Residential Accredit Loans, Inc.
Depositor
Residential Funding Corporation
Master Servicer
Mortgage Asset-Backed Pass-Through Certificates
Series 1997-QS5
$ 2,843,770 8.00% Class M-3 Certificates
Supplement dated January 5, 1999
to
prospectus supplement dated June 23, 1997
to
prospectus dated August 22, 1996
----------
Residential Funding Securities Corporation, an affiliate of the depositor, will
offer to the public the Class M-3 Certificates on a best efforts basis, from
time to time, directly or through dealers. The termination of the offering of
the Class M-3 Certificates will be the earlier to occur of January 7, 2000 or
the date on which all of the Class M-3 Certificates have been sold. Proceeds of
such offering will not be placed in escrow, trust or any similar arrangement.
The proceeds to the depositor from any sale of the Class M-3 Certificates will
be equal to the purchase price paid by the purchaser thereof, net any expenses
payable by the depositor and any compensation payable to RFSC and any dealer.
The mortgage pool consists of 1,283 mortgage loans with an outstanding aggregate
principal balance of approximately $127,936,395 as of December 1, 1998, after
deducting payments of principal due on or prior to that date.
The principal balance of the Class M-3 Certificates after the December 28, 1998
payment date will be approximately $2,843,770, representing approximately 2.22%
of the mortgage pool.
As of December 1, 1998, thirty-five mortgage loans, representing approximately
2.85% of the mortgage loans, were 30 to 59 days delinquent; five mortgage loans,
representing approximately 0.24% of the mortgage loans, were 60 to 89 days
delinquent; six mortgage loans, representing approximately 0.68% of the mortgage
loans, were 90 or more days delinquent; and seven mortgage loans, representing
approximately 0.64% of the mortgage loans, were in foreclosure. A mortgage loan
is considered to be "30 to 59 days", "60 to 89 days" or "90 or more days"
delinquent when a payment due on any due date remains unpaid as of the close of
business on the last business day immediately prior to the next following
monthly due date, the second next following monthly due date or the third next
following monthly due date, respectively. The determination as to whether a
mortgage loan falls into a category is made as of the close of business on the
last business day of each month. Delinquency information presented herein as of
December 1, 1998 was determined and prepared as of the close of business on
November 30, 1998.
The third, fourth and fifth paragraphs under the heading "ERISA Considerations"
on pages S-48 and S-49 in the prospectus supplement should be disregarded and
replaced with the following:
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Because the exemptive relief afforded by the Exemption (or any
similar exemption that might be available) will not likely apply to the
purchase, sale or holding of the Class M Certificates, no Class M
Certificate (or any interest therein) may be acquired or held by any Plan,
any trustee or other person acting on behalf of any Plan, or any other
person using "Plan Assets" to effect such acquisition or holding (each, a
"Plan Investor") unless (i) such acquirer or holder is an insurance
company, (ii) the source of funds used to acquire or hold such Certificate
(or interest therein) is an "insurance company general account" (as
defined in U.S. Department of Labor Prohibited Transaction Class Exemption
("PTCE") 95-60), and (iii) the conditions set forth in Sections I and III
of PTCE 95-60 have been satisfied. Each Beneficial Owner of a Class M
Certificate (or any interest therein) shall be deemed to have represented,
by virtue of its acquisition or holding of such Certificate (or interest
therein), that either (i) it is not a Plan Investor or (ii) (1) it is an
insurance company, (2) the source of funds used to acquire or hold such
Certificate (or interest therein) is an "insurance company general
account" (as such term is defined in PTCE 95-60), and (3) the conditions
set forth in Sections I and III of PTCE 95-60 have been satisfied.
If any Class M Certificate (or any interest therein) is acquired or
held in violation of the provisions of the preceding paragraph, the next
preceding permitted Beneficial Owner will be treated as the Beneficial
Owner of such Class M Certificate, retroactive to the date of transfer to
the purported Beneficial Owner. Any purported Beneficial Owner whose
acquisition or holding of any such Class M Certificate (or interest
therein) was effected in violation of the provisions of the preceding
paragraph shall indemnify and hold harmless the Depositor, the Trustee,
the Master Servicer, any Subservicer, and the Trust from and against any
and all liabilities, claims, costs or expenses incurred by such parties as
a result of such acquisition or holding.
Investors in the Class M Certificates are urged to obtain from a
transferee of such Certificates a certification of such transferee's
eligibility to purchase such Certificates in the form of the
representation letter attached as Annex I hereto.
Because the exemptive relief afforded by the Exemption (or any
similar exemption that might be available) also will not likely apply to
the purchase, sale or holding of the Residual Certificates, transfers of
such Certificates to any Plan Investor will not be registered by the
Trustee unless the transferee provides the Depositor, the Trustee and the
Master Servicer with an opinion of counsel satisfactory to the Depositor,
the Trustee and the Master Servicer, which opinion will not be at the
expense of the Depositor, the Trustee or the Master Servicer, that the
purchase of such Certificates by or on behalf of such Plan Investor is
permissible under applicable law, will not constitute or result in a
non-exempt prohibited transaction under ERISA or Section 4975 of the Code
and will not subject the Depositor, the Trustee or the Master Servicer to
any obligation in addition to those undertaken in the Pooling and
Servicing Agreement.
Any fiduciary or other investor of Plan Assets that proposes to
acquire or hold the Offered Certificates on behalf of or with Plan Assets
of any Plan should consult with its counsel with respect to: (i) whether
the specific and general conditions and the other requirements in the
Exemption would be satisfied, or whether any other prohibited transaction
exemption would apply, and (ii) the potential applicability of the general
fiduciary responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and Section 4975 of the Code to the
proposed investment. See "ERISA Considerations" in the Prospectus.
The sale of any of the Offered Certificates to a Plan is in no respect a
representation by the
<PAGE>
Depositor or the Underwriter that such an investment meets all relevant
legal requirements with respect to investments by Plans generally or any
particular Plan, or that such an investment is appropriate for Plans
generally or any particular Plan. Dealers will be required to deliver a
supplement, prospectus supplement and prospectus when acting as
underwriters of the certificates offered hereby and with respect to their
unsold allotments or subscriptions. In addition, all dealers selling the
Class M-3 Certificates, whether or not participating in this offering, may
be required to deliver a supplement, prospectus supplement and prospectus
until April 6, 1999.
--------------------------------------------
Residential Funding Securities Corporation
January 5, 1999
<PAGE>
ANNEX I
ERISA Representation Letter
[date]
Residential Funding Corporation
8400 Normandale Lake Boulevard, Suite 600
Minneapolis, Minnesota 55437
Residential Accredit Loans, Inc.
8400 Normandale Lake Boulevard, Suite 600
Minneapolis, Minnesota 55437
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: Residential Accredit Loans, Inc. Mortgage Asset-Backed Pass-Through
Certificates, Series 1997-QS5, Class M-[_]
Ladies and Gentlemen:
[__________________________] (the "Purchaser") intends to purchase from
[__________________________] (the "Seller") $[____________] initial Certificate
Principal Balance of the above-referenced certificates (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of June 1, 1997, among Residential Accredit
Loans, Inc., as seller (the "Company"), Residential Funding Corporation, as
master servicer (the "Master Servicer") and Bankers Trust Company, as trustee
(the "Trustee"). All terms used herein and not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement.
The Purchaser hereby certifies, represents and warrants to, and covenants
with the Company, the Trustee and the Master Servicer that, either:
(a) The Purchaser is not an employee benefit or other plan subject
to the prohibited transaction provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (a "Plan"), or any other person
(including an investment manager, a named fiduciary or a trustee of any
Plan) acting, directly or indirectly, on behalf of or purchasing any
Certificate with "plan assets" of any Plan within the meaning of the U.S.
Department of Labor ("DOL") regulation at 29 C.F.R. ss.2510.3-101; or
(b) The Purchaser is an insurance company, the source of funds to be
used by which to purchase the Certificates is an "insurance company
general account" (as such term is defined in DOL Prohibited Transaction
Class Exemption ("PTCE") 95-60), and the conditions set forth in Sections
I and III of PTCE 95-60 have been satisfied.
In addition, the Purchaser hereby certifies, represents and warrants to,
and covenants with, the Company, the Trustee and the Master Servicer that the
Purchaser will not transfer the Certificates to any Plan or person unless such
Plan or person meets the requirements set forth in either (a) or (b) above.
A-1
<PAGE>
Very truly yours,
By: ___________________
Name: ___________________
Title: ___________________
2
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