-1-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: January 22, 1998
(Date of earliest event reported)
Residential Funding Mortgage Securities II, Inc.
(Exact name of registrant as specified in its charter)
Delaware 333-28025 41-1808858
(State or Other Juris- (Commission (I.R.S. Employer
diction of Incorporation) File Number) Identification No.)
8400 Normandale Lake Blvd., Suite 600, Minneapolis, Minnesota55437
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code:(612) 832-7000
[CTSRFMSI.WPD December 7, 1995]
<PAGE>
-2-
Item 5Other Events.
On January 29, 1998, the Registrant expects to cause the issuance and
sale of Home Equity Loan-Backed Term Notes, Series 1998-HS1 (the "Term
Notes") pursuant to an Indenture to be dated as of January 29, 1998 among
Home Equity Loan Trust 1998- HS1, as Issuer, and The Chase Manhattan Bank,
as Indenture Trustee.
In connection with the expected sale of the Term Notes by Morgan Stanley
Dean Witter and Residential Funding Securities Corporation (together, the
"Underwriters"), the Registrant has been advised by Morgan Stanley Dean Witter
as Representative for the Underwriters (the "Representative"), that the
Underwriters have furnished to prospective investors certain collateral
information with respect to the revolving credit loans ("Revolving Credit
Loans") underlying the proposed offering of the Term Notes (the "Collateral Term
Sheets"), which Collateral Term Sheets are being filed electronically as
exhibits to this report.
The Collateral Term Sheets have been provided by the Underwriters.
The information in the Collateral Term Sheets is preliminary and will be
superseded by the Description of the Mortgage Pool contained in the
Prospectus Supplement relating to the Certificates and by any other
information subsequently filed with the Securities and Exchange
Commission.
The Collateral Term Sheets were prepared by the Underwriters at the
request of certain prospective investors. The Collateral Term Sheets may
be based on information that differs from the information set forth in the
Prospectus Supplement.
In addition, the actual characteristics and performance of the
Revolving Credit Loans underlying the Term Notes may differ from the
information provided in the Collateral Term Sheets, which were provided to
certain investors only to give a sense of the underlying collateral which
will affect the maturity, interest rate sensitivity and cash flow
characteristics of the Term Notes. Any difference between the collateral
information in the Collateral Term Sheets and the actual characteristics
of the Revolving Credit Loans will affect the actual yield, average life,
duration, expected maturity, interest rate sensitivity and cash flow
characteristics of the Term Notes.
[CTSRFMSI.WPD December 7, 1995]
<PAGE>
-3-
Item 7Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits
Item 601(a) of
Regulation S-K
Exhibit No. Exhibit No. Description
1 99 Collateral Term Sheets
[CTSRFMSI.WPD December 7, 1995]
<PAGE>
-4-
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf of the Registrant
by the undersigned thereunto duly authorized.
RESIDENTIAL FUNDING MORTGAGE
SECURITIES II, INC.
By: /s/ Diane S. Wold
Name: Diane S. Wold
Title: Vice President
Dated: January 22, 1998
[CTSRFMSI.WPD December 7, 1995]
<PAGE>
-5-
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf of the Registrant
by the undersigned thereunto duly authorized.
RESIDENTIAL FUNDING MORTGAGE
SECURITIES II, INC.
By:
Name: Diane S. Wold
Title: Vice President
Dated: January 22, 1998
EXHIBIT INDEX
[CTSRFMSI.WPD December 7, 1995]
<PAGE>
-6-
Item 601 (a) of Sequentially
Exhibit Regulation S-K Numbered
Number Exhibit No. Description Format
1 99 Collateral Term P
Sheets
[CTSRFMSI.WPD December 7, 1995]
<PAGE>
-7-
EXHIBIT 1
The information herein has been provided solely by Residential Funding
Securities Corporation ("RFSC"). Neither the issuer of the certificates nor any
of its affiliates makes any representation as to the accuracy and completeness
of this information, which supersedes all information previously provided by
RFSC contained in any collateral term sheets and/or any computational materials
relating to the mortgage pool. This information is preliminary and will be
superseded by the descriptions in the applicable prospectus supplement and by
any other information subsequently filed with the Securities and Exchange
Commission.
This report has been prepared based on information from sources believed to be
reliable, but its accuracy cannot be guaranteed. Information is unaudited.
<PAGE>
[CTSRFMSI.WPD December 7, 1995]
<PAGE>
$517,879,684
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC., Series 1998-HS1
Home Equity Loan-Backed Term Notes
RESIDENTIAL FUNDING CORPORATION
Master Servicer
This information has been prepared by Morgan Stanley & Co. Incorporated in
connection with the issuance of these securities by Residential Funding Mortgage
Securities II, Inc. based on information provided by Residential Funding
Securities II, Inc. with respect to the expected characteristics of the pool of
mortgage loans in which these securities will represent undivided beneficial
interests. This information is also based on certain assumptions made at your
request and certain other assumptions set forth herein. The actual
characteristics and performance of the mortgage loans will differ from the
assumptions used in preparing these materials, which are hypothetical in nature.
Changes in the assumptions may have a material impact on the information set
forth in these materials. No representation is made that any performance or
return indicated herein will be achieved. For example, it is very unlikely that
a mortgage will prepay at a constant rate or follow a predictable pattern. This
information has been provided to you at your request and may not be used or
otherwise disseminated in connection with the offer or sale of these or any
other securities, except in connection with the initial offer or sale of these
securities to you to the extent set forth below. NO REPRESENTATION IS MADE AS TO
THE APPROPRIATENESS, USEFULNESS, ACCURACY OR COMPLETENESS OF THESE MATERIALS OR
THE ASSUMPTIONS ON WHICH THEY ARE BASED. Additional information is available
upon request. These materials do not constitute an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any particular trading strategy. ANY SUCH OFFER TO BUY OR SELL
ANY SECURITY WOULD BE MADE PURSUANT TO A DEFINIITVE PROSPECTUS PREPARED BY THE
ISSUER WHICH WOULD CONTAIN MATERIAL INFORMATION NOT CONTAINED IN THESE
MATERIALS. SUCH PROSPECTUS WILL CONTAIN ALL MATERIAL INFORMATION IN RESPECT OF
ANY SUCH SECURITY OFFERED THEREBY AND ANY DECISION TO INVEST IN SUCH SECURITIES
SHOULD BE MADE SOLELY IN RELIANCE UPON SUCH PROSPECTUS. In the event of any such
offering, these materials shall be deemed superseded, amended and supplemented
in their entirety by such Prospectus. To Our Readers Worldwide: In addition,
please note that this information has been provided by Morgan Stanley & Co.
Incorporated and approved RFMSII by Morgan Stanley & Co. International Limited,
a member of the Securities and Futures Authority and Morgan Stanley Japan Ltd.
We recommend that investors obtain advice of their Morgan Stanley & Co.
International Limited or Morgan Stanley Japan Ltd. Representative about the
investment concerned. NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY.
MORGAN STANLEY DEAN WITTER
Mortgage Finance Group
MBS/ABS Capital Markets
January 15, 1998
$ 517,879,684
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC., Series 1998-HS1
Home Equity Loan-Backed Term Notes
RESIDENTIAL FUNDING CORPORATION
Master Servicer
Transaction Highlights
Class
Par
Amount
Expected
Ratings
(Moody's/S&P)
Average
Life(1)
Targeted
Price
Payment
Window (Months)(1)
Pricing
Index(2)
Class A-1
Notes
$ 517,879,684
Aaa/AAA
3.91 years
Par
1 to 124
1-month LIBOR
(1) Assuming that the optional call is exercised.
(2) Certificate coupon is capped at the weighted average of the maximum Loan
Rates less the Servicing Fee and the Surety Fee, as explained in more
detail below, with a maximum lifetime rate cap of 17.25%.
Master Servicer and Seller:
Residential Funding Corporation ("RFC")
Primary Servicer:
GMAC Mortgage Corporation
Trustee:
Wilmington Trust Company (as Owner Trustee) and Chase Manhattan Bank
(as Indenture Trustee).
Insurer/ Insurance Policy:
AMBAC Indemnity Corporation will cover 100% of losses of principal and
interest allocable to Class A-1 (subject to certain limitations as set
forth in the related prospectus).
Managers:
MORGAN STANLEY DEAN WITTER (Lead manager);
Residential Funding Securities Corporation (co-manager).
Expected Pricing Date:
January 16, 1998.
Expected Settlement:
January 29, 1998, through DTC, Euroclear and CEDEL.
Distribution Dates:
The 20th of each month, beginning February 20, 1998.
Class A-1 Interest Rate Cap:
The Class A-1 pays 1-month Libor plus a spread, capped at the Net Loan Rate Cap
(the weighted average coupon on the loans in a given month, less the servicing
and surety fee of 0.58%), with a maximum lifetime rate cap of 17.25% The Net
Loan Rate Cap is initially 9.19% and adjusts up to Prime + 1.77% in three
months.
Collateral Description:
The underlying HELOC loans have an initial gross coupon of 9.90% and reset
monthly at Prime + 2.48% subject to a weighted average life cap of 18.76%.
Pricing Speed:
30% CPR with a 15% Constant Draw Rate.
Day Count Basis:
Actual/360 interest accrual
Legal Final Maturity:
June, 2023
MORGAN STANLEY DEAN WITTER
Mortgage Finance Group
MBS/ABS Capital Markets
January 15, 1998
$ 517,879,684
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC., Series 1998-HS1
Home Equity Loan-Backed Term Notes
RESIDENTIAL FUNDING CORPORATION
Master Servicer
Transaction Highlights (continued)
Optional Call:
10% of the original pool balance.
Trust Tax Status:
Owner Trust. This is not a REMIC trust.
ERISA Eligibility:
The Class A-1 is expected to be ERISA eligible.
SMMEA Eligibility:
The Class A-1 is not SMMEA eligible.
Deal Summary
* Two types of securities will be issued by the Owner Trust as part of this
transaction: the Term Notes and the Variable Funding Notes. Issuer's
counsel will deliver an opinion that the Term Notes and the Variable
Funding Notes will be classified as debt of the Owner Trust. * Both types
of securities will receive interest at their current coupon rate and will
share in principal collections on a pro-rata basis. * Initially, the Term
Notes balance will exceed the outstanding Mortgage Loan balance by 1.5%,
representing an initial undercollateralization of Notes related to the
Mortgage Notes. * Both types of securities will benefit from the credit
enhancement provided by excess interest, overcollateralization, and the
AMBAC insurance policy. * The Mortgage Loans total approximately
$510,226,290 and have an average outstanding balance of $33,067. * The
Mortgage Loans have an initial WAC of 9.90% and a Weighted Average Margin
over the Prime Rate of 2.48%
* The Variable Funding Notes will initially be issued to RFC. They will
initially have $0 principal balance. During the revolving period (defined
below), the Variable Funding Notes will accrue a balance only in months
that draws on the lines exceed payments on the lines. After the revolving
period, the Variable Funding Notes will accrue a balance equal to all draws
on the credit lines.
* The transaction utilizes a Managed Amortization Plan Structure ("MAPS"). *
In a MAPS structure, new draws on the HELOCs are netted against prepayments
during an initial period (the "revolving period"). In this transaction the
revolving period is 60 months. * The pricing payment rate of 30% CPR and
pricing draw rate of 15% CPR would result in a net pricing CPR of 15%
during the revolving period. * After the revolving period of 60 months, or
earlier should a rapid amortization event occur, Holders will receive their
pro-rata allocation of principal collections (without netting the draw
amount) received during the related collection period. This "rapid
amortization" period has the effect of accelerating the principal payout to
the Holders.
* Credit Enhancement for the transaction is provided by the following: *
Excess Interest on the HELOCs * Overcollateralization (greater HELOC
collateral balance than Note balance) that is created by using Excess
Interest to pay down principal on the Notes. * A 100% guarantee of
principal and interest allocable to the Term Notes and the Variable Funding
Notes provided by AMBAC Indemnity Corporation (subject to certain
limitations set forth in the related prospectus).
Credit Structure
Application of Collections: Collections of principal and interest generated by
the pool will be applied monthly as described below.
I. Monthly Interest Collections:
Collections of interest will be applied in the following priority:
1) Servicing fee payment (0.58% annual fee) plus any accrued and unpaid
servicing fee; 2) Any accrued or overdue accrued interest due on the
Notes; 3) Any Liquidation Loss Amount allocable to the Notes; 4) Any
Liquidation Loss Amount allocable to the Notes from a previous period
and not yet paid; 5) The insurance policy premium; 6) Reimbursement of
AMBAC for prior draws on the insurance policy; 7) Payment of principal
on the Notes to increase the overcollateralization amount up to the
O/C target; 8) Payment of any related Carryover Amount from a prior
period paid to the Noteholders; 9) Payment to Certificate holders.
Interest collections allocated pursuant to items 3, 4, 6, and 7 constitute
"Excess Interest" (expected to be approximately 4.00% - 4.50% as of the Cut-Off
Date) which is utilized to cover losses on interest and principal payments on
the loans.
II. Monthly Principal Collections:
Collections of principal will be passed through to the Notes in the following
priority:
1) During the 60 month revolving period, an amount equal to the
difference between the monthly principal collected and any additional
draws on the borrowers' credit lines; 2) On the distribution date in
February 2003 (or earlier should a rapid amortization event occur),
Holders will receive their pro-rata percentage of all principal
collections received during the related collection period.
III. Rapid Amortization Events: 1) The failure of the Seller (Residential
Funding Corporation) to make any required payments or deposits,
deliver files, or to observe or perform any covenants or agreements as
required after a specified grace period; 2) If any representation or
warranty made by the Seller is incorrect in a material way and
adversely affects the interest of Holders or AMBAC and such breach is
not cured in a specified term; 3) Bankruptcy, insolvency or
receivership of the Seller or the Trust; 4) The Trust becomes subject
to regulation as an investment company; 5) If a Servicing Termination
Event relating to the Master Servicer occurs; 6) If the aggregate
principal of all draws under the certificate insurer policy exceeds 1%
of the original pool balance; 7) The Trust is determined to be an
association taxable as a corporation for federal income tax purposes.
Collateral Description
Home Equity Loan Type: Home equity lines of credit ("HELOCs"). Borrowers
generally obtain advances of principal (up to the respective Credit
Limits) and repay such principal during the term of the loan. All
information below is approximate and based on data as of January 1,
1998.
Aggregate Pool Balance:
$ 510,226,290
Number of Loans:
15,430
Average Outstanding Balance:
$33,067 (range: $0 to $497,966)
Average Credit Line:
$42,358 (highest: $550,000)
Lien Position:
1.97% first lien and 98.03% second lien
Combined Loan to Value Ratio:
84.49% weighted average (26.33% have a CLTV less than or equal to 80%)
Loan Utilization Rate:
78.07% weighted average (highest: 101.50%)
Junior Mortgage Ratio:
21.98% weighted average
Property Type:
93.64% single family and de-minimus PUD; 3.74% condominium; 1.27% PUD; 1.35%
other
Owner Occupancy:
99.74% owner-occupied; 0.25% second home; 0.01% investment
Weighted Average Coupon:
9.904% (range from 5.99 % - 17.25%)
Index:
100 % of the loans are indexed off of Prime
Gross Margin:
The weighted average gross margin is 2.48% at the cut-off date
GrossLife Cap: 86.11% of the loans have a lifetime cap of 18.00%; the
weighted average life cap of the remaining loans is 23.49%
Reset Frequency:
The loans reset on a monthly basis to Prime + their respective margins
Origination Dates:
All loans were originated between August, 1988 and December, 1997
Interest Rate:
Monthly adjustable rate indexed to the Prime Rate
Weighted Average Maturity:
226 months (range from 80 - 300)
Latest Scheduled Maturity:
December, 2022
Geographic Distribution: CA (56.75%), FL (4.34%), CO (3.93%), UT (3.56%),
MI (3.25%), WA (3.13%), with the remaining states under 3.0%
Principal Draws: Borrowers may draw down additional principal on the loans
up to a specified credit limit up to either five or fifteen years after
origination ("the draw period")
Principal Repayment: Repayment is required within ten years of the end of
the draw period. 20.29% of the loans are interest only loans requiring balloon
payments at maturity
Prepayment Speed:
30 % CPR is the pricing prepayment speed
Principal Draw Rate:
15 % is the principal draw rate assumption for pricing
1
The information herein has been provided solely by Morgan Stanley & Co.
Incorporated based on information with respect to the mortgage loans provided by
the sponsor. Neither the sponsor nor any of its affiliates makes any
representations as to the accuracy or completeness of the information herein.
The information herein is preliminary and will be superseded by the Prospectus
Supplement and by any other information subsequently filed with the Securities
and Exchange Commission (SEC). All assumptions and information in this report
reflect Morgan Stanley & Co. Incorporated's judgement as of this date and are
subject to change. All analyses are based on certain assumptions noted herein
and different assumptions could yield substantially different results. You are
cautioned that there is no universally accepted method for analyzing financial
instruments. You should review the assumptions: there may be differences between
these assumptions and your actual business practices. Further, Morgan Stanley &
Co. Incorporated does not guarantee any results and there is no guarantee as to
the liquidity of the instruments involved in this analysis. The decision to
adopt any strategy remains your responsibility. Morgan Stanley & Co.
Incorporated or any of its affiliates or their officers, directors, analysts, or
employees may have positions in securities, commodities or derivative
instruments therein referred to here, and may, as principal, or agent, buy or
sell such securities, commodities, or derivative instruments. In addition,
Morgan Stanley & Co. Incorporated may make a market in the securities referred
to herein. Neither the information nor the assumptions reflected herein shall be
construed to be, or constitute, an offer to sell or buy a solicitation of an
offer to sell or buy any securities, commodities or derivative instruments
mentioned herein. No sale of any securities, commodities or derivative
instruments should be consummated without the purchaser first having received a
Prospectus and, if required, Prospectus Supplement. Finally, Morgan Stanley &
Co. Incorporated has not addressed the legal, accounting, and tax implications
of the analysis with respect to you, and Morgan Stanley & Co. Incorporated
strongly urges you to seek advice from your counsel, accountant and tax advisor.
To Our Readers Worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated and approved by Morgan Stanley
& Co. International Limited, a member of The Securities and Futures Authority
Limited and Morgan Stanley Japan, Ltd. We recommend that investors obtain the
advice of their Morgan Stanley & Co. International Limited or Morgan Stanley
Japan Ltd. representative about the investments concerned. NOT FOR DISTRIBUTION
TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K. SECURITIES AND FUTURES AUTHORITY.
$517,879,000
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC., Series 1998-HS1
Home Equity Loan-Backed Term Notes
RESIDENTIAL FUNDING CORPORATION
Master Servicer
This information has been prepared by Morgan Stanley & Co. Incorporated in
connection with the issuance of these securities by Residential Funding Mortgage
Securities II, Inc. based on information provided by Residential Funding
Securities II, Inc. with respect to the expected characteristics of the pool of
mortgage loans in which these securities will represent undivided beneficial
interests. This information is also based on certain assumptions made at your
request and certain other assumptions set forth herein. The actual
characteristics and performance of the mortgage loans will differ from the
assumptions used in preparing these materials, which are hypothetical in nature.
Changes in the assumptions may have a material impact on the information set
forth in these materials. No representation is made that any performance or
return indicated herein will be achieved. For example, it is very unlikely that
a mortgage will prepay at a constant rate or follow a predictable pattern. This
information has been provided to you at your request and may not be used or
otherwise disseminated in connection with the offer or sale of these or any
other securities, except in connection with the initial offer or sale of these
securities to you to the extent set forth below. NO REPRESENTATION IS MADE AS TO
THE APPROPRIATENESS, USEFULNESS, ACCURACY OR COMPLETENESS OF THESE MATERIALS OR
THE ASSUMPTIONS ON WHICH THEY ARE BASED. Additional information is available
upon request. These materials do not constitute an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any particular trading strategy. ANY SUCH OFFER TO BUY OR SELL
ANY SECURITY WOULD BE MADE PURSUANT TO A DEFINIITVE PROSPECTUS PREPARED BY THE
ISSUER WHICH WOULD CONTAIN MATERIAL INFORMATION NOT CONTAINED IN THESE
MATERIALS. SUCH PROSPECTUS WILL CONTAIN ALL MATERIAL INFORMATION IN RESPECT OF
ANY SUCH SECURITY OFFERED THEREBY AND ANY DECISION TO INVEST IN SUCH SECURITIES
SHOULD BE MADE SOLELY IN RELIANCE UPON SUCH PROSPECTUS. In the event of any such
offering, these materials shall be deemed superseded, amended and supplemented
in their entirety by such Prospectus. To Our Readers Worldwide: In addition,
please note that this information has been provided by Morgan Stanley & Co.
Incorporated and approved RFMSII by Morgan Stanley & Co. International Limited,
a member of the Securities and Futures Authority and Morgan Stanley Japan Ltd.
We recommend that investors obtain advice of their Morgan Stanley & Co.
International Limited or Morgan Stanley Japan Ltd. Representative about the
investment concerned. NOT FOR DISTRIBUTION TO PRIVATE CUSTOMERS AS DEFINED BY
THE U.K. SECURITIES AND FUTURES AUTHORITY.
MORGAN STANLEY DEAN WITTER
Mortgage Finance Group
MBS/ABS Capital Markets
January 15, 1998
$ 517,879,000
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC., Series 1998-HS1
Home Equity Loan-Backed Term Notes
RESIDENTIAL FUNDING CORPORATION
Master Servicer
Transaction Highlights
Class
Par
Amount
Expected
Ratings
(Moody's/S&P)
Average
Life(1)
Targeted
Price
Payment
Window (Months)(1)
Pricing
Index(2)
Class A-1
Notes
$ 517,879,000
Aaa/AAA
3.91 years
Par
1 to 124
1-month LIBOR
(1) Assuming that the optional call is exercised. (2) Certificate coupon
is capped at the weighted average of the maximum Loan Rates less the
Servicing Fee and the Surety Fee, as explained in more detail below,
with a maximum lifetime rate cap of 17.25%.
Master Servicer and Seller:
Residential Funding Corporation ("RFC")
Primary Servicer: GMAC Mortgage Corporation Trustee: Wilmington Trust
Company (as Owner Trustee) and Chase Manhattan Bank (as Indenture Trustee).
Insurer/ Insurance Policy: AMBAC Indemnity Corporation will cover 100% of
losses of principal and interest allocable to Class A-1 (subject to certain
limitations as set forth in the related prospectus).
Managers:
MORGAN STANLEY DEAN WITTER (Lead manager);
Residential Funding Securities Corporation (co-manager).
Expected Pricing Date:
January 16, 1998.
Expected Settlement:
January 29, 1998, through DTC, Euroclear and CEDEL.
Distribution Dates:
The 20th of each month, beginning February 20, 1998.
Class A-1 Interest Rate Cap: The Class A-1 pays 1-month Libor plus a
spread, capped at the Net Loan Rate Cap (the weighted average coupon on the
loans in a given month, less the servicing and surety fee of 0.58%), with a
maximum lifetime rate cap of 17.25% The Net Loan Rate Cap is initially 9.19% and
adjusts up to Prime + 1.77% in three months.
Collateral Description: The underlying HELOC loans have an initial gross
coupon of 9.90% and reset monthly at Prime + 2.48% subject to a weighted average
life cap of 18.76%.
Pricing Speed:
30% CPR with a 15% Constant Draw Rate.
Day Count Basis:
Actual/360 interest accrual
Legal Final Maturity:
June, 2023
MORGAN STANLEY DEAN WITTER
Mortgage Finance Group
MBS/ABS Capital Markets
January 15, 1998
$ 517,879,000
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC., Series 1998-HS1
Home Equity Loan-Backed Term Notes
RESIDENTIAL FUNDING CORPORATION
Master Servicer
Transaction Highlights (continued)
Optional Call:
10% of the original pool balance.
Trust Tax Status:
Owner Trust. This is not a REMIC trust.
ERISA Eligibility:
The Class A-1 is expected to be ERISA eligible.
SMMEA Eligibility:
The Class A-1 is not SMMEA eligible.
Deal Summary
* Two types of securities will be issued by the Owner Trust as part of
this transaction: the Term Notes and the Variable Funding Notes.
Issuer's counsel will deliver an opinion that the Term Notes and the
Variable Funding Notes will be classified as debt of the Owner Trust.
* Both types of securities will receive interest at their current
coupon rate and will share in principal collections on a pro-rata
basis. * Initially, the Term Notes balance will exceed the outstanding
Mortgage Loan balance by 1.5%, representing an initial
undercollateralization of Notes related to the Mortgage Notes. * Both
types of securities will benefit from the credit enhancement provided
by excess interest, overcollateralization, and the AMBAC insurance
policy. * The Mortgage Loans total approximately $510,226,290 and have
an average outstanding balance of $33,067. * The Mortgage Loans have
an initial WAC of 9.90% and a Weighted Average Margin over the Prime
Rate of 2.48%
* The Variable Funding Notes will initially be issued to RFC. They will
initially have $0 principal balance. During the revolving period
(defined below), the Variable Funding Notes will accrue a balance only
in months that draws on the lines exceed payments on the lines. After
the revolving period, the Variable Funding Notes will accrue a balance
equal to all draws on the credit lines.
* The transaction utilizes a Managed Amortization Plan Structure
("MAPS"). * In a MAPS structure, new draws on the HELOCs are netted
against prepayments during an initial period (the "revolving period").
In this transaction the revolving period is 60 months. * The pricing
payment rate of 30% CPR and pricing draw rate of 15% CPR would result
in a net pricing CPR of 15% during the revolving period. * After the
revolving period of 60 months, or earlier should a rapid amortization
event occur, Holders will receive their pro-rata allocation of
principal collections (without netting the draw amount) received
during the related collection period. This "rapid amortization" period
has the effect of accelerating the principal payout to the Holders.
* Credit Enhancement for the transaction is provided by the following: *
Excess Interest on the HELOCs * Overcollateralization (greater HELOC
collateral balance than Note balance) that is created by using Excess
Interest to pay down principal on the Notes. * A 100% guarantee of
principal and interest allocable to the Term Notes and the Variable
Funding Notes provided by AMBAC Indemnity Corporation (subject to
certain limitations set forth in the related prospectus).
Credit Structure
Application of Collections: Collections of principal and interest generated
by the pool will be applied monthly as described below.
I. Monthly Interest Collections:
Collections of interest will be applied in the following priority:
1) Servicing fee payment (0.58% annual fee) plus any accrued and unpaid
servicing fee; 2) Payment on any accrued interest due on the Notes; 3)
Payment of principal on any Liquidation Loss Amount allocable to the
Notes; 4) Payment of principal on any Liquidation Loss Amount
allocable to the Notes from a previous period and not yet paid; 5) The
insurance policy premium; 6) Reimbursement of AMBAC for prior draws on
the insurance policy; 7) Payment of principal on the Notes to increase
the overcollateralization amount up to the O/C target; 8) Payment of
Term Notes and Variable Funding Notes prorata, based on security
balance any interest shortfall previously unpaid together with
interest thereon; 9) Payment to Certificate holders.
Interest collections allocated pursuant to items 3, 4, 6, and 7 constitute
"Excess Interest" (expected to be approximately 4.00% - 4.50% as of the Cut-Off
Date) which is utilized to cover losses on interest and principal payments on
the loans.
II. Monthly Principal Collections: Collections of principal will be passed
through to the Notes in the following priority:
1) During the 60 month revolving period, an amount equal to the
difference between the monthly principal collected and any additional
draws on the borrowers' credit lines; 2) On the distribution date in
February 2003 (or earlier should a rapid amortization event occur),
Holders will receive their pro-rata percentage of all principal
collections received during the related collection period.
III. Rapid Amortization Events: 1) The failure of the Seller (Residential
Funding Corporation) to make any required payments or deposits,
deliver files, or to observe or perform any covenants or agreements as
required after a specified grace period; 2) If any representation or
warranty made by the Seller is incorrect in a material way and
adversely affects the interest of Holders or AMBAC and such breach is
not cured in a specified term; 3) Bankruptcy, insolvency or
receivership of the Seller or the Trust; 4) The Trust becomes subject
to regulation as an investment company; 5) If a Servicing Termination
Event relating to the Master Servicer occurs; 6) If the aggregate
principal of all draws under the certificate insurer policy exceeds 1%
of the original pool balance; 7) The Trust is determined to be an
association taxable as a corporation for federal income tax purposes.
Collateral Description
Home Equity Loan Type: Home equity lines of credit ("HELOCs"). Borrowers
generally obtain advances of principal (up to the respective Credit
Limits) and repay such principal during the term of the loan. All
information below is approximate and based on data as of January 1,
1998.
Aggregate Pool Balance:
$ 510,226,290
Number of Loans:
15,430
Average Outstanding Balance:
$33,067 (range: $0 to $497,966)
Average Credit Line:
$42,358 (highest: $550,000)
Lien Position:
1.97% first lien and 98.03% second lien
Combined Loan to Value Ratio:
84.49% weighted average (26.33% have a CLTV less than or equal to 80%)
Loan Utilization Rate:
78.07% weighted average (highest: 101.50%)
Junior Mortgage Ratio:
21.98% weighted average
Property Type: 93.64% single family and de-minimus PUD; 3.74% condominium;
1.27% PUD; 1.35% other
Owner Occupancy:
99.74% owner-occupied; 0.25% second home; 0.01% investment
Weighted Average Coupon:
9.904% (range from 5.99 % - 17.25%)
Index:
100 % of the loans are indexed off of Prime
Gross Margin:
The weighted average gross margin is 2.48% at the cut-off date
Gross Life Cap: 86.11% of the loans have a lifetime cap of 18.00%; the
weighted average life cap of the remaining loans is 23.49%
Reset Frequency:
The loans reset on a monthly basis to Prime + their respective margins
Origination Dates:
All loans were originated between August, 1988 and December, 1997
Interest Rate:
Monthly adjustable rate indexed to the Prime Rate
Weighted Average Maturity:
226 months (range from 80 - 300)
Latest Scheduled Maturity:
December, 2022
Geographic Distribution: CA (56.75%), FL (4.34%), CO (3.93%), UT (3.56%),
MI (3.25%), WA (3.13%), with the remaining states under 3.0%
Principal Draws: Borrowers may draw down additional principal on the loans
up to a specified credit limit up to either five or fifteen years after
origination ("the draw period")
Principal Repayment: Repayment is required within ten years of the end of
the draw period. 20.29% of the loans are interest only loans requiring balloon
payments at maturity
Prepayment Speed:
30 % CPR is the pricing prepayment speed
Principal Draw Rate:
15 % is the principal draw rate assumption for pricing
5 The information herein has been provided solely by Morgan Stanley & Co.
Incorporated based on information with respect to the mortgage loans provided by
the sponsor. Neither the sponsor nor any of its affiliates makes any
representations as to the accuracy or completeness of the information herein.
The information herein is preliminary and will be superseded by the Prospectus
Supplement and by any other information subsequently filed with the Securities
and Exchange Commission (SEC). All assumptions and information in this report
reflect Morgan Stanley & Co. Incorporated's judgement as of this date and are
subject to change. All analyses are based on certain assumptions noted herein
and different assumptions could yield substantially different results. You are
cautioned that there is no universally accepted method for analyzing financial
instruments. You should review the assumptions: there may be differences between
these assumptions and your actual business practices. Further, Morgan Stanley &
Co. Incorporated does not guarantee any results and there is no guarantee as to
the liquidity of the instruments involved in this analysis. The decision to
adopt any strategy remains your responsibility. Morgan Stanley & Co.
Incorporated or any of its affiliates or their officers, directors, analysts, or
employees may have positions in securities, commodities or derivative
instruments therein referred to here, and may, as principal, or agent, buy or
sell such securities, commodities, or derivative instruments. In addition,
Morgan Stanley & Co. Incorporated may make a market in the securities referred
to herein. Neither the information nor the assumptions reflected herein shall be
construed to be, or constitute, an offer to sell or buy a solicitation of an
offer to sell or buy any securities, commodities or derivative instruments
mentioned herein. No sale of any securities, commodities or derivative
instruments should be consummated without the purchaser first having received a
Prospectus and, if required, Prospectus Supplement. Finally, Morgan Stanley &
Co. Incorporated has not addressed the legal, accounting, and tax implications
of the analysis with respect to you, and Morgan Stanley & Co. Incorporated
strongly urges you to seek advice from your counsel, accountant and tax advisor.
To Our Readers Worldwide: In addition, please note that this publication has
been issued by Morgan Stanley & Co. Incorporated and approved by Morgan Stanley
& Co. International Limited, a member of The Securities and Futures Authority
Limited and Morgan Stanley Japan, Ltd. We recommend that investors obtain the
advice of their Morgan Stanley & Co. International Limited or Morgan Stanley
Japan Ltd. representative about the investments concerned. NOT FOR DISTRIBUTION
TO PRIVATE CUSTOMERS AS DEFINED BY THE U.K. SECURITIES AND FUTURES AUTHORITY.
