amount and the Current Overcollat-eralization Amount. The
"Current Overcollateralization Amount" shall mean, for any distribution date,
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. The
"Overcollateralization Reduction Amount" for any distribution date shall equal
the positive difference, if any, between the Current Overcollateralization
Amount and the Target Overcollateralization Amount; provided that if on any
distribution date the Principal Distribution Tests are not satisfied, then the
Overcollateralization Reduction Amount shall equal zero. The "Target
Overcollateralization Amount" (i) for any distribution date prior to the
Cross-over Date, 4.00% of the Pool Scheduled Principal Balance of the Assets as
of the Cut-off Date and (ii) for any other distribution date, the lesser of (x)
4.00% of the Pool Scheduled Principal Balance of the assets as of the Cut-off
Date and (y) 7.00% of the then-outstanding Pool Scheduled Principal Balance of
the assets; provided, however, that in no event shall the Target
Overcollateralization Amount be less than 0.50% of the Pool Scheduled Principal
Balance of the assets as of the Cut-off Date. On the closing date the initial
overcollateralization amount shall equal approximately 3.50% of the Pool
Scheduled Principal Balance of the assets as of the Cut-off Date.
The "Pool Scheduled Principal Balance" for any distribution date, will be
the aggregate of the Scheduled Principal Balances, immediately prior to the
beginning of the related Collection Period, of the assets that were outstanding
at the beginning of that Collection Period, without giving effect to any
principal prepayments, net liquidation proceeds or Repurchase Prices received
(or Realized Losses incurred) on the assets on the day preceding the beginning
of that Collection Period, plus the aggregate of the principal components of any
monthly payments that were due at or prior to the beginning of that Collection
Period on the assets, but which monthly payments were not collected from an
obligor or advanced by the servicer and which were not reflected in a
corresponding reduction of the certificate principal balance. The Pool Scheduled
Principal Balance on any date of determination that is not a distribution date
shall be the Pool Scheduled Principal Balance for the next upcoming 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 and then any Interest
Distribution Amounts remaining unpaid from any previous distribution date, plus
interest on their carryover amounts, if any, for that distribution date;
(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;
S-13
<PAGE>
(4) fourth, to the class B-1 certificates, their Interest Distribution
Amount for that distribution date and then any Interest Distribution Amounts
remaining unpaid from any previous distribution date, plus interest on this
carryover amount, if any, for that distribution date;
(5) fifth, to the class B-2 certificates, their Interest Distribution
Amount for that distribution date and then any Interest Distribution Amounts
remaining unpaid from any previous distribution date, plus interest on this
carryover amount, if any, for that distribution date;
(6) sixth, concurrently, to each class of the class A certificates, any
Principal Distribution Amounts remaining unpaid from any previous distribution
dates (the "Principal Distribution Shortfall Carryover Amount" for each class);
(7) seventh, to the class A certificates, the Class A Principal
Distribution Amount, allocated in the following manner:
o first, to the class A-1 certificates in reduction of its certificate
principal balance, until reduced to zero; and
o second, concurrently (i) to the class A-5 certificates, the Class A-5
Percentage of the remaining Class A Principal Distribution Amount in
reduction of its certificate principal balance until reduced to zero and
(ii) the balance of the Class A Principal Distribution Amount allocated
sequentially to the class A-2 certificates, the class A-3 certificates,
and the class A-4 certificates, in that order, in reduction of their
respective certificate principal balances; in each case, until it has
been reduced to zero;
PROVIDED, HOWEVER, that on any Distribution Date on which the Pool Scheduled
Principal Balance is less than the aggregate certificate principal balance of
the class A certificates immediately prior to the related Distribution Date, the
Class A Principal Distribution Amount will be allocated among all of the class A
certificates PRO RATA based upon their respective certificate principal
balances;
(8) eighth, to the class M-1 certificates, any related Writedown Interest
Distribution Amount for that distribution date, any related Carryover Writedown
Interest Distribution Amount for that distribution date, any related Principal
Distribution Shortfall Carryover Amounts, and any related Principal Distribution
Amount until the class M-1 certificate principal balance is reduced to zero;
(9) ninth, to the class M-2 certificates, any related Writedown Interest
Distribution Amount for that distribution date, any related Carryover Writedown
Interest Distribution Amount for that distribution date, any related Principal
Distribution Shortfall Carryover Amounts, and any related Principal Distribution
Amount until the class M-2 certificate principal balance is reduced to zero;
(10) tenth, to the class B-1 certificates, any related Writedown Interest
Distribution Amount for that distribution date, any related Carryover Writedown
Interest Distribution Amount for that distribution date, any related Principal
Distribution Shortfall Carryover Amounts, and any related Principal Distribution
Amount until the class B-1 certificate principal balance is reduced to zero;
(11) eleventh, to the class B-2 certificates, any related Writedown
Interest Distribution Amount for that distribution date, any related Carryover
Writedown Interest Distribution Amount for that distribution date, any related
Principal Distribution Shortfall Carryover Amounts, and any related Principal
Distribution Amount until the class B-2 certificate principal balance is reduced
to zero;
(12) twelfth, if Oakwood Acceptance is the servicer, to the servicer in the
following sequential order: first the Servicing Fee for the related Collection
Period, and thereafter all Servicing Fees from previous distribution dates
remaining unpaid;
(13) thirteenth, to the class A certificates in the manner provided in
paragraph (7) above, class M-1, class M-2, class B-1 and class B-2 certificates,
in that order, the Accelerated Principal Distribution
S-14
<PAGE>
Amount for that distribution date, in reduction of the certificate principal
balance of each class until such principal balance has been reduced to zero;
(14) fourteenth, 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
(15) fifteenth, finally, any remainder to the class R certificates.
The Class A-5 Percentage for any distribution date will generally be the
percentage derived from the fraction, which will not be greater than 1, the
numerator of which is the class A-5 certificate principal balance immediately
prior to the related distribution date and the denominator of which is the sum
of the class A-2 certificate principal balance, the class A-3 certificate
principal balance, the class A-4 certificate balance and the class A-5
certificate principal balance, each immediately prior to the related
distribution date.
The Cross-over Date will be the later to occur of
o the distribution date occurring in October 2004, and
o the first distribution date on which the percentage equivalent of a
fraction, which shall not be greater than 1, the numerator of which is the
sum of the aggregate certificate principal balance -- as adjusted for
write-downs -- of the subordinated certificates and the Current
Overcollateralization Amount for that distribution date and the denominator
of which is the Pool Scheduled Principal Balance on that distribution date,
equals or exceeds 1.790 times the percentage equivalent of a fraction, which
shall not be greater than 1, the numerator of which is the sum of the
initial aggregate certificate principal balance -- as adjusted for
write-downs -- of the subordinated certificates and the Current
Overcollateralization Amount as of the Cut-off Date 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 5.5%;
o the Cumulative Realized Losses as of the related distribution date do not
exceed the following percentages of the original Pool Scheduled Principal
Balance:
October 2004 through March 2006 ...... 7%
April 2006 through March 2007 ........ 8%
April 2007 through September 2008 .... 9.5%
October 2008 and after ............... 10.5%
o the Current Realized Loss Ratio as of the related distribution date does
not exceed 3%.
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.
With respect to any distribution date, the Class B-2 Floor Amount shall
mean
S-15
<PAGE>
o if the certificate principal balances of each of the class A-1, class
A-2, class A-3, class A-4, class A-5, class M-1, class M-2 and class B-1
certificates have not been reduced to zero immediately prior to this
distribution date, then the Class B-2 Floor Amount shall equal 1.50% of
the Pool Scheduled Principal Balance of the assets as of the Cut-off
Date, or
o otherwise the Class B-2 Floor Amount shall equal zero.
With respect to any distribution date, the Total Floor Amount shall mean
o if the certificate principal balances of each of the class A-1, class
A-2, class A-3, class A-4, class A-5, class M-1, class M-2 and class B-1
certificates have not been reduced to zero immediately prior to this
distribution date and the sum of the Current Overcollateralization Amount
and the Class B-2 Floor Amount is less than 2.00% of the Pool Scheduled
Principal Balance of the assets as of the Cut-off Date, then the Total
Floor Amount shall equal 2.00% of the Pool Scheduled Principal Balance of
the assets as of the Cut-off Date, or
o otherwise, the Total Floor Amount shall equal zero.
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 2000-A. This trust will be established by the pooling and servicing
agreement dated as of March 1, 2000, together with the standard terms, May 1999
Edition, among Oakwood Mortgage Investors, Inc. ("Oakwood Mortgage"), the
servicer and the trustee. Oakwood Mortgage will acquire the assets from Oakwood
Capital Corp. ("Oakwood Capital") under sales agreements on the closing date.
Oakwood Capital will acquire all of the assets directly from Oakwood Acceptance.
Oakwood Acceptance Corporation ("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, PROVIDED, HOWEVER,
that approximately 0.64% of the assets (the "IndyMac assets") were acquired by
Oakwood Acceptance from IndyMac, Inc. Oakwood Acceptance acquired the IndyMac
assets from IndyMac, Inc. in a loan sale following the origination of these
assets. Each asset not originated directly in Oakwood Acceptance's name will
have been assigned to Oakwood Acceptance immediately after its origination, or,
in the case of the IndyMac assets, were assigned to Oakwood Acceptance in
connection with the sale of these assets to Oakwood Acceptance. Each asset will
be either an installment sales contract secured by a unit of manufactured
housing or a residential mortgage loan secured by a lien on the real estate on
which the manufactured home is deemed permanently affixed. You will find a
description of Oakwood Acceptance's general practices with respect to the
origination of manufactured housing contracts and mortgage loans in the
prospectus under "UNDERWRITING POLICIES."
Under the pooling and servicing agreement, the manufactured homes securing
the assets either comply with federal law requirements or the requirements of
state or local building codes. The Federal 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
S-16
<PAGE>
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 March 1, 2000 (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 Capital and these payments will be the property of Oakwood
Capital 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.
THE ASSETS
The assets will consist of 6,620 fixed rate assets having an aggregate
Scheduled Principal Balance as of the Cut-off Date of approximately
$328,440,850. A total of 103 assets, representing approximately 3.10% of the
assets, are step-up rate loans. The remainder of the assets are Level Payment
Loans. Step-up rate loans are assets that provide for periodic increases of, in
general, 1.00%, 1.50% or 2.00% 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 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 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 assets are actuarial obligations. The portion
of each monthly payment for any 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 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, each asset had an asset rate of at least 6.25% per
annum and not more than 18.00% per annum. The weighted average asset rate of the
assets was approximately 10.09% per annum, without giving effect to any
subsequent increase in the asset rates of the step-up rate loans.
S-17
<PAGE>
The assets had remaining terms to stated maturity as of the Cut-off Date of at
least 15 months but not more than 360 months and original terms to stated
maturity of at least 18 months but not more than 360 months. Each asset was
originated on or after May 31, 1989. As of the Cut-off Date, the assets had a
weighted average original term to stated maturity of approximately 317 months,
and a weighted average remaining term to stated maturity of approximately 315
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 assets as of
the Cut-off Date was approximately $49,613 and the Scheduled Principal Balance
of the assets as of the Cut-off Date ranged from $1,301 to $262,850. As of the
Cut-off Date, approximately 40.41% of the assets were mortgage loans.
Approximately 38.83% of the 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.
The 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 16.16% and 12.78% of the 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 76.58% of the 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 3.87%, 18.26% and 1.29% of the 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.
S-18
<PAGE>
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-19
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF MANUFACTURED HOMES
<TABLE>
<CAPTION>
SCHEDULED BY AGGREGATE SCHEDULED
NUMBER OF AGGREGATE ASSET POOL OF
GEOGRAPHIC LOCATION ASSETS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------- ---------- ------------------- -----------------------
<S> <C> <C> <C>
Alabama .............. 217 $ 8,775,214 2.67%
Alaska ............... 2 95,465 0.03
Arizona .............. 254 18,754,019 5.71
Arkansas ............. 121 5,171,648 1.57
California ........... 43 4,221,721 1.29
Colorado ............. 99 5,866,659 1.79
Delaware ............. 46 2,124,977 0.65
Florida .............. 144 7,678,611 2.34
Georgia .............. 317 13,729,742 4.18
Idaho ................ 57 4,205,629 1.28
Illinois ............. 7 343,944 0.10
Indiana .............. 13 791,245 0.24
Iowa ................. 3 250,926 0.08
Kansas ............... 75 3,649,655 1.11
Kentucky ............. 168 7,424,661 2.26
Louisiana ............ 240 9,990,420 3.04
Maryland ............. 8 418,511 0.13
Michigan ............. 23 1,784,191 0.54
Minnesota ............ 2 126,446 0.04
Mississippi .......... 169 6,865,675 2.09
Missouri ............. 173 7,486,011 2.28
Montana .............. 7 426,131 0.13
Nebraska ............. 3 318,634 0.10
Nevada ............... 57 4,537,817 1.38
New Jersey ........... 1 78,342 0.02
New Mexico ........... 162 8,000,853 2.44
New York ............. 3 170,484 0.05
North Carolina ....... 1,250 53,080,948 16.16
Ohio ................. 119 6,156,344 1.87
Oklahoma ............. 124 6,327,584 1.93
Oregon ............... 171 18,080,522 5.50
Pennsylvania ......... 2 100,698 0.03
South Carolina ....... 489 19,643,413 5.98
South Dakota ......... 1 105,526 0.03
Tennessee ............ 456 19,407,128 5.91
Texas ................ 921 41,968,779 12.78
Utah ................. 31 2,043,638 0.62
Virginia ............. 326 14,253,299 4.34
Washington ........... 181 18,181,563 5.54
Washington DC ........ 1 29,891 0.01
West Virginia ........ 113 4,133,279 1.26
Wisconsin ............ 3 80,644 0.02
Wyoming .............. 18 1,559,961 0.47
----- ------------ ------
Total .............. 6,620 $328,440,850 100.00%
===== ============ ======
</TABLE>
- ---------
Based on the mailing address of the obligor on the related asset as of the
Cut-off Date.
S-20
<PAGE>
DISTRIBUTION OF ORIGINAL ASSET AMOUNTS
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE ASSET POOL
NUMBER OF SCHEDULED BY AGGREGATE SCHEDULED
ORIGINAL ASSET AMOUNT ASSETS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------- ---------- ------------------- -----------------------
<S> <C> <C> <C>
$ 4,999 or less ........ 9 $ 33,281 0.01%
$ 5,000-$ 9,999 ........ 62 466,654 0.14
$ 10,000-$ 14,999 ....... 148 1,860,786 0.57
$ 15,000-$ 19,999 ....... 278 4,896,846 1.49
$ 20,000-$ 24,999 ....... 454 10,288,213 3.13
$ 25,000-$ 29,999 ....... 787 21,685,345 6.60
$ 30,000-$ 34,999 ....... 843 27,361,570 8.33
$ 35,000-$ 39,999 ....... 663 24,648,610 7.50
$ 40,000-$ 44,999 ....... 469 19,857,629 6.05
$ 45,000-$ 49,999 ....... 416 19,757,870 6.02
$ 50,000-$ 54,999 ....... 371 19,365,402 5.90
$ 55,000-$ 59,999 ....... 342 19,537,114 5.95
$ 60,000-$ 64,999 ....... 277 17,231,628 5.25
$ 65,000-$ 69,999 ....... 191 12,858,604 3.92
$ 70,000-$ 74,999 ....... 212 15,323,319 4.67
$ 75,000-$ 79,999 ....... 175 13,526,589 4.12
$ 80,000-$ 84,999 ....... 155 12,768,073 3.89
$ 85,000-$ 89,999 ....... 112 9,770,265 2.97
$ 90,000-$ 94,999 ....... 95 8,752,747 2.66
$ 95,000-$ 99,999 ....... 82 7,961,224 2.42
$100,000 or more ........ 479 60,489,081 18.42
--- ------------ ------
Total ................... 6,620 $328,440,850 100.00%
===== ============ ======
- ---------
The highest original asset amount was $263,288, which represents
approximately 0.08% of the aggregate principal balance of the assets at
origination. The average original principal amount of the assets was
approximately $49,756 as of the Cut-off Date.
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS OF ASSETS
<CAPTION>
PERCENTAGE OF
AGGREGATE ASSET POOL
NUMBER OF SCHEDULED BY AGGREGATE SCHEDULED
ORIGINAL ASSET AMOUNT ASSETS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------- ---------- ------------------- -----------------------
<S> <C> <C> <C>
50% or less ............. 50 $ 1,818,186 0.55%
51% - 55% ............... 34 1,611,963 0.49
56% - 60% ............... 38 1,624,331 0.49
61% - 65% ............... 72 4,204,729 1.28
66% - 70% ............... 108 5,778,973 1.76
71% - 75% ............... 173 9,675,949 2.95
76% - 80% ............... 271 16,122,829 4.91
81% - 85% ............... 540 28,169,136 8.58
86% - 90% ............... 913 46,720,697 14.22
91% - 95% ............... 2,668 135,183,748 41.16
96% - 100% .............. 1,753 77,530,309 23.61
----- ------------ ------
Total ................... 6,620 $328,440,850 100.00%
===== ============ ======
</TABLE>
- ---------
(1) Rounded to nearest 1%.
The weighted average original Loan-to-Value Ratio of the assets was
approximately 90.25% as of the Cut-off Date.
S-21
<PAGE>
CURRENT ASSET RATES
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE ASSET POOL
NUMBER OF SCHEDULED BY AGGREGATE SCHEDULED
ORIGINAL ASSET AMOUNT ASSETS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------- ---------- ------------------- -----------------------
<S> <C> <C> <C>
6.000% - 6.999% ........ 218 $ 19,783,216 6.02%
7.000% - 7.999% ........ 488 46,017,216 14.01
8.000% - 8.999% ........ 573 44,565,871 13.57
9.000% - 9.999% ........ 851 51,531,706 15.69
10.000% - 10.999% ....... 1,075 49,368,024 15.03
11.000% - 11.999% ....... 1,684 57,221,085 17.42
12.000% - 12.999% ....... 937 34,192,126 10.41
13.000% - 13.999% ....... 549 17,852,362 5.44
14.000% - 14.999% ....... 202 6,519,962 1.99
15.000% - 15.999% ....... 41 1,344,207 0.41
16.000% or more ......... 2 45,075 0.01
----- ------------ ------
Total ................. 6,620 $328,440,850 100.00%
===== ============ ======
- ---------
The weighted average current asset rate was approximately 10.09% as of the
Cut-off Date. This table reflects the asset rates as of the Cut-off Date and
does not reflect any subsequent increases in the asset rates of the Step-up Rate
Loans.
YEAR OF ORIGINATION
<CAPTION>
PERCENTAGE OF
AGGREGATE ASSET POOL
NUMBER OF SCHEDULED BY AGGREGATE SCHEDULED
ORIGINAL ASSET AMOUNT ASSETS PRINCIPAL BALANCE PRINCIPAL BALANCE
- --------------------- ---------- ------------------- -----------------------
<S> <C> <C> <C>
1989 ................ 1 $ 6,789 0.00%
1993 ................ 1 47,292 0.01
1994 ................ 1 10,585 0.00
1995 ................ 1 15,147 0.00
1997 ................ 5 119,717 0.04
1998 ................ 23 1,307,210 0.40
1999 ................ 3,935 215,552,627 65.63
2000 ................ 2,653 111,381,482 33.91
----- ------------ ------
Total ............... 6,620 $328,440,850 100.00%
===== ============ ======
</TABLE>
- ---------
The weighted average seasoning of the assets was approximately 2 months as
of the Cut-off Date.
S-22
<PAGE>
REMAINING TERMS TO MATURITY
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE ASSET POOL
NUMBER OF SCHEDULED BY AGGREGATE SCHEDULED
ORIGINAL ASSET AMOUNT ASSETS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------- ---------- -------------------- -----------------------
<S> <C> <C> <C>
1 - 60 months ............ 91 $ 819,753 0.25%
61 - 96 months ............ 94 1,333,049 0.41
97 - 120 months ........... 188 3,762,711 1.15
121 - 156 months ........... 357 7,963,793 2.42
157 - 180 months ........... 569 15,859,171 4.83
181 - 216 months ........... 86 2,629,008 0.80
217 - 240 months ........... 1,204 39,900,151 12.15
241 - 300 months ........... 1,203 48,726,716 14.84
301 - 360 months ........... 2,828 207,446,498 63.16
----- ------------ ------
Total .................... 6,620 $328,440,850 100.00%
===== ============ ======
- ---------
The weighted average remaining term to maturity of the assets was
approximately 315 months as of the Cut-off Date.
ORIGINAL TERMS TO MATURITY
<CAPTION>
PERCENTAGE OF
AGGREGATE ASSET POOL
NUMBER OF SCHEDULED BY AGGREGATE SCHEDULED
ORIGINAL ASSET AMOUNT ASSETS PRINCIPAL BALANCE PRINCIPAL BALANCE
- --------------------------- ---------- ------------------- -----------------------
<S> <C> <C> <C>
1 - 60 months .......... 88 $ 790,860 0.24%
61 - 96 months .......... 95 1,344,567 0.41
97 - 120 months ......... 187 3,738,908 1.14
121 - 156 months ......... 358 7,963,271 2.42
157 - 180 months ......... 570 15,862,970 4.83
181 - 216 months ......... 82 2,514,374 0.77
217 - 240 months ......... 1,209 40,052,683 12.19
241 - 300 months ......... 1,202 48,679,424 14.82
301 - 360 months ......... 2,829 207,493,790 63.18
----- ------------ ------
Total .................... 6,620 $328,440,850 100.00%
===== ============ ======
</TABLE>
- ---------
The weighted average original term to maturity of the assets was
approximately 317 months as of the Cut-off Date.
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", PROVIDED, HOWEVER, that approximately
0.64% of the assets were acquired by Oakwood Acceptance from IndyMac, Inc., and
underwritten in accordance with IndyMac, Inc.'s guidelines.
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
S-23
<PAGE>
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 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 Capital will make representations and warranties regarding the
assets in the sales agreement. The representations and warranties made by
Oakwood Capital also have been made to Oakwood Capital by Oakwood Acceptance in
an underlying contribution and sale agreement between Oakwood Capital and
Oakwood Acceptance, and Oakwood Capital's rights under this agreement have been
assigned to Oakwood Mortgage. Accordingly, both Oakwood Capital and Oakwood
Acceptance will make such representations and warranties. 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
agreements, and subject to Oakwood Capital's option to effect a substitution as
described in the next paragraph, Oakwood Capital will be obligated to repurchase
any asset transferred by it to Oakwood Mortgage for its Repurchase Price within
90 days after its discovery, or receipt of written notice from the trustee or
the servicer, of a breach of any representation or warranty made in the sales
agreement to which it is a party that materially and adversely affects the
trustee's interest in such asset, if the breach has not been cured by the 90th
day. Oakwood Acceptance also has an obligation to repurchase assets transferred
to Oakwood Mortgage by Oakwood Capital pursuant to the contribution and sale
agreement if
S-24
<PAGE>
Oakwood Capital fails to do so. The Repurchase Price for any repurchased 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 Capital 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 the sales agreement and
with Oakwood Mortgage's representations and warranties in the pooling and
servicing agreement regarding the assets, including the accuracy of the
asset schedule, ownership and security interests matters, and the absence
of an adverse interest.
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. 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 REMIC 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 significantly 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.
S-25
<PAGE>
In addition, any replaced asset that is a mortgage loan may only be
replaced by another mortgage loan.
Oakwood Capital 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
Capital 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 Capital's obligation to repurchase or substitute for an asset affected
by a breach of a representation or warranty and Oakwood Acceptance's obligation
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 agreements with respect to the
assets.
MATURITY AND PREPAYMENT CONSIDERATIONS
The assets had terms to maturity at origination ranging from 18 months to
360 months, but may be prepaid in full or in part at any time. The prepayment
experience of the assets, including prepayments due to liquidations of defaulted
assets, will affect the weighted average life of each class of the certificates.
Based on Oakwood Acceptance's experience with the portfolio of conventional
manufactured housing contracts it services, Oakwood Mortgage anticipates that a
number of assets will be liquidated or prepaid in full prior to their respective
maturities. A number of factors, including homeowner mobility, general and
regional economic conditions and prevailing interest rates may influence
prepayments. In addition, any repurchases of assets on account of breaches of
representations and warranties will have the same effect as prepayments of the
assets and accordingly will affect the life of the certificates. Natural
disasters may also influence prepayments. Most of the assets contain provisions
that prohibit the obligors from selling an underlying manufactured home or
mortgaged property without the prior consent of the holder of the asset. These
provisions may not be enforceable in some states. The servicer's policy is to
permit most sales of manufactured homes and mortgaged properties without
accelerating the assets where the proposed buyer meets Oakwood Acceptance's
then-current underwriting standards and either enters into an assumption
agreement or executes a new contract for the unpaid balance of the existing
asset. The execution of a new contract or mortgage note and mortgage would have
the 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
S-26
<PAGE>
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
March 2000, and will include 30 days of interest thereon;
o the servicer exercises the right of optional termination at the earliest
possible date;
o the assets have the characteristics set forth in the 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 March 30,
2000;
o cash distributions will be received by the holders of the certificates on
April 15, 2000 and on the 15th day of each month thereafter until
retirement of the certificates;
o 1 month LIBOR is assumed to be 6.1325% per annum; and
o the assets will prepay monthly at the percentages of MHP indicated in the
MHP Tables.
No representation is made that the assets will experience delinquencies or
losses at the respective rates assumed or at any other rates.
S-27
<PAGE>
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................. $ 23,799,652.26 11.772% 167 2
2................. 42,400,539.52 11.598 236 2
3................. 48,116,931.75 11.556 298 2
4................. 192,210,335.72 9.320 358 2
5................. 5,881,968.88 12.164 101 2
6**............... 5,843,657.14 8.865 352 0
STEP-UP RATE ASSETS
<CAPTION>
SCHEDULED REMAINING
PRINCIPAL BALANCE TERM TO MONTHS MONTHS FIRST STEP SECOND STEP
AS OF THE ASSET MATURITY SEASONING TO FIRST TO SECOND RATE RATE
CUT-OFF DATE RATE (MONTHS) (MONTHS) STEP STEP STEP STEP
------------------ ----------- ---------- ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 ......... $ 335,004.93 8.418% 357 3 9 * 1.637% *%
2 ......... 9,852,759.37 6.925 355 3 9 21 1.594 1.552
</TABLE>
- ---------
* Not applicable.
** First payment due May, 2000. All data relative to this payment date.
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 will cause the Weighted Average Net Asset Rate for the assets to rise from
approximately 8.949% per annum at the Cut-off Date to a maximum of approximately
9.173% per annum, as the asset rates on the step-up 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-28
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE PRINCIPAL BALANCES OUTSTANDING
<TABLE>
<CAPTION>
CLASS A-1 CERTIFICATES AT THE
FOLLOWING PERCENTAGE OF MHP
-----------------------------------------------------
PAYMENT DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date ........................... 100 100 100 100 100 100
March 15, 2001 ......................... 92 70 59 48 37 25
March 15, 2002 ......................... 86 38 14 0 0 0
March 15, 2003 ......................... 80 5 0 0 0 0
March 15, 2004 ......................... 72 0 0 0 0 0
March 15, 2005 ......................... 64 0 0 0 0 0
March 15, 2006 ......................... 55 0 0 0 0 0
March 15, 2007 ......................... 45 0 0 0 0 0
March 15, 2008 ......................... 33 0 0 0 0 0
March 15, 2009 ......................... 22 0 0 0 0 0
March 15, 2010 ......................... 10 0 0 0 0 0
March 15, 2011 ......................... 0 0 0 0 0 0
March 15, 2012 ......................... 0 0 0 0 0 0
March 15, 2013 ......................... 0 0 0 0 0 0
March 15, 2014 ......................... 0 0 0 0 0 0
March 15, 2015 ......................... 0 0 0 0 0 0
March 15, 2016 ......................... 0 0 0 0 0 0
March 15, 2017 ......................... 0 0 0 0 0 0
March 15, 2018 ......................... 0 0 0 0 0 0
March 15, 2019 ......................... 0 0 0 0 0 0
March 15, 2020 ......................... 0 0 0 0 0 0
March 15, 2021 ......................... 0 0 0 0 0 0
March 15, 2022 ......................... 0 0 0 0 0 0
March 15, 2023 ......................... 0 0 0 0 0 0
March 15, 2024 ......................... 0 0 0 0 0 0
March 15, 2025 ......................... 0 0 0 0 0 0
March 15, 2026 ......................... 0 0 0 0 0 0
March 15, 2027 ......................... 0 0 0 0 0 0
March 15, 2028 ......................... 0 0 0 0 0 0
March 15, 2029 ......................... 0 0 0 0 0 0
Weighted Average Life (years): ......... 6.1 1.6 1.2 0.9 0.8 0.7
<CAPTION>
CLASS A-2 CERTIFICATES AT THE
FOLLOWING PERCENTAGE OF MHP
------------------------------------------------------
PAYMENT DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date ........................... 100 100 100 100 100 100
March 15, 2001 ......................... 100 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 92 71 51
March 15, 2003 ......................... 100 100 73 43 14 0
March 15, 2004 ......................... 100 76 36 0 0 0
March 15, 2005 ......................... 100 49 3 0 0 0
March 15, 2006 ......................... 100 23 0 0 0 0
March 15, 2007 ......................... 100 0 0 0 0 0
March 15, 2008 ......................... 100 0 0 0 0 0
March 15, 2009 ......................... 100 0 0 0 0 0
March 15, 2010 ......................... 100 0 0 0 0 0
March 15, 2011 ......................... 96 0 0 0 0 0
March 15, 2012 ......................... 82 0 0 0 0 0
March 15, 2013 ......................... 67 0 0 0 0 0
March 15, 2014 ......................... 50 0 0 0 0 0
March 15, 2015 ......................... 36 0 0 0 0 0
March 15, 2016 ......................... 20 0 0 0 0 0
March 15, 2017 ......................... 3 0 0 0 0 0
March 15, 2018 ......................... 0 0 0 0 0 0
March 15, 2019 ......................... 0 0 0 0 0 0
March 15, 2020 ......................... 0 0 0 0 0 0
March 15, 2021 ......................... 0 0 0 0 0 0
March 15, 2022 ......................... 0 0 0 0 0 0
March 15, 2023 ......................... 0 0 0 0 0 0
March 15, 2024 ......................... 0 0 0 0 0 0
March 15, 2025 ......................... 0 0 0 0 0 0
March 15, 2026 ......................... 0 0 0 0 0 0
March 15, 2027 ......................... 0 0 0 0 0 0
March 15, 2028 ......................... 0 0 0 0 0 0
March 15, 2029 ......................... 0 0 0 0 0 0
Weighted Average Life (years): ......... 14.0 5.0 3.6 2.9 2.4 2.0
</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-29
<PAGE>
<TABLE>
<CAPTION>
CLASS A-3 CERTIFICATES AT THE
FOLLOWING PERCENTAGE OF MHP
------------------------------------------------------
PAYMENT DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date ........................... 100 100 100 100 100 100
March 15, 2001 ......................... 100 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100 80
March 15, 2004 ......................... 100 100 100 99 44 0
March 15, 2005 ......................... 100 100 100 50 0 0
March 15, 2006 ......................... 100 100 64 19 0 0
March 15, 2007 ......................... 100 98 38 0 0 0
March 15, 2008 ......................... 100 67 13 0 0 0
March 15, 2009 ......................... 100 46 0 0 0 0
March 15, 2010 ......................... 100 27 0 0 0 0
March 15, 2011 ......................... 100 8 0 0 0 0
March 15, 2012 ......................... 100 0 0 0 0 0
March 15, 2013 ......................... 100 0 0 0 0 0
March 15, 2014 ......................... 100 0 0 0 0 0
March 15, 2015 ......................... 100 0 0 0 0 0
March 15, 2016 ......................... 100 0 0 0 0 0
March 15, 2017 ......................... 100 0 0 0 0 0
March 15, 2018 ......................... 75 0 0 0 0 0
March 15, 2019 ......................... 55 0 0 0 0 0
March 15, 2020 ......................... 35 0 0 0 0 0
March 15, 2021 ......................... 18 0 0 0 0 0
March 15, 2022 ......................... 0 0 0 0 0 0
March 15, 2023 ......................... 0 0 0 0 0 0
March 15, 2024 ......................... 0 0 0 0 0 0
March 15, 2025 ......................... 0 0 0 0 0 0
March 15, 2026 ......................... 0 0 0 0 0 0
March 15, 2027 ......................... 0 0 0 0 0 0
March 15, 2028 ......................... 0 0 0 0 0 0
March 15, 2029 ......................... 0 0 0 0 0 0
Weighted Average Life (years): ......... 19.3 8.9 6.6 5.1 4.0 3.3
<CAPTION>
CLASS A-4 CERTIFICATES AT THE
FOLLOWING PERCENTAGE OF MHP
---------------------------------------------------------
PAYMENT DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date ........................... 100 100 100 100 100 100
March 15, 2001 ......................... 100 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100 97
March 15, 2005 ......................... 100 100 100 100 98 71
March 15, 2006 ......................... 100 100 100 100 81 57
March 15, 2007 ......................... 100 100 100 95 68 46
March 15, 2008 ......................... 100 100 100 82 56 36
March 15, 2009 ......................... 100 100 95 70 46 29
March 15, 2010 ......................... 100 100 84 60 38 23
March 15, 2011 ......................... 100 100 74 51 32 0
March 15, 2012 ......................... 100 95 65 43 26 0
March 15, 2013 ......................... 100 85 57 36 0 0
March 15, 2014 ......................... 100 76 49 30 0 0
March 15, 2015 ......................... 100 69 43 0 0 0
March 15, 2016 ......................... 100 61 37 0 0 0
March 15, 2017 ......................... 100 54 32 0 0 0
March 15, 2018 ......................... 100 48 27 0 0 0
March 15, 2019 ......................... 100 41 0 0 0 0
March 15, 2020 ......................... 100 35 0 0 0 0
March 15, 2021 ......................... 100 31 0 0 0 0
March 15, 2022 ......................... 99 0 0 0 0 0
March 15, 2023 ......................... 88 0 0 0 0 0
March 15, 2024 ......................... 75 0 0 0 0 0
March 15, 2025 ......................... 62 0 0 0 0 0
March 15, 2026 ......................... 51 0 0 0 0 0
March 15, 2027 ......................... 39 0 0 0 0 0
March 15, 2028 ......................... 27 0 0 0 0 0
March 15, 2029 ......................... 0 0 0 0 0 0
Weighted Average Life (years): ......... 25.8 17.6 14.0 11.3 9.0 7.1
</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-30
<PAGE>
<TABLE>
<CAPTION>
CLASS A-5 CERTIFICATES AT THE
FOLLOWING PERCENTAGE OF MHP
-------------------------------------------------------
PAYMENT DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------- --------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date ........................... 100 100 100 100 100 100
March 15, 2001 ......................... 100 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 97 89 82
March 15, 2003 ......................... 100 100 90 79 68 58
March 15, 2004 ......................... 100 91 76 63 50 39
March 15, 2005 ......................... 100 81 64 52 39 29
March 15, 2006 ......................... 100 72 55 45 33 23
March 15, 2007 ......................... 100 62 49 38 27 18
March 15, 2008 ......................... 100 56 43 33 23 15
March 15, 2009 ......................... 100 51 38 28 19 12
March 15, 2010 ......................... 100 46 34 24 15 9
March 15, 2011 ......................... 99 42 30 21 13 0
March 15, 2012 ......................... 93 38 26 17 10 0
March 15, 2013 ......................... 88 34 23 15 0 0
March 15, 2014 ......................... 81 31 20 12 0 0
March 15, 2015 ......................... 76 28 17 0 0 0
March 15, 2016 ......................... 70 25 15 0 0 0
March 15, 2017 ......................... 64 22 13 0 0 0
March 15, 2018 ......................... 57 19 11 0 0 0
March 15, 2019 ......................... 53 17 0 0 0 0
March 15, 2020 ......................... 48 14 0 0 0 0
March 15, 2021 ......................... 44 12 0 0 0 0
March 15, 2022 ......................... 40 0 0 0 0 0
March 15, 2023 ......................... 35 0 0 0 0 0
March 15, 2024 ......................... 30 0 0 0 0 0
March 15, 2025 ......................... 25 0 0 0 0 0
March 15, 2026 ......................... 21 0 0 0 0 0
March 15, 2027 ......................... 16 0 0 0 0 0
March 15, 2028 ......................... 11 0 0 0 0 0
March 15, 2029 ......................... 0 0 0 0 0 0
Weighted Average Life (years): ......... 20.0 11.0 8.5 6.8 5.4 4.4
<CAPTION>
CLASS M-1 CERTIFICATES AT THE
FOLLOWING PERCENTAGE OF MHP
--------------------------------------------------------
PAYMENT DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date ........................... 100 100 100 100 100 100
March 15, 2001 ......................... 100 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 93 93 92
March 15, 2006 ......................... 100 100 94 80 77 74
March 15, 2007 ......................... 100 100 84 69 64 60
March 15, 2008 ......................... 100 96 75 59 53 48
March 15, 2009 ......................... 100 88 66 51 44 38
March 15, 2010 ......................... 100 80 58 44 36 30
March 15, 2011 ......................... 100 73 51 37 30 0
March 15, 2012 ......................... 100 66 45 31 25 0
March 15, 2013 ......................... 100 59 39 26 0 0
March 15, 2014 ......................... 100 53 34 22 0 0
March 15, 2015 ......................... 100 48 30 0 0 0
March 15, 2016 ......................... 100 43 26 0 0 0
March 15, 2017 ......................... 100 38 22 0 0 0
March 15, 2018 ......................... 99 33 19 0 0 0
March 15, 2019 ......................... 91 29 0 0 0 0
March 15, 2020 ......................... 83 25 0 0 0 0
March 15, 2021 ......................... 76 21 0 0 0 0
March 15, 2022 ......................... 69 0 0 0 0 0
March 15, 2023 ......................... 61 0 0 0 0 0
March 15, 2024 ......................... 52 0 0 0 0 0
March 15, 2025 ......................... 43 0 0 0 0 0
March 15, 2026 ......................... 36 0 0 0 0 0
March 15, 2027 ......................... 27 0 0 0 0 0
March 15, 2028 ......................... 18 0 0 0 0 0
March 15, 2029 ......................... 0 0 0 0 0 0
Weighted Average Life (years): ......... 24.0 15.1 11.9 9.7 8.7 8.0
</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-31
<PAGE>
<TABLE>
<CAPTION>
CLASS M-2 CERTIFICATES AT THE
FOLLOWING PERCENTAGE OF MHP
--------------------------------------------------------
PAYMENT DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date ........................... 100 100 100 100 100 100
March 15, 2001 ......................... 100 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 93 93 92
March 15, 2006 ......................... 100 100 94 80 77 74
March 15, 2007 ......................... 100 100 84 69 64 60
March 15, 2008 ......................... 100 96 75 59 53 48
March 15, 2009 ......................... 100 88 66 51 44 38
March 15, 2010 ......................... 100 80 58 44 36 30
March 15, 2011 ......................... 100 73 51 37 30 0
March 15, 2012 ......................... 100 66 45 31 25 0
March 15, 2013 ......................... 100 59 39 26 0 0
March 15, 2014 ......................... 100 53 34 22 0 0
March 15, 2015 ......................... 100 48 30 0 0 0
March 15, 2016 ......................... 100 43 26 0 0 0
March 15, 2017 ......................... 100 38 22 0 0 0
March 15, 2018 ......................... 99 33 19 0 0 0
March 15, 2019 ......................... 91 29 0 0 0 0
March 15, 2020 ......................... 83 25 0 0 0 0
March 15, 2021 ......................... 76 21 0 0 0 0
March 15, 2022 ......................... 69 0 0 0 0 0
March 15, 2023 ......................... 61 0 0 0 0 0
March 15, 2024 ......................... 52 0 0 0 0 0
March 15, 2025 ......................... 43 0 0 0 0 0
March 15, 2026 ......................... 36 0 0 0 0 0
March 15, 2027 ......................... 27 0 0 0 0 0
March 15, 2028 ......................... 18 0 0 0 0 0
March 15, 2029 ......................... 0 0 0 0 0 0
Weighted Average Life (years): ......... 24.0 15.1 11.9 9.7 8.7 8.0
<CAPTION>
CLASS B-1 CERTIFICATES AT THE
FOLLOWING PERCENTAGE OF MHP
--------------------------------------------------------
PAYMENT DATE 0% 100% 150% 200% 250% 300%
- ------------------------------------------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Closing Date ........................... 100 100 100 100 100 100
March 15, 2001 ......................... 100 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 93 93 92
March 15, 2006 ......................... 100 100 94 80 77 74
March 15, 2007 ......................... 100 100 84 69 64 60
March 15, 2008 ......................... 100 96 75 59 53 48
March 15, 2009 ......................... 100 88 66 51 44 38
March 15, 2010 ......................... 100 80 58 44 36 30
March 15, 2011 ......................... 100 73 51 37 30 0
March 15, 2012 ......................... 100 66 45 31 22 0
March 15, 2013 ......................... 100 59 39 26 0 0
March 15, 2014 ......................... 100 53 34 16 0 0
March 15, 2015 ......................... 100 48 30 0 0 0
March 15, 2016 ......................... 100 43 25 0 0 0
March 15, 2017 ......................... 100 38 16 0 0 0
March 15, 2018 ......................... 99 33 8 0 0 0
March 15, 2019 ......................... 91 29 0 0 0 0
March 15, 2020 ......................... 83 22 0 0 0 0
March 15, 2021 ......................... 76 14 0 0 0 0
March 15, 2022 ......................... 69 0 0 0 0 0
March 15, 2023 ......................... 61 0 0 0 0 0
March 15, 2024 ......................... 52 0 0 0 0 0
March 15, 2025 ......................... 43 0 0 0 0 0
March 15, 2026 ......................... 36 0 0 0 0 0
March 15, 2027 ......................... 27 0 0 0 0 0
March 15, 2028 ......................... 8 0 0 0 0 0
March 15, 2029 ......................... 0 0 0 0 0 0
Weighted Average Life (years): ......... 23.9 15.0 11.7 9.6 8.7 8.0
</TABLE>
These MHP Tables have been prepared based on the Modeling Assumptions,
including the assumptions regarding the characteristics and performance of the
assets, which will differ from their actual characteristics and performance, and
should be read in conjunction with these assumptions.
S-32
<PAGE>
FACTORS AFFECTING PREPAYMENTS
The rate of principal payments on pools of manufactured housing contracts
and mortgage loans is influenced by a variety of economic, geographic, social
and other factors, including the prevailing level of interest rates from time to
time and the rate at which owners of manufactured homes sell their manufactured
homes or default on their contracts or mortgage loans. Other factors affecting
prepayment of manufactured housing contracts and mortgage loans include changes
in obligors' housing needs, job transfers, unemployment and obligors' net equity
in the manufactured homes and mortgaged properties.
In general, if prevailing interest rates fall significantly below the
interest rates on the assets in your pool, these assets are likely to 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 Capital, as seller under the sales agreement, may be required to
repurchase assets if it breaches its representations and warranties contained in
the related sales agreement, including those relating to the qualification of
the assets for REMIC purposes. Oakwood Acceptance has an obligation to
repurchase assets sold by Oakwood Capital if Oakwood Capital fails to do so. 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 ASSETS" 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 on
which the current aggregate principal balance of all outstanding certificates is
less than 10% of their original amount. 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
S-33
<PAGE>
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, the exercise of the servicer's optional termination or the
trustee's auction sale, and repurchases by or on behalf of Oakwood Capital or
Oakwood Mortgage, as the case may be. NO ASSURANCE CAN BE GIVEN AS TO THE RATE
OF PRINCIPAL PAYMENTS OR ON THE PREPAYMENTS ON THE ASSETS.
Delinquencies on assets could produce payment delays and could lead to
repossessions of manufactured homes and foreclosures in the case of Land Secured
Contracts and mortgage loans. Repossession of a manufactured home or foreclosure
on a real property or mortgaged property and the subsequent resale of the home
securing a contract or a property securing a mortgage loan may produce net
liquidation proceeds that are less than the Scheduled Principal Balance of the
related asset plus interest accrued and the expenses of sale. This shortfall
upon repossession and disposition of a manufactured home or foreclosure on a
real property or mortgaged property would result in a Realized Loss on the
asset.
The timing of changes in the rate of prepayments and defaults on the assets
may affect an investor's actual yield to maturity significantly, even if the
average rate of principal payments and defaults experienced over time is
consistent with an investor's expectations. In general, the earlier a prepayment
of principal of or a default on an asset, the greater will be the effect on the
investor's yield to maturity. As a result, the effect on an investor's yield of
principal payments or defaults occurring at a rate higher 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
S-34
<PAGE>
effect of amortizing the class A-1, class A-2, class A-3, class A-4 and class
A-5 certificates, particularly the class A-1 certificates, at a faster rate than
the rate at which the certificates would have been amortized if the Principal
Distribution Amount were required to be allocated among the classes of the
certificates pro rata prior to the Cross-over Date.
The holders of the offered subordinated certificates will not be entitled
to receive any distributions of principal on any distribution date unless either
the Cross-over Date has occurred and the Principal Distribution Tests are
satisfied for this distribution date or the certificate principal balance of
each class 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 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-1 certificates, beyond what
would otherwise be the case.
While partial prepayments of principal on the assets are applied on Due
Dates for the assets, obligors are not required to pay interest on the assets
after the date of a full prepayment of principal. As a result, full prepayments
of assets in advance of their Due Dates during the Collection Period will reduce
the amount of interest received from obligors during that Collection Period to
less than one month's interest on all the assets. If a sufficient number of
assets are prepaid in full during the Prepayment Period in advance of their
respective Due Dates, then interest payable on all of the assets during the
related Collection Period may be less than the interest payable on all of the
certificates with respect to the Collection Period. If the level of Due Date
Interest Shortfalls was large enough and exceeded any compensatory interest paid
by the servicer, 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, like the Pass-Through Rate of
all other classes of offered 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 certificates, other than the
class A-1 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, with respect to the
offered certificates other than the class A-1 certificates:
o the yield to maturity of the class A-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 7.765% per annum prepaid prior to those
with net rates lower than 7.765% per annum,
S-35
<PAGE>
o the yield to maturity of the class A-3 certificates will be lower than
that which would otherwise result if all or a substantial portion of the
assets with net rates higher than 7.945% per annum prepaid prior to those
with net rates lower than 7.945% per annum,
o the yield to maturity of the class A-4 certificates will be lower than
that which would otherwise result if all or a substantial portion of the
assets with net rates higher than 8.150% per annum prepaid prior to those
with net rates lower than 8.150% per annum,
o the yield to maturity of the class A-5 certificates will be lower than
that which would otherwise result if all or a substantial portion of the
assets with net rates higher than 8.160% per annum prepaid prior to those
with net rates lower than 8.160% per annum,
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 8.300% per annum prepaid prior to those
with net rates lower than 8.300% 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 8.250% per annum prepaid prior to those
with net rates lower than 8.250% 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 8.250% per annum prepaid prior to those
with net rates lower than 8.250% 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 Capital and by the exercise by the servicer of its
option to purchase the assets and other assets of the trust, thereby effecting
early retirement of any outstanding classes of offered certificates. If the
servicer does not exercise its optional termination right within 90 days after
it first becomes eligible to do so, the trustee shall solicit bids for the
purchase of all assets, REO Properties and Repo Properties remaining in the
trust. The trustee shall sell these assets, REO Properties and Repo Properties
only if the net proceeds to the trust from the sale would at least equal the
Termination Price. The net proceeds from the sale will be distributed first to
the servicer to reimburse it for all previously unreimbursed Liquidation
Expenses paid and Advances made by, and not previously reimbursed to, it with
respect to the assets and second to the Holders of the certificates and the
servicer. ACCORDINGLY, IT IS POSSIBLE THAT YOUR CERTIFICATES COULD BE REDEEMED
AT A PRICE LESS THAN THEIR OUTSTANDING PRINCIPAL AMOUNT PLUS ACCRUED AND UNPAID
INTEREST.
If the net proceeds from the sale would not at least equal the Termination
Price, the trustee shall decline to sell the assets, REO Properties and Repo
Properties and shall not be under any obligation to solicit any further bids or
otherwise negotiate any further sale of the assets, REO Properties and Repo
Properties.
THE TRUST
GENERAL
The certificates will be issued pursuant to the pooling and servicing
agreement. This summary of the provisions of the pooling and servicing agreement
does not purport to be complete. Reference is made to the prospectus for
important information in addition to that set forth in this prospectus
supplement regarding the terms and conditions of the offered certificates. A
copy of the standard terms to pooling and servicing agreement, 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.
S-36
<PAGE>
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 and Oakwood Capital 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 2000-A.
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.
The trustee may resign at any time, in which event Oakwood Mortgage will be
obligated to appoint a successor trustee. Oakwood Mortgage may also remove the
trustee if the trustee ceases to be eligible to continue as such under the
pooling and servicing agreement or if the trustee becomes insolvent. In these
circumstances, Oakwood Mortgage will also be obligated to appoint a successor
trustee. Any resignation or removal of the trustee and appointment of a
successor trustee will not become effective until acceptance of the appointment
by the successor trustee.
The pooling and servicing agreement requires the trustee to maintain, at
its own expense, an office or agency where certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the trustee and the Certificate Registrar in respect of the certificates
pursuant to the pooling and servicing agreement may be served.
OPTIONAL TERMINATION
The servicer may terminate the trust by purchasing all assets, REO
Properties and Repo Properties remaining in the trust at any time when the
aggregate principal balance of all outstanding certificates is less than 10% of
the original aggregate principal balance of the certificates. The trust also may
be terminated and the certificates retired on any distribution date upon the
servicer's determination, based on an opinion of counsel, that the REMIC status
of either the Pooling REMIC or the Issuing REMIC has been lost or that a
substantial risk exists that this status will be lost for the then current
taxable year. SEE "DESCRIPTION OF THE CERTIFICATES -- OPTIONAL REDEMPTION OR
TERMINATION" IN THE PROSPECTUS.
The Termination Price will equal the greater of
o the sum of
o any Liquidation Expenses incurred by the servicer in respect of any
asset that has not yet been liquidated;
o all amounts required to be reimbursed or paid to the servicer in
respect of previously unreimbursed Advances; and
o the sum of
S-37
<PAGE>
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 month preceding the month of the terminating purchase. ACCORDINGLY, IT IS
POSSIBLE THAT YOUR CERTIFICATES COULD BE REDEEMED BY AN OPTIONAL TERMINATION AT
A PRICE LESS THAN THEIR OUTSTANDING PRINCIPAL AMOUNT PLUS ACCRUED AND UNPAID
INTEREST. The basis for a valuation shall be furnished by the servicer to the
certificateholders upon request. SEE "DESCRIPTION OF THE CERTIFICATES --
OPTIONAL REDEMPTION OR TERMINATION" IN THE PROSPECTUS.
On the date of any termination of the trust, the Termination Price shall be
distributed first to the servicer to reimburse it for all previously
unreimbursed Liquidation Expenses paid and Advances made by and not previously
reimbursed to the servicer with respect to the assets and second to the
certificateholders in accordance with the distribution priorities set forth
under " -- DISTRIBUTIONS -- PRIORITY OF DISTRIBUTIONS" IN THIS PROSPECTUS
SUPPLEMENT. The Termination Price shall be deemed to be a principal prepayment
in full, together with related interest, received during the related Prepayment
Period for purposes of determining the allocation of the distributions. Upon the
termination of the trust and payment of all amounts due on the certificates and
all administrative expenses associated with the trust, any remaining assets of
the REMICs shall be sold and the proceeds distributed pro rata to the holders of
the class R certificates. SEE "DESCRIPTION OF THE CERTIFICATES -- OPTIONAL
REDEMPTION OR TERMINATION" IN THE PROSPECTUS.
AUCTION SALE
If the servicer does not exercise its optional termination right within 90
days after it first becomes eligible to do so, the trustee shall solicit bids
for the purchase of all assets, REO Properties and Repo Properties remaining in
the trust. The trustee shall sell the assets, REO Properties and Repo Properties
only if the net proceeds to the trust from the sale would at least equal the
Termination Price, and the net proceeds from the sale will be distributed first
to the servicer to reimburse it for all previously unreimbursed Liquidation
Expenses paid and Advances made by, and not previously reimbursed to, it with
respect to the assets and second to the certificateholders and the servicer in
accordance with the distribution priorities set forth under "DESCRIPTION OF THE
OFFERED 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
S-38
<PAGE>
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, the class B-2 certificates and the class X certificates, or to the
Termination Account, will be paid to the class R certificateholders pro rata,
based upon the holders' respective percentage interests, in accordance with the
provisions of the pooling and servicing agreement.
VOTING RIGHTS
The voting rights of the trust will be allocated 0.5% to the class R
certificates, 0.5% to the class X certificates and 99% to the other certificates
in proportion to their respective certificate principal balances. For a
description of the limited matters on which the certificateholders may vote. SEE
"THE POOLING AND SERVICING AGREEMENTS" IN THE PROSPECTUS.
REPORTS TO CERTIFICATEHOLDERS
The trustee will furnish the certificateholders with monthly statements
prepared by the servicer (each, a "Remittance Report") containing information
with respect to principal and interest distributions on the certificates and
Realized Losses on the assets. Any financial information contained in these
reports will not have been examined or reported upon by an independent public
accountant. Copies of the monthly statements and any annual reports prepared by
the servicer evidencing the status of its compliance with the provisions of a
pooling and servicing agreement will be furnished to related certificateholders
upon request addressed to the trustee.
A Remittance Report for a distribution date will identify the following
items:
o the Available Distribution Amount for the related distribution date;
o the Interest Distribution Amount and the carryover amounts, as well as
any Writedown Interest Distribution Amount and any Carryover Writedown
Interest Distribution Amount, for each class of the certificates for the
related distribution date, and the amount of interest of each category to
be distributed on each class based upon the Available Distribution Amount
for the related distribution date;
o the amount to be distributed on the related distribution date on each
class of the certificates to be applied to reduce the certificate
principal balance of each class, separately identifying any portion of
the amount attributable to prepayments, and the aggregate of any
Principal Distribution Shortfall Carryover Amounts for each class of the
certificates for the related distribution date, and the amount to be
distributed to reduce any Principal Distribution Amounts remaining
S-39
<PAGE>
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 made on the related distribution date;
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 Principal Balance of outstanding contracts and
outstanding mortgage loans for which the obligor is also a debtor,
whether voluntary or involuntary, in a proceeding under the Bankruptcy
Code, stated separately, that are 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.
S-40
<PAGE>
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 Corporation ("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 373, as of December 31, 1999, sales centers
located in 30 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, Carmel, Indiana, Vancouver,
Washington 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 Homes, Inc.
("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.
SERVICING PORTFOLIO
Oakwood Acceptance services all of the manufactured housing contracts it
originates or purchases -- except for some contract portfolios which it sells on
a servicing-released basis -- collecting loan payments, insurance premiums and
other payments from borrowers and remitting principal and interest payments to
the holders of the contracts. The following table shows the composition of
Oakwood Acceptance's servicing portfolio of manufactured housing contracts and
residential mortgage loans, secured by a lien on the real estate on which the
related manufactured home is deemed permanently affixed, on the dates indicated.
S-41
<PAGE>
ASSET SERVICING PORTFOLIO
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-------------------------------------------------------------------------------
1995 1996 1997 1998 1999
--------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total Number of Serviced Assets
Oakwood Acceptance Originated.... 51,566 67,120 89,411 111,351 122,955
Acquired Portfolios ............. 4,872 4,177 3,602 2,818 2,160
Aggregate Outstanding Principal
Balance of Serviced Assets
Oakwood Acceptance Originated.... $ 1,130,378 $ 1,687,406 $ 2,499,794 $ 3,536,657 $ 4,223,475
Acquired Portfolios ............. $ 70,853 $ 57,837 $ 47,027 $ 35,882 $ 26,306
Average Outstanding Principal
Balance per Serviced Asset
Oakwood Acceptance Originated $ 21.9 $ 25.1 $ 28.0 $ 31.8 $ 34.3
Acquired Portfolios ............. $ 14.5 $ 13.8 $ 13.1 $ 12.7 $ 12.2
Weighted Average Interest Rate of
Serviced Assets
Oakwood Acceptance Originated 12.0% 11.5% 11.0% 10.8% 10.6%
Acquired Portfolios ............. 11.3% 11.2% 11.1% 11.0% 10.7%
<CAPTION>
AT DECEMBER 31,
-------------------------------
1998 1999
--------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total Number of Serviced Assets
Oakwood Acceptance Originated.... 114,697 121,598
Acquired Portfolios ............. 2,635 2,053
Aggregate Outstanding Principal
Balance of Serviced Assets
Oakwood Acceptance Originated.... $ 3,692,078 $ 4,227,795
Acquired Portfolios ............. $ 32,734 $ 24,607
Average Outstanding Principal
Balance per Serviced Asset
Oakwood Acceptance Originated $ 32.2 $ 34.8
Acquired Portfolios ............. $ 12.4 $ 12.0
Weighted Average Interest Rate of
Serviced Assets
Oakwood Acceptance Originated 10.7% 10.6%
Acquired Portfolios ............. 11.0% 10.7%
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 1995 through 1999 and for each of
the three-month periods ended December 31, 1998 and December 31, 1999. 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.
DELINQUENCY EXPERIENCE
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
------------------------------------------------------------- -------------------------
1995 1996 1997 1998 1999 1998 1999
----------- ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Number of Serviced Assets
Oakwood Acceptance Originated ....... 51,566 67,120 89,411 111,351 122,955 114,697 121,598
Acquired Portfolios ................. 4,872 4,177 3,602 2,818 2,160 2,635 2,053
Number of Delinquent Assets
Oakwood Acceptance Originated:
30 to 59 days past due .............. 601 835 1,171 2,345 3,391 2,695 2,953
60 to 89 days past due .............. 185 308 476 906 1,046 973 1,077
90 days or more past due ............ 267 492 716 1,222 1,783 1,474 2,368
Total Number of Assets Delinquent 1,053 1,635 2,363 4,473 6,220 5,142 6,398
Acquired Portfolios:
30-59 days past due ................. 63 66 90 75 59 52 47
60-89 days past due ................. 17 23 23 31 14 19 18
90 days or more past due ............ 76 62 75 57 45 53 52
Total Number of Assets Delinquent 156 151 188 163 118 124 117
Total Delinquencies as a Percentage of
Serviced Assets, by Number of
Assets
Oakwood Acceptance Originated ....... 2.0% 2.4% 2.6% 4.0% 5.1% 4.5% 5.3%
Acquired Portfolios ................. 3.2% 3.6% 5.2% 5.8% 5.5% 4.7% 5.7%
</TABLE>
- ---------
Assets that are already the subject of repossession or foreclosure procedures
are not included in "delinquent assets" for purposes of this table. The period
of delinquency is based on the number of
S-42
<PAGE>
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,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------ -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total Number of Serviced Assets at
Period End .......................... 56,438 71,297 93,013 114,169 125,115
Average Number of Serviced Assets
During Period ....................... 50,742 63,868 82,155 103,591 119,642
Number of Serviced Assets
Repossessed ......................... 1,718 2,746 3,885 5,411 7,790
Serviced Assets Repossessed as a
Percentage of Total Serviced
Assets (1) .......................... 3.04% 3.85% 4.18% 4.74% 6.23%
Serviced Assets Repossessed as a
Percentage of Average Number of
Serviced Assets ..................... 3.39% 4.30% 4.73% 5.22% 6.51%
Average Outstanding Principal
Balance of Assets
Oakwood Acceptance Originated ....... $976,905 $1,409,467 $2,065,033 $2,978,235 $3,839,274
Acquired Portfolios ................. $ 30,235 $ 27,351 $ 22,943 $ 19,179 $ 14,781
Net Losses from Asset
Liquidations (2):
Total Dollars
Oakwood Acceptance Originated ....... $ 7,303 $ 14,248 $ 26,872 $ 45,189 $ 66,037
Acquired Portfolios ................. $ 473 $ 592 $ 528 $ 220 $ 173
As a Percentage of Average
Outstanding Principal Balance of
Assets (3)
Oakwood Acceptance Originated ....... 0.75% 1.01% 1.30% 1.52% 1.72%
Acquired Portfolios ................. 1.56% 2.16% 2.30% 1.15% 1.17%
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED DECEMBER 31,
-----------------------------
1998 1999
-------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total Number of Serviced Assets at
Period End .......................... 117,332 123,651
Average Number of Serviced Assets
During Period ....................... 115,751 124,383
Number of Serviced Assets
Repossessed ......................... 1,865 1,860
Serviced Assets Repossessed as a
Percentage of Total Serviced
Assets (1) .......................... 6.36% 6.02%
Serviced Assets Repossessed as a
Percentage of Average Number of
Serviced Assets ..................... 6.44% 5.98%
Average Outstanding Principal
Balance of Assets
Oakwood Acceptance Originated ....... $3,573,337 $4,183,390
Acquired Portfolios ................. $ 16,276 $ 12,113
Net Losses from Asset
Liquidations (2):
Total Dollars
Oakwood Acceptance Originated ....... $ 14,266 $ 13,205
Acquired Portfolios ................. $ 34 $ 28
As a Percentage of Average
Outstanding Principal Balance of
Assets (3)
Oakwood Acceptance Originated ....... 1.60% 1.26%
Acquired Portfolios ................. 0.84% 0.92%
</TABLE>
- ---------
Percentages expressed in the three month tables are annualized.
(1) Total number of serviced assets repossessed during the applicable period
expressed as a percentage of the total number of serviced assets at the end
of the applicable period.
(2) Net losses represent all losses incurred on Oakwood Acceptance-serviced
portfolios. Such amounts include estimates of net losses with respect to
certain defaulted assets. The length of the accrual period for the amount of
accrued and unpaid interest included in the calculation of the net loss
varies depending upon the period in which the loss was charged and whether
the asset was owned by an entity other than Oakwood Acceptance.
(3) Total net losses incurred on assets liquidated during the applicable period
expressed as a percentage of the average outstanding principal balance of
all assets.
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 1995, and its delinquency experience also has generally trended
upward during that time. It is difficult to isolate
S-43
<PAGE>
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 1995 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 1995 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.
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.
S-44
<PAGE>
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 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
S-45
<PAGE>
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 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 by Oakwood Mortgage to purchase the assets and to pay
other expenses connected with pooling the assets and issuing the certificates.
RECENT DEVELOPMENTS
In November 1998, four shareholder suits were filed against Oakwood Homes
and certain of its directors and officers. These suits have been consolidated in
one suit in the Middle District of North Carolina. The lawsuit generally alleges
that certain of Oakwood Homes' financial statements were false and misleading
and that certain other disclosures were inaccurate. Oakwood Homes has filed a
motion to dismiss this complaint. Oakwood Mortgage believes that this lawsuit
will not adversely affect distributions to be made on your certificates.
S-46
<PAGE>
UNDERWRITING
Oakwood Mortgage and Oakwood Acceptance have entered into an underwriting
agreement dated March 28, 2000 with Credit Suisse First Boston Corporation and
Banc of America Securities LLC (the "underwriters"). 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 CLASS CLASS CLASS CLASS CLASS CLASS
A-1 A-2 A-3 A-4 A-5 M-1 M-2
-------------- -------------- ------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Credit Suisse First Boston
Corporation ............ $32,500,000 $11,500,000 $ 7,000,000 $12,500,000 $ 62,539,000 $10,264,000 $ 6,159,000
Banc of America Securities
LLC .................... $32,500,000 $11,500,000 $ 7,000,000 $12,500,000 $ 62,539,000 $10,263,000 $ 6,158,000
Total ................ $65,000,000 $23,000,000 $14,000,000 $25,000,000 $125,078,000 $20,527,000 $12,317,000
The underwriting agreement provides 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 purchase
commitments of the nondefaulting underwriter may be increased or the offering
may be terminated.
The underwriters propose to offer the offered certificates initially at the
public offering prices set forth on the cover page of this prospectus
supplement, and to selling group members at such prices less a concession not in
excess of the amount set forth for each class. The underwriters and selling
group members may allow a discount not in excess of the amount set forth for
each class to other broker/dealers. After the initial public offering of the
offered certificates, the public offering prices and concessions and discounts
to broker/dealers may be changed by the underwriters.
<CAPTION>
CONCESSION DISCOUNT
(PERCENT OF (PERCENT OF
PRINCIPAL PRINCIPAL
AMOUNT) AMOUNT)
------------ ------------
<S> <C> <C>
Class A-1 .............. 0.075% 0.100%
Class A-2 .............. 0.120% 0.125%
Class A-3 .............. 0.150% 0.125%
Class A-4 .............. 0.240% 0.125%
Class A-5 .............. 0.150% 0.125%
Class M-1 .............. 0.375% 0.125%
Class M-2 .............. 0.525% 0.125%
</TABLE>
Distribution of the class B-1 certificates may be made by Credit Suisse
First Boston Corporation or Banc of America Securities LLC from time to time in
negotiated transactions or otherwise at varying prices determined at the time of
sale. Proceeds to Oakwood Mortgage from the class B-1 certificates are expected
to be approximately $13,130,000 plus accrued interest. In connection with the
purchase and sale of the class B-1 certificates, Credit Suisse First Boston
Corporation or Banc of America may be determined to have received compensation
from Oakwood Mortgage in the form of underwriting discounts and commissions.
Oakwood Mortgage and Oakwood Acceptance have agreed to indemnify the
underwriters against 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.
o Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position.
S-47
<PAGE>
o Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum.
o 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.
o Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the offered certificates originally sold by the
syndicate member are purchased in a stabilizing transaction or a syndicate
covering transaction to cover syndicate short positions.
Stabilizing transactions, syndicate covering transactions and penalty bids
may cause the prices of the offered certificates to be higher than they would
otherwise be in the absence of these transactions. These transactions, if
commenced, may be discontinued at any time.
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 financed in a multi-seller conduit commercial paper
vehicle sponsored by Bank of America, N.A., an affiliate of Banc of America
Securities LLC. Some of the proceeds of the offering of the certificates will be
used to repay this financing vehicle.
LEGAL MATTERS
Legal matters will be passed upon for Oakwood Mortgage by Hunton &
Williams, Richmond, Virginia, and for the underwriters 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
S-48
<PAGE>
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
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, 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, 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 Securities 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;
S-49
<PAGE>
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 Capital, the trustee, the servicer and any obligor with
respect to assets included in the trust constituting more than five percent of
the aggregate unamortized principal balance of the assets in the trust, or any
affiliate of such parties (the "Restricted Group"). Moreover, the Exemption
provides certain Plan fiduciaries relief from certain self-dealing/conflict of
interest prohibited transactions only if, among other requirements,
o in the case of an acquisition in connection with the initial issuance of
certificates, at least 50% of each class of certificates in which Plans
have invested is acquired by persons independent of the Restricted Group
and at least 50% of the aggregate interest in the trust is acquired by
persons independent of the Restricted Group;
o such fiduciary or its affiliate is an obligor with respect to five
percent or less of the fair market value of the obligations contained in
the trust;
o the Plan's investment in certificates of any class does not exceed 25% of
all of the certificates of that class outstanding at the time of the
acquisition; and
o immediately after the acquisition, no more than 25% of the assets of the
Plan with respect to which such person is a fiduciary is invested in
certificates representing an interest in one or more trusts containing
assets sold or serviced by the same entity.
The Exemption may apply to the acquisition and holding of the class A-1,
class A-2, class A-3, class A-4 and class A-5 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-1, class A-2, class A-3, class A-4 and class A-5
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
professional asset manager.
Before purchasing class A-1, class A-2, class A-3, class A-4 or class A-5
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
S-50
<PAGE>
specified duties and obligations may not comport with or satisfy the provisions
of ERISA setting forth the fiduciary duties of Plan fiduciaries.
BECAUSE THE CLASS M-1, CLASS M-2 AND CLASS B-1 CERTIFICATES ARE
SUBORDINATED SECURITIES, THE EXEMPTION WILL NOT APPLY TO THE PURCHASE, SALE OR
HOLDING OF THE OFFERED SUBORDINATED 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. 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 CAPITAL, 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 CAPITAL 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 A-3 ....... AAA AAA
Class A-4 ....... AAA AAA
Class A-5 ....... 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.
S-51
<PAGE>
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-1, class A-2, class A-3, class A-4 and class A-5 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-1, class A-2, class A-3, class A-4 and class A-5
certificates and the class M-1 certificates will be legal investments for
entities to the extent provided in SMMEA, unless there are state laws overriding
SMMEA. A number of states have enacted legislation overriding the legal
investment provisions of SMMEA. SEE "LEGAL INVESTMENT CONSIDERATIONS" IN THE
PROSPECTUS.
THE CLASS M-2 AND CLASS B-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. There 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-52
<PAGE>
PROSPECTUS
OAKWOOD MORTGAGE INVESTORS, INC.
DEPOSITOR
PASS-THROUGH CERTIFICATES, ISSUABLE IN SERIES
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 1 IN THIS PROSPECTUS.
Your certificates will represent obligations of your trust only and will not
represent interests in or obligations of Oakwood Mortgage or any of its
affiliates. Your certificates are not insured or guaranteed by any person.
Except as noted in this prospectus and the accompanying prospectus supplement,
the underlying accounts, contracts, and mortgage loans are not insured or
guaranteed by any government agency.
This prospectus may be used and to offer and sell any series of certificates
only if accompanied by the prospectus supplement for that series.
YOUR TRUST:
-----------
o will issue certificates backed by contracts and
mortgage loans in one or more series with one or more
classes; and
o will own contracts and mortgage loans and other
property described on the cover page of the
accompanying prospectus supplement.
YOUR CERTIFICATES:
------------------
o will be secured by the property of your trust and
will be paid only from your trust's assets;
o will be rated in one of the four highest rating
categories by at least one nationally recognized
rating organization;
o may have one or more forms of credit enhancement; and
o will be issued as part of a designated series that may
include one or more classes of certificates and credit
enhancement.
INVESTORS:
----------
o will receive interest and principal payments from
collections on the contracts and mortgage loans and
their trust's other assets, if any; and
o are entitled to receive payments from collections on
contracts and mortgage loans and other assets securing
their series of certificates, but have no entitlement
to payments from contracts, mortgage loans, or other
assets.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MARCH 28, 2000
<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.
i
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to purchase
the certificates.
<TABLE>
<CAPTION>
<S> <C>
THE TIMING AND AMOUNT OF PREPAYMENT.
PREPAYMENTS ON YOUR CERTIFICATES
COULD REDUCE THE YIELD TO MATURITY OF Prepayment levels are affected by a variety
YOUR INVESTMENT of economic, geographic, tax, legal, and
other factors, including defaults on the
assets, required repurchases of the assets
and current interest rates. The assets may be
prepaid at any time. When interest rates are
going down, home buyers are more likely to
prepay so that they may obtain lower
alternative financing on their homes. In this
event, you may not be able to reinvest the
proceeds of prepayments in another investment
of similar credit risk and yield. Conversely,
prepayments are likely to decline if interest
rates rise and you could reinvest prepayment
proceeds in investments of similar credit
risk and higher yield.
YIELD.
In general, if you purchased your
certificates at a price greater than their
par value, your investment will become less
valuable if prepayments are higher than you
anticipate and will become more valuable if
prepayments are lower than you anticipate.
Conversely, if you purchased your
certificates at a price less than their par
value, your investment will become more
valuable if prepayments are higher than you
anticipate and will become less valuable if
prepayments are lower than you anticipate.
Your certificates' sensitivity to prepayments
will be magnified by any disproportionate
allocation of principal or interest. You
could fail to recover your initial investment
if your certificates receive a
disproportionate amount of principal or
interest, and if prepayments occur
differently than you anticipate. Your yield
also may be reduced by the fact that payments
of interest to fixed-rate certificateholders
are made in the month following the month in
which such certificates accrue interest.
Losses on assets that are allocated to your
class of certificates also will reduce your
yield.
REGIONAL ECONOMIC DOWNTURNS AND THE Downturns in regional or local economic
DECLINE IN THE VALUE OF MANUFACTURED conditions will affect the frequency of
HOMES COULD RESULT IN LOSSES ON YOUR delinquency and amount of losses on the
CERTIFICATES 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
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
repossession of manufactured homes tend to be
higher than on corresponding mortgage loans
on stationary homes because, unlike
stationary homes, manufactured homes
generally loose value over time. This may
result in losses to you if the losses on
homes are too great to be absorbed by classes
of certificates that are subordinated to the
certificates held by you and other credit
enhancement features. You will have to look
primarily to the value of the manufactured
homes and mortgaged properties for recovery
of the outstanding principal of and unpaid
interest on the defaulted mortgage loans not
covered by credit enhancement. SEE "THE
TRUSTS -- THE ASSETS -- THE MORTGAGE LOANS"
IN THIS PROSPECTUS.
STATE LAW MAY LIMIT THE SERVICER'S State laws, such as the uniform commercial
ABILITY TO SERVICE THE ASSETS IN A code and motor vehicle titling statutes, may
MANNER THAT MAXIMIZES YOUR RETURN limit the servicer's ability to repossess,
foreclose, or liquidate the assets in order
to pay off certificates. State law may also
limit the amount the servicer may collect in
a liquidation to less than the amount due on
any particular asset. For example, state laws
regulate how a repossession can be conducted
and whether the servicer may obtain a
deficiency judgment if the proceeds of
foreclosure are not sufficient to repay the
loan.
CONTESTING THE TRUSTEE'S SECURITY The steps necessary to create and perfect a
INTEREST IN THE MANUFACTURED HOMES security interest in the manufactured homes
COULD REDUCE OR DELAY DISTRIBUTIONS 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 A secondary market for any series of
BE LIMITED certificate may not develop. If a secondary
market does develop, it might not continue or
it might not be sufficiently liquid to allow
you to resell any of your certificates. Also,
ERISA plans may be prohibited from purchasing
your certificates, if noted in the prospectus
supplement.
THE ENFORCEMENT OF CONSUMER A failure by Oakwood Acceptance to comply
PROTECTION LAWS MAY BE A LIABILITY TO with federal or state consumer protection
YOUR TRUST 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
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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.
CREDIT ENHANCEMENT OFTEN DOES NOT Insurance policies and other forms of credit
COVER ALL TYPES OF LOSSES ON YOUR enhancement only cover the matters expressly
CERTIFICATES addressed by their terms and detailed in your
prospectus supplement, and will not provide
protection against all risks of loss. SEE
"THE TRUSTS -- INSURANCE" IN THIS PROSPECTUS.
THE SUBORDINATION OF OTHER CLASSES TO The fact that some classes are paid after the
YOUR CLASS WILL NOT INSULATE YOU FROM classes of certificates which you hold does
LOSS 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 Certificates purchased at a discount and
PURPOSES PRIOR TO YOUR RECEIPT OF CASH other classes of certificates purchased at a
premium that are deemed to have original
issue discount may incur tax liabilities
prior to a holder's receiving the related
cash payments. SEE "FEDERAL INCOME TAX
CONSEQUENCES" IN THIS PROSPECTUS.
YOU WILL EXPERIENCE DELAYS OR The acquisition of the contracts and mortgage
REDUCTIONS OF DISTRIBUTIONS ON YOUR loans by the trust from Oakwood Mortgage is
CERTIFICATES IF THE TRANSFER IS NOT intended to be a sale. However, in the event
CONSIDERED A SALE IN THE EVENT OF that Oakwood Mortgage or one of its
BANKRUPTCY 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.
YOUR CERTIFICATES MAY BE REDEEMED AT In the event your certificates are redeemed,
A PRICE LESS THAN THEIR PRINCIPAL the purchase price will equal 100% of your
AMOUNT PLUS ACCRUED AND UNPAID certificates' then outstanding principal
INTEREST amount, plus accrued and unpaid interest
thereon at the applicable pass-through rate,
less any
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 The assets of your trust have various payment
PAYMENT PROVISIONS, WHICH COULD provisions. Some may have changing monthly
AFFECT PAYMENTS TO YOU payments, some may begin with lower payments
followed by higher payments, and still others
may have unusually large payments due at
maturity. There is a higher risk of default
on these assets than on level payment assets.
The likelihood that you will have a loss is
greater with respect to these assets than
with respect to level payment assets.
The interest rates on adjustable rate assets
will adjust periodically. They will equal the
sum of an index, for example, one-month
LIBOR, and a margin. When an index adjusts,
the amount of obligor's monthly payments
likely will change. As a result, obligors on
adjustable rate assets may be more likely to
default on their obligations than obligors on
assets bearing interest at fixed rates. The
seller of convertible loans may be required
to repurchase convertible loans if the
obligor elects to convert the asset rate from
an adjustable rate to a fixed rate. This
repurchase of a convertible loan will have
the same effect on you as a repayment in full
of the asset. You certificates may experience
a higher rate of prepayment than would
otherwise be the case if the your trust
includes convertible loans and a repurchase
obligation.
THE RATINGS PROVIDED BY THE RATING Your certificates will be rated in one of the
AGENCIES DO NOT PURPORT TO ADDRESS ALL four highest rating categories by one or more
RISKS CONTAINED IN YOUR INVESTMENT 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.
</TABLE>
4
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of certificates will be issued pursuant to a pooling and
servicing agreement among Oakwood Mortgage, as seller of the certificates,
Oakwood Acceptance or another servicer, as the servicer, and the trustee named
in the prospectus supplement. 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;
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
5
<PAGE>
earnings at a rate specified in the prospectus supplement, will provide
funds sufficient to support the payments required on such GPM Loan on a
level debt service basis, and a GPM Loan means a graduated payment asset
the terms of which provide for payments during the initial years of its
term that are less than the actual amount of principal and interest that
would be payable on a level debt service basis, if any;
o any reserve fund established and funded to make payments on the
certificates to the extent funds are not otherwise available, if any;
o any letter of credit, guarantee or surety bond, insurance policy or other
credit enhancement securing payment of all or part of the related series
of certificates;
o a pre-funding account, if any;
o other property as may be specified in the related prospectus supplement;
and
o proceeds of any of the foregoing, as specified in the prospectus
supplement.
The pooling and servicing agreement for a series will provide that
certificates may be issued up to the aggregate principal amount authorized by
Oakwood Mortgage. Each series will consist of one or more classes of
certificates and may include:
o one or more classes of senior certificates entitled to preferential
rights to distributions of principal and interest;
o one or more classes of subordinated certificates;
o one or more Strip Classes of certificates, which represent an interest
only in a specified portion of interest payments on the assets in the
related trust and that may have no principal balance, a nominal principal
balance, or a fictional principal balance that may be assigned to a
certificate or class that is used solely for purposes of determining the
amount of interest distributions and certain other rights;
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
6
<PAGE>
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.
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
7
<PAGE>
Intermediary will be responsible for disbursing funds to the Beneficial Owners
of the book-entry certificates that it represents. As a result of the foregoing
procedures, Beneficial Owners of the book-entry certificates may experience some
delay in their receipt of payments.
While the offered certificates are outstanding, except if the offered
certificates are subsequently issued in certificated, fully-registered form,
under the rules, regulations and procedures creating and affecting DTC and its
operations (the "Rules"), DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the offered certificates
and is required to receive and transmit distributions of principal of, and
interest on, the offered certificates. Unless and until the offered certificates
are issued in certificated form, Beneficial Owners who are not Participants may
transfer ownership of the offered certificates only through Participants by
instructing Participants to transfer the offered certificates, by book-entry
transfer, through DTC for the account of the purchasers of certificates, which
account is maintained with the purchasers' respective Participants. Under the
Rules and in accordance with DTC's normal procedures, transfers of ownership of
the offered certificates will be executed through DTC and the accounts of the
respective Participants at DTC will be debited and credited. Because
transactions in book-entry certificates can be effected only through DTC,
participating organizations, indirect participants and banks, the ability of a
Beneficial Owner of a book-entry certificate to pledge a certificate to persons
or entities that are not Depository Participants, or otherwise to take actions
in respect of a certificate, may be limited due to the lack of a physical
certificate representing the certificate. Issuance of the book-entry
certificates in book-entry form may reduce the liquidity of your certificates in
the secondary trading market because investors may be unwilling to purchase
book-entry certificates for which they cannot obtain physical certificates.
The book-entry certificates will be issued in fully-registered,
certificated form to Beneficial Owners of book-entry certificates or their
nominees, rather than to DTC or its nominee, only if:
o Oakwood Mortgage advises the trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository
with respect to the book-entry certificates and Oakwood Mortgage is
unable to locate a qualified successor within 30 days or
o Oakwood Mortgage, at its option, elects to terminate the book-entry
system maintained through DTC.
Upon the occurrence of either event described in the preceding sentence,
the trustee is required to notify DTC, which in turn will notify all Beneficial
Owners of book-entry certificates through Depository Participants, of the
availability of certificated certificates. Upon surrender of DTC of the
certificates representing the book-entry certificates and receipt of
instructions for re-registration, the trustee will reissue the book-entry
certificates as certificated certificates to the Beneficial Owners of the
book-entry certificates. Upon issuance of certificated certificates to
Beneficial Owners, they will be transferable directly, and not exclusively on a
book-entry basis, and registered holders will deal directly with the trustee
with respect to transfers, notices and distributions.
DTC has advised Oakwood Mortgage and the trustee that, unless and until the
offered certificates are issued in certificated, fully-registered form under the
circumstances described, DTC will take any action permitted to be taken by a
certificateholder under the pooling and servicing agreement only at the
direction of one or more Participants to whose DTC accounts the certificates are
credited. DTC has advised Oakwood Mortgage that DTC will take this action with
respect to any percentage interests of the offered certificates only at the
direction of and on behalf of Participants with respect to percentage interests
of the offered certificates. DTC may take action, at the direction of the
related Participants, with respect to some offered certificates which conflict
with actions taken with respect to other offered certificates.
8
<PAGE>
Neither Oakwood Mortgage, Oakwood Acceptance or any other seller of the
assets, 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 subset 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 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.
9
<PAGE>
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").The amount of any
principal cramdown is the amount by which the unpaid principal balance of
the asset exceeds, as applicable, depending upon the type of principal
cramdown that was applied to the asset, either the portion of the unpaid
principal balance that remains secured by the manufactured home or
mortgaged property after taking the principal cramdown into account or
the unpaid principal balance after taking into account the permanent
forgiveness of debt ordered by the bankruptcy court in connection with
the principal cramdown.
Due Date Interest Shortfall means, for any asset that is prepaid in full or
liquidated on other than a Due Date for the asset, the difference between the
amount of interest that would have accrued on the asset through the day
preceding the first Due Date after the prepayment in full or liquidation had the
asset not been prepaid in full or liquidated, net of any other administrative
fees payable out of such interest had it accrued and been paid, and the amount
of interest that actually accrued on the asset prior to the prepayment in full
or liquidation, net of an allocable portion of any other administrative fees
payable from interest payments on the asset during the period commencing on the
second day of the calendar month preceding the month in which the distribution
date occurs and ending on the first day of the month in which the distribution
date occurs (each, a "Collection Period").
Principal and interest distributable on a class of certificates may be
distributed among the certificates of a class pro rata in the proportion that
the outstanding principal or notional amount of each certificate of the class
bears to the aggregate outstanding principal or notional amount of all
certificates of the class, or in another manner as may be detailed in the
related prospectus supplement. Interest distributable on a class of certificates
will be allocated among the certificates of the class pro rata in the proportion
that the outstanding principal or notional amount of each certificate of the
class bears to the aggregate outstanding principal or notional amount of all
certificates of the class, or in another manner as may be detailed in the
related prospectus supplement.
The Final Scheduled distribution date for each class of certificates will
be the date on which the last distribution of the principal thereof is scheduled
to occur, assuming no prepayments of principal with respect to the assets
included in the trust for that series, as defined in the prospectus supplement.
OPTIONAL REDEMPTION OR TERMINATION
To the extent and under the circumstances specified in the related
prospectus supplement, the certificates of a series may be redeemed prior to
their Final Scheduled distribution date at the option of Oakwood Mortgage, the
servicer or another party as specified in the related prospectus supplement by
purchase of the outstanding certificates of the series. The right so to redeem
the certificates of a series may be conditioned upon
o the passage of a date specified in the prospectus supplement, 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
10
<PAGE>
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
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
11
<PAGE>
the purchase at the applicable asset rate on the unpaid principal balance of
each contract and mortgage loan, including any contract that has become a Repo
Property and any mortgage loan that has become a REO Property, which Repo
Property or REO Property has not yet been disposed of by the servicer. The basis
for any valuation shall be furnished by the servicer to the certificateholders
upon request.
REO Property means a mortgaged property acquired by the servicer on behalf
of a trust pursuant to a foreclosure or other similar proceeding in respect of a
mortgage loan. Repo Property means a manufactured home and any related real
property acquired by the servicer on behalf of a trust pursuant to a
repossession, foreclosure or other similar proceeding in respect of a contract.
On the date set for termination of a trust, the termination price shall be
distributed first to the servicer to reimburse it for all previously
unreimbursed liquidation expenses paid and Advances made by the servicer with
respect to the related assets and second to the certificateholders in accordance
with the payment priorities that apply on each distribution date as described in
the related prospectus supplement. Advances means any P&I Advance or Servicing
Advance.
MATURITY AND PREPAYMENT CONSIDERATIONS
MATURITY
No more than 1% of the contracts and mortgage loans securing a series will
have maturities at origination of more than 30 years.
PREPAYMENT CONSIDERATIONS
The prepayment experience on an asset pool will affect:
o the average life of the related certificates and each class thereof
issued by the related trust;
o the timing of the final distribution for each class, and whether the
final distribution occurs prior to its Final Scheduled Distribution Date;
and
o the effective yield on each class of certificates.
Because prepayments will be passed through to the holders of certificates
of each series as distributions of principal, it is likely that in the event of
prepayments, the final distribution on each class of certificates of a series
will occur prior to its Final Scheduled Distribution Date.
Contracts and mortgage loans may be prepaid in full or in part without
penalty. Oakwood Mortgage anticipates that a significant number of the contracts
and mortgage loans will be paid in full prior to their maturity. A number of
factors, including homeowner mobility, national and local economic conditions,
age of the contracts and mortgage loans, interest rates and the availability of
alternative financing may affect the prepayment experience of a particular asset
pool.
The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing market
interest rates fall significantly below the interest rates borne by particular
contracts or mortgage loans, the contracts and mortgage loans are likely to
experience higher prepayment rates than if prevailing interest rates remain at
or above the interest rates borne by the contracts and mortgage loans. However,
the rate of principal prepayments on contracts and mortgage loans is influenced
by a variety of economic, geographic, social, tax, legal and other factors.
Accordingly, there can be no assurance that any contracts or mortgage loans
included in an asset pool will conform to past prepayment experience or any
assumed rate of prepayment.
It is customary in the mortgage industry in quoting yields on a pool of
30-year fixed-rate, level payment mortgages, to compute the yield as if the pool
were a single loan that is amortized according to a 30-year schedule and is then
prepaid in full at the end of the 12th year and on a pool of
12
<PAGE>
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 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.
13
<PAGE>
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 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 or another affiliate of Oakwood Mortgage serving as
seller of the assets of your trust, 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 -- without exhibits
- -- 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
14
<PAGE>
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;
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.
15
<PAGE>
DUE-ON-SALE CLAUSES
A contract or the mortgage note or the mortgage, deed of trust or other
instrument creating a first lien on a first priority ownership interest in or
estate in fee simple in real property securing the mortgage note used in
originating a conventional mortgage loan secured by a first lien on a one- to
four-family residential real property included in your trust may contain a
due-on-sale provision permitting the holder of the contract or mortgage loan to
accelerate the maturity of the contract or mortgage loan upon the obligor's
conveyance of the underlying manufactured home or mortgaged property.
Enforcement of a due-on-sale clause applicable to a contract or mortgage loan
will have the same effect on certificates backed by a contract or mortgage loan
as a prepayment in full of the contract or mortgage loan. SEE "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 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
16
<PAGE>
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, 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
17
<PAGE>
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 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;
18
<PAGE>
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.
In the event that more than one asset is substituted for one or more replaced
assets, one or more of the foregoing characteristics may be applied on a
weighted average basis as described in the pooling and servicing agreement.
Gross Margin means, for any adjustable rate asset, the fixed percentage per
annum specified in the related contract or mortgage note that is added to the
index on each interest adjustment date to determine its new asset rate. Periodic
Rate Cap means, with respect to any adjustable rate asset, the limit on the
percentage increase that may be made to the related asset rate on any interest
adjustment date. Mortgage loan documents has the meaning assigned in the pooling
and servicing agreement.
PRE-FUNDING
If so specified in the related prospectus supplement, a portion of the
issuance proceeds of the certificates of a particular series (the "Pre-Funded
Amount" will be deposited in an account 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,
19
<PAGE>
o the Pre-Funded Amount will not exceed 25% of the Scheduled Principal
Balance of the assets, inclusive of the related Pre-Funded Amount, as of
the Cut-off Date, and
o the Pre-Funded Amount shall be invested in Eligible Investments.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the purchase of additional contracts or mortgage loans by
the end of the Pre-Funding Period, the certificateholders of the related series
of certificates then entitled to receive distributions of principal will receive
a prepayment of principal in an amount equal to the related Pre-Funded Amount
remaining in the Pre-Funding Account on the first distribution date following
the end of the Pre-Funding Period. Any prepayment of principal would have an
adverse effect on the yield to maturity of certificates purchased at a premium,
and would expose certificateholders to the risk that alternative investments of
equivalent value may not be available at a later time.
Information regarding additional assets acquired by a trust estate during
the Pre-Funding Period comparable to the disclosure regarding the assets in the
related prospectus supplement will be filed on a Current Report in Form 8-K
within fifteen days following the end of the Pre-Funding Period.
DISTRIBUTION ACCOUNT
Payments on the contracts and mortgage loans included in the trust for a
series will be remitted to the certificate account and then to the Distribution
Account for the series. Deposits may be made net of amounts required to pay
servicing fees and any amounts which are to be included in any reserve fund as
set forth in the related prospectus supplement. All or a portion of the amounts
in the Distribution Account, together with reinvestment income thereon if
payable to the certificateholders, will be available, to the extent specified in
the related prospectus supplement, for the payment of previously unpaid
servicing and administrative fees and distributions of principal and interest on
each class of the certificates of the series in the manner described in the
related prospectus supplement.
RESERVE FUNDS
If so stated in the prospectus supplement for a series, Oakwood Mortgage
will establish one or more reserve funds, which may be used by the trustee to
make any required distributions of principal or interest on the certificates of
the series to the extent funds are not otherwise available. Oakwood Mortgage may
fund a reserve fund by depositing cash, certificates of deposit or letters of
credit on the closing date, or a reserve fund may be funded by the trustee's
deposit of Available Distribution Amounts not required to pay servicing or
administrative fees or to make distributions on the certificates on each
distribution date until amounts on deposit in the reserve fund equal an initial
required amount. The method of funding any reserve fund will be described in the
related prospectus supplement. Any reserve fund will be maintained in trust but
may or may not constitute a part of the trust estate for the related series.
Oakwood Mortgage may have rights on any distribution date to cause the trustee
to make withdrawals from the reserve fund for a series and to pay these amounts
in accordance with the instructions of Oakwood Mortgage to the extent that funds
are no longer required to be maintained for the certificateholders.
INSURANCE
The trust estate for any series may be supported by insurance policies or
alternate forms of credit enhancement.
HAZARD INSURANCE
The following descriptions are 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.
20
<PAGE>
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.
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 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
21
<PAGE>
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 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 manufacturedhome or mortgaged property. Any amount
paid as the cost of repair of the manufactured home or mortgaged property will
reduce coverage by the same amount. The pooling and servicing agreement with
respect to a series will, with limited exception, require the servicer to
maintain any special hazard insurance policy for the series in full force and
effect. The servicer also must present claims, on behalf of the
certificateholders and the trustee, for all losses not otherwise covered by the
applicable standard hazard insurance policies and take all reasonable steps
necessary to permit recoveries on the claims. SEE "SALE AND SERVICING OF THE
MORTGAGE LOANS -- MAINTENANCE OF INSURANCE POLICIES AND OTHER SERVICING
PROCEDURES -- PRESENTATION OF CLAIMS" IN THIS PROSPECTUS.
To the extent provided in the related prospectus supplement, in lieu of
maintaining a special hazard insurance policy with respect to a series, a
deposit of cash, a certificate of deposit, a letter of
22
<PAGE>
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 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
23
<PAGE>
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;
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.
24
<PAGE>
The amount payable under any VA guarantee will be a percentage of the VA
contract originally guaranteed applied to indebtedness outstanding as of the
applicable date of computation specified in the VA regulations, interest accrued
on the unpaid balance of the loan to the appropriate date of computation and
limited expenses of the contract holder, but in each case only to the extent
that these amounts have not been recovered through resale of the manufactured
home. The amount payable under the guarantee may in no event exceed the original
guaranteed amount.
DELIVERY OF ADDITIONAL ASSETS
To the extent provided in the related prospectus supplement, in lieu of or
in addition to providing pool insurance, special hazard insurance, obligor
bankruptcy insurance or other insurance, Oakwood Mortgage may assign to the
trust for a series of certificates non-recourse guaranties of the timely payment
of principal and interest on contracts and mortgage loans included in the trust
secured by other assets satisfactory to each rating agency rating the series.
Oakwood Mortgage may also assign or undertake to deliver other assets to any
trust by other means as may be specified in the related prospectus supplement.
These other assets may consist of additional contracts or mortgage loans,
letters of credit or other Eligible Investments.
INVESTMENT OF FUNDS
Funds deposited in or remitted to the certificate account, the Distribution
Account, any reserve fund and any other funds and accounts for a series are to
be invested by the trustee, as directed by the servicer, in Eligible
Investments, which include
o obligations of the United States or any agency thereof provided these
obligations are backed by the full faith and credit of the United States;
o within limitations, securities bearing interest or sold at a discount
issued by any corporation, which securities are rated in the rating
category required to support the then applicable ratings assigned to that
series;
o commercial paper which is then rated in the commercial paper rating
category required to support the then applicable ratings assigned to that
series;
o demand and time deposits, certificates of deposit, bankers' acceptances
and federal funds sold by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof,
provided that either the senior debt obligations or commercial paper of a
depository institution or trust company or provided that either the
senior debt obligations or commercial paper of the parent company of such
depository institution or trust company are then rated in the security
rating category required to support the then applicable ratings assigned
to that series;
o demand and time deposits and certificates of deposit issued by any bank
or trust company or savings and loan association and fully insured by the
FDIC;
o guaranteed reinvestment agreements issued by any insurance company,
corporation or other entity acceptable to each rating agency rating that
series at the time of issuance of the series;
o repurchase agreements relating to United States government securities;
and
o money market mutual funds investing primarily in the obligations of the
United States; provided that these mutual funds are rated in a rating
category sufficient to support the initial ratings assigned to that
series.
Eligible Investments with respect to a series will include only obligations
or securities that mature on or before the date on which the invested funds are
required or may be anticipated to be required to be applied for the benefit of
the holders of the series. Any income, gain or loss from
25
<PAGE>
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.
26
<PAGE>
UNDERWRITING POLICIES
OAKWOOD'S CONTRACT UNDERWRITING GUIDELINES
Contracts included in an asset pool will, unless otherwise specified in the
related prospectus supplement, 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
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
27
<PAGE>
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.
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
28
<PAGE>
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, 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
29
<PAGE>
closing date Oakwood Mortgage will, as to each mortgage loan, deliver to the
trustee or a Custodian acting on its behalf an assignment of the mortgage in
recordable form naming the trustee as assignee, together with originals or
certified copies of all recorded assignments necessary to show an unbroken chain
of assignment of the related mortgage from the original mortgagee thereunder to
the trustee. Within one year after the closing date for a series, Oakwood
Mortgage will cause assignments of each related mortgage to be recorded in the
appropriate public recording offices for real property records wherever
necessary to protect the trustee's interest in the related mortgage loans. In
lieu of recording assignments of mortgages in a particular jurisdiction, Oakwood
Mortgage may deliver or cause to be delivered to the trustee an opinion of local
counsel to the effect that recording is not necessary to protect the right,
title and interest of the trustee in the related mortgage loans. In addition,
Oakwood Acceptance 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 as described in the related prospectus supplement. In
addition, Oakwood Acceptance and each other seller will make representations and
warranties with respect to the contracts and mortgage loans in the sales
agreement pursuant to which the contracts and mortgage loans were transferred to
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 and each other seller will have
represented, among other things, that
o immediately prior to the transfer and assignment of the contracts and
mortgage loans to Oakwood Mortgage, the seller had good title to, and was
the sole owner of, each contract and mortgage loan and there had been no
other sale or assignment thereof from the seller;
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;
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;
30
<PAGE>
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
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 and each other asset seller 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, each asset seller will be
obligated to cure the breach in all material respects within 90 days after such
asset seller'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, each asset seller 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 such asset seller's
representations and warranties. Each asset seller's obligations to repurchase or
substitute for an asset affected by a breach of a representation or warranty and
Oakwood Acceptance's obligation 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 such asset seller. "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 an asset seller defaults on its
obligation to repurchase or substitute for the asset, and no assurance can be
given that any asset seller will carry out its repurchase or substitution
obligations with respect to contracts and mortgage loans.
31
<PAGE>
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;
o administration of any mortgage escrow accounts;
o collection of insurance claims;
o if necessary, repossession of manufactured homes or foreclosure on
mortgaged properties; and
o if necessary, the obligation to advance funds to the extent payments are
not made by the obligors and are considered recoverable from late obligor
payments, from proceeds of any applicable insurance policies or from
liquidation proceeds of the asset.
The servicer shall also provide information on a periodic basis to Oakwood
Mortgage and the trustee concerning the contracts and mortgage loans, and shall
file required reports with the SEC concerning the trusts as required by the
pooling and servicing agreements.
The servicer shall keep in force throughout the term of each pooling and
servicing agreement a policy or policies of insurance covering errors and
omissions with respect to its duties under each pooling and servicing agreement,
and a fidelity bond. This policy or policies and fidelity bond shall be in a
form and amount as is generally customary among entities which service a
portfolio of manufactured housing installment sales contracts having an
aggregate principal amount of $100 million or more and which are generally
regarded as servicers acceptable to institutional investors.
The servicer, to the extent practicable, shall cause the obligors to pay
all taxes and similar governmental charges when and as due. To the extent that
nonpayment of any taxes or charges would result in the creation of a lien upon
any manufactured home or mortgaged property having a priority equal or senior to
the lien of the related contract or mortgage loan, the Servicer shall advance
any delinquent tax or charge to the extent it determines that it will be able to
recover the advance from the related obligor or from liquidation proceeds of the
related contract or mortgage loan.
COLLECTION PROCEDURES. The servicer, directly or through subservicers, will
make reasonable efforts to collect all payments called for under the contracts
or mortgage loans and, consistently with the pooling and servicing agreement and
any insurance policy or will follow the collection procedures as it follows with
respect to assets serviced by it that are comparable to the contracts or
mortgage loans.
The servicer will repossess, foreclose upon or otherwise convert the
ownership of properties that secure a defaulted asset if no satisfactory
arrangements can be made for collection of delinquent payments. In connection
with repossession, foreclosure or other conversion, the servicer will follow the
practices and procedures as it shall deem necessary or advisable and as shall be
normal and usual in its general contract and mortgage loan servicing activities.
The servicer, however, will not be required to expend its own funds in
connection with any repossession or the restoration of any property unless
32
<PAGE>
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;
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;
33
<PAGE>
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.
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
34
<PAGE>
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
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").
35
<PAGE>
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.
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
36
<PAGE>
related trust will suffer a loss to the extent that the liquidation proceeds of
a defaulted asset, after reimbursement of the servicer's related expenses, are
less than the principal balance of the asset plus accrued interest thereon at
the related asset rate. In addition, the servicer will be entitled to
reimbursement of expenditures incurred by it in connection with the restoration
of any manufactured home or mortgaged property, this right of reimbursement
being prior to the rights of the related certificateholders to receive any
related pool insurance proceeds or liquidation proceeds.
EVIDENCE AS TO COMPLIANCE
With respect to each series of certificates, the servicer will deliver each
year to the trustee an officer's certificate stating that a review of the
activities of the servicer and any subservicers during the 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.
37
<PAGE>
THE POOLING AND SERVICING AGREEMENTS
The following discussion describes the material provisions of each pooling
and servicing agreement, including the standard terms to pooling and servicing
agreement that is incorporated by reference into each pooling and servicing
agreement. When particular provisions or terms used in a pooling and servicing
agreement are referred to, the actual provisions, including definitions of
terms, are incorporated by reference in this discussion.
THE SERVICER
The servicer shall not resign from the obligations and duties imposed on it
under a pooling and servicing agreement, except upon appointment of a successor
servicer and receipt by the trustee of a letter from each applicable rating
agency that the servicer's resignation and the appointment of the successor will
not, in and of itself, result in a downgrading of any rated certificates of the
affected series or upon determination by the servicer's Board of Directors that
the performance of its duties under the pooling and servicing agreement are no
longer permissible under applicable law. No resignation shall become effective
until the trustee or a successor servicer shall have assumed the
responsibilities and obligations of the servicer in accordance with the
applicable pooling and servicing agreement.
Neither the servicer nor any of its directors, officers, employees or
agents shall be under any liability to the trust or the certificateholders, and
all of these persons shall be held harmless, for any action taken or not taken
in good faith pursuant to each pooling and servicing agreement, or for errors in
judgment; PROVIDED, HOWEVER, that no person shall be protected from liability
for actions or omissions resulting from willful misfeasance, bad faith or gross
negligence in the performance of his duties or by reason of reckless disregard
of his obligations and duties under the pooling and servicing agreement or for
breaches of representations or warranties made by him in the pooling and
servicing agreement. The servicer and any of the directors, officers, employees
or agents of the servicer may rely in good faith on any document of any kind
which, PRIMA FACIE, is properly executed and submitted by any person respecting
any matters arising under a pooling and servicing agreement. The servicer shall
be under no obligation to appear in, prosecute or defend any legal action unless
the action is related to its duties under a pooling and servicing agreement and
the action in its opinion does not involve it in any expense or liability,
except as otherwise explicitly provided in the pooling and servicing agreement;
PROVIDED, HOWEVER, that the servicer may in its discretion undertake any action
that it deems necessary or desirable with respect to a pooling and servicing
agreement if the certificateholders offer to the servicer reasonable security or
indemnity against the costs, expenses and liabilities.
THE TRUSTEE
The prospectus supplement for a series of certificates will specify the
trustee for that series. The trustee for a series may resign at any time, in
which event Oakwood Mortgage will be obligated to attempt to appoint a successor
trustee. Oakwood Mortgage may remove a trustee if the trustee ceases to be
eligible to continue as trustee under the applicable pooling and servicing
agreement or upon the occurrence of bankruptcy or insolvency related events with
respect to the trustee. The trustee for a series will also may be removed at any
time by the holders of certificates of the series evidencing at least 51% of the
voting rights of the series, as specified in the related pooling and servicing
agreement. If the certificateholders remove the trustee other than for
reasonable cause based upon the trustee's failure to continue to meet the
eligibility requirements set forth in the related pooling and servicing
agreement or the trustee's failure to perform its duties, then the
certificateholders so removing the trustee shall bear any and all costs and
expenses arising from removal and substitution. Any resignation or removal of
the trustee and appointment of a successor trustee will not become effective
until acceptance by Oakwood Mortgage of the appointment of the successor
trustee.
38
<PAGE>
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 he 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
39
<PAGE>
terminated servicer. In the event that the trustee would be obligated to succeed
the servicer but is unwilling or unable to do so, it may appoint, or petition a
court of competent jurisdiction for the appointment of, a successor servicer
meeting the criteria set forth in the related pooling and servicing agreement.
Pending this appointment, the trustee is obligated to act as successor servicer
unless prohibited by law from doing so. The trustee and the successor servicer
may agree upon the servicing compensation to be paid, which in no event may be
greater than the compensation paid to the terminated servicer under the pooling
and servicing agreement. Event of Default means the occurrence of a default
noted in the pooling and servicing agreement, along with the passage of a period
of any cure period without the default having been cured.
CERTIFICATEHOLDER RIGHTS
No certificateholder will have any right under the related pooling and
servicing agreement to institute any proceeding with respect to any pooling and
servicing agreement unless the holder previously has provided the trustee with
written notice of a default and unless the holders of certificates evidencing at
least 25% of the voting rights for the applicable series requested the trustee
in writing to institute the proceeding in its own name as trustee and have
offered to the trustee reasonable indemnity, and the trustee for 15 days has
neglected or refused to institute any proceeding. The trustee will be under no
obligation to take any action or to institute, conduct or defend any litigation
under the related pooling and servicing agreement at the request, order or
direction of any of the holders of certificates, unless the certificateholders
have offered to the trustee reasonable security or indemnity against the costs,
expenses and liabilities which the trustee may incur.
AMENDMENT
A pooling and servicing agreement may be amended by Oakwood Mortgage, the
Servicer, and the related trustee without the consent of the related
certificateholders,
o to cure any ambiguity;
o to correct or supplement any provision that may be inconsistent with any
other provision;
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
40
<PAGE>
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 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
41
<PAGE>
both the obligation of the obligor to repay the loan evidenced thereby, and the
grant of a security interest in the related manufactured home to secure
repayment of the loan.
The contracts generally are chattel paper as defined in the Uniform
Commercial Code (the "UCC") in effect in the states in which the manufactured
homes initially were located. Pursuant to the UCC, the sale of chattel paper is
treated in a manner similar to perfection of a security interest in chattel
paper. Under the pooling and servicing agreement, the servicer will retain
possession of the contracts as custodian for the trustee. Because the servicer
is not relinquishing possession of the contracts, the servicer will file a UCC-1
financing statement in the appropriate recording offices in 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 is expected to amend any certificate of title to change the lienholder
from Oakwood Acceptance or such other seller to the trustee, deliver any
documents or pay fees to re-register any manufactured home, or file any UCC
transfer instruments, and neither Oakwood Acceptance, such other seller 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 or such other seller'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,
Oakwood Acceptance or any other seller or a trustee in bankruptcy of Oakwood
Mortgage, Oakwood Acceptance or such other seller.
In recent years, manufactured homes have become increasingly large and
often are attached to their sites, without appearing to be readily mobile.
Perhaps in response to these trends, courts in many states have held that
manufactured homes, under certain circumstances, are subject to real estate
title and recording laws. As a result, a security interest created by an
installment sales contract in a manufactured home located in such a state could
be rendered subordinate to the interests of other parties claiming an interest
in the home under applicable state real estate law. In order to perfect a
42
<PAGE>
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.
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
43
<PAGE>
by virtue of the notation of its lien on the original certificate of title, if
the home is moved from a Title State to a Title State -- or of information from
a related borrower as to relocation of the home. In some Title States, the
certificate of title to a manufactured home, which is required to be in the
servicer's possession, must be surrendered before the home could be
re-registered; in the states an obligor could not re-register a manufactured
home to a transferee without the servicer's assistance. In other Title States,
when an obligor under a contract sells the related manufactured home, if it is
located in a Title State both before and after the sale, Oakwood Acceptance
should at least receive notice of any attempted re-registration thereof because
its lien is noted on the related certificate of title and accordingly should
have the opportunity to require satisfaction of the related contract before
releasing its lien on the home. If the motor vehicle authority of a Title State
to which a manufactured home is relocated or in which a manufactured home is
located when it is transferred registers the manufactured home in the name of
the owner thereof or the owner's transferee without noting Oakwood Acceptance's
lien on the related certificate of title, whether because the state did not
require the owner to surrender the certificate of title issued prior to the
transfer or issued by the Title State from which the home was moved or failed to
notify Oakwood Acceptance of re-registration and failed to note Oakwood
Acceptance's lien on the new certificate of title issued upon re-registration or
the manufactured home was moved from a state that is not a Title State,
re-registration could defeat the perfection of Oakwood Acceptance's lien in the
manufactured home. In addition, re-registration of a manufactured home, whether
due to a transfer or relocation, in a state, such as a UCC State, which does not
require a certificate of title for registration of a manufactured home, could
defeat perfection of Oakwood Acceptance's lien.
If Oakwood Acceptance and the servicer are not the same entity, Oakwood
Acceptance will be required to report to the servicer any notice it receives of
any re-registration of a manufactured home. The servicer will take all necessary
steps, at its own expense, to maintain perfection of the trustee's security
interests in each manufactured homes if it receives notice of relocation, sale
or re-registration of the manufactured home. As long as Oakwood Acceptance
remains the servicer, the servicer will not be required to cause notations to be
made on any certificate of title or to execute any instrument relating to any
manufactured home, other than a notation or a transfer instrument necessary to
show Oakwood Acceptance as the lienholder or legal titleholder. However, the
Servicer has no independent obligation to monitor the status of Oakwood
Acceptance's lien on any manufactured home.
Under the laws of most states, liens for repairs performed on a
manufactured home and for property taxes on a manufactured home take priority
even over a prior perfected security interest. These liens could arise at any
time during the term of a contract. No notice will be given to the trustee or
certificateholders in the event this lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN MANUFACTURED HOMES. The servicer, on
behalf of the trustee, to the extent required by the related pooling and
servicing agreement, may take action to enforce the trustee's security interest
with respect to contracts in default by 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,
44
<PAGE>
the trustee would be entitled to receive the net proceeds of resale up to the
amount of the unpaid principal balance of the related contract plus all accrued
and unpaid interest thereon at the related asset rate.
Under applicable laws of most states, a creditor is entitled to obtain a
judgment against a debtor for any deficiency remaining after repossession and
resale of the manufactured home securing the debtor's loan. However, obtaining
and collecting deficiency judgments is seldom economically feasible and, for
that reason, Oakwood Acceptance generally has not attempted to obtain deficiency
judgments. In addition, some states impose prohibitions or limitations on
deficiency judgments, and other statutory provisions, including federal and
state bankruptcy and insolvency laws and general equitable principles, the
Soldiers' and Sailors' Civil Relief Act, and state laws affording relief to
debtors, may interfere with or affect the ability of a secured lender to
repossess and resell collateral or to enforce a deficiency judgment. For
example, in proceedings under the United States Bankruptcy Code, as amended, as
set forth in Title 11 of the United States Code (the "Bankruptcy Code"), when a
court determines that the value of a home is less than the principal balance of
the loan it secures, the court may prevent a lender from repossessing or
foreclosing on the home, and, as part of the debtor's rehabilitation plan,
reduce the amount of the secured indebtedness to the value of the home as it
exists at the time of the proceeding, leaving the lender as a general unsecured
creditor for the difference between that value and the amount of outstanding
indebtedness. A bankruptcy court may grant the debtor a reasonable time to cure
a payment default, and in the case of a manufactured housing installment sales
contract not secured by the debtor's principal residence, also may reduce the
monthly payments due under the contract, change the rate of interest and alter
the repayment schedule. Court decisions have applied relief to claims secured by
the debtor's principal residence. If a court relieves an obligor's obligation to
repay all or any portion of the amounts otherwise due on a contract, the
servicer will not be required to advance these amounts, and any loss of this
nature may reduce amounts available for distribution on the related
certificates.
Under the terms of the federal Soldiers' and Sailors' Civil Relief Act, an
obligor who enters military service after the origination of the obligor's
contract, including an obligor who is a member of the National Guard or who is
in reserve status at the time of the origination of the contract and is later
called to active duty, may not be charged interest above an annual rate of 6.00%
during the period of the obligor's active duty status, unless a court orders
otherwise upon application of the lender. It is possible that this action could
have an effect, for an indeterminate period of time, on the ability of the
servicer to collect full amounts of interest on the contracts. Any shortfall in
interest collections resulting from the application of the Soldiers' and
Sailors' Civil Relief Act, to the extent not covered by the subordination of a
class of subordinated certificates, could result in losses to
certificateholders. In addition, the Soldiers' and Sailors' Civil Relief Act
imposes limitations which would impair the ability of the servicer to repossess
or foreclose on the manufactured home securing an affected contract during the
obligor's period of active duty status. Thus, in the event that a contract goes
into default, there may be delays and losses occasioned by the inability to
liquidate the related manufactured home in a timely fashion.
Because of the REMIC provisions of the Code, a trust as to which a REMIC
election has been made generally must dispose of any related manufactured homes
acquired pursuant to repossession, foreclosure, or similar proceedings within
three 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,
45
<PAGE>
upon repossession and resale, the amount recoverable on a manufactured home
securing an installment sales contract is generally lower than the principal
balance of the contract.
FORECLOSURE UNDER REAL PROPERTY LAWS. If a manufactured home has become
attached to real estate to a degree such that the home would be treated as real
property under the laws of the state in which it is located, it may not be
legally permissible for the servicer to repossess the home under the provisions
of the UCC or other applicable personal property laws. If so, the servicer could
obtain possession of the home only pursuant to real estate mortgage foreclosure
laws. In addition, in order to realize upon the real property securing any Land
Secured Contract, the servicer must proceed under applicable state real estate
mortgage foreclosure laws. The requirements that the servicer must meet in order
to foreclose on the real property securing a Land Secured Contract, and the
restrictions on foreclosure, are identical to the requirements and restrictions
that would apply to foreclosure of any mortgage loan. Mortgage foreclosure
generally is accomplished through judicial action, rather than by private action
as permitted under personal property laws, and real estate laws generally impose
stricter notice requirements and require public sale of the collateral. In
addition, real estate mortgage foreclosure is usually far more time-consuming
and expensive than repossession under personal property laws, and applicable
real estate law generally affords debtors many more protections than are
provided under personal property laws. Rights of redemption under real estate
laws generally are more favorable to debtors than they are under personal
property laws, and in many states antideficiency judgment legislation will be
applicable in the real estate foreclosure context even if it would not apply to
repossessions under personal property laws. If real estate laws apply to a
manufactured home, to the extent Oakwood Acceptance has not perfected its
security interest in a manufactured home under applicable real estate laws,
Oakwood Acceptance's security interest in the manufactured home would be
subordinate to a lien on such home recorded pursuant to applicable real estate
laws.
CONSUMER PROTECTION LAWS. The so-called Holder-in-Due-Course rule of the
Federal Trade Commission is intended to prevent a seller of goods pursuant to a
consumer credit contract and related lenders and assignees from transferring the
contract free of claims by the debtor thereunder against Oakwood Acceptance. The
effect of this rule is to subject the assignee of a consumer credit contract to
all claims and defenses that the debtor could have asserted against Oakwood
Acceptance under the contract. Assignee liability under this rule is limited to
amounts paid by the debtor under the assigned contract; however, a borrower also
may assert the rule to set off remaining amounts due under a contract as a
defense against a claim brought by the assignee of the contract against the
borrower. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and lending pursuant to the
contracts, including the Truth in Lending Act, the Real Estate Settlement
Procedures Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty -- Federal Trade Commission Improvement Act, the Fair
Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection
Practices Act and the Uniform Consumer Credit Code. The failure of the
originator of a contract to have complied with the provisions of some of these
laws may result in liability of the related trust to the obligor thereunder or
in a reduction of the amount payable under the contract. However, each asset
seller 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 such asset seller 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.
46
<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 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
47
<PAGE>
the mortgaged property. Delays in completion of the foreclosure occasionally may
result from difficulties in locating necessary parties. When the mortgagee's
right to foreclosure is contested, the legal proceedings necessary to resolve
the issue can be time-consuming. After the completion of a judicial foreclosure
proceeding, the court may issue a judgment of foreclosure and appoint a receiver
or other officer to conduct the sale of the property. In some states, mortgages
may also be foreclosed by advertisement, pursuant to a power of sale provided in
the mortgage. Foreclosure of a mortgage by advertisement is essentially similar
to foreclosure of a deed of trust by non-judicial power of sale.
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust that authorizes
the trustee to sell the property to a third party upon any default by the
borrower under the terms of the related note or the deed of trust. Foreclosure
also may be accomplished by judicial action in the manner provided for
foreclosure of mortgages. In some states the trustee must record a notice of
default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, the trustee must provide notice in some states to any other individual
having an interest of record in the underlying real property, including any
junior lienholders. If the deed of trust is not reinstated within any applicable
cure period, a notice of sale must be posted in a public place and, in most
states, must be published for a specified period of time in one or more
newspapers. In addition, some state laws require that a copy of the notice of
sale be posted on the property and sent to all parties having an interest of
record in the property. In some states, the borrower has the right to reinstate
the loan at any time following default until shortly before the trustee's sale.
SEE " -- RIGHTS OF REINSTATEMENT AND REDEMPTION" IN THIS PROSPECTUS.
In the case of foreclosure under either a mortgage or a deed of trust, the
sale by the receiver or other designated officer, or by the trustee, is a public
sale. However, because of the difficulty a potential buyer at the sale would
have in determining the exact status of title and because the physical condition
of the property may have deteriorated during the foreclosure proceedings, it is
not common for a third party to purchase the property at the foreclosure sale.
Rather, the lender generally purchases the property from the trustee or receiver
for an amount which may be as great as but is more often somewhat less than the
unpaid principal amount of the note, accrued and unpaid interest and the
expenses of foreclosure. Thereafter, subject to the right of the obligor in some
states to remain in possession during the redemption period, the lender will
assume the burdens of ownership, including obtaining hazard insurance and making
repairs at its own expense as are necessary to render the property suitable for
sale. The lender commonly will obtain the services of a real estate broker and
pay the broker a commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds of the sale of the
property may not equal the lender's investment in the property. Any loss with
respect to a mortgage loan may be reduced by the receipt of mortgage insurance
proceeds. SEE "THE TRUSTS" IN THIS PROSPECTUS.
Courts have imposed general equitable principles upon foreclosure. These
equitable principles are generally designed to relieve obligors from the legal
effect of defaults under the loan documents. Examples of judicial remedies that
may be fashioned include judicial requirements that the lender undertake
affirmative actions to determine the causes for the obligor's default and the
likelihood that the obligors will be able to reinstate the loan. In some cases,
courts have required lenders to reinstate loans or recast payment schedules to
accommodate obligors who are suffering temporary financial disabilities. In some
cases, courts have limited the right of a lender to foreclose if the default
under the related mortgage instrument is not monetary, such as a default arising
from the obligor's failure to maintain the property adequately or the obligor's
executing a second mortgage or deed of trust affecting the property. In other
cases, some courts have been faced with the issue whether federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that obligors under deeds of trust receive notices in addition to
statutorily-prescribed minimum requirements. For the most part, these cases have
upheld state statutory notice provisions as being reasonable or have
48
<PAGE>
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 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
49
<PAGE>
Bankruptcy Code, when a court determines that the value of a home is less than
the principal balance of the loan it secures, the court may prevent a lender
from foreclosing on the home, and, as part of the debtor's rehabilitation plan,
reduce the amount of the secured indebtedness to the value of the home as it
exists at the time of the proceeding, leaving the lender as a general unsecured
creditor for the difference between that value and the amount of outstanding
indebtedness. A bankruptcy court may grant the debtor a reasonable time to cure
a payment default, and in the case of a mortgage loan not secured by the
debtor's principal residence, also may reduce the monthly payments due under 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 preempt state laws that prohibit the
enforcement of due-on-sale clauses and provides, among other things, that
due-on-sale clauses in loans, which loans include the conventional mortgage
loans, made after the effective date of the Garn-St Germain Act are enforceable,
within limitations as set forth in the Garn-St Germain Act and the regulations
promulgated thereunder.
By virtue of the Garn-St Germain Act, the servicer may generally be
permitted to accelerate any conventional mortgage loan which contains a
due-on-sale clause upon transfer by the obligor of an interest in the property
subject to the related mortgage or deed of trust. With respect to any mortgage
loan secured by a residence occupied or to be occupied by the mortgagor, this
ability to accelerate will not apply to some transfers, including
50
<PAGE>
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.
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.
51
<PAGE>
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 any
asset seller of mortgage loans or contracts including Land Secured Contracts as
to the absence or effect of hazardous wastes or hazardous substances on any of
the related mortgaged properties or real properties. In addition, the servicer
has not made any representations or warranties or assumed any liability with
respect to the absence or effect of hazardous wastes or hazardous substances on
any mortgaged property or real property or any casualty resulting from the
presence or effect of hazardous wastes or hazardous substances on any mortgaged
property or real property, and any loss or liability resulting from the presence
or effect of 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.
52
<PAGE>
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-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.
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.
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
53
<PAGE>
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 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
54
<PAGE>
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
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
55
<PAGE>
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 ($128,950,
or $64,475 in the case of a separate return by a married individual within the
meaning of Code section 7703 for taxable year 2000 and adjusted for inflation
each year thereafter) will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the applicable amount, or (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year. The amount of
such additional taxable income recognized by holders who are subject to the
limitations of either section 67 or section 68 of the Code may be substantial
and may reduce or eliminate the after-tax yield to such holders of an investment
in the certificates of an affected series. Where appropriate, the prospectus
supplement for a particular series will indicate that the holders of
certificates of such series may be required to recognize additional income as a
result of the application of the limitations of either section 67 or section 68
of the Code. Non-corporate holders of Regular Certificates evidencing an
interest in a single-class REMIC also should be aware that miscellaneous
itemized deductions, including allocable investment expenses attributable to
such REMIC, are not deductible for purposes of the alternative minimum tax.
ORIGINAL ISSUE DISCOUNT
Certain classes of Regular Certificates may be issued with original issue
discount within the meaning of section 1273(a) of the Code. In general, such
original issue discount will equal the difference between the stated redemption
price at maturity of the Regular Certificate (generally, its principal amount)
and its issue price. Holders of Regular Certificates as to which there is
original issue discount should be aware that they generally must include
original issue discount in income for federal income tax purposes on an annual
basis under a constant yield accrual method that reflects compounding. In
general, original issue discount is treated as ordinary interest income and must
be included in income in advance of the receipt of the cash to which it relates.
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, 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
56
<PAGE>
Deemed Principal Payments). Qualified Stated Interest means stated interest that
is unconditionally payable in cash or property, other than debt instruments of
the issuer, at least annually at a single fixed rate or a variable rate that
meets certain requirements set out in the OID Regulations. Thus, in the case of
any Regular Certificate, the stated redemption price at maturity will equal the
total amount of all Deemed Principal Payments due on that certificate.
Since a certificate that is part of an Accretion Class generally will not
require unconditional payments of interest at least annually, the stated
redemption price at maturity of such a certificate will equal the aggregate of
all payments due, whether designated as principal, accrued interest, or current
interest. The issue price of a Regular Certificate generally will equal the
initial price at which a substantial amount of such certificates is sold to the
public. Deemed Principal Payments means all payments of principal and interest
provided for on a debt instrument other than Qualified Stated Interest.
Although the OID Regulations contain an aggregation rule (the "Aggregation
Rule" Aggregation Rule), under which two or more debt instruments issued in
connection with the same transaction, or related transactions in certain
circumstances, generally are treated as a single debt instrument for federal
income tax accounting purposes if issued by a single issuer to a single holder,
that Rule does not apply if the debt instruments are part of an issue (i) a
substantial portion of which is traded on an established market or (ii) a
substantial portion of which is issued for cash (or property traded on an
established market) to parties who are not related to the issuer or holder and
who do not purchase other debt instruments of the same issuer in connection with
the same transaction or related transactions. In most cases, the Aggregation
Rule will not apply to Regular Certificates of different classes because one or
both of the exceptions to the Aggregation Rule will have been met. Although the
Tax Administrator will apply the Aggregation Rule to all regular interests in a
series REMIC that are held by another REMIC created with respect to the same
series, it generally will not apply the Aggregation Rule to Regular Certificates
for purposes of reporting to certificateholders.
Under a DE MINIMIS rule, a Regular Certificate will be considered to have
no original issue discount if the amount of original issue discount on the
certificate is less than 0.25% of the certificate's stated redemption price at
maturity multiplied by the certificate's WAM. 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, acquisition discount, 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 accruing on such certificate, under the constant yield
method used to account for original issue discount.
Regular Certificates of certain series may bear interest under terms that
provide for a teaser rate period, interest holiday, or other period during which
the rate of interest payable on the certificate is lower than the rate payable
during the remainder of its life ("Teaser Certificates"). Under certain
circumstances, a Teaser Certificate may be considered to have a de minimis
amount of original issue discount even though the amount of original issue
discount on such certificate would be more than de minimis if determined as
described above. If the stated interest on a Teaser Certificate would be
Qualified Stated Interest but for the fact that during one or more accrual
periods its interest rate is below the rate applicable for the remainder of its
term, the amount of original issue discount on such
57
<PAGE>
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 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
58
<PAGE>
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,
acquisition discount, 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 accruing
on such certificate) under the constant yield method used to account for
original issue discount. To make an All OID Election, the holder of the
certificate must attach a statement to its timely filed federal income tax
return for the taxable year in which the holder acquired the certificate. The
statement must identify the instruments to which the election applies. An All
OID Election is irrevocable unless the holder obtains the consent of the
Service. If an All OID Election is made for a debt instrument with market
discount, the holder is deemed to have made an election to include in income
currently the market discount on all of the holder's other debt instruments with
market discount, as described below under "FEDERAL INCOME TAX CONSEQUENCES --
REMIC CERTIFICATES -- TAX TREATMENT OF REGULAR CERTIFICATES -- MARKET DISCOUNT."
In addition, if an All OID Election is made for a debt instrument with
amortizable premium, the holder is deemed to have made an election to amortize
the premium on all of the holder's other debt instruments with amortizable
premium under the constant yield method. SEE "FEDERAL INCOME TAX CONSEQUENCES --
REMIC CERTIFICATES -- TAX TREATMENT OF REGULAR CERTIFICATES -- AMORTIZABLE
PREMIUM" IN THIS PROSPECTUS. Certificateholders should be aware that the law is
unclear as to whether an All OID Election is effective for Interest Weighted
Certificates or Non-VRDI certificates. Interest Weighted Certificates means a
Regular Certificate, the payments on which consist entirely or primarily of a
specified nonvarying portion of the interest payable on one or more of the
assets held by the related series REMIC. Non-VDRI Certificates means a NOWA
Certificate, a Variable Rate Certificate that is issued at an Excess Premium, or
any other Variable Rate Certificate that does not qualify as a VRDI certificate.
NOWA Certificate means a Weighted Average Certificate relating to a trust, or a
designated asset pool, whose assets do not bear interest at qualified floating
rates. Variable Rate Certificate means a Regular Certificate that bears interest
at a variable rate. Weighted Average Certificate means a Regular Certificate
that provides for interest based on a weighted average of the interest rates on
some or all of the assets held by the REMIC. SEE "FEDERAL INCOME TAX
CONSEQUENCES -- REMIC CERTIFICATES -- TAX TREATMENT OF REGULAR CERTIFICATES --
INTEREST WEIGHTED CERTIFICATES AND NON-VRDI CERTIFICATES" IN THIS PROSPECTUS.
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
59
<PAGE>
generally is reduced by the amount of any Qualified Stated Interest that is
accrued but unpaid as of the acquisition date. Alternatively, the subsequent
purchaser of a Regular Certificate having original issue discount may make an
All OID Election with respect to the certificate.
If the First Distribution Period with respect to a Regular Certificate
contains more days than the number of days of stated interest that are payable
on the first distribution date, the effective interest rate received by the
holder of such certificate during the First Distribution Period will be less
than the certificate's stated interest rate, making such certificate a Teaser
Certificate. If the amount of original issue discount on the Teaser Certificate
measured under the expanded de minimis test described above exceeds the de
minimis amount of original issue discount allowable on the certificate, the
amount by which the stated interest on the certificate exceeds the interest that
would be payable on the certificate at the effective rate of interest for the
First Distribution Period would be treated as part of the certificate's stated
redemption price at maturity. Accordingly, the holder of a Teaser Certificate
may be required to recognize ordinary income arising from original issue
discount in addition to any Qualified Stated Interest that accrues in a period.
A Distribution Period is the interval between one distribution date and the next
distribution date. The First Distribution Period is the interval between the
closing date and its first distribution date.
Similarly, if the First Distribution Period with respect to a Regular
Certificate is shorter than the interval between subsequent distribution dates,
and the holder of such certificate receives interest on the first distribution
date based on a full accrual period, the effective rate of interest payable on
such certificate during the First Distribution Period will be higher than the
stated rate of interest on such certificate, making such certificate a Rate
Bubble Certificate. A Rate Bubble Certificate that otherwise bears Qualified
Stated Interest would be issued with original issue discount unless the
Pre-Issuance Accrued Interest Rule applies or the amount of original issue
discount on the certificate is de minimis. Pre-Issuance Accrued Interest Rule
means the rule in the OID Regulations under which a certificate's issue price
may be computed by subtracting from the issue price the amount of Pre-Issuance
Accrued Interest on the certificate, and a portion of the interest received on
the first distribution date with respect to the certificate would be treated as
a return of Pre-Issuance Accrued Interest rather than as a payment on the
certificate, provided that a portion of the initial purchase price of the
certificate is allocable to Pre-Issuance Accrued Interest and the certificate
provides for a payment of stated interest on the first payment date within one
year of the issue date that equals or exceeds the amount of such Pre-Issuance
Accrued Interest. Pre-Issuance Accrued Interest means interest that has accrued
under the terms of a certificate prior to its issue date. The amount of original
issue discount on a Rate Bubble Certificate attributable to the First
Distribution Period would be the amount by which the interest payment due on the
first distribution date exceeds the amount that would have been payable had the
effective rate for that Period been equal to the stated interest rate. However,
if a portion of the initial purchase price of a Rate Bubble Certificate is
allocable to Pre-Issuance Accrued Interest and such certificate provides for a
payment of stated interest on the first payment date within one year of its
issue date that equals or exceeds the amount of such Pre-Issuance Accrued
Interest, the Tax Administrator intends to 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
60
<PAGE>
original issue discount attributable to the First Distribution Period, provided
that the increased effective interest rate for that Period is attributable
solely to Pre-Issuance Accrued Interest, as typically will be the case. The Tax
Administrator will apply the Pre-Issuance Accrued Interest Rule as described
above to each Rate Bubble Certificate for which it is available if the
certificate's stated interest otherwise would be Qualified Stated Interest. If,
however, the First Distribution Period for a Rate Bubble Certificate is longer
than subsequent Distribution Periods, the application of the Pre-Issuance
Accrued Interest Rule typically will not prevent disqualification of the
certificate's stated interest because its effective interest rate during the
First Distribution Period will be less than its stated interest rate. A Rate
Bubble Certificate is a Regular Certificate with an effective interest rate
higher during the certificate's First Distribution Period than during the
remainder of its term. Thus, a Regular Certificate with a long First
Distribution Period typically will be a Teaser Certificate, as discussed above.
The Pre-Issuance Accrued Interest Rule will not apply to any amount paid at
issuance for such a Teaser Certificate that is nominally allocable to interest
accrued under the terms of such certificate before its issue date. All amounts
paid for such a Teaser Certificate at issuance, regardless of how designated,
will be included in the issue price of such certificate for federal income tax
accounting purposes.
It is not entirely clear how income should be accrued with respect to
Interest Weighted Certificates. Unless and until the Service provides contrary
administrative guidance on the income tax treatment of an Interest Weighted
Certificate, the Tax Administrator will take the position that an Interest
Weighted Certificate does not bear Qualified Stated Interest, and will account
for the income thereon as described in "FEDERAL INCOME TAX CONSEQUENCES -- REMIC
CERTIFICATES -- INTEREST WEIGHTED CERTIFICATES AND NON-VRDI CERTIFICATES" IN
THIS PROSPECTUS. Some Interest Weighted Certificates may be certificates that
provide for a relatively small amount of principal and for interest that can be
expressed as Qualified Stated Interest at a very high fixed rate with respect to
principal ("Superpremium Certificates"). Superpremium Certificates technically
are issued with amortizable premium. However, because of their close similarity
to other Interest Weighted Certificates it appears more appropriate to account
for Superpremium Certificates in the same manner as for other Interest Weighted
Certificates. Consequently, in the absence of further administrative guidance,
the Tax Administrator will account for Superpremium Certificates in the same
manner as other Interest Weighted Certificates. However, there can be no
assurance that the Service will not assert a position contrary to that taken by
the Tax Administrator, and, therefore, holders of Superpremium Certificates
should consider making a protective election to amortize premium on such
certificates.
In view of the complexities and current uncertainties as to the manner of
inclusion in income of original issue discount on the Regular Certificates, each
investor should consult its own tax advisor to determine the appropriate amount
and method of inclusion in income of original issue discount on such
certificates for federal income tax purposes.
VARIABLE RATE CERTIFICATES
Under the OID Regulations, a Variable Rate Certificate will qualify as a
VRDI certificate only if (i) the certificate is not issued at an Excess Premium;
(ii) stated interest on the certificate compounds or is payable unconditionally
at least annually at (a) one or more qualified floating rates, (b) a single
fixed rate and one or more qualified floating rates, (c) a single objective
rate, or (d) a single fixed rate and a single objective rate that is a qualified
inverse floating rate; and (iii) the qualified floating rate or the objective
rate in effect during an accrual period is set at a current value of that rate
(i.e., the value of the rate on any day occurring during the interval that
begins three months prior to the first day on which that value is in effect
under the certificate and ends one year following that day). VRDI certificates
are subject to the rules applicable to variable rate debt instruments as defined
in section 1.1275-5 of the OID Regulations ("VRDIs"). VRDIs in the OID
Regulations that are described below. Excess Premium means, with respect to a
Regular Certificate, a premium over the
61
<PAGE>
certificate's noncontingent principal amount in excess of the lesser of (1) .015
multiplied by the product of such noncontingent principal amount and the WAM of
the certificate or (2) 15% of such noncontingent principal amount.
Under the OID Regulations, a rate is a qualified floating rate if
variations in the rate reasonably can be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the debt
instrument is denominated. A qualified floating rate may measure contemporaneous
variations in borrowing costs for the issuer of the debt instrument or for
issuers in general. A multiple of a qualified floating rate is considered a
qualified floating rate only if the rate is equal to either (a) the product of a
qualified floating rate and a fixed multiple that is greater than 0.65 but not
more than 1.35 or (b) the product of a qualified floating rate and a fixed
multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate. If a Regular Certificate provides for two or more
qualified floating rates that reasonably can be expected to have approximately
the same values throughout the term of such certificate, the qualified floating
rates together will constitute a single qualified floating rate. Two or more
qualified floating rates conclusively will be presumed to have approximately the
same values throughout the term of a certificate if the values of all rates on
the issue date of such certificate are within 25 basis points of each other.
A variable rate will be considered a qualified floating rate if it is
subject to a Cap, Floor, Governor, or other similar restriction only if: (a) the
Cap, Floor, or Governor is fixed throughout the term of the related certificate
or (b) the Cap, Floor, Governor, or similar restriction is not reasonably
expected, as of the issue date, to cause the yield on the certificate to be
significantly less or significantly more than the expected yield on such
certificate determined without such Cap, Floor, Governor, or similar
restriction, as the case may be. Although the OID Regulations are unclear, it
appears that a VRDI certificate, the principal rate on which is subject to a
Cap, Floor, or Governor that itself is a qualified floating rate, bears interest
at an objective rate.
A Cap is a restriction or restrictions on the maximum stated interest rate
on a certificate. A Floor is a restriction or restrictions on the minimum stated
interest rate on a certificate. A Governor is a restriction or restrictions on
the amount of increase or decrease in the stated interest rate on a certificate
on any interest adjustment date.
An objective rate is a rate, other than a qualified floating rate, that (i)
is determined using a single fixed formula, (ii) is based on objective financial
or economic information, and (iii) is not based on information that either is
within the control of the issuer (or a related party) or is unique to the
circumstances of the issuer (or related party), such as dividends, profits, or
the value of the issuer's (or related party's) stock. That definition would
include, in addition to a rate that is based on one or more qualified floating
rates or on the yield of actively traded personal property, a rate that is based
on changes in a general inflation index. In addition, a rate would not fail to
be an objective rate merely because it is based on the credit quality of the
issuer.
Under the OID Regulations, if interest on a certificate is stated at a
fixed rate for an initial period of less than one year followed by a variable
rate that is either a qualified floating rate or an objective rate for a
subsequent period, and the value of the variable rate on the issue date is
intended to approximate the fixed rate, the fixed rate and the variable rate
together constitute a single qualified floating rate or objective rate. A
variable rate conclusively will be presumed to approximate an initial fixed rate
if the value of the variable rate on the issue date does not differ from the
value of the fixed rate by more than 25 basis points.
Under the OID Regulations, all interest payable on a Single Rate VRDI
Certificate is treated as Qualified Stated Interest. Single Rate VRDI
Certificate means a VRDI certificate that provides for stated interest
unconditionally payable in cash or property at least annually at a single
qualified floating rate or a single objective rate. The amount and accrual of
OID on a Single Rate VRDI Certificate is determined, in general, by converting
such certificate into a hypothetical fixed rate certificate and
62
<PAGE>
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 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,
63
<PAGE>
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 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.
64
<PAGE>
ANTI-ABUSE RULE
Because of concerns 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 OID
Regulations contain an anti-abuse rule. The anti-abuse rule provides that if a
principal purpose in structuring a debt instrument, engaging in a transaction,
or applying the OID Regulations is to achieve a result that is unreasonable in
light of the purposes of the applicable statutes, the Service can apply or
depart from the OID Regulations as necessary or appropriate to achieve a
reasonable result. A result is not considered unreasonable under the
regulations, however, in the absence of a substantial effect on the present
value of a taxpayer's tax liability.
MARKET DISCOUNT
A subsequent purchaser of a Regular Certificate at a discount from its
outstanding principal amount (or, in the case of a Regular Certificate having
original issue discount, its "adjusted issue price") will acquire such
certificate with market discount. The purchaser generally will be required to
recognize the market discount (in addition to any original issue discount
remaining with respect to the certificate) as ordinary income. A person who
purchases a Regular Certificate at a price lower than the remaining outstanding
Deemed Principal Payments but higher than its adjusted issue price does not
acquire the certificate with market discount, but will be required to report
original issue discount, appropriately adjusted to reflect the excess of the
price paid over the adjusted issue price. SEE "FEDERAL INCOME TAX CONSEQUENCES
- -- 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.
65
<PAGE>
A certificateholder who has acquired any Regular Certificate with market
discount generally will be required to treat a portion of any gain on a sale or
exchange of the certificate as ordinary income to the extent of the market
discount accrued to the date of disposition under one of the foregoing methods,
less any accrued market discount previously reported as ordinary income as
partial principal payments were received. Moreover, such certificateholder
generally must defer interest deductions attributable to any indebtedness
incurred or continued to purchase or carry the certificate to the extent they
exceed income on the certificate. Any such deferred interest expense, in
general, is allowed as a deduction not later than the year in which the related
market discount income is recognized. If a holder of a Regular Certificate makes
a Current Recognition Election or an All OID Election, the interest deferral
rule will not apply. Under the Contingent Payment Regulations, a secondary
market purchaser of a Non-VRDI certificate or an Interest Weighted Certificate
at a discount generally would continue to accrue interest and determine
adjustments on such certificate based on the original projected payment schedule
devised by the issuer of such certificate. SEE "FEDERAL INCOME TAX CONSEQUENCES
- -- REMIC CERTIFICATES -- ORIGINAL ISSUE DISCOUNT -- INTEREST WEIGHTED
CERTIFICATES AND NON-VRDI CERTIFICATES" IN THIS PROSPECTUS. The holder of such a
certificate would be required, however, to allocate the difference between the
adjusted issue price of the certificate and its basis in the certificate as
positive adjustments to the accruals or projected payments on the certificate
over the remaining term of the certificate in a manner that is reasonable (e.g.,
based on a constant yield to maturity).
Treasury regulations implementing the market discount rules have not yet
been issued, and uncertainty exists with respect to many aspects of those rules.
For example, the treatment of a Regular Certificate subject to optional
redemption that is acquired at a market discount is unclear. It appears likely,
however, that the market discount rules applicable in such a case would be
similar to the rules pertaining to original issue discount. Due to the
substantial lack of regulatory guidance with respect to the market discount
rules, it is unclear how those rules will affect any secondary market that
develops for a given class of Regular Certificates. Prospective investors in
Regular Certificates should consult their own tax advisors regarding the
application of the market discount rules to those certificates.
AMORTIZABLE PREMIUM
A purchaser of a Regular Certificate who purchases the certificate at a
premium over the total of its Deemed Principal Payments may elect to amortize
such premium under a constant yield method that reflects compounding based on
the interval between payments on the certificates. The legislative history of
the 1986 Act indicates that premium is to be accrued in the same manner as
market discount. Accordingly, it appears that the accrual of premium on a
Regular Certificate will be calculated using the Pricing Prepayment Assumptions.
Under Treasury regulations, amortized premium generally would be treated as an
offset to interest income on a Regular Certificate and not as a separate
deduction item. If a holder makes an election to amortize premium on a Regular
Certificate, such election will apply to all taxable debt instruments (including
all REMIC regular interests) held by the holder at the beginning of the taxable
year in which the election is made, and to all taxable debt instruments acquired
thereafter by such holder, and will be irrevocable without the consent of the
Service. Purchasers who pay a premium for the Regular Certificates should
consult their tax advisors regarding the election to amortize premium and the
method to be employed.
Amortizable premium on a Regular Certificate that is subject to redemption
at the option of Oakwood Mortgage generally must be amortized as if the optional
redemption price and date were the certificate's principal amount and maturity
date if doing so would result in a smaller amount of premium amortization during
the period ending with the optional redemption date. Thus, a certificateholder
would not be able to amortize any premium on a Regular Certificate that is
subject to optional redemption at a price equal to or greater than the
certificateholder's acquisition price unless and until the redemption option
expires. In cases where premium must be amortized on the
66
<PAGE>
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 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
67
<PAGE>
of the certificate allocable to payments on the certificate (other than
Qualified Stated Interest) previously received by the certificateholder and by
any amortized premium. Similarly, a certificateholder who receives a scheduled
or prepaid principal payment with respect to a Regular Certificate will
recognize gain or loss equal to the difference between the amount of the payment
and the allocable portion of his adjusted basis in the certificate. Except to
the extent that the market discount rules apply and except as provided below,
any gain or loss on the sale or other disposition of a Regular Certificate
generally will be capital gain or loss. Such gain or loss will be long-term gain
or loss if the certificate is held as a capital asset for the applicable
long-term capital gain holding period.
If the holder of a Regular Certificate is a bank, thrift, or similar
institution described in section 582 of the Code, any gain or loss on the sale
or exchange of such certificate will be treated as ordinary income or loss. In
the case of other types of holders, gain from the disposition of a Regular
Certificate that otherwise would be capital gain will be treated as ordinary
income to the extent that the amount actually includible in income with respect
to the certificate by the certificateholder during his holding period is less
than the amount that would have been includible in income if the yield on that
certificate during the holding period had been 110% of a specified U.S. Treasury
borrowing rate as of the date that the certificateholder acquired the
certificate. Although the legislative history to the 1986 Act indicates that the
portion of the gain from disposition of a Regular Certificate that will be
recharacterized as ordinary income is limited to the amount of original issue
discount (if any) on the certificate that was not previously includible in
income, the applicable Code provision contains no such limitation.
A portion of any gain from the sale of a Regular Certificate that might
otherwise be capital gain may be treated as ordinary income to the extent that
such certificate is held as part of a conversion transaction within the meaning
of section 1258 of the Code. A conversion transaction generally is one in which
the taxpayer has taken two or more positions in certificates or similar property
that reduce or eliminate market risk, if substantially all of the taxpayer's
return is attributable to the time value of the taxpayer's net investment in
such transaction. The amount of gain realized in a conversion transaction that
is recharacterized as ordinary income generally will not exceed the amount of
interest that would have accrued on the taxpayer's net investment at 120% of the
appropriate applicable federal rate (which rate is computed and published
monthly by the Service) at the time the taxpayer entered into the conversion
transaction, subject to appropriate reduction for prior inclusion of interest
and other ordinary income from the transaction.
Currently, the highest marginal individual income tax bracket is 39.6%. The
alternative minimum tax rate for individuals is 26% with respect to alternative
minimum tax income up to $175,000 and 28% with respect to alternative minimum
tax income over $175,000. The highest marginal federal tax rate applicable to
individuals with respect to net capital gain on assets held for one year or less
generally is 28%. 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
68
<PAGE>
trust, underlying a series must meet certain continuing qualification
requirements, and a REMIC election must be in effect. SEE "FEDERAL INCOME TAX
CONSEQUENCES -- REMIC CERTIFICATES -- REMIC QUALIFICATION" IN THIS PROSPECTUS. A
REMIC generally is treated as a pass-through entity for federal income tax
purposes, i.e., as not subject to entity-level tax. All interests in a REMIC
other than the residual interest must be regular interests. As described in
"FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- TAX TREATMENT OF
REGULAR CERTIFICATES" IN THIS PROSPECTUS, a regular interest has terms analogous
to those of a debt instrument and generally is treated as a debt instrument for
all federal income tax purposes. The Regular Certificates will generate interest
and, depending upon the issue price of the Regular Certificates, original issue
discount deductions or income attributable to premium for the related series
REMIC. As a residual interest, a Residual Certificate represents the right to
(i) the stated principal and interest on such certificate, if any, and (ii) such
certificate's pro rata share of the income generated by the related series
REMIC's assets in excess of the amount necessary to service that REMIC's regular
interests and pay that REMIC's expenses.
In a manner similar to that employed in the taxation of partnerships, REMIC
taxable income or loss will be determined at the REMIC level, but passed through
to the Residual Certificateholders. Thus, REMIC taxable income or loss will be
allocated pro rata to the related Residual Certificateholders, and each such
certificateholder will report his share of REMIC taxable income or loss on his
own federal income tax return. Prospective investors in Residual Certificates
should be aware that the obligation to account for the related series REMIC's
income or loss will continue until all of that REMIC's Regular Certificates have
been retired, which may not occur until well beyond the date on which the last
payments on Residual Certificates are made. In addition, because of the way in
which REMIC taxable income is calculated, a Residual Certificateholder may
recognize phantom income (i.e., income recognized for tax purposes in excess of
income as determined under financial accounting or economic principles) which
will be matched in later years by a corresponding tax loss or reduction in
taxable income, but which could lower the yield to Residual Certificateholders
due to the lower present value of such loss or reduction.
A portion of the income of a Residual Certificateholder may be treated
unfavorably in three contexts: (i) it may not be offset by current or net
operating loss deductions; (ii) it will be considered unrelated business taxable
income as defined in the Code ("UBTI"). UBTI to tax-exempt entities; and (iii)
it is ineligible for any statutory or treaty reduction in the 30% withholding
tax otherwise available to a foreign Residual Certificateholder.
The concepts presented in this overview are discussed more fully below.
TAXATION OF RESIDUAL CERTIFICATEHOLDERS
A Residual Certificateholder will recognize his share of the related series
REMIC's taxable income or loss for each day during his taxable year on which he
holds the Residual Certificate. The amount so recognized will be characterized
as ordinary income or loss and will not be taxed separately to the series REMIC.
If a Residual 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
69
<PAGE>
administrative expenses of the REMIC and the Regular Certificates, any tax
imposed on the REMIC's income from foreclosure property, and any bad debt
deductions with respect to the related assets. The REMIC may not take into
account any items allocable to a prohibited transaction. SEE "FEDERAL INCOME TAX
CONSEQUENCES -- REMIC CERTIFICATES -- REMIC-LEVEL TAXES" IN THIS PROSPECTUS. The
deduction of REMIC expenses by Residual Certificateholders who are individuals
is subject to certain limitations as described below in "FEDERAL INCOME TAX
CONSEQUENCES -- REMIC CERTIFICATES -- SPECIAL CONSIDERATIONS FOR CERTAIN TYPES
OF INVESTORS -- INDIVIDUALS AND PASS-THROUGH ENTITIES" IN THIS PROSPECTUS.
The amount of the REMIC's net loss with respect to a calendar quarter that
may be deducted by a Residual Certificateholder is limited to such
certificateholder's adjusted basis in the Residual Certificate as of the end of
that quarter (or time of disposition of the Residual Certificate, if earlier),
determined without taking into account the net loss for that quarter. A Residual
Certificateholder's basis in its Residual Certificate initially is equal to the
price paid for such certificate. Such basis is increased by the amount of
taxable income of the REMIC reportable by the Residual Certificateholder with
respect to the Residual Certificate and decreased (but not below zero) by the
amount of distributions made and the amount of net losses recognized with
respect to that certificate. The amount of the REMIC's net loss allocable to a
Residual Certificateholder that is disallowed under the basis limitation may be
carried forward indefinitely, but may be used only to offset income with respect
to the related Residual Certificate. The ability of Residual Certificateholders
to deduct net losses with respect to a Residual Certificate may be subject to
additional limitations under the Code, as to which certificateholders should
consult their tax advisors. A distribution with respect to a Residual
Certificate is treated as a non-taxable return of capital up to the amount of
the Residual Certificateholder's adjusted basis in his Residual Certificate. If
a distribution exceeds the adjusted basis of the Residual Certificate, the
excess is treated as gain from the sale of such Residual Certificate.
Although the law is unclear in certain respects, a Residual
Certificateholder effectively should be able to recover some or all of the basis
in his Residual Certificate as the related REMIC recovers the basis of its
assets through either the amortization of premium on such assets or the
allocation of basis to principal payments received on such assets. A REMIC's
initial aggregate basis in its assets generally will equal the sum of the issue
prices of its Regular Certificates and Residual Certificates. In general, the
issue price of a Regular Certificate of a particular class is the initial price
at which a substantial amount of the certificates of such class is sold to the
public. In the case of a Regular Certificate of a class not offered to the
public in substantial amounts, the issue price is either the price paid by the
first purchaser of such certificate or the fair market value of the property
received in exchange for such certificate, as appropriate. The REMIC's aggregate
basis will be allocated among its assets in proportion to their respective fair
market values.
The assets of certain series REMICs may have bases that exceed their
principal amounts. Except as indicated in "FEDERAL INCOME TAX CONSEQUENCES --
REMIC CERTIFICATES -- TREATMENT BY THE REMIC OF ORIGINAL ISSUE DISCOUNT, MARKET
DISCOUNT, AND AMORTIZABLE PREMIUM" IN THIS PROSPECTUS, the premium on such
assets will be amortizable under the constant yield method and the same
prepayment assumptions used in pricing the certificates. The amortized premium
will reduce the REMIC's taxable income or increase its tax loss for each year,
which will offset a corresponding amount of the stated interest or other
residual cash flow, if any, allocable to the Residual Certificateholders. It
should be noted, however, that the law concerning the amortization of premium on
assets is unclear in certain respects. If the Service were to contend
successfully that part or all of the premium on the assets underlying a REMIC is
not amortizable, the holders of the Residual Certificates in such REMIC would
recover the basis attributable to the unamortizable premium only as principal
payments are received on such assets or upon the disposition or worthlessness of
their
70
<PAGE>
Residual Certificates. The inability to amortize part or all of the premium
could give rise to timing differences between the REMIC's income and deductions,
creating phantom income.
In the first years after the issuance of the Regular Certificates, REMIC
taxable income may include significant amounts of phantom income. Phantom income
arises from timing differences between income on the underlying assets and
deductions on the Regular Certificates that result from the multiple-class
structure of the certificates. Since phantom income will arise from timing
differences between income and deductions, it will be matched by a corresponding
loss or reduction in taxable income in later years, during which economic or
financial income will exceed REMIC taxable income. Any acceleration of taxable
income, however, could lower the yield to a Residual Certificateholder, since
the present value of the tax paid on that income will exceed the present value
of the corresponding tax reduction in the later years. The amount and timing of
any phantom income are dependent upon (i) the structure of the particular REMIC
and (ii) the rate of prepayment on the assets held by the REMIC and, therefore,
cannot be predicted without reference to a particular REMIC.
The assets of certain series REMICs may have bases that are less than their
principal amounts. In such a case, a Residual Certificateholder will recover the
basis in his Residual Certificate as the REMIC recovers the portion of its basis
in the assets that is attributable to the residual interest. The REMIC's basis
in the assets is recovered as it is allocated to principal payments received by
the REMIC.
A portion of a series REMIC's taxable income may be subject to special
treatment. That portion (known as "excess inclusion income") generally is any
taxable income beyond that which the Residual Certificateholder would have
recognized had the Residual Certificate been a conventional debt instrument
bearing interest at 120% of the applicable long-term federal rate (based on
quarterly compounding) as of the date on which the Residual Certificate was
issued. Excess inclusion income generally is intended to approximate phantom
income and may result in unfavorable tax consequences for certain investors. SEE
"FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- TAX TREATMENT OF
RESIDUAL CERTIFICATES -- LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME" AND
" -- SPECIAL CONSIDERATIONS FOR CERTAIN TYPES OF INVESTORS" IN THIS PROSPECTUS.
LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME
Generally, a Residual Certificateholder's taxable income for any taxable
year may not be less than such certificateholder's excess inclusion income for
that taxable year. Excess inclusion income is equal to the excess of REMIC
taxable income for the quarterly period for the Residual Certificates over the
product of (i) 120% of the long-term applicable federal rate that would have
applied to the Residual Certificates if they were debt instruments for federal
income tax purposes on the closing date and (ii) the adjusted issue price of
such Residual Certificates at the beginning of such quarterly period. For this
purpose, the adjusted issue price of a Residual Certificate at the beginning of
a quarter is the issue price of the Residual Certificate, increased by the
amount of the daily accruals of REMIC income for all prior quarters, and
decreased by any distributions made with respect to such Residual Certificate
prior to the beginning of such quarterly period. If the Residual
Certificateholder is an organization subject to the tax on UBTI imposed by Code
section 511, the Residual Certificateholder's excess inclusion income will be
treated as UBTI. In addition, under Treasury regulations yet to be issued, if a
REIT or a RIC owns a Residual Certificate that generates excess inclusion
income, a pro rata portion of the dividends paid by the REIT or the RIC
generally will constitute excess inclusion income for their shareholders.
Finally, Residual Certificateholders who are foreign persons will not be
entitled to any exemption from the 30% withholding tax or a reduced treaty rate
with respect to their excess inclusion income from the REMIC. SEE "FEDERAL
INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- TAXATION OF CERTAIN FOREIGN
HOLDERS OF REMIC CERTIFICATES -- RESIDUAL CERTIFICATES" IN THIS PROSPECTUS.
71
<PAGE>
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. Proposed
Treasury regulations issued on February 4, 2000 (the "New Proposed Regulations")
would modify that safe harbor. Under the New Proposed Regulations, a transfer of
a noneconomic residual interest would not qualify under the safe harbor unless,
in addition to the requirements noted above, the present value of the
anticipated tax liabilities associated with holding the residual interest does
not exceed the sum of the present values of (i) any consideration given to the
transferee to acquire the interest, (ii) the expected future distributions on
the interest, and (iii) any anticipated tax savings associated with holding the
interest as the REMIC generates losses. For purposes of that calculation,
present value generally is calculated using a discount rate equal to the
applicable federal rate. The New Proposed Regulations indicate that the
effective date for the safe harbor modifications could be as early as February
4, 2000. Limitations also exist with respect to transfers of certain residual
interests to foreign investors. SEE "FEDERAL INCOME TAX CONSEQUENCES -- REMIC
CERTIFICATES -- TAXATION OF CERTAIN FOREIGN HOLDERS OF REMIC CERTIFICATES --
RESIDUAL CERTIFICATES" IN THIS PROSPECTUS.
OWNERSHIP OF RESIDUAL CERTIFICATES 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
72
<PAGE>
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 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
73
<PAGE>
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.
If an "electing large partnership" holds a Residual Certificate, all
interests in the electing large partnership are treated as held by disqualified
organizations for purposes of the tax imposed upon a pass-through entity by
section 860E(c) of the Code. The exception to this tax, otherwise available to a
pass-through entity that is furnished certain affidavits as described above, is
not available to an electing large partnership. The pooling and servicing
agreement will provide that no record or beneficial ownership interest in a
Residual Certificate may be purchased, transferred or sold, directly or
indirectly, without the express written consent of the servicer. The servicer
will grant such consent to a proposed transfer only if it receives the
following: (i) an affidavit from the proposed transferee to the effect that it
is not a disqualified organization and is not acquiring the Residual Certificate
as a nominee or agent for a disqualified organization and (ii) a covenant by the
proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the Residual
Certificate.
The REMIC provisions of the Code also require that reasonable arrangements
be made with respect to each REMIC to enable the REMIC to provide the Treasury
and the transferor with information necessary for the application of the
one-time tax described above. Consequently, the applicable pooling and servicing
agreement will provide for the servicer or an Affiliate thereof to perform such
information services as may be required for the application of the one-time tax.
Affiliate means, as to any specified person, any other person controlling or
controlled by or under common control with such specified person. For the
purposes of this definition, control, when used with respect to any specified
person, means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms controlling and controlled have the
meanings correlative to the foregoing. If a Residual Certificateholder transfers
an interest in a Residual Certificate in violation of the relevant transfer
restrictions and triggers the information requirement, the servicer or Affiliate
thereof may charge such Residual Certificateholder a reasonable fee for
providing the information.
SPECIAL CONSIDERATIONS FOR CERTAIN TYPES OF INVESTORS
DEALERS IN SECURITIES. Residual Certificateholders that are dealers in
securities should be aware that, under Treasury regulations (the "Mark-to-Market
Regulations") relating to the mark-to-market accounting provisions under section
475 of the Code dealers in securities are not permitted to mark to market any
REMIC residual 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
74
<PAGE>
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 ($128,950, or $64,475 in the case of a separate return by a
married individual within the meaning of Code section 7703 for taxable year 2000
and adjusted for inflation each year thereafter) will be reduced by the lesser
of (i) 3% of the excess of adjusted gross income over the applicable amount, or
(ii) 80% of the amount of itemized deductions otherwise allowable for such
taxable year. In some cases, the amount of additional income that would be
recognized as a result of the foregoing limitations by a Residual
Certificateholder who is an individual, trust, or estate could be substantial.
Non-corporate holders of Residual Certificates also should be aware that
miscellaneous itemized deductions, including allocable investment expenses
attributable to the related series REMIC, are not deductible for purposes of the
alternative minimum tax. Finally, persons holding an interest in a Residual
Certificate indirectly through an interest in a RIC, common trust fund or one of
certain corporations doing business as a cooperative generally will recognize a
share of any excess inclusion allocable to that Residual Certificate.
EMPLOYEE BENEFIT PLANS. SEE "FEDERAL INCOME TAX CONSEQUENCES -- REMIC
CERTIFICATES -- SPECIAL CONSIDERATIONS FOR CERTAIN TYPES OF INVESTORS --
TAX-EXEMPT ENTITIES" AND "ERISA CONSIDERATIONS" IN THIS PROSPECTUS.
REITS AND RICS. If a Residual Certificateholder is a REIT and the related
series REMIC generates excess inclusion income, a portion of REIT dividends will
be treated as excess inclusion income for the REIT's shareholders, in a manner
to be provided by regulations. Thus, shareholders in a REIT that invests in
Residual Certificates could face unfavorable treatment of a portion of their
REIT dividend income for purposes of (i) using current deductions or net
operating loss carryovers or carrybacks; (ii) UBTI in the case of tax-exempt
shareholders; and (iii) withholding tax in the case of foreign shareholders. SEE
"FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- SPECIAL CONSIDERATIONS
FOR CERTAIN TYPES OF INVESTORS -- FOREIGN RESIDUAL CERTIFICATEHOLDERS" IN THIS
PROSPECTUS. Moreover, because Residual Certificateholders may recognize phantom
income (SEE "FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- TAXATION
OF RESIDUAL CERTIFICATEHOLDERS" IN THIS PROSPECTUS), a REIT contemplating an
investment in Residual Certificates should consider carefully the effect of any
phantom income upon its ability to meet its income distribution requirements
under the Code. The same rules regarding excess inclusion will apply to a),
Residual Certificateholder that is a RIC, common trust fund, or one of certain
corporations doing business as a cooperative.
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
75
<PAGE>
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
will not be considered a government security for purposes of section 851(b)(4)
of the Code. Moreover, it is unclear whether a Residual Certificate will be
treated as a voting security under that Code section. Finally, because a series
REMIC will be treated as the issuer of the Residual Certificate for purposes of
that section, a RIC would be unable to invest more than 25% of the value of its
total assets in Residual Certificates issued by the same series REMIC.
PARTNERSHIPS. Partners in a partnership (other than an "electing large
partnership") must take into account their allocable share of any income,
including excess inclusion income, that is produced by the Residual Certificate.
The partnership itself is not subject to tax on income from the Residual
Certificate other than excess inclusion income that is allocable to partnership
interests owned by Disqualified Organizations. For the treatment of "electing
large partnerships," SEE "FEDERAL INCOME TAX CONSEQUENCES -- TAX TREATMENT OF
RESIDUAL CERTIFICATES -- OWNERSHIP OF RESIDUAL CERTIFICATES BY DISQUALIFIED
ORGANIZATIONS" IN THIS PROSPECTUS.
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
76
<PAGE>
Certificate. It is possible that a disqualification of a series REMIC (other
than an inadvertent disqualification for which relief may be provided in
Treasury regulations) may be treated as a sale or exchange of a related Residual
Certificate. If the holder has held the Residual Certificate for the applicable
long-term capital gain holding period, gain or loss on its disposition generally
will be characterized as long-term capital gain or loss. In the case of banks,
thrifts, and certain other financial institutions described in section 582 of
the Code, however, gain or loss on the disposition of a Residual Certificate
will be treated as ordinary gain or loss, regardless of the length of the
holding period. SEE "FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES --
SPECIAL CONSIDERATIONS FOR CERTAIN TYPES OF INVESTORS" 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 a certificate acquires any
residual interest in a REMIC or any interest in a Taxable Mortgage Pool that is
economically comparable to a Residual Certificate. Treasury Regulations
providing for appropriate exceptions to the application of the wash sale rules
have been authorized, but have not yet been promulgated.
LIQUIDATION OF THE REMIC
A REMIC may liquidate without the imposition of entity-level tax only in a
qualified liquidation. A liquidation is considered a qualified liquidation if
the REMIC (i) adopts a plan of complete liquidation; (ii) sells all of its
non-cash assets within 90 days of the date on which it adopts the plan; and
(iii) credits or distributes in liquidation all of the sale proceeds plus its
cash (other than amounts retained to meet claims against it) to its
certificateholders within that 90-day period. An early termination of a REMIC
caused by the redemption of all outstanding classes of certificates issued by
such REMIC, and the distribution to the Residual Certificateholders of the
excess, if any, of the fair market value of the REMIC's assets at the time of
such redemption over the unpaid principal balance and accrued and unpaid
interest of such REMIC certificates (and any administrative costs associated
with such REMIC), will constitute a complete liquidation as described in the
preceding sentence. Under the REMIC provisions of the Code, a plan of
liquidation need not be in any special form. Furthermore, if a REMIC specifies
the first day in the 90-day liquidation period in a statement attached to its
final tax return, the REMIC will be considered to have adopted a plan of
liquidation on that date.
TREATMENT BY THE REMIC OF ORIGINAL ISSUE DISCOUNT,
MARKET DISCOUNT, AND AMORTIZABLE PREMIUM
ORIGINAL ISSUE DISCOUNT. Generally, a REMIC's deductions for original issue
discount expense on its REMIC certificates will be determined in the same manner
as for determining the original issue discount income on such certificates as
described in "FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- TAX
TREATMENT OF REGULAR CERTIFICATES -- ORIGINAL ISSUE DISCOUNT" IN THIS
PROSPECTUS, without regard to the DE MINIMIS rule described therein.
MARKET DISCOUNT. In general, a REMIC will have market discount income with
respect to its Qualified Mortgages if the basis of the REMIC in such assets is
exceeded by their adjusted issue prices. A REMIC's aggregate initial basis in
its Qualified Mortgages (and any other assets transferred to the REMIC on the
startup day) equals the aggregate of the issue prices of the regular and
residual interests in the REMIC. That basis is allocated among the REMIC's
Qualified Mortgages based on their relative fair market values. Any market
discount that accrues on a REMIC's Qualified Mortgages will be recognized
currently as an item of REMIC ordinary income. The amount of market discount
income to be recognized in any period is determined in a manner generally
similar to that used in the determination of original issue discount, as if the
Qualified Mortgages had been issued (i) on the date they were acquired by the
REMIC and (ii) for a price equal to the REMIC's initial basis in the Qualified
Mortgages. The same prepayment assumptions used in pricing the certificates are
used to compute the yield to maturity of a REMIC's Qualified Mortgages.
77
<PAGE>
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 such conversion for an amount
equal to the asset's current principal balance plus accrued but unpaid interest
(and provided that certain other requirements are met) or (g) a qualified
liquidation of the REMIC; (ii) the receipt of income from assets that are not
the type of assets or investments that a REMIC is permitted to hold; (iii) the
receipt of compensation for services by a REMIC; and (iv) the receipt of gain
from disposition of cash-flow investments other than pursuant to a qualified
liquidation of the REMIC. A disposition of a Qualified Mortgage or cash flow
investment will not give rise to a prohibited transaction, however, if the
disposition was (i) required to prevent default on a regular interest resulting
from a default on one or more of the REMIC's Qualified Mortgages or (ii) made to
facilitate a clean-up call. The REMIC provisions of the Code define a clean-up
call as the redemption of a class of regular interests when, by reason of prior
payments with respect to those interests, the administrative costs associated
with servicing the class outweigh the benefits of maintaining the class. Under
those regulations, the redemption of a class of regular interests with an
outstanding principal balance of no more than 10% of the original principal
balance qualifies as a clean-up call. The REMIC provisions of the Code also
provide that the modification of an asset generally will not be treated as a
disposition of that asset if it is occasioned by a default or a reasonably
foreseeable default, an assumption of the asset, the waiver of a due-on-sale or
encumbrance clause, or the conversion of an interest rate by an obligor pursuant
to the terms of a convertible adjustable rate asset.
In addition, a REMIC generally will be taxed at a 100% rate on any
contribution to the REMIC after the closing date unless such contribution is a
cash contribution that (i) takes place within the three-month period beginning
on the closing date; (ii) is made to facilitate a clean-up call (as defined in
the preceding paragraph) or a qualified liquidation (as defined in "FEDERAL
INCOME TAX
78
<PAGE>
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 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 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.
79
<PAGE>
Permitted Investments include cash flow investments, qualified reserve
assets, and foreclosure property. Cash flow investments are investments of
amounts received with respect to Qualified Mortgages for a temporary period (not
to exceed thirteen months) before distribution to holders of regular or residual
interests in the REMIC. Qualified reserve assets are intangible investment
assets (other than REMIC residual interests) that are part of a qualified
reserve fund maintained by the REMIC. A qualified reserve fund is any reasonably
required reserve maintained by a REMIC to provide for full payment of expenses
of the REMIC or amounts due on the regular interests or residual interest in
such REMIC in the event of (i) defaults or delinquencies on the Qualified
Mortgages held by such REMIC; (ii) interest shortfalls on such Qualified
Mortgages caused by prepayments of those assets; (iii) lower than expected
returns on cash-flow investments; or (iv) unanticipated losses or expenses
incurred by the REMIC. A qualified reserve fund will be disqualified if more
than 30% of the gross income from the assets in such fund for the year is
derived from the sale of property held for less than three months, unless such
sale was required to prevent a default on the regular interests caused by a
default on one or more Qualified Mortgages. To the extent that the amount in a
qualified reserve fund exceeds a reasonably required amount, it must be reduced
promptly and appropriately. Foreclosure property generally is property acquired
by the REMIC in connection with the default or imminent default of a Qualified
Mortgage. Foreclosure property may not be held beyond the end of the third
taxable year beginning after foreclosure occurs 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 end of the sixth taxable
year beginning 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
80
<PAGE>
on a variable rate regular interest will not prevent such an interest from
qualifying as a regular interest. In addition, a qualifying variable rate may be
expressed as a multiple of, or a constant number of basis points more or less
than, one of the permissible types of variable rates described above. Finally, a
limitation on the amount of interest to be paid on a variable rate regular
interest based on the total amount available for distribution is permissible,
provided that it is not designed to avoid the restrictions on qualifying
variable rates. The REMIC provisions of the Code also provide that the specified
principal amount of a REMIC regular interest may be zero if the interest
associated with such regular interest constitutes a specified nonvarying portion
of the interest on one or more of the REMIC's Qualified Mortgages.
If the interest payable on a REMIC regular interest is disproportionately
high relative to the specified principal amount of that interest, that interest
may be treated, in whole or in part, as a second residual interest, which could
result in the disqualification of the REMIC. Under the REMIC provisions of the
Code, interest payments (or similar amounts) are considered disproportionately
high if the issue price of a regular interest exceeds 125% of its specified
principal amount. Under the REMIC provisions of the Code, however, interest
payable at a disproportionately high rate will not cause a regular interest to
be recharacterized as a residual interest if the interest payable on that
regular interest consists of a specified nonvarying portion of the interest
payable on one or more of the REMIC's Qualified Mortgages. None of the Regular
Certificates will have an issue price that exceeds 125% of their respective
specified principal amounts unless the interest payable on those certificates
consists of a specified nonvarying portion of the interest payable on one or
more of the REMIC's Qualified Mortgages.
The Code requires certain arrangements to be made with respect to all
REMICs. Those arrangements, which are intended to prevent acquisitions of REMIC
residual interests (including the Residual Certificates) by certain
organizations that are not subject to federal income tax, are described in
"FEDERAL INCOME TAX CONSEQUENCES -- 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
81
<PAGE>
portion of the REMIC's income for the period of time in which the requirements
for REMIC status are not satisfied.
TAXABLE MORTGAGE POOLS
Corporate income tax can be imposed on the net income of certain entities
issuing non-REMIC debt obligations secured by real estate mortgages ("Taxable
Mortgage Pools"). Any entity other than a REMIC, a REIT or a financial asset
securitization investment trust (a "FASIT") 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 (i) such interest is not effectively connected with a trade or business in
the United States of the certificateholder, (ii) the Foreign Person is not a 10%
shareholder within the meaning of Section 871(h)(3)(B) of the Code or a
controlled foreign corporation as described in Section 881(c)(3)(C) of the Code,
(iii) the Foreign Person is not a bank receiving interest on a loan made in the
ordinary course of business, and (iv) 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 and (iii) the certificateholder meets
the requirements listed under "FEDERAL INCOME TAX CONSEQUENCES -- REMIC
CERTIFICATES -- TAXATION OF CERTAIN FOREIGN HOLDERS OF REMIC CERTIFICATES --
REMIC REGULAR CERTIFICATES" IN THIS PROSPECTUS. Because the assets held by a
series REMIC will not be issued in registered form, amounts received by Residual
Certificateholders who are Foreign Persons will not be exempt from the 30%
withholding tax. Such amounts generally will be subject to United States
withholding tax when paid or otherwise distributed (or when the Residual
Certificate is disposed of)
82
<PAGE>
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 invokes the protection of an income tax treaty with
respect to United States withholding tax generally will be required to obtain a
taxpayer identification number from the Service in advance and provide
verification that such investor is entitled to the protection of the relevant
income tax treaty. Foreign tax-exempt investors generally will be required to
provide verification of their tax-exempt status. Foreign investors are urged to
consult with their tax advisors with respect to those new withholding rules.
BACKUP WITHHOLDING
Under federal income tax law, a certificateholder may be subject to backup
withholding under certain circumstances. Backup withholding applies to a
certificateholder who is a United States person if the certificateholder, among
other things, (i) fails to furnish his social security number or other taxpayer
identification number to the trustee; (ii) furnishes the trustee an incorrect
taxpayer identification number; (iii) fails to report properly interest and
dividends; or (iv) under certain circumstances, fails to provide the trustee or
the certificateholder's securities broker with a certified statement, signed
under penalties of perjury, that the taxpayer identification number provided to
the trustee is correct and that the certificateholder is not subject to backup
withholding. Backup withholding applies, under certain circumstances, to a
certificateholder who is a foreign 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,
83
<PAGE>
does not apply to payments on certificates made to certain exempt recipients,
such as tax-exempt organizations, and to certain Foreign Persons.
Certificateholders should consult their tax advisors for additional information
concerning the potential application of backup withholding to payments received
by them with respect to a certificate.
REPORTING AND TAX ADMINISTRATION
REGULAR CERTIFICATES
Reports will be made at least annually to holders of record of Regular
Certificates (other than those with respect to whom reporting is not required)
and to the Service as may be required by statute, regulation, or administrative
ruling with respect to (i) interest paid or accrued on the certificates; (ii)
original issue discount, if any, accrued on the certificates; and (iii)
information necessary to compute the accrual of any market discount or the
amortization of any premium on the certificates.
RESIDUAL CERTIFICATES
For purposes of federal income tax reporting and administration, a series
REMIC generally will be treated as a partnership, and the related Residual
Certificateholders as its partners. A series REMIC will file an annual return on
Form 1066 and will be responsible for providing information to Residual
Certificateholders sufficient to enable them to report properly their shares of
the REMIC's taxable income or loss, although it is anticipated that such
information actually will be supplied by the trustee based upon information it
receives from the servicer in its monthly reports delivered pursuant to the
pooling and servicing agreement. The REMIC provisions of the Code require
reports to be made by a REMIC to its Residual Certificateholders each calendar
quarter in order to permit such certificateholders to compute their taxable
income accurately. A person that holds a Residual Certificate as a nominee for
another person is required to furnish those quarterly reports to the person for
whom it is a nominee within 30 days of receiving such reports. A REMIC is
required to file all such quarterly reports for a taxable year with the Service
as an attachment to the REMIC's income tax return for that year. As required by
the Code, a series REMIC's taxable year will be the calendar year.
Residual Certificateholders should be aware that their responsibilities as
holders of the residual interest in a REMIC, including the duty to account for
their shares of the REMIC's income or loss on their returns, continue for the
life of the REMIC, even after the principal and interest on their Residual
Certificates have been paid in full.
The Treasury has issued temporary and final regulations concerning certain
aspects of REMIC tax administration. Under those regulations, a Residual
Certificateholder must be designated as the REMIC's tax matters person (the
"TMP"). The TMP generally has responsibility for overseeing and providing notice
to the other Residual Certificateholders of certain administrative and judicial
proceedings regarding the REMIC's tax affairs, although other holders of the
Residual Certificates of the same series would be able to participate in such
proceedings in appropriate circumstances. It is expected that the servicer or an
Affiliate thereof will acquire a portion of the residual interest in each series
REMIC in order to permit it to be designated as TMP for the REMIC and will
prepare and file the REMIC's federal and state income tax and information
returns.
Treasury regulations provide that a Residual Certificateholder is not
required to treat items on its return consistently with their treatment on the
REMIC's return if the certificateholder owns 100% of the Residual Certificates
for the entire calendar year. Otherwise, each Residual Certificateholder is
required to treat items on its returns consistently with their treatment on the
REMIC's return, unless the certificateholder either files a statement
identifying the inconsistency or establishes that the inconsistency resulted
from incorrect information received from the REMIC. The Service may assess a
deficiency resulting from a failure to comply with the consistency requirement
without instituting an
84
<PAGE>
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
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
85
<PAGE>
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.
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
($128,950, or $64,475 in the case of a separate return by a married individual
within the meaning of Code section 7703 for taxable year 2000, 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. As in the case of
Regular Certificates, Code section 1272(a)(6) applies to non-REMIC certificates,
but no regulations have been issued describing the application of that Section
to such securities. Nonetheless, unless and until the release of administrative
guidance to the contrary, the Tax Administrator will account for the non-REMIC
certificates as though section 1272(a)(6) applied to them. Thus, the Tax
Administrator will account for a class of non-REMIC certificates in the same
manner as it would account for a class of Regular Certificates with the same
terms. There can be no assurance, however, that the Service ultimately will
sanction the Tax Administrator's position.
The original issue discount rules generally apply to residential mortgage
loans originated after March 2, 1984, and the market discount rules apply to any
such loans originated after July 18, 1984.
86
<PAGE>
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 their adjusted issue prices.
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 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.
87
<PAGE>
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," " -- 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
88
<PAGE>
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.
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
89
<PAGE>
each alternative, a potential investor is urged to consult its own tax advisor
regarding the proper treatment of such certificates for federal income tax
purposes.
LIMITATIONS ON DEDUCTIONS WITH RESPECT TO STRIP CERTIFICATES
The holder of a Strip Certificate will be treated as owning an interest in
each of the assets of the related trust and will recognize an appropriate share
of the income and expenses associated with those assets. Accordingly, an
individual, trust, or estate that holds a Strip Certificate directly or through
a pass-through entity will be subject to the same limitations on deductions with
respect to such certificate as are applicable to holders of Participation
Certificates. SEE "FEDERAL INCOME TAX CONSEQUENCES -- NON-REMIC CERTIFICATES --
TREATMENT OF PARTICIPATION CERTIFICATES" IN THIS PROSPECTUS.
SALE OF A NON-REMIC CERTIFICATE
A sale of a non-REMIC certificate prior to its maturity will result in gain
or loss equal to the difference between the amount received and the holder's
adjusted basis in such certificate. The rules for computing the adjusted basis
of a Non-REMIC Certificate are the same as in the case of a Regular Certificate.
SEE "FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- TAX TREATMENT OF
REGULAR CERTIFICATES -- GAIN OR LOSS ON DISPOSITION" IN THIS PROSPECTUS. Gain or
loss from the sale or other disposition of a non-REMIC certificate generally
will be capital gain or loss to the certificateholder if the certificate is held
as a capital asset within the meaning of section 1221 of the Code, and will be
long-term or short-term depending on whether the certificate has been held for
the applicable long-term capital gain holding period. Ordinary income treatment,
however, will apply to the extent mandated by the original issue discount and
market discount rules or if the certificateholder is a financial institution
described in section 582 of the Code. SEE "FEDERAL INCOME TAX CONSEQUENCES --
REMIC CERTIFICATES -- GAIN OR LOSS ON DISPOSITION" IN THIS PROSPECTUS.
TAXATION OF CERTAIN FOREIGN HOLDERS OF NON-REMIC CERTIFICATES
Interest, including original issue discount, paid on a non-REMIC
Certificate to a Foreign Person generally is treated as portfolio interest and,
therefore, is not subject to any United States tax, provided that (i) such
interest is not effectively connected with a trade or business in the United
States of the Certificateholder, (ii) the Foreign Person is not a 10%
shareholder within the meaning of Code Section 871(h)(3)(B) or a controlled
foreign corporation as described under Code Section 881(c)(3)(C), (iii) the
Foreign Person is not a bank receiving interest on a loan made during the
ordinary course of business, and (iv) 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 meet the
foregoing conditions, 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
90
<PAGE>
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 Code Sections 871(h)(4) and 881(c)(4) deny portfolio
interest treatment to certain types of contingent interest, those provisions
generally apply only to interest based on the income, profits, or property
values of the debtor. Accordingly, it is not anticipated that those provisions
will apply to deny portfolio interest treatment to certificateholders who are
Foreign Persons. However, because the scope of those provisions is not entirely
clear, investors who are Foreign Persons should consult their tax advisors
regarding the potential application of those provisions 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.
PROPOSED LEGISLATION
The President's recently released budget proposal contains tax legislative
proposals that could affect the tax consequences to you of the purchase,
ownership, and disposition of the certificates. Under one legislative proposal,
a REMIC itself would be secondarily liable for taxes on phantom income and would
be required to pay such taxes to the extent that they were not paid by the
REMICs residual holders on the applicable due date. Under the current law, only
the REMIC residual holder is liable for the payment of taxes on phantom income.
SEE "FEDERAL INCOME TAX CONSEQUENCES -- REMIC CERTIFICATES -- TAX TREATMENT OF
RESIDUAL CERTIFICATES -- TAXATION OF RESIDUAL CERTIFICATEHOLDERS" IN THIS
PROSPECTUS. If this legislative proposal were enacted in its present form, it
would be effective for REMICs formed after the date of enactment. In addition,
the President's budget proposes legislation that in its current form would
require holders of debt instruments that use an accrual method of accounting to
include market discount in income on a constant yield basis as it accrues. Under
current law, a holder of a debt instrument with market discount generally
recognizes income attributable to market discount only as principal is received
or when the holder disposes of the debt instrument. SEE "FEDERAL INCOME TAX
CONSEQUENCES -- REMIC CERTIFICATES -- MARKET DISCOUNT" IN THIS PROSPECTUS. The
proposal would be effective for debt instruments acquired on or after the date
of enactment. It is unknown whether either of these provisions will be included
in any bill introduced into Congress this year or, if introduced, whether either
proposal will be enacted. Prospective investors in REMIC certificates should
consult their tax advisors regarding the proposed legislation discussed above.
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
91
<PAGE>
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;
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;
92
<PAGE>
o Prohibited Transaction Class Exemption 90-1 ("PTCE 90-1"), regarding
investments by insurance company pooled separate accounts;
o Prohibited Transaction Class Exemption 84-14 ("PTCE 84-14"), regarding
investment decisions made by a qualified professional 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
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
93
<PAGE>
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.
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
94
<PAGE>
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 Report on Form 10-Q for the quarter ended
December 31, 1999, and
o the Oakwood Homes Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.
All documents filed by Oakwood Mortgage or Oakwood Homes pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of the offering of the certificates
shall be deemed, in the case of Oakwood Mortgage, to be incorporated by
reference into this prospectus and, in the case of Oakwood Homes, to be
incorporated by reference into this prospectus and the prospectus supplement
relating to a class of certificates that is supported by a guarantee of Oakwood
Homes, from the dates of filing of these documents. Any statement contained in
this prospectus or in a document all or any portion of which is incorporated or
deemed to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus and the related
prospectus supplement to the extent that a statement contained in this
prospectus or in the prospectus supplement or in any other subsequently filed
document which also is or deemed to be incorporated by reference in this
prospectus or in the prospectus supplement modifies or supersedes that
statement. Any modified or superseded statement shall not be deemed, except as
modified or superseded, to constitute a part of this prospectus and the related
prospectus supplement.
We will provide you without charge, on your request, a copy of any of the
documents incorporated in this prospectus by reference, other than the exhibits
to those documents, unless the exhibits are specifically incorporated by
reference. Requests should be directed to Oakwood Mortgage Investors, Inc., in
writing at 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.
95
<PAGE>
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 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
96
<PAGE>
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.
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.
97
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE PAGE
--------- ---------
<S> <C> <C> <C>
1986 Act ...................................... 57 OID Regulations ............................... 56
Accretion Class ............................... 6 Ordinary Ratio Certificate .................... 88
Advance ....................................... 12 PAC Class ..................................... 6
Affiliate ..................................... 55 Parity Price .................................. 13
Aggregation Rule .............................. 57 Participants .................................. 7
All OID Election .............................. 59 Participation Certificate ..................... 85
Balloon Payment Loan .......................... 15 Periodic Rate Cap ............................. 19
Bankruptcy Code ............................... 45 Plan .......................................... 91
Beneficial Owner .............................. 7 Plan Asset Regulations ........................ 91
Benefit Plan Opinion .......................... 93 Plan Investor ................................. 93
Bi-Weekly Loan ................................ 15 PO Certificate ................................ 85
Buy-Down Loan ................................. 15 Pre-Funded Amount ............................. 19
Cap ........................................... 62 Pre-Issuance Accrued Interest ................. 60
Capital Appreciation Class .................... 6 Pre-Issuance Accrued Interest Rule ............ 60
CERCLA ........................................ 51 Prepayment Period ............................. 10
Code .......................................... 45 Pricing Prepayment Assumptions ................ 56
Collection Period ............................. 10 Principal-Only Class .......................... 6
Companion Class ............................... 6 Qualified Bank ................................ 39
Compensating Interest ......................... 35 Qualified Mortgage ............................ 77
Complementary Strip Certificates .............. 89 Qualified Stated Interest ..................... 57
Compound Interest Class ....................... 6 Qualifying REIT Interest ...................... 75
Contingent Payment Obligation ................. 64 Rate Bubble Certificate ....................... 61
Contingent Payment Regulations ................ 64 Ratio Certificate ............................. 90
Convertible Loan .............................. 15 RCRA .......................................... 52
Current Recognition Election .................. 65 Realized Loss ................................. 10
Custodian ..................................... 29 REMIC ......................................... 6
Cut-off Date .................................. 5 Remittance Report ............................. 39
Deemed Principal Payments ..................... 57 REO Property .................................. 12
Depository Participants ....................... 7 Repo Property ................................. 12
Disqualified Organization ..................... 72 Repurchase Price .............................. 18
Distribution Period ........................... 60 Residual Certificate .......................... 6
Early Payment ................................. 35 RIC ........................................... 55
Eligible Account .............................. 33 Scheduled Principal Balance ................... 11
Escrow Account ................................ 33 Servicing Advance ............................. 34
Event of Default .............................. 40 Servicing Fee ................................. 33
Excess Premium ................................ 59 Single Rate VRDI Certificate .................. 62
Final Scheduled Distribution Date ............. 10 SMMEA ......................................... 95
Financial Intermediary ........................ 7 Soldiers' and Sailors' Civil Relief Act ....... 10
First Distribution Period ..................... 60 Soldiers' and Sailors' Shortfall .............. 10
Floor ......................................... 62 Strip Class ................................... 6
Foreign Person ................................ 82 Stripping Regulations ......................... 87
Foreign Person Certification .................. 82 Superpremium Certificate ...................... 61
Governor ...................................... 62 Taxable Mortgage Pool ......................... 81
Gross Margin .................................. 19 Tax Administrator ............................. 55
Increasing Payment Loan ....................... 15 Teaser Certificate ............................ 57
Interest Reduction Loan ....................... 15 Title State ................................... 42
Interest Weighted Certificate ................. 59 Title V ....................................... 47
Inverse Floater Certificate ................... 64 TMP ........................................... 84
IO Certificate ................................ 88 UBTI .......................................... 69
Land Secured Contract ......................... 24 UCC State ..................................... 42
Level Payment Loan ............................ 15 Variable Rate Certificate ..................... 59
Multiple Rate VRDI Certificate ................ 63 VRDI .......................................... 59
Non-Recoverable Advance ....................... 35 WAM ........................................... 57
Non-VRDI certificate .......................... 59 Weighted Average Certificate .................. 59
NOWA Certificate .............................. 59
</TABLE>
98
<PAGE>
(This page left blank intentionally)
<PAGE>
(This page left blank intentionally)
<PAGE>
(This page left blank intentionally)
<PAGE>
[GRAPHIC]
