<PAGE>
PROSPECTUS SUPPLEMENT DATED DECEMBER 14, 2000
(TO PROSPECTUS DATED JUNE 21, 2000)
$575,000,000
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC.
DEPOSITOR
HOME LOAN TRUST 2000-HI5
ISSUER
RESIDENTIAL FUNDING CORPORATION
MASTER SERVICER
HOME LOAN-BACKED NOTES SERIES 2000-HI5
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<S> <C>
OFFERED NOTES The trust will issue eight classes of notes backed by two pools of closed-end,
primarily second lien fixed rate home loans with high combined loan-to-value ratios.
CREDIT ENHANCEMENT Credit enhancement for the notes consists of:
o excess interest and overcollateralization; and
o a guaranty insurance policy issued by Ambac Assurance Corporation.
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[Ambac logo]
Bear, Stearns & Co. Inc., Salomon Smith Barney Inc. and Residential Funding
Securities Corporation will offer the notes to the public at varying prices to
be determined at the time of sale. The proceeds to the depositor from the sale
of the underwritten notes will be approximately 99.69% of the principal amount
of the notes, plus accrued interest on the notes before deducting expenses.
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YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-8 IN THIS
PROSPECTUS SUPPLEMENT.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED NOTES OR DETERMINED THAT
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY
RESIDENTIAL FUNDING SECURITIES CORPORATION
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes in two separate documents that
provide progressively more detail:
o the prospectus, which provides general information, some of which may not
apply to your series of notes; and
o this prospectus supplement, which describes the specific terms of your
series of notes.
If the description of your notes in this prospectus supplement differs from the
related description in the accompanying prospectus, you should rely on the
information in this prospectus supplement.
The depositor's principal offices are located at 8400 Normandale Lake Boulevard,
Suite 600, Minneapolis, Minnesota 55437 and its phone number is (952) 832-7000.
TABLE OF CONTENTS
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PAGE
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<S> <C>
Summary.........................................................................................................S-3
Risk Factors....................................................................................................S-8
Introduction...................................................................................................S-13
Description of the Home Loan Pool..............................................................................S-13
General ...................................................................................................S-13
Payments on the Simple
Interest Home Loans.......................................................................................S-14
Balloon Home Loans..........................................................................................S-15
Home Loan Pool Characteristics..............................................................................S-15
High Cost Loans.............................................................................................S-31
Underwriting Standards......................................................................................S-31
Representations and Warranties..............................................................................S-32
Additional Information .....................................................................................S-32
The Issuer.....................................................................................................S-33
The Owner Trustee .............................................................................................S-33
The Indenture Trustee..........................................................................................S-33
The Credit Enhancer............................................................................................S-33
Description of the Securities..................................................................................S-35
General ...................................................................................................S-35
Book-Entry Notes............................................................................................S-35
Glossary of Terms...........................................................................................S-37
Payments ...................................................................................................S-40
Interest Payments on the Notes..............................................................................S-40
Principal Payments on the Notes.............................................................................S-41
Allocation of Payments on the
Home Loans................................................................................................S-41
The Paying Agent............................................................................................S-42
Maturity and Optional Redemption ...........................................................................S-42
Description of the Policy .....................................................................................S-43
Certain Yield and Prepayment
Considerations ...........................................................................................S-43
Description of the Home Loan Purchase
Agreement.................................................................................................S-52
PAGE
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<S> <C>
Purchase of Home Loans.........................................................................................S-52
Representations and Warranties .............................................................................S-52
Description of the Servicing Agreement ........................................................................S-53
The Master Servicer.........................................................................................S-54
The Initial Subservicer.....................................................................................S-54
Delinquency and Loss Experience of the
Master Servicer's Portfolio...........................................................................S-54
Servicing and Other Compensation and
Payment of Expenses...................................................................................S-55
Principal and Interest Collections..........................................................................S-56
Release of Lien; Refinancing of
Senior Lien...............................................................................................S-56
Collection and Liquidation Practices;
Loss Mitigation...........................................................................................S-56
Optional Repurchase of Defaulted
Home Loans................................................................................................S-57
Description of the Trust Agreement and
Indenture.................................................................................................S-57
The Trust Fund .............................................................................................S-57
Reports To Holders .........................................................................................S-57
Certain Covenants ..........................................................................................S-58
Modification of Indenture ..................................................................................S-59
Certain Matters Regarding the
Indenture Trustee and the Issuer..........................................................................S-59
Material Federal Income Tax
Consequences..............................................................................................S-60
ERISA Considerations ..........................................................................................S-60
Legal Investment ..............................................................................................S-61
Method of Distribution ........................................................................................S-61
Experts........................................................................................................S-62
Legal Matters..................................................................................................S-63
Ratings........................................................................................................S-63
ANNEX I.........................................................................................................I-1
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S-2
<PAGE>
SUMMARY
The following summary is a very general overview of the offered notes
and does not contain all of the information that you should consider in making
your investment decision. To understand the terms of the notes, you should read
carefully this entire document and the accompanying prospectus.
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<S> <C>
Issuer or Trust.............................Home Loan Trust 2000-HI5.
Title of the offered securities.............Home Loan-Backed Notes, Series 2000-HI5.
Depositor...................................Residential Funding Mortgage Securities II, Inc., an
affiliate of Residential Funding Corporation.
Master servicer and Seller..................Residential Funding Corporation.
Owner trustee...............................Wilmington Trust Company.
Indenture trustee...........................The Chase Manhattan Bank.
Credit enhancer.............................Ambac Assurance Corporation.
Home loan pool..............................15,022 fixed rate home loans with an aggregate
principal balance of approximately $575,000,104
as of the close of business on the day prior
to the cut-off date, secured primarily by
second liens on one- to four-family
residential properties.
Cut-off date................................December 1, 2000.
Closing date................................On or about December 21, 2000.
Payment dates...............................Beginning in January 2001 on the 25th of each month or, if
the 25th is not a business day, the next business day.
Form of notes...............................Book-entry.
See "Description of the Securities--Book-Entry Notes" in
this prospectus supplement.
Minimum denominations.......................$25,000
Legal investment............................The notes will not be "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement
Act of 1984.
See "Legal Investment" in this prospectus supplement and
"Legal Investment Matters" in the prospectus.
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S-3
<PAGE>
NOTES
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INITIAL
INITIAL RATING
NOTE NOTE (MOODY'S/ FINAL SCHEDULED
CLASS RATE BALANCE S&P) PAYMENT DATE DESIGNATIONS
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<S> <C> <C> <C> <C> <C>
A-I-1 7.020% $ 116,305,000 Aaa/AAA May 25, 2009 Senior/Fixed
Rate/Sequential
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A-I-2 6.755% $ 56,395,000 Aaa/AAA August 25, 2011 Senior/Fixed
Rate/Sequential
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A-I-3 6.845% $ 81,213,000 Aaa/AAA January 25, 2014 Senior/Fixed
Rate /Sequential
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A-I-4 6.940% $ 37,298,000 Aaa/AAA December 25, 2014 Senior/Fixed
Rate/Sequential
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A-I-5 7.045% $ 58,603,000 Aaa/AAA December 25, 2016 Senior/Fixed
Rate/Sequential
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A-I-6 7.240% $ 70,385,000 Aaa/AAA April 25, 2020 Senior/Fixed
Rate/Sequential
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A-I-7 7.475% $ 129,801,000 Aaa/AAA December 25, 2025 Senior/Fixed
Rate/Sequential
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Total Class A-I Notes: $ 550,000,000
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Senior/Fixed
A-II 7.210% $ 25,000,000 Aaa/AAA December 25, 2025 Rate/Pass-Through
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Total Class A-II Notes: $ 25,000,000
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Total Class A Notes: $ 575,000,000
====================================================================================================================
Total Notes $ 575,000,000
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OTHER INFORMATION:
CLASS A-I-7 NOTES AND CLASS A-II NOTES:
The note rate on the Class A-I-7 Notes and Class A-II Notes will increase by
0.50% per annum on the first payment date after the first possible optional
termination date.
S-4
<PAGE>
THE TRUST
The depositor will establish Home Loan Trust 2000-HI5, a Delaware business
trust, to issue the Home Loan Backed Notes, Series 2000- HI5. The assets of the
trust will consist of the home loans and related assets.
THE HOME LOAN POOL
The home loans to be deposited in the trust consist of two groups, group I and
group II, of which 99.95% and 100.00%, respectively, are secured by second
mortgages or deeds of trust. The remainder of the home loans are secured by
first mortgages or deeds of trust.
The group I loans have the following aggregate characteristics as of the cut-off
date:
---------------------------------------------------------
WEIGHTED
RANGE AVERAGE
------------------ ----------
Principal balance $1,441 to $100,000 $37,707
Loan rate 8.250% to 18.750% 13.9591%
Original term to maturity
(months) 60 to 300 235
Remaining term to stated
maturity (months) 53 to 300 233
Combined loan-to-value 13% to 126% 116.19%
ratio
---------------------------------------------------------
Principal balance is an average.
The group II loans have the following aggregate characteristics as of the
cut-off date:
-----------------------------------------------------------
WEIGHTED
RANGE AVERAGE
-------------------- ----------
Principal balance $14,332 to $100,000 $57,340
Loan rate 9.125% to 17.625% 13.4789%
Original term to
maturity (months) 120 to 300 251
Remaining term to
stated maturity (months) 96 to 300 249
Combined loan-to-
value ratio 77% to 125% 113.66%
-----------------------------------------------------------
Principal balance is an average.
See "Description of the Home Loan Pool" in this prospectus supplement.
THE CERTIFICATES
The trust will also issue Home Loan-Backed Certificates, Series 2000-HI5, which
are not offered by this prospectus supplement.
PAYMENTS ON THE NOTES
Amount available for monthly distribution. On each monthly payment date, the
indenture trustee will make distributions to investors. The amounts available
for distribution will include:
o collections of monthly payments of principal and interest on the home
loans, including prepayments and other unscheduled collections,
plus
o amounts from any draws on the policy and any payments under the limited
reimbursement agreement, minus
o fees and expenses of the trust.
See "Description of the Servicing Agreement--Principal and Interest Collections"
in this prospectus supplement.
Payments. Payments to noteholders will be made from amounts available for
distribution as follows:
o Distribution of interest to the notes
o Distribution of principal to the notes
o Distribution of principal to the notes to cover specified losses
S-5
<PAGE>
o Payment to the credit enhancer of its premium for the policy and any
payments in connection with the limited reimbursement agreement
o Reimbursement to the credit enhancer for specified prior draws made on
the policy
o Other than on the first payment date, distribution of additional
principal to the notes if the level of overcollateralization is below
what is required
o Payment to the credit enhancer for any other amounts owed
o Distribution of any remaining funds to the certificates
Each of the Class A-I Notes and Class A-II Notes represents rights to receive
principal primarily from its respective loan group. Principal payments on the
notes will be as described under "Description of the Securities--Principal
Payments on the Notes" in this prospectus supplement.
In addition, payments on the notes will be made on each payment date from draws
on the guaranty insurance policy, if necessary. Draws will cover shortfalls in
amounts available to pay interest on the notes at the applicable note rate, any
losses allocated to the notes and amounts due on the notes on the payment date
in December, 2025.
CREDIT ENHANCEMENT
The credit enhancement for the benefit of the notes consists of:
EXCESS INTEREST. Because the mortgagors are expected to pay more interest on the
home loans than is necessary to pay the interest on the notes, along with fees
and expenses of the trust each month, there may be excess interest. This excess
interest may be used to protect the notes against most types of losses by making
an additional payment of principal up to the amount of the losses.
OVERCOLLATERALIZATION. Excess interest that is not needed to cover losses in the
current period will be used to make additional principal payments on the notes,
except on the first payment date, until the aggregate principal balance of the
home loans exceeds the aggregate principal amount of notes by a specified
amount, as described in this prospectus supplement. This excess will represent
overcollateralization, which may absorb some losses on the home loans, if they
are not covered by excess interest. If the level of overcollateralization falls
below what is required, the excess interest described above will be paid to the
notes as additional principal in order to maintain the required level of
overcollateralization.
POLICY. On the closing date, the credit enhancer will issue the guaranty
insurance policy in favor of the indenture trustee. The policy will
unconditionally and irrevocably guarantee interest on the notes at the
applicable note rate, will cover all losses allocated to the notes not covered
by excess interest or overcollateralization and will guarantee amounts due on
the notes on the payment date in December, 2025. Some payments that are covered
by the policy may be paid directly to the indenture trustee from a limited
reimbursement agreement in favor of the credit enhancer, instead of by a draw
under the policy.
S-6
<PAGE>
OPTIONAL TERMINATION
On any payment date on which the aggregate principal balance of the home loans,
after applying payments received in the related collection period, is less than
10% of the aggregate principal balance of the home loans as of the cut-off date,
the master servicer will have the option to purchase some or all of the
remaining home loans.
Under an optional purchase of the home loans, a dollar amount of the notes equal
to the amount of home loans purchased will be paid in full with accrued
interest.
RATINGS
When issued, the notes will receive ratings not lower than those listed on page
S-4 of this prospectus supplement. A security rating is not a recommendation to
buy, sell or hold a security and the assigning rating agency may change or
withdraw the rating at any time. The ratings also do not address the rate of
principal prepayments on the home loans. The rate of prepayments, if different
than originally anticipated, could adversely affect the yield realized by
holders of the notes.
LEGAL INVESTMENT
The notes will not be "mortgage related securities" for purposes of SMMEA. You
should consult your legal advisors in determining whether and to what extent the
notes constitute legal investments for you.
ERISA CONSIDERATIONS
The notes may be eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts. ERISA plans should consult with
their legal advisors before investing in the notes.
See "ERISA Considerations" in this prospectus supplement and the prospectus.
TAX STATUS
For federal income tax purposes, the notes will be treated as indebtedness. The
trust will not be subject to tax.
See "Material Federal Income Tax Consequences" in this prospectus supplement and
the prospectus.
S-7
<PAGE>
RISK FACTORS
The notes are not suitable investments for all investors. In
particular, you should not purchase the notes unless you understand the
prepayment, credit, liquidity and market risks associated with the notes.
The notes are complex securities. You should possess, either alone or
together with an investment advisor, the expertise necessary to evaluate the
information contained in this prospectus supplement and the accompanying
prospectus in the context of your financial situation and tolerance for risk.
You should carefully consider, among other things, the following
factors in connection with the purchase of the notes:
RISKS ASSOCIATED WITH THE HOME LOANS
The return on your Approximately 99.95% of the group I loans and all of the
notes may be reduced group II loans are secured by second liens, rather than
by losses on the home first liens. In the case of second liens, proceeds from
loans, which are more liquidation of the mortgaged property will be available
likely because they to satisfy the home loans only if the claims of any
are primarily secured mortgages have been satisfied in full. When it is
by second liens. uneconomical to senior foreclose on a mortgaged property
or engage in other loss mitigation procedures, the
master servicer may write off the entire outstanding
balance of the home loan as a bad debt. These are
risks particularly applicable to home loans secured by
second liens that have high combined loan-to-value
ratios or have small balances relative to the total
indebtedness of the borrower because it is more likely
that the master servicer would determine foreclosure to
be uneconomical for those types of home loans than for
first lien mortgage loans with low loan-to-value ratios.
As of the cut-off date, the weighted average combined
loan-to-value ratio of the group I loans and group II
loans is 116.19% and 113.66%, respectively, and
approximately 93.56% and 92.35% of the group I loans and
group II loans, respectively, will have combined
loan-to-value ratios in excess of 100.00%.
Delays in payment on The master servicer is not obligated to advance
because the master scheduled your notes may result monthly payments of
servicer is not principal and interest on home loans that are delinquent
required to advance. or in default. As a result, noteholders will not
receive a regular stream of payments from home loans
that become delinquent or go into default. The rate of
delinquency and default of second mortgage loans may be
greater than that of mortgage loans secured by first
liens on comparable properties.
S-8
<PAGE>
The return on your Mortgage loans similar to those included in the home
notes may be reduced loan pool have been originated for a limited period of
in an economic time. During this time, economic conditions nationally
downturn. and in most regions of the country have been generally
favorable. However, a deterioration in economic
conditions could adversely affect the ability and
willingness of mortgagors to repay their loans. No
prediction can be made as to the effect of an economic
downturn on the rate of delinquencies and losses on the
home loans.
Origination disclosure 57.3% and 30.0% of the group I loans and group II loans
practices for the home respectively, are subject to special rule-s, disclosure
loans could create requirements and other regulatory provisions because
liabilities that may they are high cost loans. Purchasers or assignees of
affect your notes. these high cost loans, including the trust, could be
exposed to all claims and defenses that the mortgagors
could assert against the originators of the home loans
Remedies available to a mortgagor include monetary
penalties, as well as rescission rights if the
appropriate disclosures were not given as required or if
other violations occurred. See "Description of the Home
Loan Pool--High Cost Loans" in this prospectus
supplement and "Certain Legal Aspects of the Trust
Assets and Related Matters" in the prospectus.
The underwriting The underwriting standards under which the home loans
standards for the were underwritten are analogous to credit lending,
home loans are more rather than mortgage lending, since underwriting
sensitive to risks decisions were based primarily on the borrower's credit
relating to borrower history and capacity to repay rather than on the value
credit-worthiness and of the collateral. The underwriting standards allow
less sensitive to risks loans to be approved with combined loan-to-value ratios
relating to collateral of up to 125%. See "Description of the Home Loan
value compared to Pool--Underwriting Standards" in this prospectus
first lien loans. supplement. Because of the relatively high combined
loan-to-value ratios of the home loans and the fact that
the home loans are primarily secured by second liens,
losses on the home loans will likely be higher than on
first lien mortgage loans.
The return on your The concentration of the related mortgaged properties in
notes may be one or more geographic regions may increase the risk of
particularly sensitive loss to the notes. Approximately 9.2% and 27.3% of the
to changes in real cut-off date principal balance of the group I loans and
estate markets in group II loans, respectively, are located in California.
specific regions. If the regional economy or housing market weakens in
California, or in any other region having a significant
concentration of the properties underlying the home
loans, the home loans related to properties in that
region may experience increased rates of delinquency,
which may result in losses on the home loans. A region's
economic condition and housing market may be adversely
affected by a variety of events, including natural
disasters such as earthquakes, hurricanes, floods and
eruptions, and civil disturbances such as riots.
S-7
<PAGE>
Debt incurred by the With respect to home loans which were used for debt
borrowers in addition consolidation, there can be no assurance that the
to the home loans borrower will not incur further debt in addition to the
could increase your home loan. This additional debt could impair the ability
risk. of borrowers to service their debts, which in turn could
result in higher rates of delinquency and loss on the
home loans.
SERVICING PRACTICES
Loss mitigation The master servicer may use a wide variety of practices
practices or the to limit losses on defaulted home loans, including
release of a lien may writing off part of the debt, reducing future payments,
increase your risk. and deferring the collection of past due payments. The
servicing agreement also permits the master servicer to
release the lien on a limited number of mortgaged
properties in order to reduce the amount of a potential
loss. See "Description of the Servicing Agreement -
Release of Lien; Refinancing of Senior Lien" and "-
Collection and Liquidation Practices; Loss Mitigation"
in this prospectus supplement.
LIMITED OBLIGATIONS
Payments on the Credit enhancement for the notes includes excess
home loans, together interest, overcollateralization and the guaranty
with the guaranty insurance policy. None of the depositor, the master
insurance policy, are their affiliates will have any obligation to replace
the sole source of servicer or any of this credit enhancement, or to take
payments on your any other action to maintain any rating of the notes.
notes. If any losses are incurred on the home loans that are
not covered by this credit enhancement, the holders of
the notes will bear the risk of these losses.
LIQUIDITY RISKS
You may have to hold A secondary market for your notes may not develop. Even
your notes to maturity if a secondary market does develop, it may not continue,
if their marketability or it may be illiquid. Illiquidity means you may not be
is limited. able to find a buyer to buy your securities readily or
at prices that will enable you to realize a desired
yield.
SPECIAL YIELD AND PREPAYMENT CONSIDERATIONS
The yield to maturity The yield to maturity of your notes will depend on a
on your notes will variety of factors, including:
vary depending on the
rate of prepayments.
S-10
<PAGE>
o the rate and timing of principal payments on the
related home loans, including prepayments, defaults
and liquidations, and repurchases due to breaches
of representations or warranties;
o the note rate on your note; and
o the purchase price you paid for your note.
The rates of prepayments and defaults are two of the
most important and least predictable of these factors.
In general, if you purchase a note at a price higher
than its outstanding principal amount and principal
payments occur faster than you assumed at the time of
purchase, your yield will be lower than anticipated.
Conversely, if you purchase a note at a price lower than
its outstanding principal amount and principal payments
occur more slowly than you assumed at the time of
purchase, your yield will be lower than anticipated.
The Class A-I Notes will receive principal payments
primarily from the group I loans. The Class A-II Notes
will receive principal payments primarily from the group
II loans. Therefore, the yields on the Class A-I Notes
and Class A-II Notes will be sensitive to the rate and
timing of principal payments primarily from the home
loans in their respective loan groups.
The rate of Since mortgagors can generally prepay their home loans
prepayments on the at any time, the rate and timing of principal payments
home loans will vary on the notes are highly uncertain. Generally, when
depending on future market interest rates increase, mortgagors are less
market conditions and likely to prepay their home loans. This could result in
other factors. a slower return of principal to you at a time when you
might have been able to reinvest those funds at a higher
rate of interest than the note rate. On the other hand,
when market interest rates decrease, borrowers are
generally more likely to prepay their home loans. This
could result in a faster return of principal to you at a
time when you might not be able to reinvest those funds
at an interest rate as high as the note rate of your
notes.
Refinancing programs, which may involve soliciting all
or some of the mortgagors to refinance their home loans,
may increase the rate of prepayments on the home loans.
These programs may be conducted by the master servicer
or any of its affiliates, the subservicers or an
unaffiliated third party.
S-11
<PAGE>
53.1% and 55.4% of the group I loans and group II loans,
respectively, provide for payment of a prepayment charge
during a specific period. Prepayment charges may reduce
the rate of prepayment on the home loans until the end
of the related prepayment charge period. See
"Description of the Home Loan Pool--Home Loan Pool
Characteristics" in this prospectus supplement and
"Yield and Prepayment Considerations" in the prospectus.
S-12
<PAGE>
INTRODUCTION
The trust will be formed under an amended and restated trust agreement,
to be dated as of the closing date, between the depositor and the owner trustee.
The issuer will issue $575,000,000 aggregate principal amount of Home
Loan-Backed Notes, Series 2000-HI5. These notes will be issued under an
indenture, to be dated as of the closing date, between the issuer and the
indenture trustee. Under the trust agreement, the issuer will issue one class of
Home Loan-Backed Certificates, Series 2000-HI5. The notes and the certificates
are collectively referred to in this prospectus supplement as the securities.
Only the notes are offered by this prospectus supplement.
You can find definitions for capitalized terms used in this prospectus
supplement under the caption "Glossary" beginning on page 126 in the prospectus
or on page S-37 under the caption "Description of the Securities--Glossary of
Terms" in this prospectus supplement.
DESCRIPTION OF THE HOME LOAN POOL
GENERAL
On the closing date, the depositor will transfer to the issuer a pool
of home loans secured primarily by second liens on one- to four-family
residential properties. The home loan pool will consist of home loans with an
aggregate unpaid principal balance of approximately $575,000,104 as of the close
of business on the business day prior to the cut-off date.
The home loan pool will be divided into two groups, the Group I Loans
and the Group II Loans. The Group I Loans will consist of home loans which had
principal balances at origination which, when added together with the principal
balance of the related first lien, if any, are less than or equal to the
conforming balance. The conforming balance for home loans secured by a single
family property is $252,700 for all home loans other than those originated in
Alaska, Hawaii, Guam and the U.S. Virgin Islands, for which it is $379,050. The
conforming balance is higher for home loans secured by two- to four-family
properties.
99.95% and 100.00% of the group I loans and group II loans,
respectively, are secured by second liens on fee simple or leasehold interests
in one- to four-family residential properties and the remainder are secured by
first liens. The home loans will consist of conventional, closed-end,
fixed-rate, fully-amortizing and balloon payment home loans with terms to
maturity of approximately five, ten, fifteen, twenty or twenty-five years from
the date of origination or modification. The proceeds of the home loans
generally were used by the related borrowers for:
o debt consolidation,
o home improvement,
o the partial refinancing of the related mortgaged property,
o provision of a limited amount of cash to the borrower, or
o a combination of any of the above.
The mortgagor for each home loan represented at the time of origination that the
related mortgaged property would be owner-occupied as a primary home. As to home
loans which have been modified, references in this prospectus supplement to the
date of origination shall be deemed to be the date of the most recent
modification. All percentages of the home loans described in this prospectus
supplement are approximate percentages determined by cut-off date balance,
unless otherwise indicated.
S-13
<PAGE>
The home loans were acquired by Residential Funding Corporation, as
seller, under its home equity 125 loan program from unaffiliated sellers as
described in this prospectus supplement and in the prospectus, except in the
case of 5.3% of the home loans which were purchased by the seller through its
affiliate HomeComings Financial Network, Inc. No unaffiliated seller sold more
than 17.4% of the home loans to Residential Funding Corporation. The home loans
will be subserviced by GMAC Mortgage Corporation, an affiliate of the depositor
and of the master servicer. See "Description of the Servicing Agreement--The
Initial Subservicers" in this prospectus supplement.
The home loans were underwritten as described under "--Underwriting
Standards."
The seller will make representations and warranties regarding the home
loans sold by it as of the date of issuance of the notes. Further, the seller
will be required to repurchase or substitute for any home loan sold by it as to
which a breach of its representations and warranties relating to that home loan
occurs if the breach materially adversely affects the interests of the
securityholders or the credit enhancer in the home loan. See "Description of the
Home Loan Purchase Agreement" in this prospectus supplement and "Trust Asset
Program--Qualifications of Sellers" and "Description of the Securities--Review
of Trust Assets" and "--Representations Relating to Loans" in the prospectus.
As to any date, the pool balance will be equal to the aggregate of the
principal balances of all home loans owned by the trust as of that date. The
principal balance of a home loan, other than a liquidated home loan, on any day
is equal to its principal balance as of the cut-off date, minus all collections
credited against the principal balance of the home loan in accordance with the
related mortgage note prior to that day. The principal balance of a liquidated
home loan after final recovery of substantially all of the related liquidation
proceeds which the master servicer reasonably expects to receive will be zero.
PAYMENTS ON THE SIMPLE INTEREST HOME LOANS
3.7% and 1.7% of Group I Loans and Group II Loans, respectively,
provide for simple interest payments and are referred to as the simple interest
home loans. These home loans require that each monthly payment consist of an
installment of interest which is calculated according to the simple interest
method. This method calculates interest using the basis of the outstanding
principal balance of the home loan multiplied by the loan rate and further
multiplied by a fraction, the numerator of which is the number of days in the
period elapsed since the preceding payment of interest was made and the
denominator of which is the number of days in the annual period for which
interest accrues on the home loan. As payments are received on the home loans,
the amount received is applied first to interest accrued to the date of payment
and the balance is applied to reduce the unpaid principal balance.
Accordingly, if a mortgagor pays a fixed monthly installment before its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be less than it would have been
had the payment been made as scheduled, and the portion of the payment applied
to reduce the unpaid principal balance will be correspondingly greater. However,
the next succeeding payment will result in a greater portion of the payment
allocated to interest if that payment is made on its scheduled due date.
Alternatively, if a mortgagor pays a fixed monthly installment after its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be greater than it would have
been had the payment been made as scheduled, and the remaining portion, if any,
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. If each scheduled payment is made on or prior to its
scheduled due date, the principal balance of the home loan will amortize in the
manner described in the beginning of this paragraph. However, if the mortgagor
consistently makes scheduled payments after the scheduled due date the home loan
will amortize more slowly than scheduled. Any remaining unpaid principal is
payable on the final maturity date of the home loan.
96.3% and 98.3% of the Group I Loans and Group II Loans, respectively,
are actuarial home loans, on which 30 days of interest is owed each month
irrespective of the day on which the payment is received.
S-14
<PAGE>
BALLOON HOME LOANS
0.3% and 2.5% of the Group I Loans and Group II Loans, respectively,
are balloon home loans, which require monthly payments of principal based on a
30-year amortization schedule and have scheduled maturity dates of approximately
fifteen years from the due date of the first monthly payment, in each case
leaving a balloon payment due and payable on the respective scheduled maturity
date. The existence of a balloon payment in most cases requires the related
mortgagor to refinance the mortgage loan or sell the mortgaged property on or
prior to the scheduled maturity date. The ability of a mortgagor to meet either
of these requirements will be affected by several factors, including the level
of available mortgage rates at the time of sale or refinancing, the mortgagor's
equity in the related mortgaged property, the financial condition of the
mortgagor, tax laws, prevailing general economic conditions and the terms of any
related first lien mortgage loan. None of the depositor, the master servicer,
the indenture trustee or the owner trustee is obligated to refinance any balloon
home loan. The policy issued by the credit enhancer will provide coverage on any
losses allocable to the notes incurred upon liquidation of a balloon loan
arising out of or in connection with the failure of a mortgagor to make its
balloon payment.
In addition, during a temporary period the monthly payments received on
some of the home loans were applied in a manner that reduced the rate of
principal amortization. As a result, 1.4% and 0.4% of the Group I Loans and
Group II Loans, respectively, may have an unpaid principal amount on their
scheduled maturity dates, assuming no prepayments, of greater than 1 time and
not more than 4 times the related monthly payment. It is not clear whether the
related mortgagor will be legally obligated to pay the unpaid principal amount.
The payment of the amount at maturity for these home loans will be subject to
the same considerations as those for balloon home loans as described in the
preceding paragraph.
HOME LOAN POOL CHARACTERISTICS
The Group I Loans have the following characteristics:
o The Group I Loans will bear interest at the loan rate stated in
the related mortgage note which will be at least 8.25% per
annum but no more than 18.75% per annum, with a weighted
average loan rate of approximately 13.9591% per annum as of the
cut-off date.
o None of the Group I Loans were originated prior to August 1997
or will have a maturity date later than
December 2025.
o No Group I Loan will have a remaining term to stated maturity
as of the cut-off date of less than 53 months.
o The weighted average original term to maturity of the Group I
Loans as of the cut-off date will be approximately 235 months.
o The weighted average remaining term to stated maturity of the
Group I Loans as of the cut-off date will be approximately 233
months.
o 0.2% of the Group I Loans will have original terms to maturity
of approximately five years, with a weighted average remaining
term to stated maturity as of the cut-off date of approximately
58 months.
o 3.3% of the Group I Loans will have original terms to maturity
of approximately ten years, with a weighted average remaining
term to stated maturity as of the cut-off date of approximately
117 months.
o 40.6% of the Group I Loans will have original terms to maturity
of approximately fifteen years, with
S-15
<PAGE>
a weighted average remaining term to stated maturity as of the
cut-off date of approximately 178 months.
o 15.1% of the Group I Loans will have original terms to maturity
of approximately twenty years, with a weighted average
remaining term to stated maturity as of the cut-off date of
approximately 238 months.
o 40.5% of the Group I Loans will have original terms to maturity
of approximately twenty-five years, with a weighted average
remaining term to stated maturity as of the cut-off date of
approximately 298 months.
o The Group I Loans have principal and interest payable monthly
on the due date specified in each mortgage note.
o 93.6% of the Group I Loans will be secured by mortgages or
deeds of trust on property in which the borrower has little or
no equity because the related combined LTV ratio at the time of
origination exceeds 100%.
o 0.3% of the Group I Loans are balloon loans, which have
original terms to maturity of approximately 15 years based on a
30 year amortization schedule, with a weighted average
remaining term to stated maturity as of the cut-off date of
approximately 178 months.
Below is a description of some additional characteristics of the Group
I Loans which are given as of the cut-off date unless otherwise indicated. All
percentages of the Group I Loans are approximate percentages unless otherwise
indicated by the cut-off date balance. A percentage of 0.00% represents less
than 0.01% of the cut-off date balance. Unless otherwise specified, all
principal balances of the Group I Loans are as of the cut-off date and are
rounded to the nearest dollar.
CREDIT SCORES AS OF THE DATE OF ORIGINATION OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP I LOANS
RANGE OF CREDIT SCORES AS OF THE DATE OF Number of Cut-off Date BY CUT-OFF
ORIGINATION OF THE GROUP I HOME LOANS Home Loans Balance DATE BALANCE
------------------------------------------------- ---------- -------------- ----------------
<S> <C> <C> <C>
620 to 639 .............................. 2 $ 44,465 0.01%
640 to 659 .............................. 1,271 37,429,686 6.81
660 to 679 .............................. 3,556 126,077,037 22.92
680 to 699 .............................. 3,722 142,226,773 25.86
700 to 719 .............................. 3,219 133,746,417 24.32
720 to 739 .............................. 1,691 67,513,179 12.28
740 to 759 .............................. 805 30,933,313 5.62
760 to 779 .............................. 254 9,615,145 1.75
780 to 799 .............................. 63 2,335,772 0.42
Greater than or equal to 800 .................... 3 78,213 0.01
-------- ------------- -----------
Total .................................... 14,586 $550,000,001 100.00%
======== ============= ===========
</TABLE>
S-16
<PAGE>
LOAN RATES OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP I LOANS
NUMBER OF HOME BY CUT-OFF
RANGE OF LOAN RATES(%) LOANS CUT-OFF DATE BALANCE DATE BALANCE
---------------------------------------------------------- -------------- -------------------- --------------
<S> <C> <C> <C>
8.001 to 8.500 ................................... 1 $ 29,443 0.01%
9.001 to 9.500 ................................... 3 69,510 0.01
9.501 to 10.000 .................................. 5 102,570 0.02
10.001 to 10.500 ................................. 14 335,434 0.06
10.501 to 11.000 ................................. 20 551,958 0.10
11.001 to 11.500 ................................. 54 1,715,125 0.31
11.501 to 12.000 ................................. 466 18,658,045 3.39
12.001 to 12.500 ................................. 694 28,593,383 5.20
12.501 to 13.000 ................................. 2,868 114,754,982 20.86
13.001 to 13.500 ................................. 1,766 72,650,238 13.21
13.501 to 14.000 ................................. 2,932 113,850,982 20.70
14.001 to 14.500 ................................. 1,490 55,872,502 10.16
14.501 to 15.000 ................................. 1,931 69,391,964 12.62
15.001 to 15.500 ................................. 588 20,375,605 3.70
15.501 to 16.000 ................................. 285 9,410,214 1.71
16.001 to 16.500 ................................. 178 5,653,993 1.03
16.501 to 17.000 ................................. 753 22,164,787 4.03
17.001 to 17.500 ................................. 271 7,931,586 1.44
17.501 to 18.000 ................................. 242 7,094,257 1.29
18.001 to 18.500 ................................. 23 732,434 0.13
18.501 to 19.000 ................................. 2 60,988 0.01
--------- ------------ ------
Total .......................................... 14,586 $550,000,001 100.00%
========= ============ ======
</TABLE>
The weighted average loan rate of the Group I Loans will be
approximately 13.9591% per annum.
S-17
<PAGE>
ORIGINAL GROUP I LOAN STATED PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF GROUP I LOANS BY
RANGE OF ORIGINAL STATED HOME CUT-OFF DATE CUT-OFF DATE MINIMUM MAXIMUM
PRINCIPAL BALANCES LOANS BALANCE BALANCE BALANCE BALANCE
---------------------------------- ---------- --------------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
$0.01 to $25,000.00...... 2,754 $ 58,556,741 10.65% $ 1,441.29 $ 25,000.00
$25,000.01 to $50,000.00...... 9,602 353,152,446 64.21 25,004.85 50,000.00
$50,000.01 to $75,000.00...... 2,210 136,520,731 24.82 50,012.11 75,000.00
$75,000.01 to $100,000.00..... 20 1,770,082 0.32 77,900.00 100,000.00
----- ------------ ------- ------------ -------------
Total............................ 14,586 $ 550,000,001 100.00% $ 1,441.29 $ 100,000.00
========= =============== ====== ============ ============
</TABLE>
The average cut-off date balance of the Group I Loans will be
approximately $37,707.
ORIGINAL COMBINED LTV RATIOS OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP I LOANS BY
NUMBER OF CUT-OFF DATE BALANCE CUT-OFF DATE
RANGE OF COMBINED LTV RATIOS(%) HOME LOANS BALANCE
----------------------------------------- ----------- --------------------- -------------------
<S> <C> <C> <C>
10.01 to 20.00 ..................... 1 $ 26,486 0.00%
20.01 to 30.00 ..................... 4 99,448 0.02
30.01 to 40.00 ..................... 3 79,827 0.01
40.01 to 50.00 ..................... 4 120,501 0.02
50.01 to 60.00 ..................... 8 212,272 0.04
60.01 to 70.00 ..................... 16 489,385 0.09
70.01 to 75.00 ..................... 15 486,349 0.09
75.01 to 80.00 ..................... 75 2,173,544 0.40
80.01 to 85.00 ..................... 61 1,943,461 0.35
85.01 to 90.00 ..................... 121 3,635,099 0.66
90.01 to 95.00 ..................... 288 8,973,775 1.63
95.01 to 100.00 ..................... 553 17,177,152 3.12
100.01 to 105.00 ..................... 883 29,839,274 5.43
105.01 to 110.00 ..................... 1,666 58,819,639 10.69
110.01 to 115.00 ..................... 2,318 85,814,661 15.60
115.01 to 120.00 ..................... 2,822 109,394,295 19.89
120.01 to 125.00 ..................... 5,743 230,420,909 41.89
125.01 to 130.00 ..................... 5 293,926 0.05
------ ------------ ----
Total............................ 14,586 $550,000,001 100.00%
====== =============== ======
</TABLE>
The weighted average combined LTV ratio, or LTV ratio in the case of the
Group I Loans secured by first liens on the related mortgaged properties, at
origination of the Group I Loans will be approximately 116.19%.
S-18
<PAGE>
JUNIOR RATIOS OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP I
LOANS BY CUT-OFF DATE
RANGE OF JUNIOR RATIOS(%) NUMBER OF HOME LOANS CUT-OFF DATE BALANCE BALANCE
--------------------------------------------------------- -------------------------- ------------------------
<S> <C> <C> <C>
5.01 to 10.00.............. 52 $ 746,762 0.14%
10.01 to 15.00.............. 520 11,348,922 2.06
15.01 to 20.00.............. 1,773 48,884,497 8.89
20.01 to 25.00.............. 3,256 106,668,072 19.40
25.01 to 30.00.............. 3,194 118,960,027 21.64
30.01 to 40.00.............. 3,997 172,774,736 31.43
40.01 to 50.00.............. 1,350 67,039,699 12.20
50.01 to 60.00.............. 308 16,290,932 2.96
60.01 to 70.00.............. 101 5,595,213 1.02
70.01 to 80.00.............. 16 847,479 0.15
80.01 to 90.00.............. 10 475,128 0.09
90.01 to 100.00.............. 2 67,268 0.01
------------- ------------- -------
Total...................... 14,579 $ 549,698,735 100.00%
============ =============== =========
</TABLE>
The preceding table excludes Group I Loans secured by first liens. A
junior ratio is the ratio of the original amount of a Group I Loan secured by a
second lien to the sum of (1) the original amount of the Group I Loan and (2)
the unpaid principal balance of any senior lien balance at the time of the
origination of the Group I Loans.
The weighted average junior ratio of the Group I Loans by original loan
balance will be approximately 30.87%.
S-19
<PAGE>
REMAINING TERM TO STATED MATURITY OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP I
NUMBER OF HOME LOANS BY CUT-OFF DATE
RANGE OF MONTHS REMAINING TO STATED MATURITY LOANS CUT-OFF DATE BALANCE BALANCE
--------------------------------------------- ------------- -------------------- ---------------------
<S> <C> <C> <C>
1 to 96................................................. 60 $ 1,544,973 0.28%
97 to 108............................................... 12 302,265 0.05
109 to 120.............................................. 581 17,556,315 3.19
121 to 144.............................................. 11 402,963 0.07
145 to 156.............................................. 12 368,518 0.07
157 to 168.............................................. 68 1,893,034 0.34
169 to 180.............................................. 6,385 222,250,531 40.41
181 to 288.............................................. 2,157 86,353,652 15.70
289 to 300.............................................. 5,300 219,327,748 39.88
------ ---------------- ---------
Total.............................................. 14,586 $ 550,000,001 100.00%
====== ================ =========
</TABLE>
The weighted average remaining term to stated maturity of the Group I
Loans will be approximately 233 months.
YEAR OF ORIGINATION OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP I
NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF DATE
YEAR OF ORIGINATION LOANS BALANCE
--------------------------------------------------- ----------------- ---------------------- -------------------------
<S> <C> <C> <C>
1997...................................... 3 $ 67,980 0.01%
1998...................................... 24 778,873 0.14
1999...................................... 192 5,938,402 1.08
2000...................................... 14,367 543,214,745 98.77
------------- ---------------- --------
Total................................ 14,586 $ 550,000,001 100.00%
============= ================ ========
</TABLE>
S-20
<PAGE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP I
NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF-DATE
STATE LOANS BALANCE
------------------- ---------------- ---------------------- -----------------------
<S> <C> <C> <C>
California........ 1,213 $ 50,645,477 9.21%
Florida........... 1,027 38,237,027 6.95
Maryland.......... 804 31,029,755 5.64
Pennsylvania...... 749 26,898,691 4.89
Virginia.......... 663 25,388,397 4.62
Ohio.............. 658 24,336,336 4.42
Indiana........... 596 21,384,077 3.89
Georgia........... 536 20,269,412 3.69
Illinois.......... 531 19,939,747 3.63
Arizona........... 480 18,515,624 3.37
Alabama........... 486 17,474,617 3.18
Michigan.......... 406 14,955,127 2.72
New York.......... 402 14,774,224 2.69
Missouri.......... 400 13,879,375 2.52
Washington........ 323 13,028,651 2.37
Wisconsin......... 323 11,988,290 2.18
Colorado.......... 289 11,918,680 2.17
Kansas............ 324 11,405,371 2.07
Other............. 4,376 163,931,124 29.81
--------- --------------- ---------
Total......... 14,586 $ 550,000,001 100.00%
========= =============== =========
</TABLE>
The reference to "Other" in the preceding table includes states and the
District of Columbia that contain mortgaged properties for less than 2% of the
Group I Loans.
S-21
<PAGE>
MORTGAGED PROPERTY TYPES OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP I
NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF DATE
PROPERTY TYPE LOANS BALANCE
--------------------------------------------------- ----------------- -------------------- ----------------------
<S> <C> <C> <C>
Single Family Residence........................... 13,298 $ 501,975,727 91.27%
PUD Detached...................................... 476 20,469,827 3.72
Condominium....................................... 480 14,694,449 2.67
PUD Attached...................................... 152 6,064,710 1.10
Townhouse/Rowhouse Attached....................... 93 3,450,395 0.63
Multifamily (2-4 Units)........................... 63 2,399,554 0.44
Townhouse/Rowhouse Detached....................... 20 816,711 0.15
Modular........................................... 3 89,902 0.02
Manufactured Home................................. 1 38,725 0.01
--------- -------------- -----
Total......................................... 14,586 $ 550,000,001 100.00%
========= ============== =======
</TABLE>
LOAN PURPOSE OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP I
NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF DATE
PURPOSE LOANS BALANCE
--------------------------------------------------- ----------------- -------------------- -----------------------
<S> <C> <C> <C>
Debt Consolidation .................... 12,604 $481,614,000 87.57%
Cash .................................. 1,556 51,980,944 9.45
Home Improvement/Debt Consolidation ... 232 9,240,130 1.68
Rate/Term Refinance ................... 37 1,379,290 0.25
Home Improvement ...................... 19 720,671 0.13
Purchase Money ........................ 10 296,234 0.05
Convenience ........................... 8 267,182 0.05
Education ............................. 2 49,484 0.01
Other ................................. 118 4,452,065 0.81
------------ ------------ ------
Total ............................ 14,586 $550,000,001 100.00%
============ ============ ======
</TABLE>
LIEN PRIORITY OF THE GROUP I LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP I
NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF DATE
LIEN PRIORITY LOANS BALANCE
---------------------------------- ----------------- ---------------------- ----------------------
<S> <C> <C> <C>
First Lien....................... 7 $ 301,266 0.05%
Second Lien...................... 14,579 549,698,735 99.95
---------- ------------------ ---------
Total....................... 14,586 $ 550,000,001 100.00%
========== ================== ==========
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
DEBT-TO-INCOME RATIOS AS OF DATE OF ORIGINATION OF THE GROUP I LOANS
PERCENTAGE OF GROUP I
RANGE OF DEBT-TO-INCOME RATIOS AS OF DATE OF NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF DATE
ORIGINATION OF THE GROUP I LOANS(%) LOANS BALANCE
------------------------------------------------- -------------- --------------------- ----------------------
<S> <C> <C> <C>
0 to 5.00 ........................................ 1 $ 29,566 0.01%
10.01 to 15.00 ................................... 5 181,084 0.03
15.01 to 20.00 ................................... 74 2,361,130 0.43
20.01 to 25.00 ................................... 331 11,334,631 2.06
25.01 to 30.00 ................................... 1,088 37,781,516 6.87
30.01 to 35.00 ................................... 2,234 79,704,664 14.49
35.01 to 40.00 ................................... 3,243 118,722,984 21.59
40.01 to 45.00 ................................... 5,025 184,432,571 33.53
45.01 to 50.00 ................................... 2,585 115,451,855 20.99
-------- ------------ ------
Total ....................................... 14,586 $550,000,001 100.00%
======== ============ ======
</TABLE>
The weighted average debt-to-income ratio as of the date of origination of
the Group I Loans will be approximately 40.22%.
S-23
<PAGE>
The Group II Loans have the following characteristics:
o The Group II Loans will bear interest at the loan rate stated in the
related mortgage note which will be at least 9.12% per annum but no
more than 17.63% per annum, with a weighted average loan rate of
approximately 13.4789% per annum as of the cut-off date.
o None of the Group II Loans were originated prior to November 1998 or
will have a maturity date later than December 2025.
o No Group II Loan will have a remaining term to stated maturity as of
the cut-off date of less than 96 months.
o The weighted average original term to maturity of the Group II Loans
as of the cut-off date will be approximately 251 months.
o The weighted average remaining term to stated maturity of the Group
II Loans as of the cut-off date will be approximately 249 months.
o 3.1% of the Group II Loans will have original terms to maturity of
approximately ten years, with a weighted average remaining term to
stated maturity as of the cut-off date of approximately 116 months.
o 25.7% of the Group II Loans will have original terms to maturity of
approximately fifteen years, with a weighted average remaining term
to stated maturity as of the cut-off date of approximately 177
months.
o 15.7% of the Group II Loans will have original terms to maturity of
approximately twenty years, with a weighted average remaining term to
stated maturity as of the cut-off date of approximately 238 months.
o 53.0% of the Group II Loans will have original terms to maturity of
approximately twenty-five years, with a weighted average remaining
term to stated maturity as of the cut-off date of approximately 298
months.
o The Group II Loans have principal and interest payable monthly on the
due date specified in each mortgage note.
o 92.4% of the Group II Loans will be secured by mortgages or deeds of
trust on property in which the borrower has little or no equity
because the related combined LTV ratio at the time of origination
exceeds 100%.
o 2.5% of the Group II Loans are balloon loans with a weighted average
remaining term to stated maturity as of the cut-off date of
approximately 178 months.
Below is a description of some additional characteristics of the Group II
Loans which are given as of the cut-off date unless otherwise indicated. All
percentages of the Group II Loans are approximate percentages unless otherwise
indicated by the cut-off date balance. A percentage of 0.00% represents less
than 0.01% of the cut-off date balance. Unless otherwise specified, all
principal balances of the Group II Loans are as of the cut-off date and are
rounded to the nearest dollar.
S-24
<PAGE>
CREDIT SCORES AS OF THE DATE OF ORIGINATION OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP II LOANS
RANGE OF CREDIT SCORES AS OF THE DATE OF Number of BY CUT-OFF
ORIGINATION OF THE GROUP II HOME LOANS Home Loans Cut-off Date Balance DATE BALANCE
----------------------------------------- ---------------- ------------------------- -------------
<S> <C> <C> <C>
640 to 659 13 $ 521,706 2.09%
660 to 679 72 3,420,507 13.68
680 to 699 108 5,857,220 23.43
700 to 719 137 8,412,064 33.65
720 to 739 64 4,309,944 17.24
740 to 759 27 1,651,797 6.61
760 to 779 14 776,942 3.11
780 to 799 1 49,923 0.20
---------- ---------------- ------------
Total................................. 436 $ 25,000,103 100.00%
============ ================ ============
</TABLE>
LOAN RATES OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP II
NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF DATE
RANGE OF LOAN RATES(%) LOANS BALANCE
-------------------------------------------------- --------------- -------------------- -----------------------
<S> <C> <C> <C>
9.001 to 9.500............................. 2 $ 118,182 0.47%
11.001 to 11.500............................. 3 174,343 0.70
11.501 to 12.000............................. 18 1,136,686 4.55
12.001 to 12.500............................. 32 1,993,589 7.97
12.501 to 13.000............................. 101 6,263,986 25.06
13.001 to 13.500............................. 80 4,738,231 18.95
13.501 to 14.000............................. 99 5,611,516 22.45
14.001 to 14.500............................. 44 2,319,033 9.28
14.501 to 15.000............................. 26 1,327,679 5.31
15.001 to 15.500............................. 14 639,893 2.56
15.501 to 16.000............................. 5 274,110 1.10
16.001 to 16.500............................. 3 81,764 0.33
16.501 to 17.000............................. 6 216,134 0.86
17.001 to 17.500............................. 2 69,959 0.28
17.501 to 18.000............................. 1 35,000 0.14
---- ----------- --------
Total...................................... 436 $ 25,000,103 100.00%
===== ============ ========
</TABLE>
The weighted average loan rate of the Group II Loans will be approximately
13.4789% per annum.
S-25
<PAGE>
ORIGINAL GROUP II LOAN STATED PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP II LOANS
NUMBER OF CUT-OFF DATE BY CUT-OFF DATE MINIMUM MAXIMUM
RANGE OF ORIGINAL STATED PRINCIPAL BALANCE HOME LOANS BALANCE BALANCE BALANCE BALANCE
----------------------------------------- ----------- ------------ ------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 00.01 to 25,000.00....... 10 $ 207,475 0.83% $ 14,331.87 $ 24,937.31
25,000.01 to 50,000.00....... 152 6,606,220 26.42 26,592.01 50,000.00
50,000.01 to 75,000.00....... 259 16,802,435 67.21 50,449.03 75,000.00
75,000.01 to 100,000.00....... 15 1,383,974 5.54 80,986.40 100,000.00
-- ----------- ------ ---------- -----------
Total........................... 436 $25,000,103 100.00% $14,331.87 $100,000.00
=== =========== ====== ========== ===========
</TABLE>
The average cut-off date balance of the Group II Loans will be
approximately $57,340.
ORIGINAL COMBINED LTV RATIOS OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP II
NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF DATE
RANGE OF COMBINED LTV RATIOS(%) LOANS BALANCE
--------------------------------------------------- -------------- ------ -------------- ----------------------
<S> <C> <C> <C>
75.01 to 80.00................................... 2 $ 57,511 0.23%
80.01 to 85.00................................... 1 19,000 0.08
85.01 to 90.00................................... 6 296,455 1.19
90.01 to 95.00................................... 15 712,173 2.85
95.01 to 100.00................................... 17 827,879 3.31
100.01 to 105.00................................... 45 2,628,411 10.51
105.01 to 110.00................................... 66 3,566,217 14.26
110.01 to 115.00................................... 87 4,970,597 19.88
115.01 to 120.00................................... 91 5,316,706 21.27
120.01 to 125.00................................... 106 6,605,153 26.42
--------- ----------- ------------
Total...................................... 436 $25,000,103 100.00%
========= =========== ============
</TABLE>
The weighted average combined LTV ratio, or LTV ratio in the case of the
Group II Loans secured by first liens on the related mortgaged properties, at
origination of the Group II Loans will be approximately 113.66%.
S-26
<PAGE>
JUNIOR RATIOS OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF GROUP II
NUMBER OF HOME CUT-OFF DATE BALANCE LOANS BY CUT-OFF DATE
RANGE OF JUNIOR RATIOS(%) LOANS BALANCE
------------------------------------------------- -------------- -------------------- ----------------------
<S> <C> <C> <C>
5.01 to 10.00.............................. 8 $ 213,772 0.86%
10.01 to 15.00.............................. 51 2,118,841 8.48
15.01 to 20.00.............................. 135 7,091,879 28.37
20.01 to 25.00.............................. 148 8,854,791 35.42
25.01 to 30.00.............................. 73 5,256,198 21.02
30.01 to 40.00.............................. 20 1,414,173 5.66
40.01 to 50.00.............................. 1 50,449 0.20
------ ------------ --------
Total.............................. 436 $ 25,000,103 100.00%
====== ============ ========
</TABLE>
The preceding table excludes Group II Loans secured by first liens. A
junior ratio is the ratio of the original amount of a Group II Loan secured by
a second lien to the sum of (1) the original amount of the Group II Loan and
(2) the unpaid principal balance of any senior lien balance at the time of the
origination of the Group II Loans.
The weighted average junior ratio of the Group II Loans by original loan
balance will be approximately 21.96%.
REMAINING TERM TO STATED MATURITY OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP II LOANS BY
NUMBER OF HOME CUT-OFF DATE CUT-OFF DATE
RANGE OF MONTHS REMAINING TO STATED MATURITY LOANS BALANCE BALANCE
------------------------------------------------------------- -------------- ------------- -----------------
<S> <C> <C> <C>
1 to 96............................................... 1 $ 52,775 0.21%
109 to 120 .............................................. 14 731,280 2.93
157 to 168 .............................................. 7 297,065 1.19
169 to 180 .............................................. 130 6,747,854 26.99
181 to 288 .............................................. 72 4,329,851 17.32
289 to 300 .............................................. 212 12,841,278 51.36
---- ----------- -------
Total...................................................... 436 $25,000,103 100.00%
==== =========== =======
</TABLE>
The weighted average remaining term to stated maturity of the Group II
Loans will be approximately 249 months.
YEAR OF ORIGINATION OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP II LOANS BY
NUMBER OF HOME CUT-OFF DATE CUT-OFF DATE
YEAR OF ORIGINATION LOANS BALANCE BALANCE
------------------ --------------- ------------- -----------------
<S> <C> <C> <C>
1998.............. 1 $ 52,775 0.21%
1999.............. 13 719,645 2.88
2000.............. 422 24,227,683 96.91
----- ------------ ------
Total.......... 436 $25,000,103 100.00%
===== ============ =======
</TABLE>
S-27
<PAGE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP II LOANS BY
NUMBER OF HOME CUT-OFF DATE BALANCE CUT-OFF DATE
STATE LOANS BALANCE
------------------------------------------------------------- ------------- --------------------- -------------------
<S> <C> <C> <C>
California .................................................. 116 $ 6,835,665 27.34%
Maryland..................................................... 37 2,130,400 8.52
Virginia..................................................... 38 2,073,008 8.29
Vashington................................................... 24 1,406,299 5.63
Colorado..................................................... 17 1,026,804 4.11
Illinois..................................................... 18 951,763 3.81
Georgia...................................................... 19 941,026 3.76
New York..................................................... 14 813,461 3.25
Florida...................................................... 13 694,460 2.78
Arizona...................................................... 12 689,775 2.76
Ohio......................................................... 10 608,139 2.43
Massachusetts................................................ 12 606,986 2.43
Other........................................................ 106 6,222,317 24.89
------- ------------- ---------
Total.................................................... 436 $ 25,000,103 100.00%
======= ============= =========
</TABLE>
The reference to "Other" in the preceding table includes states and the
District of Columbia that contain mortgaged properties for less than 2% of the
Group II Loans.
<TABLE>
<CAPTION>
MORTGAGED PROPERTY TYPES OF THE GROUP II LOANS
PERCENTAGE OF
GROUP II LOANS
NUMBER OF CUT-OFF DATE BALANCE BY CUT-OFF DATE
PROPERTY TYPE HOME-LOANS BALANCE
--------------------------------------------------------- ----------- -------------------- ---------------
<S> <C> <C> <C>
Single Family Residence .................................. 371 $21,240,114 84.96%
PUD Detached ............................................. 53 3,105,569 12.42
PUD Attached ............................................. 6 370,979 1.48
Townhouse/Rowhouse Attached .............................. 2 138,584 0.55
Condominium .............................................. 3 90,906 0.36
Multifamily (2-4 Units) .................................. 1 53,951 0.22
------ ----------- ------
Total ................................................ 436 $25,000,103 100.00%
====== =========== ======
</TABLE>
S-28
<PAGE>
LOAN PURPOSE OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP II LOANS BY
NUMBER OF HOME CUT-OFF DATE BALANCE CUT-OFF DATE
PURPOSE LOANS BALANCE
----------------------------------------------------------- -------------- -------------------- ----------------
<S> <C> <C> <C>
Debt Consolidation ........................................ 345 $ 19,919,696 79.68%
Cash ...................................................... 58 3,283,246 13.13
Home Improvement/Debt Consolidation ....................... 15 919,474 3.68
Purchase Money............................................. 9 509,440 2.04
Home Improvement........................................... 3 103,150 0.41
Education.................................................. 1 14,332 0.06
Other...................................................... 5 250,766 1.00
------ --------------- ----------
Total ................................................. 436 $ 25,000,103 100.00%
======= =============== ==========
</TABLE>
LIEN PRIORITY OF THE GROUP II LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
GROUP II LOANS BY
NUMBER OF HOME CUT-OFF DATE CUT-OFF DATE
LIEN PRIORITY LOANS BALANCE BALANCE
------------------------------------------------------------- -------------- ---- ------- ------------------
<S> <C> <C> <C>
Second Lien ................................................. 436 $25,000,103 100.00%
------- ----------- --------
Total................................................. 436 $25,000,103 100.00%
======= =========== ========
</TABLE>
<TABLE>
<CAPTION>
DEBT-TO-INCOME RATIOS AS OF DATE OF ORIGINATION OF THE GROUP II LOANS
PERCENTAGE OF
GROUP II LOANS BY
RANGE OF DEBT-TO-INCOME RATIOS AS OF DATE OF NUMBER OF HOME CUT-OFF DATE CUT-OFF DATE
ORIGINATION OF THE GROUP II LOANS(%) LOANS BALANCE BALANCE
-------------------------------------------------------------- -------------- ------------- -------------------
<S> <C> <C> <C>
15.01 to 20.00 .............................................. 1 $ 74,729 0.30%
20.01 to 25.00 .............................................. 6 263,270 1.05
25.01 to 30.00 .............................................. 24 1,198,733 4.79
30.01 to 35.00 .............................................. 48 2,698,985 10.80
35.01 to 40.00 .............................................. 83 4,834,064 19.34
40.01 to 45.00 .............................................. 118 6,806,559 27.23
45.01 to 50.00 .............................................. 156 9,123,764 36.49
-------- ----------- ---------
Total.................................................. 436 $25,000,103 100.00%
======== =========== =========
</TABLE>
The weighted average debt-to-income ratio as of the date of origination of
the Group II Loans will be approximately 42.00%.
As to each home loan, the combined LTV ratio, in most cases, will be the
ratio, expressed as a percentage, of (1) the sum of (A) the original principal
balance of the home loan, and (B) any outstanding principal balance, at
origination of the home loan, of all other mortgage loans, if any, secured by
senior or subordinate liens on the related mortgaged property, to (2) the
appraised value, or, if permitted by the origination guidelines of Residential
Funding Corporation, a statistical valuation or the stated value. The appraised
value for any home loan will be the appraised value of the related mortgaged
property determined in the appraisal used in the origination of the home loan,
which may have been obtained at an earlier time. If the home loan was
originated simultaneously with or not more than 12 months after a senior lien
on the related mortgaged property, the appraised value shall be the lesser of
the appraised value at the
S-29
<PAGE>
origination of the senior lien and the sales price for the mortgaged property.
However, for not more than 27.2% and 2.9% of the Group I Loans and Group II
Loans, respectively, the stated value will be the value of the property as
stated by the related mortgagor in his or her application. See "Description of
the Home Loan Pool--Underwriting Standards" in this prospectus supplement.
In connection with each home loan that is secured by a leasehold interest,
the seller will have represented that, among other things:
o the use of leasehold estates for residential properties is an
accepted pract related mortgaged property is located;
o residential property in the area consisting of leasehold estates is
readily
o the lease is recorded and no party is in any way in breach of any
provision
o the leasehold is in full force and effect and is not subject to any
prior li the leasehold could be terminated; and
o the remaining term of the lease does not terminate less than five
years after the maturity date of the home loan.
Approximately 53.1% and 55.4% of the Group I Loans and Group II Loans,
respectively, provide for payment of a prepayment charge, if these loans prepay
within a specified time period. The prepayment charge, in most cases, is the
maximum amount permitted under applicable state law. 47.8% of the Group I Loans
and 49.1% of the Group II Loans provide for payment of a prepayment charge for
full prepayments made within approximately three years of the origination of
such home loans in an amount calculated in accordance with the terms of the
related mortgage note. However, some state laws restrict the imposition of
prepayment charges even when the home loans expressly provide for the
collection of those charges. Although the Alternative Mortgage Transactions
Parity Act permits the collection of prepayment charges in connection with some
types of eligible mortgage loans preempting any contrary state law
prohibitions, some states may not recognize the preemptive authority of the
Parity Act. As a result, it is possible that prepayment charges may not be
collected even on home loans that provide for the payment of these charges. The
master servicer will be entitled to all prepayment charges and late payment
charges received on the home loans and these amounts will not be available for
payment on the notes.
As of the cut-off date, no home loan will be 30 days or more delinquent in
payment of principal and interest. For a description of the methodology used to
catergorize home loans as delinquent, see "Description of the Servicing
Agreement--Delinquency and Loss Experience of the Master Servicer's Portfolio"
in this prospectus supplement.
All of the home loans except one Group I Loan and one Group II Loan were
originated under full documentation programs.
No home loan provides for deferred interest, negative amortization or
future advances.
All of the mortgaged properties underlying the home loans were
owner-occupied.
S-30
<PAGE>
HIGH COST LOANS
As of the cut-off date, 57.3% and 29.9% of the Group I Loans and Group II
Loans, respectively, were High Cost Loans. Purchasers or assignees of any High
Cost Loan, including the trust, could be liable under federal law for all
claims and subject to all defenses that the borrower could assert against the
originator of a High Cost Loan. Remedies available to the borrower include
monetary penalties, as well as rescission rights if appropriate disclosures
were not given or provided in a timely way as required or the mortgage contains
certain prohibited loan provisions. The maximum damages that may be recovered
under these provisions from an assignee, including the trust, is the remaining
amount of indebtedness plus the total amount paid by the borrower in connection
with the home loan.
Residential Funding Corporation, as seller, will represent and warrant, as
of the date of issuance of the notes, that each home loan at the time it was
made complied in all material respects with applicable local, state and federal
laws. As a result of this representation and warranty, the seller will be
required to repurchase or substitute for any home loan that violated the
Homeownership Act at the time of origination, if that violation adversely
affects the interests of the securityholders or the credit enhancer in that
home loan. The seller maintains policies and procedures that are designed to
verify that the home loans do not violate the Homeownership Act. However, there
can be no assurance that these policies and procedures will assure that each
and every home loan complies with the Homeownership Act in all material
respects.
Residential Funding Corporation is opposed to predatory lending practices,
as a matter of corporate policy. Residential Funding Corporation maintains
policies and procedures that are designed to verify that as to each High Cost
Loan,
o none of the proceeds were used to finance the purchase of single
premium credit insurance policies and
o none of the loans contain prepayment penalties that extend beyond
five years after the date of origination.
However, there can be no assurance that these policies and procedures will
assure that these requirements are satisfied as to each and every home loan. In
addition, Residential Funding Corporation's Servicer Guide requires each
subservicer to accurately and fully report its borrower credit files to credit
repositories in a timely manner.
In addition to the Homeownership Act, a number of legislative proposals
have been introduced at both the federal and state level that are designed to
discourage predatory lending practices. Some states have enacted, or may enact,
laws or regulations generally similar to the Homeownership Act that prohibit
inclusion of some provisions in mortgage loans that have interest rates or
origination costs in excess of prescribed levels, and require that the
borrowers be given certain disclosures or receive credit counseling prior to
the consummation of the mortgage loans. In some cases state law may impose
requirements and restrictions greater than those in the Homeownership Act. For
example, North Carolina has enacted a law effective with respect to residential
closed-end loans originated on or after July 1, 2000 that have interest rates,
origination costs or prepayment penalties in excess of certain prescribed
levels. The originators' failure to comply with any of these laws that are
applicable could subject the trust, and other assignees of the home loans, to
monetary penalties and could result in the borrowers' rescinding the home loans
against either the trust or subsequent holders of the home loans. However, the
seller will be required to repurchase or substitute for any home loan that
violated any applicable law at the time of origination, if that violation
adversely affects the interests of the securityholders or the credit enhancer
in that home loan. See "Certain Legal Aspects of the Trust Assets and Related
Matters" in the prospectus.
UNDERWRITING STANDARDS
The following is a brief description of the various underwriting standards
and procedures applicable to the home loans.
S-31
<PAGE>
In most cases, the underwriting standards of Residential Funding
Corporation as to the home loans originated or purchased by it place a greater
emphasis on the creditworthiness and debt service capacity of the borrower than
on the underlying collateral in evaluating the likelihood that a borrower will
be able to repay the related home loan.
Residential Funding Corporation relies on a number of guidelines to assist
underwriters in the credit review and decision process. The underwriting
criteria provide for the evaluation of a loan applicant's creditworthiness
through the use of a consumer credit report, verification of employment and a
review of the debt-to-income ratio of the applicant. Income is verified through
various means, including without limitation applicant interviews, written
verifications with employers and review of pay stubs or tax returns. The
borrower must demonstrate sufficient levels of disposable income to satisfy
debt repayment requirements.
The underwriting standards require the home loans originated or purchased
by Residential Funding Corporation to have been fully documented. A prospective
borrower is required to complete a detailed application providing pertinent
credit information.
In determining the adequacy of the mortgaged property as collateral for
home loans included in the home loan pool, an appraisal is made of each
property considered for financing or, if permitted by the underwriting
standards, the value of the related mortgaged property will be determined by a
statistical valuation or the stated value. The home loans purchased by
Residential Funding Corporation and included in the home loan pool generally
were originated subject to a maximum combined LTV ratio of 125%, and the
related borrowers may have been permitted to retain as cash a limited amount of
the proceeds of the home loans. In addition, the home loans were generally
subject to a maximum loan amount of $75,000 and a maximum total monthly
debt-to-income ratio of 50%. There can be no assurance that the combined LTV
ratio or the debt-to-income ratio for any home loan will not increase from the
levels established at origination.
The underwriting standards of Residential Funding Corporation may be
varied in appropriate cases. There can be no assurance that every home loan in
the home loan pool was originated in conformity with the applicable
underwriting standards in all material respects, or that the quality or
performance of the home loans will be equivalent under all circumstances.
REPRESENTATIONS AND WARRANTIES
Each person that sold home loans to Residential Funding Corporation made
limited representations and warranties regarding the related home loans as of
the date they are purchased by Residential Funding Corporation. However, those
representations and warranties will not be assigned to the owner trustee or the
indenture trustee for the benefit of the holders of the securities, so a breach
of those representations and warranties will not be enforceable on behalf of
the trust.
ADDITIONAL INFORMATION
The description in this prospectus supplement of the home loan pool and
the mortgaged properties is based upon the home loan pool as constituted at the
close of business on the business day prior to the cut-off date, except as
otherwise noted. Prior to the issuance of the notes, home loans may be removed
from the home loan pool as a result of incomplete documentation or otherwise if
the depositor deems that removal necessary or appropriate. A limited number of
other home loans may be added to the home loan pool prior to the issuance of
the notes. The depositor believes that the information in this prospectus
supplement will be substantially representative of the characteristics of the
home loan pool as it will be constituted at the time the notes are issued
although the range of loan rates and maturities and some other characteristics
of the home loans in the home loan pool may vary.
A Current Report on Form 8-K will be available to purchasers of the notes
and will be filed, together with the servicing agreement, the indenture, the
trust agreement and the home loan purchase agreement, with the Commission
within fifteen days after the initial issuance of the notes. In the event home
loans are removed from or added to the home
S-32
<PAGE>
loan pool as described in the preceding paragraph, that removal or addition
will be noted in the Current Report on Form 8-K.
THE ISSUER
The Home Loan Trust 2000-HI5 is a business trust formed under the laws of
the State of Delaware under the trust agreement for the purposes described in
this prospectus supplement. The trust agreement constitutes the "governing
instrument" under the laws of the State of Delaware relating to business
trusts. After its formation, the issuer will not engage in any activity other
than:
o acquiring and holding the home loans and the other assets of the issuer
and related proceeds,
o issuing the notes and the certificates,
o making payments on the notes and the certificates, and
o engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing.
The issuer's principal offices are in Wilmington, Delaware, in care of
Wilmington Trust Company, as owner trustee, at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001.
THE OWNER TRUSTEE
Wilmington Trust Company is the owner trustee under the trust agreement.
The owner trustee is a Delaware banking corporation and its principal offices
are located at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001.
Neither the owner trustee nor any director, officer or employee of the
owner trustee will be under any liability to the issuer or the securityholders
for any action taken or for refraining from the taking of any action in good
faith under the trust agreement or for errors in judgment. However, none of the
owner trustee, any director, officer or employee of the owner trustee will be
protected against any liability which would otherwise be imposed by reason of
willful malfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under the trust
agreement. All persons into which the owner trustee may be merged or with which
it may be consolidated or any person resulting from the merger or consolidation
shall be the successor of the owner trustee under the trust agreement.
THE INDENTURE TRUSTEE
The Chase Manhattan Bank is the indenture trustee under the indenture. The
principal offices of the indenture trustee are located in New York, New York.
THE CREDIT ENHANCER
The following information has been supplied by Ambac Assurance
Corporation, the credit enhancer, for inclusion in this prospectus supplement.
No representation is made by the depositor, the master servicer, the
underwriters or any of their affiliates as to the accuracy or completeness of
the information.
S-33
<PAGE>
The credit enhancer is a Wisconsin-domiciled stock insurance corporation
regulated by the Office of the Commissioner of Insurance of the State of
Wisconsin and licensed to do business in 50 states, the District of Columbia,
the Commonwealth of Puerto Rico and the Territory of Guam. The credit enhancer
primarily insures newly-issued municipal and structured finance obligations.
The credit enhancer is a wholly owned subsidiary of Ambac Financial Group, Inc.
(formerly, AMBAC Inc.), a 100% publicly-held company. Moody's, Standard &
Poor's and Fitch have each assigned a triple-A financial strength rating to the
credit enhancer.
The consolidated financial statements of the credit enhancer and
subsidiaries as of December 31, 1999 and December 31, 1998 and for each of the
years in the three-year period ended December 31, 1999 prepared in accordance
with generally accepted accounting principles, included in the Annual Report on
Form 10-K of Ambac Financial Group, Inc. (which was filed with the Commission
on March 30, 2000; Commission File Number 1-10777), and the unaudited
consolidated financial statements of the credit enhancer and subsidiaries as of
September 30, 2000 and for the periods ending September 30, 2000 and September
30, 1999, included in the Quarterly Report on Form 10-Q of Ambac Financial
Group, Inc., for the period ended September 30, 2000 (which was filed with the
Commission on November 13, 2000), are hereby incorporated by reference into
this prospectus supplement and shall be deemed to be a part of this prospectus
supplement. Any statement contained in a document incorporated in this
prospectus supplement by reference shall be modified or superseded for the
purposes of this prospectus supplement to the extent that a statement contained
in this prospectus supplement by reference in this prospectus supplement also
modifies or supersedes the statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this prospectus supplement.
All financial statements of the credit enhancer and subsidiaries included
in documents filed by Ambac Financial Group, Inc. with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the
date of this prospectus supplement and prior to the termination of the offering
of the notes shall be deemed to be incorporated by reference into this
prospectus supplement and to be a part hereof from the respective dates of
filing the documents.
The following table sets forth the capitalization of the credit enhancer
as of December 31, 1998, December 31, 1999 and September 30, 2000, in
conformity with generally accepted accounting principles.
AMBAC ASSURANCE CORPORATION
CAPITALIZATION TABLE
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
September 30,
December 31, 1998 December 31, 1999 2000
----------------- ----------------- ----------------
(unaudited)
<S> <C> <C> <C>
Unearned premiums................................... $1,303 $1,442 $1,508
Other liabilities................................... 548 524 479
------ ------ ------
Total liabilities............................. 1,851 1,966 1,987
----- ----- -----
Stockholder's equity:
Common Stock.................................. 82 82 82
Additional paid-in capital.................... 541 752 757
Accumulated other
comprehensive income (loss)................... 138 (92) (17)
Retained earnings............................. 1,405 1,674 1,915
----- ----- -----
Total stockholder's equity.......................... 2,166 2,416 2,737
----- ----- -----
Total liabilities and
stockholder's equity................................ $4,017 $4,382 $4,724
====== ====== ======
</TABLE>
S-34
<PAGE>
For additional financial information concerning the credit enhancer, see
the audited financial statements of the credit enhancer incorporated by
reference in this prospectus supplement. Copies of the financial statements of
the credit enhancer incorporated by reference and copies of the credit
enhancer's annual statement for the year ended December 31, 1999 prepared in
accordance with statutory accounting standards are available, without charge,
from the credit enhancer. The address of the credit enhancer's administrative
offices and its telephone number are One State Street Plaza, 19th Floor, New
York, New York 10004 and (212) 668-0340.
The credit enhancer makes no representation regarding the notes or the
advisability of investing in the notes and makes no representation regarding,
nor has it participated in the preparation of, this prospectus supplement other
than the information supplied by the credit enhancer and presented under the
headings "The Credit Enhancer" and "Description of the Policy" in this
prospectus supplement and in the financial statements incorporated in this
prospectus supplement by reference.
DESCRIPTION OF THE SECURITIES
GENERAL
The notes will be issued under the indenture. The certificates will be
issued under the trust agreement. The following summaries describe provisions
of the securities, the indenture and the trust agreement. The summaries do not
purport to be complete and are subject to, and qualified in their entirety by
reference to, the provisions of the applicable agreement.
The notes will be secured by the assets of the trust pledged by the issuer
to the indenture trustee under the indenture which will consist of:
o the home loans;
o all amounts on deposit in the Payment Account;
o the policy; and
o proceeds of the above.
The Class A-I Notes correspond primarily to the Group I Loans and the
Class A-II Notes correspond primarily to the Group II Loans. The Loan Groups
are described in the tables shown under "Description of the Home Loan
Pool--Home Loan Pool Characteristics."
BOOK-ENTRY NOTES
The notes will initially be issued as book-entry notes. Note owners in the
United States may elect to hold their notes through the Depository Trust
Company, or DTC, if they are participants in that system, or indirectly through
organizations which are participants in that system. Noteholders in Europe may
elect to hold their notes through Euroclear or Clearstream Banking, societe
anonyme, formerly known as Cedelbank SA, or Clearstream, if they are
participants of these systems, or indirectly through organizations which are
participants in these systems. The book-entry notes will be issued in one or
more securities which equal the aggregate principal amount of the notes and
will initially be registered in the name of Cede & Co., the nominee of DTC.
Clearstream and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Clearstream's and
Euroclear's names on the books of their respective depositaries which in turn
will hold the positions in customers' securities accounts in the depositaries'
names on the books of DTC. Investors may hold the beneficial interests in the
book-entry notes in
S-35
<PAGE>
minimum denominations of $25,000 and in integral multiples of $1 in excess of
$25,000. Except as described below, no beneficial owner of the notes will be
entitled to receive a physical certificate, or definitive note, representing the
security. Unless and until definitive notes are issued, it is anticipated that
the only holder of the notes will be Cede & Co., as nominee of DTC. Note owners
will not be holders as that term is used in the indenture.
The beneficial owner's ownership of a book-entry note will be recorded
on the records of the brokerage firm, bank, thrift institution or other
financial intermediary that maintains the beneficial owner's account for that
purpose. In turn, the financial intermediary's ownership of the book-entry notes
will be recorded on the records of DTC, or of a participating firm that acts as
agent for the financial intermediary, whose interest will in turn be recorded on
the records of DTC, if the beneficial owner's financial intermediary is not a
DTC participant and on the records of Clearstream or Euroclear, as appropriate.
Note owners will receive all payments of principal and interest on the
notes from the indenture trustee through DTC and DTC participants. While the
notes are outstanding, except under the circumstances described below, under the
DTC rules, regulations and procedures, DTC is required to make book-entry
transfers among participants on whose behalf it acts in connection with the
notes and is required to receive and transmit payments of principal and interest
on the notes.
Participants and indirect participants with whom note owners have
accounts for notes are similarly required to make book-entry transfers and
receive and transmit the payments on behalf of their respective note owners.
Accordingly, although note owners will not possess physical certificates, the
DTC rules provide a mechanism by which note owners will receive payments and
will be able to transfer their interest.
Note owners will not receive or be entitled to receive definitive notes
representing their respective interests in the notes, except under the limited
circumstances described below. Unless and until definitive notes are issued,
note owners who are not participants may transfer ownership of notes only
through participants and indirect participants by instructing the participants
and indirect participants to transfer the notes, by book-entry transfer, through
DTC for the account of the purchasers of the notes, which account is maintained
with their respective participants. Under DTC's rules and in accordance with
DTC's normal procedures, transfers of ownership of notes will be executed
through DTC and the accounts of the respective participants at DTC will be
debited and credited. Similarly, the participants and indirect participants will
make debits or credits, as the case may be, on their records on behalf of the
selling and purchasing note owners.
Under a book-entry format, beneficial owners of the book-entry notes
may experience some delay in their receipt of payments, since the payments will
be forwarded by the indenture trustee to Cede & Co. Payments on notes held
through Clearstream or Euroclear will be credited to the cash accounts of
Clearstream participants or Euroclear participants in accordance with the
relevant system's rules and procedures, to the extent received by the relevant
depositary. The payments will be subject to tax reporting in accordance with
relevant United States tax laws and regulations. Because DTC can only act on
behalf of financial intermediaries, the ability of a beneficial owner to pledge
book-entry notes to persons or entities that do not participate in the
depositary system, or otherwise take actions relating to the book-entry notes,
may be limited due to the lack of physical certificates for the book-entry
notes. In addition, issuance of the book-entry notes in book-entry form may
reduce the liquidity of the notes in the secondary market since some potential
investors may be unwilling to purchase securities for which they cannot obtain
physical certificates.
DTC has advised the indenture trustee that, unless and until definitive
notes are issued, DTC will take any action permitted to be taken by the holders
of the book-entry notes under the indenture only at the direction of one or more
financial intermediaries to whose DTC accounts the book-entry notes are
credited, to the extent that the actions are taken on behalf of financial
intermediaries whose holdings include the book-entry notes. Clearstream or the
Euroclear operator, as the case may be, will take any other action permitted to
be taken by noteholders under the indenture on behalf of a Clearstream
participant or Euroclear participant only in accordance with its relevant rules
and procedures and subject to the ability of the relevant depositary to effect
the actions on its behalf through DTC. DTC may take actions, at the direction of
the related participants, with respect to some notes which conflict with actions
taken relating to other notes.
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Definitive notes will be issued to beneficial owners of the book-entry
notes, or their nominees, rather than to DTC, if (a) the indenture trustee
determines that DTC is no longer willing, qualified or able to discharge
properly its responsibilities as nominee and depository with respect to the
book-entry notes and the indenture trustee is unable to locate a qualified
successor, (b) the indenture trustee elects to terminate a book-entry system
through DTC or (c) after the occurrence of an event of default under the
indenture, beneficial owners having percentage interests representing at least a
majority of the aggregate note balance of the notes advise DTC through the
financial intermediaries and the DTC participants in writing that the
continuation of a book-entry system through DTC, or a successor to DTC, is no
longer in the best interests of beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the indenture trustee will be required to notify all
beneficial owners of the occurrence of this event and the availability through
DTC of definitive notes. Upon surrender by DTC of the global certificate or
certificates representing the book-entry notes and instructions for
re-registration, the indenture trustee will issue and authenticate definitive
notes and, subsequently, the indenture trustee will recognize the holders of the
definitive notes as holders under the indenture.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform the procedures and the procedures may be discontinued at any time.
See Annex I to this prospectus supplement.
None of the depositor, the master servicer or the indenture trustee
will have any liability for any actions taken by DTC or its nominee, including,
without limitation, actions for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the notes held by
Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to the beneficial ownership interests.
For additional information regarding DTC, Clearstream, Euroclear and
the notes, see Annex I to this prospectus supplement and "Description of the
Securities--Form of Securities" in the prospectus.
GLOSSARY OF TERMS
The following terms are given the meanings shown below to help describe
the cash flows on the notes:
COLLECTION PERIOD--As to any payment date, the calendar month preceding
the month of that payment date.
EXCESS LOSS AMOUNT--As of any payment date, the sum of the following
for the related Collection Period:
o any Liquidation Loss Amounts, other than those described in the
next three bullet points, which, when added to the aggregate of
the Liquidation Loss Amounts for all preceding Collection
Periods, exceed $184,000,033;
o any Special Hazard Losses in excess of the Special Hazard Amount;
o any Fraud Losses in excess of the Fraud Loss Amount; and
o any Extraordinary Losses.
Excess Loss Amounts will not be covered by any Liquidation Loss Distribution
Amount or by a reduction in the Outstanding Reserve Amount. Any Excess Loss
Amounts, however, will be covered by the policy and, in the event payments are
not made as required under the policy, the losses will be allocated on a pro
rata basis to the notes based on their outstanding note balances.
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FRAUD LOSS AMOUNT--Initially, $28,750,005. As of any date of
determination after the cut-off date, the Fraud Loss Amount shall equal:
o prior to the first anniversary of the cut-off date, an amount
equal to 5% of the aggregate of the principal balances of the
home loans as of the cut-off date minus the aggregate of any
Liquidation Loss Amounts on the home loans due to Fraud Losses up
to the date of determination;
o from the first to the second anniversary of the cut-off date, an
amount equal to (1) the lesser of (a) the Fraud Loss Amount as of
the most recent anniversary of the cut-off date and (b) 3% of the
aggregate of the principal balances of the home loans as of the
most recent anniversary of the cut-off date minus (2) the
aggregate of any Liquidation Loss Amounts on the home loans due
to Fraud Losses since the most recent anniversary of the cut-off
date up to the date of determination; and
o from the second to the fifth anniversary of the cut-off date, an
amount equal to (1) the lesser of (a) the Fraud Loss Amount as of
the most recent anniversary of the cut-off date and (b) 2% of the
aggregate of the principal balances of the home loans as of the
most recent anniversary of the cut-off date minus (2) the
aggregate of any Liquidation Loss Amounts on the home loans due
to Fraud Losses since the most recent anniversary of the cut-off
date up to the date of determination. On and after the fifth
anniversary of the cut-off date, the Fraud Loss Amount shall be
zero.
GROUP I LOANS--The home loans that correspond primarily to the Class
A-I Notes as further described in "Description of The Home Loan Pool--Home Loan
Pool Characteristics" in this prospectus supplement.
GROUP II LOANS--The home loans that correspond primarily to the Class
A-II Notes as further described in "Description of The Home Loan Pool--Home Loan
Pool Characteristics" in this prospectus supplement.
INTEREST COLLECTIONS--As to any payment date, an amount equal to the
sum of:
o the portion allocable to interest of all scheduled monthly
payments on the home loans received during the related Collection
Period, minus the servicing fees and expenses of the trust;
o the portion of all Net Liquidation Proceeds allocated to interest
under the terms of the mortgage notes, reduced by the
administrative fees for that Collection Period;
o the interest portion of the repurchase price for any deleted home
loans and the interest portion of the cash purchase price paid in
connection with any optional purchase of the home loans by the
master servicer; and
o any proceeds and recoveries on a home loan received during the
related Collection Period, net of administrative fees, after it
becomes a Liquidated Home Loan.
LIQUIDATED HOME LOAN--As to any payment date, any home loan which the
master servicer has determined, based on the servicing procedures specified in
the servicing agreement, as of the end of the preceding Collection Period, that
all liquidation proceeds which it expects to recover in connection with the
disposition of the related mortgaged property have been recovered. In addition,
the master servicer will treat any home loan that is 180 days or more delinquent
as having been finally liquidated.
LIQUIDATION LOSS AMOUNT--With respect to any payment date and any home
loan that became a Liquidated Home Loan during the related Collection Period,
the unrecovered portion of the principal balance of that home loan at the end of
such Collection Period, after giving effect to the Net Liquidation Proceeds
applied to reduce the principal balance of that home loan.
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LIQUIDATION LOSS DISTRIBUTION AMOUNT--As to any payment date, an amount
equal to the sum of (A) 100% of the Liquidation Loss Amounts, other than any
Excess Loss Amounts, on the home loans on the payment date, plus (B) any
Liquidation Loss Amounts, other than any Excess Loss Amounts, remaining unpaid
from any preceding payment date, to the extent not reflected on such preceding
payment date by a reduction of the Outstanding Reserve Amount.
NET LIQUIDATION PROCEEDS--As to any Liquidated Home Loan, the proceeds,
excluding amounts drawn on the policy or paid in connection with the limited
reimbursement agreement, received in connection with the liquidation of the home
loan, whether through trustee's sale, foreclosure sale or otherwise, reduced by
related expenses, but not including the portion, if any, of the proceeds that
exceed the principal balance of the home loan at the end of the Collection
Period immediately preceding the Collection Period in which the home loan became
a Liquidated Home Loan.
OUTSTANDING RESERVE AMOUNT--With respect to any payment date, the
amount, if any, by which the pool balance, after applying payments received in
the related Collection Period, exceeds the aggregate note balance of the notes
on the payment date, after application of Principal Collections for that date.
The Outstanding Reserve Amount will be increased by distributions of the Reserve
Increase Amount, if any, to the notes. On each payment date, the Outstanding
Reserve Amount, as in effect immediately prior to the payment date, if any,
shall be deemed to be reduced by an amount equal to any Liquidation Loss
Amounts, other than any Excess Loss Amounts, for the payment date, except to the
extent that Liquidation Loss Amounts were covered on the payment date by a
Liquidation Loss Distribution Amount, which amount would be distributed, if
available, from any excess Interest Collections for that payment date. Any
Liquidation Loss Amounts not so covered will be covered by draws on the policy
to the extent provided in this prospectus supplement. However, any Excess Loss
Amounts are required to be covered by a draw on the policy in all cases, without
regard to the availability of the Outstanding Reserve Amount, and the
Outstanding Reserve Amount will not be reduced by any Excess Loss Amount under
any circumstances.
To the extent that the Outstanding Reserve Amount is insufficient or
not available to absorb Liquidation Loss Amounts that are not covered by the
Liquidation Loss Distribution Amount, and if payments are not made under the
policy as required, a noteholder may incur a loss.
PRINCIPAL COLLECTION DISTRIBUTION AMOUNT--As to any payment date, the
total Principal Collections for that payment date; provided however, on any
payment date as to which the Outstanding Reserve Amount that would result
without regard to this proviso exceeds the Reserve Amount Target, the Principal
Collection Distribution Amount will be reduced by the amount of the excess until
the Outstanding Reserve Amount equals the Reserve Amount Target. To the extent
the Reserve Amount Target decreases on any payment date, the amount of the
Principal Collection Distribution Amount will be reduced on that payment date
and on each subsequent payment date to the extent the remaining Outstanding
Reserve Amount is in excess of the reduced Reserve Amount Target until the
Outstanding Reserve Amount equals the Reserve Amount Target.
PRINCIPAL COLLECTIONS--As to any payment date, an amount equal to the
sum of:
o the principal portion of all scheduled monthly payments on the
home loans received in the related Collection Period; and
o all unscheduled collections, including full and partial mortgagor
prepayments on the home loans, Insurance Proceeds, Liquidation
Proceeds and proceeds from repurchases of, and some amounts
received in connection with any substitutions for, the home
loans, received or deemed received during the related Collection
Period, to the extent the amounts are allocable to principal.
RESERVE AMOUNT TARGET--As to any payment date prior to the Stepdown
Date, an amount equal to 2.00% of the aggregate cut-off date pool balance. On or
after the Stepdown Date, the Reserve Amount Target will be equal to the lesser
of (a) the Reserve Amount Target as of the cut-off date and (b) 4.00% of the
aggregate pool balance after applying payments received in the related
Collection Period, but not lower than $2,875,001, which is 0.50% of the
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aggregate cut-off date pool balance. However, any scheduled reduction to the
Reserve Amount Target described in the preceding sentence shall not be made as
of any payment date unless certain loss and delinquency tests set forth in the
indenture are met. In addition, the Reserve Amount Target may be reduced with
the prior written consent of the credit enhancer and notice to the rating
agencies.
RESERVE INCREASE AMOUNT--As to any payment date, other than the payment
date in January 2001, the amount necessary to bring the Outstanding Reserve
Amount up to the Reserve Amount Target, and as to the payment date in January
2001, an amount equal to zero.
SPECIAL HAZARD AMOUNT--Initially, $5,750,001. As of any date of
determination following the cut-off date, the Special Hazard Amount shall equal
the initial Special Hazard Amount less the sum of (A) the aggregate of any
Liquidation Loss Amounts on the home loans due to Special Hazard Losses and (B)
the Adjustment Amount. The Adjustment Amount will be equal to an amount
calculated under the terms of the indenture.
STEPDOWN DATE--The later of:
o the payment date in January 2004, and
o the payment date on which the pool balance after applying
payments received in the related Collection Period is less than
50% of the aggregate cut-off date pool balance.
PAYMENTS
Payments on the notes will be made by the indenture trustee or the
paying agent beginning in January 2001 on the 25th day of each month or the
following business day if the 25th is not a business day. Each of these dates is
referred to as a payment date. Payments on the notes will be made to the persons
in whose names the notes are registered at the close of business on the last day
of the prior calendar month. See "Description of the Securities--Distributions
of Principal and Interest on the Securities" in the prospectus. Payments will be
made by check or money order mailed to the address of the person which appears
on the security register, or upon the request of a holder owning notes having
denominations aggregating at least $1,000,000, by wire transfer or otherwise. In
the case of book-entry notes, payments will be made by wire transfer to DTC or
its nominee in amounts calculated on the determination date as described in this
prospectus supplement. However, the final payment relating to the notes will be
made only upon presentation and surrender of the notes at the office or the
agency of the indenture trustee specified in the notice to holders of the final
payment. A business day is any day other than a Saturday or Sunday or a day on
which banking institutions in the State of California, Minnesota, New York,
Pennsylvania, Illinois or Delaware are required or authorized by law to be
closed.
INTEREST PAYMENTS ON THE NOTES
Interest payments will be made on the notes on each payment date at the
related note rate. The note rate for the Class A-I-1 Notes, Class A-I-2 Notes,
Class A-I-3 Notes, Class A-I-4 Notes, Class A-I-5 Notes, Class A-I-6 Notes,
Class A-I-7 Notes, and Class A-II Notes will be 7.020%, 6.755%, 6.845%, 6.940%,
7.045%, 7.240%, 7.475% and 7.210% per annum, respectively; provided, however,
that the note rate on the Class A-I-7 Notes and Class A-II Notes will increase
by 0.50% per annum on the payment date following the first payment date on which
the master servicer can exercise its option to purchase the home loans from the
trust as described in "--Maturity and Optional Redemption" in this prospectus
supplement.
Interest on the notes relating to any payment date will accrue for the
related accrual period on the note balance. The accrual period for any payment
date for each class of notes will be the calendar month preceding the month in
which the related payment date occurs. Interest for each class of notes will be
based on a 30-day month and a 360-day year. Interest payments on the notes will
be funded from payments on the home loans and, if necessary, from draws on the
policy.
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PRINCIPAL PAYMENTS ON THE NOTES
On each payment date, other than the payment date in December 2025,
principal payments will be due and payable on the notes in a total amount equal
to the aggregate of the following:
o the Principal Collection Distribution Amount,
o the Reserve Increase Amount,
o the Liquidation Loss Distribution Amount and
o any amount drawn on the policy or paid to the trustee on behalf
of the credit enhancer under the limited reimbursement agreement
in respect of principal for that payment date.
These amounts will be distributed concurrently to (a) the Class A-I Notes in the
aggregate and (b) the Class A-II Notes, in each case allocated in proportion to
the percentage of the Principal Collections derived from the related loan group
for that payment date, until the note balances of the Class A-I Notes in the
aggregate or Class A-II Notes have been reduced to zero. In addition, once the
note balances of the notes related to a loan group have been reduced to zero,
principal payments in respect of that loan group will be distributed to the
remaining class or classes of Class A Notes related to the other loan group
until their note balances have been reduced to zero. All distributions to the
Class A-I Notes will be allocated among the Class A-I Notes in accordance with
the priorities described in the next section. On the payment date in December
2025, principal will be due and payable on each class of notes in amounts equal
to the related note balance, if any. In no event will principal payments on any
class of notes on any payment date exceed the related note balance on that date.
ALLOCATION OF PAYMENTS ON THE HOME LOANS
The master servicer on behalf of the trust will establish a Payment
Account into which the master servicer will deposit Principal Collections and
Interest Collections for each payment date on the business day prior to that
payment date. The Payment Account will be an Eligible Account and amounts on
deposit in the Payment Account will be invested in permitted investments.
On each payment date, Principal Collections and Interest Collections
will be allocated from the Payment Account in the following order of priority:
o first, to pay accrued interest due on the note balance of the
notes;
o second, to pay as principal on the notes, an amount equal to the
Principal Collection Distribution Amount for that payment
date;
o third, to pay as principal on the notes, an amount equal to the
Liquidation Loss Distribution Amount for that payment date;
o fourth, to pay, pro rata, the credit enhancer the premium for the
policy, along with any previously unpaid premiums for the policy
with interest, and any payments in connection with the limited
reimbursement agreement;
o fifth, to reimburse the credit enhancer for prior draws made on
the policy, other than those attributable to Excess Loss Amounts
or amounts which are required to be paid to the credit enhancer
or to the
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trust pursuant to the limited reimbursement agreement
described in this prospectus supplement, with interest;
o sixth, to pay as principal on the notes, an amount equal to the
Reserve Increase Amount for that payment date;
o seventh, to pay the credit enhancer any other amounts owed under
the insurance agreement; and
o eighth, to pay any remaining amounts to the holders of the
certificates.
Any payments of principal allocable to the Class A-I Notes shall be
paid to the Class A-I-1 Notes, Class A-I-2 Notes, Class A-I-3 Notes, Class A-I-4
Notes, Class A-I-5 Notes, Class A-I-6 Notes and Class A-I-7 Notes, in that
order, in each case until the outstanding note balance of each of these notes
has been reduced to zero.
Any payments of principal allocable to the Class A-II Notes shall be
paid to the Class A-II Notes until the outstanding note balance of the Class
A-II Notes is reduced to zero.
THE PAYING AGENT
The paying agent shall initially be the indenture trustee, together
with any successor. The paying agent shall have the revocable power to withdraw
funds from the Payment Account for the purpose of making payments to the
noteholders.
MATURITY AND OPTIONAL REDEMPTION
Each class of notes will be payable in full on the payment date in
December 2025, in each case to the extent of any accrued and unpaid interest and
the outstanding note balance on that date, if any. In addition, a principal
payment may be made in partial or full redemption of the notes upon the exercise
by the master servicer of its option to purchase all or a portion of the home
loans and related assets. This option may be exercised on any payment date on
which the aggregate principal balance of the home loans, after applying payments
received in the related Collection Period, is reduced to an amount less than
$57,500,010, which is 10% of the aggregate cut-off date pool balance. In the
event that all of the home loans are purchased by the master servicer, the
purchase price will be equal to the sum of the outstanding pool balance and any
accrued and unpaid interest at the weighted average of the loan rates through
the day preceding the payment date on which the purchase occurs together with
all amounts due and owing to the credit enhancer.
In the event that a portion of the home loans are purchased by the
master servicer, the purchase price will be equal to the sum of the aggregate
principal balances of the home loans so purchased and any accrued and unpaid
interest at the weighted average of the related loan rates on the home loans
through the day preceding the payment date on which the purchase occurs,
together with all amounts due and owing to the credit enhancer in connection
with the home loans so purchased. Any purchase will be subject to satisfaction
of conditions specified in the servicing agreement, including:
o the master servicer shall have delivered to the indenture trustee
a home loan schedule containing a list of all home loans
remaining in the trust after removal;
o the master servicer shall represent and warrant that no selection
procedures reasonably believed by the master servicer to be
adverse to the interests of the securityholders or the credit
enhancer were used by the master servicer in selecting the home
loans so purchased; and
o each rating agency shall have been notified of the proposed
retransfer and shall not have notified the master servicer that
the retransfer would result in a reduction or withdrawal of the
ratings of the notes without regard to the policy.
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DESCRIPTION OF THE POLICY
On the closing date, the credit enhancer will issue the policy in favor
of the indenture trustee on behalf of the issuer. The policy will
unconditionally and irrevocably guarantee specified payments on the notes equal
to the sum of:
o the amount by which accrued interest on the notes at the related
note rates on each payment date exceeds the amount on deposit in
the Payment Account on each payment date less the Principal
Collection Distribution Amount for each payment date,
o any Liquidation Loss Amount, other than any Excess Loss Amount,
for each payment date, to the extent not currently covered by a
Liquidation Loss Distribution Amount or a reduction in the
Outstanding Reserve Amount, and
o any Excess Loss Amount for each payment date.
Notwithstanding the foregoing, the amount of the draw under the policy will be
reduced by any amount paid directly to the trust under the limited reimbursement
agreement described in the second following paragraph. Under the terms of the
indenture, draws under the policy relating to any Liquidation Loss Amount will
be paid to the notes by the paying agent, as principal, to the extent the notes
would have been paid that amount. In addition, a draw will be made on the policy
to cover some shortfalls in amounts allocable to the noteholders following the
sale, liquidation or other disposition of the assets of the trust in connection
with the liquidation of the trust's assets as permitted under the indenture
following an event of default under the indenture. In addition, the policy will
guarantee the payment of the outstanding note balance of each note on the
payment date in December 2025. In the absence of payments under the policy,
noteholders will directly bear the credit risks associated with their investment
to the extent the risks are not covered by the Outstanding Reserve Amount or
otherwise.
THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY
FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
The credit enhancer has entered into a limited reimbursement agreement
whereby some amounts otherwise payable under the policy will be reimbursed to
the credit enhancer, or if directed by the credit enhancer, will be paid
directly to the trust by a third party. The trust is not a party to the limited
reimbursement agreement and has no rights with respect to it. In the event those
amounts are not paid to the trust under the limited reimbursement agreement, the
credit enhancer will nevertheless remain obligated to make all payments required
to be made under the policy as described in this section.
CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS
GENERAL
The yields to maturity and the aggregate amount of distributions on the
notes will be affected by the rate and timing of principal payments and the
amount and timing of mortgagor defaults resulting in Liquidation Loss Amounts.
The rate of default of home loans secured by second liens may be greater than
that of home loans secured by first liens. In addition, yields on the notes may
be adversely affected by a higher or lower than anticipated rate of principal
payments on the home loans. The rate of principal payments on the home loans
will in turn be affected by the amortization schedules of the home loans, the
rate and timing of principal prepayments on the home loans by the mortgagors,
liquidations of defaulted home loans and repurchases of home loans due to
breaches of representations.
The rate and timing of principal payments on and the weighted average
lives of the Class A-I Notes and Class A-II Notes will be affected primarily by
the rate and timing of principal payments (including prepayments, defaults,
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liquidations and purchases) on the Group I Loans and Group II Loans,
respectively. However, as a result of the cash flow provisions described in this
prospectus supplement, Interest Collections from one loan group may be applied
to cover principal losses and build overcollateralization in the other loan
group. In addition, once the note balances of the notes related to a loan group
have been reduced to zero, principal payments in respect of the loan group will
be distributed to the remaining class or classes of Class A Notes related to the
other loan group until their note balances have been reduced to zero.
The timing of changes in the rate of prepayments, liquidations and
repurchases of the home loans may, and the timing of Liquidation Loss Amounts
will, significantly affect the yield to an investor, even if the average rate of
principal payments experienced over time is consistent with an investor's
expectation. Since the rate and timing of principal payments on the home loans
will depend on future events and on a variety of factors, as further described
in this prospectus supplement and in the prospectus under "Yield and Prepayment
Considerations," no assurance can be given as to the rate or the timing of
principal payments on the notes.
The home loans in most cases may be prepaid by the mortgagors at any
time. However, in some circumstances, some of the home loans will be subject to
a prepayment charge. See "Description of the Home Loan Pool" in this prospectus
supplement. In addition, as described under "Description of the Home Loan
Pool--Home Loan Pool Characteristics" in this prospectus supplement, some of the
home loans may be assumable under the terms of the mortgage note, and the
remainder are subject to customary due-on-sale provisions. The master servicer
shall enforce any due-on-sale clause contained in any mortgage note or mortgage,
to the extent permitted under applicable law and governmental regulations.
However, if the master servicer determines that it is reasonably likely that any
mortgagor will bring, or if any mortgagor does bring, legal action to declare
invalid or otherwise avoid enforcement of a due-on-sale clause contained in any
mortgage note or mortgage, the master servicer shall not be required to enforce
the due-on-sale clause or to contest the action. The extent to which some of the
home loans are assumed by purchasers of the mortgaged properties rather than
prepaid by the related mortgagors in connection with the sales of the mortgaged
properties will affect the weighted average lives of the notes and may result in
a prepayment experience on the home loans that differs from that on other
conventional home loans. See "Yield and Prepayment Considerations" in the
prospectus.
Prepayments, liquidations and repurchases of the home loans will result
in distributions to holders of the notes of principal amounts which would
otherwise be distributed over the remaining terms of the home loans. Factors
affecting prepayment, including defaults and liquidations, of home loans include
changes in mortgagors' housing needs, job transfers, unemployment, mortgagors'
net equity in the mortgaged properties, changes in the value of the mortgaged
properties, mortgage market interest rates, solicitations and servicing
decisions. In addition, if prevailing mortgage rates fell significantly below
the loan rates on the home loans, the rate of prepayments, including
refinancings, would be expected to increase. Conversely, if prevailing mortgage
rates rose significantly above the loan rates on the home loans, the rate of
prepayments on the home loans would be expected to decrease. Prepayment of the
related first lien may also affect the rate of prepayments on the home loans.
The yield to maturity of the notes will depend, in part, on whether, to
what extent, and the timing with respect to which, any Reserve Increase Amount
is used to accelerate payments of principal on the notes or the Reserve Amount
Target is reduced. The amount of the Reserve Increase Amount paid to the notes
on any payment date will be affected by, among other things, delinquencies on
the home loans. See "Description of the Securities--Allocation of Payments on
the Home Loans" in this prospectus supplement.
The rate of defaults on the home loans will also affect the rate and
timing of principal payments on the home loans. In general, defaults on home
loans are expected to occur with greater frequency in their early years. The
rate of default of home loans secured by second liens is likely to be greater
than that of home loans secured by first liens on comparable properties. The
rate of default on home loans which are refinance home loans, and on home loans
with high combined LTV ratios, may be higher than for other types of home loans.
Furthermore, the rate and timing of prepayments, defaults and liquidations on
the home loans will be affected by the general economic condition of the region
of the country in which the related mortgaged properties are located. The risk
of delinquencies and loss is greater and prepayments are less likely in regions
where a weak or deteriorating economy exists, as may be evidenced by, among
S-44
<PAGE>
other factors, increasing unemployment or falling property values. See "Yield
and Prepayment Considerations" in the prospectus.
Because the loan rates on the home loans and the note rates on the
notes are fixed as set forth under "Description of the Securities--Interest
Payments on the Notes" in this prospectus supplement, these rates will not
change in response to changes in market interest rates. Accordingly, if market
interest rates or market yields for securities similar to the notes were to
rise, the market value of the notes may decline.
In addition, the yield to maturity on the notes will depend on, among
other things, the price paid by the holders of the notes and the related note
rate. The extent to which the yield to maturity of a note is sensitive to
prepayments will depend, in part, upon the degree to which it is purchased at a
discount or premium. In general, if notes are purchased at a premium and
principal distributions on the notes occur at a rate faster than assumed at the
time of purchase, the investor's actual yield to maturity will be lower than
anticipated at the time of purchase. Conversely, if notes are purchased at a
discount and principal distributions on the notes occur at a rate slower than
assumed at the time of purchase, the investor's actual yield to maturity will be
lower than anticipated at the time of purchase. For additional considerations
relating to the yield on the notes, see "Yield and Prepayment Considerations" in
the prospectus.
The notes are subject to various priorities for payment of principal as
described in this prospectus supplement. Distributions of principal on classes
having an earlier priority of payment will be affected by the rates of
prepayment of the home loans early in the life of the home loan pool. The timing
of commencement of principal distributions and the weighted average lives of
notes with a later priority of payment will be affected by the rates of
prepayment of the home loans both before and after the commencement of principal
distributions on those classes.
Final Scheduled Payment Dates: Using the structuring assumptions and
assuming a 0% prepayment assumption, no losses or delinquencies on the home
loans, and that on each payment date the Reserve Amount Target is always 0% of
the aggregate cut-off date pool balance, the final scheduled payment date on
each class of notes other than the Class A-I-7 Notes and Class A-II Notes will
be as follows:
o for the Class A-I-1 Notes, the payment date in May 2009;
o for the Class A-I-2 Notes, the payment date in August 2011;
o for the Class A-I-3 Notes, the payment date in January 2014;
o for the Class A-I-4 Notes, the payment date in December 2014;
o for the Class A-I-5 Notes, the payment date in December 2016; and
o for the Class A-I-6 Notes, the payment date in April 2020.
The final scheduled payment date with respect to the Class A-I-7 Notes
and Class A-II Notes will be December 25, 2025 which is the payment date
immediately following the latest scheduled maturity date for any home loan in
the related loan group.
Due to losses and prepayments on the home loans, the final scheduled
payment date on each class of notes may be substantially earlier than the dates
indicated in the preceding two paragraphs. In addition, the actual final payment
date may be later than the final scheduled payment date, except with respect to
the Class A-I-7 Notes and Class A-II Notes.
Weighted Average Life: Weighted average life refers to the average
amount of time that will elapse from the date of issuance of a security to the
date of distribution to the investor of each dollar distributed in reduction of
principal
S-45
<PAGE>
of the security, assuming no losses. The weighted average life of the notes will
be influenced by, among other things, the amount of any Reserve Increase Amount
paid to the Notes, and the rate at which principal on the home loans is paid,
which may be in the form of scheduled amortization, prepayments or liquidations.
The prepayment model used in this prospectus supplement, or prepayment
assumption, represents an assumed rate of prepayment each month relative to the
then outstanding principal balance of a pool of home loans. A 100% prepayment
assumption assumes a constant prepayment rate of 2% per annum of the then
outstanding principal balance of the home loans in the first month of the life
of the home loans and an additional 0.9286% per annum in each month thereafter
until the fifteenth month. Beginning in the fifteenth month and in each month
thereafter during the life of the home loans, a 100% prepayment assumption
assumes a constant prepayment rate of 15% per annum each month. As used in the
table below, a 50% prepayment assumption assumes prepayment rates equal to 50%
of the prepayment assumption. Correspondingly, a 150% prepayment assumption
assumes prepayment rates equal to 150% of the prepayment assumption, and so
forth. The prepayment assumption does not purport to be a historical description
of prepayment experience or a prediction of the anticipated rate of prepayment
of any pool of home loans, including the home loans.
The tables below have been prepared on the basis of specific
assumptions as described below in this paragraph regarding the weighted average
characteristics of the home loans that are expected to be included in the trust
as described under "Description of the Home Loan Pool" in this prospectus
supplement and the performance of the home loans. The tables assume, among other
things, that:
o The Group I Loans consist of five groups of home loans, with the
home loans in each group having the following aggregate
characteristics as of the cut-off date:
<TABLE>
<CAPTION>
ORIGINAL
AMORTIZATION REMAINING TERM
AGGREGATE LOAN RATE NET OF TERM TO MATURITY
GROUP PRINCIPAL BALANCE LOAN RATE SERVICING FEES (MONTHS) (MONTHS)
----------- ------------------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
I-1 $ 1,545,360.82 13.137% 12.557% 360 358
I-2 19,055,841.20 13.912 13.332 116 114
I-3 224,422,789.37 13.941 13.361 180 178
I-4 82,037,754.67 13.920 13.340 240 238
I-5 222,938,253.94 14.006 13.426 300 298
</TABLE>
o the first group above consists of balloon loans with a remaining
term to stated maturity of 178 months;
o The Group II Loans consist of five groups of home loans, with the
home loans in each group having the following aggregate
characteristics as of the cut-off date:
S-46
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL
AMORTIZATION REMAINING TERM
AGGREGATE LOAN RATE NET OF TERM TO MATURITY
GROUP PRINCIPAL BALANCE LOAN RATE SERVICING FEES (MONTHS) (MONTHS)
-------- ------------------ --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
II-1 $ 699,108.86 12.570% 11.990% 360 358
II-2 780,010.83 13.521 12.941 120 117
II-3 6,221,045.07 13.674 13.094 180 178
II-4 3,907,682.97 13.389 12.809 240 238
II-5 13,392,152.27 13.408 12.828 300 298
</TABLE>
o the first group above consists of balloon loans with a remaining
term to stated maturity of 178 months.
In addition, the following assumptions apply to the Group I Loans and
Group II Loans:
o the scheduled monthly payment for each home loan has been based
on its outstanding principal balance, interest rate and remaining
term to maturity, so that the home loan will amortize in amounts
sufficient for its repayment over its remaining term to maturity;
o none of the seller, the master servicer or the depositor will
repurchase any home loan, as described under "Description of the
Securities--Assignment of the Trust Assets" and
"--Representations Relating to Loans" in the prospectus, and the
master servicer does not exercise its option to purchase the home
loans and, as a result, cause a termination of the trust except
as indicated in the tables;
o there are no delinquencies or Liquidation Loss Amounts on the
home loans, and principal payments on the home loans will be
timely received together with prepayments, if any, on the last
day of the month and at the respective constant percentages of
the prepayment assumption in the table;
o there is no prepayment interest shortfall or any other interest
shortfall in any month;
o the home loans, including the simple interest home loans, pay on
the basis of a 30-day month and a 360-day year;
o payments on the notes will be received on the 25th day of each
month, commencing in January 2001;
o the expenses described under "Description of the
Securities--Allocation of Payments on the Home Loans" in this
prospectus supplement will be paid out of the trust, and there
are no additional ongoing trust expenses payable out of the
trust; and
o the notes will be purchased on December 21, 2000.
This list of assumptions is referred to as the structuring assumptions.
The actual characteristics and performance of the home loans will
differ from the assumptions used in constructing the tables below, which are
hypothetical in nature and are provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the home loans will prepay at a constant level
of the prepayment assumption until maturity or that all of the home loans will
prepay at the same level of the prepayment assumption. Moreover, the diverse
remaining terms to maturity and mortgage
S-47
<PAGE>
rates of the home loans could produce slower or faster principal distributions
than indicated in the tables at the various constant percentages of the
prepayment assumption, even if the weighted average remaining terms to maturity
and weighted average loan rate of the home loans are as assumed. Any difference
between the assumptions and the actual characteristics and performance of the
home loans, or actual prepayment or loss experience, will affect the percentage
of initial note balance outstanding over time and the weighted average lives of
the notes.
Subject to the foregoing discussion and assumptions, the following
tables indicate the weighted average life of the notes, and list the percentage
of the initial note balance of the notes that would be outstanding after each of
the payment dates shown at various percentages of the prepayment assumption.
S-48
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF INITIAL NOTE BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION
CLASS A-I-1 CLASS A-I-2
-------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATE 0% 50% 75% 100% 125% 150% 0% 50% 75% 100% 125% 150%
----------------- -- --- --- ---- ---- ---- --- ---- ---- ---- ---- ----
Initial Percentage........ 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
December 2001............. 84 63 52 42 31 20 100 100 100 100 100 100
December 2002............. 76 23 0 0 0 0 100 100 94 42 0 0
December 2003............. 67 0 0 0 0 0 100 69 0 0 0 0
December 2004............. 57 0 0 0 0 0 100 0 0 0 0 0
December 2005............. 45 0 0 0 0 0 100 0 0 0 0 0
December 2006............. 32 0 0 0 0 0 100 0 0 0 0 0
December 2007............. 16 0 0 0 0 0 100 0 0 0 0 0
December 2008............. 0 0 0 0 0 0 96 0 0 0 0 0
December 2009............. 0 0 0 0 0 0 54 0 0 0 0 0
December 2010............. 0 0 0 0 0 0 9 0 0 0 0 0
December 2011............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2012............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2013............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2014............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2015............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2016............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2017............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2018............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2019............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2020............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2021............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2022............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2023............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2024............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2025............. 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
to Maturity in Years...... 4.3 1.4 1.1 0.9 0.8 0.7 9.1 3.3 2.5 2.0 1.7 1.5
<CAPTION>
CLASS A-I-3
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATE 0% 50% 75% 100% 125% 150%
----------------- --- --- ---- ---- ---- ----
Initial Percentage........ 100% 100% 100% 100% 100% 100%
December 2001............. 100 100 100 100 100 100
December 2002............. 100 100 100 100 95 62
December 2003............. 100 100 95 45 0 0
December 2004............. 100 97 32 0 0 0
December 2005............. 100 50 0 0 0 0
December 2006............. 100 5 0 0 0 0
December 2007............. 100 0 0 0 0 0
December 2008............. 100 0 0 0 0 0
December 2009............. 100 0 0 0 0 0
December 2010............. 100 0 0 0 0 0
December 2011............. 72 0 0 0 0 0
December 2012............. 34 0 0 0 0 0
December 2013............. 0 0 0 0 0 0
December 2014............. 0 0 0 0 0 0
December 2015............. 0 0 0 0 0 0
December 2016............. 0 0 0 0 0 0
December 2017............. 0 0 0 0 0 0
December 2018............. 0 0 0 0 0 0
December 2019............. 0 0 0 0 0 0
December 2020............. 0 0 0 0 0 0
December 2021............. 0 0 0 0 0 0
December 2022............. 0 0 0 0 0 0
December 2023............. 0 0 0 0 0 0
December 2024............. 0 0 0 0 0 0
December 2025............. 0 0 0 0 0 0
Weighted Average Life
to Maturity in Years...... 11.6 5.1 3.8 3.0 2.5 2.2
</TABLE>
-------
The weighted average life of a note is determined by (i) multiplying the
net reduction, if any, of note balance by the number of years from the
date of issuance of the note to the related payment date, (ii) adding the
results, and (iii) dividing the sum by the aggregate of the net
reductions.
THIS TABLE HAS BEEN PREPARED BASED UPON THE STRUCTURING ASSUMPTIONS,
WHICH MAY DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE OF
THE HOME LOANS. THIS TABLE SHOULD BE READ IN CONJUNCTION WITH THESE
STRUCTURING ASSUMPTIONS.
* Indicates a number that is greater than zero but less than 0.5%.
S-49
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF INITIAL NOTE BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION
CLASS A-I-4 CLASS A-I-5
------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATE 0% 50% 75% 100% 125% 150% 0% 50% 75% 100% 125% 150%
----------------- --- ---- ---- ---- ---- ---- --- --- --- ---- ---- ---
Initial Percentage........ 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
December 2001............. 100 100 100 100 100 100 100 100 100 100 100 100
December 2002............. 100 100 100 100 100 100 100 100 100 100 100 100
December 2003............. 100 100 100 100 97 4 100 100 100 100 100 100
December 2004............. 100 100 100 42 0 0 100 100 100 100 57 0
December 2005............. 100 100 48 0 0 0 100 100 100 45 0 0
December 2006............. 100 100 0 0 0 0 100 100 63 0 0 0
December 2007............. 100 20 0 0 0 0 100 100 4 0 0 0
December 2008............. 100 0 0 0 0 0 100 60 0 0 0 0
December 2009............. 100 0 0 0 0 0 100 10 0 0 0 0
December 2010............. 100 0 0 0 0 0 100 0 0 0 0 0
December 2011............. 100 0 0 0 0 0 100 0 0 0 0 0
December 2012............. 100 0 0 0 0 0 100 0 0 0 0 0
December 2013............. 77 0 0 0 0 0 100 0 0 0 0 0
December 2014............. 0 0 0 0 0 0 80 0 0 0 0 0
December 2015............. 0 0 0 0 0 0 9 0 0 0 0 0
December 2016............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2017............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2018............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2019............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2020............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2021............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2022............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2023............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2024............. 0 0 0 0 0 0 0 0 0 0 0 0
December 2025............. 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
to Maturity in Years...... 13.3 6.7 5.0 4.0 3.3 2.8 14.5 8.2 6.3 5.0 4.1 3.5
<CAPTION>
CLASS A-I-6
-------------------------------------------------------
DISTRIBUTION DATE 0% 50% 75% 100% 125% 150%
----------------- --- --- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage........ 100% 100% 100% 100% 100% 100%
December 2001............. 100 100 100 100 100 100
December 2002............. 100 100 100 100 100 100
December 2003............. 100 100 100 100 100 100
December 2004............. 100 100 100 100 100 96
December 2005............. 100 100 100 100 78 27
December 2006............. 100 100 100 81 22 0
December 2007............. 100 100 100 32 0 0
December 2008............. 100 100 60 0 0 0
December 2009............. 100 100 21 0 0 0
December 2010............. 100 70 0 0 0 0
December 2011............. 100 34 0 0 0 0
December 2012............. 100 * 0 0 0 0
December 2013............. 100 0 0 0 0 0
December 2014............. 100 0 0 0 0 0
December 2015............. 100 0 0 0 0 0
December 2016............. 87 0 0 0 0 0
December 2017............. 63 0 0 0 0 0
December 2018............. 35 0 0 0 0 0
December 2019............. 3 0 0 0 0 0
December 2020............. 0 0 0 0 0 0
December 2021............. 0 0 0 0 0 0
December 2022............. 0 0 0 0 0 0
December 2023............. 0 0 0 0 0 0
December 2024............. 0 0 0 0 0 0
December 2025............. 0 0 0 0 0 0
Weighted Average Life
to Maturity in Years...... 17.4 10.6 8.3 6.7 5.6 4.7
</TABLE>
-------
The weighted average life of a note is determined by (i) multiplying
the net reduction, if any, of note balance by the number of years from
the date of issuance of the note to the related payment date, (ii)
adding the results, and (iii) dividing the sum by the aggregate of the
net reductions.
THIS TABLE HAS BEEN PREPARED BASED UPON THE STRUCTURING ASSUMPTIONS,
WHICH MAY DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE OF THE
HOME LOANS. THIS TABLE SHOULD BE READ IN CONJUNCTION WITH THESE
STRUCTURING ASSUMPTIONS.
* Indicates a number that is greater than zero but less than 0.5%.
S-50
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF INITIAL NOTE BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION
CLASS A-I-7 CLASS A-II
-------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATE 0% 50% 75% 100% 125% 150% 0% 50% 75% 100% 125% 150%
----------------- -- --- --- --- --- --- -- --- --- --- --- ---
Initial Percentage........ 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
December 2001............. 100 100 100 100 100 100 97 92 90 88 86 83
December 2002............. 100 100 100 100 100 100 96 84 79 73 68 63
December 2003............. 100 100 100 100 100 100 94 76 68 61 54 48
December 2004............. 100 100 100 100 100 100 92 69 59 51 43 36
December 2005............. 100 100 100 100 100 100 90 62 51 42 34 28
December 2006............. 100 100 100 100 100 86 88 56 44 35 27 21
December 2007............. 100 100 100 100 87 64 85 50 38 29 21 16
December 2008............. 100 100 100 95 68 47 82 45 33 24 17 12
December 2009............. 100 100 100 77 52 34 79 40 28 19 13 9
December 2010............. 100 100 93 61 39 24 75 35 24 16 10 6
December 2011............. 100 100 77 48 29 17 71 31 20 13 8 4
December 2012............. 100 100 62 37 21 11 67 27 17 10 6 3
December 2013............. 100 83 49 28 15 7 61 23 14 8 4 2
December 2014............. 100 66 37 20 10 4 56 19 11 6 3 1
December 2015............. 100 51 27 13 6 2 47 15 8 4 2 1
December 2016............. 100 43 22 10 4 1 44 13 7 3 1 *
December 2017............. 100 36 17 7 2 0 40 11 5 2 1 0
December 2018............. 100 29 13 5 1 0 36 9 4 2 * 0
December 2019............. 100 23 9 3 * 0 31 7 3 1 * 0
December 2020............. 83 17 6 1 0 0 26 5 2 1 0 0
December 2021............. 70 13 4 * 0 0 22 4 1 * 0 0
December 2022............. 55 9 2 0 0 0 17 3 1 0 0 0
December 2023............. 38 5 1 0 0 0 12 2 * 0 0 0
December 2024............. 17 1 0 0 0 0 6 * 0 0 0 0
December 2025............. 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
to Maturity in Years...... 22.2 16.3 13.7 11.6 9.9 8.5 14.7 8.3 6.6 5.4 4.5 3.9
Weighted Average Life
to Call in Years**........ 21.8 14.9 12.5 10.5 8.8 7.6 14.6 7.9 6.2 5.1 4.2 3.6
</TABLE>
-------
The weighted average life of a note is determined by (i) multiplying
the net reduction, if any, of note balance by the number of years from
the date of issuance of the note to the related payment date, (ii)
adding the results, and (iii) dividing the sum by the aggregate of the
net reductions.
THIS TABLE HAS BEEN PREPARED BASED UPON THE STRUCTURING ASSUMPTIONS,
WHICH MAY DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE OF THE
HOME LOANS. THIS TABLE SHOULD BE READ IN CONJUNCTION WITH THESE
STRUCTURING ASSUMPTIONS.
* Indicates a number that is greater than zero but less than 0.5%.
** Assumes an optional termination is exercised on the first payment
date when the aggregate pool balance is less than 10% of the
aggregate cut-off date pool balance.
S-51
<PAGE>
DESCRIPTION OF THE HOME LOAN PURCHASE AGREEMENT
The home loans to be deposited in the trust by the depositor will be
purchased by the depositor from the seller under the home loan purchase
agreement dated as of December 1, 2000 between the seller and the depositor. The
following summary describes the primary terms of the home loan purchase
agreement and is qualified in its entirety by reference to the home loan
purchase agreement.
PURCHASE OF HOME LOANS
Under the home loan purchase agreement, the seller will transfer and
assign to the depositor all of its right, title and interest in and to the home
loans and the mortgage notes, mortgages and other related documents. The
purchase prices for the home loans are specified percentages of their face
amounts as of the time of transfer and are payable by the depositor as provided
in the home loan purchase agreement.
The home loan purchase agreement will require that, within the time
period specified in this prospectus supplement, the seller deliver to the
indenture trustee, or the custodian, the home loans sold by the seller and the
related documents described in the preceding paragraph for the home loans.
REPRESENTATIONS AND WARRANTIES
The seller will represent and warrant with respect to the home loans
that, among other things:
o the information with respect to the home loans in the schedule
attached to the home loan purchase agreement is true and correct
in all material respects, and
o immediately prior to the sale of the home loans to the depositor,
the seller was the sole owner and holder of the home loans free
and clear of any and all liens and security interests.
The seller will also represent and warrant that, among other things, as
of the closing date:
o the home loan purchase agreement constitutes a legal, valid and
binding obligation of the seller, and
o the home loan purchase agreement constitutes a valid transfer and
assignment of all right, title and interest of the seller in and
to the home loans and the proceeds of the home loans.
The benefit of the representations and warranties made by the seller
will be assigned to the indenture trustee.
Within 90 days of the closing date, Wells Fargo Bank Minnesota, N.A.,
the custodian, will review or cause to be reviewed the home loans and the
related documents. If any home loan or related document is found to be missing
or defective, and the defect or omission materially and adversely affects the
value of the related home loan, or the interests of the indenture trustee, as
pledgee of the home loans, the securityholders or the credit enhancer in the
home loan and the defect is not cured within 90 days following notification of
the defect or omission to the seller and the trust by the custodian, the seller
will be obligated under the home loan purchase agreement to deposit the
repurchase price into the Custodial Account. In lieu of any deposit, the seller
may substitute an eligible substitute loan; provided that the substitution may
be subject to the delivery of an opinion of counsel regarding tax matters. Any
purchase or substitution will result in the removal of the home loan required to
be removed from the trust. Any removed home loan is referred to as a deleted
loan. The obligation of the seller to remove deleted loans sold by it from the
trust is the sole remedy regarding any defects in the home loans sold by the
seller and related documents for the home loans available against the seller.
S-52
<PAGE>
As to any home loan, the repurchase price referred to in the preceding
paragraph is equal to the principal balance of the home loan at the time of any
removal described in the preceding paragraph plus its accrued and unpaid
interest to the date of removal. In connection with the substitution of an
eligible substitute loan, the seller will be required to deposit in the
Custodial Account a substitution adjustment amount equal to the excess of the
principal balance of the related deleted loan to be removed from the trust over
the principal balance of the eligible substitute loan.
An eligible substitute loan is a home loan substituted by the seller
for a deleted loan which must, on the date of the substitution:
o have an outstanding principal balance, or in the case of a
substitution of more than one home loan for a deleted loan, an
aggregate principal balance, not in excess of the principal
balance relating to the deleted loan;
o have a loan rate no lower than and not more than 1% in excess of
the loan rate of the deleted loan;
o have a combined LTV ratio at the time of substitution no higher
than that of the deleted loan at the time of substitution;
o have, at the time of substitution, a remaining term to maturity
not more than one year earlier and not later than the remaining
term to maturity of the deleted loan;
o comply with each representation and warranty as to the home loans
in the home loan purchase agreement, deemed to be made as of the
date of substitution;
o be ineligible for inclusion in a REMIC if the deleted loan was a
REMIC ineligible loan, generally, because (a) the value of the
real property securing the deleted loan was not at least equal to
eighty percent of the original principal balance of the deleted
loan, calculated by subtracting the amount of any liens that are
senior to the loan and a proportionate amount of any lien of
equal priority from the value of the property when the loan was
originated and (b) substantially all of the proceeds of the
deleted loan were not used to acquire, improve or protect an
interest in the real property securing the loan; and
o satisfy other conditions specified in the indenture.
In addition, the seller will be obligated to deposit the repurchase
price or substitute an eligible substitute loan for a home loan as to which
there is a breach of a representation or warranty in the home loan purchase
agreement and the breach is not cured by the seller within the time provided in
the home loan purchase agreement.
DESCRIPTION OF THE SERVICING AGREEMENT
The following summary describes terms of the servicing agreement, dated
as of December 21, 2000 among the trust, the indenture trustee and the master
servicer. The summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the provisions of the servicing
agreement. Whenever particular defined terms of the servicing agreement are
referred to, the defined terms are incorporated in this prospectus supplement by
reference. See "The Agreements" in the prospectus.
S-53
<PAGE>
THE MASTER SERVICER
Residential Funding Corporation, an indirect wholly-owned subsidiary of
GMAC Mortgage Group, Inc. and an affiliate of the depositor, will be responsible
for master servicing the home loans under the servicing agreement. Residential
Funding Corporation will also be responsible for servicing the home loans in
accordance with its servicing guide directly or through one or more
subservicers. Responsibilities of Residential Funding Corporation will include
the receipt of funds from subservicers, the reconciliation of servicing
activity, investor reporting and remittances to the indenture trustee and the
owner trustee to accommodate payments to securityholders. For a general
description of Residential Funding Corporation and its activities, see "The Home
Loan Pool--Residential Funding Corporation" in this prospectus supplement and
"Residential Funding Corporation" in the prospectus.
In addition, Residential Funding Corporation will undertake collection
activity and default management of any home loans currently subserviced by GMAC
Mortgage Corporation, if such home loans become delinquent. Neither the master
servicer nor any subservicer will be required to make advances relating to
delinquent payments of principal and interest on the home loans.
For information regarding foreclosure procedures, see "Description of
the Securities--Servicing and Administration of Trust Assets" in the prospectus.
Servicing and charge-off policies and collection practices may change over time
in accordance with Residential Funding Corporation's business judgment, changes
in Residential Funding Corporation's portfolio of home loans of the types
included in the home loan pool that it services for its clients and applicable
laws and regulations, and other considerations.
THE INITIAL SUBSERVICER
Primary servicing for the home loans will be provided by GMAC Mortgage
Corporation under a subservicing agreement with the master servicer. GMAC
Mortgage Corporation is an indirect wholly-owned subsidiary of General Motors
Acceptance Corporation. GMAC Mortgage Corporation is engaged in the mortgage
banking business, including the origination, purchase, sale and servicing of
residential loans.
GMAC Mortgage Corporation's executive offices are located at 100 Witmer
Road, Horsham, Pennsylvania 19044-0963.
DELINQUENCY AND LOSS EXPERIENCE OF THE MASTER SERVICER'S PORTFOLIO
The following tables summarize the delinquency and loss experience of
the master servicer for all loans originated or acquired by the master servicer
under its home equity 125 loan program. The data presented in the following
tables are for illustrative purposes only, and there is no assurance that the
delinquency and loss experience of the home loans will be similar to that set
forth in the tables below.
The information in the tables below has not been adjusted to eliminate
the effect of the significant growth in the size of the master servicer's home
equity 125 loan portfolio during the periods shown. Accordingly, loss and
delinquency as percentages of aggregate principal balance of the home equity 125
loans serviced for each period would be higher than those shown if some of the
home loans were artificially isolated at a point in time and the information
showed the activity only as to those home equity 125 loans.
There can be no assurance that the delinquency experience set forth in
the tables below will be representative of the results that may be experienced
by the home loans serviced by the initial subservicers.
As used in this prospectus supplement, a loan is considered to be "30
to 59 days" or "30 or more days" delinquent when a payment due on any due date
remains unpaid as of the close of business on the next following monthly due
date. However, since the determination as to whether a loan falls into this
category is made as of the close
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<PAGE>
of business on the last business day of each month, a loan with a payment due on
July 1 that remained unpaid as of the close of business on July 31 would still
be considered current as of July 31. If that payment remained unpaid as of the
close of business on August 31, the loan would then be considered to be 30 to 59
days delinquent. Delinquency information presented in this prospectus supplement
as of the cut-off date is determined and prepared as of the close of business on
the last business day immediately prior to the cut-off date.
HOME EQUITY 125 LOAN PORTFOLIO DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998 AT DECEMBER 31, 1999 AT SEPTEMBER 30, 2000
-------------------------------- ------------------------------- ---------------------------
BY NO. OF BY DOLLAR AMOUNT BY NO. OF BY DOLLAR BY NO. OF BY DOLLAR
LOANS OF LOANS LOANS AMOUNT OF LOANS LOANS AMOUNT OF LOANS
------------- ------------------ ------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Total Active Portfolio..........
21,801 $766,661,924 72,221 $2,563,539,307 112,014 $4,036,110,084
Total Portfolio (Fund Amt)......
23,615 $839,480,133 77,912 $2,802,042,641 123,890 $4,538,425,203
Period of Delinquency
30-59 days...................
205 $ 6,352,595 392 $12,851,232 524 $ 16,960,847
60-89 days...................
45 $ 1,496,715 180 $ 5,815,745 291 $ 9,713,257
90+ days.....................
200 $ 6,720,291 442 $ 15,337,068 896 $ 30,403,302
Total Delinquent Loans..........
450 $ 14,569,601 1,014 $ 34,004,046 1,711 $ 57,077,406
Percent of Portfolio............
2.06% 1.90% 1.40% 1.33% 1.53% 1.41%
Completed Foreclosures..........
0 -- 1 $ 56,774 4 $ 165,839
Foreclosure %...................
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Completed Chargeoffs............
56 $ 1,651,587 343 $ 10,229,167 756 $ 7,799,839
Chargeoff %.....................
0.24% 0.20% 0.44% 0.37% 0.61% 0.61%
App./Pending Foreclosures.......
6 $ 268,086 10 $ 346,072 43 $ 1,590,866
App./Pending Foreclosure %......
0.03% 0.03% 0.01% 0.01% 0.04% 0.04%
App./Pending Chargeoffs.........
71 $ 2,146,794 275 $ 8,831,539 533 $ 17,652,249
App./Pending Chargeoff %........
0.33% 0.28% 0.38% 0.34% 0.48% 0.44%
</TABLE>
Because collection activity and default management of the home loans
subserviced by GMAC Mortgage Corporation will be transferred to Residential
Funding Corporation immediately upon delinquency, the loss and delinquency
experience of GMAC Mortgage Corporation is not relevant to this transaction and
is therefore not included in this prospectus supplement.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The servicing fee for each home loan is payable out of the interest
payments on the home loan. The servicing fee as of the cut-off date for each
home loan will be 0.58% per annum of the outstanding principal balance of the
home loan. The Servicing Fees consist of (a) servicing compensation payable to
the master servicer relating to its master servicing activities, and (b)
subservicing and other related compensation payable to the subservicers,
including the compensation paid to the master servicer as the direct servicer of
a home loan for which there is no subservicer. The primary compensation to be
paid to the master servicer relating to its master servicing activities will be
0.08% per annum of the outstanding principal balance of each home loan. The
master servicer is obligated to pay some ongoing expenses associated with the
trust and incurred by the master servicer in connection with its
responsibilities under the servicing agreement. See "Description of the
Securities--Servicing and Administration of Trust Assets" in the prospectus for
information regarding other possible compensation to the master servicer and the
subservicers and for information regarding expenses payable by the master
servicer.
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<PAGE>
PRINCIPAL AND INTEREST COLLECTIONS
The master servicer shall establish and maintain a Custodial Account in
which the master servicer shall deposit or cause to be deposited any amounts
representing payments on and any collections received relating to the home loans
received on or after the cut-off date. The Custodial Account shall be an
Eligible Account. On each determination date, which is the 20th day of each
month, or if that day is not a business day, the following business day, the
master servicer will notify the paying agent and the indenture trustee of the
aggregate amounts required to be withdrawn from the Custodial Account and
deposited into the Payment Account prior to the close of business on the
business day following the determination date.
Permitted investments are specified in the servicing agreement and are
limited to investments which meet the criteria of the rating agencies from time
to time as being consistent with their then-current ratings of the notes.
The master servicer will make the following withdrawals from the
Custodial Account and deposit the amounts as follows:
o on the business day prior to each payment date, to the Payment
Account, an amount equal to Principal Collections and Interest
Collections for the preceding Collection Period; and
o to pay to itself or the seller various reimbursement amounts and
other amounts as provided in the servicing agreement.
All collections on the home loans will generally be allocated in
accordance with the mortgage notes between Principal Collections and Interest
Collections. As to unscheduled collections, the master servicer may elect to
treat the amounts as included in Principal Collections and Interest Collections
for the payment date in the month of receipt, but is not obligated to do so. As
described in this prospectus supplement under "Description of the
Securities--Principal Payments on the Notes," any amount for which the election
is so made shall be treated as having been received on the last day of the
related Collection Period for the purposes of calculating the amount of
principal and interest distributions to the notes.
RELEASE OF LIEN; REFINANCING OF SENIOR LIEN
The servicing agreement permits the master servicer to release the lien
on the mortgaged property securing a home loan under limited circumstances if
the home loan is current in payment. A release may be made in any case where the
borrower simultaneously delivers a mortgage on a substitute mortgaged property,
if the combined LTV ratio is not increased. A release may also be made, in
connection with a simultaneous substitution of the mortgaged property, if the
combined LTV ratio would be increased to not more than the lesser of (a) 125%
and (b) 105% times the combined LTV ratio previously in effect, if the master
servicer determines that appropriate compensating factors are present.
Furthermore, a release may also be permitted in cases where no substitute
mortgaged property is provided, causing the home loan to become unsecured,
subject to limitations in the servicing agreement. At the time of the release,
some terms of the home loan may be modified, including a loan rate increase or a
maturity extension, and the terms of the home loan may be further modified in
the event that the borrower subsequently delivers a mortgage on a substitute
mortgaged property.
The master servicer may permit the refinancing of any existing lien
senior to a home loan, provided that specified conditions in the servicing
agreement are met.
COLLECTION AND LIQUIDATION PRACTICES; LOSS MITIGATION
The master servicer is authorized to engage in a wide variety of loss
mitigation practices with respect to the home loans, including waivers,
modifications, payment forbearances, partial forgiveness, entering into
repayment
S-56
<PAGE>
schedule arrangements, and capitalization of arrearages; provided in any case
that the master servicer determines that the action is not materially adverse to
the interests of the indenture trustee as pledgee of the home loans and is
generally consistent with the master servicer's policies with respect to similar
loans; and provided further that some modifications, including reductions in the
loan rate, partial forgiveness or a maturity extension, may only be taken if the
home loan is in default or if default is reasonably foreseeable. For home loans
that come into and continue in default, the master servicer may take a variety
of actions including foreclosure upon the mortgaged property, writing off the
balance of the home loan as bad debt, taking a deed in lieu of foreclosure,
accepting a short sale, permitting a short refinancing, arranging for a
repayment plan, modifications as described above, or taking an unsecured note.
See "Description of the Securities--Servicing and Administration of Trust
Assets" in the prospectus.
OPTIONAL REPURCHASE OF DEFAULTED HOME LOANS
Under the servicing agreement, the master servicer will have the option
to repurchase from the trust any home loan which is 60 days or more delinquent
at a purchase price equal to its principal balance plus accrued interest.
DESCRIPTION OF THE TRUST AGREEMENT AND INDENTURE
The following summary describes the primary terms of the trust
agreement and the indenture. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of the
trust agreement and the indenture. See "The Agreements" in the prospectus.
THE TRUST FUND
Simultaneously with the issuance of the notes, the issuer will pledge
the assets of the trust to the indenture trustee as collateral for the notes. As
pledgee of the home loans, the indenture trustee will be entitled to direct the
trust in the exercise of all rights and remedies of the trust against the seller
under the home loan purchase agreement and against the master servicer under the
servicing agreement.
REPORTS TO HOLDERS
The indenture trustee will mail to each holder of notes, at its address
listed on the security register maintained with the indenture trustee, a report
setting forth amounts relating to the notes for each payment date, among other
things:
o the amount of principal payable on the payment date to the
holders of securities;
o the amount of interest payable on the payment date to the holders
of securities;
o the aggregate note balance of the notes after giving effect to
the payment of principal on the payment date;
o Principal Collections and Interest Collections for the related
Collection Period;
o the aggregate principal balance of the home loans as of the end
of the preceding Collection Period;
o the Outstanding Reserve Amount as of the end of the related
Collection Period; and
o the amount paid, if any, under the policy and the limited
reimbursement agreement for the payment date.
S-57
<PAGE>
In the case of information furnished under the first and second listed
clause above relating to the notes, the amounts shall be expressed as a dollar
amount per $1,000 in face amount of notes.
CERTAIN COVENANTS
The indenture will provide that the issuer may not consolidate with or
merge into any other entity, unless:
o the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States, any state or the
District of Columbia,
o the entity expressly assumes, by an indenture supplemental to the
indenture, the issuer's obligation to make due and punctual
payments upon the notes and the performance or observance of any
agreement and covenant of the issuer under the indenture,
o no event of default shall have occurred and be continuing
immediately after the merger or consolidation,
o the issuer has received consent of the credit enhancer and has
been advised that the ratings of the securities, without regard
to the policy, then in effect would not be reduced or withdrawn
by any rating agency as a result of the merger or consolidation,
o any action that is necessary to maintain the lien and security
interest created by the indenture is taken,
o the issuer has received an opinion of counsel to the effect that
the consolidation or merger would have no material adverse tax
consequence to the issuer or to any noteholder or
certificateholder, and
o the issuer has delivered to the indenture trustee an officer's
certificate and an opinion of counsel each stating that the
consolidation or merger and the supplemental indenture comply
with the indenture and that all conditions precedent, as provided
in the indenture, relating to the transaction have been complied
with.
The issuer will not, among other things:
o except as expressly permitted by the indenture, sell, transfer,
exchange or otherwise dispose of any of the assets of the issuer,
o claim any credit on or make any deduction from the principal and
interest payable relating to the notes, other than amounts
withheld under the Internal Revenue Code or applicable state law,
or assert any claim against any present or former holder of notes
because of the payment of taxes levied or assessed upon the
issuer,
o permit the validity or effectiveness of the indenture to be
impaired or permit any person to be released from any covenants
or obligations with respect to the notes under the indenture
except as may be expressly permitted by the indenture, or
o permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or
otherwise arise upon or burden the assets of the issuer or any
part of its assets, or any of its interest or the proceeds of its
assets.
The issuer may not engage in any activity other than as specified under "The
Issuer" in this prospectus supplement.
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<PAGE>
MODIFICATION OF INDENTURE
With the consent of the holders of a majority of the outstanding notes
and the credit enhancer, the issuer and the indenture trustee may execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the indenture, or modify, except as provided below, in any
manner the rights of the noteholders. Without the consent of the holder of each
outstanding note affected by that modification and the credit enhancer, however,
no supplemental indenture will:
o change the due date of any installment of principal of or
interest on any note or reduce its principal amount, its interest
rate specified or change any place of payment where or the coin
or currency in which any note or any of its interest is payable;
o impair the right to institute suit for the enforcement of some
provisions of the indenture regarding payment;
o reduce the percentage of the aggregate amount of the outstanding
notes, the consent of the holders of which is required for any
supplemental indenture or the consent of the holders of which is
required for any waiver of compliance with some provisions of the
indenture or of some defaults thereunder and their consequences
as provided for in the indenture;
o modify or alter the provisions of the indenture regarding the
voting of notes held by the issuer, the depositor or an affiliate
of any of them;
o decrease the percentage of the aggregate principal amount of
notes required to amend the sections of the indenture which
specify the applicable percentage of aggregate principal amount
of the notes necessary to amend the indenture or some other
related agreements;
o modify any of the provisions of the indenture in a manner as to
affect the calculation of the amount of any payment of interest
or principal due on any note, including the calculation of any of
the individual components of the calculation; or
o permit the creation of any lien ranking prior to or, except as
otherwise contemplated by the indenture, on a parity with the
lien of the indenture with respect to any of the collateral for
the notes or, except as otherwise permitted or contemplated in
the indenture, terminate the lien of the indenture on any
collateral or deprive the holder of any note of the security
afforded by the lien of the indenture.
The issuer and the indenture trustee may also enter into supplemental
indentures, with the consent of the credit enhancer and without obtaining the
consent of the noteholders, for the purpose of, among other things, curing any
ambiguity, correcting any error, or correcting or supplementing any provision in
the indenture that may be inconsistent with any other provision in the indenture
or in this prospectus supplement.
CERTAIN MATTERS REGARDING THE INDENTURE TRUSTEE AND THE ISSUER
Neither the indenture trustee nor any director, officer or employee of
the indenture trustee will be under any liability to the issuer or the related
noteholders for any action taken or for refraining from the taking of any action
in good faith under the indenture or for errors in judgment. None of the
indenture trustee and any director, officer or employee of the indenture trustee
will be protected against any liability which would otherwise be imposed by
reason of willful malfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties under the
indenture. Subject to limitations in the indenture, the indenture trustee and
any director, officer, employee or agent of the indenture trustee shall be
indemnified by the issuer and held harmless against any loss, liability or
expense incurred in connection with investigating, preparing to defend or
defending any legal action,
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<PAGE>
commenced or threatened, relating to the indenture other than any loss,
liability or expense incurred by reason of willful malfeasance, bad faith or
negligence in the performance of its duties under the indenture or by reason of
reckless disregard of its obligations and duties under the indenture. All
persons into which the indenture trustee may be merged or with which it may be
consolidated or any person resulting from a merger or consolidation shall be the
successor of the indenture trustee under the indenture.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Thacher Proffitt & Wood, counsel to the depositor,
for federal income tax purposes, the notes will be characterized as indebtedness
and the issuer, as created under the terms and conditions of the trust
agreement, will not be classified as an association taxable as a corporation, a
publicly traded partnership within the meaning of Section 7704 of the Internal
Revenue Code, a corporation or a taxable mortgage pool under Section 7701(i) of
the Internal Revenue Code.
For federal income tax purposes, the notes will not be treated as
having been issued with "original issue discount," as described in the
prospectus. See "Material Federal Income Tax Consequences" in the prospectus.
The notes will not be treated as assets described in Section
7701(a)(19)(C) of the Internal Revenue Code and will not be treated as "real
estate assets" under Section 856(c)(4)(A) of the Internal Revenue Code. In
addition, interest on the notes will not be treated as "interest on obligations
secured by mortgages on real property" under Section 856(c)(3)(B) of the
Internal Revenue Code. The notes also will not be treated as "qualified
mortgages" under Section 860G(a)(3)(C) of the Internal Revenue Code.
Prospective investors in the notes should see "Material Federal Income
Tax Consequences" and "State and Other Tax Consequences" in the prospectus for a
discussion of the application of federal income and state and local tax laws to
the issuer and purchasers of the notes.
ERISA CONSIDERATIONS
Any fiduciary or other investor of ERISA plan assets that proposes to
acquire or hold the notes on behalf of or with ERISA plan assets of any ERISA
plan should consult with its counsel with respect to the potential applicability
of the fiduciary responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and the Internal Revenue Code to the proposed
investment. See "ERISA Considerations" in the prospectus.
Each purchaser of a note, by its acceptance of the note, shall be
deemed to have represented that the acquisition of the note by the purchaser
does not constitute or give rise to a prohibited transaction under section 406
of ERISA or section 4975 of the Internal Revenue Code, for which no statutory,
regulatory or administrative exemption is available. See "ERISA Considerations"
in the prospectus.
The notes may not be purchased with the assets of an ERISA plan if the
depositor, the master servicer, the indenture trustee, the owner trustee or any
of their affiliates:
o has investment or administrative discretion with respect to the
ERISA plan's assets;
o has authority or responsibility to give, or regularly gives,
investment advice regarding the ERISA plan's assets, for a fee
and under an agreement or understanding that the advice will
serve as a primary basis for investment decisions regarding the
ERISA plan's assets and will be based on the particular
investment needs for the ERISA plan; or
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o is an employer maintaining or contributing to the ERISA plan.
LEGAL INVESTMENT
The notes will not constitute "mortgage related securities" for
purposes of SMMEA. Accordingly, many institutions with legal authority to invest
in mortgage related securities may not be legally authorized to invest in the
notes. No representation is made in this prospectus supplement as to whether the
notes constitute legal investments for any entity under any applicable statute,
law, rule, regulation or order. Prospective purchasers are urged to consult with
their counsel concerning the status of the notes as legal investments for the
purchasers prior to investing in notes.
METHOD OF DISTRIBUTION
Subject to the terms and conditions of an underwriting agreement, dated
December 14, 2000, Bear, Stearns & Co. Inc., Salomon Smith Barney Inc. and
Residential Funding Securities Corporation, as underwriters, have agreed to
purchase and the depositor has agreed to sell to each underwriter the principal
amount of notes opposite its name in the tables below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF:
-------------------------------------------------------------------
UNDERWRITER CLASS A-I-1 CLASS A-I-2 CLASS A-I-3
----------- ----------- ----------- -----------
<S> <C> <C> <C>
Bear, Stearns & Co. Inc............................ $ 36,769,000 $18,799,000 $27,071,000
Salomon Smith Barney Inc........................... $ 39,768,000 $18,798,000 $27,071,000
Residential Funding Securities Corporation......... $ 39,768,000 $18,798,000 $27,071,000
------------ ----------- -----------
Total.............................................. $116,305,000 $56,395,000 $ 81,213,000
============= =========== ============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF:
----------------------------------------------------------------
UNDERWRITER CLASS A-I-4 CLASS A-I-5 CLASS A-I-6
----------- ----------- ----------- -----------
<S> <C> <C> <C>
Bear, Stearns & Co. Inc............................. $12,434,000 $19,535,000 $23,463,000
Salomon Smith Barney Inc............................ $12,432,000 $19,534,000 $23,461,000
Residential Funding Securities Corporation.......... $12,432,000 $19,534,000 $23,461,000
------------ ------------ ------------
Total...............................................
$37,298,000 $58,603,000 $70,385,000
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF:
--------------------------------------------
UNDERWRITER CLASS A-I-7 CLASS A-II
----------- ---------------- -------------
<S> <C> <C>
Bear, Stearns & Co. Inc............................. $ 43,267,000 $ 8,334,000
Salomon Smith Barney Inc............................ $ 43,267,000 $ 8,333,000
Residential Funding Securities Corporation.......... $ 43,267,000 $ 8,333,000
------------ -----------
Total............................................... $129,801,000 $25,000,000
============ ===========
</TABLE>
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In connection with the notes, the underwriters have agreed, in
accordance with the terms and conditions of the underwriting agreement, to
purchase all of the notes if any of the notes are purchased thereby.
The distribution of the underwritten notes by the underwriters may be
effected from time to time in one or more negotiated transactions, or otherwise,
at varying prices to be determined at the time of sale. Proceeds to the
depositor from the sale of the notes, before deducting expenses payable by the
depositor, will be approximately 99.69% of the aggregate principal amount of the
notes, plus accrued interest on the notes from the cut-off date.
The underwriters may effect these transactions by selling the notes to
or through dealers, and those dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the underwriters for
whom they act as agent. In connection with the sale of the notes, the
underwriters may be deemed to have received compensation from the depositor in
the form of underwriting compensation. The underwriters and any dealers that
participate with the underwriter in the distribution of the notes may be deemed
to be underwriters and any profit on the resale of the notes positioned by them
may be deemed to be underwriting discounts and commissions under the Securities
Act.
It is expected that delivery of the notes will be made only in
book-entry form through DTC, Clearstream and Euroclear as discussed in this
prospectus supplement, on or about December 21, 2000 against payment in
immediately available funds.
In addition, the underwriting agreement provides that the obligations
of the underwriters to pay for and accept delivery of the related notes is
subject to, among other things, the receipt of legal opinions and to the
conditions, among others, that no stop order suspending the effectiveness of the
depositor's registration statement shall be in effect, and that no proceedings
for that purpose shall be pending before or threatened by the Commission.
The underwriting agreement provides that the depositor will indemnify
the related underwriters and that under limited circumstances the related
underwriter will indemnify the depositor against some liabilities, including
liabilities under the Securities Act of 1933, or contribute to payments the
related underwriter may be required to make for these liabilities.
There can be no assurance that a secondary market for the notes will
develop or, if it does develop, that it will continue. The primary source of
information available to investors concerning the notes will be the monthly
statements discussed in this prospectus supplement under "Description of the
Trust Agreement and Indenture--Reports to Holders" and in the prospectus under
"Description of the Securities--Reports to Securityholders,"which will include
information as to the outstanding principal amount of the notes. There can be no
assurance that any additional information regarding the notes will be available
through any other source. In addition, the depositor is not aware of any source
through which price information about the notes will be generally available on
an ongoing basis. The limited nature of this type of information regarding the
notes may adversely affect the liquidity of the notes, even if a secondary
market for the notes becomes available.
Residential Funding Securities Corporation is an affiliate of the
depositor.
EXPERTS
The consolidated financial statements of Ambac Assurance Corporation
and subsidiaries, as of December 31, 1999 and 1998 and for each of the years in
the three-year period ended December 31, 1999 are incorporated by reference in
this prospectus supplement and in the registration statement in reliance upon
the report of KPMG LLP, independent certified public accountants, incorporated
by reference in this prospectus supplement, and upon the authority of said
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<PAGE>
firm as experts in accounting and auditing.
LEGAL MATTERS
Legal matters concerning the notes will be passed upon for the
depositor and Residential Funding Securities Corporation by Thacher Proffitt &
Wood, New York, New York and for Bear, Stearns & Co. Inc. and Salomon Smith
Barney Inc. by Brown & Wood LLP, New York, New York.
RATINGS
It is a condition to issuance that the notes be rated not less than
"Aaa" by Moody's and "AAA" by Standard & Poor's. The depositor has not requested
a rating on the notes by any rating agency other than Moody's and Standard &
Poor's. However, there can be no assurance as to whether any other rating agency
will rate the notes, or, if it does, what rating would be assigned by any other
rating agency. A rating on the notes by another rating agency, if assigned at
all, may be lower than the ratings assigned to the notes by Moody's and Standard
& Poor's. A securities rating addresses the likelihood of the receipt by holders
of notes of distributions on the home loans. The rating takes into consideration
the structural and legal aspects associated with the notes. The ratings on the
notes do not, however, constitute statements regarding the possibility that
holders might realize a lower than anticipated yield. A securities rating is not
a recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating organization. Each securities
rating should be evaluated independently of similar ratings on different
securities.
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<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Residential Funding Mortgage Securities II, Inc., Home Loan-Backed Notes, Series
2000-HI5, which are referred to as the global securities, will be available only
in book-entry form. Investors in the global securities may hold interests in
these global securities through any of DTC, Clearstream or Euroclear. Initial
settlement and all secondary trades will settle in same day funds.
Secondary market trading between investors holding interests in global
securities through Clearstream and Euroclear will be conducted in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice. Secondary market trading between investors
holding interests in global securities through DTC will be conducted according
to the rules and procedures applicable to U.S. corporate debt obligations.
Secondary cross-market trading between investors holding interests in
global securities through Clearstream or Euroclear and investors holding
interests in global securities through DTC participants will be effected on a
delivery-against-payment basis through the respective depositories of
Clearstream and Euroclear, in such capacity, and other DTC participants.
Although DTC, Euroclear and Clearstream are expected to follow the
procedures described below in order to facilitate transfers of interests in the
global securities among participants of DTC, Euroclear and Clearstream, they are
under no obligation to perform or continue to perform those procedures, and
those procedures may be discontinued at any time. Neither the depositor, the
master servicer nor the trustee will have any responsibility for the performance
by DTC, Euroclear and Clearstream or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their obligations.
Non-U.S. holders of global securities will be subject to U.S.
withholding taxes unless those holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or their
participants.
INITIAL SETTLEMENT
The global securities will be registered in the name of Cede & Co. as
nominee of DTC. Investors' interests in the global securities will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. Clearstream and Euroclear will hold positions on
behalf of their participants through their respective depositories, which in
turn will hold such positions in accounts as DTC participants.
Investors electing to hold interests in global securities through DTC
participants, rather than through Clearstream or Euroclear accounts, will be
subject to the settlement practices applicable to similar issues of pass-through
certificates. Investors' securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold interests in global securities through
Clearstream or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no temporary
global security and no "lock-up" or restricted period. Interests in global
securities will be credited to the securities custody accounts on the settlement
date against payment in same-day funds.
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SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Transfers between DTC Participants. Secondary market trading between
DTC participants will be settled using the DTC procedures applicable to similar
issues of prior mortgage loan backed notes in same-day funds.
Transfers between Clearstream and/or Euroclear Participants. Secondary
market trading between Clearstream participants or Euroclear participants and/or
investors holding interests in global securities through them will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Transfers between DTC seller and Clearstream or Euroclear purchaser.
When interests in global securities are to be transferred on behalf of a seller
from the account of a DTC participant to the account of a Clearstream
participant or a Euroclear participant for a purchaser, the purchaser will send
instructions to Clearstream or Euroclear through a Clearstream participant or
Euroclear participant at least one business day prior to settlement. Clearstream
or the Euroclear operator will instruct its respective depository to receive an
interest in the global securities against payment. Payment will include interest
accrued on the global securities from and including the last distribution date
to but excluding the settlement date. Payment will then be made by the
respective depository to the DTC participant's account against delivery of an
interest in the global securities. After this settlement has been completed, the
interest will be credited to the respective clearing system, and by the clearing
system, in accordance with its usual procedures, to the Clearstream
participant's or Euroclear participant's account. The credit of this interest
will appear on the next business day and the cash debit will be back-valued to,
and the interest on the global securities will accrue from, the value date,
which would be the preceding day when settlement occurred in New York. If
settlement is not completed through DTC on the intended value date, i.e., the
trade fails, the Clearstream or Euroclear cash debit will be valued instead as
of the actual settlement date.
Clearstream participants and Euroclear participants will need to make
available to the respective clearing system the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement from cash on hand, in which case the Clearstream
participants or Euroclear participants will take on credit exposure to
Clearstream or the Euroclear operator until interests in the global securities
are credited to their accounts one day later.
As an alternative, if Clearstream or the Euroclear operator has
extended a line of credit to them, Clearstream participants or Euroclear
participants can elect not to pre-position funds and allow that credit line to
be drawn upon. Under this procedure, Clearstream participants or Euroclear
participants receiving interests in global securities for purchasers would incur
overdraft charges for one day, to the extent they cleared the overdraft when
interests in the global securities were credited to their accounts. However,
interest on the global securities would accrue from the value date. Therefore,
the investment income on the interest in the global securities earned during
that one-day period would tend to offset the amount of these overdraft charges,
although this result will depend on each Clearstream participant's or Euroclear
participant's particular cost of funds.
Since the settlement through DTC will take place during New York
business hours, DTC participants are subject to DTC procedures for transferring
interests in global securities to the respective depository of Clearstream or
Euroclear for the benefit of Clearstream participants or Euroclear participants.
The sale proceeds will be available to the DTC seller on the settlement date.
Thus, to the seller settling the sale through a DTC participant, a cross-market
transaction will settle no differently than a sale to a purchaser settling
through a DTC participant.
Finally, intra-day traders that use Clearstream participants or
Euroclear participants to purchase interests in global securities from DTC
participants or sellers settling through them for delivery to Clearstream
participants or Euroclear participants should note that these trades will
automatically fail on the sale side unless affirmative action is taken. At least
three techniques should be available to eliminate this potential condition:
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o borrowing interests in global securities through Clearstream or
Euroclear for one day, until the purchase side of the intra-day
trade is reflected in the relevant Clearstream or Euroclear
accounts, in accordance with the clearing system's customary
procedures;
o borrowing interests in global securities in the United States from
a DTC participant no later than one day prior to settlement, which
would give sufficient time for such interests to be reflected in
the relevant Clearstream or Euroclear accounts in order to settle
the sale side of the trade; or
o staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is
at least one day prior to the value date for the sale to the
Clearstream participant or Euroclear participant.
Transfers between Clearstream or Euroclear seller and DTC purchaser.
Due to time zone differences in their favor, Clearstream participants and
Euroclear participants may employ their customary procedures for transactions in
which interests in global securities are to be transferred by the respective
clearing system, through the respective depository, to a DTC participant. The
seller will send instructions to Clearstream or the Euroclear operator through a
Clearstream participant or Euroclear participant at least one business day prior
to settlement. Clearstream or Euroclear will instruct its respective depository,
to credit an interest in the global securities to the DTC participant's account
against payment. Payment will include interest accrued on the global securities
from and including the last distribution date to but excluding the settlement
date. The payment will then be reflected in the account of the Clearstream
participant or Euroclear participant the following business day, and receipt of
the cash proceeds in the Clearstream participant's or Euroclear participant's
account would be back-valued to the value date, which would be the preceding
day, when settlement occurred through DTC in New York. If settlement is not
completed on the intended value date, i.e., the trade fails, receipt of the cash
proceeds in the Clearstream participant's or Euroclear participant's account
would instead be valued as of the actual settlement date.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of global securities holding securities through
Clearstream or Euroclear, or through DTC if the holder has an address outside
the U.S., will be subject to the 30% U.S. withholding tax that typically applies
to payments of interest, including original issue discount, on registered debt
issued by U.S. persons, unless:
o each clearing system, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or
business in the chain of intermediaries between the beneficial
owner and the U.S. entity required to withhold tax complies with
applicable certification requirements; and
o the beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
o Exemption for Non-U.S. Persons--Form W-8 or Form W-8BEN.
Beneficial holders of global securities that are Non-U.S.
persons can obtain a complete exemption from the withholding tax
by filing a signed Form W-8, or Certificate of Foreign Status,
or Form W- 8BEN, or Certificate of Foreign Status of Beneficial
Owner for United States Tax Withholding. If the information
shown on Form W-8 or Form W-8BEN changes, a new Form W-8 or Form
W-8BEN must be filed within 30 days of the change. After
December 31, 2000, only Form W-8BEN will be acceptable.
o Exemption for Non-U.S. persons with effectively connected
income--Form 4224 or Form W-8ECI. A Non-U.S. person, including a
non-U.S. corporation or bank with a U.S. branch, for which the
interest income is effectively connected with its conduct of a
trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224, or Exemption from
Withholding of Tax on Income Effectively Connected with the
Conduct
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of a Trade or Business in the United States, or Form W-8ECI, or
Certificate of Foreign Person's Claim for Exemption from
Withholding on Income Effectively Connected with the Conduct of
a Trade or Business in the United States.
o Exemption or reduced rate for Non-U.S. persons resident in
treaty countries--Form 1001 or Form W-8BEN. Non-U.S. persons
residing in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate, depending on
the treaty terms, by filing Form 1001, or Holdership, Exemption
or Reduced Rate Certificate, or Form W-8BEN. Form 1001 or Form
W-8BEN may be filed by Bond Holders or their agent. After
December 31, 2000, only Form W-8BEN will be acceptable.
o Exemption for U.S. Persons--Form W-9. U.S. persons can obtain a
complete exemption from the withholding tax by filing Form W-9,
or Payer's Request for Taxpayer Identification Number and
Certification.
U.S. Federal Income Tax Reporting Procedure. The holder of a global
security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds the
security--the clearing agency, in the case of persons holding directly on the
books of the clearing agency. Form W-8, Form 1001 and Form 4224 are effective
until December 31, 2000. Form W-8BEN and Form W-8ECI are effective until the
third succeeding calendar year from the date the form is signed. The term "U.S.
person" means:
o a citizen or resident of the United States;
o a corporation, partnership or other entity treated as a corporation
or a partnership for United States federal income tax purposes,
organized in or under the laws of the United States or any state
thereof, including for this purpose the District of Columbia,
unless, in the case of a partnership, future Treasury regulations
provide otherwise;
o an estate that is subject to U.S. federal income tax regardless of
the source of its income; or
o a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or
more United States persons have the authority to control all
substantial decisions of the trust.
Certain trusts not described in the final bullet of the preceding sentence in
existence on August 20, 1996 that elect to be treated as a United States Person
will also be a U.S. person. The term "Non-U.S. person" means any person who is
not a U.S. person. This summary does not deal with all aspects of U.S. Federal
income tax withholding that may be relevant to foreign holders of the global
securities. Investors are advised to consult their own tax advisors for specific
tax advice concerning their holding and disposing of the global securities.
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MODULE
RFMS20600
CIK 0000945212
CCC alexan$3
<PAGE>
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC.
$575,000,000
HOME LOAN-BACKED NOTES,
SERIES 2000-HI5
PROSPECTUS SUPPLEMENT
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY
RESIDENTIAL FUNDING SECURITIES CORPORATION
UNDERWRITERS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE NOTES OFFERED IN THIS PROSPECTUS SUPPLEMENT IN ANY STATE
WHERE THE OFFER IS NOT PERMITTED.
Dealers will be required to deliver a prospectus supplement and prospectus when
acting as underwriter of the notes offered hereby and with respect to its unsold
allotment or subscription. In addition, all dealers selling the notes, whether
or not participating in this offering, may be required to deliver a prospectus
supplement and prospectus until March 15, 2001.
