Exhibit 99.2
PROSPECTUS SUPPLEMENT
(To Prospectus dated )
- --------------------------------------------------------------------------------
$___________ (Approximate)
____________________ Manufactured Housing Contract Trust 199 -
Manufactured Housing Contract
Senior/Subordinate Pass-Through Certificates, Series 199 -
$ (Approximate) % Class A-1 $ (Approximate) % Class -5
$ (Approximate) % Class A-2 $ (Approximate) % Class A-6
$ (Approximate) % Class A-3 $ (Approximate) % Class B-1
$ (Approximate) % Class A-4
Access Financial Lending Corp., Servicer
[LOGO]
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The Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates,
Series (the "Certificates") will represent interests in a pool (the "Contract
Pool") of actuarial manufactured housing installment sales contracts and
installment loan agreements (the "Initial Contracts"), funds on deposit in a
trust account (the "Pre-Funding Account") to be established with the Trustee and
certain related property held by the Manufactured Housing Contract Trust (the
"Trust"). The Trust will acquire the Contracts from Access Financial Receivables
Corp. ("Receivables Corp." or the "Seller"), as described herein. Each Contract
was originated or purchased from certain dealers or brokers by Access Financial
Lending Corp. ("AFL") in the ordinary course of its business. AFL will serve as
servicer of the Contracts (in such capacity and together with any successor
servicer, the "Servicer"). The term "approximate," with respect to the aggregate
principal amount of any Certificates or Contracts, means that the amount is
subject to a variance of plus or minus 5%. Terms used and not otherwise defined
herein have the respective meanings ascribed to such terms in the Prospectus
dated and attached hereto (the "Prospectus").
The Certificates will consist of five classes of senior certificates
(collectively, the "Senior Certificates") designated as the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class
A-4 Certificates and the Class A-5 Certificates, four classes of subordinate
certificates designated as the Class A-6 Certificates, the Class B-1
Certificates, the Class B-2 Certificates and the Class C Certificates
(collectively, the "Subordinate Certificates"). The Trust will also issue a
residual class of Certificates for each REMIC election made by the Trust (the
"Residual Certificates"). Only the Senior Certificates, the Class A-6
Certificates and the Class B-1 Certificates are being offered hereby (the
"Offered Certificates"). The Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates,
the Class A-6 Certificates, the Class B-1 Certificates and the Class B-2
Certificates will evidence in the aggregate initial undivided interests in the
Contract Pool of approximately %, %, %, %, %, %, % and %,
respectively, based on their Original Certificate Principal Balances (as defined
herein); the Class C Certificate is a subordinate "interest-only" certificate
and does not have a Certificate Principal Balance. See "Description of the
Certificates" herein.
(Continued on following page)
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Prospective investors should consider the information set forth under "Risk
Factors" on page of this Prospectus Supplement and page of the accompanying
Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions Seller(1)(2)
--------- -------------- ------------
Class A-1 Certificates........ %
Class A-2 Certificates........ %
Class A-3 Certificates........ %
Class A-4 Certificates........ %
Class A-5 Certificates........ %
Class A-6 Certificates........ %
Class B-1 Certificates........ %
Total......................... $ $ $
= =
(1) Plus accrued interest, if any, at the applicable rate from .
(2) Before deducting expenses, payable by the Seller estimated to be $.
- --------------------------------------------------------------------------------
The Offered Certificates are offered by the Underwriters, when, as and if issued
by the Trust, delivered to and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Offered Certificates in book-entry form will be made through The Depository
Trust Company, Cedel Bank, societe anonyme and the Euroclear System on or about
against payment in immediately available funds.
(Continued from previous page)
The Pooling and Servicing Agreement dated as of (the
"Agreement") by and among AFL, Receivables Corp. and , as
Trustee, provides that additional contracts (the "Subsequent Contracts") are
intended to be purchased by the Trust from the Seller from time to time on or
before , 199 from funds on deposit in the Pre-Funding Account. On
the Closing Date an aggregate cash amount not to exceed $ will be
deposited with the Trustee in the Pre-Funding Account; amounts not to exceed
$ of such amount will be funded from the sale of the Class A
Certificates, and may be used to acquire Subsequent Contracts.
One or more elections will be made to treat certain assets of the Trust
as one or more real estate mortgage investment conduits ("REMICs") for federal
income tax purposes. See "Certain Federal Income Tax Consequences" herein and in
the Prospectus.
Neither AFL nor Receivables Corp. nor any of their affiliates will have
any obligations with respect to the Certificates except, in the case of AFL for
obligations arising from certain representations and warranties of AFL with
respect to certain characteristics of the Contracts. In the event of an uncured
breach of any such representation or warranty that materially adversely affects
a Contract, AFL will be obligated under certain circumstances to repurchase such
Contract or substitute another contract therefor, as described herein and in the
Prospectus.
The interests of the owners of the Offered Certificates (the
"Certificate Owners") will be represented by book-entries on the records of The
Depository Trust Company and participating members thereof. See "Description of
the Certificates -- Registration of Offered Certificates" herein.
and (the
"Underwriters") intend to make a secondary market in the Offered Certificates,
but have no obligation to do so. There can be no assurance that a secondary
market for the Offered Certificates will develop, or if it does develop, that it
will continue to exist or provide sufficient liquidity.
The Offered Certificates will not be insured or guaranteed by any
governmental agency or instrumentality, the Underwriters or any of their
affiliates, or Receivables Corp., AFL or any of their affiliates.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
CERTIFICATES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
---------------------------
This Prospectus Supplement does not contain complete information about
the offering of the Offered Certificates. Additional information is contained in
the Prospectus and purchasers are urged to read both this Prospectus Supplement
and the Prospectus in full. Sales of the Offered Certificates may not be
consummated unless the purchaser has received both this Prospectus Supplement
and the Prospectus. Terms used and not otherwise defined herein have the
respective meanings ascribed to such terms in the Prospectus.
To the extent that any statements in this Prospectus Supplement
conflict with statements contained in the Prospectus, the statements in the
Prospectus Supplement shall control.
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SUMMARY
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Capitalized terms used and not otherwise defined herein
have the respective meanings assigned them in the Prospectus or elsewhere in
this Prospectus Supplement. Reference is made to the "Index of Significant
Definitions" herein and in the Prospectus for the location of the definitions of
certain capitalized terms.
Issuer................................. Manufactured Housing Contract Trust 199
Offered Certificates................... Manufactured Housing Contract
Senior/Subordinate Pass-Through
Certificates, Series (the
"Certificates"). The Offered
Certificates consist of five classes
of senior certificates designated as
the Class A-1, Class A-2, Class A-3,
Class A-4 and Class A-5 Certificates
(collectively, the "Senior
Certificates") and two classes of
Subordinate Certificates, designated
as the Class A-6 and Class B-1
Certificates. The Trust will also
issue two additional classes of
Subordinate Certificates and the
Residual Certificates.
Servicer............................... Access Financial Lending Corp., a
Delaware corporation ("AFL" or,
together with any successor servicer
under the Agreement referred to below,
the "Servicer") and a wholly-owned
subsidiary of Access Financial
Holdings Corp., which is a
wholly-owned subsidiary of Cargill
Financial Services Corporation.
Seller................................. The Contracts will be acquired by the
Trust from Access Financial
Receivables Corp. (the "Seller") on
the Closing Date. See "The Contract
Pool" herein.
Trustee................................
Risk Factors......................... Certain special considerations are
particularly relevant to a decision to
invest in the Offered Certificates
sold hereunder. See "Risk Factors"
herein and in the Prospectus.
Cut-off Date...........................
Closing Date...........................
Original Class A-1 Principal Balance... $ (Approximate, subject to a variance of
plus or minus 5%).
Original Class A-2 Principal Balance.. $ (Approximate, subject to a variance of
plus or minus 5%.
Original Class A-3 Principal Balance... $ (Approximate, subject to a variance of
plus or minus 5%).
Original Class A-4 Principal Balance... $ (Approximate, subject to a variance of
plus or minus 5%).
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Original Class A-5 Principal Balance... $ (Approximate, subject to a variance of
plus or minus 5%).
Original Class A-6 Principal Balance... $ (Approximate, subject to a variance of
plus or minus 5%).
Original Class B-1 Principal Balance... $ (Approximate, subject to a variance of
plus or minus 5%).
Class A-1 Remittance Rate.............. % per annum, calculated on the basis
of a 360-day year comprised of twelve
30-day months, payable monthly,
subject to a maximum rate equal to the
Weighted Average Net Contract Rate.
The "Weighted Average Net Contract
Rate" with respect to each Remittance
Date is a rate equal to (i) the
weighted average of the Contract Rates
applicable to the Scheduled Payments
that were due in the related
Collection Period on outstanding
Contracts less (ii) _____% per annum,
representing the Monthly Servicing Fee
(as defined herein), if AFL is no
longer the Servicer.
Class A-2 Remittance Rate.............. % per annum, calculated on the basis
of a 360-day year comprised of twelve
30-day months, payable monthly,
subject to a maximum rate equal to the
Weighted Average Net Contract Rate.
Class A-3 Remittance Rate.............. % per annum, calculated on the basis
of a 360-day year comprised of twelve
30-day months, payable monthly,
subject to a maximum rate equal to the
Weighted Average Net Contract Rate.
Class A-4 Remittance Rate.............. % per annum, calculated on the basis
of a 360-day year comprised of twelve
30-day months, payable monthly,
subject to a maximum rate equal to the
Weighted Average Net Contract Rate.
Class A-5 Remittance Rate.............. % per annum, calculated on the basis
of a 360-day year comprised of twelve
30-day months, payable monthly,
subject to a maximum rate equal to the
Weighted Average Net Contract Rate.
Class A-6 Remittance Rate.............. % per annum, calculated on the basis
of a 360-day year comprised of twelve
30-day months, payable monthly,
subject to a maximum rate equal to the
Weighted Average Net Contract Rate.
Class B-1 Remittance Rate.............. % per annum, calculated on the basis
of a 360-day year comprised of twelve
30-day months, payable monthly,
subject to a maximum rate equal to the
Weighted Average Net Contract Rate.
Remittance Date........................ The ____ day of each month (or if such
____ day is not a business day, the
next succeeding business day),
commencing in . The first
Remittance Date is .
Record Date............................ The last business day of the month
preceding the related Remittance Date.
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Collection Period...................... With respect to any Remittance Date, the
calendar month prior to the month of
such Remittance Date (each, a
"Collection Period").
Agreement.............................. The Pooling and Servicing Agreement
dated as of _________ (the
"Agreement"), by and among AFL,
Receivables Corp. and
___________________, as trustee (the
"Trustee").
The Contract Pool...................... The Contract Pool will initially be
comprised of actuarial manufactured
housing installment sales contracts
and installment loan agreements
(collectively, the "Initial
Contracts") originated or purchased
from certain dealers or brokers by AFL
in the ordinary course of its business
to be conveyed to the Trust on the
Closing Date and funds on deposit in a
trust account (the "Pre-Funding
Account") to be established with the
Trustee.
The Agreement provides that additional
actuarial manufactured housing
installment sales contracts and
installment loan agreements (the
"Subsequent Contracts") (the Initial
Contracts and the Subsequent Contracts
together, the "Contracts") are
intended to be purchased by the Trust
from the Seller from time to time on
or before , 199_ from funds on deposit
in the Pre-Funding Account. On the
Closing Date an aggregate cash amount
not to exceed $ will be deposited with
the Trustee in the Pre-Funding
Account; amounts not to exceed $ of
such aggregate amount will be funded
from the sale of the Class A
Certificates, and may be used to
acquire Subsequent Contracts.
The Subsequent Contracts to be purchased
by the Trust, if available, will be
originated on or prior to , 199_, sold
by AFL to the Seller and then sold by
the Seller to the Trust. The Agreement
will provide that the Contracts must
in the aggregate conform to certain
specified characteristics following
the conveyance of any Subsequent
Contracts. See "The Contract Pool."
Each Contract will be secured by (i) a
new or used manufactured home (each
manufactured home securing a Contract
being referred to herein as a
"Manufactured Home") (a Contract
secured by a Manufactured Home, a
"Manufactured Home Contract") or (ii)
a Manufactured Home together with the
real estate on which such Manufactured
Home is located (a Contract secured by
a Manufactured Home and such real
estate, a "Land Secured Contract").
The Contracts will not be insured by
any governmental agency or
instrumentality.
As of the Cut-off Date, the Contract
Pool consisted of approximately
Initial Contracts having a Cut-off
Date Pool Principal Balance of
approximately $ . The Initial
Contracts, as of their origination,
were
S-5
secured by Manufactured Homes located
in __ states and have been selected
by AFL from the manufactured housing
installment sale contracts and
installment loan portfolio of AFL on
the basis of the criteria specified in
the Agreement. Approximately % of the
Initial Contracts by outstanding
principal balance as of the Cut-off
Date were secured by Manufactured
Homes located in , % in ,
% in , % in
and % in . No other state
represented more than % of the Initial
Contracts. All of the Initial
Contracts bear interest at a fixed
annual percentage rate (the "Contract
Rate") which is specified in the
Contract. Monthly payments of
principal and interest on the Initial
Contracts will be due on various days
(each, a "Due Date") throughout each
month. As of the Cut-off Date, the
Contract Rates on the Initial
Contracts ranged from % to %, with
a weighted average Contract Rate of
approximately %. Because the Servicing
Fee is subordinated while AFL is the
Servicer, the Weighted Average Net
Contract Rate as of the Cut-off Date
is also %. As of the Cut-off Date, the
Initial Contracts had a weighted
average original term to maturity of
approximately months and a weighted
average remaining term to maturity of
approximately months. The final
scheduled payment date on the Initial
Contract with the latest maturity is
in . The Initial Contracts were
originated or purchased from certain
dealers or brokers during , and . See
"The Contract Pool" and "Prepayment
and Yield Considerations" herein for a
detailed description of the Initial
Contracts.
Following the initial Cut-Off Date, the
Trust will be obligated to purchase
from time to time on or before , 199_
subject to the availability thereof,
Subsequent Contracts which will be
originated on or before , 199_, and
acquired by the Seller from AFL for
subsequent sale to the Trust pursuant
to a Purchase Agreement (the "Purchase
Agreement") between the Seller and the
Trust. The aggregate principal amounts
of Subsequent Contracts which may be
acquired by the Trust is $ . In
connection with each purchase of
Subsequent Contracts, the Trust will
be required to pay to the Seller a
cash purchase price of 100% of the
principal amount thereof from the
Pre-Funding Account. Under the
Agreement, AFL will be obligated to
sell Subsequent Contracts to the
Seller for sale to the Trust, and the
Trust will be obligated, subject to
the satisfaction of certain conditions
described herein, to purchase such
Subsequent Contracts. AFL will
designate as a cut-off date (each a
"Subsequent Cut-Off Date") the first
day of the month in which Subsequent
Contracts will be conveyed by the
Seller to the Trust (each a
"Subsequent Transfer Date") occurring
during the Funding Period (as defined
herein). The Trust may
S-6
purchase the Subsequent Contracts only
from the Seller and not from any other
person.
Pre Funding Account.................... On the Closing Date an aggregate cash
amount (the "Pre- Funded Amount"),
which shall not exceed $ , will be
deposited with the Trustee in an
account in the name of the Trustee on
behalf of the Trust (the "Pre- Funding
Account"); amounts not to exceed $ of
such aggregate amount will be funded
from the sale of the Class A
Certificates, and may be used to
acquire Subsequent Contracts. During
the period (the "Funding Period") from
the Closing Date until the earliest of
the date on which (i) the amount on
deposit in the Pre-Funding Account is
less than $100,000, (ii) an Event of
Default occurs under the Agreement, or
(iii) the , 199_ Remittance Date
occurs, the Pre- Funded Amount will be
maintained in the Pre- Funding
Account. The Pre-Funding Account will
be reduced during the Funding Period
by the amount thereof used to purchase
Subsequent Contracts in accordance
with the Agreement. AFL expects that
the Pre-Funded Amount will be reduced
to less than $100,000 by the , 199_
Remittance Date. Any Pre-Funded Amount
remaining at the end of the Funding
Period will be used to prepay pro rata
the Class A Certificates on the , 199_
Remittance Date.
Description of Certificates............ The Certificates evidence undivided
interests in the Contract Pool and
certain other property held in trust
for the benefit of the
Certificateholders. The Class A-1,
Class A-2, Class A-3, Class A-4 and
Class A-5 Certificates are Senior
Certificates and the Class A-6, Class
B-1, Class B-2 and Class C
Certificates are Subordinate
Certificates, all as described herein.
The Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6 and
Class B-1 Certificates are the Offered
Certificates. The Offered Certificates
will be offered in book-entry form
only in denominations of $1,000. The
undivided percentage interest (the
"Percentage Interest") evidenced by
any particular Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class
A-6 or Class B-1 Certificate for
purposes of calculating distributions
to the holder of such Certificate will
be equal to the percentage obtained by
dividing the original denomination of
such Certificate by the Original Class
A-1 Principal Balance, the Original
Class A-2 Principal Balance, the
Original Class A-3 Principal Balance,
the Original Class A-4 Principal
Balance, the Original Class A-5
Principal Balance, the Original Class
A-6 Principal Balance or the Original
Class B-1 Principal Balance, as
appropriate.
In addition to the Offered Certificates,
the Trust will issue two additional
classes of Subordinate Certificates,
the Class B-2 and the Class C
Certificates, which are subordinated
to the Senior Certificates, the Class
A-6 and the Class B-1
S-7
Certificates to the extent described
herein. The Class B-2 and the Class C
Certificates are not being offered
hereby. The Class B-2 Certificates
will have an original balance of $
and a Remittance Rate which, for
purposes of this Prospectus
Supplement, has been assumed on each
Remittance Date to equal % per annum,
subject to a maximum rate equal to the
Weighted Average Net Contract Rate.
The Trust will also issue one residual
class of Certificates with respect to
each REMIC election made by the Trust
(the "Residual Certificates") which
are not being offered hereby. The
Class C Certificates and the Residual
Certificates will initially be
retained by the Seller or an affiliate
thereof.
The Class B-2, Class C and Residual
Certificates are not offered hereby,
and any information contained herein
with respect to the Class B-2, Class C
and Residual Certificates is provided
only to permit a better understanding
of the cash flow mechanics and
subordination provisions of the Trust,
insofar as such mechanics and
provisions are relevant to the Offered
Certificates. The Senior Certificates,
the Class A-6, the Class B-1, the
Class B-2, the Class C Certificates
and the Residual Certificates are
collectively referred to as the
"Certificates."
Distributions.......................... On each Remittance Date, distributions
on the Certificates will be made in
the following order of priority: (i)
to the holders of the Senior
Certificates, (ii) to the holders of
the Class A-6 Certificates, (iii) to
the holders of the Class B-1
Certificates, (iv) to the holders of
the Class B-2 Certificates and (v) to
the holders of the Class C
Certificates, in the manner described
below.
Distributions of interest and principal
to the holders of a Class of Senior
Certificates will be made in an amount
equal to the sum of (i) their
respective Percentage Interests of the
amount of interest calculated as
described below under "A. Senior
Interest" and (ii) their respective
Percentage Interests of an amount of
principal calculated as described
below under "B. Senior Principal."
Distributions of interest and principal
to the Class A-6 Certificateholders
will be made in an amount equal to
their respective Percentage Interests
multiplied by the Class A-6
Distribution Amount (as defined
below).
Distributions of interest and principal
to the Class B-1 Certificateholders
will be made in an amount equal to
their respective Percentage Interests
multiplied by the Class B-1
Distribution Amount (as described
below).
Distributions of interest and principal
to the Class B-2 Certificateholders
will be made in an amount equal to
their respective Percentage Interests
of the Class B-2 Distribution Amount
(as described below).
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The rights of the Subordinate
Certificateholders and the Residual
Certificateholders to receive
distributions are subordinated to the
rights of the Senior
Certificateholders to the extent
described herein. The rights of the
Class B-1, Class B-2, Class C and
Residual Certificateholders to receive
distributions are subordinated to the
rights of the Class A-6
Certificateholders, and the rights of
the Class B-2, Class C and Residual
Certificateholders to receive
distributions are subordinated to the
rights of the Class B-1
Certificateholders to the extent
described herein. The Class C
Certificates represent a class of
subordinated, "interest-only"
certificates, the distributions on
which are subordinated to the rights
of the Class B-2 Certificateholders
and, if AFL is no longer the Servicer,
to the payment of the Monthly
Servicing Fee. The holders of the
Residual Certificates will be entitled
to receive only miscellaneous amounts
not required to be distributed on
account of the other classes of
Certificates (the "Residual
Distribution Amount").
Distributions will be made on each
Remittance Date commencing in to
holders of record on the related
Record Date, except that the final
distribution in respect of the Offered
Certificates will only be made upon
presentation and surrender of the
Offered Certificates at the office or
agency appointed by the Trustee for
that purpose in New York, New York.
The "Class A-6 Distribution Amount" for
any Remittance Date is intended to be
equal to the "Class A-6 Formula
Distribution Amount," which equals the
sum of (i) the amount of interest
calculated as described under "C.
Class A-6 Interest" below and (ii) an
amount of principal calculated as
described under "D. Class A-6
Principal" below. The "Class A-6
Distribution Amount" for any
Remittance Date will equal the lesser
of (i) the Class A-6 Formula
Distribution Amount for such
Remittance Date or (ii) the Amount
Available in the Certificate Account
available for distribution to the
Class A-6 Certificateholders (after
giving effect to the distributions
made to Senior Certificateholders) on
such Remittance Date (the "Class A-6
Remaining Amount Available").
The "Class B-1 Distribution Amount" for
any Remittance Date is intended to be
equal to the "Class B-1 Formula
Distribution Amount," which equals the
sum of (i) the amount of interest
calculated as described under "E.
Class B-1 Interest" below and (ii) an
amount of principal calculated as
described under "F. Class B-1
Principal" below. The "Class B-1
Distribution Amount" for any
Remittance Date will equal the lesser
of (i) the Class B-1 Formula
Distribution Amount for such
Remittance Date or (ii) the Amount
Available in the Certificate Account
available for distribution to the
Class B-1
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Certificateholders (after giving
effect to the distributions made to
Senior and Class A-6
Certificateholders) on such Remittance
Date (the "Class B-1 Remaining Amount
Available").
The "Class B-2 Distribution Amount" for
any Remittance Date is intended to be
equal to the "Class B-2 Formula
Distribution Amount," which equals the
sum of (i) the amount of interest
calculated as described below under
"G. Class B-2 Interest," and (ii) the
amount of principal calculated as
described below under "H. Class B-2
Principal." The "Class B-2
Distribution Amount" for any
Remittance Date will equal the lesser
of (i) the Class B-2 Formula
Distribution Amount for such
Remittance Date or (ii) the Amount
Available in the Certificate Account
available for distribution to the
Class B-2 Certificateholders (after
giving effect to the distributions
made to Senior, Class A-6 and Class
B-1 Certificateholders) on such
Remittance Date (the "Class B-2
Remaining Amount Available").
See "Description of the Certificates"
for a detailed description of the
amounts on deposit in the Certificate
Account that will constitute the
Amount Available on each Remittance
Date (the "Amount Available"). The
Amount Available will include amounts
otherwise payable to the holders of
the Class A-6, the Class B-1, the
Class B-2 and the Class C
Certificates, to AFL as the Monthly
Servicing Fee and to the Residual
Certificateholders. The Class A-6
Remaining Amount Available will
include amounts otherwise payable to
the holders of the Class B-1, the
Class B-2 and the Class C
Certificates, to AFL as the Monthly
Servicing Fee and to the Residual
Certificateholders. The Class B-1
Remaining Amount Available will
include amounts otherwise payable to
the holders of the Class B-2 and the
Class C Certificates, to AFL as the
Monthly Servicing Fee and to the
Residual Certificateholders. The Class
B-2 Remaining Amount Available will
include amounts otherwise payable to
the holders of the Class C
Certificates, to AFL as the Monthly
Servicing Fee and to the Residual
Certificateholders.
The "Certificate Principal Balance" of a
Class of Certificates as of any
Remittance Date is the original
principal balance of such Class of
Certificates less all amounts
previously distributed to such Class
on account of principal. The Senior
Principal Balance as of any Remittance
Date is the sum of the Class A-1
Principal Balance, the Class A-2
Principal Balance, the Class A-3
Principal Balance, the Class A-4
Principal Balance and the Class A-5
Principal Balance as of such date.
A. Senior Interest..................... Interest on the outstanding Principal
Balance of each Class of Senior
Certificates will accrue with respect
to each Remittance Date for the period
commencing
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on the first day of the calendar month
and ending on the last day of such
calendar month preceding such
Remittance Date (each such period, an
"Accrual Period"), commencing .
Interest will be paid concurrently on
each Class of Senior Certificates on
each Remittance Date, to the extent of
the Amount Available for such date in
the Certificate Account, at the
related Remittance Rate on the Class
A-1 Principal Balance, the Class A-2
Principal Balance, the Class A-3
Principal Balance, the Class A-4
Principal Balance and the Class A-5
Principal Balance, respectively,
before giving effect to any
distributions on such Remittance Date.
In the event that, on a particular
Remittance Date, the Amount Available
in the Certificate Account is not
sufficient to make a full distribution
of interest to the holders of each
Class of Senior Certificates, the
Amount Available will be distributed
among the outstanding Classes of
Senior Certificates pro rata based on
the aggregate amount of interest due
on each such Class, and the amount of
the shortfall will be carried forward
and added to the amount such holders
will be entitled to receive on the
next Remittance Date. Any such amount
so carried forward will bear interest
at the related Remittance Rate, to the
extent legally permissible. See
"Description of the Certificates."
B. Senior Principal.................... Holders of a Class of Senior
Certificates will be entitled to
receive on each Remittance Date as
payments of principal, in the order of
priority set forth below and to the
extent of the Amount Available in the
Certificate Account on such date after
payment of interest on all Classes of
Senior Certificates, the sum of (x)
the Senior Percentage of the Formula
Principal Distribution Amount for such
Remittance Date, and (y) any portion
of the amount described in clause (x)
preceding which was due to the holders
of the Senior Certificates on prior
Remittance Dates, but which remains
unpaid on such Remittance Date. The
Agreement defines the "Formula
Principal Distribution Amount" with
respect to a Remittance Date as the
sum of (i) all scheduled payments of
principal due on each outstanding
Contract during the related Collection
Period, (ii) the Scheduled Principal
Balance of each Contract which, during
the related Collection Period, was
purchased by AFL pursuant to the
Agreement on account of certain
breaches of its representations and
warranties, (iii) all Partial
Principal Prepayments applied and all
Principal Prepayments in full received
during the related Collection Period,
(iv) the Scheduled Principal Balance
of each Contract that became a
Liquidated Contract during such
related Collection Period and (v) the
Accelerated Principal Payment, if any,
for such Remittance Date. When the
Certificate Principal Balance of a
Class of Senior Certificates is
reduced to zero, no further
distributions of principal will be
made to the holders of such Class.
S-11
The "Senior Percentage" for any
Remittance Date prior to the Class B
Cross-over Date (as defined below),
and for any Remittance Date on or
after the Class B Cross-over Date on
which any Class B Principal
Distribution Test (as described below)
has not been satisfied, will equal
100%. On each Remittance Date on or
after the Class B Cross-over Date, if
each Class B Principal Distribution
Test has been satisfied on such
Remittance Date, the "Senior
Percentage" will equal a fraction,
expressed as a percentage, the
numerator of which is the sum of the
Senior Principal Balance and the Class
A-6 Principal Balance for such
Remittance Date (before giving effect
to any distributions on such
Remittance Date) and the denominator
of which is the Pool Scheduled
Principal Balance at the end of the
second preceding Collection Period.
The "Scheduled Principal Balance" of a
Contract for any Collection Period is
its principal balance as specified in
its amortization schedule, after
giving effect to any previous partial
principal prepayments, any principal
prepayment in full and to the
principal portion of the scheduled
payment due on its scheduled payment
date (the "Due Date") in that
Collection Period, but without giving
effect to any adjustments due to
bankruptcy or similar proceedings and
after giving effect to any partial
principal prepayments applied and
principal prepayments in full received
during the related Collection Period.
The "Pool Scheduled Principal Balance"
with respect to any Collection Period
is the aggregate of the Scheduled
Principal Balances of all Contracts
(other than Liquidated Contracts and
Contracts repurchased by AFL during
such Collection Period) outstanding at
the end of such Collection Period. A
"Liquidated Contract" is a defaulted
Contract as to which all amounts that
the Servicer expects to recover
through the date of disposition of the
Manufactured Home have been received.
The principal distribution to be made to
the holders of the Senior Certificates
on any Remittance Date will be
distributed, to the extent of the
Amount Available after payment of
interest on all Classes of Senior
Certificates, first, to the Class A-1
Certificateholders until the Class A-1
Principal Balance has been reduced to
zero, then to the Class A-2
Certificateholders until the Class A-2
Principal Balance has been reduced to
zero, then to the Class A-3
Certificateholders until the Class A-3
Principal Balance has been reduced to
zero, then to the Class A-4
Certificateholders until the Class A-4
Principal Balance has been reduced to
zero, then to the Class A-5
Certificateholders until the Class A-5
Principal Balance has been reduced to
zero.
If, on any Remittance Date prior to the
Class A-5 Principal Balance being
reduced to zero, the Pool
S-12
Scheduled Principal Balance at the
close of business on the last day of
the related Collection Period would be
less than the sum of the Class A-1
Principal Balance, the Class A-2
Principal Balance, the Class A-3
Principal Balance, the Class A-4
Principal Balance and the Class A-5
Principal Balance on such Remittance
Date after giving effect to
distributions of principal to be made
on such date, then the Amount
Available remaining after distribution
of interest on the Senior Certificates
will be distributed to the Classes of
Senior Certificates on a pro rata
basis as a distribution of principal,
and the amount of the shortfall will
be allocated pro rata among the
outstanding Classes of Senior
Certificates, based upon their
respective outstanding Certificate
Principal Balances.
C. Class A-6 Interest.................. Interest on the outstanding Class A-6
Principal Balance will accrue with
respect to each Remittance Date during
the related Accrual Period, commencing
. On each Remittance Date,
to the extent of the Class A-6
Remaining Amount Available, if any, on
such Remittance Date after payment of
the Senior Distribution Amount,
interest will be paid to the Class A-6
Certificateholders at the Class A-6
Remittance Rate on the Class A-6
Principal Balance (before giving
effect to any distributions on such
Remittance Date). The "Class A-6
Principal Balance" is the Original
Class A-6 Principal Balance less all
amounts previously distributed to the
Class A-6 Certificateholders on
account of principal. In the event
that, on a particular Remittance Date,
the Class A-6 Remaining Amount
Available, plus other funds, if any,
in the Certificate Account available
therefor, are not sufficient to make a
full distribution of interest to the
Class A-6 Certificateholders, the
amount of the deficiency will be
carried forward as an amount that the
Class A-6 Certificateholders are
entitled to receive on the next
Remittance Date. Any amount so carried
forward will bear interest at the
Class A-6 Remittance Rate, to the
extent legally permissible. See
"Description of the Certificates --
Class A-6 Interest."
D. Class A-6 Principal................. Payments of principal on the Class A-6
Certificates will not commence until
the Senior Principal Balance has been
reduced to zero. On each Remittance
Date on or after the date on which the
Senior Principal Balance has been
reduced to zero, holders of Class A-6
Certificates will be entitled to
receive the Senior Percentage of the
Formula Principal Distribution Amount,
until the Class A-6 Principal Balance
has been reduced to zero.
E. Class B-1 Interest.................. Interest on the outstanding Class B-1
Principal Balance will accrue with
respect to each Remittance Date during
the related Accrual Period, commencing
.
S-13
On each Remittance Date, to the extent
of the Class B-1 Remaining Amount
Available, if any, on such Remittance
Date after payment of the Senior
Distribution Amount and the Class A-6
Distribution Amount, interest will be
paid to the Class B-1
Certificateholders at the Class B-1
Remittance Rate on the Class B-1
Principal Balance (before giving
effect to any distributions on such
Remittance Date). The "Class B-1
Principal Balance" is the Original
Class B-1 Principal Balance less all
amounts previously distributed to the
Class B-1 Certificateholders on
account of principal.
In the event that, on a particular
Remittance Date, the Class B-1
Remaining Amount Available, plus other
funds, if any, in the Certificate
Account available therefor, are not
sufficient to make a full distribution
of interest to the Class B-1
Certificateholders, the amount of the
deficiency will be carried forward as
an amount that the Class B-1
Certificateholders are entitled to
receive on the next Remittance Date.
Any amount so carried forward will
bear interest at the Class B-1
Remittance Rate, to the extent legally
permissible. See "Description of the
Certificates -- Class B-1 Interest."
F. Class B-1 Principal................. Payments of principal on the Class B-1
Certificates will not commence until
the Class B Cross-over Date, and will
be made on that Remittance Date and
each Remittance Date thereafter only
if each Class B Principal Distribution
Test is satisfied on such Remittance
Date (unless the Senior Principal
Balance and the Class A-6 Principal
Balance have been reduced to zero in
which event none of the Class B
Distribution Tests need be satisfied).
The "Class B Cross-over Date" will be
the later of (A) the Remittance Date
in , or (B) the first Remittance Date
on which the sum of (i) the Senior
Principal Balance on such Remittance
Date (before taking into account any
distributions to be made on such
Remittance Date) and (ii) the Class
A-6 Principal Balance on such
Remittance Date (before taking into
account any distributions to be made
on such Remittance Date) (such sum
expressed as a percentage of the Pool
Scheduled Principal Balance at the end
of the second preceding Collection
Period) is less than %. The Class B
Principal Distribution Tests on each
Remittance Date relate to losses and
delinquencies on the Contracts, and
are described under "Description of
the Certificates -- Class B-1
Principal."
On each Remittance Date on or after the
Class B Cross-over Date, if each Class
B Principal Distribution Test is
satisfied on such Remittance Date
(unless the Senior Principal Balance
and the Class A-6 Principal Balance
have been reduced to zero in which
event none of the Class B Distribution
Tests
S-14
need be satisfied), Class B-1
Certificateholders will be entitled to
receive, as payments of principal, the
sum of (i) the Class B Percentage of
the Formula Principal Distribution
Amount and (ii) any portion of the
amount described in clause (i)
preceding which was due to the Class
B-1 Certificateholders on prior
Remittance Dates but which remains
unpaid on such Remittance Date; such
amount will only be distributed to the
extent of the Class B-1 Remaining
Amount Available in the Certificate
Account on such date after payment of
all interest payable on the Class B-1
Certificates.
The Class B Percentage for any
Remittance Date on or after the Class
B Cross-over Date on which each Class
B Principal Distribution Test has been
satisfied will be equal to 100% minus
the Senior Percentage. The Class B
Percentage for each Remittance Date,
if any, after the Senior Principal
Balance and the Class A-6 Principal
Balance have both been reduced to
zero, will be equal to 100%.
G. Class B-2 Interest.................. Interest on the outstanding Class B-2
Principal Balance will accrue with
respect to each Remittance Date during
the related Accrual Period, commencing
.
On each Remittance Date, to the extent
of the Class B-2 Remaining Amount
Available, if any, for a Remittance
Date after payment of the Senior
Distribution Amount, the Class A-6
Distribution Amount and the Class B-1
Distribution Amount for such date,
interest will be paid to the Class B-2
Certificateholders on such Remittance
Date at the Class B-2 Remittance Rate
on the Class B-2 Principal Balance
(before giving effect to any
distributions on such Remittance
Date). The "Class B-2 Principal
Balance" is the Original Class B-2
Principal Balance less all amounts
previously distributed to the Class
B-2 Certificateholders on account of
principal.
In the event that, on a particular
Remittance Date, the Class B-2
Remaining Amount Available, plus other
funds, if any, in the Certificate
Account available therefor, are not
sufficient to make a full distribution
of interest to the Class B-2
Certificateholders, the amount of the
deficiency will be carried forward as
an amount that the Class B-2
Certificateholders are entitled to
receive on the next Remittance Date.
Any amount so carried forward will
bear interest at the Class B-2
Remittance Rate, to the extent legally
permissible. See "Description of the
Certificates -- Class B-2 Interest."
H. Class B-2 Principal................. Payments of principal on the Class B-2
Certificates will not commence until
the Remittance Date on which the Class
B-1 Principal Balance has been reduced
to zero and will be made on such
Remittance Date and each Remittance
Date thereafter only if each Class B
Principal Distribution Test is
satisfied on such
S-15
Remittance Date (unless the Senior
Principal Balance and the Class A-6
Principal Balance have been reduced to
zero in which event none of the Class
B Distribution Tests need be
satisfied). See "Description of the
Certificates -- Class B-2 Principal."
On each Remittance Date, on or after the
date on which the Class B-1 Principal
Balance has been reduced to zero and
on which each Class B Principal
Distribution Test is satisfied (unless
the Senior Principal Balance and the
Class A-6 Principal Balance have been
reduced to zero in which event none of
the Class B Distribution Tests need be
satisfied), the Class B-2
Certificateholders will be entitled to
receive, as payments of principal, the
sum of (i) the Class B Percentage of
the Formula Principal Distribution
Amount and (ii) any portion of the
amount described in clause (i)
preceding which was due to the Class
B- 2 Certificateholders on prior
Remittance Dates but which remains
unpaid on such Remittance Date; such
amount will only be distributed to the
extent of the Class B-2 Remaining
Amount Available in the Certificate
Account on such date, after payment of
all interest payable on the Class B-2
Certificates.
I.Class C Distributions;
Overcollateralization Amount ........ The Weighted Average Net Contract Rate
for the Contract Pool is expected
generally to be higher than the
weighted average of the Remittance
Rates applicable to the Class A-1,
Class A-2, Class A-3, Class A-4, Class
A-5, Class A-6, Class B-1 and Class
B-2 Certificates (collectively, the
"Non-IO Certificates"), thus
generating certain excess interest
collections which, in the absence of
losses and delinquencies, will not be
necessary to fund distributions on the
Non-IO Certificates. The Agreement
provides that this excess interest,
together with, if AFL is then the
Servicer, the Monthly Servicing Fee
then otherwise due to AFL, be applied,
to the extent available, to make
accelerated payments of principal to
the class or classes then entitled to
receive distributions of principal;
such application is expected to cause
the aggregate Certificate Principal
Balance of the Non-IO Certificates to
amortize more rapidly than the
Contract Pool, resulting in
"overcollateralization" (i.e., the
excess of the Pool Scheduled Principal
Balance over the aggregate Certificate
Principal Balance of the Non-IO
Certificates). This excess interest
for a Collection Period, together with
interest on the overcollateralization
amount itself, on the related
Remittance Date is the "Class C
Formula Distribution Amount" for such
Remittance Date. On any Remittance
Date the "Overcollateralization
Amount" will be an amount equal to the
difference between the Pool Scheduled
Principal Balance as of the end of the
immediately preceding Collection
Period and the aggregate Certificate
Principal Balance of the Non-IO
Certificates on such Remittance Date
(and after taking
S-16
into account all other distributions
to be made on such Remittance Date).
The amounts available to fund the Class
C Formula Distribution Amount (which
amount will be the Class B-2 Remaining
Amount Available less the Class B-2
Distribution Amount and less the
Monthly Servicing Fee (for such
Remittance Date) such amount being the
"Class C Distribution Amount") will be
applied, together with the Monthly
Servicing Fee if AFL is the Servicer,
to make such accelerated payments of
principal on each Remittance Date
until the Overcollateralization Amount
is approximately equal to $
(the "Initial Required
Overcollateralization Amount").
Thereafter, the Class C Distribution
Amount will be available to make
distributions of the Class C Formula
Distribution Amount to the holders of
the Class C Certificates, unless, due
to losses, the Overcollateralization
Amount is decreased, in which event
such applications will commence to the
extent necessary to increase the
actual Overcollateralization Amount to
the Required Overcollateralization
Amount. The level of the Required
Overcollateralization Amount is equal
to, for any Remittance Date, (x) prior
to the Class B Cross-over Date, the
Initial Required Overcollateralization
Amount, (y) on and after the Class B
Cross-over Date, and as long as each
Class B Principal Distribution Test is
then satisfied, the lesser of (i) the
Initial Required Overcollateralization
Amount and (ii) the greater of (a) %
of the then Scheduled Pool Principal
Balance and (b) % of the Cut-off Date
Pool Principal Balance and (z) on and
after the Class B Cross-over Date, if
any Class B Distribution Test is not
satisfied, the required level as of
the immediately preceding Remittance
Date.
The amount, if any, of the Class C
Distribution Amount actually applied
as an accelerated payment of principal
on any Remittance Date (such amount to
be the lesser of (x) the excess of (i)
the Required Overcollateralization
Amount over (ii) the actual
Overcollateralization Amount on such
Remittance Date and (y) the Class C
Distribution Amount and the Monthly
Servicing Fee if AFL is the Servicer
for the immediately preceding
Collection Period) is the "Accelerated
Principal Payment" for such Remittance
Date.
Subordination of Class A-6, Class B-1,
Class B-2, Class C and Residual
Certificates......................... The rights of the holders of the Class
A-6, Class B-1, Class B-2, Class C
Certificates and Residual Certificates
to receive distributions with respect
to the Contracts in the Trust will be
subordinated, to the extent described
herein, to such rights of the holders
of the Senior Certificates. This
subordination is intended to enhance
the likelihood
S-17
of regular receipt by the holders of
the Senior Certificates of the full
amount of their scheduled monthly
payments of interest and principal and
to afford such holders protection
against losses on Liquidated
Contracts.
The protection afforded to the holders
of the Senior Certificates by means of
the subordination of the Class A-6,
Class B-1, Class B-2, Class C and
Residual Certificates will be
accomplished by the preferential right
of the Senior Certificateholders to
receive, prior to any distribution
being made on a Remittance Date in
respect of the Class A-6, Class B-1,
Class B-2, Class C and Residual
Certificates, the amounts of interest
and principal due them on each
Remittance Date out of the Amount
Available on such date in the
Certificate Account and, if necessary,
by the right of such Senior
Certificateholders to receive future
distributions of Amounts Available
that would otherwise be payable to the
holders of the Class A-6, Class B-1,
Class B-2, Class C and Residual
Certificates.
Inaddition, the rights of the holders
of the Class B-1, Class B-2, Class C
and Residual Certificates to receive
distributions with respect to the
Contracts will be subordinated, to the
extent described herein, to such
rights of the holders of the Class A-6
Certificates. This subordination is
intended to enhance the likelihood of
regular receipt by the holders of the
Class A-6 Certificates of the full
amount of their scheduled monthly
payments of interest and principal and
to afford such holders protection
against losses on Liquidated
Contracts.
The protection afforded to the holders
of the Class A-6 Certificates by means
of the subordination of the Class B-1,
Class B-2, Class C and Residual
Certificates will be accomplished by
the preferential right of the Class
A-6 Certificateholders to receive,
prior to any distribution being made
on a Remittance Date in respect of the
Class B-1, Class B-2, Class C and
Residual Certificates, the amounts of
interest and principal due them on
each Remittance Date out of the Class
A-6 Remaining Amount Available on such
date in the Certificate Account and,
if necessary, by the right of such
Class A-6 Certificateholders to
receive future distributions of Class
A-6 Remaining Amounts Available that
would otherwise be payable to the
holders of the Class B-1, Class B-2,
Class C and Residual Certificates.
The rights of the holders of the Class
B-2, Class C and Residual Certificates
to receive distributions with respect
to the Contracts will be subordinated
in the same manner to such rights of
the holders of the Senior
Certificates, Class A-6 Certificates
and Class B-1 Certificates.
S-18
The rights of the holders of the Class C
Certificates to receive distributions
with respect to the Contracts on each
Remittance Date will be subordinated
to the rights of the holders of the
Senior Certificates, Class A-6
Certificates, Class B-1 Certificates
and Class B-2 Certificates and to the
payment of the Monthly Servicing Fee.
See "Description of the
Certificates-Subordination of Class
A-6, Class B-1, Class B-2, Class C and
Residual Certificates."
The rights of the holders of the
Residual Certificates to receive
distributions with respect to the
Contracts on each Remittance Date will
be subordinated to the rights of the
holders of all other classes of
Certificates and to the payment of the
Monthly Servicing Fee. See
"Description of the Certificates --
Subordination of Class A-6, Class B-1,
Class B-2, Class C and Residual
Certificates."
Losses on Liquidated Contracts......... As described above, the distribution of
principal to the Senior and the Class
A-6 Certificateholders and to the
Class B-1 Certificateholders is
intended to include the Senior
Percentage and the Class B Percentage,
respectively, of the Scheduled
Principal Balance of each Contract
that became a Liquidated Contract
during the preceding Collection
Period. If the Net Liquidation
Proceeds (as defined below) from a
Liquidated Contract are less than the
Scheduled Principal Balance of such
Liquidated Contract plus accrued and
unpaid interest thereon plus amounts
reimbursable to the Servicer for
advances of certain taxes and
insurance premiums, the deficiency (a
"Realized Loss") will, in effect, be
absorbed first, by the Residual
Certificateholders, second, by the
Class C Certificateholders (both
through the application of the Class C
Distribution Amount to fund such
deficiency and through a reduction in
the Overcollateralization Amount),
third, by the Monthly Servicing Fee
(so long as AFL is the Servicer),
fourth, by the Class B-2
Certificateholders, fifth, by the
Class B-1 Certificateholders and
sixth, by the Class A-6
Certificateholders, since a portion of
the Amount Available equal to such
deficiency and otherwise distributable
to them will be paid to the Senior
Certificateholders. If AFL is no
longer the Servicer, then the Monthly
Servicing Fee will become senior to
all Certificateholders' distributions.
"Liquidation Proceeds" means cash
(including insurance proceeds)
received in connection with the
liquidation of defaulted Contracts,
whether through repossession,
foreclosure sale or otherwise,
including any rental income realized
from the repossessed Manufactured
Home. "Net Liquidation Proceeds"
means, as to a Liquidated Contract,
all Liquidation Proceeds received on
or prior to the last day of the
Collection Period in which such
Contract became a Liquidated Contract,
net of Liquidation Expenses.
"Liquidation Expenses" means
out-of-pocket expenses (exclusive of
any overhead expenses) which are
S-19
incurred by the Servicer in connection
with the liquidation of any defaulted
Contract, on or prior to the date on
which the related Manufactured Home is
disposed of, including, without
limitation, legal fees and expenses,
and any related and unreimbursed
expenditures for property taxes,
property preservation or restoration
of the property to marketable
condition.
If the Amount Available is not
sufficient to cover the entire
principal portion of the Senior
Formula Distribution Amount due to the
Senior Certificateholders or the
entire principal portion of the Class
A-6 Formula Distribution Amount due to
the Class A-6 Certificateholders on a
particular Remittance Date, then (i)
if the Senior Percentage is less than
100%, the Senior Percentage on future
Remittance Dates will be increased and
the Class B Percentage on future
Remittance Dates will be reduced as a
result of such deficiency and (ii) the
amount of the deficiency will be
carried forward as an amount the
Senior Certificateholders or the Class
A-6 Certificateholders are entitled to
receive on future Remittance Dates,
until paid in full. If the Amount
Available is sufficient to cover the
entire principal portion of the Senior
Formula Distribution Amount due to the
Senior Certificateholders and the
entire principal portion of the Class
A-6 Formula Distribution Amount due to
the Class A-6 Certificateholders on a
particular Remittance Date but is not
sufficient to cover the entire
principal portion of the Class B-1
Formula Distribution Amount due to the
Class B-1 Certificateholders, the
amount of the deficiency will be
carried forward as an amount that the
Class B-1 Certificateholders are
entitled to receive on the next
Remittance Date.
As a result of the subordination of the
Class B-1 and the Class B-2
Certificates, the Monthly Servicing
Fee (so long as AFL is the Servicer),
and the subordination of the Class C
and Residual Certificates, the Class
A-6 Certificateholders will not absorb
(i) losses resulting from Realized
Losses or (ii) delinquent payments on
the Contracts, at least to the extent
that such subordination has not been
exhausted. See "Description of the
Certificates -- Subordination of Class
A-6, Class B-1, Class B-2, Class C and
Residual Certificates" and "Prepayment
and Yield Considerations."
As a result of the subordination of the
Class B-2 Certificates, the Monthly
Servicing Fee (so long as AFL is the
Servicer), and the subordination of
the Class C and Residual Certificates,
the Class B-1 Certificateholders will
not absorb (i) losses resulting from
Realized Losses or (ii) delinquent
payments on the Contracts, at least to
the extent that such subordination has
not been exhausted. See "Description
of the Certificates -- Subordination
of Class A-6, Class B-1, Class B-2,
Class C and
S-20
Residual Certificates" and "Prepayment
and Yield Considerations."
As a result of the subordination of the
Monthly Servicing Fee (so long as AFL
is the Servicer) and of the Class C
and Residual Certificates, the Class
B-2 Certificateholders will not absorb
(i) losses resulting from Realized
Losses or (ii) delinquent payments on
the Contracts, at least to the extent
that such subordination has not been
exhausted. See "Description of the
Certificates -- Subordination of Class
A-6, Class B-1, Class B-2, Class C and
Residual Certificates" and "Prepayment
and Yield Considerations."
Final Scheduled Remittance Date........ The Final Scheduled Remittance Date for
each Class of the Offered Certificates
will be the Remittance Date in . The
Final Scheduled Remittance Date has
been determined by adding six months
to the maturity date of the Contract
with the latest stated maturity.
Because the rate of distributions in
reduction of the Principal Balances of
the Offered Certificates will depend
on the rate of amortization of the
Contracts (including amortization due
to prepayments and defaults), the
actual final distribution on any Class
of Offered Certificates could occur
significantly earlier than the Final
Scheduled Remittance Date. The rate of
payments on the Contracts will depend
on their particular characteristics,
as well as on interest rates
prevailing from time to time and other
economic factors, and no assurance can
be given as to the actual payment or
default experience of the Contracts.
Mandatory Prepayment................... Of the maximum original Pre-Funding
Amount of $ , maximum amounts of $
will be funded from the proceeds of
the scale of the Class A Certificates,
and may be used to acquire Subsequent
Contracts. In the event that, on the
199_ Remittance Date, not all of the $
funded from the proceeds of the sale
of the Class A Certificates, has been
used to acquire Subsequent Contracts,
then the Class A Certificates will be
prepaid in part on such date, on a pro
rata basis with respect to the Owners
of individual Certificates of the
related Class, from and to the extent
of such remaining amounts.
Optional Termination................... The Servicer has the option to purchase
from the Trust all Contracts then
outstanding and all other property in
the Trust if, among other conditions,
on any Remittance Date the Pool
Scheduled Principal Balance is less
than 10% of the Cut-off Date Pool
Principal Balance. See "Description of
the Certificates -- Optional
Termination" herein.
Auction Sale........................... The Agreement requires that, within
ninety days following the first
Remittance Date as of which the Pool
Scheduled Principal Balance is less
than 10% of the Cut-off Date Pool
Principal Balance, if the
S-21
Servicer has not exercised its
optional termination right by such
date, the Trustee solicit bids for the
purchase of all Contracts remaining in
the Trust. In the event that
satisfactory bids are received as
described in the Agreement, the net
sale proceeds will be distributed to
Certificateholders, in the same order
of priority as collections received in
respect of the Contracts. If
satisfactory bids are not received,
the Trustee shall decline to sell the
Contracts and shall not be under any
obligation to solicit any further bids
or otherwise negotiate any further
sale of the Contracts. Such sale and
consequent termination of the Trust
must constitute a "qualified
liquidation" of each REMIC established
by the Trust under Section 860F of the
Internal Revenue Code of 1986, as
amended, including, without
limitation, the requirement that the
qualified liquidation takes place over
a period not to exceed 90 days. See
"Description of the Certificates --
Auction Sale".
Advances............................... The Servicer will be required, not later
than each Remittance Date, to deposit
into the Certificate Account an amount
equal to the Scheduled Payments due,
but not collected, with respect to
delinquent Contracts during the prior
Collection Period, but only if, in its
good faith business judgment, the
Servicer believes that such amounts
will ultimately be recovered on or
with respect to the related Contract.
Any such amounts so advanced are
"Delinquency Advances." See
"Description of the Certificates --
Advances" herein.
Registration of Offered Certificates... The Offered Certificates initially will
be issued in book- entry form. Persons
acquiring beneficial ownership
interests in such Offered Certificates
("Beneficial Certificate Owner") may
elect to hold their interests through
The Depository Trust Company ("DTC"),
in the United States, or Cedel Bank,
societe anonyme ("CEDEL") or the
Euroclear System ("Euroclear"), in
Europe. Transfers within DTC, CEDEL or
Euroclear, as the case may be, will be
in accordance with the usual rules and
operating procedures of the relevant
system. So long as the Offered
Certificates are book-entry
certificates, such Offered
Certificates will be evidenced by one
or more Offered Certificates
registered in the name of Cede & Co.
("Cede"), as the nominee of DTC or one
of the relevant depositories
(collectively, the "European
Depositories"). Cross-market transfers
between persons holding directly or
indirectly through DTC, on the one
hand, and counterparties holding
directly or indirectly through CEDEL
or Euroclear, on the other, will be
effected in DTC through Citibank N.A.
("Citibank") or Morgan Guaranty Trust
Company of New York ("Morgan"), the
relevant depositories of CEDEL or
Euroclear, respectively, and each a
participating member of DTC. The
Offered Certificates will initially be
registered in the name of Cede. The
interests of such Beneficial
Certificate
S-22
Owners will be represented by
book-entries on the records of DTC and
participating members thereof. No
Beneficial Certificate Owner will be
entitled to receive a definitive
certificate representing such person's
interest, except under the limited
circumstances described herein. All
references herein to any Offered
Certificates reflect the rights of
Beneficial Certificate Owners only as
such rights may be exercised through
DTC and its participating
organizations for so long as such
Offered Certificates are held by DTC.
See "Description of the Certificates
-- Registration of Offered
Certificates" herein.
Federal Income Tax Consequences........ One or more elections will be made to
treat certain assets of the Trust as
one or more REMICs for federal income
tax purposes. Each class of the
Offered Certificates will be
designated as a "regular interest" in
a REMIC and a separate class of
certificates will be designated as the
"residual interest" with respect to
each REMIC. Certificateholders that
would otherwise report income under a
cash method of accounting will be
required to include in income interest
on the Offered Certificates (including
original issue discount, if any) in
accordance with an accrual method of
accounting. See "Certain Federal
Income Tax Consequences" herein and in
the Prospectus.
ERISA Considerations................... Senior Certificates. Subject to the
conditions and discussion set forth
herein, the Senior Certificates may be
purchased by employee benefit plans
that are subject to the Employee
Retirement Income Security Act of
1974, as amended ("ERISA") after the
earlier of (i) the date on which the
Funding Period expires and (ii) the
date on which the Department of Labor
amends the Exemption (as defined
below) to permit the use of
pre-funding accounts thereunder. See
"ERISA Considerations" herein and in
the Prospectus.
Subordinate Certificates. Except for an
insurance company using assets of its
general account, a fiduciary of any
employee benefit plan or other plan
subject to ERISA and/or Section 4975
of the Internal Revenue Code of 1986,
as amended (the "Code"), should not
purchase or hold the Subordinate
Certificates as such actions may give
rise to a transaction prohibited under
ERISA or Section 4975 of the Code. See
"ERISA Considerations" herein and in
the Prospectus.
Legal Investment....................... The Offered Certificates (other than the
Class B-1 Certificates) at the time of
issuance qualify as "mortgage related
securities" under the Secondary
Mortgage Market Enhancement Act of
1984, as amended ("SMMEA") and, as
such, will constitute legal
investments for certain types of
investors to the extent provided in
SMMEA. The Class B-1 Certificates are
not "mortgage related securities"
S-23
under SMMEA. Accordingly, many
institutions with legal authority to
invest in comparably rated securities
may not be legally authorized to
invest in the Class B-1 Certificates.
Investors should consult their own
legal advisors in determining whether
and to what extent the Offered
Certificates (other than the Class B-1
Certificates) constitute legal
investments for such investors. See
"Legal Investment Matters" in the
Prospectus.
Ratings................................ It is a condition to the issuance of the
Senior Certificates that they be rated
" " by (" ") and
" " by , (" "). It
is a condition to the issuance of the
Class A-6 Certificates that they be
rated at least " " by and
" " by . It is a condition
to the issuance of the Class B-1
Certificates that they be rated at
least " " by and " " by . The Seller
has not requested a rating on the
Offered Certificates by any rating
agency other than and . However, there
can be no assurance as to whether any
other rating agency will rate any or
all of the Offered Certificates, or if
it does, what rating would be assigned
by any such other rating agency. A
rating on any or all of the Offered
Certificates by certain other rating
agencies, if assigned at all, may be
lower than the rating assigned to such
Certificates by either or .
See "Ratings" herein.
A security rating is not a
recommendation to buy, sell or hold
securities and may be subject to
revision or withdrawal at any time.
S-24
RISK FACTORS
Prospective Offered Certificateholders should consider, among other
things, the factors discussed in the Prospectus under "Risk Factors." In
addition, prospective Offered Certificateholders should consider the following
in connection with the purchase of Offered Certificates:
1. General. An investment in the Certificates may be affected by, among
other things, a downturn in national, regional or local economic conditions. The
geographic locations of the Manufactured Homes in the Contract Pool are set
forth herein. Regional and local economic conditions are often volatile and,
historically, regional and local economic conditions, as well as national
economic conditions, have affected the delinquency, loan loss and repossession
experience of manufactured housing installment sales contracts. Adverse economic
conditions in any of the states with high concentrations could adversely affect
the delinquency or loan loss experience of the Contracts. Moreover, regardless
of its location, manufactured housing generally depreciates in value. Thus,
Certificateholders should expect that, as a general matter, the market value of
any Manufactured Home will be lower than the outstanding principal balance of
the related Contract. See "The Contract Pool." Sufficiently high delinquencies
and liquidation losses on the Contracts in the Contract Pool will have the
effect of reducing, and could eliminate, the protection against loss afforded by
any credit enhancement supporting any Class of the related Certificates. See
"Description of Credit Enhancement" in the Prospectus. If such protection is
eliminated, or if no such protection is provided, the holders of such
Certificates will bear all risk of loss on the Contracts and must rely on the
value of the Manufactured Homes for recovery of the outstanding principal of and
unpaid interest on any defaulted Contracts.
2. Security Interests in the Manufactured Homes; Transfer of Contracts
and Security Interests. On or prior to the Closing Date, AFL will convey the
related Contracts to the Seller and the Seller will convey the related Contracts
to the Trust.
Each Contract is secured by a security interest in a Manufactured Home
together with, in the case of Land Secured Contracts, the real estate on which
the related Manufactured Home is located. Perfection of security interests in
the Manufactured Homes and enforcement of rights to realize upon the value of
the Manufactured Homes as collateral for the Contracts are subject to a number
of federal and state laws, including the Uniform Commercial Code (the "UCC") as
adopted in the states in which the Manufactured Homes are located and such
states' certificate of title statutes, but generally not their real estate laws.
Under such federal and state laws, a number of factors may limit the ability of
a holder of a perfected security interest in Manufactured Homes to realize upon
such Manufactured Homes or may limit the amount realized to less than the amount
due under the related Contract. See "Certain Legal Aspects of the Contracts."
In addition, because of the expense and administrative inconvenience
involved, AFL will not amend any certificates of title relating to any
Manufactured Home to change the lienholder specified therein to the Trustee, and
will not execute any transfer instrument (including, among, other instruments,
UCC-3 assignments) relating to any Manufactured Home in favor of the Trustee or
note thereon the Trustee's interest. As a result, AFL will remain the lienholder
on the certificate of title relating to the Manufactured Home. In some states,
in the absence of such an amendment, execution or notation, the assignment to
the Trustee of the security interest in the Manufactured Homes located therein
may not be effective or such security interest may not be perfected. If any
otherwise effectively assigned security interest in favor of the Trustee is not
perfected, such assignment of the security interest to the Trustee may not be
effective against creditors of AFL to the extent it continues to be specified as
lienholder on any certificate of title or as secured party on any UCC filing, or
against a trustee in bankruptcy of AFL.
Each Contract (other than a Land Secured Contract) will be "chattel
paper" as defined in the UCC as in effect in Minnesota (where AFL's executive
office is currently located) and the jurisdiction in which the related
Manufactured Home was located at origination. Under the UCC as in effect in each
such jurisdiction, the sale of chattel paper is treated in a manner similar to
perfection of a security interest in chattel paper. Under the Agreement, the
Trustee will have possession of the Contracts. In addition, AFL and the Seller
will make appropriate filings of UCC-1 financing statements in the office of the
Secretary
S-25
of State of the State where their principal place of business is located to give
notice of the Trustee's ownership of the Contracts. The Trustee's interest in
the Contracts could, through the fraud or negligence of the Trustee, be defeated
if a subsequent purchaser were able to take physical possession of the Contracts
without notice of such assignment.
Further, because of the expenses and administrative inconvenience
involved, the assignment of mortgages or deeds of trust to the Trustee will not
be recorded with respect to the mortgages or deeds of trust (each, a"Mortgage")
securing each Land Secured Contract. The failure to record the assignments to
the Trustee of the Mortgage securing Land Secured Contracts may result in the
sale of such Contracts or the Trustee's rights in the land secured by the
Mortgage being ineffective against creditors of AFL or against a trustee in
bankruptcy of AFL or against a subsequent purchaser of such Contracts from AFL
or Receivables Corp., without notice of the sale to the Trustee. See "The
Contract Pool" herein for a description of the programs under which Contracts
are originated or purchased by AFL.
3. Federal and State Consumer Protection Laws. Numerous federal and
state consumer protection laws could adversely affect the interest of the Trust
in the Contracts in the Contract Pool. For instance, as described herein under
"Certain Legal Aspects of the Contracts -- Consumer Protection Laws," the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief Act"),
could, under certain circumstances, cap the amount of interest that may be
charged on certain Contracts at 6% and may hinder the ability, of the Servicer
to foreclose on such Contracts in a timely fashion. In addition, other federal
and state consumer protection laws impose requirements on lending under
installment sales contracts and installment loan agreements such as the
Contracts, and the failure by the lender or seller of goods to comply with such
requirements could give rise to liabilities of assignees for amounts due under
such agreements and the right of set-off against claims by such assignees. These
laws could apply to the Trust as assignee of the related Contracts. AFL will
represent and warrant that, as of the Cut-Off Date, each Contract complies with
all requirements of law. A breach of any such representation or warranty that
materially adversely affects the Trust's interest in any Contract will create an
obligation by AFL to repurchase, or at its option substitute another contract
for, such Contract, unless such breach is cured within the time period specified
in the Agreement. AFL will have no obligation to repurchase any Contract subject
to the Relief Act, however.
4. No Recourse. The purchase of the Certificates will be without
recourse. See "Description of Credit Enhancement" in the Prospectus. The
Certificates will not represent an interest in or obligation of, and the
Certificates will not be guaranteed by, AFL or Receivables Corp. or any of their
affiliates. In addition, the Certificates will not be insured or guaranteed by
any governmental agency or instrumentality.
5. Prepayment Considerations. The prepayment experience on the
Contracts underlying the Certificates (including prepayments due to liquidations
of defaulted Contracts) will affect the average life and the maturity of such
Certificates. Prepayments on the Contracts in the Contract Pool may be
influenced by a variety of economic, geographic, social and other factors,
including repossessions, seasonality and interest rates. Other factors affecting
prepayment on the Contracts include changes in housing needs, job transfers and
unemployment. See "Prepayment and Yield Considerations" herein.
6. Certain Matters Relating to Insolvency. As described herein under
"The Contract Pool," each of the Contracts will be conveyed by AFL to
Receivables Corp. and by Receivables Corp. to the Trust. Each of AFL and
Receivables Corp. intend that their respective conveyance of the Contracts
constitute a sale, rather than a pledge of the Contracts to secure its
respective indebtedness. However, if any such entity were to become a debtor
under the federal bankruptcy code, it is possible that a creditor or trustee in
bankruptcy of such entity or such entity as debtor-in-possession may argue that
the sale of the Contracts by such entity was a pledge of the Contracts rather
than a sale. This position, if presented to or accepted by a court, could result
in a delay in or reduction of distributions to the Certificateholders.
7. The Subsequent Contracts and the Pre-Funding Account. If the
principal amount of eligible Contracts available during the Funding Period and
sold to the Trust is less than 100% of the Pre-Funded Amount, the Seller will
have insufficient Contracts to sell to the Trust, on the Subsequent Transfer
Dates,
S-26
thereby resulting in prepayments of principal to Owners of one or more Classes
of Class A Certificates as described herein. In addition, any conveyance of
Subsequent Contracts is subject to the following conditions, among others: (i)
each such Subsequent Contract must satisfy the representations and warranties
specified in the Purchase Agreement and the Agreement; (ii) AFL will not select
such Subsequent Contracts in a manner that they believe is adverse to the
interests of the Class A Certificateholders; (iii) AFL will deliver certain
opinions of counsel with respect to the validity of the conveyance of such
Subsequent Contracts; and (iv) as of the Subsequent Cut-Off Date, the Contracts
at that time, including the Subsequent Contracts to be conveyed by the Seller as
of such Subsequent Cut-Off Date, will satisfy the criteria set forth in the
Agreement, as described herein under "The Contract Pool".
To the extent that amounts on deposit in the Pre-Funding Account have
not been fully applied to the purchase of Subsequent Contracts by the Trust by
the end of the Funding Period, the Owners of one or more Classes of Class A
Certificates will receive a prepayment of principal in an amount equal to the
Pre-Funded Amount allocable to such Class and remaining in the Pre-Funding
Account following the purchase of any Subsequent Contracts on the first
Remittance Date following the Funding Period. Although no assurances can be
given, it is anticipated by AFL that the principal amount of Subsequent
Contracts sold to the Trust will require the application of substantially all
amounts on deposit in the Pre- Funding Account and that there will be no
material principal prepayment to the Class A Certificateholders.
Each Subsequent Contract must satisfy the eligibility criteria referred
to above at the time of its addition. However, Subsequent Contracts may have
been originated or purchased by AFL using credit criteria different from those
which were applied to the Initial Contracts and may be of a different credit
quality. Therefore, following the transfer of Subsequent Contracts to the Trust,
the characteristics of the Contracts in the Trust may vary significantly from
those of the Initial Contracts. See "The Contract Pool".
THE CONTRACT POOL
All of the Contracts to be sold by Receivables Corp. to the Trust will
be originated or purchased by AFL. On or prior to the Closing Date, AFL will
sell such Initial Contracts to Receivables Corp. On the date of initial issuance
of the Offered Certificates, the Trust will acquire the Initial Contracts
comprising the Contract Pool from Receivables Corp. Additional contracts (the
"Subsequent Contracts") are intended to be purchased by the Trust from the
Seller from time to time on or before , 199_, from funds on deposit in the
Pre-Funding Account. The Initial Contracts and the Subsequent Contracts are
referred herein collectively as the "Contracts". The Subsequent Contracts to be
purchased by the Trust, if available, will be originated on or prior to , 199_,
sold by AFL to the Seller and then sold by the Seller to the Trust. The
Agreement will provide that the Contracts must in the aggregate conform to
certain specified characteristics described below following the conveyance of
the Subsequent Contracts. The Trustee will have possession of the Contracts.
Each Contract will provide for scheduled payments of principal and
interest on specified monthly due dates (each, a "Due Date"). The day of each
month constituting the Due Date will vary from Contract to Contract. The
scheduled payment due on each monthly Due Date (the "Scheduled Payment") is or
will be specified in the Initial Contract or Subsequent Contract, respectively.
The Contracts will all be actuarial Contracts. Each Contract will bear
interest at a fixed annual percentage rate (the "Contract Rate") and will
provide for level payments over the term of such Contract that fully amortize
the principal balance of such Initial Contract. The Contract Pool will not
contain any "step-up rate" Contracts.
The Contract Pool will contain a limited number of Contracts as to
which the real estate is either (i) in lieu of a cash down payment on the
Manufactured Home ("Land-in-Lieu Contracts"), representing % of the Contract
Pool (by aggregate principal balance as of the Cut-off Date) or (ii) taken as
collateral against a loan advanced on the related Manufactured Home together
with the real estate on
S-27
which the Manufactured Home is located ("Land-Home Contracts") (together, "Land
Secured Contracts"), representing % of the Contract Pool (by aggregate
principal balance as of the Cut-off Date).
Under the Agreement, the Manufactured Homes are required to comply with
the requirements of certain federal statutes. These statutes generally require
the Manufactured Homes to have a minimum of 400 square feet of living space and
a minimum width of 102 inches and to be of a kind customarily used at a fixed
location. Such statutes also require the Manufactured Homes to be transportable
in one or more sections, and to be built on a permanent chassis and designed to
be used as dwellings, with or without permanent foundations, when connected to
the required utilities. The Manufactured Homes include the plumbing, heating,
air conditioning and electrical systems contained therein.
Management of AFL estimates that as of the date of origination in
excess of % of the Manufactured Homes are used as primary residences by the
obligors under the Initial Contracts (each, an "Obligor") secured by such
Manufactured Homes.
All Contracts will have fixed Contract Rates. As of the Cut-off Date,
the Contract Rates on the Initial Contracts ranged % to %. The weighted
average Contract Rate as of the Cut-off Date was approximately %. Because the
Servicing Fee is subordinated while AFL is the Servicer, the Weighted Average
Net Contract Rate as of the Cut-off Date is also %. As of the Cut-off Date, the
Initial Contracts had remaining terms to maturity of at least months but not
more than months, and original terms to maturity of at least months but not more
than months. As of the Cut-off Date, the Initial Contracts had a weighted
average remaining term to maturity of approximately months, and a weighted
average original term to maturity of approximately months. The average
outstanding principal balance of the Initial Contracts as of the Cut-off Date
was $ and the outstanding principal balances of the Initial Contracts as
of the Cut-off Date ranged from $ to $ . The weighted average
loan-to-value ratio for the Initial Contracts at origination was %. "Value"
in such calculation, (i) in the case of Manufactured Home Contracts and Land
as Additional Collateral Contracts, is equal to the stated cash sale price of
such Manufactured Home, including sales and other taxes, plus, to the extent
financed, filing and recording fees imposed by law, premiums for related
insurance and prepaid finance charges, (ii) in the case of Land-Home Contracts
and Land-in-Lieu Contracts, is equal to the sum of Value in (i) above and the
appraised value of the land securing the Initial Contract and (iii) in the case
of Refinanced Contracts, is equal to the outstanding principal balance of the
Contract refinanced at the time such Refinanced Contract was originated.
Manufactured homes, unlike site-built homes, generally depreciate in value, and
it has been AFL's experience that, upon repossession, the market value of a
manufactured home securing a manufactured housing contract is generally lower
than the principal balance of the related manufactured housing contract.
The Contracts will be secured by Manufactured Homes located in states;
approximately % of the Initial Contracts by outstanding principal balance as
of the Cut-off Date were secured by Manufactured Homes located in , % in
, % in , % in and % in . No other
state represented more than % of the Initial Contracts.
Approximately % of the Initial Contracts by outstanding principal
balance as of the Cut-off Date are secured by Manufactured Homes which were new
at the time the related Initial Contracts were originated and approximately %
of the Initial Contracts by outstanding principal balance as of the Cut-off Date
are secured by Manufactured Homes which were used at the time the related
Initial Contracts were originated.
All of the Contracts will be conventional Contracts in that they are
not insured or guaranteed by any governmental agency or instrumentality.
Conveyance of Subsequent Contracts
The Agreement permits the Trust to acquire up to $ aggregate
principal balance of Subsequent Contracts. Accordingly, the statistical
characteristics of the Contract Pool will vary as of any Subsequent Cut-Off Date
upon the acquisition of Subsequent Contracts.
S-28
The obligation of the Trust to purchase the Subsequent Contracts on a
Subsequent Transfer Date is subject to the following requirements: (i) such
Subsequent Contract may not be _____ or more days contractually delinquent as of
the related Subsequent Cut-Off Date; (ii) the stated term to maturity to such
Subsequent Contract may not exceed _____ years; (iii) such Subsequent Contract
will be a Manufactured Home Contract or a Land Secured Contract and (iv)
following the purchase of such Subsequent Contracts by the Trust, the Contracts
in the Contract Pool (including the Subsequent Contracts) (a) will have a
weighted average Contract Rate of at least %; (b) will have a weighted average
original term to stated maturity of not more than months; (c) will have a
weighted average LTV of not more than %; (d) will have no Contract with a
principal balance in excess of $ ; (e) will have a concentration not in
excess of % by aggregate principal balance; and (f) will have not more
than % in aggregate principal balance of Contracts relating to non-owner
occupied Manufactured Homes.
S-29
Set forth below is a description of certain additional characteristics
of the Initial Contracts:
Geographical Distribution of Manufactured Homes as of Origination(1)
Aggregate
Number of Principal % of
Initial Balance Contract Pool
Contracts Outstanding By Outstanding
As of As of Cut-off Principal Balance As
State Cut-off Date Date of Cut-off Date
----- ------------ ------------- --------------------
Alabama...................................... $ %
Arizona......................................
Arkansas.....................................
California...................................
Colorado.....................................
Delaware.....................................
Florida......................................
Georgia......................................
Idaho........................................
Illinois.....................................
Indiana......................................
Iowa.........................................
Kansas.......................................
Kentucky.....................................
Louisiana....................................
Maryland.....................................
Michigan.....................................
Minnesota....................................
Mississippi..................................
Missouri.....................................
Montana......................................
Nebraska.....................................
Nevada.......................................
New Mexico...................................
New York.....................................
North Carolina...............................
Oklahoma.....................................
Oregon.......................................
Pennsylvania.................................
South Carolina...............................
Tennessee....................................
Texas........................................
Utah.........................................
Virginia.....................................
Washington...................................
West Virginia................................
Wisconsin....................................
Wyoming......................................
------ ------------- ---------
Total...................................... $ %
====== ============= =========
- --------------------
(1) Based on billing address of Obligors.
S-30
Years of Origination of Initial Contracts
Aggregate
Number of Principal % of
Initial Balance Contract Pool
Contracts Outstanding By Outstanding
As of As of Cut-off Principal Balance As
Years Cut-off Date Date of Cut-off Date
----- ------------ ------------- --------------------
......................................... $ %
.........................................
.........................................
------ ----------- -------
Total...................................... $ %
====== =========== =======
Distribution of Original Principal Balances of Initial Contracts(1)
Aggregate % of
Number of Principal Contract Pool
Initial Balance By Outstanding
Contracts Outstanding Principal Balance
As of As of Cut-off As of Cut-off
Distribution Cut-off Date Date Date
------------ ------------ ------------- -----------------
$ 5,000 or less........................... $ %(2)
$ 5,000+ - 10,000............................
$ 10,000+ - 20,000............................
$ 20,000+ - 30,000............................
$ 30,000+ - 40,000............................
$ 40,000+ - 50,000............................
$ 50,000+ - 60,000............................
$ 60,000+ - 70,000............................
$ 70,000+ - 80,000............................
$ 80,000+ - 90,000............................
$ 90,000+ -100,000............................
$100,000+ -110,000............................
$110,000+ -120,000............................
$150,000+...... ..............................
Total.......................................
------ ------------ ---------
$ %
====== ============ =========
(1) The maximum original Initial Contract principal balance is $ ,
which represents % of the original principal balance of the Initial
Contracts at origination.
(2) This percentage is less than 0.01%.
S-31
Distribution of Original Loan-to-Value Ratios(1)
Aggregate
Number of Principal % of
Initial Balance Contract Pool
Contracts Outstanding By Outstanding
As of As of Cut-off Principal Balance As
Distribution Cut-off Date Date of Cut-off Date
------------ ------------ ------------- --------------------
50% or less.................................. $ %
50.01 - 60%..................................
60.01 - 70%..................................
70.01 - 80%..................................
80.01 - 90%..................................
90.01 - 100%.................................
Total......................................
------ ----------- ----------
$ %
====== =========== ==========
- ------------------
(1) Determined at the time of loan origination. The definition of "Value"
is set forth above under "The Contract Pool". Manufactured Homes,
unlike site-built homes, generally depreciate in value, and it should
generally be expected, especially with Initial Contracts with high
loan-to-value ratios at origination, that at any time after the
origination of an Initial Contract the market value of the Manufactured
Home securing such Initial Contract may be lower than the outstanding
principal balance of such Initial Contract. The original loan-to-value
ratio of a Refinanced Contract is determined at the time of origination
of such Refinanced Contract for purposes of preparing this table and
other statistical information presented herein related to loan-to-value
ratios. See "Access Financial Lending Corp. -- Underwriting Guidelines
-- Loan-to-Value Ratio" herein. The Contract Pool contained $ in
aggregate principal balance of Refinanced Contracts as of the Cut-Off
Date.
The weighted average original loan-to-value ratio of the Initial
Contracts as of the Cut-off Date was approximately %.
Contract Rates(1)
Aggregate
Number of Principal % of
Initial Balance Contract Pool
Contracts Outstanding By Outstanding
As of As of Cut-off Principal Balance As
Contract Rate Cut-off Date Date of Cut-off Date
------------- ------------ ------------- --------------------
6.01 - 7.00%................................ $ %
7.01 - 8.00%................................
8.01 - 9.00%................................
9.01 - 10.00%...............................
10.01 - 11.00%...............................
11.01 - 12.00%...............................
12.01 - 13.00%...............................
13.01 - 14.00%...............................
14.01 - 16.00%............................... (2)
------- --------------- ------------
Total...................................... $ %
======= =============== ===========
- ------------------
(1) The weighted average Contract Rate of the Initial Contracts as of the
Cut-off Date was approximately %.
(2) This percentage is less than 0.01%.
S-32
Remaining Terms to Maturity (in Months)(1)
Aggregate
Number of Principal % of
Initial Balance Contract Pool
Contracts Outstanding By Outstanding
As of As of Cut-off Principal Balance As
Remaining Terms Cut-off Date Date of Cut-off Date
--------------- ------------ -------------- --------------------
1 - 60..................................... $ %
61 - 84.....................................
85 - 120....................................
121 - 180....................................
181 - 240....................................
241 - 300....................................
301 - 360....................................
-------- ------------- ----------
Total...................................... $ %
======== ============= ==========
- ------------------
(1) The weighted average remaining term to maturity of the Initial
Contracts as of the Cut-off Date was approximately months.
Loan Purpose
Aggregate
Number of Principal % of
Initial Balance Contract Pool
Contracts Outstanding By Outstanding
As of As of Cut-off Principal Balance As
Purpose Cut-off Date Date of Cut-off Date
------- ------------ ------------- --------------------
Purchase..................................... $ %
Refinance....................................
------ ------------- ----------
Total...................................... $ %
====== ============= ==========
Manufactured Home Type
Aggregate
Number of Principal % of
Initial Balance Contract Pool
Contracts Outstanding By Outstanding
As of As of Cut-off Principal Balance As
Type Cut-off Date Date of Cut-off Date
---- ------------ ------------- --------------------
Single Wide.................................. $ %
Double Wide..................................
----- ----------- ---------
Total...................................... $ %
===== =========== =========
S-33
PREPAYMENT AND YIELD CONSIDERATIONS
The general prepayment and yield considerations discussed in the
Prospectus under "Yield Considerations" are applicable to the Offered
Certificates. In addition, prospective Offered Certificateholders should
consider the following:
The Initial Contracts had maturities at origination ranging from months
to months, but may be prepaid in full or in part at any time. The prepayment
experience of the Contracts (including prepayments due to liquidations of
defaulted Contracts) will affect the weighted average life of the Offered
Certificates. Based on AFL's experience with the portfolio of conventional
manufactured housing contracts serviced by it, AFL anticipates that a number of
Contracts will be prepaid in full prior to their maturity. A number of factors,
including homeowner mobility, general and regional economic conditions and
prevailing interest rates, may influence prepayments. Natural disasters may also
influence prepayments. In addition, repurchases of Contracts on account of
certain breaches of representations and warranties will have the effect of
prepaying such Contracts and therefore will affect the weighted average life of
the Offered Certificates. Most of the Initial Contracts contain provisions that
prohibit the owner from selling the Manufactured Home without the prior consent
of the holder of the related Initial Contract. Such provisions are similar to
"due-on-sale" clauses and may not be enforceable in certain states. See "Certain
Legal Aspects of the Contracts -- Transfers of Manufactured Homes;
Enforceability of Restrictions on Transfer" herein. Notwithstanding the
inclusion of such "due on sale" clauses in the Contract, it is AFL's current
policy to permit most sales of Manufactured Homes where the proposed buyer meets
AFL's then current underwriting standards and enters into an assumption
agreement. See "-- Weighted Average Life of the Offered Certificates" below.
The allocation of distributions to the Offered Certificateholders in
accordance with the Agreement will have the effect of accelerating the
amortization of the Classes of Senior Certificates and delaying the amortization
of certain other Classes of Offered Certificates from the amortization that
otherwise would be applicable if the principal were distributed pro rata
according to the outstanding principal balances of each Offered Certificate. If
a purchaser of Offered Certificates purchases them at a discount and calculates
its anticipated yield to maturity based on an assumed rate of distributions of
principal on the Offered Certificates that is faster than the rate actually
realized, such purchaser's actual yield to maturity will be lower than the yield
so calculated by such purchaser. See "Description of the Certificates --
Distributions."
As described herein under "Description of the Certificates --
Subordination of Class A-6, Class B-1, Class B-2, Class C and Residual
Certificates" and "-- Losses on Liquidated Contracts," to the extent that, on
any Remittance Date, the Amount Available is not sufficient to permit a full
distribution of the principal to the Offered Certificateholders, the effect will
be to cause the Offered Certificates to be amortized more slowly than they
otherwise would have been amortized, and losses on Liquidated Contracts and
delinquencies on the Contracts will be borne by the Offered Certificateholders
in the manner described thereunder and as described below.
The distribution of Accelerated Principal Payments to create and
thereafter maintain the Overcollateralization Amount at the Required
Overcollateralization Amount will accelerate the amortization of the Non-IO
Certificates relative to the amortization of the Contract Pool. It is possible
that, under certain scenarios and with respect to certain Remittance Dates, if
the Required Overcollateralization Amount is reduced and Overcollateralization
Reduction Amounts (as defined herein) are paid to the holders of the Class C
Certificates, the holders of the Senior, Class A-6, Class B-1 and Class B-2
Certificates may receive no, or reduced, distributions of principal. See
"Description of the Certificates - Class C Distributions, Overcollateralization
Amounts."
The Servicer (whether or not AFL remains the Servicer) has the option
to repurchase the Contracts and any other property constituting the Trust if on
any Remittance Date the Pool Scheduled Principal Balance is less than 10% of the
Cut-off Date Pool Principal Balance. See "Description of the Certificates --
Optional Termination" herein. If the Servicer does not exercise such option on
the first
S-34
Remittance Date on which such option may be exercised, the Trustee will be
required to conduct an auction sale as described herein. See "Description of the
Certificates -- Auction Sale" herein.
Although Contract Rates on the Contracts vary, in the event that, with
respect to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class B-1 and Class B-2 Certificates, a large number of Contracts having Net
Contract Rates equal to or higher than the applicable Remittance Rate (without
giving effect to the maximum rate) were to prepay while Contracts having Net
Contract Rates lower than such Remittance Rate did not prepay, with the result
that the interest collections on the remaining Contracts were not sufficient to
support such Remittance Rate, then the Remittance Rate for such Class of
Certificates would be equal to the weighted average of the Net Contract Rates on
each Contract remaining in the Contract Pool. The "Net Contract Rate" is the
contractual rate of interest payable under a Contract (the "Contract Rate"),
less, if AFL is no longer the Servicer, the Monthly Servicing Fee allocable to
such Contract for such Collection Period.
Obligors are not required to pay interest on the Contracts after the
date of full prepayment of principal or the date of a partial prepayment of
principal (to the extent of such partial prepayment). As a result, partial or
full prepayments in advance of the related Due Dates for such Contracts in any
Collection Period will reduce the amount of interest received from the related
Obligors during such Collection Period to less than one month's interest.
However, when a Contract is prepaid in full during any Collection Period, but
after the Due Date for such Contract in such Collection Period, the effect will
be to increase the amount of interest received from the related Obligor during
such Collection Period to more than one month's interest. If a sufficient amount
of partial prepayments are made or a sufficient number of Contracts are prepaid
in full in a given Collection Period in advance of their respective Due Dates,
interest received on all of the Contracts during that Collection Period, after
netting out the Monthly Servicing Fee (and other expenses of the Trust), may be
less than the interest payable on the Senior and/or Subordinate Certificates
with respect to such Collection Period. As a result, the Amount Available for
the related Remittance Date may not be sufficient to distribute the interest on
the Offered Certificates in the full amount set forth herein under "Description
of the Certificates -- Distributions on the Certificates" and to make a full
distribution of the Formula Principal Distribution Amount to the Senior and/or
Subordinate Certificateholders. Although no assurance can be given in this
matter, Receivables Corp. does not anticipate that the net shortfall of interest
received because of partial prepayments or prepayments in full in any Collection
Period would be great enough, in the absence of delinquencies or liquidation
losses, to reduce the Amount Available for a Remittance Date below the amount
that would have been required to be distributed to Offered Certificateholders on
that Remittance Date in the absence of such prepayment interest shortfalls.
Because the Contracts are actuarial Contracts, the outstanding
principal balances thereof will reduce, for purposes of accrual of interest
thereon, by a precomputed amortization amount on each Due Date whether or not
the Scheduled Payment for such Due Date is received in advance of or subsequent
to such Due Date. Thus, the effect of delinquent Scheduled Payments, even if
they are ultimately paid by the Obligor, will be to reduce the yields on such
Contracts below their respective Contract Rates (because interest will not have
accrued on the principal portion of any Scheduled Payment while it is
delinquent). If the Servicer does not make a Monthly Advance with respect to
such delinquent Contracts as described herein, the result will be to reduce the
effective yield to the Trust derived from such Initial Contracts to a yield
below their Contract Rates. Under certain circumstances, such yield reductions
could cause the aggregate yield to the Trust derived from the Contract Pool to
be insufficient to support the distribution of interest on the Offered
Certificates, after netting out other expenses of the Trust.
To the extent that on any Remittance Date the Class A-6 Remaining
Amount Available, Class B-1 Remaining Amount Available or Class B-2 Remaining
Amount Available is not sufficient to pay to the holders of the Class A-6
Certificates, Class B-1 Certificates or Class B-2 Certificates, respectively,
all payments of interest to which such Certificateholders are entitled on such
Remittance Date, the Trustee will withdraw the amount of such deficiency from
the Certificate Account from funds, if any, which would otherwise constitute a
portion of the Amount Available for the following Remittance Date and distribute
such funds to the Class A-6, Class B-1 and Class B-2 Certificateholders, as the
case may be.
S-35
In such event, the Amount Available to be distributed to all Certificateholders,
including the holders of the Senior Certificates, on the next Remittance Date
will be reduced by such amount.
The yield to Offered Certificateholders will be below that otherwise
produced by the applicable remittance rates because, while, in the absence of
losses or delinquencies, one month's interest on the Contracts will be collected
during each Collection Period, the portion of such interest to which the Offered
Certificateholders are entitled will not be distributed until the ____ day (or,
if such day is not a business day, the next business day) of the month following
the Collection Period.
Mandatory Prepayment
Of the maximum original Pre-Funding Amount of $ , maximum amounts
of $ will be funded from the proceeds of the sale of the Class A
Certificates, and may be used to acquire Subsequent Contracts. In the event
that, on the 199_ Payment Date, not all of the $ funded from the proceeds
of the sale of the Class A Certificates, has been used to acquire Subsequent
Contracts, then the Class A Certificates will be prepaid in part on such date,
on a pro rata basis with respect to the Owners of individual Certificates, from
and to the extent of such remaining amounts.
Although no assurances can be given, it is anticipated by AFL that the
principal amount of Subsequent Contracts sold to the Trust will require the
application of substantially all the amount on deposit in the Pre-Funding
Account and that there should be no material principal prepaid to the Class A
Certificateholders.
Weighted Average Lives of the Offered Certificates
The following information is given solely to illustrate the effect of
prepayments of the Contracts on the weighted average lives of the Offered
Certificates under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced by the Contracts.
Weighted average life refers to the average amount of time from the
date of issuance of a security until each dollar of principal of such security
will be repaid to the investor. The weighted average life of an Offered
Certificate is determined by (i) multiplying the amount of cash distributions in
reduction of the Principal Balance of such Certificate by the number of years
from the date of issuance of such Certificate to the stated Remittance Date,
(ii) adding the results, and (iii) dividing the sum by the Original Principal
Balance of such Certificate. The weighted average life of the Offered
Certificates will be affected by the rate at which principal on the Contracts is
paid. Principal payments on Contracts may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
repayments (other than from scheduled amortization) and liquidations due to
default or other dispositions of Contracts). Prepayments on Contracts may be
measured by a prepayment standard or model. The model used in this Prospectus
Supplement ("Prepayment Model") is based on an assumed rate of prepayment each
month of the then unpaid principal balance of a pool of new contracts. 100% of
the Prepayment Model assumes constant prepayment rates of 3.7% per annum of the
then unpaid principal balance of such Contracts in the first month of the life
of the Contracts and an additional 0.1% per annum in each month thereafter until
the 24th month. Beginning in the 24th month and in each month thereafter during
the life of the Contracts, 100% of the Prepayment Model assumes a constant
prepayment rate of 6% per annum.
As used in the following table, "0% of the Prepayment Model" assumes no
prepayments on the Contracts; "75% of the Prepayment Model" assumes the
Contracts will prepay at rates equal to 75% of the Prepayment Model assumed
prepayment rates; "100% of the Prepayment Model" assumes the Contracts will
prepay at rates equal to 100% of the Prepayment Model assumed prepayment rates;
"150% of the Prepayment Model" assumes the Contracts will prepay at rates equal
to 150% of the Prepayment Model assumed prepayment rates; "200% of the
Prepayment Model" assumes the Contracts will prepay at rates equal to 200% of
the Prepayment Model assumed prepayment rates; and "300% of the Prepayment
Model" assumes the Contracts will prepay at rates equal to 300% of the
Prepayment Model assumed prepayment rates.
S-36
There is no assurance, however, that prepayments of the Contracts will
conform to any level of the Prepayment Model, and no representation is made that
the Contracts will prepay at the prepayment rates shown or any other prepayment
rate. The rate of principal payments on pools of manufactured housing contracts
is influenced by a variety of economic, geographic, social and other factors,
including the level of interest rates and the rate at which manufactured
homeowners sell their manufactured homes or default on their contracts. Other
factors affecting prepayment of such contracts include changes in obligors'
housing needs, jobs transfers, unemployment and obligors' net equity in the
manufactured homes. In the case of mortgage loans secured by site-built homes,
in general, if prevailing interest rates fall significantly below the interest
rates on such mortgage loans, the mortgage loans are likely to be subject to
higher prepayments rates than if prevailing interest rates remained at or above
the rates borne by such mortgage loans. Conversely, if prevailing interest rates
rise above the interest rates on such mortgage loans, the rate of prepayment
would be expected to decrease. In the case of manufactured housing contracts,
however, because the outstanding principal balances are, in general, much
smaller than mortgage loan balances and the original term to maturity of each
such contract is generally shorter, the reduction or increase in the size of the
monthly payments on contracts of the same maturity and principal balance arising
from a change in the interest rate there on is generally much smaller.
Consequently, changes in prevailing interest rates may not have a similar
effect, or may have a similar effect, but to a smaller degree, on the prepayment
rates on manufactured housing contracts.
The percentages and weighted average lives in the following tables were
determined assuming that (i) scheduled interest and principal payments on the
Contracts are received in a timely manner and prepayments are made at the
indicated percentages of the Prepayment Model set forth in the tables; (ii) the
Servicer does not exercise its right of optional termination described above;
(iii) the Contracts, as of the Cut-off Date, will be grouped into eight groups
having the additional characteristics set forth in the table entitled 'Assumed
Contract Characteristics' below; (iv) the Original Principal Balance and
Remittance Rate of each Class of Certificates is as described herein; (v) no
interest shortfalls will arise in connection with prepayment in full of the
Contracts; (vi) there will be no losses on the Contract Pool; (vii) a servicing
fee of % per annum will be paid to the Servicer after distribution on the
Offered Certificates; (viii) amounts, including Accelerated Principal Payments,
will be distributed on account of each class of Certificates in accordance with
the payment priorities described herein; (ix) distributions are made on the
Certificates on the 15th day of each month commencing on , (x) the Closing Date
for the issuance of the Certificates is and (xi) the Class B-2 Remittance Rate
is %. The tables assume that there are no losses or delinquencies on the
Contracts. No representation is made that losses or delinquencies on the
Contracts will be experienced at the rate assumed in the preceding sentence or
at any other rate.
Assumed Contract Characteristics
Original Remaining
Principal Term to Maturity Term to Maturity
Pool Balance Contract Rate (Months) (Months)
- ---------------- --------- ------------- ---------------- ----------------
1.............. $ %
2..............
3..............
4..............
5..............
6..............
7..............
8..............
---------
$
=========
Since the tables were prepared on the basis of the assumptions in the
preceding paragraph, there are discrepancies between the characteristics of the
actual Contracts and the characteristics of the
S-37
Contracts assumed in preparing the tables. Any such discrepancy may have an
effect upon the percentages of the Original Class A-1 Principal Balance,
Original Class A-2 Principal Balance, Original Class A-3 Principal Balance,
Original Class A-4 Principal Balance, Original Class A-5 Principal Balance,
Original Class A-6 Principal Balance and Original Class B-1 Principal Balance
outstanding and weighted average lives of such Certificates set forth in the
tables. In addition, since the actual Contracts and the Trust have
characteristics which differ from those assumed in preparing the tables set
forth below, the distributions of principal on the Senior Certificates may be
made earlier or later than indicated in the tables.
It is not likely that Contracts will prepay at any constant percentage
of the Prepayment Model to maturity or that all Contracts will prepay at the
same rate. In addition, the diverse remaining terms to maturity of the Contracts
(which include recently originated Contracts) could produce slower distributions
of principal than indicated in the tables at the various percentages of the
Prepayment Model specified even if the weighted average remaining term to
maturity of the Contracts is months.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a variety
of the assumptions discussed herein.
Based on the foregoing assumptions, the following tables indicate the
resulting weighted average lives of the Offered Certificates and set forth the
percentage of the Original Class A-1 Balance, Original Class A-2 Principal
Balance, Original Class A-3 Principal Balance, Original Class A-4 Principal
Balance, Original Class A-5 Principal Balance, Original Class A-6 Principal
Balance and Original Class B-1 Principal Balance that would be outstanding after
each of the dates shown at the indicated percentages of the Prepayment Model.
[Remainder of page intentionally left blank]
S-38
Percent of the Original Class A-1 Principal Balance at the
Respective Percentages of the Prepayment Model
Prepayments (% of Prepayment Model)
Date 0% 75% 100% 150% 200% 300%
- ---- -- --- ---- ---- ---- ----
Initial Percentage.......
Weighted Average Life
(1) (years)...............
(1) The weighted average life of a Class A-1 Certificate is determined by
(i) multiplying the amount of cash distributions in reduction of the
principal balance of such Certificate by the number of years from the
date of issuance of such Class A-1 Certificate to the stated Remittance
Date, (ii) adding the results, and (iii) dividing the sum by the
initial principal balance of such Class A-1 Certificate.
S-39
Percent of the Original Class A-2 Principal Balance at the
Respective Percentages of the Prepayment Model
Prepayments (% of Prepayment Model)
Date 0% 75% 100% 150% 200% 300%
- ---- -- --- ---- ---- ---- ----
Initial Percentage
Weighted Average Life
(1) (years)
(1) The weighted average life of a Class A-2 Certificate is determined by
(i) multiplying the amount of cash distributions in reduction of the
principal balance of such Certificate by the number of years from the
date of issuance of such Class A-2 Certificate to the stated Remittance
Date, (ii) adding the results, and (iii) dividing the sum by the
initial principal balance of such Class A-2 Certificate.
S-40
Percent of the Original Class A-3 Principal Balance at the
Respective Percentages of the Prepayment Model
Prepayments (% of Prepayment Model)
Date 0% 75% 100% 150% 200% 300%
- ---- -- --- ---- ---- ---- ----
Initial Percentage
Weighted Average Life
(1) (years)
(1) The weighted average life of a Class A-3 Certificate is determined by
(i) multiplying the amount of cash distributions in reduction of the
principal balance of such Certificate by the number of years from the
date of issuance of such Class A-3 Certificate to the stated Remittance
Date, (ii) adding the results, and (iii) dividing the sum by the
initial principal balance of such Class A-3 Certificate.
* This figure is less than 0.5% but greater than 0%.
S-41
Percent of the Original Class A-4 Principal Balance at the
Respective Percentages of the Prepayment Model
Prepayments (% of Prepayment Model)
Date 0% 75% 100% 150% 200% 300%
- ---- -- --- ---- ---- ---- ----
Initial Percentage
Weighted Average Life
(1) (years)
(1) The weighted average life of a Class A-4 Certificate is determined by
(i) multiplying the amount of cash distributions in reduction of the
principal balance of such Certificate by the number of years from the
date of issuance of such Class A-4 Certificate to the stated Remittance
Date, (ii) adding the results, and (iii) dividing the sum by the
initial principal balance of such Class A-4 Certificate.
S-42
Percent of the Original Class A-5 Principal Balance at the
Respective Percentages of the Prepayment Model
Prepayments (% of Prepayment Model)
Date 0% 75% 100% 150% 200% 300%
- ---- -- --- ---- ---- ---- ----
Initial Percentage
Weighted Average Life
(1) (years)
(1) The weighted average life of a Class A-5 Certificate is determined by
(i) multiplying the amount of cash distributions in reduction of the
principal balance of such Certificate by the number of years from the
date of issuance of such Class A-5 Certificate to the stated Remittance
Date, (ii) adding the results, and (iii) dividing the sum by the
initial principal balance of such Class A-5 Certificate.
S-43
Percent of the Original Class A-6 Principal Balance at the
Respective Percentages of the Prepayment Model
Prepayments (% of Prepayment Model)
Date 0% 75% 100% 150% 200% 300%
- ---- -- --- ---- ---- ---- ----
Initial Percentage
Weighted Average Life
(1) (years)
(1) The weighted average life of a Class A-6 Certificate is determined by
(i) multiplying the amount of cash distributions in reduction of the
principal balance of such Certificate by the number of years from the
date of issuance of such Class A-6 Certificate to the stated Remittance
Date, (ii) adding the results, and (iii) dividing the sum by the
initial principal balance of such Class A-6 Certificate.
S-44
Percent of the Original Class B-1 Principal Balance at the
Respective Percentages of the Prepayment Model
Prepayments (% of Prepayment Model)
Date 0% 75% 100% 150% 200% 300%
- ---- -- --- ---- ---- ---- ----
Initial Percentage
Weighted Average Life
(1) (years)
(1) The weighted average life of a Class B-1 Certificate is determined by
(i) multiplying the amount of cash distributions in reduction of the
principal balance of such Certificate by the number of years from the
date of issuance of such Class B-1 Certificate to the stated Remittance
Date, (ii) adding the results, and (iii) dividing the sum by the initial
principal balance of such Class B-1 Certificate.
* This figure is less than 0.5% but greater than 0.0%.
S-45
ACCESS FINANCIAL LENDING CORP.
General
Access Financial Lending Corp. ("AFL"), a Delaware corporation, provides
housing finance programs to consumers throughout the United States through its
Mortgage Lending and Manufactured Housing Programs. AFL is the successor by
merger of Access Financial Lending Corp., a Delaware corporation (formerly
Equicon Corporation), whose principal business was the purchase of
non-conforming mortgages, and Access Financial Corp., whose principal business
was the retail financing of manufactured housing. The merger occurred on July 1,
1996.
The Company is a wholly-owned subsidiary of Access Financial Holding
Corp. ("AFH"), which is a Delaware corporation and wholly-owned subsidiary of
Cargill Financial Services Corporation. AFH was formed in January 1996 to
facilitate the continued growth of the housing finance business.
The Company maintains its principal offices at 400 Highway 169 South,
Suite 400, St. Louis Park, Minnesota 55426-0365.
AFL is engaged in the business of, among other things, purchasing,
originating, selling and servicing installment sales contracts and installment
loan agreements for manufactured housing (hereinafter referred to as "contracts"
or "manufactured housing contracts").
AFL purchases and originates manufactured housing contracts through
regional offices throughout the United States, servicing states.
In addition to its purchases of manufactured housing contracts from
dealers, since August 1995, AFL has originated certain contracts through
brokers. Each broker will solicit potential obligors to refinance contracts on
used manufactured homes with AFL. All broker-originated contracts must meet
AFL's underwriting criteria, as described below.
Underwriting Policies
General.
All manufactured housing contracts that are purchased by AFL from
dealers or originated by AFL through a broker are written on forms provided by
AFL and are purchased or underwritten, as the case may be, on an individually
approved basis. With respect to each retail manufactured housing contract to be
purchased from a dealer or submitted by a broker and underwritten, as the case
may be, AFL's general practice is to have the dealer or broker submit the
customer's credit application, manufacturer's invoice (if the contract is for a
new home) and certain other information relating to the contract to the
applicable regional office of AFL. Personnel at the regional office make an
analysis of the creditworthiness of the customer and of other aspects of the
proposed transaction. If the creditworthiness of the customer and other aspects
of the transaction are approved by the regional office, AFL purchases the
contract after the manufactured home is delivered and set up.
Because manufactured homes generally depreciate in value, AFL's
management believes that the creditworthiness of a potential obligor under a
manufactured housing contract should be the most important criterion in
determining whether to approve the purchase or origination of such manufactured
housing contract. In this regard, AFL uses an underwriting guideline matrix
based upon each applicant's credit history, residence history, employment
history, debt-to-income ratio and down payment percentage. Although, with
respect to certain of these criteria, AFL has minimum requirements, AFL
management does not believe that these minimum requirements are themselves
generally sufficient to warrant a credit approval of an applicant. Thus, there
were and are no requirements on the basis of which, if they are met, credit is
routinely approved, and if they are not met, credit is routinely denied. Rather,
if an applicant has a low rating with respect to one of the criteria mentioned
above, there generally must be a compensating higher rating with respect to
other items in order for such applicant to be approved. In
S-46
addition, in certain cases, credit applications are approved even if certain of
the minimum criteria are not met. The ultimate decision to approve or reject a
credit application is thus the result of a judgment made by either regional
management or AFL senior management.
AFL's policy is to approve or reject each credit application within 72
hours of receipt. Thus, there is generally less time for credit investigation
than is the case, for instance, with loans for site-built homes. Although AFL's
management believes that the 72 hour period for approval or rejection of each
credit application is in line with industry practice, no assurance can be given
that any credit application that was approved in 72 hours would have been
approved if a longer period had been provided for credit investigation.
The qualifications of all regional office personnel authorized to
approve or reject credit applications are reviewed by the President and/or the
Chief Executive Officer of AFL. All such personnel have certain lending limits
applicable to their approval authority. AFL has no set qualifications for any
employees to whom authority to approve or reject credit applications may be
delegated.
The credit review and approval practices of each regional office are
subject to internal reviews and audits that, through sampling, examine the
nature of the verification of credit histories, residence histories, employment
histories and debt-to-income ratios of the applicants and evaluate the credit
risks associated with the contracts purchased through such regional office by
rating the obligors on such contracts according to their credit histories,
residence histories, employment histories, debt-to-income ratios and down
payment percentage. Selection of underwriting files for review is generally made
by the personnel performing the examination, without prior knowledge on the part
of regional office personnel of the files to be selected for review. However,
AFL has no requirement that any specific random selection procedures be
followed, and no assurance can be given that the files reviewed in any
examination process are representative of the contract originations in the
related regional office. In addition, no statistical analysis is performed on
the results of any such examination of underwriting files.
AFL currently purchases or originates only conventional manufactured
housing contracts (that is, contracts that are not insured or guaranteed by a
governmental agency or instrumentality).
Underwriting policies for the origination or purchase on an individual
basis of manufactured housing contracts are established by AFL's management and
are applicable to all regional offices in AFL's manufactured housing regional
office system. Except as described above, during the period in which any
Contracts were originated or purchased on an individual basis by AFL there were
no significant changes in the aspects of such policies that are described above.
Loan-to-Value Ratios.
Generally, AFL's policy is to finance no more than (a) 95% of the
buyer's total cost of any new manufactured home and (b) 90% of the buyer's total
cost of any used manufactured home. Such buyer's total cost includes (x) (i)
with respect to a new manufactured home, the sales price of such manufactured
home or (ii) with respect to a used manufactured home, the lesser of the
verified sales price or retail value as specified in the National Automobile
Dealers Association Mobile/Manufactured Housing Appraisal Guide ("NADA") and (y)
the sum of certain additional items, including (i) limited dealer-installed
extras, (ii) limited furniture, (iii) freight, (iv) sales tax, title and fees,
(v) certain insurance premiums and (vi) limited set-up allowance (such items,
collectively, the "Extras").
New Homes.
The maximum amount financed with respect to new manufactured homes is
based on the lesser of (a) the sum of (x) 130% of the manufacturer's net invoice
and (y) the value of the Extras and (b) 95% of the buyer's total cost.
The maximum amount financed with respect to new manufactured homes
related to Land-Home Contracts is based on the sum of (x) the lesser of (a) 130%
of the manufacturer's net invoice, plus the
S-47
value of the Extras and (b) 95% of the buyer's total cost, and (y) 95% of the
lesser of property appraised value or the purchase price of the land.
The maximum amount financed with respect to new manufactured homes
related to Land-in-Lieu Contracts is based on the sum of (x) (i) 135% of the
manufacturer's net invoice when the value of the land (as appraised by an AFL
approved independent appraiser or as determined by a tax valuation statement, as
the case may be) is at least 20% of the buyer's total cost, computed as
described above or (ii) 130% of the manufacturer's net invoice when the value of
the land is at least 10% of the buyer's total cost, computed as described above
and (y) the value of the Extras.
Used Homes and Refinancings.
The maximum amount financed with respect to used manufactured homes is
the lower of (x) 90% of the buyer's total cost or (y) 90% of retail value as
specified in NADA plus the value of any Extras.
The maximum amount financed with respect to used manufactured homes
related to Land-Home Contracts is based on the sum of (x) the lesser of 95% of
appraised value as determined by an AFL appraiser or 120% of the retail value as
specified in NADA, (y) 95% of the lesser of property appraised value or the
purchase price of the land and (z) the value of any Extras.
The maximum amount financed with respect to used manufactured homes
related to Land-in-Lieu Contracts is based on the lesser of (x) 90% of the total
buyer's cost or (y) 90% of the retail value as specified in NADA plus the value
of any Extras. The value of the land, computed as described above, must be at
least 10% of the total buyer's cost.
AFL may re-finance a used manufactured housing Contract through its
broker network. Consistent with AFL's general underwriting policy, an obligor's
creditworthiness is the most important underwriting criterion, in connection
with a refinancing. Special emphasis is placed on the customer's actual payment
history record in connection with a re-financing transaction, with relatively
less weight being placed on the value of the related collateral. Even in the
re-financing context, however, it is AFL's policy not to allow the original
principal balance of the new Contract to exceed 115% of the related manufactured
home's NADA retail value at the time of the re-financing. Each re-financed
Contract included in the Contract Pool is a "Refinanced Contract". For purposes
of the statistical presentation of Loan-to-Value Ratios set forth herein, each
Refinanced Contract has been assigned a Loan-to-Value Ratio of 100%.
Contracts in excess of the maximums stated above require special
circumstances (e.g., particularly strong credit) before AFL will originate or
purchase them.
Certain Origination Statistics.
The volume of manufactured housing contracts originated by AFL or
purchased by AFL from dealers on an individual basis for the periods indicated
below and certain other information at the end of such periods are as follows:
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Contracts Originated or Purchased on an Individual Basis
Months Months
Ended Ended
-------- --------
(Dollars in Thousands)
Principal balance of contracts purchased..................... $ $
Number of contracts purchased................................
Average contract size(1)..................................... $ $
Average interest rate(1)(2).................................. % %
Number of regional offices(3)................................
(1) As of period end.
(2) Weighted average gross coupon.
(3) Includes regional offices originating or purchasing manufactured housing
contracts as of the end of the time period.
Servicing
AFL services all of the manufactured housing contracts that it purchases or
originates. AFL plans to retain servicing responsibilities with respect to
contracts sold by it. Generally, such servicing responsibilities are also
carried out through AFL's centralized servicing facility and regional offices.
Servicing responsibilities include collecting principal and interest payments,
taxes, insurance premiums and other payments from obligors and, where such
contracts have been sold, remitting principal and interest payments to the
holders thereof, to the extent such holders are entitled thereto. Collection
procedures include repossession and resale of manufactured homes securing
defaulted contracts and, if deemed advisable by AFL, entering into workout
arrangements with obligors under certain defaulted contracts. Although decisions
as to whether to repossess any manufactured home are made on an individual
basis, AFL's general policy is to institute repossession procedures promptly
after AFL personnel determine that it is unlikely that a defaulted contract will
be brought current, and thereafter to diligently pursue the resale of such
manufactured homes if the market is favorable. In addition, AFL may enter into
arrangements, pursuant to which it will service manufactured housing contracts
held by other entities. Such contracts would not be purchased by AFL or sold to
such other entities by AFL.
The following tables show the size of the portfolio of manufactured housing
contracts originated and serviced by AFL, together with certain delinquency,
loan loss and liquidation experience on the dates indicated:
Size of Serviced Portfolio
As of As of
(1)
--------- ----------
(Dollars in Thousands)
Unpaid principal balance of contracts being serviced.... $ $
Average unpaid principal balance............................ $ $
Number of contracts being serviced.........................
(1)
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Delinquency Experience
As of As of
----------------- ---------------------
(Dollars in Thousands)
Number of Contracts Outstanding(1).................................
Number of Contracts Delinquent:(2)
30 - 59 Days...................................................
60 - 89 Days...................................................
90 Days or More................................................
Total Contracts Delinquent.........................................
Delinquencies as a Percentage of Contracts Outstanding(3).......... % %
(1) Excludes contracts already held in repossession.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months).
(3) As a percentage of the total number of contracts outstanding as of period
end.
Loan Loss and Repossession Experience
For the For the Nine
Fiscal Year Months Ending
End Ending ,
, (1)
------------- ----------------
(Dollars in Thousands)
Number of Contracts Serviced(1)................................
Principal Balance of Contracts Serviced(1)..................... $ $
Contract Liquidations(2)....................................... % %
Net Losses:
Dollars(3)................................................. $ $
Percentage(4).............................................. % %
(1) As of period end. Includes contracts already in repossession and stage
funding of Land Home contracts.
(2) As a percentage of the total number of contracts being serviced as of period
end. The percentage for the months ending is not annualized.
(3) The calculation of net loss on liquidated contracts included unpaid interest
to the date of repossession and all expenses of repossession and
liquidation. The dollar amount for the months ending is not annualized.
(4) As a percentage of the aggregate principal balance of contracts being
serviced as of period end. The percentage for the months ending is not
annualized.
The data presented in the foregoing tables is for illustrative purposes
only.
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DESCRIPTION OF THE CERTIFICATES
The Offered Certificates will be issued pursuant to the Agreement. A
form of the Agreement will be made available to prospective investors upon
request (made to AFL at the address specified in the Prospectus under
"Incorporation of Certain Documents by Reference") and will be filed with the
Securities and Exchange Commission after the initial issuance of the
Certificates as an exhibit to a Current Report on Form 8-K. Reference is made to
the Prospectus for additional information regarding the terms and conditions of
the Agreement.
Set forth below are summaries of the specific terms and provisions
pursuant to which the Offered Certificates will be issued. The following
summaries do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, the provisions of the Agreement. When particular
provisions or terms used in the Agreement are referred to, the actual provisions
(including definitions of terms) are incorporated by reference.
General
The Offered Certificates initially will be issued in book-entry form.
Persons acquiring beneficial ownership interests in such Offered Certificates
("Beneficial Certificate Owner") may elect to hold their interests through The
Depository Trust Company ("DTC"), in the United States, or Cedel Bank, societe
anonyme ("CEDEL") or the Euroclear System ("Euroclear"), in Europe. Transfers
within DTC, CEDEL or Euroclear, as the case may be, will be in accordance with
the usual rules and operating procedures of the relevant system. So long as the
Offered Certificates are book-entry certificates, such Offered Certificates will
be evidenced by one or more Offered Certificates registered in the name of Cede
& Co. ("Cede"), as the nominee of DTC or one of the relevant depositories
(collectively, the "European Depositories"). Cross-market transfers between
persons holding directly or indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through CEDEL or Euroclear, on the
other, will be effected in DTC through Citibank N.A. ("Citibank") or Morgan
Guaranty Trust Company of New York ("Morgan"), the relevant depositories of
CEDEL or Euroclear, respectively, and each a participating member of DTC. The
Offered Certificates will initially be registered in the name of Cede. The
interests of such Beneficial Certificate Owners will be represented by
book-entries on the records of DTC and participating members thereof. No
Beneficial Certificate Owner will be entitled to receive a definitive
certificate representing such person's interest, except under the limited
circumstances described herein. All references herein to any Offered
Certificates reflect the rights of Beneficial Certificate Owners only as such
rights may be exercised through DTC and its participating organizations for so
long as such Offered Certificates are held by DTC. See " -- Registration of
Offered Certificates" below.
The Percentage Interest of a Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6 Certificate or Class B-1 Certificate is the percentage
obtained from dividing the original denomination of such Certificate by the
Original Class A-1 Principal Balance, the Original Class A-2 Principal Balance,
the Original Class A-3 Principal Balance, the Original Class A-4 Principal
Balance, the Original Class A-5 Principal Balance, the Original Class A-6
Principal Balance or the Original Class B-1 Principal Balance, as appropriate.
Definitive Senior Certificates, if issued, will be transferable and exchangeable
at the corporate trust office of the Trustee at its Corporate Trust Department
in New York or, if it so elects, at the office of an agent in New York, New
York. No service charge will be made for any registration of exchange or
transfer, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge.
The Class B-2 and Class C Certificates are not being offered hereby.
The Trust will also issue a residual class in each REMIC created by the Trust
(the "Residual Certificates") which are not being offered hereby and will
initially be retained by the Seller. The Senior Certificates, the Class A-6
Certificates, the Class B-1 Certificates, the Class B-2 Certificates, the Class
C Certificates and the Residual Certificates are collectively referred to as the
"Certificates."
The Trust includes (i) the Contract Pool, including certain rights to
receive payments due on the Contracts on and after the Cut-off Date, (ii) the
amounts held from time to time in the "Certificate
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Account" (as described herein under " -- Payment on Contracts; Certificate
Account") maintained by the Trustee pursuant to the Agreement, (iii) the amounts
held from time to time in the "Pre-Funding Account" maintained by the Trustee
pursuant to the Agreement, (iv) any property which initially secured a Contract
and which is acquired in the process of realizing thereon and (v) the obligation
of AFL under certain conditions, to repurchase Contracts sold by it with respect
to which certain representations and warranties have been breached and not
cured.
On the Closing Date, AFL will convey the Initial Contracts to
Receivables Corp. and Receivables Corp. will convey the Initial Contracts to the
Trust. See "The Contract Pool" herein. Pursuant to the Agreement, following the
initial Cut-Off Date, the Trust will be obligated to purchase from time to time
on or before 199_, subject to the availability of Subsequent Contracts which
will be originated on or before 199_, and acquired by the Seller from AFL for
subsequent sale to the Trust pursuant to a Purchase Agreement between the Seller
and the Trust. The aggregate principal amounts of Subsequent Contracts which may
be acquired by the Trust is $ . In connection with each purchase of Subsequent
Contracts, the Trust will be required to pay to the Seller a cash purchase price
of 100% of the principal amount thereof from the Pre-Funding Account. Under the
Agreement, AFL will be obligated to sell Subsequent Contracts to the Seller for
sale to the Trust, and the Trust will be obligated, subject to the satisfaction
of certain conditions set forth therein to purchase such Subsequent Contracts.
AFL will designate as a Subsequent Cut-Off Date the first day of the month in
which the related Subsequent Contracts are conveyed to the Trust. The Trust may
purchase the Subsequent Contracts only from the Seller and not from any other
person.
AFL, as Servicer, will service the Contracts pursuant to the Agreement.
The Contracts will be held by the Trustee.
Distributions of principal and interest to the holders of the Offered
Certificates will be made on the ____ day of each month, or, if such day is not
a business day, the next succeeding business day (each, a "Remittance Date")
beginning in , to the persons in whose names the Offered Certificates are
registered at the close of business on the last business day of the month
preceding the month in which such distribution payment is made (the "Record
Date").
Representations and Warranties
AFL will make certain warranties with respect to each Contract as of
the Closing Date, including that: (a) as of the Cut-off Date the most recent
scheduled payment was made or was not delinquent more than 59 days; (b) no
provision of a Contract has been waived, altered or modified in any respect,
except by instruments or documents contained in the related Contract file; (c)
each Contract is a legal, valid and binding obligation of the Obligor and is
enforceable in accordance with its terms (except as may be limited by laws
affecting creditors' rights generally); (d) no Contract is subject to any right
of rescission, set-off, counterclaim or defense; (e) each Manufactured Home
securing a Contract is covered by hazard insurance; (f) each Contract has been
originated by a manufactured housing dealer or AFL in the ordinary course of
such dealer's or AFL's business and, if originated by a manufactured housing
dealer, was purchased by AFL in the ordinary course of business; (g) no Contract
was originated in or is subject to the laws of any jurisdiction whose laws would
make unlawful the transfer of the Contract or an interest therein to the Trust;
(h) each Contract complies with all requirements of law; (i) no Contract has
been satisfied, subordinated in whole or in part or rescinded and the
Manufactured Home securing the Contract has not been released from the lien of
the Contract in whole or in part; (j) each Contract creates a valid and
enforceable first priority security interest in favor of AFL in the Manufactured
Home covered thereby and, with respect to each Land Secured Contract, the lien
created thereby has been recorded or will be recorded within six months, and
such security interest or lien has been assigned by AFL; (k) all parties to each
Contract had capacity to execute such Contract; (l) prior to the transfer of the
Contracts by AFL, AFL had good and marketable title to each Contract free and
clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest, and was the sole owner and had full right to transfer such Contract;
(m) as of the Cut-off Date, there was no default, breach, violation or event
permitting acceleration under any Contract (except for payment delinquencies
permitted by clause (a) above), no event which with notice and the expiration of
any grace or cure period would constitute a default, breach,
S-52
violation or event permitting acceleration under such Contract, and AFL has not
waived any of the foregoing; (n) as of the Closing Date there were no liens or
claims which have been filed for work, labor or materials affecting a
Manufactured Home or any related real property securing a Contract, which are or
may be liens prior or equal to the lien of the Contract; (o) each Contract is a
fully-amortizing loan with a fixed Contract Rate and provides for level payments
over the term of such Contract; (p) each Contract contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for realization against the collateral of the benefits of the
security; (q) the description of each Contract set forth in the list of
Contracts delivered to the Trustee is true and correct; (r) there is only one
original of each Contract and each Contract (other any Land Secured Contract)
constitutes chattel paper within the meaning of the applicable Uniform
Commercial Code; (s) none of the Contracts had a loan-to-value ratio at
origination greater than ____________________; (t) the principal balance of each
Refinanced Contract at the time of origination did not exceed the then
outstanding principal balance of the Contract refinanced thereby together with
certain insurance and refinancing costs; (u) to the best knowledge of AFL, not
less than 95% of the Contract Pool relates to Manufactured Homes which were the
related Obligors' primary residence at the time of origination; (v) the related
Manufactured Home (other than any Manufactured Home relating to a Land-Home
Contract) is not considered or classified as part of the real estate on which it
is located under the laws of the jurisdiction in which it is located, and as of
the Closing Date such Manufactured Home was free of damage and in good repair
and (w) each Contract is a "qualified mortgage" under Section 860G(a)(3) of the
Code and each Manufactured Home is "manufactured housing" within the meaning of
Section 25(e)(10) of the Code.
Subject to AFL's option to effect a substitution as described in the
next paragraph, AFL will be obligated to repurchase for the Repurchase Price (as
defined below) any Contract on the first business day after the first
Determination Date which is more than 90 days after AFL becomes aware, or AFL's
receipt of written notice from the Trustee or the Servicer, of a breach of any
representation or warranty of AFL that materially adversely affects the Trust's
interest in any Contract if such breach has not been cured. The Repurchase Price
for any Contract will be the remaining principal amount outstanding on such
Contract on the date of repurchase plus accrued and unpaid interest thereon at
its Contract Rate to the end of the related Due Date.
In lieu of purchasing a Contract as specified in the preceding
paragraph, during the two-year period following the Closing Date, AFL may, at
its option, substitute an Eligible Substitute Contract (as defined below) for
the Contract that it is otherwise obligated to repurchase (referred to herein as
the "Replaced Contract"). An Eligible Substitute Contract is a Contract that (a)
as of the date of its substitution, satisfies all of the representations and
warranties, (b) after giving effect to the scheduled payment due in the month of
such substitution has a Scheduled Principal Balance that is not greater than the
Scheduled Principal Balance of the Replaced Contract, (c) has a Contract Rate
that is at least equal to the Contract Rate of the Replaced Contract and (d) has
a remaining term to maturity that is not greater than the remaining term to
maturity of the Replaced Contract. AFL will be required to deposit in the
Certificate Account cash in the amount, if any, by which the Scheduled Principal
Balance of the Replaced Contract exceeds the Scheduled Principal Balance of the
Contract being substituted.
Payments on Contracts; Certificate Account
The Trustee will initially establish and maintain an account (the
"Certificate Account") at a depository institution organized under the laws of
the United States or any state, the deposits of which are insured to the full
extent permitted by law by the Federal Deposit Insurance Corporation (the
"FDIC") whose commercial paper, long-term deposits or long-term unsecured senior
debt has a rating of F-1 by Fitch and P-1 by Moody's in the case of commercial
paper or in one of the two highest rating categories by Fitch and Moody's in the
case of long-term deposits or long-term unsecured senior debt, and which is
subject to examination by federal or state authorities or a depository
institution otherwise acceptable to Fitch and Moody's (an "Eligible
Institution"). The funds in the Certificate Account are required to be invested
in Eligible Investments that will mature not later than the business day
preceding the applicable Remittance Date. "Eligible Investments" include, among
other investments, obligations of the United States or of any agency thereof
backed by the full faith and credit of the United States; certificates
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of deposit, time deposits and bankers' acceptances sold by eligible financial
institutions; commercial paper rated F-1+ by Fitch and P-1 by Moody's; and other
obligations acceptable to Fitch and Moody's.
All payments in respect of principal and interest on the Contracts
received by the Servicer (exclusive of Scheduled Payments due prior to the
Cut-off Date), including Liquidation Proceeds (net of Liquidation Expenses), are
required to be paid into the Certificate Account not later than the second
business day following receipt thereof. Amounts received as late payment fees,
extension fees, assumption fees or similar fees may be retained by the Servicer
as part of its servicing fees. See " -- Servicing Compensation" herein. In
addition, the amount paid by AFL for any Contract repurchased as a result of a
breach of a representation or warranty under the Agreement, and amounts required
to be deposited upon substitution of an Eligible Substitute Contract because of
a breach of a representation or warranty (which amounts will be treated as
partial principal prepayments) are required to be paid in the Certificate
Account. On each Remittance Date, the Trustee shall withdraw from the
Pre-Funding Account any earnings received on investment of the Pre-Funding
Amount held by it in the Pre-Funding Account and deposit such earnings in the
Certificate Account. On the , 199_ Payment Date, the Trustee shall withdraw from
the Pre-Funding Account any funds theretofore remaining and deposit such funds
in the Certificate Account.
On the third business day prior to each Remittance Date (the
"Determination Date"), the Servicer will determine the Amount Available and the
amounts to be distributed on the Certificates on such Remittance Date. The
"Amount Available" for any Remittance Date is (I) the sum of (a) the amount in
the Certificate Account on the close of business on the day immediately
preceding such Determination Date and (b) the aggregate amount of Delinquency
Advances relating to such Remittance Date, together with certain
insurance-related amounts to be deposited by the Servicer for such Remittance
Date, less (II) the sum of (a) payments on Contracts that have been repurchased
as a result of a breach of a representation or warranty, (b) the Amount Held For
Future Distribution, (c) any portion of Liquidation Proceeds used to reimburse
the Servicer for Servicing Advances and Delinquency Advances previously made by
the Servicer with respect to the related Contract, (d) amounts used to reimburse
the Servicer with respect to Nonrecoverable Delinquency Advances and Delinquency
Advances and Servicing Advances to the extent permitted by the Agreement, (e) if
AFL is not the Servicer, the Monthly Servicing Fee, and (f) amounts which may be
withdrawn from the Certificate Account as a result of a deposit thereto made in
error, or to fund certain rebates or refunds due to Obligors. The "Amount Held
For Future Distribution" as of a Determination Date are amounts representing
Scheduled Payments or other collections and recoveries which relate to the
second following, or any future, Remittance Date. See " -- Advances" below for a
description of the Servicer's advancing responsibilities.
The Trustee or its Paying Agent will withdraw funds from the
Certificate Account on each Remittance Date (but only to the extent of the
related Amount Available and, in certain limited circumstances to pay interest
on the Subordinate Certificates, from certain other amounts) to make payments to
Offered Certificateholders as specified under " -- Distributions" below. As more
fully described herein under "The Contract Pool," the day of each month
constituting the Due Date of the Scheduled Payments for each Contract will vary
from Contract to Contract. In addition, the Contracts may be prepaid in full or
in part at any time. Thus, the Amount Available for any Remittance Date (other
than the portion thereof consisting of the applicable monthly Delinquency
Advance, if any) will have been deposited into the Certificate Account on
various days throughout the preceding calendar month. As a result, payments
received at any time during a calendar month will not be distributed to the
Offered Certificateholders until the day of the succeeding calendar month (or if
such day is not a business day, on the next succeeding business day.) See
"Prepayment and Yield Considerations" herein and "Yield Considerations" in the
Prospectus. From time to time, as provided in the Agreement, the Servicer will
also withdraw funds from the Certificate Account to make payments to it as
permitted by the Agreement and described in subclauses (ii), (iv) and (v) of
clause (b) in the second preceding paragraph.
S-54
Distributions
On each Remittance Date, distributions on the Offered Certificates will
be made in the following order of priority: (i) to the holders of the Senior
Certificates, (ii) to the holders of the Class A-6 Certificates, (iii) to the
holders of the Class B-1 Certificates, (iv) to the holders of the Class B-2
Certificates, and (v) to the holders of the Class C Certificates, as described
below.
Distributions of interest and, to the extent specified below, principal
to holders of a Class of Senior Certificates will be made on each Remittance
Date in an amount equal to the sum of (i) their respective Percentage Interests
of the amount of interest calculated as described under "Senior Interest" below
and (ii) their respective Percentage Interests, distributed to each Class of
Senior Certificates in the order of priority described under "Senior Principal"
below, of an amount of principal calculated as described below under "Senior
Principal." Distributions on the Senior Certificates will be applied first to
the payment of interest and then to the payment of principal. The Senior
Distribution Amount for any Remittance Date is intended to be equal to the sum
(referred to as the "Senior Formula Distribution Amount") of (i) the amount of
interest calculated as set forth under "Senior Interest" below and (ii) the
amount of principal described below under "Senior Principal," except that, if
the Senior Formula Distribution Amount exceeds the Amount Available in the
Certificate Account on such Remittance Date, then the Senior Distribution Amount
shall instead equal the Amount Available.
Distributions of interest and, to the extent specified below, principal
to holders of Class A-6 Certificates will be made on each Remittance Date in an
amount equal to their respective Percentage Interests multiplied by the Class
A-6 Distribution Amount. Distributions on the Class A-6 Certificates will be
applied first to the payment of interest and then to the payment of principal.
The Class A-6 Distribution Amount for any Remittance Date is intended to be
equal to the sum (referred to as the "Class A-6 Formula Distribution Amount") of
(i) the amount of interest calculated as set forth under "Class A-6 Interest"
below and (ii) on and after the Remittance Date on which the Senior Principal
Balance is reduced to zero, the amount of principal described below under "Class
A-6 Principal." If the Amount Available in the Certificate Account available for
distribution to the Class A-6 Certificateholders (after giving effect to any
distribution made to Senior Certificateholders on such Remittance Date) (the
"Class A-6 Remaining Amount Available") is less than the Class A-6 Formula
Distribution Amount, then the Class A-6 Distribution Amount will equal the Class
A-6 Remaining Amount Available and the amount of such deficiency, to the extent
not funded by certain other amounts on deposit in the Certificate Account and
available therefor, will be carried forward and added to the amount such holders
will be entitled to receive on the next Remittance Date.
Distributions of interest and, to the extent specified below, principal
to holders of Class B-1 Certificates will be made on each Remittance Date in an
amount equal to their respective Percentage Interests multiplied by the Class
B-1 Distribution Amount. Distributions on the Class B-1 Certificates will be
applied first to the payment of interest and then to the payment of principal.
The Class B-1 Distribution Amount for any Remittance Date is intended to be
equal to the sum (referred to as the "Class B-1 Formula Distribution Amount") of
(a) the amount of interest calculated as set forth under "Class B-1 Interest"
below and (b) on and after the Class B Cross-over Date, if each Class B
Principal Distribution Test was satisfied on such Remittance Date, the Formula
Principal Distribution Amount calculated as described under "Class B-1
Principal" below. If the Amount Available in the Certificate Account available
for distribution to the Class B-1 Certificateholders (after giving effect to any
distribution made to Senior and Class A-6 Certificateholders on such Remittance
Date) (the "Class B-1 Remaining Amount Available") is less than the Class B-1
Formula Distribution Amount, then the Class B-1 Distribution Amount will equal
the Class B-1 Remaining Amount Available and the amount of such deficiency, to
the extent not funded by certain other amounts on deposit in the Certificate
Account and available therefor, will be carried forward and added to the amount
such holders will be entitled to receive on the next Remittance Date.
Distributions of interest and, to the extent specified below, principal
to holders of the Class B-2 Certificates will be made on each Remittance Date in
an amount equal to their respective Percentage Interests of the Class B-2
Distribution Amount. The Class B-2 Distribution Amount for any Remittance
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Date is intended to equal to the sum (referred to as the "Class B-2 Formula
Distribution Amount") of (a) the amount of interest calculated as set forth
under "Class B-2 Interest" below and (b) on and after the Remittance Date on
which the Class B-1 Principal Balance is reduced to zero, if each Class B
Principal Distribution Test was satisfied on such Remittance Date, the amount of
principal described below under "Class B-2 Principal" below. Distributions on
the Class B-2 Certificates will be applied first to the payment of interest and
then to the payment of principal. If the Amount Available in the Certificate
Account available for distribution to the Class B-2 Certificateholders (after
giving effect to distributions made to Senior, Class A-6 and Class B-1
Certificateholders on such Remittance Date) (the "Class B-2 Remaining Amount
Available") is not sufficient to make a full distribution of the Class B-2
Formula Distribution Amount to the Class B-2 Certificateholders, then the Class
B-2 Distribution Amount will equal the Class B-2 Remaining Amount Available and
the amount of such deficiency, to the extent not funded by certain other amounts
on deposit in the Certificate Account and available therefor, will be carried
forward and added to the amount such holders will be entitled to receive on the
next Remittance Date.
The rights of the Subordinate Certificateholders and the Residual
Certificateholders to receive distributions are subordinated to the rights of
the Senior Certificateholders, the rights of the Class B-1, Class B-2, Class C
and Residual Certificateholders to receive distributions are subordinated to the
rights of the Class A-6 Certificateholders, the rights of the Class B-2, Class C
and Residual Certificateholders to receive distributions are subordinated to the
rights of the Class B-1 Certificateholders, in each case, to the extent
described herein. The Class C Certificates represent a class of subordinated,
"interest-only" certificates, the distributions on which are subordinated to the
rights of the Class B-2 Certificateholders and, for so long as AFL is the
Servicer, the payment of the Monthly Servicing Fee. The holders of the Residual
Certificates will be entitled to receive only miscellaneous amounts not required
to be distributed on account of the other classes of Certificates.
Each distribution with respect to a Book-Entry Certificate will be paid
to DTC, which will credit the amount of such distribution to the accounts of its
Participants in accordance with its normal procedures. Each Participant will be
responsible for disbursing such distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm will be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by DTC and the Participants in accordance with DTC's
rules.
The Servicer will furnish to the Trustee, and the Trustee will send
with each distribution on a Remittance Date to each holder of the Offered
Certificates, a statement or statements setting forth, among other things, (i)
the amount of such distribution allocable to principal (including Principal
Prepayments, if any) and (ii) the amount of such distribution allocable to
interest.
Senior Interest
One month's interest (computed on the basis of a 360-day year of twelve
30-day months) will be paid concurrently to the holders of each Class of Senior
Certificates on each Remittance Date, to the extent of the Amount Available in
the Certificate Account on such date, at the related Remittance Rate on the then
outstanding Principal Balance of each Class of Senior Certificates. Interest on
each Class of Senior Certificates will accrue with respect to each Remittance
Date during the related Accrual Period, commencing .
The Remittance Rates for the Class A-1, Class A-2, Class A-3, Class A-4
and Class A-5 Certificates are %, %, %, % and % per annum, respectively, subject
to a maximum rate equal to the Weighted Average Net Contract Rate, computed on
the basis of a 360-day year of twelve 30-day months. In all but the most unusual
prepayment scenarios, it is anticipated that the applicable Remittance Rate on
the Senior Certificates will be the Remittance Rate without giving effect to the
maximum rate of the Weighted Average Net Contract Rate. In the unlikely event
that a large number of Contracts having Net Contract Rates equal to or greater
than such applicable Remittance Rate were
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to prepay while the Contracts having Net Contract Rates less than such
applicable Remittance Rate did not prepay, with the result that interest
collections on the remaining Contracts were not sufficient to support such
applicable Remittance Rate, then the Remittance Rate for any such Class would be
equal to the Weighted Average Net Contract Rate.
The Certificate Principal Balance of any Class of Senior Certificates
of any Remittance Date is the Original Principal Balance of such Class less all
amounts previously distributed to holders of such Class on account of principal.
The Senior Principal Balance as of any Remittance Date is the sum of the Class
A-1 Principal Balance, the Class A-2 Principal Balance, the Class A-3 Principal
Balance, the Class A-4 Principal Balance and the Class A-5 Principal Balance.
In the event that, on a particular Remittance Date, the Amount
Available in the Certificate Account is not sufficient to make a full
distribution of interest to the holders of each Class of Senior Certificates,
the Amount Available will be distributed among the outstanding Classes of Senior
Certificates pro rata based on the aggregate amount of interest due on each such
Class, and the amount of shortfall will be carried forward and added to the
amount such holders will be entitled to receive on the future Remittance Dates,
until paid in full. Such a shortfall could occur, for example, if delinquencies
or losses realized on the Contracts were exceptionally high and were
concentrated in a particular month. In addition, the Amount Available in the
Certificate Account with respect to any Remittance Date may be reduced by the
amount of funds, if any, used to cover an interest shortfall on the Class A-6,
Class B-1 or Class B-2 Certificates, as described below. Any such amount so
carried forward will bear interest at the applicable Remittance Rate for each
Class of Senior Certificates, to the extent permitted by law.
Senior Principal
Holders of a Class of Senior Certificates will be entitled to receive
on each Remittance Date as payments of principal, in the order of priority set
forth below and to the extent of the Amount Available in the Certificate Account
on such date after payment of interest on all Classes of Senior Certificates,
the sum of (x) the Senior Percentage of the Formula Principal Distribution
Amount for such Remittance Date, and (y) any portion of the amount described in
clause (x) preceding which was due to the holders of the Senior Certificates on
prior Remittance Dates, but which remains unpaid on such Remittance Date. The
Agreement defines the "Formula Principal Distribution Amount" with respect to a
Remittance Date as the sum of (i) all scheduled payments of principal due on
each outstanding Contract during the related Collection Period, (ii) the
Scheduled Principal Balance of each Contract which, during the related
Collection Period, was purchased by AFL pursuant to the Agreement on account of
certain breaches of its representations and warranties, (iii) all Partial
Principal Prepayments applied and all Principal Prepayments in full received
during the related Collection Period, (iv) the Scheduled Principal Balance of
each Contract that became a Liquidated Contract during such related Collection
Period, (v) the Accelerated Principal Payment, if any, for such Remittance Date
and (vi) on the , 199_ Remittance Date, any amount remaining on deposit in the
Pre-Funding Account. When the Certificate Principal Balance of a Class of Senior
Certificates is reduced to zero, no further distributions of principal will be
made to the holders of such Class.
The "Senior Percentage" for any Remittance Date prior to the Class B
Cross-over Date, and for any Remittance Date on or after the Class B Cross-over
Date on which any Class B Principal Distribution Test is not satisfied (each as
described under "Class B-1 Principal" below) will be 100%, and for any
Remittance Date on or after the Class B Cross-over Date on which each Class B
Principal Distribution Test is satisfied will equal a fraction, expressed as a
percentage, the numerator of which is the sum of the Senior Principal Balance
and the Class A-6 Principal Balance for such Remittance Date (before giving
effect to any distributions on such Remittance Date) and the denominator of
which is the Pool Scheduled Principal Balance at the end of the second preceding
Collection Period. The Scheduled Principal Balance of a Contract for any
Collection Period is its principal balance as specified in its amortization
schedule at the time relating thereto (before any adjustment to such schedule by
reason of bankruptcy, moratorium or similar waiver or grace period) as of the
Due Date in the Collection Period next preceding such Remittance Date, after
giving effect to the principal portion of the scheduled payment due on such Due
Date and irrespective of any delinquency in payment on such Contract and after
giving effect to any
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partial prepayments applied and prepayments in full received during the related
Collection Period. The "Pool Scheduled Principal Balance" is the aggregate of
the Scheduled Principal Balances of all Contracts (other than Liquidated
Contracts and Contracts purchased by AFL during such Collection Period)
outstanding at the end of such Collection Period. A "Liquidated Contract" is a
defaulted Contract as to which all amounts that the Servicer expects to recover
through the date of disposition of the Manufactured Home have been received.
The principal distribution to be made to the holders of the Senior
Certificates on any Remittance Date will be distributed, to the extent of the
Amount Available after payment of interest on all Classes of Senior
Certificates, first to the Class A-1 Certificateholders until the Class A-1
Principal Balance has been reduced to zero, then to the Class A-2
Certificateholders until the Class A-2 Principal Balance has been reduced to
zero, then to the Class A-3 Certificateholders until the Class A-3 Principal
Balance has been reduced to zero, then to the Class A-4 Certificateholders until
the Class A-4 Principal Balance has been reduced to zero, then to the Class A-5
Certificateholders until the Class A-5 Principal Balance has been reduced to
zero.
If, on any Remittance Date prior to the Class A-5 Principal Balance
being reduced to zero, the Pool Scheduled Principal Balance at the close of
business on the last day of the related Collection Period would be less than the
sum of the Class A-1 Principal Balance, the Class A-2 Principal Balance, the
Class A-3 Principal Balance, the Class A-4 Principal Balance and the Class A-5
Principal Balance on such Remittance Date after giving effect to distributions
of principal to be made on such date, then the Amount Available remaining after
distribution of interest on the Senior Certificates will be distributed to the
Classes of Senior Certificates on a pro rata basis as a distribution of the
Senior Percentage of the Formula Principal Distribution Amount, and the amount
of the shortfall will be allocated pro rata among the outstanding Classes of
Senior Certificates, based upon their respective outstanding Certificate
Principal Balances.
As hereinafter described, all Realized Losses will be absorbed first,
by the Residual Certificates, second, by the Class C Certificates, third, by the
Monthly Servicing Fee otherwise payable to AFL in its capacity as Servicer,
fourth, by the Class B-2 Certificates, fifth, by the Class B-1 Certificates and
sixth, by the Class A-6 Certificates. If the Amount Available on any Remittance
Date is less than the Senior Distribution Amount, the Amount Available will be
applied first to the payment of interest pro rata to the outstanding Senior
Certificates, based on the aggregate amount of interest then payable on each
Class of Senior Certificates and then to the payment of principal to the Class
of Senior Certificates then entitled thereto.
Class A-6 Interest
Interest will be paid to the Class A-6 Certificateholders on each
Remittance Date, to the extent of the Class A-6 Remaining Amount Available, if
any. Interest on the outstanding Class A-6 Principal Balance will accrue with
respect to each Remittance Date during the related Accrual Period, commencing
. On each Remittance Date, to the extent of the Class A-6
Remaining Amount Available, if any, on such Remittance Date after payment of the
Senior Distribution Amount, interest will be paid to the Class A-6
Certificateholders at the Class A-6 Remittance Rate on the Class A-6 Principal
Balance (before giving effect to any distributions on such Remittance Date). The
Class A-6 Principal Balance is the Original Class A-6 Principal Balance less the
sum of all amounts previously distributed to Class A-6 Certificateholders on
account of principal. In the event that, on a particular Remittance Date, the
Class A-6 Remaining Amount Available in the Certificate Account is not
sufficient to make a full distribution of interest to the Class A-6
Certificateholders, funds in the Certificate Account representing collections
received after the related Collection Period will be applied to such deficiency,
and any remaining deficiency will be carried forward and added to the amount
such holders will be entitled to receive on the next Remittance Date. Any such
amount so carried forward will bear interest at the Class A-6 Remittance Rate,
to the extent permitted by law.
The Class A-6 Remittance Rate on each Remittance Date will be % per
annum, subject to a maximum rate equal to the Weighted Average Net Contract
Rate, computed on the basis of a 360-day
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year of twelve 30-day months. In all but the most unusual prepayment scenarios,
it is anticipated that the Class A-6 Remittance Rate will be %. In the unlikely
event that a large number of Contracts having Net Contract Rates equal to or
higher than % (which Contracts represent approximately
% of the Cut-off Date Pool Principal Balance) were to prepay while the
Contracts having Net Contract Rates lower than % did not prepay, with the result
that the interest collections on the remaining Contracts were not sufficient to
support a Class A-6 Remittance Rate of %, then the Class A-6 Remittance Rate
would be equal to the Weighted Average Net Contract Rate.
Class A-6 Principal
On each Remittance Date on or after the date on which the Senior
Principal Balance has been reduced to zero, Class A-6 Certificateholders will be
entitled to receive, as payments of principal, the sum of (i) the Senior
Percentage of the Formula Principal Distribution Amount, and (ii) any portion of
the amount described in clause (i) preceding which was due to the Class A-6
Certificateholders on prior Remittance Dates, but which remains unpaid on such
Remittance Date; such amount will only be distributed to the extent of the Class
A-6 Remaining Amount Available in the Certificate Account on such Remittance
Date, after payment of all interest payable on the Class A-6 Certificates. On
each Remittance Date on or after the Class B Cross-over Date on which each Class
B Principal Distribution Test is satisfied, payments of principal will be made
to Class B-1 or Class B-2 Certificateholders, even if Class A-6
Certificateholders are not yet entitled to receive payments of principal because
the Senior Principal Balance has not been reduced to zero.
Class B-1 Interest
Interest will be paid to the Class B-1 Certificateholders on each
Remittance Date, to the extent of the Class B-1 Remaining Amount Available if
any. Interest on the outstanding Class B-1 Principal Balance will accrue with
respect to each Remittance Date during the related Accrual Period, commencing
. On each Remittance Date, to the extent of the Class B-1
Remaining Amount Available, if any, on such Remittance Date after payment of the
Senior Distribution Amount and the Class A-6 Distribution Amount, interest will
be paid to the Class B-1 Certificateholders at the Class B-1 Remittance Rate on
the Class B-1 Principal Balance (before giving effect to any distributions on
such Remittance Date). The Class B-1 Principal Balance is the Original Class B-1
Principal Balance less the sum of all amounts previously distributed to Class
B-1 Certificateholders on account of principal. In the event that, on a
particular Remittance Date, the Class B-1 Remaining Amount Available is not
sufficient to make a full distribution of interest to the Class B-1
Certificateholders, funds in the Certificate Account representing collections
received after the related Collection Period will be applied to such deficiency,
and any remaining deficiency will be carried forward and added to the amount
such holders will be entitled to receive on the next Remittance Date.
The Class B-1 Remittance Rate on each Remittance Date will be % per
annum, subject to a maximum rate equal to the Weighted Average Net Contract
Rates, computed on the basis of a 360-day year of twelve 30-day months. In all
but the most unusual prepayment scenarios, it is anticipated that the Class B-1
Remittance Rate will be %. In the unlikely event that a large number of
Contracts having Net Contract Rates equal to or higher than % (which Contracts
represent approximately
% of the Cut-off Date Pool Principal Balance) were to prepay while the
Contracts having Net Contract Rates lower than % did not prepay, with the result
that the interest collections on the remaining Contracts were not sufficient to
support a Class B-1 Remittance Rate of %, then the Class B-1 Remittance Rate
would be equal to the Weighted Average Net Contract Rate.
Class B-1 Principal
Prior to the Class B Cross-over Date, there will be no distributions of
principal on the Class B-1 Certificates. The Class B Cross-over Date will be the
later of (A) the Remittance Date in or the first Remittance Date on which the
sum of (i) the Senior Principal Balance on such Remittance Date (before taking
into account any distributions to be made on such Remittance Date) and (ii) the
Class A-6 Principal Balance on such Remittance Date (before taking into account
any distributions to be made on
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such Remittance Date) (such sum expressed as a percentage of the Pool Scheduled
Principal Balance at the end of the second preceding Collection Period) is less
than %.
On each Remittance Date on or after the Class B Cross-over Date and
prior to the Remittance Date on which the Senior Principal Balance and the Class
A-6 Principal Balance are reduced to zero, holders of Class B-1 and Class B-2
Certificates will be entitled to distributions of principal only if each of the
following tests (each a "Class B Principal Distribution Test") is satisfied on
such Remittance Date: (i) the Average Sixty-Day Delinquency Ratio (as defined
below) as of such Remittance Date must not exceed %; (ii) the Average Thirty-Day
Delinquency Ratio (as defined below) as of such Remittance Date must not exceed
%; (iii) the Cumulative Realized Losses (as defined below) as of such Remittance
Date must not exceed a certain specified percentage of the Cut-off Date Pool
Principal Balance, depending on the year in which such Remittance Date occurs;
(iv) the Current Realized Loss Ratio (as defined below) as of such Remittance
Date must not exceed % if AFL is the Servicer, or % if AFL is not the Servicer;
(v) the sum of (a) the Senior Principal Balance on such Remittance Date and (b)
the Class A-6 Principal Balance divided by the Pool Scheduled Principal Balance
at the end of the second preceding Collection Period must be less than %; and
(vi) the sum of (a) the Class B-1 and Class B-2 Principal Balance and (b) the
Overcollateralization Amount must not be less than % of the Aggregate Principal
Balance of the Contracts as of the Cut-off Date.
The "Average Sixty-Day Delinquency Ratio" for any Remittance Date will
be equal to the arithmetic average, for such Remittance Date and for the two
immediately preceding Remittance Dates, of a fraction, expressed as a
percentage, the numerator of which is the aggregate of the Scheduled Principal
Balance of all Contracts (including Contracts in repossession) that were
delinquent 60 days or more as of the end of the Collection Period preceding such
Remittance Date, and the denominator of which is the Pool Scheduled Principal
Balance as of such date. The "Average Thirty-Day Delinquency Ratio" for any
Remittance Date will be equal to the arithmetic average, for such Remittance
Date and for the two immediately preceding Remittance Dates, of a fraction,
expressed as a percentage, the numerator of which is the aggregate of the
Scheduled Principal Balance of all Contracts (including Contracts in
repossession) that were delinquent 30 days or more as of the end of the
Collection Period preceding such date, and the denominator of which is the Pool
Scheduled Principal Balance as of such date. The "Current Realized Loss Ratio"
for any Remittance Date will be equal to a fraction, expressed as a percentage,
the numerator of which is the aggregate of all Realized Losses during the twelve
immediately preceding Collection Periods, and the denominator of which is the
arithmetic average of the Pool Scheduled Principal Balance as of the last day of
the twelfth preceding Collection Period and the Pool Scheduled Principal Balance
as of the last day of the immediately preceding Collection Period. The
"Cumulative Realized Losses" for any Remittance Date will be equal to the sum of
all liquidation losses of all Contracts that became Liquidated Contracts since
the Cut-off Date.
On each Remittance Date on or after the Class B Cross-over Date, if
each Class B Principal Distribution Test is satisfied on such Remittance Date
(unless the Senior Principal Balance and the Class A-6 Principal Balance have
been reduced to zero in which event none of the Class B Distribution Tests need
be satisfied), Class B-1 Certificateholders will be entitled to receive, as
payments of principal, the sum of (i) the Class B Percentage of the Formula
Principal Distribution Amount and (ii) any portion of the amount described in
clause (i) preceding which was due to the Class B-1 Certificateholders on prior
Remittance Dates but which remains unpaid on such Remittance Date; such amount
will only be distributed to the extent of the Class B-1 Remaining Amount
Available in the Certificate Account on such date after payment of all interest
payable on the Class B-1 Certificates. The Agreement provides that in no event
shall an amount of principal be distributed to the holders of the Class B-1 or
Class B-2 Certificates if, after paying such amount, the test set forth in
clause (vi) of "Class B Principal Distribution Test" would be violated; any such
principal not so distributed shall instead be distributed to the Class of Senior
Certificates or the Class A-6 Certificates, whichever is then entitled to
receive distributions of principal. The Class B-2 Certificateholders will not be
entitled to any distributions of principal until the Class B-1 Principal Balance
has been reduced to zero. The Class B Percentage for any Remittance Date on or
after the Class B Cross-over Date on which each Class B Principal Distribution
Test has been satisfied will be equal to 100% minus the Senior Percentage. The
Class B Percentage for each
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Remittance Date, if any, after the Senior Principal Balance and the Class A-6
Principal Balance have both been reduced to zero, will be equal to 100%.
Class B-2 Interest
Interest will be paid to the Class B-2 Certificateholders on each
Remittance Date, to the extent of the Class B-2 Remaining Amount Available, if
any. Interest on the outstanding Class B-2 Principal Balance will accrue with
respect to each Remittance Date during the Related Accrual Period, commencing
. On each Remittance Date, to the extent of the Class B-2 Remaining
Amount Available, if any, for a Remittance Date after payment of the Senior
Distribution Account, the Class A-6 Distribution Amount and the Class B-1
Distribution Amount, interest will be paid to the Class B-2 Certificateholders
on such Remittance Date at the Class B-2 Remittance Rate on the Class B-2
Principal Balance (before giving effect to any distributions on such Remittance
Date). The Class B-2 Principal Balance is the Original Class B-2 Principal
Balance less the sum of all amounts previously distributed to Class B-2
Certificateholders on account of principal. In the event that, on a particular
Remittance Date, the Class B-2 Remaining Amount Available is not sufficient to
make a full distribution of interest to the Class B-2 Certificateholders, funds
in the Certificate Account representing collections received after the related
Collection Period will be applied to such deficiency and any remaining
deficiency will be carried forward and added to the amount such holders will be
entitled to receive on the next Remittance Date.
For purposes of this Prospectus Supplement, the Class B-2 Remittance
Rate on each Remittance Date has been assumed to be % per annum, subject to a
maximum rate equal to the Weighted Average Net Contract Rates, computed on the
basis of a 360-day year of twelve 30-day months.
Class B-2 Principal
Prior to the Remittance Date on which the Class B-1 Principal Balance
is reduced to zero, there will be no distributions of principal on the Class B-2
Certificates. Prior to the Class B Cross-over Date, there will be no
distributions of principal on the Class B-1 Certificates. On each Remittance
Date, on or after the date on which the Class B-1 Principal Balance has been
reduced to zero and on which each Class B Principal Distribution Test is
satisfied (unless the Senior Principal Balance and the Class A-6 Principal
Balance have been reduced to zero in which event none of the Class B
Distribution Tests need be satisfied), the Class B-2 Certificateholders will be
entitled to receive, as payments of principal, the sum of (i) the Class B
Percentage of the Formula Principal Distribution Amount and (ii) any portion of
the amount described in clause (i) preceding which was due to the Class B-2
Certificateholders on prior Remittance Dates but which remains unpaid on such
Remittance Date; such amount will only be distributed to the extent of the Class
B-2 Remaining Amount Available in the Certificate Account on such date, after
payment of all interest payable on the Class B-2 Certificates. The Agreement
provides that in no event shall an amount of principal be distributed to the
holders of the Class B-1 or Class B-2 Certificates if, after paying such amount,
the test set forth in clause (vi) of "Class B Principal Distribution Test" would
be violated; any such principal not so distributed shall instead be distributed
to the Class of Senior Certificates or the Class A-6 Certificates, whichever is
then entitled to receive distributions of principal.
Class C Distributions; Overcollateralization Amount
The Weighted Average Net Contract Rate for the Contract Pool is
expected generally to be higher than the weighted average of the fixed
Remittance Rates applicable to the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class B-1 and Class B-2 Certificates (collectively, the
"Non-IO Certificates"), thus generating certain excess interest collections
which, in the absence of losses and delinquencies, will not be necessary to fund
distributions on the Non-IO Certificates. The Agreement provides that this
excess interest, together with, if AFL is then the Servicer, the Monthly
Servicing Fee then otherwise due to AFL, be applied, to the extent available, to
make accelerated payments of principal to the Class or Classes then entitled to
receive distributions of principal. Such accelerated payments are expected to
cause the aggregate Principal Balance of the Non-IO Certificates to amortize
more rapidly than the Contract Pool, resulting in "overcollateralization" (i.e.,
the excess of the Pool Scheduled
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Principal Balance over the aggregate Principal Balance of the Non-IO
Certificates). This excess interest for a Collection Period, together with
interest on the overcollateralization amount itself, on the related Remittance
Date is the "Class C Formula Distribution Amount" for such Remittance Date. On
any Remittance Date, the "Overcollateralization Amount" will be an amount equal
to the difference between the Pool Scheduled Principal Balance as of the end of
the immediately preceding Collection Period and the aggregate Certificate
Principal Balance of the Non-IO Certificates on such Remittance Date (and after
taking into account all other distributions to be made on such Remittance Date).
The amounts available to fund the Class C Formula Distribution Amount
(which amount will be the Class B-2 Remaining Amount Available less the Class
B-2 Distribution Amount and less the Monthly Servicing Fee for such Remittance
Date, such amount being the "Class C Distribution Amount") will be applied,
together with the Monthly Servicing Fee if AFL is the Servicer, to make such
accelerated payments of principal on each Remittance Date until the
Overcollateralization Amount is equal to approximately $ (the "Initial
Overcollateralization Amount"). Thereafter, the Class C Distribution Amount will
be available to make distributions of the Class C Formula Distribution Amount to
the holders of the Class C Certificates, unless, due to losses, the
Overcollateralization Amount is decreased, in which event such applications will
commence to the extent necessary to increase the actual Overcollateralization
Amount to the Required Overcollateralization Amount. The level of the Required
Overcollateralization Amount is equal to, for any Remittance Date, (x) prior to
the Class B Cross-over Date, the Initial Required Overcollateralization Amount,
(y) on and after the Class B Cross-over Date, and as long as each Class B
Principal Distribution Test is then satisfied, the lesser of (i) the Initial
Required Overcollateralization Amount and (ii) the greater of (a) % of the then
Scheduled Pool Principal Balance and (b) % of the Cut-off Date Pool Principal
Balance and (z) on and after the Class B Crossover Date, if any Class B
Distribution Test is not satisfied, the required level as of the immediately
preceding Remittance Date. If, on any Remittance Date, the level of Required
Overcollateralization Amount is permitted to be reduced, the "Excess
Overcollateralization Amount" (the excess of (x) the actual
Overcollateralization Amount on such Remittance Date (after taking into account
all other distributions on such Remittance Date) over (y) the Required
Overcollateralization Amount for such Remittance Date) will be paid to the Class
C Certificateholders from the Formula Principal Distribution Amount otherwise
payable to the holders of the Non-IO Certificates on such Remittance Date (any
such amount so paid to the Class C Certificateholders, an "Overcollateralization
Reduction Amount"). The Overcollateralization Reduction Amount, if any, on any
Remittance Date shall be funded first, from the Class B Percentage of the
Formula Principal Distribution Amount otherwise distributable to the holders of
the Class B-1 or Class B-2 Certificates on such Remittance Date, and, if such
amount is insufficient to fund in full the Overcollateralization Reduction
Amount on such Remittance Date, then, second, from the Senior Percentage of the
Formula Principal Distribution Amount otherwise distributable to the holders of
the Senior or Class A-6 Certificates on such Remittance Date. The Agreement
provides that in no event shall an Overcollateralization Reduction Amount be
paid to the Class C Certificateholders if, after paying such amount, the test
set forth in clause (vi) of the definition of "Class B Principal Distribution
Test" would be violated.
The amount, if any, of the Class C Distribution Amount actually applied
as an accelerated payment of principal on any Remittance Date (such amount to be
the lesser of (x) the excess of (i) the Required Overcollateralization Amount
over (ii) the actual Overcollateralization Amount on such Remittance Date and
(y) the Class C Distribution Amount and the Monthly Servicing Fee if AFL is the
Servicer for the immediately preceding Collection Period) is the "Accelerated
Principal Payment" for such Remittance Date.
Subordination of Class A-6, Class B-1, Class B-2, Class C and Residual
Certificates
The rights of the holders of the Class A-6, the Class B-1, the Class
B-2, Class C Certificates and the Residual Certificates to receive distributions
with respect to the Contracts in the Trust will be subordinated to such rights
of the Senior Certificateholders. This subordination is intended to enhance the
likelihood of regular receipt by the holders of the Senior Certificates of the
full amount of their scheduled monthly payments of principal and interest and to
afford such holders protection against losses on Liquidated Contracts. The
protection afforded to the Senior Certificateholders by means of the
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subordination feature will be accomplished by the preferential right of the
Senior Certificateholders to receive, prior to any distribution being made on a
Remittance Date in respect of the Class A-6, the Class B-1, the Class B-2, the
Class C Certificates and the Residual Certificates, the amount of principal and
interest due them on each Remittance Date out of the Amount Available on deposit
on such date in the Certificate Account and by the right of the Senior
Certificateholders to receive future distributions on the Contracts that would
otherwise be payable to the holders of Class A-6, Class B-1, Class B-2, Class C
and Residual Certificates. On each Remittance Date the Class A-6
Certificateholders will be entitled to receive only amounts described above
under "Class A-6 Interest" and "Class A-6 Principal," the Class B-1
Certificateholders will be entitled to receive only amounts described above
under "Class B-1 Interest" and "Class B-1 Principal," and the Class B-2
Certificateholders will be entitled to receive only amounts described above
under "Class B-2 Interest" and "Class B-2 Principal."
In addition, the rights of the holders of the Class B-1, the Class B-2,
the Class C and the Residual Certificates to receive distributions will be
subordinate to such rights of the Class A-6 Certificateholders. This
subordination is intended to enhance the likelihood of regular receipt by the
holders of the Class A-6 Certificates of the full amount of their scheduled
monthly payments of principal and interest and to afford such holders protection
against losses on Liquidated Contracts. The protection afforded to the Class A-6
Certificateholders by means of the subordination feature will be accomplished by
the preferential right of the Class A-6 Certificateholders to receive, prior to
the distribution being made on a Remittance Date in respect of the Class B-1,
the Class B-2, the Class C and the Residual Certificates, the amount of
principal and interest due them on each Remittance Date out of the Class A-6
Remaining Amount Available on deposit on such date in the Certificate Account
and by the right of the Class A-6 Certificate holders to receive future
distributions on the Contracts that would otherwise be payable to the holders of
Class B-1, Class B-2, Class C and Residual Certificates.
In addition, the rights of the holders of the Class B-2, the Class C
and the Residual Certificates to receive distributions will be subordinate to
such rights of the Class B-1 Certificateholders. This subordination is intended
to enhance the likelihood of regular receipt by the holders of the Class B-1
Certificates of the full amount of their scheduled monthly payments of principal
and interest and to afford such holders protection against losses on Liquidated
Contracts. The protection afforded to the Class B-1 Certificateholders by means
of the subordination feature will be accomplished by the preferential right of
the Class B-1 Certificateholders to receive, prior to any distribution being
made on a Remittance Date in respect of the Class B-2, the Class C and the
Residual Certificates, the amount of principal and interest due them on each
Remittance Date out of the Class B-1 Remaining Amount Available on deposit on
such date in the Certificate Account and by the right of the Class B-1
Certificateholders to receive future distributions on the Contracts that would
otherwise be payable to the holders of Class B-1, Class B-2, Class C and
Residual Certificates.
The rights of the holders of the Class C Certificates to receive
distributions with respect to the Contracts on each Remittance Date will be
subordinated to the rights of the holders of the Senior Certificates, Class A-6
Certificates, Class B-1 Certificates and Class B-2 Certificates, and to the
payment of the Monthly Servicing Fee.
The rights of the Residual Certificateholders to receive distributions
will be subordinated to the rights of the holders of all other classes of
Certificates and to the payment of the Monthly Servicing Fee. On each Remittance
Date the Residual Certificateholders will receive the remaining Amount
Available, if any, after payment of the amount distributed to the Senior, Class
A-6, Class B-1, Class B-2 and Class C Certificateholders as described above
(less the Monthly Servicing Fee and less amounts retained by the Servicer to
reimburse itself for taxes paid in respect of prohibited transactions) plus
aggregate Repossession Profits (as defined in the Agreement).
Losses on Liquidated Contracts
As described above, the distribution of principal to the Senior and the
Class A-6 Certificateholders and to the Class B-1 Certificateholders is intended
to include the Senior Percentage and the Class B Percentage, respectively, of
the Scheduled Principal Balance of each Contract that became
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a Liquidated Contract during the preceding Collection Period. If the Net
Liquidation Proceeds (as defined below) from a Liquidated Contract are less than
the Scheduled Principal Balance of such Liquidated Contract plus accrued and
unpaid interest thereon plus amounts reimbursable to the Servicer for advances
of certain taxes and insurance premiums, the deficiency (a "Realized Loss")
will, in effect, be absorbed first, by the Residual Certificateholders, second,
by the Class C Certificateholders (both through the application of the Class C
Distribution Amount to fund such deficiency and through a reduction in the
Overcollateralization Amount), third, by the Monthly Servicing Fee (so long as
AFL is the Servicer), fourth, by the Class B-2 Certificateholders, fifth, by the
Class B-1 Certificateholders and sixth, by the Class A-6 Certificateholders,
since a portion of the Amount Available equal to such deficiency and otherwise
distributable to them will be paid to the Senior Certificateholders. If AFL is
no longer the Servicer, then the Monthly Servicing Fee will become senior to all
Certificateholders distributions.
"Liquidation Proceeds" means cash (including insurance proceeds)
received in connection with the liquidation of defaulted Contracts, whether
through repossession, foreclosure sale or otherwise. 'Net Liquidation Proceeds'
means, as to a Liquidated Contract, all Liquidation Proceeds received on or
prior to the last day of the Collection Period in which such Contract became a
Liquidated Contract, net of Liquidation Expenses. "Liquidation Expenses" means
out-of-pocket expenses (exclusive of any overhead expenses) which are incurred
by the Servicer in connection with the liquidation of any defaulted Contract, on
or prior to the date on which the related Manufactured Home is disposed of,
including, without limitation, legal fees and expenses, and any related and
unreimbursed expenditures for property taxes, property preservation or
restoration of the property to marketable condition.
If the Amount Available is not sufficient to cover the entire principal
portion of the Senior Formula Distribution Amount due to the Senior
Certificateholders or the entire principal portion of the Class A-6 Formula
Distribution Amount due to the Class A-6 Certificateholders on a particular
Remittance Date, then (i) if the Senior Percentage is less than 100%, the Senior
Percentage on future Remittance Dates will be increased and the Class B
Percentage on future Remittance Dates will be reduced as a result of such
deficiency and (ii) the amount of the deficiency will be carried forward as an
amount the Senior Certificateholders or the Class A-6 Certificateholders are
entitled to receive on future Remittance Dates, until paid in full. If the
Amount Available is sufficient to cover the entire principal portion of the
Senior Formula Distribution Amount due to the Senior Certificateholders and the
entire principal portion of the Class A-6 Formula Distribution Amount due to the
Class A-6 Certificateholders on a particular Remittance Date but is not
sufficient to cover the entire principal portion of the Class B-1 Formula
Distribution Amount due to the Class B-1 Certificateholders, the amount of the
deficiency will be carried forward as an amount that the Class B-1
Certificateholders are entitled to receive on the next Remittance Date.
As a result of the subordination of the Class B-1 and the Class B-2
Certificates, the Monthly Servicing Fee (so long as AFL is the Servicer), and
the subordination of the Class C and Residual Certificates, the Class A-6
Certificateholders will not absorb (i) losses resulting from Realized Losses or
(ii) delinquent payments on the Contracts, at least to the extent that such
subordination has not been exhausted. See " -- Subordination of Class A-6, Class
B-1, Class B-2, Class C and Residual Certificates" and "Prepayment and Yield
Considerations."
As a result of the subordination of the Class B-2 Certificates, the
Monthly Servicing Fee (so long as AFL is the Servicer), and the subordination of
the Class C and Residual Certificates, the Class B-1 Certificateholders will not
absorb (i) losses resulting from Realized Losses or (ii) delinquent payments on
the Contracts, at least to the extent that such subordination has not been
exhausted. See " -- Subordination of Class A-6, Class B-1, Class B-2, Class C
and Residual Certificates" and "Prepayment and Yield Considerations."
As a result of the subordination of the Monthly Servicing Fee (so long
as AFL is the Servicer) and of the Class C and Residual Certificates, the Class
B-2 Certificateholders will not absorb (i) losses resulting from Realized Losses
or (ii) delinquent payments on the Contracts at least to the extent that such
subordination has not been exhausted. See " -- Subordination of Class A-6, Class
B-1, Class B-2, Class C and Residual Certificates" and "Prepayment and Yield
Considerations."
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Reports to Certificateholders
The Servicer will furnish to the Trustee, and the Trustee will include
with each distribution to a Offered Certificateholder, a statement in respect of
the related Remittance Date setting forth, among other things:
(a) the amount of such distribution to holders of each
Class of Certificates allocable to interest (separately identifying any
unpaid interest shortfall included);
(b) the amount of such distribution to holders of each
Class of Certificates allocable to principal (separately identifying
the aggregate amount of any principal prepayments included);
(c) the amount of any shortfall in the Formula Principal
Distribution Amount allocated to each Class of Certificateholders for
such Remittance Date, as applicable;
(d) the Principal Balance of each Class of Certificates
after giving effect to the distribution of principal on such Remittance
Date;
(e) the Senior Percentage for the following Remittance
Date;
(f) the Pool Scheduled Principal Balance of the Contracts
for the following Remittance Date;
(g) the Pool Factor (a percentage derived from a fraction
the numerator of which is (f) and the denominator of which is the
Cut-off Date Pool Principal Balance);
(h) the number and aggregate principal balance of
Contracts delinquent (i) 30-59 days and (ii) 60 or more days;
(i) the number of Manufactured Homes that were
repossessed during the Collection Period ending immediately prior to
such Remittance Date;
(j) the number of Manufactured Homes that were
repossessed but remain in inventory as of the last day of the
Collection Period ending immediately prior to such Remittance Date;
(k) the Weighted Average Net Contract Rate of all
outstanding Contracts; and
(l) the Overcollateralization Amount and any
Overcollateral Reduction Amount for such Remittance Date.
Information furnished pursuant to clauses (a) through (d) will be
expressed as dollar amounts for a Senior Certificate with a 1% Percentage
Interest or per $1,000 denomination of Certificate.
In addition, within a reasonable period of time after the end of each
calendar year, the Servicer will furnish a report to each Certificateholder of
record at any time during such calendar year as to the aggregate of amounts
reported pursuant to (a) and (b) above for such calendar year.
Optional Termination
The Agreement provides that on any Remittance Date after the first
Remittance Date on which the Pool Scheduled Principal Balance is less than 10%
of the Cut-off Date Pool Principal Balance, the Servicer will have the option to
repurchase, upon giving notice mailed no earlier than the and no later than the
day of the month next preceding the month of the exercise of such option, all
outstanding Contracts at a price equal to the greater of (i) the sum of (w) 100%
of the Scheduled Principal Balance of each Contract (other than any Contract as
to which the related Manufactured Home has been acquired
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and not yet disposed of and whose fair market value is included pursuant to
clause (x) below) as of the final Remittance Date; (x) the fair market value of
such acquired property (as determined by the Servicer); (y) the aggregate amount
of any unreimbursed Delinquency Advances and unreimbursed Servicing Advances and
(z) any unpaid interest on the Certificates due on prior Remittance Dates as
well as one month's interest, at a rate equal to the related remittance rate
borne by any outstanding Class of Certificates plus the Monthly Servicing Fee,
on the Scheduled Principal Balance of each Contract (including any Contract as
to which the related Manufactured Home has been repossessed and not yet disposed
of), but in no event less than the amount necessary to pay all Classes of
Certificates in full, including accrued and unpaid interest thereon (the amount
described in this clause (i) being the "Termination Price") and (ii) the sum of
(x) the aggregate fair market value (as determined by the Servicer) of all of
the assets of the Trust and (y) the amount described in clause (i)(z) above.
Auction Sale
The Agreement requires that, within ninety days following a Remittance
Date as of which the Pool Scheduled Principal Balance is less than 10% of the
Cut-off Date Pool Principal Balance, if the Servicer has not exercised its
optional termination rights by such date, the Trustee shall solicit bids for the
purchase of all Contracts remaining in the Trust. In the event that satisfactory
bids are received as described in the Agreement, the net sale proceeds will be
distributed to Certificateholders, in the same order of priority as collections
received in respect of the Contracts. The Trustee, however, will not accept any
bid for the Contracts unless certain requirements are met, including the
requirement that such bid is in an amount at least equal to the Termination
Price. The sale of the Contracts must be for an amount no less than fair market
value. If satisfactory bids are not received, the Trustee shall decline to sell
the Contracts and shall not be under any obligation to solicit any further bids
or otherwise negotiate any further sale of the Contracts. Such sale and
consequent termination of the Trust must constitute a "qualified liquidation" of
each REMIC established by the Trust under Section 860F of the Internal Revenue
Code of 1986, as amended, including, without limitation, the requirement that
the qualified liquidation takes place over a period not to exceed 90 days.
Termination of the Agreement
The Agreement will terminate upon the last action required to be taken
by the Trustee on the final Remittance Date following the later of (i) the
purchase by the Servicer of all Contracts and all property acquired in respect
of any Contract remaining in the Trust as described above under "-- Optional
Termination", (ii) the sale of the Contracts as described under "-- Auction
Sale" or (iii) the final payment or other liquidation (or any advance with
respect thereto) of the last Contract remaining in the Trust or the disposition
of all property acquired upon repossession of any Manufactured Home.
Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed, to the extent of funds available, to such
Certificateholders on the final Remittance Date in proportion to their
respective Percentage Interests an amount equal to the respective unpaid
Principal Balances of the Certificates, together with any unpaid interest on
such Certificates due on prior Remittance Dates and one month's interest at the
applicable Remittance Rates on such unpaid Principal Balances. If the Agreement
is then being terminated, any amount which remains on deposit in the Certificate
Account (other than amounts retained to meet claims) after distribution to the
Certificateholders will be distributed to the Residual Certificateholders.
Amendment
The Agreement may be amended by Receivables Corp., the Servicer and the
Trustee without the consent of the Certificateholders (i) to cure any ambiguity,
(ii) to correct or supplement any provision therein that may be inconsistent
with any other provision therein, (iii) to add to the duties or obligations of
the Servicer, (iv) to obtain a rating from a nationally recognized rating agency
or to maintain or improve the ratings of any Class of the Offered Certificates
then given by any rating agency (it being understood that, after obtaining the
rating of the Offered Certificates from _____ and _____, neither the Trustee nor
the Servicer is obligated to obtain, maintain or improve any rating assigned to
the Offered
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Certificates), or (v) to make any other provisions with respect to matters or
questions arising under such Agreement, provided that such action will not, as
evidenced by an opinion of counsel, adversely affect in any material respect the
interests of the Certificateholders. The Agreement may also be amended by
Receivables Corp., the Servicer and the Trustee with the consent of the holders
of Certificates of each Class affected thereby evidencing, as to such Class,
Percentage Interests aggregating not less than 51% for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, any distributions which are
required to be made on any Certificate without the consent of the holder of each
Certificate affected thereby or (ii) reduce the aforesaid percentage of
Certificates the holders of which are required to consent to any such amendment,
without the consent of the holders of all Certificates then outstanding, and no
such amendment shall adversely affect the status of the Trust as a REMIC.
The Agreement may also be amended from time to time, without the
consent of any Certificateholders, by the Trustee, Receivables Corp., and the
Servicer to modify, eliminate or add to the provisions of the Agreement to (i)
maintain the qualification of the Trust as a REMIC under the Code or avoid, or
minimize the risk of, the imposition of any tax on the Trust under the Code that
would be a claim against the Trust assets, provided that an opinion of counsel
is delivered to the Trustee to the effect that such action is necessary or
appropriate to maintain such qualification or avoid any such tax or minimize the
risk of its imposition, or (ii) prevent the Trust from entering into any
"prohibited transaction" as defined in Section 860F of the Code, provided that
an opinion of counsel is delivered to the Trustee to the effect that such action
is necessary or appropriate to prevent the Trust from entering into such
prohibited transaction.
Servicing Compensation
For its servicing of the Contracts, the Servicer will be entitled to
receive a monthly servicing fee equal to 1/12th of the product of % and the Pool
Scheduled Principal Balance for the related Remittance Date (the "Monthly
Servicing Fee"). The Amount Available will be net of the Monthly Servicing Fee
if AFL is not the Servicer; if AFL is the Servicer, the Monthly Servicing Fee
will be subordinate to distributions on account of the Certificates except
distributions to the Class C and Residual Certificateholders. See "-- Payments
on the Contracts; Certificate Account" herein.
Advances
Delinquency Advances. The Servicer will be required, not later than
each Remittance Date, to deposit into the Certificate Account an amount equal to
the Scheduled Payments due, but not collected, with respect to delinquent
Contracts during the prior Collection Period, but only if, in its good faith
business judgment, the Servicer believes that such amounts will ultimately be
recovered on or with respect to the related Contract. Any such amounts so
advanced are "Delinquency Advances." The Servicer will be permitted to fund its
payment of Delinquency Advances on any Remittance Date from collections on any
Contract deposited to the Certificate Account subsequent to the related
Collection Period not required to be distributed to Certificateholders on the
related Remittance Date, and will be required to reimburse the Certificate
Account for such amounts from its own funds or from payments collected on the
Contracts in a Collection Period that are not otherwise distributable on the
related Remittance Date. Delinquency Advances are intended to maintain a regular
flow of scheduled interest and principal payments to Certificateholders rather
than to guarantee or insure against losses.
A Contract is "delinquent" if any payment due thereon is not made by
the close of business on its Due Date.
The Servicer is permitted to reimburse itself for Delinquency Advances
funded from its own funds only from subsequent collections on the related
delinquent Contract, unless the Servicer determines that any unreimbursed
Delinquency Advance constitutes a Nonrecoverable Delinquency Advance, in which
event it will be reimbursable to the Servicer from collections on the Contract
Pool generally.
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A "Nonrecoverable Delinquency Advance" is a Delinquency Advance
previously made by the Servicer but which the Servicer subsequently, in its good
faith business judgment, determines not to be recoverable from the related
Contract.
Servicing Advances. The Agreement requires the Servicer to pay, from
its own funds, all reasonable and customary out-of-pocket costs and expenses
incurred in connection with its servicing duties, including property
preservation expenses, the costs of enforcing the Contracts, the security
interests in the related Manufactured Homes, the management and liquidation of
repossessed Manufactured Homes, advances for taxes, insurance, ground rents and
similar types of charges (all such amounts, "Servicing Advances"). The Servicer
will be required to make a Servicing Advance only if it believes that such
amount will be recoverable with respect to the related Contract, or, if the
related Manufactured Home is being liquidated, if such amount will increase the
related Net Liquidation Proceeds. Servicing Advances are reimbursable to the
Servicer only from the related Contract or related Liquidation Proceeds, and,
except as otherwise provided in the Agreement, not from collections on the
Contract Pool generally.
Both unreimbursed Delinquency Advances and unreimbursed Servicing
Advances are a priority claim against subsequent collections on or with respect
to the related Contract, and the payment of such claims thus will reduce the
Amount Available.
Servicer Termination Events
Events of Termination under the Agreement will include the following
(i) any failure by the Servicer to distribute to the Certificateholders any
required payment which continues unremedied for 5 days after the giving of
written notice; (ii) any failure by the Servicer duly to observe or perform in
any material respect any other of its covenants or agreements in the Agreement
that materially and adversely affects the interests of Certificateholders,
which, in either case, continues unremedied for 30 days after the giving of
written notice of such failure of breach; (iii) any assignment or delegation by
the Servicer of its duties or rights under the Agreement, except as specifically
permitted under the Agreement, or any attempt to make such an assignment or
delegation; (iv) certain events of insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings regarding the Servicer, and (v)
the Servicer is no longer an Eligible Servicer (as defined in the Agreement).
Notice as used herein shall mean notice to the Servicer by the Trustee or AFL,
or to AFL, the Servicer, if any, and the Trustee by the holders of Certificates
representing interests aggregating not less than 25% of the Trust.
The Trustee
(the "Trustee") has its corporate trust offices at . The
Trustee may resign at any time, in which event Receivables Corp. will be
obligated to appoint a successor Trustee. Receivables Corp. may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances,
Receivables Corp. will also be obligated to appoint a successor Trustee. Any
resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by the successor
Trustee.
The Agreement requires the Trustee to maintain, at its own expense, an
office or agency in __________ where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee and the Certificate Registrar in respect of the Certificates
pursuant to the Agreement may be served.
The Trustee, or any of its affiliates, in its individual or any other
capacity, may become the owner or pledgee of Certificates with the same rights
as it would if it were not Trustee.
The Trustee will also act as Certificate Administrator under the
Agreement. In such capacity it will act as Paying Agent, Certificate Registrar
and Authenticating Agent.
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Registration of Offered Certificates
The Offered Certificates will be book-entry certificates (the
"Book-Entry Certificates"). The Beneficial Certificate Owners may elect to hold
their Offered Certificates through DTC in the United States, or CEDEL or
Euroclear (in Europe) if they are participants of such systems ("Participants"),
or indirectly through organizations which are Participants in such systems. The
Book-Entry Certificates will be issued in one or more certificates per class of
Offered Certificates which in the aggregate equal the principal balance of such
Offered Certificates and will initially be registered in the name of Cede, the
nominee of DTC. CEDEL and Euroclear will hold omnibus positions on behalf of
their Participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the depositaries'
names on the books of DTC. Citibank will act as depositary for CEDEL and Morgan
will act as depositary for Euroclear (in such capacities, individually the
"Relevant Depositary" and collectively the "European Depositaries"). Investors
may hold such beneficial interests in the Book-Entry Certificates in minimum
denominations representing principal amounts of $1,000. Except as described
below, no Beneficial Certificate Owner will be entitled to receive a physical
certificate representing such Certificate (a "Definitive Certificate"). Unless
and until Definitive Certificates are issued, it is anticipated that the only
"Owner" of such Offered Certificates will be Cede, as nominee of DTC. Beneficial
Certificate Owners will not be Owners as that term is used in the Pooling
Agreement. Beneficial Certificate Owners are only permitted to exercise their
rights indirectly through Participants and DTC.
The Beneficial Certificate Owner's ownership of a Book-Entry
Certificate will be recorded on the records of the brokerage firm, bank, thrift
institution or other financial intermediary (each, a "Financial Intermediary")
that maintains the Beneficial Certificate Owner's account for such purpose. In
turn, the Financial Intermediary's Ownership of such Book-Entry Certificate 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 Certificate Owner's Financial Intermediary is
not a DTC Participant and on the records of CEDEL or Euroclear, as appropriate).
Beneficial Certificate Owners will receive all distributions of
principal of, and interest on, the Offered Certificates from the Trustee through
DTC and DTC Participants. While such Offered Certificates are outstanding
(except under the circumstances described below), under the rules, regulations
and procedures creating and affecting DTC and its operations (the "Rules"), DTC
is required to make book-entry transfers among Participants on whose behalf it
acts with respect to such Offered Certificates and is required to receive and
transmit distributions of principal of, and interest on, such Offered
Certificates. Participants and indirect participants with whom Beneficial
Certificate Owners have accounts with respect to Offered Certificates are
similarly required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective Beneficial Certificate Owners.
Accordingly, although Beneficial Certificate Owners will not possess
certificates, the Rules provide a mechanism by which Beneficial Certificate
Owners will receive distributions and will be able to transfer their interest.
Beneficial Certificate Owners will not receive or be entitled to
receive certificates representing their respective interests in the Offered
Certificates, except under the limited circumstances described below. Unless and
until Definitive Certificates are issued, Beneficial Certificate Owners who are
not Participants may transfer ownership of Offered Certificates only through
Participants and indirect participants by instructing such Participants and
indirect participants to transfer such Offered Certificates, by book-entry
transfer, through DTC for the account of the purchasers of such Offered
Certificates, which account is maintained with their respective Participants.
Under the Rules and in accordance with DTC's normal procedures, transfers of
ownership of such Offered Certificates 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 Beneficial Certificate Owners.
Because of time zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
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securities settled during such processing will be reported to the relevant
Euroclear or CEDEL Participants on such business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL Participant
(as defined below) or Euroclear Participant (as defined below) to a DTC
Participant will be received with value on the DTC settlement date but will be
available in the relevant CEDEL or Euroclear cash account only as of the
business day following settlements in DTC. For information with respect to tax
documentation procedures relating to the Certificates, see "Certain Federal
Income Tax Consequences -- Foreign Investors" and " -- Backup Withholding" in
the Prospectus and "Global Clearance, Settlement and Tax Documentation
Procedures -- Certain U.S. Federal Income Tax Documentation Requirements" in
Annex I hereto.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. CEDEL Participants and Euroclear Participants may not deliver instructions
directly to the European Depositaries.
DTC, which is a New York-chartered limited purpose trust company,
performs services for its Participants ("DTC Participants"), some of which
(and/or their representatives) own DTC. In accordance with its normal
procedures, DTC is expected to record the positions held by each DTC Participant
in the Book-Entry Certificates, whether held for its own account or as a nominee
for another person. In general, beneficial ownership of Book-Entry Certificates
will be subject to the rules, regulations and procedures governing DTC and DTC
Participants as in effect from time to time.
CEDEL is incorporated under the laws of Luxembourg as a professional
depositary. CEDEL holds securities for its participant organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depositary, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 31 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative
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corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear Securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each
Remittance Date by the Trustee to DTC. DTC will be responsible for crediting the
amount of such payments to the accounts of the applicable DTC Participants in
accordance with DTC's normal procedures. Each DTC Participant will be
responsible for disbursing such payment to the Beneficial Certificate Owners of
the Book-Entry Certificates that it represents and to each Financial
Intermediary for which it acts as agent. Each such Financial Intermediary will
be responsible for disbursing funds to the Beneficial Certificate Owners of the
Book-Entry Certificates that it represents.
Under a book-entry format, Beneficial Certificate Owners of the
Book-Entry Certificates may experience some delay in their receipt of payments,
since such payments will be forwarded by the Trustee to Cede. Distributions with
respect to Offered Certificates held through CEDEL or Euroclear will be credited
to the cash accounts of CEDEL Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by the Relevant Depositary. Such distributions 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 Certificate Owner to pledge Book-Entry Certificates, to persons or
entities that do not participate in the Depository system, or otherwise take
actions in respect of such Book-Entry Certificates, may be limited due to the
lack of physical certificates for such Book-Entry Certificates. In addition,
issuance of the Book-Entry Certificates in book-entry form may reduce the
liquidity of such Certificates in the secondary market since certain potential
investors may be unwilling to purchase Certificates for which they cannot obtain
physical certificates.
Monthly and annual reports on the Trust provided by the Servicer to
Cede, as nominee of DTC, may be made available to Beneficial Certificate Owners
upon request, in accordance with the rules, regulations and procedures creating
and affecting the Depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates of such Beneficial Certificate Owners are
credited.
DTC has advised the Trustee that, unless and until Definitive
Certificates are issued, DTC will take any action permitted to be taken by the
holders of the Book-Entry Certificates under the Pooling Agreement only at the
direction of one or more Financial Intermediaries to whose DTC accounts the
Book-Entry Certificates are credited, to the extent that such actions are taken
on behalf of Financial Intermediaries whose holdings include such Book-Entry
Certificates. CEDEL or the Euroclear Operator, as the case may be, will take any
action permitted to be taken by an Owner under the Pooling Agreement
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on behalf of a CEDEL Participant or Euroclear Participant only in accordance
with its relevant rules and procedures and subject to the ability of the
Relevant Depositary to effect such actions on its behalf through DTC. DTC may
take actions, at the direction of the related Participants, with respect to some
Offered Certificates which conflict with actions taken with respect to other
Offered Certificates.
Definitive Certificates will be issued to Beneficial Certificate Owners
of the Book-Entry Certificates, or their nominees, rather than to DTC, only if
(a) DTC or the Depositor advises the Trustee in writing that DTC is no longer
willing, qualified or able to discharge properly its responsibilities as a
nominee and depository with respect to the Book-Entry Certificates and the
Depositor or the Trustee is unable to locate a qualified successor, (b) the
Depositor, at its sole option, elects to terminate a book-entry system through
DTC or (c) DTC, at the direction of the Beneficial Certificate Owners
representing a majority of the outstanding Percentage Interests of the Offered
Certificates, advises the Trustee in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of Beneficial Certificate Owners.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among Participants
of DTC, CEDEL and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
General
As a result of the assignment of the Contracts in a Contract Pool to
the Trustee, the Trust will succeed collectively to all of the rights (including
the right to receive payment on such Contracts), and will assume the obligations
of the obligee, under such Contracts. Each Contract evidences both (a) the
obligation of the Obligor to repay the loan evidenced thereby, and (b) the grant
of a security interest in either the Manufactured Home. Certain aspects of both
features of the Contracts are described more fully below.
The following discussion focuses on issues relating generally to AFL's
or any lender's interest in manufactured housing contracts. See "-- Security
Interests in the Manufactured Homes" herein for a discussion of certain issues
relating to the transfer to the Trust of the Contracts and the related security
interests in the Manufactured Homes.
Security Interests in the Manufactured Homes
The Manufactured Homes securing the Contracts may be located in all 50
states and the District of Columbia. Security interests in manufactured homes,
similar to the ones securing the Contracts, ("manufactured homes") generally may
be perfected either by notation of the secured party's lien on the certificate
of title or by delivery of the required documents and payment of a fee to the
state motor vehicle authority, depending on state law. In some non-title states,
perfection pursuant to the provisions of the UCC is required. Generally, with
respect to manufactured housing contracts individually originated or purchased
by AFL, AFL effects such notation or delivery of the required documents and
fees, and obtains possession of the certificate of title or a lien certificate,
as appropriate, under the laws of the state in which any manufactured home
securing a manufactured housing conditional sales contract is registered. If AFL
fails, due to clerical errors or otherwise, to effect such notation or delivery,
or files the security interest under the wrong law (for example, under a motor
vehicle title statute rather than under the UCC, in a few states), AFL may not
have a first-priority security interest in the manufactured home securing a
contract. As manufactured homes have become larger and often have been attached
to their sites without any apparent intention to move them, courts in many
states have held that manufactured homes, under certain circumstances, may
become subject to real estate title and recording laws. As a result, a security
interest in a manufactured home could be rendered subordinate to the interests
of other parties claiming an interest in the home under applicable state real
estate law. In order to perfect a security interest in a manufactured home under
real estate laws, the holder of the security interest must
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file either a "fixture filing" under the provisions of the UCC or a real estate
mortgage under the real estate laws of the state where the home is located.
These filings must be made in the real estate records office of the county where
the home is located. Most of the Contracts in any Contract Pool will contain
provisions prohibiting the Obligor from permanently attaching the Manufactured
Home to its site if it was not so attached on the date of the Contract. As long
as each Manufactured Home was not so attached on the date of the Contract and
the Obligor does not violate this agreement, a security interest in the
Manufactured Home will be governed by the certificate of title laws or the UCC,
and the notation of the security interest on the certificate of title or the
filing of a UCC financing statement will be effective to maintain the priority
of AFL's security interest in the Manufactured Home. Upon the conveyance of each
Contract to the Seller, AFL will represent that it had obtained a perfected
first-priority security interest in the Manufactured Home securing the related
Contract. Such representation, however, will not be based upon an inspection of
the site of any Manufactured Home to determine if the Manufactured Home had
become permanently attached to its site.
In the absence of fraud, forgery or permanent affixation of a
manufactured home to its site by the manufactured home owner, or administrative
error by state recording officials, the notation of the lien of AFL on the
certificate of title or delivery of the required documents and fees (or if
applicable, perfection under the UCC) will be sufficient to protect AFL against
the rights of subsequent purchasers of a manufactured home or subsequent lenders
who take a security interest in the manufactured home. If there are any
manufactured homes as to which the security interest in favor of AFL is not
perfected, such security interest would be subordinate to the claims of, among
others, subsequent purchasers for value of and holders of perfected security
interests in such manufactured homes.
In the event that the owner of a manufactured home moves it to a state
other than the state in which such manufactured home initially is registered,
under the laws of most states, the perfected security interest in the
manufactured home would continue for four months after such relocation and
thereafter until the owner registers the manufactured home in such state. If the
owner were to relocate a manufactured home to another state and were to
re-register the manufactured home in such state, and if steps are not taken to
re-perfect an existing security interest in such state, the security interest in
the manufactured home would cease to be perfected. A majority of states
generally require surrender of a certificate of title to such manufactured home.
AFL must therefore surrender possession if it holds the certificate of title to
such manufactured home or, in the case of manufactured homes registered in
states which provide for notation of lien, AFL would receive notice of surrender
if its security interest in the manufactured home is noted on the certificate of
title. Accordingly, AFL would have the opportunity to re-perfect its security
interest in the manufactured home in the state of relocation. In states which do
not require a certificate of title for registration of a manufactured home,
re-registration could defeat the perfection. In the ordinary course of servicing
its manufactured housing contracts, AFL takes steps to effect such re-perfection
upon receipt of notice of re-registration or information from the obligor as to
relocation. Similarly, when an obligor under a contract sells a manufactured
home, AFL must surrender possession of the certificate of title or AFL will
receive notice as a result of its lien noted thereon and accordingly AFL will
have an opportunity to require satisfaction of the related contract before
release of the lien. Such protections generally would not be available in the
case of security interests in manufactured homes located in non-title states
where perfection of such security interest is achieved by appropriate filings
under the UCC (as in effect in such state).
Under the laws of most states, liens for repairs performed on a
manufactured home and liens for personal property taxes take priority over a
perfected security interest in the manufactured home. Upon the conveyance of
each Contract to the Seller, AFL will represent that it had obtained a perfected
first-priority security interest in the Manufactured Home securing the related
Contract. The Seller will, in turn, warrant in the Agreement that, as of the
date of initial issuance of such Series of Certificates, no Manufactured Home
was subject to any such lien. However, such warranties will not be based on any
lien searches or other review. In addition, such liens could arise after the
date of initial issuance of the Certificates. Notice may not be given to
Receivables Corp., the Servicer, the Trustee or Certificateholders in the event
such a lien arises.
Enforcement of Security Interests in Manufactured Homes
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The Servicer on behalf of the Trustee, to the extent required by the
related Agreement, may take action to enforce the Trustee's security interest
with respect to Contracts in default by repossession and resale of the
Manufactured Homes securing such defaulted Contracts. In general, as long as a
manufactured home has not become subject to the real estate law, a creditor can
repossess a manufactured home by voluntary surrender, by "self-help"
repossession that is "peaceful" (i.e., without breach of the peace) or, in the
absence of voluntary surrender and the ability to repossess without breach of
the peace, by judicial process. The holder of a manufactured housing contract
generally must give the obligor a number of days' notice prior to commencement
of any repossession. The UCC and consumer protection laws in most states place
restrictions on repossession sales, including requiring prior notice to the
obligor and commercial reasonableness in effecting such a sale. The law in most
states also requires that the obligor be given notice of any sales prior to
resale of the unit so that the obligor may redeem at or before such resale.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from an obligor for any deficiency on repossession
and resale of the manufactured home securing such obligor's contract. However,
some states impose prohibitions or limitations on deficiency judgments, and in
many cases the defaulting obligor would have no assets with which to pay a
judgment.
Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit or
delay AFL's ability to repossess and resell any Manufactured Home or enforce a
deficiency judgment.
Land Secured Contracts
General. The Land Secured Contract will, to the extent described under
"The Contract Pool," be secured by Mortgages on the property on which the
related Manufactured Homes are located. The Mortgages will either be mortgages
or deeds of trust, depending on the general real estate practice in the state in
which the Mortgaged Property is located. A mortgage creates a lien upon the real
property described in the mortgage. There are two parties to a mortgage: the
mortgagor, who is the borrower, and the mortgagee, who is the lender. The
mortgagor delivers to the mortgagee a note or bond evidencing the loan and the
mortgage. A deed of trust normally has three parties: the real property owner
called the trustor (similar to a mortgagor), a lender called the beneficiary
(similar to the mortgagee) and a third-party grantee called the trustee. Under a
deed of trust, the trustor grants the property, irrevocably until the debt is
paid, "in trust with power of sale" to the trustee to secure payment of the
obligation.
Non-Recordation. Because of the expenses and administrative
inconvenience involved, the assignment of mortgages or deeds of trust to the
Trustee will not be recorded with respect to the Mortgages securing each Land
Secured Contract. The failure to record the assignments to the Trustee of the
Mortgage securing Land Secured Contracts may result in the sale of such
Contracts or the Trustee's rights in the land secured by the Mortgage being
ineffective against creditors of AFL or against a trustee in bankruptcy of AFL
or against a subsequent purchaser of such Contracts from AFL or Receivables
Corp., without notice of the sale to the Trustee.
Foreclosure. Foreclosure of a mortgage is generally accomplished by
judicial action. The action is initiated by the service of legal pleadings upon
all parties having an interest of record in the real property. Delays in
completion of the foreclosure occasionally may result from difficulties in
locating and serving necessary parties. Judicial foreclosure proceedings are
generally not contested by any of the parties due to the lack of the mortgagor's
equity in the property. However, when the mortgagee's right to foreclosure is
contested, the legal proceedings necessary to resolve the issue can be time
consuming and expensive. After the completion of a judicial foreclosure
proceeding, the court issues a judgment of foreclosure and a court officer
conducts the sale of the property.
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust that
authorizes the trustee to sell the property to a third party upon any default by
the borrower under the terms of the note or deed of trust. In certain states,
such
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foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages.
In some states, the borrower-trustor has the right to reinstate the
loan at any time following default until shortly before the trustee's sale. In
general, the borrower, or any other person having a junior encumbrance on the
real estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears plus the costs and expenses incurred in enforcing the
obligation. Certain state laws control the amount of foreclosure expenses and
costs, including attorneys' fees, which may be recovered by a lender.
The sale must be conducted by public auction and must be held in the
county where all or some part of the property subject to the mortgage is
located. However, because of the difficulty a potential buyer at the sale would
have in determining the exact status of title and because the physical condition
of the property may have deteriorated during the foreclosure proceedings, it is
not common for a third party to purchase the property at the foreclosure sale.
Rather, the lender generally purchases the property for an amount equal to the
unpaid principal amount of the note, accrued and unpaid interest and the
expenses of foreclosure. Thereafter, subject to the right of the borrower in
some states to remain in possession during the redemption period, the lender
will assume the burdens of ownership, including obtaining hazard insurance and
making such repairs at its own expense as are necessary to render the property
suitable for sale. The lender commonly will obtain the services of a real estate
broker and pay the broker a commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale of
the property may not equal the lender's investment in the property.
Rights of Redemption. In some states, after a sale pursuant to a deed
of trust or a foreclosure of a mortgage, the borrower and certain foreclosed
junior lienors are given a statutory period in which to redeem the property from
the foreclosure sale. Redemption may occur upon payment of the entire principal
balance of the loan, accrued statutory interest and expenses of foreclosure. The
effect of a right of redemption is to diminish the ability of the lender to sell
the foreclosed property. The exercise of a right of redemption would defeat the
title of any purchaser from the lender subsequent to foreclosure and before
expiration of the redemption period. Consequently, the practical effect of the
redemption right is to force the lender to maintain the property, and pay the
expenses of ownership until the redemption period has expired.
Anti-Deficiency Legislation and Other Limitations on Lenders. Certain
states have imposed statutory restrictions that limit the remedies of a
mortgagee under a mortgage relating to a single family residence. In some
states, statutes limit the right of the lender to obtain a deficiency judgment
against the borrower following foreclosure or sale under a deed of trust. A
deficiency judgment is a personal judgment against the borrower equal in most
cases to the difference between the amount due to the lender and the net amount
realized upon the foreclosure sale.
Some state statutes may require the lender to exhaust the security
afforded under a mortgage or deed of trust by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the borrower. In
certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting such security;
however, in some of these states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and may be precluded
from exercising remedies with respect to the security.
Other statutory provisions may limit any deficiency judgment against
the former borrower following a foreclosure sale to the excess of the
outstanding debt over the fair market value of the property at the time of such
sale. The purpose of these statutes is to prevent a beneficiary or a mortgagee
from obtaining a large deficiency judgment against the former borrower as a
result of low or no bids at the foreclosure sale.
In some states, exceptions to the anti-deficiency statutes are provided
for in certain instances where the value of the lender's security has been
impaired by acts or omissions of the borrower, for example, in the event of
waste of the property.
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In addition to anti-deficiency and related legislation, numerous other
federal and state, statutory provisions, including the federal bankruptcy laws,
the federal Soldiers' and Sailors' Civil Relief Act of 1940 and state laws
affording relief to debtors, may interfere with or affect the ability of a
secured mortgage lender to realize upon its security. A bankruptcy court may
grant the debtor a reasonable time to cure a payment default, and in the case of
a mortgage loan not secured by the debtor's principal residence, also may reduce
the monthly payments due under such mortgage loan, change the rate of interest
and alter the mortgage loan repayment schedule. Certain court decisions have
applied such relief to claims secured by, the debtor's principal residence.
The Code provides priority to certain tax liens over the lien of the
mortgage or deed of trust. The laws of some states provide priority to certain
tax liens over the lien of the mortgage or deed of trust. Numerous federal and
some state consumer protection laws impose substantive requirements upon
mortgage lenders in connection with the origination, servicing and enforcement
of mortgage loans. These laws include the federal Truth in Lending Act, Real
Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair Credit
Billing Act, Fair Credit Reporting Act, and related statutes and regulations.
These federal laws and state laws impose specific statutory liabilities upon
lenders who originate or service mortgage loans and who fail to comply with the
provisions of the law. In some cases, this liability may affect assignees of the
mortgage loans.
Consumer Protection Laws
The so-called "Holder-in-Due-Course" rule of the Federal Trade
Commission is intended to defeat the ability of the transferor of a consumer
credit contract which is the seller of goods which gave rise to the transaction
(and certain related lenders and assignees) to transfer such contract free of
notice of claims by the obligor thereunder. The effect of this rule is to
subject the assignee of such a contract to all claims and defenses which the
obligor could assert against the seller of goods. Liability under this rule is
limited to amounts paid under such a contract; however, the obligor also may be
able to assert the rule to set off remaining amounts due as a defense against a
claim brought by the assignee against such obligor. Generally, this rule will
apply to any Contracts conveyed to the Trustee and to any claims made by the
Servicer on behalf of the Trustee, as the assignee of Receivables Corp., and in
turn AFL. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and lending pursuant to such
Contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with their
provisions may affect the enforceability of the related Contract or create
liability for the Trust.
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended (the "Relief Act"), if so required by a obligor under a manufactured
housing contract who enters military service after the origination of such
obligor's contract (including a obligor who is a member of the National Guard or
is in reserve status at the time of the origination of the contract and is later
called to active duty), such obligor may not be charged interest above an annual
rate of 6% during the period of such obligor's active duty status, unless a
court orders otherwise upon application of the lender. In addition, the Relief
Act imposes limitations which would impair the ability of any lender to
foreclose on an affected contract during the obligor's period of active duty
status. It is possible that application of the Relief Act to certain of the
Contracts could have an effect, for an indeterminate period of time, on the
ability of the Servicer to collect full amounts of interest or foreclose on such
Contracts and to the extent not covered by a Credit Facility, could result in
delays in payment or losses to the holders of the related Certificates. Neither
AFL nor Receivables Corp. will make any representation or warranty as to whether
any Contract is or could become subject to the Relief Act.
Transfers of Manufactured Homes; Enforceability of Restrictions on Transfer
The Contracts comprising any Contract Pool generally will prohibit the
sale or transfer of the related Manufactured Homes without the consent of the
obligee and permit the acceleration of the maturity of the Contracts by the
obligee upon any such sale or transfer that is not consented to. Under
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the Agreement, AFL as Servicer is required to consent to any such transfer and
to permit the assumption of the related Contract if the proposed buyer meets the
Servicer's underwriting standards and enters into an assumption agreement, the
Servicer determines that permitting such assumption will not materially increase
the risk of nonpayment of the Contract and such action will not adversely affect
or jeopardize any coverage under any insurance policy required by the Agreement.
If the Servicer determines that these conditions have not been fulfilled, then
it is required to withhold its consent to the transfer, but only to the extent
permitted under the Contract and applicable law and governmental regulations and
only to the extent that such action will not adversely affect or jeopardize any
coverage under any insurance policy required by the Agreement. In certain cases,
a delinquent Obligor may attempt to transfer a Manufactured Home in order to
avoid a repossession proceeding with respect to such Manufactured Home.
In the case of a transfer of a Manufactured Home after which the
obligee desires to accelerate the maturity of the related Contract, the
obligee's ability to do so will depend on the enforceability under state law of
the clause permitting acceleration on transfer. The Garn-St. Germain Depositary
Institutions Act of 1982 preempts, subject to certain exceptions and conditions,
state laws prohibiting enforcement of such clauses applicable to manufactured
homes. To the extent such exceptions and conditions apply in some states, the
Servicer may be prohibited from enforcing such a clause in respect of certain
Manufactured Homes.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary
Controls Act of 1980, as amended ("Title V"), provides that, subject to the
following conditions, state usury limitations shall not apply to any loan which
is secured by a first lien on certain kinds of manufactured housing. The
Contracts would be covered under Title V if, among other things, they satisfy
certain conditions governing the terms of any prepayments, late charges and
deferral fees and requiring a 30-day notice period prior to instituting any
action leading to repossession of the related unit.
Title V authorized any state to reimpose limitations on interest rates
and finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejects application of the federal law. Fifteen states
adopted such a law prior to the April 1, 1983 deadline. In addition, even where
Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.
Upon the conveyance of each Contract to the Trust, Receivables Corp. will
represent that such Contract complied with applicable usury laws.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of certain of the material federal income tax
consequences of the purchase, ownership and disposition of the Offered
Certificates is to be considered only in connection with "Certain Federal Income
Tax Considerations" in the Prospectus. The discussion herein and in the
Prospectus is based upon laws, regulations, rulings and decisions now in effect,
all of which are subject to change. The discussion below and in the Prospectus
does not purport to deal with all federal tax consequences applicable to all
categories of investors, some of which may be subject to special rules.
Investors should consult their own tax advisors in determining the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of the Offered Certificates.
REMIC Elections
The Trustee will cause one or more elections to be made with respect to
certain specified assets of the Trust as real estate mortgage investment
conduits ("REMICs") within the meaning of Code Section 860D. _______________,
special tax counsel, will advise that, in its opinion, for federal income tax
purposes, assuming the REMIC elections are made and compliance with the Pooling
and Servicing Agreement, each Class of the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, the Class A-6 Certificates and the Class B-1 Certificates will
each be treated as a "regular interest" in a REMIC.
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For federal income tax purposes, regular interests in a REMIC are
treated as debt instruments issued by the REMIC on the date on which those
interests are created, and not as ownership interests in the REMIC or its
assets. Owners of Class A Certificates that otherwise report income under a cash
method of accounting will be required to report income with respect to such
Certificates under an accrual method. The prepayment assumption that will be
used in determining the rate of accrual of original issue discount on the Class
A Certificates is ___% of the "Prepayment Assumption." See "Maturity, Prepayment
and Yield Considerations" herein. herein and "Certain Federal Income Tax
Considerations - - Discount and Premium" in the Prospectus.
Taxation of Foreign Investors
In general, foreign investors will not be subject to U.S. withholding
on income from the Offered Certificates. See "Certain Federal Income Tax
Considerations -- Foreign Investors -- Grantor Trust Securities and REMIC
Regular Securities" in the Prospectus.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain fiduciary restrictions on employee benefit plans that
are subject to ERISA and on persons who are fiduciaries with respect to such
plans. In addition, such plans, as well as certain plans or other retirement
arrangements not subject to ERISA, but which are subject to Section 4975 of the
Code (such as individual retirement accounts) and any entity whose underlying
assets include plan assets by reason of a plan or account investing in such
entity (collectively, "Plans") are subject to prohibited transaction
restrictions.
See "ERISA Considerations" in the Prospectus.
Purchasers that are insurance companies should consult with their
counsel with respect to the recent United States Supreme Court case interpreting
the fiduciary responsibility rules of ERISA, John Hancock Mutual Life Insurance
Co. v. Harris Trust & Savings Bank, 114 S. Ct. 517 (1993). In John Hancock, the
Supreme Court ruled that assets held in an insurance company's general account
may be deemed to be "plan assets" for purposes of ERISA under certain
circumstances.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemption
(defined below) and other administrative exemptions under ERISA and the
potential consequences in their specific circumstances, prior to making an
investment in the Offered Certificates. Moreover, each Plan fiduciary should
determine whether under the general fiduciary standards of investment prudence
and diversification an investment in the Offered Certificates is appropriate for
the Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
Senior Certificates
The Department of Labor ("DOL") has granted to each of
and an administrative exemption, Prohibited Transaction
Exemption and Prohibited Transaction Exemption , respectively
(each, an "Exemption"), from certain of the prohibited transaction rules of
ERISA. The Exemption exempts from the prohibitions of Sections 406(a) and 407(a)
of ERISA, and the related excise tax provisions of Section 4975 of the Code, the
purchase, holding, and resale by Plans of pass-through certificates representing
interests in trusts that hold assets consisting primarily of certain
receivables, loans, and other obligations that meet the general conditions
summarized below. The receivables covered by the Exemption include manufactured
housing installment sales contracts and installment loan agreements secured by
manufactured homes such as the Contracts.
Among the general conditions which must be satisfied for the Exemption
to apply to the acquisition, holding and resale by a Plan of the Senior
Certificates are the following:
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(1) The acquisition of the Senior Certificates by a Plan is on
terms (including the price for the Senior Certificates) that are at
least as favorable to the Plan as they would be in an arm's-length
transaction with an unrelated party.
(2) The rights and interests evidenced by the Senior
Certificates acquired by the Plan are not subordinated to the rights
and interests evidenced by other certificates of the Trust.
(3) The Senior Certificates acquired by the Plan have received
a rating at the time of such acquisition that is in one of the three
highest generic rating categories from Moody's, Fitch, Duff & Phelps
Rating Co. or Standard & Poor's Corporation.
(4) The Trustee is not an affiliate of the Underwriters,
Receivables Corp., AFL, any obligor with respect to Contracts included
in the Trust constituting more than 5% of the aggregate unamortized
principal balance of the assets in the Trust, or any affiliate of such
parties. (Such parties and the Trustee and its affiliates, are
sometimes referred to herein collectively as the "Restricted Group").
As of the date hereof, no Obligor with respect to Contracts included in
the Trust is an Obligor with respect to Contracts constituting more
than 5% of the aggregate unamortized principal balance of the assets of
the Trust.
(5) The sum of all payments made to and retained by the
Underwriters in connection with the distribution of the Senior
Certificates represents not more than reasonable compensation for
underwriting the Senior Certificates. The sum of all payments made to
and retained by Receivables Corp. pursuant to the sale of the Contracts
to the Trust represents not more than the fair market value of such
Contracts. The sum of all payments made to and retained by AFL
represents not more than reasonable compensation for AFL's services
under the Agreement and reimbursement of AFL's reasonable expenses in
connection therewith.
(6) The Plan is an "accredited investor" as defined in Rule
501(a)(1) of Regulation D of the Securities and Exchange Commission
under the Securities Act of 1933.
In addition, the Exemption exempts from the prohibitions of Sections
406(a), 406(b) and 407(a) of ERISA, and the related excise tax provisions of
Section 4975 of the Code, transactions undertaken in connection with the
servicing, management and operation of such a trust pursuant to a binding
pooling and servicing agreement, subject to the foregoing general conditions and
to certain additional requirements.
The Exemption also exempts from the prohibition of Sections 406(b)(1)
and 406(b)(2) of ERISA the related excise tax provisions of Section 4975 of the
Code, the direct or indirect sale, exchange or transfer of Senior Certificates
between Receivables Corp. or the Underwriters and a Plan when the person who has
discretionary authority or renders investment advice with respect to the
investment of the Plan's assets in the Senior Certificates (the "Fiduciary") is
(a) an obligor with respect to 5 percent or less of the fair market value of
Contracts in the Trust or (b) an affiliate or any such person, subject to the
general conditions summarized above and to the following additional
requirements:
(1) No member of the Restricted Group is a sponsor of the
Plan.
(2) In connection with the initial issuance of Senior
Certificates, at least 50% in Percentage Interests of each Class of
Senior Certificates is acquired by persons independent of the
Restricted Group and at least 50% of the aggregate interest in the
Trust is acquired by persons independent of the Restricted Group.
(3) The Plan's investment in the Senior Certificates does not
exceed 25% in Percentage Interests of any Class of Senior Certificates
outstanding at the time of acquisition.
(4) Immediately after the acquisition of the Senior
Certificates, no more than 25% of the assets of the Plan with respect
to which the Fiduciary has discretionary authority or renders
S-79
investment advice are invested in certificates representing an interest
in a trust containing assets sold or serviced by the same entity.
The exemption also applies to the direct or indirect acquisition or disposition
of Senior Certificates by a Plan in the secondary market if certain conditions
are met and the continued holding of Senior Certificates acquired in initial or
secondary markets.
Prior to the earlier of (i) the date on which the Funding Period
expires and (ii) the date on which the DOL amends the Exemption to permit the
use of pre-funding accounts thereunder, Plans will not be permitted to purchase
the Senior Certificates. On the earlier to occur of such dates, the Exemption
may be available for the purchase of Senior Certificates by Plans. Before
purchasing a Senior Certificate, a fiduciary of a Plan should make its own
determination as to the availability of the exemptive relief provided in the
Exemption, and whether the conditions of such Exemption will be applicable to
the Certificate. Any fiduciary of a Plan considering whether to purchase a
Senior Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See "ERISA Considerations" in the
Prospectus.
Subordinate Certificates
As indicated above, one of the general conditions for use of the
Exemption is that the rights and interests evidenced by certificates acquired by
the Plan not be subordinated to the rights and interests evidenced by other
certificates of the Trust. Accordingly, the Subordinated Certificates could not
generally be purchased or held by a Plan or a person using plan assets in
reliance on the Exemption. However, Prohibited Transaction Class Exemption 95-60
("PTCE 95-60") provides an exemption for an insurance company general account
purchaser of a certificate issued by an asset-backed pool trust if, among other
conditions, the trust is covered by an administrative exemption granted to the
underwriter (such as the Exemption) and the conditions for such exemption are
met except for the general conditions described in (2) and (3) above. Thus, if
the conditions of the Exemption are satisfied with respect to the Senior
Certificates, the Class A-6 and Class B-1 Certificates may be acquired by an
insurance company using general account assets provided the conditions of PTCE
95-60 are satisfied.
Before purchasing a Class A-6 or Class B-1 Certificate, an
insurance company general account purchaser should make its own determination as
to the availability of the exemptive relief provided in the Exemption and in
PTCE 95-60, and whether the conditions of the Exemption and PTCE 95-60 will be
applicable to the Certificate. Any insurance company considering whether to
purchase a Class A-6 or B-1 Certificate should also carefully review with its
own legal advisors the applicability of the fiduciary duty and prohibited
transaction provisions of ERISA and the Code to such investment.
RATINGS
It is a condition to the issuance of the Senior Certificates that they
be rated " " by (" ") and " " by (" "). It is a condition to the issuance of the
Class A-6 Certificates that they be rated at least " " by and " " by . It is a
condition to the issuance of the Class B-1 Certificates that they be rated at
least " " by and " " by . A security 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 agency.
The ratings assigned by and to pass-through certificates address the
likelihood of the receipt by the related certificateholders of their allocable
share of principal and interest on the underlying assets. and ratings take into
consideration the credit quality of the related underlying assets, any credit
support arrangements, structural and legal aspects associated with such
certificates, and the extent to which the payment stream on such underlying
assets are adequate to make payments required by such certificates. and ratings
on such certificates do not, however, constitute a statement
S-80
regarding frequency of prepayments on the underlying assets or as to whether
yield may be adversely affected as a result thereof.
Receivables Corp. has not requested a rating on the Offered
Certificates by any rating agency other than and . However, there can be no
assurance as to whether any other rating agency will rate any or all of the
Offered Certificates, or if it did, what rating would be assigned to the Offered
Certificates by any such other rating agency. A rating on any or all of the
Offered Certificates by certain other rating agencies, if assigned at all, may
be lower than the rating assigned to such Certificates by
and .
PLAN OF DISTRIBUTION
Subject to the terms and conditions of the Underwriting Agreement dated
(the "Underwriting Agreement"), the Seller has agreed to sell, and and (the
"Underwriters") have agreed to purchase from the Seller, the Offered
Certificates.
In the Underwriting Agreement, each of the Underwriters has agreed,
subject to the terms and conditions set forth therein, to purchase, the
principal amount of the Offered Certificates set forth opposite its name below.
Underwriter Principal Amount of Offered Certificates
.......................................................... $
..........................................................
Total................................................ $
The Seller has been advised by the Underwriters that they propose to
offer the Offered Certificates to the public initially at the prices set forth
on the cover page of this Prospectus Supplement, and to certain dealers at such
prices less a concession not to exceed % of the Original Class A-1 Principal
Balance, % of the Original Class A-2 Principal Balance, % of the Original Class
A-3 Principal Balance, % of the Original Class A-4 Principal Balance, % of the
Original Class A-5 Principal Balance, % of the Original A-6 Principal Balance
and % of the Original Class B-1 Principal Balance; that the Underwriters and
such dealers may allow a discount of % of the Original Class A-1 Principal
Balance, % of the Original Class A-2 Principal Balance, % of the Original Class
A-3 Principal Balance, % of the Original Class A-4 Principal Balance, % of the
Original Class A-5 Principal Balance, % of the Original A-6 Principal Balance
and % of the Original Class B-1 Principal Balance to certain other dealers.
After the initial public offering of the Offered Certificates, the public
offering price and concession and discount to dealers may be changed by the
Underwriters.
The Underwriting Agreement provides that AFL will indemnify each
Underwriter against certain liabilities, including civil liabilities, under the
Securities Act of 1933, as amended, or contribute to payments either Underwriter
may be required to make in respect thereof.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Certificates will be used by Receivables Corp. for general corporate
purposes, including the purchase of the Contracts, the carrying costs of the
Contracts until the sale of the Certificates and to pay other expenses connected
with pooling the Contracts and issuing the Certificates.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon
for AFL and the Seller by . will act as counsel for the Underwriters.
S-81
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Manufactured Housing Contract Trust Offered Certificates (the "Global
Securities") will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through any of DTC, CEDEL or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors through CEDEL and Euroclear
will be conducted in the ordinary way in accordance with the normal rules and
operating procedures of CEDEL and Euroclear and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors through DTC will be
conducted according to DTC's rules and procedures applicable to U.S. corporate
debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of Cede 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. As a result, CEDEL and Euroclear will
hold positions on behalf of their participants through their Relevant Depositary
which in turn will hold such positions in their accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow DTC settlement practices. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the settlement
date.
Investors electing to hold their Global Securities through CEDEL 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. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
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.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior home
equity loan asset-backed certificates issues in same-day funds.
I-1
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC, Seller and CEDEL or Euroclear Participants. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a CEDEL Participant or a Euroclear Participant, the purchaser
will send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear will instruct the Relevant Depositary, as the case may be, to receive
the Global Securities against payment. Payment will include interest accrued on
the Global Securities from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in such
accrual period and a year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
Relevant Depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt 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 on the
intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debt
will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their account one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, CEDEL Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although the result will depend on each CEDEL
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for crediting Global
Securities to the respective European Depositary for the benefit of CEDEL
Participants or Euroclear Participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC Participants a
cross-market transaction will settle no differently than a trade between two DTC
Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
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 CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases CEDEL
or Euroclear will instruct the respective Depository, as appropriate, to credit
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 coupon payment to and excluding the settlement date on the basis of the
actual number of days in such accrual period and a year assumed to consist of
360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
The payment will then be reflected in the
I-2
account of CEDEL Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the CEDEL Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). In the event that the
CEDEL Participant or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debt in anticipation of receipt of
the sale proceeds in its account, the back-valuation will extinguish any
overdraft incurred over that one-day period. If settlement is not completed on
the intended value date (i.e., the trade fails), receipt of the cash proceeds in
the CEDEL Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail on
the sale side unless affirmative action is taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear account
in order to settle the sale side of the trade; or
(c) 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 CEDEL Participant or Euroclear
Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
CEDEL 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 generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons (as defined below), unless (i) 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 such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (ii) such beneficial owner takes one
of the following steps to obtain an exemption or reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8). Beneficial Certificate
Owners of Global Securities that are Non-U.S. Persons (as defined below) can
obtain a complete exemption from the withholding tax by filing a signed Form W-8
(Certificate of Foreign Status). If the information shown on Form W-8 changes, a
new Form W-8 must be filed within 30 days of such change.
Exemption for Non-U.S. Persons with effectively connected income (Form
4224). A Non-U.S. Person (as defined below), 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 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a Trade
or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). 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 (Ownership, Exemption or
Reduced Rate Certificate). If the treaty provides only for a reduced rate,
withholding tax will be imposed at that rate unless the filer alternatively
files Form W-8. Form 1001 may be filed by Certificate Owners or their agent.
I-3
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 (Payer's Request
for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Owner 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
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
On April 22, 1996 the IRS issued proposed regulations relating to (i)
withholding income tax on U.S.-source income paid to Non-U.S. Persons; (ii)
claiming Non-U.S. Person status to avoid backup withholding; and (iii) reporting
to the IRS of payments to Non-U.S. Persons. The proposed regulations would
substantially revise some aspects of the current system for withholding on and
reporting amounts paid to Non-U.S. Persons. The regulations unify current
certification procedures and forms and reliance standards are clarified. Most
forms are proposed to be combined into a single form: Form W-8. The regulations
are proposed to be effective for payments made after December 31, 1997.
Certificates issued, however, on or before the date that is 60 days after the
proposed regulations are made final will continue to be valid until they expire.
All proposed regulations are subject to change before adoption in their final
form. No reliable prediction can be made as to when, if ever, the proposed
regulations will be made final and if so, as to their final form.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity organized in or under
the laws of the United States or any political subdivision thereof or (iii) an
estate or trust that is subject to U.S. federal income tax regardless of the
source of its income. 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.
I-4
INDEX OF PRINCIPAL DEFINITIONS
Page
Accelerated Principal Payment..................................................................................S-17
Accrual Period .............................................................................................S-11
AFC .........................................................................................S-1, S-3
AFH .............................................................................................S-46
AFL .............................................................................................S-46
Agreement ..............................................................................................S-5
Amount Available .......................................................................................S-10, S-54
Beneficial Certificate Owner.............................................................................S-22, S-51
Book-Entry Certificates........................................................................................S-69
Cede .......................................................................................S-22, S-51
CEDEL .......................................................................................S-22, S-51
CEDEL Participants.............................................................................................S-70
Certificate Account............................................................................................S-53
Certificate Owners..............................................................................................S-2
Certificate Principal Balance..................................................................................S-10
Certificates .........................................................................................S-1, S-8
Citibank .......................................................................................S-22, S-51
Class A-1 Remittance Rate.......................................................................................S-4
Class A-2 Remittance Rate.......................................................................................S-4
Class A-3 Remittance Rate.......................................................................................S-4
Class A-4 Remittance Rate.......................................................................................S-4
Class A-5 Remittance Rate.......................................................................................S-4
Class A-6 Distribution Amount...................................................................................S-9
Class A-6 Formula Distribution Amount.....................................................................S-9, S-55
Class A-6 Principal Balance....................................................................................S-13
Class A-6 Remaining Amount Available......................................................................S-9, S-55
Class A-6 Remittance Rate.......................................................................................S-4
Class B Cross-over Date........................................................................................S-14
Class B Principal Distribution Test............................................................................S-60
Class B-1 Distribution Amount...................................................................................S-9
Class B-1 Formula Distribution Amount.....................................................................S-9, S-55
Class B-1 Interest.............................................................................................S-14
Class B-1 Principal..........................................................................S-14, S-16, S-57, S-61
Class B-1 Principal Balance....................................................................................S-14
Class B-1 Remaining Amount Available.....................................................................S-10, S-55
Class B-1 Remittance Rate.......................................................................................S-4
Class B-2 Distribution Amount..................................................................................S-10
Class B-2 Formula Distribution Amount....................................................................S-10, S-56
Class B-2 Interest.............................................................................................S-15
Class B-2 Principal............................................................................................S-16
Class B-2 Principal Balance....................................................................................S-15
Class B-2 Remaining Amount Available.....................................................................S-10, S-56
Class C Distribution Amount....................................................................................S-17
Class C Formula Distribution Amount............................................................................S-16
Closing Date ..............................................................................................S-3
Code .............................................................................................S-23
Collection Period ..............................................................................................S-5
Contract Pool ..............................................................................................S-1
Contract Rate ..................................................................................S-6, S-27, S-35
Contracts ........................................................................................S-5, S-27
Cooperative .............................................................................................S-71
Cut-off Date ..............................................................................................S-3
i
Page
Definitive Certificate.........................................................................................S-69
Determination Date.............................................................................................S-54
DOL .............................................................................................S-78
DTC .......................................................................................S-22, S-51
DTC Participants .............................................................................................S-70
Due Date ..................................................................................S-6, S-12, S-27
Eligible Institution...........................................................................................S-53
Eligible Investments...........................................................................................S-53
ERISA .......................................................................................S-23, S-78
Euroclear .......................................................................................S-22, S-51
Euroclear Operator.............................................................................................S-70
Euroclear Participants.........................................................................................S-70
European Depositaries..........................................................................................S-69
European Depositories....................................................................................S-22, S-51
Extras .............................................................................................S-47
FDIC .............................................................................................S-53
Financial Intermediary.........................................................................................S-69
Fitch .......................................................................................S-24, S-80
Funding Period ..............................................................................................S-7
Global Securities ..............................................................................................S-1
Initial Contracts .........................................................................................S-1, S-5
Land Secured Contract...........................................................................................S-5
Land Secured Contracts.........................................................................................S-28
Land-Home Contracts............................................................................................S-28
Land-in-Lieu Contracts.........................................................................................S-27
Liquidated Contract............................................................................................S-12
Liquidation Expenses.....................................................................................S-19, S-64
Liquidation Proceeds...........................................................................................S-19
Manufactured Home ..............................................................................................S-5
Manufactured Home Contract......................................................................................S-5
Monthly Servicing Fee..........................................................................................S-67
Moody's .......................................................................................S-24, S-80
Morgan .......................................................................................S-22, S-51
Mortgage .............................................................................................S-26
NADA .............................................................................................S-47
Non-IO Certificates......................................................................................S-16, S-61
Non-U.S. Person ..............................................................................................S-4
Obligor .............................................................................................S-28
Original Class A-1 Principal Balance............................................................................S-3
Original Class A-2 Principal Balance............................................................................S-3
Original Class A-3 Principal Balance............................................................................S-3
Original Class A-4 Principal Balance............................................................................S-3
Original Class A-5 Principal Balance............................................................................S-4
Original Class A-6 Principal Balance............................................................................S-4
Original Class B-1 Principal Balance............................................................................S-4
Overcollateralization..........................................................................................S-16
Overcollateralization Amount...................................................................................S-16
Overcollateralization Reduction Amount.........................................................................S-62
Participants .............................................................................................S-69
Plans .............................................................................................S-78
Pool Scheduled Principal Balance...............................................................................S-12
Pre-Funded Amount ..............................................................................................S-7
Pre-Funding Account........................................................................................S-1, S-7
ii
Page
Prepayment Model .............................................................................................S-36
Prospectus ..............................................................................................S-1
Purchase Agreement..............................................................................................S-6
Realized Loss .......................................................................................S-19, S-64
Receivables Corp. ..............................................................................................S-1
Record Date ........................................................................................S-4, S-52
Refinanced Contract............................................................................................S-48
Relevant Depositary............................................................................................S-69
Relief Act .......................................................................................S-26, S-76
REMIC ..............................................................................................S-2
REMICs .............................................................................................S-77
Remittance Date ........................................................................................S-4, S-52
Replaced Contract .............................................................................................S-53
Required Overcollateralization Amount....................................................................S-17, S-62
Residual Certificates.....................................................................................S-8, S-51
Residual Distribution Amount....................................................................................S-9
Rules .............................................................................................S-69
Scheduled Payment .............................................................................................S-27
Scheduled Principal Balance....................................................................................S-12
Seller .........................................................................................S-1, S-3
Senior Certificates.............................................................................................S-1
Senior Formula Distribution Amount.............................................................................S-55
Senior Percentage .......................................................................................S-12, S-57
Servicer .........................................................................................S-1, S-3
Servicing Advances.............................................................................................S-68
SMMEA .............................................................................................S-23
Subordinate Certificates........................................................................................S-1
Subsequent Contracts.................................................................................S-2, S-5, S-27
Subsequent Cut-Off Date.........................................................................................S-6
Terms and Conditions...........................................................................................S-71
Title V .............................................................................................S-77
Trust ..............................................................................................S-1
Trustee ........................................................................................S-5, S-68
U.S. Person ..............................................................................................S-4
UCC .............................................................................................S-25
Underwriters ........................................................................................S-2, S-81
Underwriting Agreement.........................................................................................S-81
Weighted Average Net Contract Rate..............................................................................S-4
iii