Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-89322
PROSPECTUS SUPPLEMENT DATED JUNE 30, 2004
(TO PROSPECTUS DATED JUNE 30, 2004)
$782,927,364 (APPROXIMATE)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
DEPOSITOR
BANK OF AMERICA, N.A.
MASTER SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2004-3
---------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-24 IN THIS PROSPECTUS
SUPPLEMENT AND PAGE 11 IN THE ACCOMPANYING PROSPECTUS.
Neither the certificates nor the underlying mortgage loans are insured or
guaranteed by any governmental agency.
The certificates will represent interests only in the trust and will not
represent interests in or obligations of Banc of America Commercial Mortgage
Inc. or any of its affiliates, including Bank of America Corporation.
The Series 2004-3 Commercial Mortgage Pass-Through Certificates will consist of
the following classes:
o senior certificates consisting of the Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-1A and Class X Certificates;
o junior certificates consisting of the Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N,
Class O and Class P Certificates;
o the Class CC-A, Class CC-B, Class CC-C, Class CC-D, Class CC-E and Class
CC-F Certificates;
o the Class SS-A, Class SS-B, Class SS-C and Class SS-D Certificates;
o the Class UH-A, Class UH-B, Class UH-C, Class UH-D, Class UH-E, Class UH-F,
Class UH-G, Class UH-H and Class UH-J Certificates; and
o the residual certificates consisting of the Class R-I and Class R-II
Certificates.
Only the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class B, Class
C, Class D and Class E Certificates are offered hereby.
The trust's assets will consist primarily of 94 mortgage loans and other
property described in this prospectus supplement and the accompanying
prospectus. The mortgage loans are secured by first liens on commercial and
multifamily properties. This prospectus supplement more fully describes the
offered certificates, as well as the characteristics of the mortgage loans and
the related mortgaged properties.
---------------------
Certain characteristics of the offered certificates include:
APPROXIMATE
CERTIFICATE BALANCE PASS-THROUGH ASSUMED FINAL RATINGS RATED FINAL
AS OF RATE AS OF DISTRIBUTION MOODY'S/ DISTRIBUTION
CLASS DELIVERY DATE(1) DELIVERY DATE DATE(2) S&P(3) DATE(4)
Class A-1(5)..... $ 23,000,000 2.9750% December 10, 2006 Aaa/AAA June 10, 2039
Class A-2(5)..... $ 34,000,000 4.3480% April 10, 2009 Aaa/AAA June 10, 2039
Class A-3(5)..... $125,000,000 4.8750% April 10, 2011 Aaa/AAA June 10, 2039
Class A-4(5)..... $110,000,000 5.1760% March 10, 2013 Aaa/AAA June 10, 2039
Class A-5(5)..... $414,397,485 5.4836%(6) May 10, 2014 Aaa/AAA June 10, 2039
Class B ......... $ 28,879,200 5.5386%(7) November 10, 2014 Aa2/AA June 10, 2039
Class C ......... $ 11,551,680 5.5386%(7) November 10, 2015 Aa3/AA- June 10, 2039
Class D ......... $ 24,547,319 5.5386%(7) July 10, 2016 A2/A June 10, 2039
Class E ......... $ 11,551,680 5.5386%(7) July 10, 2016 A3/A- June 10, 2039
(Footnotes to table on page S-5)
With respect to the offered certificates, Banc of America Securities LLC
is acting as sole lead manager and bookrunner. Bear, Stearns & Co. Inc. and
Goldman, Sachs & Co. are acting as co-managers, and Banc of America Securities
LLC will be the sole bookrunner for any other classes of certificates, none of
which are offered by this prospectus supplement. Banc of America Securities
LLC, Bear, Stearns & Co. Inc., and Goldman, Sachs & Co. will purchase the
offered certificates from Banc of America Commercial Mortgage Inc. and will
offer them to the public at negotiated prices determined at the time of sale.
The underwriters expect to deliver the offered certificates to purchasers on or
about July 14, 2004. Banc of America Commercial Mortgage Inc. expects to
receive from this offering approximately 100.32% of the initial principal
amount of the offered certificates, plus accrued interest from July 1, 2004
before deducting expenses payable by Banc of America Commercial Mortgage Inc.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE OFFERED SECURITIES OR
DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
SOLE LEAD MANAGER AND BOOKRUNNER
BANC OF AMERICA SECURITIES LLC
---------------------
BEAR, STEARNS & CO. INC. GOLDMAN, SACHS & CO.
June 30, 2004
Banc of America Commercial Mortgage Inc.
Commercial Mortgage Pass-Through Certificates, Series 2004-3
Geographic Overview of Mortgage Pool
[MAP OMITTED]
UTAH NORTH CAROLINA
2 properties 3 properties
$13,241,454 $19,988,417
1.1% of total 1.7% of total
MISSOURI SOUTH CAROLINA
2 properties 1 property
$2,772,671 $7,009,556
0.2% of total 0.6% of total
SOUTH DAKOTA GEORGIA
1 property 8 properties
$3,190,639 $26,015,950
0.3% of total 2.3% of total
NORTH DAKOTA FLORIDA
1 property 23 properties
$2,716,926 $89,111,522
0.2% of total 7.7% of total
IOWA KENTUCKY
1 property 1 property
$1,870,000 $2,708,337
0.2% of total 0.2% of total
MINNESOTA ALABAMA
2 properties 3 properties
$20,109,068 $8,638,027
1.7% of total 0.7% of total
ILLINOIS MISSISSIPPI
6 properties 1 property
$22,798,181 $166,360
2.0% of total 0.0% of total
MICHIGAN TENNESSEE
5 properties 5 properties
$91,624,950 $25,797,913
7.9% of total 2.2% of total
INDIANA LOUISIANA
5 properties 4 properties
$35,617,607 $14,046,111
3.1% of total 1.2% of total
OHIO TEXAS
2 properties 27 properties
$6,452,874 $210,332,973
0.6% of total 18.2% of total
PENNSYLVANIA OKLAHOMA
4 properties 1 property
$24,678,000 $480,596
2.1% of total 0.0% of total
NEW YORK KANSAS
4 properties 1 property
$136,342,202 $1,515,727
11.8% of total 0.1% of total
NEW HAMPSHIRE NEW MEXICO
1 property 1 property
$3,752,000 $720,894
0.3% of total 0.1% of total
MASSACHUSETTS COLORADO
11 properties 4 properties
$36,529,936 $6,456,981
3.2% of total 0.6% of total
CONNECTICUT ARIZONA
1 property 14 properties
$20,916,858 $65,197,976
1.8% of total 5.6% of total
NEW JERSEY CALIFORNIA
6 properties 12 properties
$33,836,341 $85,556,196
2.9% of total 7.4% of total
DELAWARE NEVADA
1 property 11 properties
$2,710,354 $53,612,825
0.2% of total 4.6% of total
MARYLAND OREGON
3 properties 2 properties
$16,294,191 $16,052,002
1.4% of total 1.4% of total
VIRGINIA WASHINGTON
6 properties 3 properties
$27,732,220 $18,573,158
2.4% of total 1.6% of total
[LEGEND OMITTED]
--------------------------------------------
(less than) 1.0% of Initial Pool Balance
1.0% - 5.0% of Initial Pool Balance
5.1% - 10.0% of Initial Pool Balance
(greater than) 10.0% of Initial Pool Balance
--------------------------------------------
[Pie Chart Omitted]
MORTAGED PROPERTIES BY PROPERTY TYPE
Industrial 2.0%
Hotel 1.2%
Office 31.8%
Manufactured Housing 19.7%
Self Storage 16.5%
Multifamily 16.0%
Retail 12.8%
NOTE REGARDING PIE CHART ON OPPOSITE PAGE: NUMBERS MAY NOT TOTAL TO 100% DUE TO
ROUNDING.
FOR MORE INFORMATION
Banc of America Commercial Mortgage Inc. has filed with the SEC additional
registration materials relating to the certificates. You may read and copy any
of these materials at the SEC's Public Reference Room at the following
locations:
o SEC Public Reference Section
450 Fifth Street, N.W.
Room 1204
Washington, D.C. 20549
o SEC Midwest Regional Offices
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that
contains reports, proxy and information statements, and other information that
has been filed electronically with the SEC. The Internet address is
http://www.sec.gov.
You may also contact Banc of America Commercial Mortgage Inc. in writing at 214
North Tryon Street, Charlotte, North Carolina 28255, or by telephone at (704)
386-2400.
See also the sections captioned "Available Information" and "Incorporation of
Certain Information by Reference" appearing at the end of the accompanying
prospectus.
TABLE OF CONTENTS
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS ............................ S-6
EXECUTIVE SUMMARY ............................................ S-7
SUMMARY OF PROSPECTUS SUPPLEMENT ............................. S-11
RISK FACTORS ................................................. S-24
Risks Related to the Certificates .......................... S-24
Risks Related to the Mortgage Loans ........................ S-33
DESCRIPTION OF THE MORTGAGE POOL ............................. S-70
General .................................................... S-70
Certain Terms and Conditions of the Mortgage Loans ......... S-72
Due Dates ................................................ S-72
Mortgage Rates; Calculations of Interest ................. S-72
Hyperamortization ........................................ S-72
Amortization of Principal ................................ S-73
Prepayment Provisions .................................... S-73
Defeasance ............................................... S-74
Release Or Substitution of Properties ...................... S-75
"Due-on-Sale" and "Due-on-Encumbrance"
Provisions ............................................ S-76
CC Component Mortgage Loan ................................. S-78
SS Component Mortgage Loan ................................. S-78
UH Component Mortgage Loan ................................. S-79
CBA Whole Loan ............................................. S-81
Significant Mortgage Loans ................................. S-82
Additional Mortgage Loan Information ....................... S-116
General .................................................. S-116
Delinquencies ............................................ S-116
Tenant Matters ........................................... S-116
Ground Leases and Other Non-Fee Interests ................ S-116
Subordinate Financing .................................... S-116
Lender/Borrower Relationships ............................ S-117
Certain Underwriting Matters ............................... S-117
Environmental Assessments ................................ S-117
Generally ................................................ S-118
Property Condition Assessments ........................... S-119
Appraisals and Market Studies ............................ S-119
Zoning and Building Code Compliance ...................... S-120
Hazard, Liability and Other Insurance .................... S-120
The Mortgage Loan Seller ................................... S-121
Assignment of the Mortgage Loans; Repurchases and
Substitutions ............................................ S-121
Representations and Warranties; Repurchases and
Substitutions ............................................ S-125
Changes in Mortgage Pool Characteristics ................... S-128
SERVICING OF THE MORTGAGE LOANS .............................. S-129
General .................................................... S-129
The Master Servicer ........................................ S-137
The Special Servicer ....................................... S-137
Sub-Servicers .............................................. S-138
Servicing and Other Compensation and Payment of
Expenses ................................................. S-138
Evidence as to Compliance .................................. S-143
Modifications, Waivers, Amendments and Consents ............ S-144
Defaulted Mortgage Loans; Purchase Option .................. S-147
REO Properties ............................................. S-149
Inspections; Collection of Operating Information ........... S-149
Termination of the Special Servicer ........................ S-150
DESCRIPTION OF THE CERTIFICATES .............................. S-151
General .................................................... S-151
S-3
Registration and Denominations ............................. S-151
Certificate Balances and Notional Amount ................... S-152
Pass-Through Rates ......................................... S-154
Distributions .............................................. S-156
General .................................................. S-156
Class CC Certificates and the CC Component
Mortgage Loan .......................................... S-156
Class SS Certificates and the SS Component
Mortgage Loan .......................................... S-159
Class UH Certificates and the UH Component
Mortgage Loan .......................................... S-161
The Available Distribution Amount ........................ S-165
Application of the Available Distribution Amount ......... S-166
Excess Liquidation Proceeds .............................. S-171
Distributable Certificate Interest ....................... S-171
Principal Distribution Amount ............................ S-172
Distributions of Prepayment Premiums ..................... S-174
Treatment of REO Properties .............................. S-175
Subordination; Allocation of Losses and Certain
Expenses ................................................. S-175
Interest Reserve Account ................................... S-178
P&I Advances ............................................... S-178
Appraisal Reductions ....................................... S-181
Reports to Certificateholders; Certain Available
Information .............................................. S-184
Trustee Reports .......................................... S-184
Servicer Reports ......................................... S-185
Other Information ........................................ S-186
Voting Rights .............................................. S-187
Termination; Retirement of Certificates .................... S-187
THE TRUSTEE .................................................. S-189
The Trustee ................................................ S-189
Indemnification ............................................ S-189
YIELD AND MATURITY CONSIDERATIONS ............................ S-190
Yield Considerations ....................................... S-190
General .................................................. S-190
Rate and Timing of Principal Payments .................... S-190
Losses and Shortfalls .................................... S-191
Certain Relevant Factors ................................. S-192
Weighted Average Lives ..................................... S-193
USE OF PROCEEDS .............................................. S-198
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ...................... S-198
General .................................................... S-198
Discount and Premium; Prepayment Premiums .................. S-198
Characterization of Investments in Offered Certificates..... S-199
Possible Taxes on Income From Foreclosure Property ......... S-199
Reporting and Other Administrative Matters ................. S-200
CERTAIN ERISA CONSIDERATIONS ................................. S-200
LEGAL INVESTMENT ............................................. S-203
METHOD OF DISTRIBUTION ....................................... S-204
LEGAL MATTERS ................................................ S-205
RATINGS ...................................................... S-205
INDEX OF PRINCIPAL DEFINITIONS ............................... S-206
ANNEX A ...................................................... A-1
ANNEX B ...................................................... B-1
ANNEX C ...................................................... C-1
ANNEX D ...................................................... D-1
S-4
FOOTNOTES TO TABLE ON COVER OF PROSPECTUS SUPPLEMENT
(1) Subject to a variance of plus or minus 10%.
(2) As of the delivery date, the "assumed final distribution date" with
respect to any class of offered certificates is the distribution date on
which the final distribution would occur for such class of certificates
based upon the assumptions, among others, that all payments are made when
due and that no mortgage loan is prepaid, in whole or in part, prior to
its stated maturity, any mortgage loan with an anticipated repayment date
is not prepaid prior to, but is paid in its entirety on its anticipated
repayment date, and otherwise based on the maturity assumptions described
in this prospectus supplement, if any. The actual performance and
experience of the mortgage loans will likely differ from such
assumptions. See "Yield and Maturity Considerations" in this prospectus
supplement.
(3) It is a condition to their issuance that the classes of offered
certificates be assigned ratings by Moody's Investors Service, Inc.
and/or Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., no lower than those set forth above. The ratings on the
offered certificates do not represent any assessments of (i) the
likelihood or frequency of voluntary or involuntary principal prepayments
on the mortgage loans, (ii) the degree to which such prepayments might
differ from those originally anticipated, (iii) whether and to what
extent prepayment premiums will be collected on the mortgage loans in
connection with such prepayments or the corresponding effect on yield to
investors or (iv) whether and to what extent default interest will be
received or net aggregate prepayment interest shortfalls will be
realized.
(4) The "rated final distribution date" for each class of offered
certificates has been set at the first distribution date that follows two
years after the end of the amortization term for the mortgage loan that,
as of the cut-off date, has the longest remaining amortization term,
irrespective of its scheduled maturity. See "Ratings" in this prospectus
supplement.
(5) For purposes of making distributions to the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-1A Certificates the pool of
mortgage loans will be deemed to consist of two distinct loan groups,
loan group 1 and loan group 2. Loan group 1 will consist of 64 mortgage
loans, representing approximately 75.4% of the initial pool balance as of
the cut-off date. Loan group 2 will consist of 30 mortgage loans,
representing approximately 24.6% of the initial pool balance as of the
cut-off date. Loan group 2 will include approximately 67.0% of the
initial pool balance of all the mortgage loans secured by multifamily
properties and approximately 70.6% of the initial pool balance of all the
mortgage loans secured by manufactured housing properties.
So long as funds are sufficient on any distribution date to make
distributions of all interest on such distribution date to the Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5, Class A-1A and Class X
Certificates, interest distributions on the Class A-1, Class A-2, Class
A-3, Class A-4 and Class A-5 Certificates will be based upon amounts
available relating to mortgage loans in loan group 1 and interest
distributions on the Class A-1A Certificates will be based upon amounts
available relating to mortgage loans in loan group 2. In addition,
generally, the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates will only be entitled to receive distributions of principal
collected or advanced in respect of mortgage loans in loan group 1 until
the certificate balance of the Class A-1A Certificates has been reduced to
zero, and the Class A-1A Certificates will only be entitled to receive
distributions of principal collected or advanced in respect of mortgage
loans in loan group 2 until the certificate balance of the Class A-5
Certificates has been reduced to zero. However, on and after any
distribution date on which the certificate balances of the Class B through
Class P Certificates have been reduced to zero, distributions of principal
collected or advanced in respect of the pool of mortgage loans will be
distributed to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5
and Class A-1A Certificates pro rata.
(6) The Class A-5 Certificates will accrue interest at the weighted average
net mortgage rate less 0.055%.
(7) The Class B, Class C, Class D and Class E Certificates will accrue
interest at the weighted average net mortgage rate.
S-5
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
the offered certificates; and (b) this prospectus supplement, which describes
the specific terms of the offered certificates. If the terms of the offered
certificates vary between this prospectus supplement and the accompanying
prospectus, you should rely on the information in this prospectus supplement.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 2004-3 Certificates and the trust in abbreviated form:
Executive Summary, which begins on page S-7 of this prospectus
supplement and shows certain characteristics of the offered certificates
in tabular form;
Summary of Prospectus Supplement, which begins on page S-11 of this
prospectus supplement and gives a brief introduction of the key features
of Series 2004-3 and the mortgage loans; and
Risk Factors, which begins on page S-24 of this prospectus supplement
and describes risks that apply to Series 2004-3 which are in addition to
those described in the accompanying prospectus with respect to the
securities issued by the trust generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The tables of contents in this prospectus supplement and the
accompanying prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"Index of Principal Definitions" beginning on page S-207 in this prospectus
supplement. The capitalized terms used in the accompanying prospectus are
defined under the caption "Glossary" beginning on page 107 in the prospectus.
In this prospectus supplement, "we" refers to the depositor, and "you"
refers to a prospective investor in the offered certificates.
---------------------
Until October 12, 2004, all dealers that buy, sell or trade the offered
certificates, whether or not participating in this offering, may be required to
deliver a prospectus supplement and the accompanying prospectus. This is in
addition to the dealers' obligation to deliver a prospectus supplement and the
accompanying prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
If and to the extent required by applicable law or regulation, this
prospectus supplement and the accompanying prospectus will be used by the
underwriter in connection with offers and sales related to market-making
transactions in the offered certificates with respect to which the underwriter
is a principal. The underwriter may also act as agent in such transactions.
Such sales will be made at negotiated prices at the time of sale.
S-6
EXECUTIVE SUMMARY
The following executive summary does not include all relevant information
relating to the offered certificates and the mortgage loans. In particular, the
executive summary does not address the risks and special considerations
involved with an investment in the offered certificates, and prospective
investors should carefully review the detailed information appearing elsewhere
in this prospectus supplement and in the accompanying prospectus before making
any investment decision. The executive summary also describes the certificates
that are not offered by this prospectus supplement (other than the Class CC-A,
Class CC-B, Class CC-C, Class CC-D, Class CC-E, Class CC-F, Class SS-A, Class
SS-B, Class SS-C, Class SS-D, Class UH-A, Class UH-B, Class UH-C, Class UH-D,
Class UH-E, Class UH-F, Class UH-G, Class UH-H, Class UH-J, Class R-I and Class
R-II Certificates) which have not been registered under the Securities Act of
1933, as amended, and which will be sold to investors in private transactions.
Certain capitalized terms used in this executive summary may be defined
elsewhere in this prospectus supplement, including in Annex A hereto, or in the
prospectus. An "Index of Principal Definitions" is included at the end of this
prospectus supplement. A "Glossary" is included at the end of the prospectus.
Terms that are used but not defined in this prospectus supplement will have the
meanings specified in the prospectus.
CERTIFICATE APPROXIMATE
BALANCE OR PERCENTAGE APPROXIMATE
NOTIONAL OF POOL CREDIT
CLASS RATINGS(1) AMOUNT(2) BALANCE(2) SUPPORT
Offered Certificates
A-1(9) Aaa/AAA $ 23,000,000 1.991% 14.250%
A-2(9) Aaa/AAA $ 34,000,000 2.943% 14.250%
A-3(9) Aaa/AAA $ 125,000,000 10.821% 14.250%
A-4(9) Aaa/AAA $ 110,000,000 9.522% 14.250%
A-5(9) Aaa/AAA $ 414,397,485 35.873% 14.250%
B Aa2/AA $ 28,879,200 2.500% 11.750%
C Aa3/AA- $ 11,551,680 1.000% 10.750%
D A2/A $ 24,547,319 2.125% 8.625%
E A3/A- $ 11,551,680 1.000% 7.625%
- ------ ---- ---------------- ------ ------
Private Certificates -- Not Offered Hereby(7)
A-1A(9) Aaa/AAA $ 284,159,066 24.599% 14.250%
F Baa1/BBB+ $ 15,883,560 1.375% 6.250%
G Baa2/BBB $ 11,551,680 1.000% 5.250%
H Baa3/BBB- $ 15,883,560 1.375% 3.875%
J Ba1/BB+ $ 4,331,880 0.375% 3.500%
K Ba2/BB $ 5,775,840 0.500% 3.000%
L Ba3/BB- $ 5,775,840 0.500% 2.500%
M B1/B+ $ 4,331,880 0.375% 2.125%
N B2/B $ 2,887,920 0.250% 1.875%
O B3/B- $ 2,887,920 0.250% 1.625%
P NR/NR $ 18,771,480 1.625% 0.000%
X Aaa/AAA $ 1,155,167,990(8) N/A N/A
APPROXIMATE
INITIAL
PASS-
THROUGH WEIGHTED
RATE AS AVERAGE
OF DELIVERY LIFE PRINCIPAL
CLASS RATE TYPE DATE (YEARS)(3) WINDOW(3)
Offered Certificates
A-1(9) Fixed 2.97500% 1.258 8/10/2004-12/10/2006
A-2(9) Fixed 4.34800% 3.642 12/10/2006-4/10/2009
A-3(9) Fixed 4.87500% 5.558 4/10/2009-4/10/2011
A-4(9) Fixed 5.17600% 7.234 4/10/2011-3/10/2013
A-5(9) WAC(4) 5.48360%(4) 9.723 3/10/2013-5/10/2014
B WAC(5) 5.53860%(5) 10.022 6/10/2014-11/10/2014
C WAC(5) 5.53860%(5) 11.192 11/10/2014-11/10/2015
D WAC(5) 5.53860%(5) 11.613 11/10/2015-7/10/2016
E WAC(5) 5.53860%(5) 11.989 7/10/2016-7/10/2016
- ------- ------- ---------- ------ ---------------------
Private Certificates -- Not Offered Hereby(7)
A-1A(9) Fixed(6) 5.20700%(6) 7.748 8/10/2004-6/10/2014
F WAC(5) 5.53860%(5) 11.989 7/10/2016-7/10/2016
G WAC(5) 5.53860%(5) 11.989 7/10/2016-7/10/2016
H WAC(5) 5.53860%(5) 11.989 7/10/2016-7/10/2016
J Fixed(6) 5.10200%(6) 11.989 7/10/2016-7/10/2016
K Fixed(6) 5.10200%(6) 11.989 7/10/2016-7/10/2016
L Fixed(6) 5.10200%(6) 11.989 7/10/2016-7/10/2016
M Fixed(6) 5.10200%(6) 11.989 7/10/2016-7/10/2016
N Fixed(6) 5.10200%(6) 11.989 7/10/2016-7/10/2016
O Fixed(6) 5.10200%(6) 11.989 7/10/2016-7/10/2016
P Fixed(6) 5.10200%(6) 14.623 7/10/2016-6/10/2019
X Variable Rate(8) 0.31064%(8) (8) N/A
(1) Ratings shown are those of Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.,
respectively.
(2) As of the delivery date. Subject to a variance of plus or minus 10%.
(3) Based on the maturity assumptions (as defined under "Yield and Maturity
Considerations" in this prospectus supplement). As of the delivery date,
calculations for the certificates assume no prepayments will be made on
the mortgage loans prior to their related maturity dates (or, in the case
of the mortgage loan with an anticipated repayment date, the related
anticipated repayment date).
(4) The Class A-5 Certificates will accrue interest at the weighted average
net mortgage rate less 0.055%.
(5) The Class B, Class C, Class D, Class E, Class F, Class G and Class H
Certificates will accrue interest at the weighted average net mortgage
rate.
S-7
(6) The Class A-1A, Class J, Class K, Class L, Class M, Class N, Class O and
Class P Certificates will accrue interest at a fixed rate subject to a
cap at the weighted average net mortgage rate.
(7) Not offered by this prospectus supplement. Any information we provide
herein regarding the terms of these certificates is provided only to
enhance your understanding of the offered certificates.
(8) The Class X Certificates are not offered by this prospectus supplement.
Any information we provide herein regarding the terms of these
certificates is provided only to enhance your understanding of the
offered certificates. The Class X Certificates will not have a
certificate balance and their holders will not receive distributions of
principal, but such holders are entitled to receive payments of the
aggregate interest accrued on the notional amount of the Class X
Certificates, as described in this prospectus supplement. The interest
rate applicable to the Class X Certificates for each distribution date
will be as described in this prospectus supplement. See "Description of
the Certificates-- Pass-Through Rates" in this prospectus supplement.
(9) For purposes of making distributions to the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-1A Certificates, the pool of
mortgage loans will be deemed to consist of two distinct loan groups,
loan group 1 and loan group 2. Loan group 1 will consist of 64 mortgage
loans, representing approximately 75.4% of the initial pool balance as of
the cut-off date. Loan group 2 will consist of 30 mortgage loans,
representing approximately 24.6% of the initial pool balance as of the
cut off date. Loan group 2 will include approximately 67.0% of the
initial pool balance of all the mortgage loans secured by multifamily
properties and approximately 70.6% of the initial pool balance of all the
mortgage loans secured by manufactured housing properties.
So long as funds are sufficient on any distribution date to make
distributions of all interest on such distribution date to the Class A-1, Class
A-2, Class A-3, Class A-4, Class A-5, Class A-1A and Class X Certificates,
interest distributions on the Class A-1, Class A-2, Class A-3, Class A-4 and
Class A-5 Certificates will be based upon amounts available relating to mortgage
loans in loan group 1 and interest distributions on the Class A-1A Certificates
will be based upon amounts available relating to mortgage loans in loan group 2.
In addition, generally, the Class A-1, Class A-2, Class A-3, Class A-4 and Class
A-5 Certificates will only be entitled to receive distributions of principal
collected or advanced in respect of mortgage loans in loan group 1 until the
certificate balance of the Class A-1A Certificates has been reduced to zero, and
the Class A-1A Certificates will only be entitled to receive distributions of
principal collected or advanced in respect of mortgage loans in loan group 2
until the certificate balance of the Class A-5 Certificates has been reduced to
zero. However, on and after any distribution date on which the certificate
balances of the Class B through Class P Certificates have been reduced to zero,
distributions of principal collected or advanced in respect of the pool of
mortgage loans will be distributed to the Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5 and Class A-1A Certificates pro rata.
S-8
Below is certain information regarding the mortgage loans and the
mortgaged properties in the entire mortgage pool and loan group 1 or loan group
2, as applicable, as of the cut-off date. All weighted averages set forth below
are based on the respective cut-off date balances (as defined in this
prospectus supplement) of the mortgage loans in the entire mortgage pool, loan
group 1 and loan group 2. One mortgage loan that is included in loan group 1,
referred to as the CC Component Mortgage Loan, is divided into a senior
component and 6 subordinate components. Unless otherwise stated, all references
to the principal balance of the CC Component Mortgage Loan and related
information (including cut-off date balances, loan group balances, debt service
coverage ratios and loan-to-value ratios) is a reference to the senior
component only of this mortgage loan and accordingly, such ratios would be
lower (in the case of debt service coverage) or higher (in the case of
loan-to-value) if the subordinate components were included. One mortgage loan
that is included in loan group 1, referred to as the SS Component Mortgage
Loan, is divided into a senior component and 4 subordinate components. Unless
otherwise stated, all references to the principal balance of the SS Component
Mortgage Loan and related information (including cut-off date balances, loan
group balances, debt service coverage ratios and loan-to-value ratios) is a
reference to the senior component only of this mortgage loan and accordingly,
such ratios would be lower (in the case of debt service coverage) or higher (in
the case of loan-to-value) if the subordinate components were included. One
mortgage loan that is included in loan group 1, referred to as the UH Component
Mortgage Loan, is divided into a senior component and 9 subordinate components.
Unless otherwise stated, all references to the principal balance of the UH
Component Mortgage Loan and related information (including cut-off date
balances, loan group balances, debt service coverage ratios and loan-to-value
ratios) is a reference to the senior component only of this mortgage loan and
accordingly, such ratios would be lower (in the case of debt service coverage)
or higher (in the case of loan-to-value) if the subordinate components were
included. One mortgage loan, which is included in loan group 1 and is referred
to as the CBA Mortgage Loan, is part of a split loan structure that is secured
by the same mortgage instrument on the related mortgaged property. Unless
otherwise stated, all references to the principal balance and related
information (including cut-off date balances, loan group balances, debt service
coverage ratios and loan-to-value ratios) is in reference to the CBA Mortgage
Loan only and excludes the other mortgage loan in the split loan structure. The
other mortgage loan is not included in the trust fund and is referred to as the
CBA B Note. The CBA Mortgage Loan, together with its related CBA B Note, is
referred to as the CBA Whole Loan. The SS Component Mortgage Loan is part of a
split loan structure that is secured by the same mortgage instrument on the
related mortgaged property. Unless otherwise stated, all references to the
principal balance and related information (including cut-off date balances,
loan group balances, debt service coverage ratios and loan-to-value ratios) is
in reference to the SS Component Mortgage Loan only and excludes the other
mortgage loan in the split loan structure (as well as the related subordinate
components). The other mortgage loan is not included in the trust fund and is
referred to as the 17 State Street Note B. The SS Component Mortgage Loan,
together with its related 17 State Street Note B, is referred to as the 17
State Street Whole Loan. This information is described, and additional
information regarding the mortgage loans and the mortgaged properties is
described, under "Description of the Mortgage Pool" in this prospectus
supplement and in Annex A to this prospectus supplement.
S-9
MORTGAGE POOL CHARACTERISTICS
ENTIRE MORTGAGE POOL
CHARACTERISTICS (APPROXIMATE)
- ------------------------------------------ -------------------------------
Initial principal balance(1) ............. $1,155,167,991
Number of mortgage loans ................. 94
Number of mortgaged properties ........... 189
Number of balloon mortgage
loans(2) ................................ 89
Number of ARD loans ...................... 1
Number of full period interest only
mortgage loans .......................... 3
Number of fully amortizing loans ......... 1
Average cut-off date balance ............. $12,289,021
Range of cut-off date balances ........... $1,635,476 to $109,538,973
Weighted average mortgage rate ........... 5.457%
Weighted average remaining
lock-out period ......................... 94 months
Range of remaining terms to
maturity(3) ............................. 52 to 179 months
Weighted average remaining term to
maturity(3) ............................. 109 months
Weighted average underwritten debt
service coverage ratio(4) ............... 1.61x
Weighted average cut-off date
loan-to-value ratio(4) .................. 67.2%
LOAN GROUP 1 LOAN GROUP 2
CHARACTERISTICS (APPROXIMATE) (APPROXIMATE)
- ------------------------------------------ ------------------------------- ------------------------------
Initial principal balance(1) ............. $871,008,925 $284,159,066
Number of mortgage loans ................. 64 30
Number of mortgaged properties ........... 155 34
Number of balloon mortgage
loans(2) ................................ 61 28
Number of ARD loans ...................... 1 0
Number of full period interest only
mortgage loans .......................... 2 1
Number of fully amortizing loans ......... 0 1
Average cut-off date balance ............. $13,609,514 $ 9,471,969
Range of cut-off date balances ........... $1,635,476 to $109,538,973 $1,987,369 to $37,351,472
Weighted average mortgage rate ........... 5.527% 5.241%
Weighted average remaining
lock-out period ......................... 92 months 100 months
Range of remaining terms to
maturity(3) ............................. 55 to 179 months 52 to 144 months
Weighted average remaining term to
maturity(3) ............................. 111 months 105 months
Weighted average underwritten debt
service coverage ratio(4) ............... 1.72 x 1.29 x
Weighted average cut-off date
loan-to-value ratio(4) .................. 63.8 % 77.5 %
- ---------
(1) Subject to a variance of plus or minus 10%. The initial pool balance and
the loan group 1 balance exclude the subordinate components of each of
the UH Component Mortgage Loan, the CC Component Mortgage Loan and the SS
Component Mortgage Loan.
(2) Excludes mortgage loans that are interest only until maturity or until
the anticipated repayment date and fully amortizing mortgage loans.
(3) In the case of the mortgage loan that has an anticipated repayment date,
the maturity is based on the anticipated repayment date.
(4) The calculation of the debt service coverage ratio and loan-to-value
ratios with respect to each of the UH Component Mortgage Loan, the CC
Component Mortgage Loan and the SS Component Mortgage Loan excludes the
related subordinate components. Accordingly, these ratios would be lower
(in the case of debt service coverage ratios) and higher (in the case of
loan-to-value ratios) if the subordinate components were included.
"Cut-off date loan-to-value ratio" and "underwritten debt service coverage
ratio" are calculated as described in Annex A to this prospectus
supplement.
S-10
SUMMARY OF PROSPECTUS SUPPLEMENT
This summary highlights selected information from this prospectus
supplement. It does not contain all of the information you need to consider in
making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING
OF THE OFFERED CERTIFICATES, READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS CAREFULLY.
RELEVANT PARTIES AND DATES
DEPOSITOR
Banc of America Commercial Mortgage Inc. The depositor, a Delaware
corporation, is a subsidiary of Bank of America, N.A. The depositor maintains
its principal office at 214 North Tryon Street, Mail code NC1-027-21-02,
Charlotte, North Carolina 28255. See "The Depositor" in the accompanying
prospectus. Neither the depositor nor any of its affiliates has insured or
guaranteed the offered certificates.
TRUSTEE
Wells Fargo Bank, N.A. The Trustee, a national banking association, will
also act as REMIC administrator. See "The Trustee" in this prospectus
supplement.
MASTER SERVICER
Bank of America, N.A., a national banking association. See "Servicing of
the Mortgage Loans-- The Master Servicer" in this prospectus supplement.
SPECIAL SERVICER
Midland Loan Services, Inc. See "Servicing of the Mortgage Loans--The
Special Servicer" in this prospectus supplement.
MORTGAGE LOAN SELLER
Bank of America, N.A. is a national banking association. Bank of America,
N.A. is the parent of Banc of America Commercial Mortgage Inc. and a
wholly-owned subsidiary of NB Holdings Corporation, which in turn is a
wholly-owned subsidiary of Bank of America Corporation. Bank of America, N.A.
maintains its principal office at Bank of America Corporate Center, 100 North
Tryon Street Charlotte, North Carolina 28255.
CUT-OFF DATE
July 1, 2004.
DELIVERY DATE
On or about July 14, 2004.
RECORD DATE
With respect to each class of offered certificates and each distribution
date, the last business day of the calendar month immediately preceding the
month in which such distribution date occurs.
DISTRIBUTION DATE
The 10th day of each month or, if any such 10th day is not a business day,
the next succeeding business day. The first distribution date with respect to
the offered certificates will occur in August 2004.
S-11
DETERMINATION DATE
The earlier of (i) the sixth day of the month in which the related
distribution date occurs, or if such sixth day is not a business day, then the
immediately preceding business day, and (ii) the fourth business day prior to
the related distribution date.
COLLECTION PERIOD
With respect to any distribution date, the period that begins immediately
following the determination date in the calendar month preceding the month in
which such distribution date occurs and ends on and includes the determination
date in the calendar month in which such distribution date occurs. The first
collection period applicable to the offered certificates will begin immediately
following the cut-off date and end on the determination date in August 2004.
MORTGAGE LOANS
THE MORTGAGE POOL
The pool of mortgage loans consists of 94 multifamily and commercial
mortgage loans. Sixty-four of the mortgage loans are in loan group 1 and 30 of
the mortgage loans are in loan group 2. Sixty-eight of these mortgage loans
(which include 46 mortgage loans in loan group 1 and 22 mortgage loans in loan
group 2) were (a) originated by Bank of America, N.A. or its conduit
participants or (b) acquired by Bank of America, N.A. from various third party
originators (other than Bridger Commercial Funding LLC). Twenty-six mortgage
loans (which include 18 mortgage loans in loan group 1 and eight mortgage loans
in loan group 2) were acquired by Bank of America, N.A. from Bridger Commercial
Funding LLC. The mortgage loans in the entire mortgage pool have an aggregate
cut-off date balance of approximately $1,155,167,991 which is referred to as
the initial pool balance, subject to a variance of plus or minus 10%. The
mortgage loans in loan group 1 have an aggregate cut-off date balance of
approximately $871,008,925 which is referred to as the group 1 balance. The
mortgage loans in loan group 2 have an aggregate cut-off date balance of
approximately $284,159,066 which is referred to as the group 2 balance.
One mortgage loan, which is included in the trust fund and is included in
loan group 1, referred to as the CC Component Mortgage Loan is divided into a
senior component and 6 subordinate components. The aggregate principal balance
of the CC Component Mortgage Loan (including its subordinate components) as of
the cut-off date is approximately $102,780,036. The principal balance of the
senior component of the CC Component Mortgage Loan is approximately
$77,780,036, representing 6.7% of the initial pool balance and 8.9% of the
group 1 balance. The principal balance of the subordinate components of the CC
Component Mortgage Loan is approximately $25,000,000. See "Description of the
Mortgage Pool--CC Component Mortgage Loan" in this prospectus supplement.
One mortgage loan, which is included in the trust fund and is included in
loan group 1, referred to as the SS Component Mortgage Loan is divided into a
senior component and 4 subordinate components. The aggregate principal balance
of the SS Component Mortgage Loan (including its subordinate components) as of
the cut-off date is approximately $89,574,744. The principal balance of the
senior component of the SS Component Mortgage Loan is approximately
$75,850,000, representing 6.6% of the initial pool balance and 8.7% of the
group 1 balance. The principal balance of the subordinate components of the SS
Component Mortgage Loan is approximately $13,724,744. See "Description of the
Mortgage Pool--SS Component Mortgage Loan" in this prospectus supplement.
One mortgage loan, which is included in the trust fund and is included in
loan group 1, referred to as the UH Component Mortgage Loan is divided into a
senior component and 9 subordinate components. The aggregate principal balance
of the UH Component Mortgage Loan (including its subordinate components) as of
the cut-off date is approximately $182,538,973. The principal balance of the
senior component of the UH Component Mortgage Loan is approximately
$109,538,973, representing 9.5% of the initial pool balance and 12.6% of the
group 1 balance. The principal balance of the subordinate components of the UH
Component Mortgage Loan is approximately $73,000,000. See "Description of the
Mortgage Pool--UH Component Mortgage Loan" in this prospectus supplement.
S-12
The SS Component Mortgage Loan is part of a split loan structure, which is
evidenced by a separate promissory note secured by the related mortgaged
property. The other mortgage loan in this split loan structure is not included
in the trust fund and this mortgage loan is referred to as the 17 State Street
Note B. The SS Component Mortgage Loan and the related 17 State Street Note B
is referred to as the 17 State Street Whole Loan. The aggregate principal
balance as of the cut-off date of the SS Component Mortgage Loan is
$89,574,744. The aggregate principal balance as of the date of origination of
the 17 State Street Note B is $22,425,256. See "Description of the Mortgage
Pool--17 State Street Whole Loan" in this prospectus supplement.
One mortgage loan, which is included in the trust fund and is included in
loan group 1, referred to as the CBA Mortgage Loan is part of a split loan
structure, which is evidenced by a separate promissory note secured by the
related mortgaged property. The other mortgage loan in this split loan
structure is not included in the trust fund and this mortgage loan is referred
to as the CBA B Note. The CBA Mortgage Loan and the related CBA B Note is
referred to as the CBA Whole Loan. The aggregate principal balance as of the
cut-off date of the CBA Mortgage Loan is $2,716,926 and represents 0.2% of the
initial pool balance and 0.3% of the group 1 balance. The aggregate principal
balance as of the date of origination of the CBA B Note is $170,000. See
"Description of the Mortgage Pool--CBA Whole Loan" in this prospectus
supplement.
All numerical information provided in this prospectus supplement with
respect to the mortgage loans is provided on an approximate basis. The
principal balance of each mortgage loan as of the cut-off date assumes the
timely receipt of all principal scheduled to be paid on or before the cut-off
date and assumes no defaults, delinquencies or prepayments on any mortgage loan
on or before the cut-off date. For purposes of the presentation of numbers and
statistical information set forth in this prospectus supplement, unless
otherwise noted, all numbers and statistical information regarding the mortgage
loans include only the senior component of each of the UH Component Mortgage
Loan, the CC Component Mortgage Loan and the SS Component Mortgage Loan and the
CBA Mortgage Loan with respect to the CBA Whole Loan. The calculation of the
debt service coverage ratio, cut-off date balance per unit and loan-to-value
ratios with respect to each of the UH Component Mortgage Loan, the CC Component
Mortgage Loan and the SS Component Mortgage Loan excludes the related
subordinate components. These ratios would be lower (in the case of debt
service coverage ratios) and higher (in the case of loan-to-value ratios) if
the subordinate components were included. All weighted average information
provided in this prospectus supplement, unless otherwise stated, reflects
weighting by related cut-off date balance. The sum of the numerical data in any
column of any table presented in this prospectus supplement may not equal the
indicated total due to rounding. All percentages of the mortgage pool, or of
any specified sub-group thereof, referred to in this prospectus supplement
without further description are approximate percentages by aggregate cut-off
date balance. See "Description of the Mortgage Pool--Changes in Mortgage Pool
Characteristics" in this prospectus supplement.
The cut-off date balance of each mortgage loan is the unpaid principal
balance thereof as of the cut-off date, after application of all payments of
principal due on or before such date, whether or not received. The cut-off date
balances of the mortgage loans in (a) the entire mortgage pool range from
$1,635,476 to $109,538,973, and the average cut-off date balance is $12,289,021
(b) loan group 1 range from $1,635,476 to $109,538,973 and the average cut-off
date balance is $13,609,514 and (c) in loan group 2 range from $1,987,369 to
$37,351,472, and the average cut-off date balance is $9,471,969.
S-13
As of the cut-off date, the mortgage loans had the following additional
characteristics.
SELECTED MORTGAGE LOAN CHARACTERISTICS
ENTIRE MORTGAGE POOL LOAN GROUP 1 LOAN GROUP 2
---------------------- ----------------------- -----------------------
Range of mortgage
rates .................. 4.186% per annum to 4.290% per annum to 4.186% per annum to
6.845% per annum 6.845% per annum 6.327% per annum
Weighted average
mortgage rate .......... 5.457% per annum 5.527% per annum 5.241% per annum
Range of remaining
terms to stated
maturity(1) ............ 52 months to 179 55 months to 179 52 months to 144
months months months
Weighted average
remaining term to
stated maturity(1)...... 109 months 111 months 105 months
Range of remaining
amortization
terms(2) ............... 119 months to 360 238 months to 360 119 months to 360
months months months
Weighted average
remaining
amortization
term(2) ................ 347 months 344 months 357 months
Range of remaining
lock-out periods ....... 21 months to 138 22 months to 138 21 months to 138
months months months
Range of cut-off date
loan-to-value
ratios(3) .............. 37.0% to 80.9% 37.5% to 80.9% 37.0% to 80.7%
Weighted average
cut-off date
loan-to-value
ratio(3) ............... 67.2% 63.8% 77.5%
Range of maturity
date loan-to-value
ratios(3)(4) ........... 29.6% to 75.1% 29.6% to 75.1% 44.4% to 75.1%
Weighted average
maturity date
loan-to-value
ratio(3)(4) ............ 57.8% 54.4% 68.3%
Range of
underwritten
debt service
coverage
ratios(3) .............. 1.15x to 2.78x 1.20x to 2.78x 1.15x to 1.65x
Weighted average
underwritten debt
service coverage
ratio(3) ............... 1.61x 1.72x 1.29x
- ----------
(1) In the case of the mortgage loan that has an anticipated repayment date,
the maturity is based on the anticipated repayment date.
(2) Excludes mortgage loans that are interest only until maturity or until
the anticipated repayment date.
S-14
(3) The calculation of the debt service coverage ratio and loan-to-value
ratios with respect to each of the CC Component Mortgage Loan, the SS
Component Mortgage Loan and the UH Component Mortgage Loan excludes the
related subordinate components. Accordingly, these ratios would be lower
(in the case of debt service coverage ratios) and higher (in the case of
loan-to-value ratios) if the subordinate components were included.
(4) Excludes the mortgage loans that are fully amortizing.
Set forth below are the number of mortgaged properties, and the
approximate percentage of the initial pool balance secured by such mortgaged
properties, located in the six states with the highest concentrations:
GEOGRAPHIC CONCENTRATION
NUMBER OF PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
MORTGAGED INITIAL POOL GROUP 1 GROUP 2
STATE PROPERTIES BALANCE(1) BALANCE(1) BALANCE(1)
- -------------------- ------------ --------------- --------------- --------------
Texas .............. 27 18.2% 23.1% 3.1%
New York ........... 4 11.8% 13.6% 6.2%
Michigan ........... 5 7.9% 4.7% 17.8%
Florida ............ 23 7.7% 5.9% 13.4%
California ......... 12 7.4% 7.3% 7.6%
Arizona ............ 14 5.6% 7.1% 1.3%
- ----------
(1) With respect to mortgage loans secured by multiple properties in multiple
states, the cut-off date balance is allocated among such states based
upon amounts set forth in the related mortgage loan documents. Those
amounts are set forth in Annex A to this prospectus supplement.
The remaining mortgaged properties are located throughout 32 other states,
with no more than 5.0% of the initial pool balance secured by mortgaged
properties located in any such other jurisdiction.
S-15
Set forth below are the number of mortgaged properties, and the
approximate percentage of the initial pool balance secured by such mortgaged
properties, operated for each indicated purpose:
PROPERTY TYPE
NUMBER OF PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
MORTGAGED INITIAL POOL GROUP 1 GROUP 2
PROPERTY TYPE PROPERTIES BALANCE(1) BALANCE(1) BALANCE(1)
- ------------------------------------- ------------ --------------- --------------- --------------
Office .............................. 25 31.8% 42.1% 0.0%
Manufactured Housing Communities..... 21 19.7% 7.7% 56.4%
Self Storage ........................ 99 16.5% 21.9% 0.0%
Multifamily ......................... 21 16.0% 7.0% 43.6%
Retail .............................. 19 12.8% 17.0% 0.0%
Industrial .......................... 3 2.0% 2.7% 0.0%
Hotel ............................... 1 1.2% 1.7% 0.0%
- ----------
(1) The sum of the percentages in this column may not equal 100% due to
rounding.
FOR MORE DETAILED STATISTICAL INFORMATION REGARDING THE MORTGAGE POOL, SEE
ANNEX A HERETO.
On or before the delivery date, the mortgage loan seller will transfer all
of the mortgage loans, without recourse, to the depositor, or at the direction
of the depositor to the trustee for the benefit of holders of the certificates.
In connection with such transfer, the mortgage loan seller will make certain
representations and warranties regarding the characteristics of the mortgage
loans. As described in more detail later in this prospectus supplement, the
mortgage loan seller will be obligated to cure any material breach of any such
representation or warranty made by it or either repurchase the affected
mortgage loan or, in the period and manner described in this prospectus
supplement, substitute a qualified substitute mortgage loan for the affected
mortgage loan and pay any substitution shortfall amount. See "Description of
the Mortgage Pool--Assignment of the Mortgage Loans; Repurchases and
Substitution" and "--Representations and Warranties; Repurchases and
Substitutions" in this prospectus supplement.
The mortgage loan seller will sell each of its respective mortgage loans
without recourse and has no obligations with respect to the offered
certificates other than pursuant to such representations, warranties and
repurchase or substitution obligations. The depositor has made no
representations or warranties with respect to the mortgage loans and will have
no obligation to repurchase or replace mortgage loans with deficient
documentation or which are otherwise defective. See "Description of the
Mortgage Pool" and "Risk Factors--Risks Related to the Mortgage Loans" in this
prospectus supplement and "Description of the Trust Funds" and "Certain Legal
Aspects of Mortgage Loans" in the accompanying prospectus.
The master servicer and, if circumstances require, the special servicer,
will service and administer the mortgage loans pursuant to the pooling and
servicing agreement among the depositor, the master servicer, the special
servicer, the trustee and the REMIC administrator. See "Servicing of the
Mortgage Loans" in this prospectus supplement and "The Pooling and Servicing
Agreements" in the accompanying prospectus. The compensation to be received by
the master servicer (including certain master servicing fees) and the special
servicer (including special servicing fees, liquidation fees and workout fees)
for their services is described in this prospectus supplement under "Servicing
of the Mortgage Loans--Servicing and Other Compensation and Payment of
Expenses."
OFFERED SECURITIES
THE OFFERED CERTIFICATES; CERTIFICATE BALANCES AND PASS-THROUGH RATES
The offered certificates consist of 9 classes of the depositor's
Commercial Mortgage Pass-Through Certificates as part of Series 2004-3, namely
the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class B, Class C,
Class D and Class E Certificates. As of the delivery date, your certificates
will have the
S-16
approximate aggregate principal amount or notional amount indicated in the
chart on the cover of this prospectus supplement, subject to a variance of plus
or minus 10%, and will accrue interest at an annual rate referred to as a
pass-through rate indicated in the chart on the cover of this prospectus
supplement and the accompanying footnotes. Interest on the offered certificates
will be calculated based on a 360-day year consisting of twelve 30-day months,
or a 30/360 basis.
Series 2004-3 consists of a total of 42 classes of certificates, the
following 33 of which are not being offered through this prospectus supplement
and the accompanying prospectus: Class A-1A, Class X, Class F, Class G, Class
H, Class J, Class K, Class L, Class M, Class N, Class O, Class P, Class CC-A,
Class CC-B, Class CC-C, Class CC-D, Class CC-E, Class CC-F, Class SS-A, Class
SS-B, Class SS-C, Class SS-D, Class UH-A, Class UH-B, Class UH-C, Class UH-D,
Class UH-E, Class UH-F, Class UH-G, Class UH-H, Class UH-J, Class R-I and Class
R-II. The pass-through rates applicable to each of the Class A-1A, Class F,
Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O and
Class P Certificates for each distribution date are set forth on page S-7 of
this prospectus supplement. The pass-through rates applicable to each of the
Class CC-A, Class CC-B, Class CC-C, Class CC-D, Class CC-E, Class CC-F, Class
SS-A, Class SS-B, Class SS-C, Class SS-D, Class UH-A, Class UH-B, Class UH-C,
Class UH-D, Class UH-E, Class UH-F, Class UH-G, Class UH-H and Class UH-J
Certificates for each distribution date are set forth in the pooling agreement.
The Class CC-A, Class CC-B, Class CC-C, Class CC-D, Class CC-E and Class CC-F
Certificates are referred to in this prospectus supplement as the Class CC
Certificates. The Class SS-A, Class SS-B, Class SS-C and Class SS-D
Certificates are referred to in this prospectus supplement as the Class SS
Certificates. The UH-A, Class UH-B, Class UH-C, Class UH-D, Class UH-E, Class
UH-F, Class UH-G, Class UH-H and Class UH-J Certificates are referred to in
this prospectus supplement as the Class UH Certificates. The Class R-I and
Class R-II Certificates will not have a certificate balance, a notional amount
or a pass-through rate.
CLASS X CERTIFICATES
Notional Amount
The Class X Certificates will not have a certificate balance. For purposes
of calculating the amount of accrued interest, however, the Class X
Certificates will have a notional amount.
The notional amount of the Class X Certificates will equal the aggregate
certificate balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class A-1A, Class B, Class C, Class D, Class E, Class F, Class G, Class H,
Class J, Class K, Class L, Class M, Class N, Class O and Class P Certificates
outstanding from time to time. The Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-1A, Class B, Class C, Class D, Class E, Class F, Class G,
Class H, Class J, Class K, Class L, Class M, Class N, Class O and Class P
Certificates are referred to in this prospectus supplement as the "Sequential
Pay Certificates". The initial notional amount of the Class X Certificates will
be approximately $1,155,167,990, although it may be as much as 10% larger or
smaller. The notional amount of the Class X Certificates is used solely for the
purpose of determining the amount of interest to be distributed on such class
of Certificates and does not represent the right to receive any distributions
of principal.
Pass Through Rate
The pass-through rate applicable to the Class X Certificates for the
initial distribution date will equal approximately 0.31064% per annum. The
pass-through rate applicable to the Class X Certificates for any interest
accrual period subsequent to the initial distribution date will, in general,
equal the excess, if any, of (1) the weighted average net mortgage rate, over
(2) the weighted average of the pass-through rates applicable to all the
classes of Sequential Pay Certificates.
DISTRIBUTIONS
For purposes of making distributions to the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-1A Certificates, the pool of mortgage
loans will be deemed to consist of two distinct groups, loan
S-17
group 1 and loan group 2. Loan group 1 will consist of 64 mortgage loans,
representing approximately 75.4% of the initial pool balance as of the cut-off
date, and loan group 2 will consist of 30 mortgage loans, representing
approximately 24.6% of the initial pool balance as of the cut-off date. Loan
group 2 will include approximately 67.0% of the initial pool balance secured by
multifamily properties and approximately 70.6% of the initial pool balance
secured by manufactured housing properties. Annex A to this prospectus
supplement will set forth the loan group designation with respect to each
mortgage loan.
The total of all payments or other collections (or advances in lieu
thereof) on or in respect of the mortgage loans (but excluding prepayment
premiums and excess interest, each as described in this prospectus supplement)
that are available for distributions of interest on and principal of the
certificates on any distribution date is herein referred to as the available
distribution amount for such date. See "Description of the
Certificates--Distributions--The Available Distribution Amount" in this
prospectus supplement. On each distribution date, the trustee will apply the
available distribution amount for such date for the following purposes and in
the following order of priority:
A. Amount and Order of Distributions
First, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-1A
and Class X: To pay interest, concurrently, (a) on Class A-1, Class A-2, Class
A-3, Class A-4 and Class A-5 pro rata, from the portion of the available
distribution amount for such distribution date that is attributable to the
mortgage loans in loan group 1, (b) on Class A-1A from the portion of the
available distribution amount for such distribution date that is attributable
to the mortgage loans in loan group 2 and (c) on Class X, from the available
distribution amount, in each case in accordance with their interest
entitlements. However, if on any distribution date, the available distribution
amount (or applicable portion thereof) is insufficient to pay in full the total
amount of interest to be paid to any of the classes described above, the
available distribution amount will be allocated among all these classes pro
rata in accordance with their interest entitlements.
Second, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class
A-1A: To the extent of amounts then required to be distributed as principal,
(A)(i) first, to the Class A-1 Certificates, available principal received from
loan group 1 and, after the Class A-1A Certificates have been reduced to zero,
available principal received from loan group 2 remaining after payments to the
Class A-1A Certificates have been made, until the principal balance of the
Class A-1 Certificates is reduced to zero, (ii) then, to the Class A-2
Certificates, available principal received from loan group 1 remaining after
distributions in respect of principal to the Class A-1 Certificates and, after
the Class A-1A Certificates have been reduced to zero, available principal
received from loan group 2 remaining after payments to the Class A-1A and Class
A-1 Certificates have been made, until the principal balance of the Class A-2
Certificates is reduced to zero, (iii) then, to the Class A-3 Certificates,
available principal received from loan group 1 remaining after distributions in
respect of principal to the Class A-1 and Class A-2 Certificates and, after the
Class A-1A Certificates have been reduced to zero, available principal received
from loan group 2 remaining after payments to the Class A-1A, Class A-1 and
Class A-2 Certificates have been made, until the principal balance of the Class
A-3 Certificates is reduced to zero (iv) then, to the Class A-4 Certificates,
available principal received from loan group 1 remaining after distributions in
respect of principal to the Class A-1, Class A-2 and Class A-3 Certificates
and, after the Class A-1A Certificates have been reduced to zero, available
principal received from loan group 2 remaining after payments to the Class
A-1A, Class A-1, Class A-2, and Class A-3 Certificates have been made, until
the principal balance of the Class A-4 Certificates is reduced to zero (v)
then, to the Class A-5 Certificates, available principal received from loan
group 1 remaining after distributions in respect of principal to the Class A-1,
Class A-2, Class A-3 and Class A-4 Certificates and, after the Class A-1A
Certificates have been reduced to zero, available principal received from loan
group 2 remaining after payments to the Class A-1A, Class A-1, Class A-2, Class
A-3 and Class A-4 Certificates have been made, until the principal balance of
the Class A-5 Certificates is reduced to zero and (B) to the Class A-1A
Certificates, available principal received from loan group 2 and, after the
Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5 certificates have been
reduced to
S-18
zero, available principal received from loan group 1 remaining after payments
to the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Certificates
have been made, until the principal balance of the Class A-1A Certificates is
reduced to zero.
Third, Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class
A-1A: To reimburse Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and
Class A-1A pro rata, for any previously unreimbursed losses on the mortgage
loans allocable to principal that were previously borne by those classes.
Fourth, Class B: To Class B as follows: (a) to interest on Class B in the
amount of its interest entitlement; (b) to the extent of funds available for
principal, to principal on Class B until reduced to zero; and (c) to reimburse
Class B for any previously unreimbursed losses on the mortgage loans allocable
to principal that were previously borne by that class.
Fifth, Class C: To Class C in a manner analogous to the Class B
allocations of the fourth step.
Sixth, Class D: To Class D in a manner analogous to the Class B
allocations of the fourth step.
Seventh, Class E: To Class E in a manner analogous to the Class B
allocations in the fourth step.
Finally, Private Certificates: In the amounts and order of priority
provided for in the Pooling Agreement.
The distributions referred to in priority Second above, will be made, pro
rata, among the Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates, Class A-4 Certificates, Class A-5 Certificates and Class A-1A
Certificates when the certificate balances of all other certificates having
certificate balances have been reduced to zero and in any event on the final
distribution date as described under "Description of the
Certificates--Distributions--The Available Distribution Amount" in this
prospectus supplement.
B. Interest and Principal Entitlements
A description of each class's interest entitlement can be found in
"Description of the Certificates-- Distributions--Distributable Certificate
Interest" in this prospectus supplement. As described in such section, there
are circumstances in which your interest entitlement for a distribution date
could be less than one full month's interest at the pass-through rate on your
certificate's principal amount.
The amount of principal required to be distributed to the classes entitled
to principal on a particular distribution date also can be found in
"Description of the Certificates--Principal Distribution Amount" in this
prospectus supplement.
C. Prepayment Premiums
The manner in which any prepayment consideration and yield maintenance
premiums received during a particular collection period will be allocated to
one or more of the classes of offered certificates is described in "Description
of the Certificates--Distributions--Distributions of Prepayment Premiums" in
this prospectus supplement.
SUBORDINATION
A. General
The chart below describes the manner in which the rights of various
classes will be senior to the rights of other classes. Entitlement to receive
principal and interest on any distribution date is depicted in descending
order. The manner in which mortgage loan losses are allocated is depicted in
ascending order; provided that mortgage loan losses will not be allocated to
any class of the Class CC Certificates (other than mortgage loan losses on the
CC Component Mortgage Loan), the Class SS Certificates (other than mortgage
loan losses on the SS Component Mortgage Loan), the Class UH Certificates
(other than mortgage loan losses on the UH Component Mortgage Loan), or the
Class R-I or Class R-II Certificates.
S-19
Mortgage loan losses that are realized on the CC Component Mortgage Loan will
be allocated to the Class CC Certificates in reverse sequential order before
being allocated to any other class of Certificates. Mortgage loan losses that
are realized on the SS Component Mortgage Loan will be allocated to the Class
SS Certificates in reverse sequential order before being allocated to any other
class of Certificates. Mortgage loan losses that are realized on the UH
Component Mortgage Loan will be allocated to the Class UH Certificates in
reverse sequential order before being allocated to any other class of
Certificates. No principal payments or loan losses will be allocated to the
Class X Certificates. However, the notional amount on the Class X Certificates
(which is used to calculate interest due on the Class X Certificates) will
effectively be reduced by the allocation of principal payments and loan losses
to the other classes of certificates, the principal balances of which
correspond to the notional amount of the Class X Certificates.
[GRAPHIC OMITTED]
-------------------------------------------------------------
CLASS A-1 CERTIFICATES(1), CLASS A-2 CERTIFICATES(1),
CLASS A-3 CERTIFICATES(1), CLASS A-4 CERTIFICATES(1),
CLASS A-5 CERTIFICATES(1), CLASS A-1A CERTIFICATES(1),
AND CLASS X CERTIFICATES(2)
-------------------------------------------------------------
|
|
---------------------------
CLASS B CERTIFICATES
---------------------------
|
|
---------------------------
CLASS C CERTIFICATES
---------------------------
|
|
---------------------------
CLASS D CERTIFICATES
---------------------------
|
|
---------------------------
CLASS E CERTIFICATES
---------------------------
|
|
------------------------------------
PRIVATE CERTIFICATES(3)(4)(5)
(other than the Class A-1A and
Class X Certificates)
------------------------------------
(1) The Class A-1A Certificates have a priority entitlement to principal
payments received in respect of mortgage loans included in loan group
2. The Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates have a priority entitlement to principal payments
received in respect of mortgage loans included in loan group 1. See
"Description of the Certificates--The Available Distribution Amount"
in this prospectus supplement.
(2) The Class X Certificates will only be senior with respect to payments
of interest and will not be entitled to receive any payments in
respect of principal.
(3) Each class of Class CC Certificates will only be subordinate to the
offered certificates with respect to payments and other collections
received on the CC Component Mortgage Loan.
(4) Each class of Class SS Certificates will only be subordinate to the
offered certificates with respect to payments and other collections
received on the SS Component Mortgage Loan.
(5) Each class of Class UH Certificates will only be subordinate to the
offered certificates with respect to payments and other collections
received on the UH Component Mortgage Loan.
S-20
No other form of credit enhancement will be available for the benefit of
the holders of the offered certificates.
See "Description of the Certificates--Subordination; Allocation of Losses
and Certain Expenses" in this prospectus supplement.
B. Shortfalls in Available Funds
The following types of shortfalls in available funds will be allocated in
the same manner as mortgage loan losses:
o shortfalls resulting from additional compensation which the master
servicer or special servicer is entitled to receive;
o shortfalls resulting from interest on advances of principal and interest
or property expenses made by the master servicer the special servicer or
the trustee;
o shortfalls resulting from extraordinary expenses of the trust;
o shortfalls resulting from a reduction of a mortgage loan's interest rate
or principal amount by a bankruptcy court or from other unanticipated or
default-related expenses of the trust; and
o shortfalls due to nonrecoverable advances being reimbursed from
principal and/or interest collections.
See "Description of the Certificates--Distributions" in this prospectus
supplement.
ADVANCES OF PRINCIPAL AND INTEREST
A. P&I Advances
The master servicer (or the trustee, if applicable) is required to advance
delinquent monthly mortgage loan payments (including mortgage loan payments on
the subordinate components of each of the CC Component Mortgage Loan, the SS
Component Mortgage Loan and the UH Component Mortgage Loan) if it determines
that the advance will be recoverable. The master servicer will not advance
balloon payments due at maturity, late payment charges or default interest. The
master servicer also is not required to advance prepayment or yield maintenance
premiums. If an advance is made, the master servicer will not advance its
servicing fee, but will advance the trustee's fee.
B. Property Protection Advances
The master servicer (or the trustee, if applicable) may also be required
to make advances to pay delinquent real estate taxes, assessments and hazard
insurance premiums and similar expenses necessary to protect and maintain the
mortgaged property, to maintain the lien on the mortgaged property or enforce
the related mortgage loan documents.
C. Interest on Advances
The master servicer and the trustee, as applicable, will be entitled to
interest as described in this prospectus supplement on any of the advances
referenced in the two immediately preceding paragraphs, other than for advances
referenced under the above Paragraph A of payments not delinquent past
applicable grace periods. Interest accrued on any of these outstanding advances
may result in reductions in amounts otherwise payable on the certificates.
See "Description of the Certificates--P&I Advances" and "Servicing of the
Mortgage Loans-- Servicing and Other Compensation and Payment of Expenses" in
this prospectus supplement and "Description of the Certificates--Advances in
Respect of Delinquencies" and "The Pooling and Servicing Agreements--Certificate
Account" in the accompanying prospectus.
S-21
OTHER ASPECTS OF THE OFFERED CERTIFICATES
A. Denominations
The Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Certificates
will be offered in minimum denominations of $10,000 initial principal amount.
The Class B, Class C, Class D and Class E Certificates will be offered in
minimum denominations of $100,000 initial principal amount. Investments in
excess of the minimum denominations may be made in multiples of $1.
B. Registration, Clearance and Settlement
Each class of offered certificates will be registered in the name of Cede
& Co., as nominee of The Depository Trust Company. The book-entry system
through The Depository Trust Company may be terminated with respect to all or
any portion of any class of the offered certificates.
See "Description of the Certificates--Registration and Denominations" in
this prospectus supplement and "Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in the accompanying prospectus.
OPTIONAL TERMINATION
On any distribution date on which the aggregate principal balance of the
pool of mortgage loans remaining in the trust is less than 1% of the aggregate
unpaid balance of the mortgage loans as of the cut-off date, certain entities
specified in this prospectus supplement will have the option to purchase all of
the remaining mortgage loans at the price specified in this prospectus
supplement (and all property acquired through exercise of remedies in respect
of any mortgage loan). Exercise of this option will terminate the trust and
retire the then outstanding certificates. The trust could also be terminated in
connection with an exchange of all the then outstanding certificates (other
than the Class R-I, Class R-II, Class CC, Class SS and Class UH Certificates),
including the Class X Certificates (provided, however, that the Class A-1
through Class H Certificates are no longer outstanding), for the mortgage loans
remaining in the trust, but all of the holders of such classes of certificates
would have to voluntarily participate in such exchange. See "Description of the
Certificates--Termination; Retirement of Certificates" in this prospectus
supplement and "Description of the Certificates--Termination" in the
prospectus.
TAX STATUS
Elections will be made to treat designated portions of the trust (other
than excess interest) as two separate real estate mortgage investment conduits,
referred to in this prospectus supplement as REMICs--REMIC I and REMIC II--for
federal income tax purposes. In addition, a separate REMIC election will also
be made with respect to the CC Component Mortgage Loan, the SS Component
Mortgage Loan and the UH Component Mortgage Loan referred to in this prospectus
supplement as the Component Mortgage Loan REMIC. The senior component of each
of the CC Component Mortgage Loan, the SS Component Mortgage Loan and the UH
Component Mortgage Loan and each class of the Class CC Certificates, the Class
SS Certificates and the Class UH Certificates will represent "regular
interests" in the Component Mortgage Loan REMIC. In the opinion of counsel,
such portions of the trust will qualify for this treatment. The portion of the
trust consisting of the excess interest will be treated as a grantor trust for
federal income tax purposes and will be beneficially owned by the Class P
Certificates.
Pertinent federal income tax consequences of an investment in the offered
certificates include:
o Each class of offered certificates will constitute "regular interests"
in one of the REMICs.
o The regular interests will be treated as newly originated debt
instruments for federal income tax purposes.
o Beneficial owners will be required to report income on the offered
certificates in accordance with the accrual method of accounting.
S-22
o It is anticipated that the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5 and Class B Certificates will be issued at a premium, that the
Class C and Class D Certificates will be issued with a de minimis amount
of original issue discount and that the Class E Certificates will be
issued with more than a de minimis amount of original issue discount for
federal income tax purposes.
See "Certain Federal Income Tax Consequences" in this prospectus
supplement and in the accompanying prospectus.
ERISA CONSIDERATIONS
Subject to important considerations described under "Certain ERISA
Considerations" in this prospectus supplement and in the accompanying
prospectus, the depositor expects that the offered certificates are eligible
for purchase by persons investing assets of employee benefit plans or
individual retirement accounts. A benefit plan fiduciary considering the
purchase of any offered certificates should consult with its counsel to
determine whether all required conditions have been satisfied.
See "Certain ERISA Considerations" in this prospectus supplement and in
the accompanying prospectus.
LEGAL INVESTMENT
The offered certificates will not constitute "mortgage related securities"
within the meaning of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. If your investment activities are subject to legal investment laws and
regulations, regulatory capital requirements, or review by regulatory
authorities, then you may be subject to restrictions on investment in the
offered certificates. You should consult your own legal advisors for assistance
in determining the suitability of and consequences to you of the purchase,
ownership, and sale of the offered certificates.
See "Legal Investment" in this prospectus supplement and in the
accompanying prospectus.
CERTIFICATE RATINGS
It is a requirement for issuance of the offered certificates that they
receive credit ratings no lower than the following credit ratings from Moody's
Investors Service, Inc. and Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.:
MOODY'S S&P
--------- -----
Class A-1 .......... Aaa AAA
Class A-2 .......... Aaa AAA
Class A-3 .......... Aaa AAA
Class A-4 .......... Aaa AAA
Class A-5 .......... Aaa AAA
Class B ............ Aa2 AA
Class C ............ Aa3 AA-
Class D ............ A2 A
Class E ............ A3 A-
The ratings of the offered certificates address the likelihood of the
timely payment of interest and the ultimate repayment of principal by the rated
final distribution date. A security rating does not address the frequency of
prepayments (either voluntary or involuntary) or the possibility that
certificateholders might suffer a lower than anticipated yield, nor does a
security rating address the likelihood of receipt of prepayment premiums or the
collection of excess interest.
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 organization. Any such revision, if negative, or withdrawal of a rating
could have a material adverse effect on the affected class of offered
certificates. See "Ratings" in this prospectus supplement and "Rating" in the
accompanying prospectus for a discussion of the basis upon which ratings are
assigned, the limitations and restrictions on ratings, and conclusions that
should not be drawn from a rating.
S-23
RISK FACTORS
o YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE MAKING AN
INVESTMENT DECISION. IN PARTICULAR, DISTRIBUTIONS ON YOUR CERTIFICATES WILL
DEPEND ON PAYMENTS RECEIVED ON AND OTHER RECOVERIES WITH RESPECT TO THE
MORTGAGE LOANS. THEREFORE, YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS
RELATING TO THE MORTGAGE LOANS AND THE MORTGAGED PROPERTIES.
o THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES RELATING
TO YOUR CERTIFICATES. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY
KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR YOUR
INVESTMENT.
o IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, YOUR INVESTMENT COULD BE
MATERIALLY AND ADVERSELY AFFECTED.
o THIS PROSPECTUS SUPPLEMENT ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THE RISKS DESCRIBED BELOW AND ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT.
RISKS RELATED TO THE CERTIFICATES
YOUR LACK OF CONTROL OVER THE
TRUST FUND CAN CREATE RISK.... You and other certificateholders generally do
not have the right to make decisions with
respect to the administration of the trust. See
"Servicing of the Mortgage Loans-- General" in
this prospectus supplement. Such decisions are
generally made, subject to the express terms of
the pooling agreement, by the master servicer,
the trustee or the special servicer, as
applicable. Any decision made by one of those
parties in respect of the trust, even if such
decision is determined to be in your best
interests by such party, may be contrary to the
decision that you or other certificateholders
would have made and may negatively affect your
interests.
POTENTIAL CONFLICTS
OF INTEREST................... The special servicer will have latitude in
determining whether to liquidate or modify
defaulted mortgage loans. See "Servicing of the
Mortgage Loans--Modifications, Waivers,
Amendments and Consents" in this prospectus
supplement.
The master servicer, the special servicer or
an affiliate of either may purchase certain of
the certificates or hold certain companion
mortgage loans which are part of a split loan
structure but which are not held in the trust
fund. In addition, the holder of certain of
the non-offered certificates has the right to
remove a special servicer and appoint a
successor, which may be an affiliate of such
holder. It is possible that the special
servicers or affiliates thereof may be holders
of such non-offered certificates. This could
cause a conflict between the master servicer's
or the special servicer's duties to the trust
under the pooling and servicing agreement and
its interest as a holder of a certificate or a
companion mortgage loan. In addition, the
master servicer is the mortgage loan seller.
This could cause a conflict between the master
servicer's duty to the trust under the pooling
and servicing
S-24
agreement and its interest as the mortgage
loan seller. However, the pooling and
servicing agreement provides that the mortgage
loans shall be administered in accordance with
the servicing standards without regard to
ownership of any certificate by the master
servicer, the special servicer or any
affiliate of the master servicer or the
special servicer. See "Servicing of the
Mortgage Loans --General" in this prospectus
supplement.
In addition, certain of the mortgage loans
included in the trust fund may have been
refinancings of debt previously held by an
affiliate of the mortgage loan seller.
The related property managers and borrowers
may experience conflicts of interest in the
management and/or ownership of the real
properties securing the mortgage loans
because:
o a substantial number of the mortgaged real
properties are managed by property managers
affiliated with the respective borrowers;
o these property managers also may manage
and/or franchise additional properties,
including properties that may compete with
the mortgaged real properties; and
o affiliates of the property managers and/or
the borrowers, or the property managers
and/or the borrowers themselves also may
own other properties, including competing
properties.
PREPAYMENTS WILL AFFECT
DISTRIBUTIONS AND YIELD
CONSIDERATIONS..... The yield on any offered certificate will
depend on (a) the price at which such
certificate is purchased by an investor and (b)
the rate, timing and amount of distributions on
such certificate. The rate, timing and amount
of distributions on any offered certificate
will, in turn, depend on, among other things:
o the pass-through rate for such certificate;
o the rate and timing of principal payments
(including principal prepayments) and other
principal collections on or in respect of
the mortgage loans and the extent to which
such amounts are to be applied or otherwise
result in a reduction of the certificate
balance of the class of certificates to
which such certificate belongs;
o the rate, timing and severity of realized
losses and additional trust fund expenses
(each as described in this prospectus
supplement) and the extent to which such
losses and expenses result in the failure
to pay interest on, or a reduction of the
certificate balance of, the class of
certificates to which such certificate
belongs;
S-25
o the timing and severity of any net
aggregate prepayment interest shortfalls
(each as described in this prospectus
supplement) and the extent to which such
shortfalls are allocated in reduction of
the distributable certificate interest
payable on the class of certificates to
which such certificate belongs;
o the extent to which prepayment premiums are
collected and, in turn, distributed on the
class of certificates to which such
certificate belongs; and
o the rate and timing of reimbursement of
advances.
It is impossible to predict with certainty any
of the factors described in the preceding
paragraph. Accordingly, investors may find it
difficult to analyze the effect that such
factors might have on the yield to maturity of
any class of offered certificates. See
"Description of the Mortgage Pool",
"Description of the Certificates--
Distributions" and "--Subordination;
Allocation of Losses and Certain Expenses" and
"Yield and Maturity Considerations" in this
prospectus supplement. See also "Yield and
Maturity Considerations" in the accompanying
prospectus.
PREPAYMENT AND REPURCHASES MAY
AFFECT THE YIELD TO MATURITY
OF YOUR CERTIFICATES......... The yield to maturity on your certificates
will depend, in significant part, upon the rate
and timing of principal payments on the
mortgage loans. For this purpose, principal
payments include both voluntary prepayments, if
permitted, and involuntary prepayments, such as
prepayments resulting from casualty or
condemnation, defaults and liquidations,
purchases or repurchases upon breaches of
representations and warranties.
The investment performance of your
certificates may vary materially and adversely
from your expectations if the actual rate of
prepayment on the mortgage loans is higher or
lower than you anticipate.
Voluntary prepayments, if permitted, generally
require payment of a prepayment premium.
Nevertheless, we cannot assure you that the
related borrowers will refrain from prepaying
their mortgage loans due to the existence of a
prepayment premium. Also, we cannot assure you
that involuntary prepayments will not occur.
The rate at which voluntary prepayments occur
on the mortgage loans will be affected by a
variety of factors, including:
o the terms of the mortgage loans;
o the length of any prepayment lockout
period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
S-26
o the applicable yield maintenance charges or
prepayment premiums;
o the master servicer's or special servicer's
ability to enforce those charges or
premiums;
o the occurrence of casualties or natural
disasters; and
o economic, demographic, tax, legal or other
factors.
No yield maintenance charge or prepayment
premium will be generally required for
prepayments in connection with a casualty or
condemnation. In addition, if the mortgage
loan seller repurchases any mortgage loan from
the trust due to a material breach of
representations or warranties or a material
document defect, the repurchase price paid
will be passed through to the holders of the
certificates with the same effect as if the
mortgage loan had been prepaid in part or in
full, except that no prepayment premium or
yield maintenance charge would be payable. The
repurchase price paid by the mortgage loan
seller may not include a liquidation fee. Such
a repurchase may therefore adversely affect
the yield to maturity on your certificates.
BORROWER DEFAULTS MAY ADVERSELY
AFFECT YOUR YIELD............ The rate and timing of delinquencies or
defaults on the mortgage loans will affect:
o the aggregate amount of distributions on
the offered certificates;
o their yield to maturity;
o the rate of principal payments; and
o their weighted average life.
If losses on the mortgage loans exceed the
aggregate principal amount of the classes of
certificates subordinated to a particular
class, such class will suffer a loss equal to
the full amount of such excess (up to the
outstanding principal amount of such
certificate).
If you calculate your anticipated yield based
on assumed rates of defaults and losses that
are lower than the default rate and losses
actually experienced and such losses are
allocable to your certificates, your actual
yield to maturity will be lower than the
assumed yield. Under certain extreme
scenarios, such yield could be negative. In
general, the earlier a loss borne by you on
your certificates occurs, the greater the
effect on your yield to maturity.
Even if losses on the mortgage loans are not
borne by your certificates, those losses may
affect the weighted average life and yield to
maturity of your certificates. This may be so
because those losses lead to your certificates
having a higher percentage ownership interest
in the trust
S-27
and related distributions of principal
payments on the mortgage loans than would
otherwise have been the case. The effect on
the weighted average life and yield to
maturity of your certificates will depend upon
the characteristics of the remaining mortgage
loans.
Additionally, delinquencies and defaults on
the mortgage loans may significantly delay the
receipt of distributions by you on your
certificates, unless certain advances are made
to cover delinquent payments or the
subordination of another class of certificates
fully offsets the effects of any such
delinquency or default.
THE BORROWER'S FORM OF ENTITY
MAY CAUSE SPECIAL RISKS...... Most of the borrowers are legal entities
rather than individuals. Mortgage loans made to
legal entities may entail risks of loss greater
than those of mortgage loans made to
individuals. For example, a legal entity, as
opposed to an individual, may be more inclined
to seek legal protection from its creditors
under the bankruptcy laws. Unlike individuals
involved in bankruptcies, most of the entities
generally do not have personal assets and
creditworthiness at stake. The terms of the
mortgage loans generally require that the
borrowers covenant to be single-purpose
entities, although in many cases the borrowers
are not required to observe all covenants and
conditions that typically are required in order
for them to be viewed under standard rating
agency criteria as "special purpose entities".
In general, borrowers organizational documents
or the terms of the mortgage loans limit their
activities to the ownership of only the related
mortgaged property or properties and limit the
borrowers ability to incur additional
indebtedness. These provisions are designed to
mitigate the possibility that the borrowers
financial condition would be adversely impacted
by factors unrelated to the mortgaged property
and the mortgage loan in the pool. However, we
cannot assure you that the related borrowers
will comply with these requirements. The
bankruptcy of a borrower, or a general partner
or managing member of a borrower, may impair
the ability of the lender to enforce its rights
and remedies under the related mortgage. Two
mortgage loans, representing 1.9% of the
initial pool balance (2.5% of the group 1
balance), were made to a borrower with members
or affiliates that have previously filed for
bankruptcy.
Many of the borrowers are not special purpose
entities structured to limit the possibility
of becoming insolvent or bankrupt, and
therefore may be more likely to become
insolvent or the subject of a voluntary or
involuntary bankruptcy proceeding because such
borrowers may be:
o operating entities with businesses distinct
from the operation of the property with the
associated
S-28
liabilities and risks of operating an
ongoing business; or
o individuals that have personal liabilities
unrelated to the property.
However, any borrower, even a special purpose
entity structured to be bankruptcy-remote, as
an owner of real estate will be subject to
certain potential liabilities and risks. We
cannot provide assurances that any borrower
will not file for bankruptcy protection or
that creditors of a borrower or a corporate or
individual general partner or managing member
of a borrower will not initiate a bankruptcy
or similar proceeding against such borrower or
corporate or individual general partner or
managing member.
Furthermore, with respect to any related
borrowers, creditors of a common parent in
bankruptcy may seek to consolidate the assets
of such borrowers with those of the parent.
Consolidation of the assets of such borrowers
would likely have an adverse effect on the
funds available to make distributions on your
certificates, and may lead to a downgrade,
withdrawal or qualification of the ratings of
your certificates. In this respect, eight
groups of mortgage loans, representing 25.8%
of the initial pool balance, are made to
affiliated borrowers. See "Certain Legal
Aspects of Mortgage Loans--Bankruptcy Laws" in
the accompanying prospectus.
In addition, with respect to five mortgage
loans, representing 5.4% of the initial pool
balance (7.2% of the group 1 balance) the
borrowers own the related mortgaged property
as tenants in common. These mortgage loans may
be subject to prepayment, including during
periods when prepayment might otherwise be
prohibited, as a result of partition. Although
some of the related borrowers have purported
to waive any right of partition, we cannot
assure you that any such waiver would be
enforced by a court of competent jurisdiction.
BANKRUPTCY PROCEEDINGS ENTAIL
CERTAIN RISK................. Under the federal bankruptcy law, the filing
of a petition in bankruptcy by or against a
borrower will stay the sale of the real
property owned by that borrower, as well as the
commencement or continuation of a foreclosure
action. In addition, even if a court determines
that the value of the mortgaged property is
less than the principal balance of the mortgage
loan it secures, the court may prevent a lender
from foreclosing on the mortgaged property
(subject to certain protections available to
the lender). As part of a restructuring plan, a
court also may reduce the amount of secured
indebtedness to the then-value of the mortgaged
property, which action would make the lender a
general unsecured creditor for the difference
between the then-current value and the
S-29
amount of its outstanding mortgage
indebtedness. A bankruptcy court also may: (1)
grant a debtor a reasonable time to cure a
payment default on a mortgage loan; (2) reduce
periodic payments due under a mortgage loan;
(3) change the rate of interest due on a
mortgage loan; or (4) otherwise alter the
mortgage loan's repayment schedule.
Moreover, the filing of a petition in
bankruptcy by, or on behalf of, a junior
lienholder may stay the senior lienholder from
taking action to foreclose on the junior lien.
Additionally, the borrower's trustee or the
borrower, as debtor-in-possession, has certain
special powers to avoid, subordinate or
disallow debts. In certain circumstances, the
claims of the securitization trustee may be
subordinated to financing obtained by a
debtor-in-possession subsequent to its
bankruptcy.
Under the federal bankruptcy law, the lender
will be stayed from enforcing a borrower's
assignment of rents and leases. The federal
bankruptcy law also may interfere with the
master servicer's or special servicer's
ability to enforce lockbox requirements. The
legal proceedings necessary to resolve these
issues can be time consuming and may
significantly delay or diminish the receipt of
rents. Rents also may escape an assignment to
the extent they are used by the borrower to
maintain the mortgaged property or for other
court authorized expenses.
As a result of the foregoing, the
securitization trustee's recovery with respect
to borrowers in bankruptcy proceedings may be
significantly delayed, and the aggregate
amount ultimately collected may be
substantially less than the amount owed.
Certain of the mortgage loans may have
sponsors that have previously filed
bankruptcy, which in some cases may have
involved the same property that currently
secures the mortgage loan. In each case, the
related entity or person has emerged from
bankruptcy. However, we cannot assure you that
such sponsors will not be more likely than
other sponsors to utilize their rights in
bankruptcy in the event of any threatened
action by the mortgagee to enforce its rights
under the related loan documents.
ADDITIONAL COMPENSATION TO THE
SERVICER WILL AFFECT YOUR
RIGHT TO RECEIVE
DISTRIBUTIONS..... To the extent described in this prospectus
supplement, the master servicer, the special
servicer or the trustee, as applicable, will be
entitled to receive interest on unreimbursed
advances. This interest will generally accrue
from the date on which the related advance is
made or the related expense is incurred through
the date of reimbursement. In addition, under
certain circumstances, including delinquencies
in the payment of
S-30
principal and interest, a mortgage loan will
be specially serviced and the special servicer
will be entitled to compensation for special
servicing activities. The right to receive
interest on advances or special servicing
compensation is senior to the rights of
certificateholders to receive distributions on
the offered certificates. The payment of
interest on advances and the payment of
compensation to the special servicer may lead
to shortfalls in amounts otherwise
distributable on your certificates.
LIQUIDITY FOR CERTIFICATES MAY
BE LIMITED................... Your certificates will not be listed on any
securities exchange or traded on the NASDAQ
Stock Market, and there is currently no
secondary market for your certificates. While
the underwriters currently intend to make a
secondary market in the offered certificates,
they are not obligated to do so. Accordingly,
you may not have an active or liquid secondary
market for your certificates. Lack of liquidity
could result in a substantial decrease in the
market value of your certificates. Many other
factors may affect the market value of your
certificates including the then-prevailing
interest rates.
MORTGAGE LOAN AMORTIZATION
WILL AFFECT PAYMENT.......... As principal payments or prepayments are made
on a mortgage loan that is part of a pool of
mortgage loans, the pool will be subject to
more concentrated risks with respect to the
diversity of mortgaged properties, types of
mortgaged properties and number of borrowers,
as described above. Classes that have a later
sequential designation or a lower payment
priority are more likely to be exposed to this
concentration risk than are classes with an
earlier sequential designation or a higher
priority. This is the case because principal on
the offered certificates is generally payable
in sequential order, and no class entitled to
distribution of principal generally receives
principal until the principal amount of the
preceding class or classes entitled to receive
principal have been reduced to zero.
SUBORDINATION CREATES SPECIAL
CONSIDERATIONS FOR INVESTORS
IN SUBORDINATE OFFERED
CERTIFICATES.................. As described in this prospectus supplement,
unless your certificates are Class A-1, Class
A-2, Class A-3, Class A-4, Class A-5, Class
A-1A or Class X Certificates, your rights to
receive distributions of amounts collected or
advanced on or in respect of the mortgage loans
will be subordinated to those of the holders of
the offered certificates with an earlier
alphabetical designation.
GRACE PERIODS UNDER THE
MORTGAGE LOANS MAY IMPACT
THE MASTER SERVICER'S
OBLIGATION TO ADVANCE........ The mortgage loans have grace periods for
monthly payments ranging from 0 to 15 days. In
some cases, such
S-31
grace periods may run past the determination
date. If borrowers pay at the end of such
grace periods rather than on the due dates for
such monthly payments, the master servicer
will be required to make an advance for such
monthly payment (and monthly servicing reports
will show significant advances as a result)
even though the borrower is not technically
delinquent under the terms of its mortgage
loan. No interest will accrue on these
advances made by the master servicer until
after the end of the related grace period. For
purposes of the foregoing discussions, a grace
period is the number of days before a late
payment charge is due on a mortgage loan,
which may be different from the date an event
of default would occur under the mortgage
loan.
RISKS TO THE MORTGAGED
PROPERTIES RELATING TO
RECENT TERRORIST ATTACKS
AND FOREIGN CONFLICTS........ On September 11, 2001, the United States was
subjected to multiple terrorist attacks which
resulted in considerable uncertainty in the
world financial markets. The terrorist attacks
on the World Trade Center and the Pentagon
suggest an increased likelihood that large
public areas such as shopping malls or large
office buildings could become the target of
terrorist attacks in the future. The
possibility of such attacks could (i) lead to
damage to one or more of the mortgaged
properties if any such attacks occur, (ii)
result in higher costs for insurance premiums
and such higher premiums could adversely affect
the cash flow at such mortgaged properties or
(iii) impact leasing patterns or shopping
patterns which could adversely impact leasing
revenue and mall traffic and percentage rent.
As a result, the ability of the mortgaged
properties to generate cash flow may be
adversely affected. In addition, the United
States is engaged in continuing military
operations in Iraq, Afghanistan and elsewhere.
It is uncertain what effect these operations
will have on domestic and world financial
markets, economies, real estate markets,
insurance costs or business segments. The full
impact of these events is not yet known but
could include, among other things, increased
volatility in the price of securities including
the certificates. The terrorist attacks may
also adversely affect the revenues or costs of
operation of the mortgaged properties. With
respect to shopping patterns, such events have
significantly reduced air travel throughout the
United States and, therefore, have had a
negative effect on revenues in areas heavily
dependent on tourism. The decrease in air
travel may have a negative effect on certain of
the mortgaged properties that are dependent on
tourism or that are located in areas heavily
dependent on tourism which could reduce the
ability of the affected mortgaged properties to
generate cash flow. The attacks also could
result in higher costs for insurance or for
security, particularly for larger properties.
See "--Property
S-32
Insurance May Not Protect Your Certificates
from Loss in the Event of Casualty or Loss"
below. Accordingly, these disruptions,
uncertainties and costs could materially and
adversely affect your investment in the
certificates.
RISKS RELATED TO THE MORTGAGE LOANS
RISKS ASSOCIATED WITH
COMMERCIAL LENDING MAY BE
DIFFERENT THAN FOR
RESIDENTIAL LENDING.......... The mortgaged properties consist solely of
multifamily rental and commercial properties.
Commercial and multifamily lending is generally
viewed as exposing a lender to a greater risk
of loss than residential one to four family
lending because it usually involves larger
loans to a single borrower or a group of
related borrowers.
The repayment of a commercial or multifamily
loan is typically dependent upon the ability
of the applicable property to produce cash
flow through the collection of rents or other
operating revenues. Even the liquidation value
of a commercial property is determined, in
substantial part, by the capitalization of the
property's cash flow. However, net operating
income can be volatile and may be insufficient
to cover debt service on the loan at any given
time.
The net operating incomes and property values
of the mortgaged properties may be adversely
affected by a large number of factors. Some of
these factors relate to the properties
themselves, such as:
o the age, design and construction quality of
the properties;
o perceptions regarding the safety,
convenience and attractiveness of the
properties;
o the proximity and attractiveness of
competing properties;
o the adequacy of the property's management
and maintenance;
o increases in operating expenses;
o an increase in the capital expenditures
needed to maintain the properties or make
improvements;
o dependence upon a single tenant and
concentration of tenant in a particular
business;
o a decline in the financial condition of a
major tenant;
o an increase in vacancy rates; and
S-33
o a decline in rental rates as leases are
renewed or entered into with new tenants.
Other factors are more general in nature, such
as:
o national, regional or local economic
conditions, including plant closings,
military base closings, industry slowdowns
and unemployment rates;
o local real estate conditions, such as an
oversupply of retail space, office space or
multifamily housing;
o demographic factors;
o changes or continued weakness in specific
industry segments;
o the public perception of safety for
customers and clients;
o consumer confidence;
o consumer tastes and preferences;
o retroactive changes in building codes;
o conversion of a property to an alternative
use;
o new construction in the market; and
o number and diversity of tenants.
The volatility of net operating income will be
influenced by many of the foregoing factors,
as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o in the case of rental properties, the rate
at which new rentals occur;
o tenant defaults;
o the property's "operating leverage" which
is generally the percentage of total
property expenses in relation to revenue,
the ratio of fixed operating expenses to
those that vary with revenues, and the
level of capital expenditures required to
maintain the property and to retain or
replace tenants; and
o in the case of government sponsored
tenants, the right of the tenant in some
instances to cancel a lease due to a lack
of appropriations.
A decline in the real estate market or in the
financial condition of a major tenant will
tend to have a more immediate effect on the
net operating income of properties with
short-term revenue sources, such as short-term
or month-to-month leases, and may lead to
higher rates of delinquency or defaults.
S-34
Commercial properties represent security for
64.3% of the initial pool balance and 85.3% of
the group 1 balance. Manufactured housing
communities represent security for 19.7% of
the initial pool balance (7.7% of the group 1
balance and 56.4% of the group 2 balance).
Lending on commercial properties and
manufactured housing communities is generally
perceived as involving greater risk than
lending on the security of multifamily
residential properties. Certain types of
commercial properties and manufactured housing
communities are exposed to particular kinds of
risks. See "Risk Factors-- Risks Related to
the Mortgage Loans--Particular Property Types
Present Special Risks--Risks Particular to
"--Office Properties", "--Retail Properties",
"--Multifamily", "--Manufactured Housing
Communities", "--Industrial and Warehouse
Properties", "--Self-Storage Properties",
"--Other" and "--Hotel Properties" in this
prospectus supplement.
POOR PROPERTY MANAGEMENT WILL
LOWER THE PERFORMANCE OF THE
RELATED MORTGAGED PROPERTY... The successful operation of a real estate
project depends upon the property manager's
performance and viability. The property manager
is responsible for:
o responding to changes in the local market;
o planning and implementing the rental
structure;
o operating the property and providing
building services;
o managing operating expenses; and
o assuring that maintenance and capital
improvements are carried out in a timely
fashion.
Properties deriving revenues primarily from
short-term sources, such as short-term or
month-to-month leases, are generally more
management intensive than properties leased to
creditworthy tenants under long-term leases.
Good management, by controlling costs,
providing services to tenants and seeing to
property maintenance and upkeep, can, in some
cases, improve cash flow, reduce vacancy,
leasing and repair costs and preserve property
value. Poor management could impair short term
cash flow and the long term viability of a
property.
We make no representation or warranty as to
the skills of any present or future managers.
Additionally, we cannot assure you that the
property managers will be in a financial
condition to fulfill their management
responsibilities throughout the terms of their
respective management agreements.
Furthermore, we cannot assure you that the
mortgaged properties will not have related
management which in the
S-35
event that a related management company is
incapable of performing its duties may affect
one or more groups of mortgaged properties.
BALLOON LOANS MAY PRESENT
GREATER RISK THAN FULLY
AMORTIZING LOANS.............. Eighty-nine of the mortgage loans, excluding
those mortgage loans that are interest only
until maturity or the anticipated repayment
date (61 of these mortgage loans are in loan
group 1 and 28 of these mortgage loans are in
loan group 2), representing 97.8% of the
initial pool balance, (97.7% of the group 1
balance and 98.1% of the group 2 balance) as of
the cut-off date, will have substantial
payments (that is, balloon payments) due at
their respective stated maturities unless the
mortgage loan is previously prepaid. Fifty-five
of the mortgage loans (44 of these mortgage
loans are in loan group 1 and 11 of these
mortgage loans are in loan group 2)
representing in the aggregate 58.4% of the
initial pool balance (67.7% of the group 1
balance and 30.1% of the group 2 balance) as of
the cut-off date, will have balloon payments
due during the period from November 1, 2013,
through November 1, 2014. In addition, three of
the mortgage loans (two of these mortgage loans
are in loan group 1 and one of these mortgage
loans is in loan group 2) representing 1.5% of
the initial pool balance (1.6% of the group 1
balance and 1.2% of the group 2 balance) as of
the cut-off date, will provide for payments of
interest only until maturity.
Mortgage loans with balloon payments or
substantial scheduled principal balances
involve a greater risk to the lender than
fully amortizing loans, because the borrower's
ability to repay a mortgage loan on its
maturity date or the anticipated repayment
date typically will depend upon its ability
either to refinance the loan or to sell the
related mortgaged property at a price
sufficient to permit repayment. In addition,
the one fully-amortizing mortgage loan, which
represents 0.2% of the initial pool balance
(0.7% of the group 2 balance), which accrues
interest on an "actual/360" basis but has
fixed monthly payments, may, in fact, have a
small balloon payment due at maturity.
Circumstances that will affect the ability of
the borrower to accomplish either of these
goals at the time of attempted sale or
refinancing include:
o the prevailing mortgage rates;
o the fair market value of the property;
o the borrower's equity in the related
property;
o the financial condition of the borrower and
operating history of the property;
o the operating history of the property and
occupancy levels of the property;
S-36
o reduction in applicable government
assistance/rent subsidy programs;
o tax laws;
o prevailing general and regional economic
conditions; and
o the availability of, and competition for,
credit for multifamily or commercial
properties, as the case may be.
We cannot assure you that each borrower will
have the ability to repay the remaining
principal balance on the pertinent date. See
"Description of the Mortgage Pool-- Certain
Terms and Conditions of the Mortgage Loans"
and "--Additional Mortgage Loan Information"
in this prospectus supplement and "Risk
Factors--Certain Factors Affecting
Delinquency, Foreclosure and Loss of the
Mortgage Loans--Increased Risk of Default
Associated with Balloon Payments" in the
accompanying prospectus.
The availability of funds in the mortgage and
credit markets fluctuates over time. None of
the mortgage loan seller, the parties to the
pooling and servicing agreement, or any third
party is obligated to refinance any mortgage
loan.
PARTICULAR PROPERTY TYPES
PRESENT SPECIAL RISKS:
OFFICE PROPERTIES............. Office properties secure 24 of the mortgage
loans, representing 31.8% of the initial pool
balance (42.1% of the group 1 balance) as of
the cut-off date.
A large number of factors may adversely affect
the value of office properties, including:
o the number and quality of an office
building's tenants;
o the physical attributes of the building in
relation to competing buildings (e.g., age,
condition, design, access to transportation
and ability to offer certain amenities,
such as sophisticated building systems);
o the desirability of the area as a business
location;
o the strength and nature of the local
economy (including labor costs and quality,
tax environment and quality of life for
employees);
o an adverse change in population, patterns
of telecommuting or sharing of office
space;
o local competitive conditions, including the
supply of office space or the existence or
construction of new competitive office
buildings;
o quality of management;
o changes in population and employment
affecting the demand for office space;
S-37
o properties not equipped for modern business
becoming functionally obsolescent; and
o declines in the business of tenants,
especially single tenanted property.
In addition, there may be significant costs
associated with tenant improvements, leasing
commissions and concessions in connection with
reletting office space. Moreover, the cost of
refitting office space for a new tenant is
often higher than the cost of refitting other
types of property.
Included in the office properties references
above are six medical office properties
representing 3.3% of the initial pool balance
(4.4% of the group 1 balance) as of the
cut-off date. The performance of a medical
office property may depend on the proximity of
such property to a hospital or other health
care establishment and on reimbursements for
patient fees from private or
government-sponsored insurance companies. The
sudden closure of a nearby hospital may
adversely affect the value of a medical office
property. In addition, the performance of a
medical office property may depend on
reimbursements for patient fees from private
or government-sponsored insurers and issues
related to reimbursement (ranging from
non-payment to delays in payment) from such
insurers could adversely impact cash flow at
such mortgaged properties. Moreover, medical
office properties appeal to a narrow market of
tenants and the value of a medical office
property may be adversely affected by the
availability of competing medical office
properties.
RETAIL PROPERTIES............. Retail properties secure 19 of the mortgage
loans, representing 12.8% of the initial pool
balance (17.0% of the group 1 balance) as of
the cut-off date.
Several factors may adversely affect the value
and successful operation of a retail property,
including:
o changes in consumer spending patterns,
local competitive conditions (such as the
supply of retail space or the existence or
construction of new competitive shopping
centers or shopping malls);
o alternative forms of retailing (such as
direct mail, video shopping networks and
internet web sites which reduce the need
for retail space by retail companies);
o the quality and philosophy of management;
o the safety, convenience and attractiveness
of the property to tenants and their
customers or clients;
o the public perception of the safety of
customers at shopping malls and shopping
centers;
S-38
o the need to make major repairs or
improvements to satisfy the needs of major
tenants; and
o traffic patterns and access to major
thoroughfares.
The general strength of retail sales also
directly affects retail properties. The
retailing industry is currently undergoing
consolidation due to many factors, including
growth in discount and alternative forms of
retailing. If the sales by tenants in the
mortgaged properties that contain retail space
were to decline, the rents that are based on a
percentage of revenues may also decline, and
tenants may be unable to pay the fixed portion
of their rents or other occupancy costs. The
cessation of business by a significant tenant
can adversely affect a retail property, not
only because of rent and other factors
specific to such tenant, but also because
significant tenants at a retail property play
an important part in generating customer
traffic and making a retail property a
desirable location for other tenants at such
property. In addition, certain tenants at
retail properties may be entitled to terminate
their leases if an anchor tenant fails to
renew or terminates its lease, becomes the
subject of a bankruptcy proceeding or ceases
operations at such property.
The presence or absence of an "anchor tenant"
or a "shadow anchor" in or near a shopping
center also can be important because anchors
play a key role in generating customer traffic
and making a shopping center desirable for
other tenants. An "anchor tenant" is usually
proportionately larger in size than most other
tenants in the mortgaged property, is vital in
attracting customers to a retail property and
is located on or adjacent to the related
mortgaged property. A "shadow anchor" is
usually proportionally larger in size than
most tenants in the mortgaged property, is
important in attracting customers to a retail
property and is located sufficiently close and
convenient to the mortgaged property, but not
on the mortgaged property, so as to influence
and attract potential customers. Eleven of the
mortgaged properties, securing mortgage loans
representing approximately 8.7% of the initial
pool balance (11.5% of the group 1 balance) as
of the cut-off date are secured by retail
properties that are considered by the mortgage
loan seller to have an "anchor tenant." Six of
the mortgaged properties, securing mortgage
loans representing approximately 3.2% of the
initial pool balance (4.2% of the group 1
balance) as of the cut-off date, are retail
properties that are considered by the mortgage
loan seller to be "shadow anchored." Two of
the mortgaged properties, securing mortgage
loans representing approximately 0.9% of the
initial pool balance (1.2% of the group 1
balance) as of the cut-off date, are retail
properties that are considered by the mortgage
loan seller to be "unanchored".
S-39
If anchor stores in a mortgaged property were
to close, the related borrower may be unable
to replace those anchors in a timely manner or
without suffering adverse economic
consequences. Certain of the tenants or anchor
stores of the retail properties may have
co-tenancy clauses and/or operating covenants
in their leases or operating agreements which
permit those tenants or anchor stores to cease
operating under certain conditions, including,
without limitation, certain other stores not
being open for business at the mortgaged
property or a subject store not meeting the
minimum sales requirement under its lease. In
addition, in the event that a "shadow anchor"
fails to renew its lease, terminates its lease
or otherwise ceases to conduct business within
a close proximity to the mortgaged property,
customer traffic at the mortgaged property may
be substantially reduced. We cannot assure you
that such space will be occupied or that the
related mortgaged property will not suffer
adverse economic consequences.
MULTIFAMILY PROPERTIES........ Multifamily properties secure 21 of the
mortgage loans, representing 16.0% of the
initial pool balance (7.0% of the group 1
balance and 43.6% of the group 2 balance) as of
the cut-off date.
Several factors may adversely affect the value
and successful operation of a multifamily
property, including:
o the physical attributes of the apartment
building (e.g., its age, appearance and
construction quality);
o the location of the property (e.g., a
change in the neighborhood over time);
o the ability and willingness of management
to provide adequate maintenance and
insurance;
o the types of services or amenities the
property provides;
o the property's reputation;
o the level of mortgage interest rates (which
may encourage tenants to purchase rather
than lease housing);
o the tenant mix, such as the tenant
population being predominantly students or
being heavily dependent on workers from a
particular business or personnel from a
local military base;
o the presence of competing properties;
o adverse local or national economic
conditions which may limit the amount of
rent that may be charged and may result in
a reduction of timely rent payments or a
reduction in occupancy levels; and
o state and local regulations which may
affect the building owner's ability to
increase rent to market rent for an
equivalent apartment.
S-40
Certain states regulate the relationship of an
owner and its tenants. Commonly, these laws
require a written lease, good cause for
eviction, disclosure of fees, and notification
to residents of changed land use, while
prohibiting unreasonable rules, retaliatory
evictions, and restrictions on a resident's
choice of unit vendors. Apartment building
owners have been the subject of suits under
state "Unfair and Deceptive Practices Acts"
and other general consumer protection statutes
for coercive, abusive or unconscionable
leasing and sales practices. A few states
offer more significant protection. For
example, there are provisions that limit the
bases on which a landlord may terminate a
tenancy or increase its rent or prohibit a
landlord from terminating a tenancy solely by
reason of the sale of the owner's building.
In addition to state regulation of the
landlord-tenant relationship, numerous
counties and municipalities impose rent
control on apartment buildings. These
ordinances may limit rent increases to fixed
percentages, to percentages of increases in
the consumer price index, to increases set or
approved by a governmental agency, or to
increases determined through mediation or
binding arbitration. Any limitations on a
borrower's ability to raise property rents may
impair such borrower's ability to repay its
multifamily loan from its net operating income
or the proceeds of a sale or refinancing of
the related multifamily property.
Certain of the mortgage loans are secured by
mortgaged properties that are eligible (or
become eligible in the future) for and have
received low income housing tax credits
pursuant to Section 42 of the Internal Revenue
Code in respect of various units within the
mortgaged property or have tenants that rely
on rent subsidies under various
government-funded programs, including the
Section 8 Tenant-Based Assistance Rental
Certificate Program of the United States
Department of Housing and Urban Development.
We can give you no assurance that such
programs will be continued in their present
form or that the level of assistance provided
will be sufficient to generate enough revenues
for the related borrower to meet its
obligations under the related mortgage loans.
Certain of the mortgage loans are secured or
may be secured in the future by mortgaged
properties that are subject to certain
affordable housing covenants, in respect of
various units within the mortgaged properties.
MANUFACTURED HOUSING
COMMUNITIES.................. Manufactured housing communities secure 17 of
the mortgage loans representing 19.7% of the
initial pool balance (7.7% of the group 1
balance and 56.4% of the group 2 balance) as of
the cut-off date. Significant factors
determining the value of such properties are
generally
S-41
similar to the factors affecting the value of
multifamily residential properties. In
addition, these properties are special purpose
properties that could not be readily converted
to general residential, retail or office use.
In fact, certain states also regulate changes
in manufactured housing communities and
require that the landlord give written notice
to its tenants a substantial period of time
prior to the projected change. Consequently,
if the operation of any of such properties
becomes unprofitable such that the borrower
becomes unable to meet its obligation on the
related mortgage loan, the liquidation value
of the related property may be substantially
less, relative to the amount owing on the
mortgage loan, than would be the case if such
properties were readily adaptable to other
uses.
INDUSTRIAL AND
WAREHOUSE PROPERTIES.......... Industrial and warehouse properties secure
three of the mortgage loans representing 2.0%
of the initial pool balance (2.7% of the group
1 balance) as of the cut-off date.
Among the significant factors determining the
value of industrial and warehouse properties
are:
o the quality of tenants;
o building design and adaptability (e.g.,
clear heights, column spacing, zoning
restrictions, number of bays and bay
depths, divisibility and truck turning
radius); and
o the location of the property (e.g.,
proximity to supply sources and customers,
availability of labor and accessibility to
distribution channels).
In addition, industrial and warehouse
properties may be adversely affected by
reduced demand for industrial and warehouse
space occasioned by a decline in a particular
industrial site or occasioned by a decline in
a particular industry segment, and a
particular industrial and warehouse property
may be difficult to release to another tenant
or may become functionally obsolete relative
to newer properties.
SELF-STORAGE PROPERTIES....... Self-storage properties secure nine of the
mortgage loans, representing 16.5% of the
initial pool balance (21.9% of the group 1
balance) as of the cut-off date. Self-storage
properties are considered vulnerable to
competition, because both acquisition costs and
break-even occupancy are relatively low. The
conversion of self-storage facilities to
alternative uses would generally require
substantial capital expenditures. Thus, if the
operation of any of the self-storage mortgaged
properties becomes unprofitable due to
o decreased demand;
S-42
o competition;
o age of improvements; or
o other factors so that the borrower becomes
unable to meet its obligations on the
related mortgage loan,
the liquidation value of that self-storage
mortgaged property may be substantially less,
relative to the amount owing on the mortgage
loan, than if the self-storage mortgaged
property were readily adaptable to other uses.
Tenant privacy, anonymity and efficient access
may heighten environmental risks. No
environmental assessment of a mortgaged
property included an inspection of the
contents of the self-storage units included in
the self-storage mortgaged properties and
there is no assurance that all of the units
included in the self-storage mortgaged
properties are free from hazardous substances
or other pollutants or contaminants or will
remain so in the future.
HOTEL PROPERTIES.............. A hotel property secures one of the mortgage
loans, representing 1.2% of the initial pool
balance (1.7% of the group 1 balance) as of the
cut-off date, and it is considered full-service
or limited-service.
Various factors may adversely affect the
economic performance of a hotel, including:
o adverse economic and social conditions,
either local, regional or national (which
may limit the amount that can be charged
for a room and reduce occupancy levels);
o the construction of competing hotels or
resorts;
o continuing expenditures for modernizing,
refurbishing and maintaining existing
facilities prior to the expiration of their
anticipated useful lives;
o a deterioration in the financial strength
or managerial capabilities of the owner and
operator of a hotel; and
o changes in travel patterns (including, for
example, the decline in air travel
following the terrorist attacks in New York
City, Washington, D.C. and Pennsylvania and
the current military operations in Iraq,
Afghanistan and elsewhere) caused by
changes in access, energy prices, strikes,
relocation of highways, the construction of
additional highways or other factors.
Because hotel rooms generally are rented for
short periods of time, the financial
performance of hotels tends to be affected by
adverse economic conditions and competition
more quickly than other commercial properties.
S-43
Moreover, the hotel and lodging industry is
generally seasonal in nature and different
seasons affect different hotels depending on
type and location. This seasonality can be
expected to cause periodic fluctuations in a
hotel property's room and restaurant revenues,
occupancy levels, room rates and operating
expenses.
When applicable, the liquor licenses for most
of the mortgaged properties are commonly held
by affiliates of the mortgagors, unaffiliated
managers and operating lessees. The laws and
regulations relating to liquor licenses
generally prohibit the transfer of such
licenses to any person. In the event of a
foreclosure of a hotel property that holds a
liquor license, the trustee or a purchaser in
a foreclosure sale would likely have to apply
for a new license, which might not be granted
or might be granted only after a delay which
could be significant. There can be no
assurance that a new license could be obtained
promptly or at all. The lack of a liquor
license in a full-service hotel could have an
adverse impact on the revenue from the related
mortgaged property or on the hotel's occupancy
rate.
Hotels may be operated under franchise,
management or operating agreements that may be
terminated by the franchisor, manager or
operator. It may be difficult to terminate a
manager of a hotel after foreclosure of a
mortgage.
AFFILIATIONS WITH A FRANCHISE
OR HOTEL MANAGEMENT COMPANY
PRESENT CERTAIN RISKS........ The mortgage loan secured by a hotel
property, representing approximately 1.2% of
the initial pool balance (1.7% of the group 1
balance) as of the cut-off date, is affiliated
with a franchise or hotel management company
through a franchise or management agreement.
The performance of a hotel property affiliated
with a franchise or hotel management company
depends in part on:
o the continued existence and financial
strength of the franchisor or hotel
management company;
o the public perception of the franchise or
hotel chain service mark; and
o the duration of the franchise licensing or
management agreements.
S-44
Any provision in a franchise agreement or
management agreement providing for termination
because of a bankruptcy of a franchisor or
manager generally will not be enforceable.
Replacement franchises may require
significantly higher fees.
The transferability of a franchise license
agreement is generally restricted. In the
event of a foreclosure, the lender or its
agent may not have the right to use the
franchise license without the franchisor's
consent. Conversely, in the case of certain
mortgage loans, the lender may be unable to
remove a franchisor or a hotel management
company that it desires to replace following a
foreclosure.
SUBORDINATE FINANCING MAY MAKE
RECOVERY DIFFICULT IN THE
EVENT OF LOSS................ The terms of certain mortgage loans permit or
require the borrowers to post letters of credit
and/or surety bonds for the benefit of the
mortgage loan, which may constitute a
contingent reimbursement obligation of the
related borrower or an affiliate. The issuing
bank or surety will not typically agree to
subordination and standstill protection
benefiting the mortgagee.
Additionally, although the mortgage loans
generally restrict the pledging of general
partnership and managing member equity
interests in a borrower subject to certain
exceptions, the terms of the mortgages
generally permit, subject to certain
limitations, the pledging of less than a
controlling portion of the limited partnership
or non-managing membership equity interest in
a borrower. Moreover, in general, any borrower
that does not meet special purpose entity
criteria may not be restricted in any way from
incurring unsecured subordinate debt or
mezzanine debt. We are aware that 14 mortgage
loans, representing 12.4% of the initial pool
balance (9.1% of the group 1 balance and 22.3%
of the group 2 balance), provide that the
members of the borrower have the right to
incur mezzanine debt under specified
circumstances set forth in the related loan
documents. The borrowers under two of the 14
mortgage loans, representing approximately
1.0% of the initial pool balance (0.7% of the
group 1 balance and 2.2% of the group 2
balance), have existing mezzanine debt. With
respect to one of the mortgage loans that has
existing mezzanine debt, representing 0.5% of
the initial pool balance (2.2% of the group 2
balance), the mortgagee and the related
mezzanine lender have entered into a mezzanine
intercreditor agreement that sets forth the
rights of the parties. Pursuant to such
mezzanine intercreditor agreement, the related
mezzanine lender among other things (x) has
agreed, under certain circumstances, not to
enforce its rights to realize upon collateral
securing the mezzanine loan or take any
enforcement action with respect to the
mezzanine loan
S-45
without written confirmation from the rating
agencies that such enforcement action would
not cause the downgrade, withdrawal or
qualification of the current ratings of the
certificates and (y) has subordinated the
mezzanine loan documents to the related
mortgage loan documents and has the option to
purchase the related mortgage loan if such
mortgage loan becomes defaulted or cure the
default.
Although the mortgage loans generally either
prohibit the related borrower from encumbering
the mortgaged property with additional secured
debt or require the consent of the holder of
the first lien prior to so encumbering such
property, a violation of such prohibition may
not become evident until the related mortgage
loan otherwise defaults. In addition, the
related borrower may be permitted to incur
additional indebtedness secured by furniture,
fixtures and equipment, and to incur
additional unsecured indebtedness. When a
mortgage loan borrower (or its constituent
members) also has one or more other
outstanding loans (even if subordinated
unsecured loans or loans secured by property
other than the mortgaged property), the trust
is subjected to additional risk. The borrower
may have difficulty servicing and repaying
multiple loans. The existence of another loan
generally will make it more difficult for the
borrower to obtain refinancing of the mortgage
loan or sell the related mortgaged property
and may jeopardize the borrower's ability to
make any balloon payment due at maturity or at
the related anticipated repayment date.
Moreover, the need to service additional debt
may reduce the cash flow available to the
borrower to operate and maintain the mortgaged
property. We are aware that two mortgage loans
representing 1.0% of the initial pool balance
(0.7% of the group 1 balance and 2.2% of the
group 2 balance) have existing unsecured
subordinate debt. In addition, we are aware
(i) that three mortgage loans, representing
7.3% of the initial pool balance (9.4% of the
group 1 balance and 0.7% of the group 2
balance), permit additional unsecured debt
under certain circumstances, and (ii) that
four mortgage loans representing 2.9% of the
initial pool balance (2.5% of the group 1
balance and 3.8% of the group 2 balance),
permit future subordinate debt secured by the
mortgaged property subject to certain
conditions. We are also aware that five
mortgage loans, representing 23.3% of the
initial pool balance (30.2% of the group 1
balance and 2.1% of the group 2 balance), have
existing subordinate debt secured by the
mortgaged property.
The SS Component Mortgage Loan is one of two
mortgage loans that are part of a split loan
structure that is secured by the same mortgage
instrument on the related mortgaged property.
The other mortgage loan in this split loan
structure is not included in the trust. The
S-46
other mortgage loan's principal balance as of
the date of origination was $22,425,256. This
mortgage loan is subordinate in right of
payment to the mortgage loan that is included
in the trust. See "Description of the Mortgage
Pool--17 State Street Whole Loan" in this
prospectus supplement.
One mortgage loan, representing 0.2% of the
initial pool balance (0.3% of the group 1
balance), is one of two mortgage loans that
are part of a split loan structure that is
secured by the same mortgage instrument on the
related mortgaged property. The other mortgage
loan in this split loan structure is not
included in the trust. The other mortgage
loan's principal balance as of the date of
origination was $170,000. This mortgage loan
is subordinate in right of payment to the
mortgage loan that is included in the trust.
See "Description of the Mortgage Pool--The CBA
Whole Loan" in this prospectus supplement.
Additionally, if the borrower (or its
constituent members) defaults on the mortgage
loan and/or any other loan, actions taken by
other lenders such as a foreclosure or an
involuntary petition for bankruptcy against
the borrower could impair the security
available to the trust, including the
mortgaged property, or stay the trust's
ability to foreclose during the course of the
bankruptcy case. The bankruptcy of another
lender also may operate to stay foreclosure by
the trust. The trust may also be subject to
the costs and administrative burdens of
involvement in foreclosure or bankruptcy
proceedings or related litigation. See
"Certain Legal Aspects of Mortgage
Loans--Subordinate Financing" in the
accompanying prospectus.
The debt service requirements of mezzanine
debt reduce cash flow available to the
borrower that could otherwise be used to make
capital improvements, as a result of which the
value of the property may be adversely
affected. We make no representation whether
any other subordinate financing encumbers any
mortgaged property, any borrower has incurred
material unsecured debt other than trade
payables in the ordinary course of business,
or any third party holds debt secured by a
pledge of an equity interest in a borrower.
Also, although the portions of the CC
Component Mortgage Loan, the SS Component
Mortgage Loan and the UH Component Mortgage
Loan relating to the offered certificates do
not include the related subordinate
components, the related borrowers are still
obligated to make interest and principal
payments on the entire amount of such mortgage
loans.
S-47
YOUR INVESTMENT IS NOT INSURED
OR GUARANTEED................ The mortgage loans are not insured or
guaranteed by any person or entity,
governmental or otherwise.
The mortgage loans are generally non-recourse
loans. If a default occurs under any mortgage
loan, recourse generally may be had only
against the specific properties and other
assets that have been pledged to secure the
loan. Payment prior to maturity is
consequently dependent primarily on the
sufficiency of the net operating income of the
mortgaged property. Payment at maturity is
primarily dependent upon the market value of
the mortgaged property or the borrower's
ability to refinance the property. The
depositor has not undertaken an evaluation of
the financial condition of any borrower.
ADVERSE ENVIRONMENTAL
CONDITIONS MAY REDUCE
CASHFLOW FROM A
MORTGAGED PROPERTY........... The trust could become liable for a material
adverse environmental condition at an
underlying real property. Any such potential
liability could reduce or delay payments on the
offered certificates.
All of the mortgaged properties were subject
to environmental site assessments in
connection with origination, including Phase I
site assessments or updates of previously
performed Phase I site assessments, had a
transaction screen performed in lieu of a
Phase I site assessment or was required to
have environmental insurance in lieu of an
environmental site assessment. In some cases,
Phase II site assessments also have been
performed. Although those assessments involved
site visits and other types of review, we
cannot assure you that all environmental
conditions and risks were identified.
The environmental investigations described
above, as of the date of the report relating
to the environmental investigation, did not
reveal any material violation of applicable
environmental laws with respect to any known
circumstances or conditions concerning the
related mortgaged property, or, if the
environmental investigation report revealed
any such circumstances or conditions with
respect to the related mortgaged property,
then--
o the circumstances or conditions were
subsequently remediated in all material
respects; or
o generally, one or more of the following was
the case:
1. a party not related to the related
borrower with financial resources
reasonably adequate to cure to cure the
circumstance or condition in all
material respects was identified as a
responsible party for such circumstance
or condition;
S-48
2. the related borrower was required to
provide additional security to cure the
circumstance or condition in all
material respects and to obtain and,
for the period contemplated by the
related mortgage loan documents,
maintain an operations and maintenance
plan;
3. the related borrower provided a "no
further action" letter or other
evidence that applicable federal, state
or local governmental authorities had
no current intention of taking any
action, and are not requiring any
action, in respect of such circumstance
or condition;
4. such circumstances or conditions were
investigated further and based upon
such additional investigation, an
independent environmental consultant
recommended no further investigation or
remediation, or recommended only the
implementation of an operations and
maintenance program, which the related
borrower is required to do;
5. the expenditure of funds reasonably
estimated to be necessary to effect
such remediation was the lesser of (a)
an amount equal to two percent of the
outstanding principal balance of the
related mortgage loan and (b) $200,000;
6. an escrow of funds exists reasonably
estimated to be sufficient for purposes
of effecting such remediation;
7. the related borrower or other
responsible party is currently taking
such actions, if any, with respect to
such circumstances or conditions as
have been required by the applicable
governmental regulatory authority;
8. the related mortgaged property is
insured under a policy of insurance,
subject to certain per occurrence and
aggregate limits and a deductible,
against certain losses arising from
such circumstances or conditions; or
9. a responsible party with financial
resources reasonably adequate to cure
to cure the circumstance or condition
in all material respects provided a
guaranty or indemnity to the related
borrower to cover the costs of any
required investigation, testing,
monitoring or remediation.
In some cases, the environmental consultant
did not recommend that any action be taken
with respect to a potential adverse
environmental condition at a mortgaged real
property securing a mortgage loan that we
intend to include in the trust fund because a
responsible party with respect to that
condition had already been identified. There
can be no assurance, however, that such a
S-49
responsible party will be financially able to
address the subject condition or compelled to
do so.
Furthermore, any particular environmental
testing may not have covered all potential
adverse conditions. For example, testing for
lead-based paint, lead in water and radon was
done only if the use, age and condition of the
subject property warranted that testing.
There can be no assurance that--
o the environmental testing referred to above
identified all material adverse
environmental conditions and circumstances
at the subject properties;
o the recommendation of the environmental
consultant was, in the case of all
identified problems, the appropriate action
to take;
o any of the environmental escrows
established with respect to any of the
mortgage loans that we intend to include in
the trust fund will be sufficient to cover
the recommended remediation or other
action; or
o an environmental insurance policy will
cover all or part of a claim asserted
against it because such policies are
subject to various deductibles, terms,
exclusions, conditions and limitations, and
have not been extensively interpreted by
the courts.
THE BENEFITS PROVIDED BY
CROSS-COLLATERALIZATION MAY
BE LIMITED................... As described under "Description of the
Mortgage Pool--General" in this prospectus
supplement, the mortgage pool includes one set
of cross-collateralized mortgage loans, which
represent 2.4% of the initial pool balance
(9.8% of the group 2 balance).
Cross-collateralization arrangements may be
terminated with respect to some mortgage loan
groups under the terms of the related mortgage
loan documents. Cross-collateralization
arrangements seek to reduce the risk that the
inability of one or more of the mortgaged
properties securing any such set of
cross-collateralized mortgage loans (or any
such mortgage loan with multiple notes and/or
mortgaged properties) to generate net operating
income sufficient to pay debt service will
result in defaults and ultimate losses.
Cross-collateralization arrangements involving
more than one borrower could be challenged as
fraudulent conveyances by creditors of the
related borrower in an action brought outside
a bankruptcy case or, if such borrower were to
become a debtor in a bankruptcy case, by the
borrower's representative.
A lien granted by such a borrower entity could
be avoided if a court were to determine that:
S-50
o such borrower was insolvent when granting
the lien, was rendered insolvent by the
granting of the lien or was left with
inadequate capital, or was not able to pay
its debts as they matured; and
o such borrower did not receive fair
consideration or reasonably equivalent
value when it allowed its mortgaged
property or properties to be encumbered by
a lien securing the entire indebtedness.
Among other things, a legal challenge to the
granting of the liens may focus on the
benefits realized by such borrower from the
respective mortgage loan proceeds, as well as
the overall cross-collateralization. If a
court were to conclude that the granting of
the liens was an avoidable fraudulent
conveyance, that court could:
o subordinate all or part of the pertinent
mortgage loan to existing or future
indebtedness of that borrower;
o recover payments made under that mortgage
loan; or
o take other actions detrimental to the
holders of the certificates, including,
under certain circumstances, invalidating
the mortgage loan or the mortgages securing
such cross-collateralization.
MORTGAGE LOANS TO RELATED
BORROWERS AND CONCENTRATIONS
OF RELATED TENANTS MAY RESULT
IN MORE SEVERE LOSSES ON YOUR
CERTIFICATES.................. Certain groups of borrowers under the
mortgage loans are affiliated or under common
control with one another. However, no group of
affiliated borrowers are obligors on mortgage
loans representing more than 9.2% of the
initial pool balance (4.7% of the group 1
balance and 23.0% of the group 2 balance). In
addition, tenants in certain mortgaged
properties also may be tenants in other
mortgaged properties, and certain tenants may
be owned by affiliates of the borrowers or
otherwise related to or affiliated with a
borrower. There are also several cases in which
a particular entity is a tenant at multiple
mortgaged properties, and although it may not
be a major tenant (as described in the
prospectus supplement) at any such property, it
may be significant to the successful
performance of such properties.
In such circumstances, any adverse
circumstances relating to a borrower or tenant
or a respective affiliate and affecting one of
the related mortgage loans or mortgaged
properties could arise in connection with the
other related mortgage loans or mortgaged
properties. In particular, the bankruptcy or
insolvency of any such borrower or tenant or
respective affiliate could have an adverse
effect on the operation of all of the related
mortgaged properties and on the ability of
such related mortgaged properties to produce
sufficient cash flow to make required payments
on the related mortgage loans. For example, if
a person
S-51
that owns or directly or indirectly controls
several mortgaged properties experiences
financial difficulty at one mortgaged
property, it could defer maintenance at one or
more other mortgaged properties in order to
satisfy current expenses with respect to the
mortgaged property experiencing financial
difficulty. It could also attempt to avert
foreclosure by filing a bankruptcy petition
that might have the effect of interrupting
monthly payments for an indefinite period on
all the related mortgage loans. See "Certain
Legal Aspects of Mortgage Loans--Bankruptcy
Laws" in the accompanying prospectus.
In addition, a number of the borrowers under
the mortgage loans are limited or general
partnerships. Under certain circumstances, the
bankruptcy of the general partner in a
partnership may result in the dissolution of
such partnership. The dissolution of a
borrower partnership, the winding-up of its
affairs and the distribution of its assets
could result in an acceleration of its payment
obligations under the related mortgage loan.
THE GEOGRAPHIC CONCENTRATION
OF MORTGAGED PROPERTIES MAY
ADVERSELY AFFECT PAYMENT ON
YOUR CERTIFICATES............ A concentration of mortgaged properties in a
particular state or region increases the
exposure of the mortgage pool to any adverse
economic developments that may occur in such
state or region, conditions in the real estate
market where the mortgaged properties securing
the related mortgage loans are located, changes
in governmental rules and fiscal polices, acts
of nature, including floods, tornadoes and
earthquakes (which may result in uninsured
losses), and other factors which are beyond the
control of the borrowers. In this regard as of
the cut-off date:
o Twenty-seven of the mortgaged properties,
which constitute security for 18.2% of the
initial pool balance (23.1% of the group 1
balance and 3.1% of the group 2 balance),
are located in Texas;
o Four of the mortgaged properties, which
constitute security for 11.8% of the
initial pool balance (13.6% of the group 1
balance and 6.2% of the group 2 balance),
are located in New York;
o Five of the mortgaged properties, which
constitute security for 7.9% of the initial
pool balance (4.7% of the group 1 balance
and 17.8% of the group 2 balance), are
located in Michigan;
o Twenty-three of the mortgaged properties,
which constitute security for 7.7% of the
initial pool balance (5.9% of the group 1
balance and 13.4% of the group 2 balance),
are located in Florida;
S-52
o Twelve of the mortgaged properties, which
constitute security for 7.4% of the initial
pool balance (7.3% of the group 1 balance
and 7.6% of the group 2 balance), are
located in California; and
o Fourteen of the mortgaged properties, which
constitute security for 5.6% of the initial
pool balance (7.1% of the group 1 balance
and 1.3% of the group 2 balance), are
located in Arizona.
MORTGAGE LOANS WITH HIGHER THAN
AVERAGE PRINCIPAL BALANCES MAY
CREATE MORE RISK OF LOSS..... Concentrations in a pool of mortgage loans
with larger than average balances can result in
losses that are more severe, relative to the
size of the pool, than would be the case if the
aggregate balance of such pool were more evenly
distributed. In this regard:
o Twenty-one mortgage loans (15 of these
mortgage loans are included in loan group 1
and six of these mortgage loans are
included in loan group 2) have cut-off date
balances that are higher than the average
cut-off date balance;
o the largest single mortgage loan, by
cut-off date balance, represents
approximately 9.5% of the initial pool
balance (12.6% of the group 1 balance), and
the one group of cross-collateralized
mortgage loans represents in the aggregate
approximately 2.4% of the initial pool
balance (9.8% of the group 2 balance); and
o the ten largest mortgage loans or cross
collateralized loan groups (seven of these
mortgage loans are in loan group 1 and four
of these mortgage loans are in loan group
2) have cut-off date balances that
represent in the aggregate 43.3% of the
initial pool balance (46.8% of the group 1
balance and 32.5% of the group 2 balance).
CHANGES IN CONCENTRATION MAY
SUBJECT YOUR CERTIFICATES TO
GREATER RISK OF LOSS......... As payments in respect of principal
(including payments in the form of voluntary
principal prepayments, liquidation proceeds (as
described in this prospectus supplement) and
the repurchase prices for any mortgage loans
repurchased due to breaches of representations
or warranties) are received with respect to the
mortgage loans, the remaining mortgage loans as
a group may exhibit increased concentration
with respect to the type of properties,
property characteristics, number of borrowers
and affiliated borrowers and geographic
location. Because principal on the certificates
(other than the Class X, Class R-I and Class
R-II Certificates) is payable in sequential
order, classes that have a lower priority with
respect to the payment of principal are
relatively more likely to be exposed to any
risks associated with changes in
concentrations.
S-53
PREPAYMENT PREMIUMS PRESENT
SPECIAL RISKS............... Ninety-four of the mortgage loans (64 of
these mortgage loans are in loan group 1 and 30
of these mortgage loans are in loan group 2),
representing 100% of the initial pool balance
(100% of the group 1 balance and 100% of the
group 2 balance) as of the cut-off date
generally prohibit any voluntary prepayment of
principal prior to the final one to six
scheduled monthly payments, which includes any
payment that is due upon the stated maturity
date or anticipated repayment date, as
applicable, of the related mortgage loan;
however, these mortgage loans generally permit
defeasance. In addition, 11 of the mortgage
loans (nine of these mortgage loans are in loan
group 1 and two of these mortgage loans are in
loan group 2) representing 13.3% of the initial
pool balance (17.1% of the group 1 balance and
1.9% of the group 2 balance), (a) have an
initial lock-out period, (b) are then subject
after expiration of the initial lock-out period
to a period where the borrower has an option to
prepay the loan subject to a prepayment
premium, and (c) becomes thereafter prepayable
without an accompanying prepayment premium
prior to its maturity. In addition, 83 of the
mortgage loans, representing 86.7% of the
initial pool balance (82.9% of the group 1
balance and 98.1% of the group 2 balance) as of
the cut-off date, are prepayable at any time
subject to a prepayment premium. See
"Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage Loans--
Prepayment Provisions" in this prospectus
supplement. Any prepayment premiums actually
collected on the remaining mortgage loans,
which generally permit voluntary prepayments
during particular periods and, depending on the
period, require the payment of a prepayment
premium with such prepayment, will be
distributed among the respective classes of
certificates in the amounts and in accordance
with the priorities described in this
prospectus supplement under "Description of the
Certificates-- Distributions--Distributions of
Prepayment Premiums" in this prospectus
supplement. The depositor, however, makes no
representation as to the collectibility of any
prepayment premium.
See "Servicing of the Mortgage Loans--
Modifications, Waivers, Amendments and
Consents" in this prospectus supplement and
"Certain Legal Aspects of Mortgage Loans--
Default Interest and Limitations on
Prepayments" in the accompanying prospectus.
See "Description of the Mortgage Pool--
Assignment of the Mortgage Loans; Repurchases"
and "--Representations and Warranties;
Repurchases and Substitutions", "Servicing of
the Mortgage Loans--Defaulted Mortgage Loans;
Purchase Option" and "Description of the
Certificates--Termination; Retirement of
Certificates" in this prospectus supplement.
S-54
Generally. Provisions requiring prepayment
premiums may not be enforceable in some states
and under federal bankruptcy law. Those
provisions also may constitute interest for
usury purposes. Accordingly, we cannot assure
you that the obligation to pay a prepayment
premium will be enforceable. Also, we cannot
assure you that foreclosure proceeds will be
sufficient to pay an enforceable prepayment
premium. Additionally, although the collateral
substitution provisions related to defeasance
do not have the same effect on the
certificateholders as prepayment, we cannot
assure you that a court would not interpret
those provisions as requiring a prepayment
premium. In certain jurisdictions those
collateral substitution provisions might
therefore be deemed unenforceable or usurious
under applicable law.
We also note the following with respect to
prepayment premiums:
o liquidation proceeds (as described in this
prospectus supplement) recovered in respect
of any defaulted mortgage loan will, in
general, be applied to cover outstanding
advances prior to being applied to cover
any prepayment premium due in connection
with the liquidation of such mortgage loan;
o the special servicer may waive a prepayment
premium in connection with obtaining a
pay-off of a defaulted mortgage loan;
o no prepayment premium will be payable in
connection with any repurchase of a
mortgage loan resulting from a material
breach of representation or warranty or a
material document defect by the mortgage
loan seller;
o no prepayment premium will be payable in
connection with the purchase of all of the
mortgage loans and any REO properties by
the special servicer, master servicer or
any holder or holders of certificates
evidencing a majority interest in the
controlling class in connection with the
termination of the trust;
o no prepayment premium will be payable in
connection with the purchase of defaulted
mortgage loans by the master servicer,
special servicer or any holder or holders
of certificates evidencing a majority
interest in the controlling class; and
o in general, no prepayment premium is
payable with respect to a prepayment due to
casualty or condemnation.
See "Servicing of the Mortgage Loans--
Modifications, Waivers, Amendments and
Consents" in this prospectus supplement and
"Certain Legal Aspects of Mortgage Loans--
Default Interest and Limitations on
Prepayments" in the accompanying prospectus.
See "Description of the
S-55
Mortgage Pool--Assignment of the Mortgage
Loans; Repurchases and Substitutions" and
"--Representations and Warranties; Repurchases
and Substitutions", "Servicing of the Mortgage
Loans--Defaulted Mortgage Loans; Purchase
Option" and "Description of the Certificates--
Termination; Retirement of Certificates" in
this prospectus supplement.
THE OPERATION OF THE MORTGAGED
PROPERTY UPON FORECLOSURE OF
THE MORTGAGE LOAN MAY AFFECT
TAX STATUS................... If the trust were to acquire a mortgaged
property subsequent to a default on the related
mortgage loan pursuant to a foreclosure or deed
in lieu of foreclosure, the special servicer
would be required to retain an independent
contractor to operate and manage the mortgaged
property. Among other things, the independent
contractor would not be permitted to perform
construction work on the mortgaged property
unless such construction generally was at least
10% complete at the time default on the related
mortgage loan became imminent. In addition, any
net income from such operation and management,
other than qualifying "rents from real
property" (as defined in Section 856(d) of the
Internal Revenue Code of 1986, as amended), or
any rental income based on the net profits of a
tenant or sub-tenant or allocable to a service
that is non-customary in the area and for the
type of building involved, will subject the
trust fund to federal (and possibly state or
local) tax on such income at the highest
marginal corporate tax rate (currently 35%),
thereby reducing net proceeds available for
distribution to certificateholders.
LEASEHOLD INTERESTS ARE SUBJECT
TO TERMS OF THE GROUND LEASE... Seven mortgaged properties, representing
approximately 4.7% of the initial pool balance
(6.2% of the group 1 balance) as of the cut-off
date are secured, in whole or in part, by a
mortgage on a ground lease. Leasehold mortgages
are subject to certain risks not associated
with mortgage loans secured by the fee estate
of the mortgagor. The most significant of these
risks is that the ground lease may terminate
if, among other reasons, the ground lessee
breaches or defaults in its obligations under
the ground lease or there is a bankruptcy of
the ground lessee or the ground lessor.
Accordingly, a leasehold mortgagee may lose the
collateral securing its leasehold mortgage. In
addition, although the consent of the ground
lessor generally will not be required for
foreclosure, the terms and conditions of a
leasehold mortgage may be subject to the terms
and conditions of the ground lease, and the
rights of a ground lessee or a leasehold
mortgagee with respect to, among other things,
insurance, casualty and condemnation may be
affected by the provisions of the ground lease.
S-56
CONDOMINIUM OWNERSHIP MAY
LIMIT USE AND IMPROVEMENTS... We are aware that one mortgage loan,
representing 1.9% of the initial pool balance
(2.6% of the group 1 balance) as of the cut-off
date, is secured by a property that consists of
the related borrower's interest in condominium
interests in buildings and/or other
improvements, the related percentage interests
in the common area and the related voting
rights in the condominium association. In the
case of condominiums, a board of managers
generally has discretion to make decisions
affecting the condominium building and there
may be no assurance that the borrower under a
mortgage loan secured by one or more interests
in that condominium will have any control over
decisions made by the related board of
managers. Thus, decisions made by that related
board of managers, including regarding
assessments to be paid by the unit owners,
insurance to be maintained on the condominium
building and many other decisions affecting the
maintenance, repair and, in the event of a
casualty or condemnation, restoration of that
building, may have a significant impact on the
mortgage loans in the trust fund that are
secured by mortgaged real properties consisting
of such condominium interests. There can be no
assurance that the related board of managers
will always act in the best interests of the
borrower under those mortgage loans. Further,
due to the nature of condominiums, a default
under the related mortgage loan will not allow
the special servicer the same flexibility in
realizing on the collateral as is generally
available with respect to properties that are
not condominiums. The rights of other unit
owners, the documents governing the management
of the condominium units and the state and
local laws applicable to condominium units must
be considered. In addition, in the event of a
casualty with respect to such a mortgaged
property, due to the possible existence of
multiple loss payees on any insurance policy
covering that mortgaged property, there could
be a delay in the allocation of related
insurance proceeds, if any. Consequently,
servicing and realizing upon the collateral
described above could subject the
certificateholders to a greater delay, expense
and risk than with respect to a mortgage loan
secured by a property that is not a
condominium.
INFORMATION REGARDING THE
MORTGAGE LOANS IS LIMITED.... The information set forth in this prospectus
supplement with respect to the mortgage loans
is derived principally from one or more of the
following sources:
o a review of the available credit and legal
files relating to the mortgage loans;
o inspections of each mortgaged property with
respect to the applicable mortgage loan
undertaken by or on behalf of the mortgage
loan seller;
S-57
o generally, unaudited operating statements
for the mortgaged properties related to the
mortgage loans supplied by the borrowers;
o appraisals for the mortgaged properties
related to the mortgage loans that
generally were performed in connection with
origination (which appraisals were used in
presenting information regarding the values
of such mortgaged properties as of the
cut-off date under "Description of the
Mortgage Pool" and under Annex A for
illustrative purposes only);
o engineering reports and environmental
reports for the mortgaged properties
related to the mortgage loans that
generally were prepared in connection with
origination; and
o information supplied by entities from which
the mortgage loan seller acquired, or which
currently service, certain of the mortgage
loans.
Also, several mortgage loans constitute
acquisition financing. Accordingly, limited or
no operating information is available with
respect to the related mortgaged property. All
of the mortgage loans were originated during
the preceding nine months.
BORROWER LITIGATION MAY AFFECT
TIMING OR PAYMENT ON YOUR
CERTIFICATES................. Certain borrowers and the principals of
certain borrowers and/or managers may have been
involved in bankruptcy or similar proceedings
or have otherwise been parties to real
estate-related litigation.
There may also be other legal proceedings
pending and, from time to time, threatened
against the borrowers and their affiliates
relating to the business of or arising out of
the ordinary course of business of the
borrowers and their affiliates. We cannot
assure you that such litigation will not have
a material adverse effect on the distributions
to certificateholders.
RELIANCE ON A SINGLE TENANT OR
A SMALL GROUP OF TENANTS MAY
INCREASE THE RISK OF LOSS.... A deterioration in the financial condition of
a tenant can be particularly significant if a
mortgaged property is leased to a single tenant
or a small number of tenants. Mortgaged
properties leased to a single tenant or a small
number of tenants also are more susceptible to
interruptions of cash flow if a tenant fails to
renew its lease. This is because the financial
effect of the absence of rental income may be
severe; more time may be required to relet the
space; and substantial capital costs may be
incurred to make the space appropriate for
replacement tenants. In this regard, see "Risk
Factors--Risks Related to the Mortgage
Loans--Risks Related to Retail
S-58
Properties" and "--Risks Related to Office
Properties" in this prospectus supplement.
Retail and office properties also may be
adversely affected if there is a concentration
of particular tenants among the mortgaged
properties or of tenants in a particular
business or industry.
MORTGAGED PROPERTIES WITH
TENANTS PRESENT SPECIAL RISK... The income from, and market value of, the
mortgaged properties leased to various tenants
would be adversely affected if:
o space in the mortgaged properties could not
be leased or relet;
o tenants were unable to meet their lease
obligations;
o leasing or re-leasing is restricted by
exclusive rights of tenants to lease the
mortgaged properties or other covenants not
to lease space for certain uses or
activities, or covenants limiting the types
of tenants to which space may be leased;
o substantial re-leasing costs were required
and/or the cost of performing landlord
obligations under existing leases
materially increased;
o a significant tenant were to become a
debtor in a bankruptcy case; or
o rental payments could not be collected for
any other reason.
Repayment of the mortgage loans secured by
retail, offices and industrial and warehouse
properties will be affected by the expiration
of leases and the ability of the respective
borrowers to renew the leases or relet the
space on comparable terms. In addition if a
significant portion of tenants have leases
which expire near or at maturity of the
related mortgage loan, then it may make it
more difficult for the related borrower to
seek refinancing or make any applicable
balloon payment. Certain of the mortgaged
properties may be leased in whole or in part
by government-sponsored tenants who have the
right to cancel their leases at any time or
for lack of appropriations. Additionally,
mortgage loans may have concentrations of
leases expiring at varying rates in varying
percentages.
Even if vacated space is successfully relet,
the costs associated with reletting, including
tenant improvements and leasing commissions,
could be substantial and could reduce cash
flow from the mortgaged properties. Moreover,
if a tenant defaults in its obligations to a
borrower, the borrower may incur substantial
costs and experience significant delays
associated with enforcing its rights and
protecting its investment, including costs
incurred in renovating and reletting the
property.
S-59
Additionally, in certain jurisdictions, if
tenant leases are subordinated to the liens
created by the mortgage but do not contain
attornment provisions (provisions requiring
the tenant to recognize as landlord under the
lease a successor owner following
foreclosure), the leases may terminate upon
the transfer of the property to a foreclosing
lender or purchaser at foreclosure.
Accordingly, if a mortgaged property is
located in such a jurisdiction and is leased
to one or more desirable tenants under leases
that are subordinate to the mortgage and do
not contain attornment provisions, such
mortgaged property could experience a further
decline in value if such tenants leases were
terminated.
With respect to certain of the mortgage loans,
the related borrower has given to certain
tenants or others an option to purchase, a
right of first refusal or a right of first
offer to purchase all or a portion of the
mortgaged property in the event a sale is
contemplated, and such right is not
subordinate to the related mortgage. This may
impede the mortgagee's ability to sell the
related mortgaged property at foreclosure, or,
upon foreclosure, this may affect the value
and/or marketability of the related mortgaged
property.
MORTGAGED PROPERTIES WITH
MULTIPLE TENANTS MAY INCREASE
RELETTING COSTS AND REDUCE
CASH FLOW.................... If a mortgaged property has multiple tenants,
reletting expenditures may be more frequent
than in the case of mortgaged properties with
fewer tenants, thereby reducing the cash flow
available for debt service payments.
Multi-tenanted mortgaged properties also may
experience higher continuing vacancy rates and
greater volatility in rental expenses.
TENANCIES IN COMMON MAY
HINDER OR DELAY RECOVERY..... With respect to five mortgage loans,
representing 5.4% of the initial pool balance
(7.2% of the group 1 balance) as of the cut-off
date, the borrowers own the related mortgaged
property as tenants in common. These mortgage
loans may be subject to prepayment, including
during periods when prepayment might otherwise
be prohibited, as a result of partition.
Although some of the related borrowers have
purported to waive any right of partition, we
cannot assure you that any such waiver would be
enforced by a court of competent jurisdiction.
In general, with respect to a tenant in common
ownership structure, each tenant in common
owns an undivided share in the property and if
such tenant in common desires to sell its
interest in the property (and is unable to
find a buyer or otherwise needs to force a
partition) such tenant in common has the
ability to request that a court order a sale
of the property and distribute the proceeds to
each tenant in common proportionally. As a
result, if a
S-60
borrower exercises such right of partition,
the related mortgage loans may be subject to
prepayment. In addition, the tenant in common
structure may cause delays in the enforcement
of remedies; this may occur, for example,
because of procedural or substantive issues
resulting from the existence of multiple
borrowers under the related loan, such as in
bankruptcy, in which circumstance, each time a
tenant in common borrower files for
bankruptcy, the bankruptcy court stay will be
reinstated.
TENANT BANKRUPTCY ADVERSELY
AFFECTS PROPERTY
PERFORMANCE......... The bankruptcy or insolvency of a major
tenant, or a number of smaller tenants, in
retail, office, industrial and warehouse
properties may adversely affect the income
produced by a mortgaged property. Under the
federal bankruptcy code a tenant has the option
of assuming or rejecting any unexpired lease.
If the tenant rejects the lease, the landlord's
claim for breach of the lease would be a
general unsecured claim against the tenant
(absent collateral securing the claim). The
claim would be limited to the unpaid rent
reserved under the lease for the periods prior
to the bankruptcy petition (or earlier
surrender of the leased premises) which are
unrelated to the rejection, plus the greater of
one year's rent or 15% of the remaining
reserved rent (but not more than three year's
rent).
AFFILIATIONS WITH A FRANCHISE
OR HOTEL MANAGEMENT COMPANY
PRESENT CERTAIN RISKS........ One mortgage loan secured by a hotel
property, representing approximately 1.2% of
the initial pool balance as of the cut-off date
(1.7% of the group 1 balance), is affiliated
with a franchise or hotel management company
through a franchise or management agreement.
The performance of a hotel property affiliated
with a franchise or hotel management company
depends in part on:
o the continued existence and financial
strength of the franchisor or hotel
management company;
o the public perception of the franchise or
hotel chain service mark; and
o the duration of the franchise licensing or
management agreements.
Any provision in a franchise agreement or
management agreement providing for termination
because of a bankruptcy of a franchisor or
manager generally will not be enforceable.
Replacement franchises may require
significantly higher fees.
The transferability of a franchise license
agreement is generally restricted. In the
event of a foreclosure, the
S-61
lender or its agent may not have the right to
use the franchise license without the
franchisor's consent. Conversely, in the case
of certain mortgage loans, the lender may be
unable to remove a franchisor or a hotel
management company that it desires to replace
following a foreclosure.
ONE ACTION RULES MAY LIMIT
REMEDIES..................... Several states (including California) have
laws that prohibit more than one "judicial
action" to enforce a mortgage obligation, and
some courts have construed the term "judicial
action" broadly. Accordingly, the special
servicer is required to obtain advice of
counsel prior to enforcing any of the trust
fund's rights under any of the mortgage loans
that include mortgaged properties where the
rule could be applicable.
PROPERTY INSURANCE MAY NOT
PROTECT YOUR CERTIFICATES
FROM LOSS IN THE EVENT OF
CASUALTY OR LOSS.... The loan documents for each of the mortgage
loans generally require the borrower to
maintain, or cause to be maintained, specified
property and liability insurance. The mortgaged
properties may suffer casualty losses due to
risks which were not covered by insurance or
for which insurance coverage is inadequate. We
cannot assure you that borrowers will be able
to maintain adequate insurance. Moreover, if
reconstruction or any major repairs are
required, changes in laws may materially affect
the borrower's ability to effect any
reconstruction or major repairs or may
materially increase the costs of the
reconstruction or repairs. In addition certain
of the mortgaged properties are located in
California, Washington, Texas, Oregon, Utah,
Nevada and along the Southeastern coastal areas
of the United States. These areas have
historically been at greater risk regarding
acts of nature (such as earthquakes, floods and
hurricanes) than other states. The loans do not
generally require the borrowers to maintain
earthquake or windstorm insurance.
In light of the September 11, 2001 terrorist
attacks in New York City and the Washington,
D.C. area, many reinsurance companies (which
assume some of the risk of the policies sold
by primary insurers) have indicated that they
intend to eliminate coverage for acts of
terrorism from their reinsurance policies.
Without that reinsurance coverage, primary
insurance companies would have to assume that
risk themselves, which may cause them to
eliminate such coverage in their policies,
increase the amount of deductible for acts of
terrorism or charge higher premiums for such
coverage. In order to offset this risk,
Congress passed the Terrorism Risk Insurance
Act of 2002, which established the Terrorism
Insurance Program. The Terrorism Insurance
Program is administered by the Secretary of
the Treasury and will provide financial
S-62
assistance from the United States government
to insurers in the event of another terrorist
attack that is the subject of an insurance
claim. The Treasury Department will establish
procedures for the Terrorism Insurance Program
under which the federal share of compensation
will be equal to 90% of that portion of
insured losses that exceeds an applicable
insurer deductible required to be paid during
each program year. The federal share in the
aggregate in any program year may not exceed
$100 billion. An insurer that has paid its
deductible is not liable for the payment of
any portion of total annual United States-wide
losses that exceed $100 billion, regardless of
the terms of the individual insurance
contracts. The Terrorism Risk Insurance Act of
2002 does not require insureds to purchase the
coverage nor does it stipulate the pricing of
the coverage. In addition, there can be no
assurance that all of the borrowers under the
mortgage loans have accepted the continued
coverage. The Terrorism Insurance Program
requires that each insurer for policies in
place prior to November 26, 2002 provide its
insureds with a statement of the proposed
premiums for terrorism coverage, identifying
the portion of the risk that the federal
government will cover, within 90 days after
November 26, 2002. Insureds will have 30 days
to accept the continued coverage and pay the
premium. If an insured does not pay the
premium, insurance for acts of terrorism may
be excluded from the policy. All policies for
insurance issued after November 26, 2002 must
make similar disclosure. Through December
2005, insurance carriers are required under
the program to provide terrorism coverage in
their basic "all-risk" policies, as the
Secretary of the Treasury has extended in June
2004 such mandatory participation (scheduled
to expire in December 2004) through December
2005. Any commercial property and casualty
terrorism insurance exclusion that was in
force on November 26, 2002 is automatically
voided to the extent that it excludes losses
that would otherwise be insured losses,
subject to the immediately preceding
paragraph. Any state approval of such types of
exclusions in force on November 26, 2002 is
also voided. However, it is unclear what acts
will fall under the category of "terrorism" as
opposed to "acts of war" or "natural
disasters," which may not be covered by such
program. In addition, coverage under such
program will only be available for terrorist
acts that are committed by an individual or
individuals acting on behalf of a foreign
person or foreign interest. In addition, the
Terrorism Insurance Program applies to United
States risks only and to acts that are
committed by an individual or individuals
acting on behalf of a foreign person or
foreign interest as an effort to influence or
coerce United States civilians or the United
States government. It remains unclear what
acts will fall under the purview of the
Terrorism Insurance Program.
S-63
Furthermore, since the Terrorism Insurance
Program was passed into law, it has yet to be
determined whether it or state legislation has
lowered or will substantially lower the cost
of obtaining terrorism insurance.
Finally, the Terrorism Insurance Program
terminates on December 31, 2004 (with a
potential to extend to December 31, 2005).
There can be no assurance that such temporary
program will create any long-term changes in
the availability and cost of such insurance.
Moreover, there can be no assurance that such
program will be renewed or subsequent
terrorism insurance legislation will be passed
upon its expiration. It is reported that a new
legislation has been introduced in June 2004
to extend the Terrorism Risk Insurance Program
beyond December 31, 2005. However, there can
be no assurance that such proposal will be
enacted into law.
In the event that such casualty losses are not
covered by standard casualty insurance
policies, the loan documents may not
specifically require the borrowers to obtain
this form of coverage. Although the mortgage
loan documents relating to the remaining
mortgage loans contain general provisions
which permit the lender to require other
reasonable insurance and which do not
expressly forbid the lender from requiring
terrorism insurance, we cannot assure you
whether requiring terrorism insurance would be
reasonable or otherwise permissible under the
general provisions for any particular mortgage
loan.
If the loan documents require insurance
covering terrorist or similar acts, the master
servicer or the special servicer, pursuant to
the pooling and servicing agreement, may not
be required to maintain insurance covering
terrorist or similar acts, nor will it be
required to call a default under a mortgage
loan, if the related borrower fails to
maintain such insurance and the special
servicer consents. In determining whether to
require insurance for terrorist or similar
acts or to call a default, each of the master
servicer and the special servicer will
consider the following two factors following
due inquiry in accordance with the servicing
standard:
o such insurance is not available at
commercially reasonable rates; and
o at that time, the risks relating to
terrorist or similar acts were not commonly
insured against for properties similar to
the mortgaged property and located in or
around the region in which the mortgaged
property is located.
However, if the special servicer determines
following due inquiry, in accordance with the
servicing standard, that it is in the best
interests of the certificateholders not to
call a default, the master servicer and the
special servicer may, in certain
circumstances, waive the default regardless of
such factors.
S-64
Any losses incurred with respect to mortgage
loans included in the trust fund due to
uninsured risks or insufficient hazard
insurance proceeds could adversely affect
distributions on your certificates.
ZONING LAWS AND USE
RESTRICTIONS, MAY AFFECT
THE OPERATION OF A
MORTGAGED PROPERTY OR THE
ABILITY TO REPAIR OR RESTORE
A MORTGAGED PROPERTY.......... Certain of the mortgaged properties may not
comply with current zoning laws, including
density, use, parking and set back
requirements, due to changes in zoning
requirements after such mortgaged properties
were constructed. These properties, as well as
those for which variances or special permits
were issued, are considered to be a "legal
non-conforming use" and/or the improvements are
considered to be "legal non-conforming
structures". This means that the borrower is
not required to alter the use or structure to
comply with the existing or new law; however,
the borrower may not be able to rebuild the
premises "as is" in the event of a casualty
loss. This may adversely affect the cash flow
of the property following the casualty. If a
casualty were to occur, we cannot assure you
that insurance proceeds would be available to
pay the mortgage loan in full. In addition, if
the property were repaired or restored in
conformity with the current law, the value of
the property or the revenue-producing potential
of the property may not be equal to that which
existed before the casualty.
In addition, certain of the mortgaged
properties which are non-conforming may not be
"legal non-conforming uses" or "legal
non-conforming structures". The failure of a
mortgaged property to comply with zoning laws
or to be a "legal non-conforming use" or
"legal non-conforming structure" may adversely
affect market value of the mortgaged property
or the borrower's ability to continue to use
it in the manner it is currently being used.
In addition, certain of the mortgaged
properties may be subject to certain use
restrictions imposed pursuant to reciprocal
easement agreements or operating agreements.
Such use restrictions could include, for
example, limitations on the character of the
improvements of the properties, limitations
affecting noise and parking requirements,
among other things, and limitations on the
borrowers' right to operate certain types of
facilities within a prescribed radius. These
limitations could adversely affect the ability
of the related borrower to lease the mortgaged
property on favorable terms, thus adversely
affecting the borrower's ability to fulfill
its obligations under the related mortgage
loan.
In addition, certain of the mortgaged
properties are subject to certain use
restrictions imposed pursuant to restrictive
covenants, reciprocal easement agreements or
S-65
operating agreements or, in the case of
mortgaged properties that are condominiums,
condominium declarations or other condominium
use restrictions or regulations, especially in
a situation where the mortgaged property does
not represent the entire condominium building.
Such use restrictions include, for example,
limitations on the character of the
improvements or the properties, limitations
affecting noise and parking requirements,
among other things, and limitations on the
borrowers' right to operate certain types of
facilities within a prescribed radius. These
limitations could adversely affect the ability
of the related borrower to lease the mortgaged
property on favorable terms, thus adversely
affecting the borrower's ability to fulfill
its obligations under the related mortgage
loan.
SOME MORTGAGED PROPERTIES MAY
NOT BE READILY CONVERTIBLE TO
ALTERNATIVE USES............. Some of the mortgaged properties may not be
readily convertible to alternative uses if
those properties were to become unprofitable
for any reason or if those properties were
designated as historic sites. Converting
commercial properties and manufactured housing
communities to alternate uses generally
requires substantial capital expenditures. The
liquidation value of a mortgaged property
consequently may be substantially less than
would be the case if the property were readily
adaptable to other uses.
Zoning or other restrictions also may prevent
alternative uses. See "Risk Factors--Risks
Related to the Mortgage Loans--Zoning Laws and
Use Restrictions" in this prospectus
supplement.
APPRAISALS ARE LIMITED IN
REFLECTING THE VALUE OF A
MORTGAGED PROPERTY........... Appraisals were obtained with respect to each
of the mortgaged properties in connection with
the origination of the applicable mortgage
loan. In general, appraisals represent the
analysis and opinion of qualified appraisers
and are not guarantees of present or future
value. One appraiser may reach a different
conclusion than the conclusion that would be
reached if a different appraiser were
appraising that property. Moreover, appraisals
seek to establish the amount a typically
motivated buyer would pay a typically motivated
seller and, in certain cases, may have taken
into consideration the purchase price paid by
the borrower. That amount could be
significantly higher than the amount obtained
from the sale of a mortgaged property under a
distress or liquidation sale. We cannot assure
you that the information set forth in this
prospectus supplement regarding appraised
values or loan-to-value ratios accurately
reflects past, present or future market values
of the mortgaged properties.
S-66
MORTGAGE LOAN SELLERS MAY
NOT BE ABLE TO MAKE A
REQUIRED REPURCHASE OR
SUBSTITUTION OF A DEFECTIVE
MORTGAGE LOAN................ Each mortgage loan seller is the sole
warranting party in respect of the mortgage
loans sold by such mortgage loan seller to us.
Neither we nor any of our affiliates (except,
in certain circumstances, for Bank of America
N.A. in its capacity as the mortgage loan
seller) are obligated to repurchase or
substitute any mortgage loan in connection with
either a breach of the mortgage loan seller's
representations and warranties or any document
defects, if the mortgage loan seller defaults
on its obligation to do so. We cannot provide
assurances that the mortgage loan seller will
have the financial ability to effect such
repurchases or substitutions. Any mortgage loan
that is not repurchased or substituted and that
is not a "qualified mortgage" for a REMIC may
cause the trust fund to fail to qualify as one
or more REMICs or cause the trust fund to incur
a tax. See "Description of the Mortgage Pool--
The Mortgage Loan Seller" and "Representations
and Warranties; Repurchases and Substitutions"
in this prospectus supplement and "The Pooling
and Servicing Agreements--Representations and
Warranties; Repurchases" in the accompanying
prospectus.
RISKS RELATED
TO ENFORCEABILITY............. All of the mortgages permit the lender to
accelerate the debt upon default by the
borrower. The courts of all states will enforce
acceleration clauses in the event of a material
payment default. Courts, however, may refuse to
permit foreclosure or acceleration if a default
is deemed immaterial or the exercise of those
remedies would be unjust or unconscionable.
If a mortgaged property has tenants, the
borrower typically assigns its income as
landlord to the lender as further security,
while retaining a license to collect rents as
long as there is no default. If the borrower
defaults, the license terminates and the
lender is entitled to collect rents. In
certain jurisdictions, such assignments may
not be perfected as security interests until
the lender takes actual possession of the
property's cash flow. In some jurisdictions,
the lender may not be entitled to collect
rents until the lender takes possession of the
property and secures the appointment of a
receiver. In addition, as previously
discussed, if bankruptcy or similar
proceedings are commenced by or for the
borrower, the lender's ability to collect the
rents may be adversely affected.
POTENTIAL ABSENCE OF
ATTORNMENT PROVISIONS ENTAILS
RISKS........................ In some jurisdictions, if tenant leases are
subordinate to the liens created by the
mortgage and do not contain attornment
provisions (i.e., provisions requiring the
tenant to recognize a successor owner following
foreclosure as landlord under the lease), the
leases may terminate upon
S-67
the transfer of the property to a foreclosing
lender or purchaser at foreclosure. Not all
leases were reviewed to ascertain the
existence of attornment or subordination
provisions. Accordingly, if a mortgaged
property is located in such a jurisdiction and
is leased to one or more desirable tenants
under leases that are subordinate to the
mortgage and do not contain attornment
provisions, such mortgaged property could
experience a further decline in value if such
tenants' leases were terminated. This is
particularly likely if such tenants were
paying above-market rents or could not be
replaced.
If a lease is not subordinate to a mortgage,
the trust will not possess the right to
dispossess the tenant upon foreclosure of the
mortgaged property (unless otherwise agreed to
with the tenant). If the lease contains
provisions inconsistent with the mortgage
(e.g., provisions relating to application of
insurance proceeds or condemnation awards) or
that could affect the enforcement of the
lender's rights (e.g., a right of first
refusal to purchase the property), the
provisions of the lease will take precedence
over the provisions of the mortgage.
RISKS RELATING TO COSTS OF
COMPLIANCE WITH APPLICABLE
LAWS AND REGULATIONS.......... A borrower may be required to incur costs to
comply with various existing and future
federal, state or local laws and regulations
applicable to the related mortgaged property,
for example, zoning laws and the Americans with
Disabilities Act of 1990, as amended, which
requires all public accommodations to meet
certain federal requirements related to access
and use by persons with disabilities. See
"Certain Legal Aspects of Mortgage
Loans--Americans with Disabilities Act" in the
accompanying prospectus. The expenditure of
these costs or the imposition of injunctive
relief, penalties or fines in connection with
the borrower's noncompliance could negatively
impact the borrower's cash flow and,
consequently, its ability to pay its mortgage
loan.
NO MORTGAGE LOAN INCLUDED IN
THE TRUST FUND HAS BEEN
REUNDERWRITTEN............... We have not reunderwritten the mortgage
loans. Instead, we have relied on the
representations and warranties made by the
mortgage loan seller, and the mortgage loan
seller's obligation to repurchase or substitute
a mortgage loan or cure the breach in the event
of a material breach of a representation or
warranty. These representations and warranties
do not cover all of the matters that we would
review in underwriting a mortgage loan and you
should not view them as a substitute for
reunderwriting the mortgage loans. If we had
reunderwritten the mortgage loans, it is
possible that the reunderwriting process may
have revealed problems with a mortgage loan not
covered
S-68
by a representation or warranty. In addition,
we can give no assurance that the mortgage
loan seller will be able to repurchase or
substitute a mortgage loan or cure the breach
in the event of a material breach of a
representation or warranty. See "Description
of the Mortgage Pool--Representations and
Warranties; Repurchases and Substitutions" in
this prospectus supplement.
BOOK-ENTRY SYSTEM FOR
CERTIFICATES MAY DECREASE
LIQUIDITY AND DELAY PAYMENT... The offered certificates will be issued as
book-entry certificates. Each class of
book-entry certificates will be initially
represented by one or more certificates
registered in the name of a nominee for The
Depository Trust Company, or DTC. Since
transactions in the classes of book-entry
certificates generally can be effected only
through The Depository Trust Company, and its
participating organizations:
o the liquidity of book-entry certificates in
secondary trading market that may develop
may be limited because investors may be
unwilling to purchase certificates for
which they cannot obtain physical
certificates;
o your ability to pledge certificates to
persons or entities that do not participate
in the DTC system, or otherwise to take
action in respect of the certificates, may
be limited due to the lack of a physical
security representing the certificates;
o your access to information regarding the
certificates may be limited since
conveyance of notices and other
communications by The Depository Trust
Company to its participating organizations,
and directly and indirectly through those
participating organizations to you, will be
governed by arrangements among them,
subject to any statutory or regulatory
requirements as may be in effect at that
time; and
o you may experience some delay in receiving
distributions of interest and principal on
your certificates because distributions
will be made by the trustee to DTC and DTC
will then be required to credit those
distributions to the accounts of its
participating organizations and only then
will they be credited to your account
either directly or indirectly through DTC's
participating organizations.
See "Description of the
Certificates--Registration and Denomination"
in this prospectus supplement.
SEE "RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF
CERTAIN OTHER RISKS AND SPECIAL CONSIDERATIONS THAT MAY BE APPLICABLE TO YOUR
CERTIFICATES AND THE MORTGAGE LOANS.
S-69
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The pool of mortgage loans (the "Mortgage Pool") consists of 94
multifamily and commercial mortgage loans. The Mortgage Pool will be deemed to
consist of two loan groups ("Loan Group 1" and "Loan Group 2" and,
collectively, the "Loan Groups"). Loan Group 1 will consist of 64 mortgage
loans with an aggregate principal balance of $871,008,925 representing
approximately 75.4% of the aggregate principal balance of the Mortgage Pool as
of July 1, 2004 (the "Cut-off Date") (the "Group 1 Balance"). Loan Group 2 will
consist of 30 mortgage loans with an aggregate principal balance of
$284,159,066 (or approximately 67.0% of the aggregate principal balance of the
mortgage loans secured by multifamily properties and approximately 70.6% of the
aggregate principal balance of the mortgage loans secured by manufactured
housing properties), representing approximately 24.6% of the aggregate
principal balance of the Mortgage Pool as of the Cut-off Date (the "Group 2
Balance"). Each of the Group 1 Balance and the Group 2 Balance are sometimes
referred to individually in this prospectus supplement as a "Group Balance" and
are collectively referred to as the "Group Balances". Annex A to this
prospectus supplement sets forth the Loan Group designation with respect to
each mortgage loan.
Sixty-eight of the mortgage loans (46 of the mortgage loans in Loan Group
1 and 22 of the mortgage loans in Loan Group 2) were (a) originated by Bank of
America, N.A. ("Bank of America") or its conduit participants or (b) acquired
by Bank of America from various third party originators, other than Bridger
Commercial Funding LLC ("Bridger"). Bridger is a real estate financial services
company organized in 1998 under the laws of the State of Missouri that
originates and acquires commercial and multifamily real estate loans through
its own origination offices working in conjunction with various commercial
banks in local markets across the United States. Bridger's loan underwriting
and quality control procedures are undertaken principally at its headquarters
located at 100 Shoreline Highway, Suite 100, Mill Valley, California 94941.
Through May 31, 2004, Bridger has originated in excess of $1.7 billion in loans
secured by commercial real estate. The mortgage loans described in the first
sentence of this paragraph are referred to in this prospectus supplement as the
"BOA-Originated Mortgage Loans". Twenty-six mortgage loans (18 of the mortgage
loans in Loan Group 1 and eight of the mortgage loans in Loan Group 2) were
acquired by Bank of America from Bridger (such mortgage loans, the "BOA-Bridger
Mortgage Loans"). The BOA-Originated Mortgage Loans and the BOA-Bridger
Mortgage Loans collectively constitute the "Mortgage Loans". The Mortgage Loans
have an aggregate Cut-off Date Balance of $1,155,167,991 (the "Initial Pool
Balance"), subject to a variance of plus or minus 10%. The Initial Pool Balance
and each applicable Group Balance excludes the CC Subordinate Components, the
SS Subordinate Components, the UH Subordinate Components, the 17 State Street
Note B and the CBA B Note. See "Description of the Trust Funds" and "Certain
Legal Aspects of Mortgage Loans" in the accompanying prospectus.
The "Cut-off Date Balance" of each Mortgage Loan is the unpaid principal
balance thereof as of the Cut-off Date, after application of all payments of
principal due on or before such date, whether or not received. All numerical
information provided in this prospectus supplement with respect to the Mortgage
Loans is provided on an approximate basis. All numerical and statistical
information presented in this prospectus supplement (including Cut-off Date
Balances, each Group Balance, loan-to-value ratios, Cut-off Date Balance per
unit and debt service coverage ratios) with respect to each of the CC Component
Mortgage Loan, the SS Component Mortgage Loan and the UH Component Mortgage
Loan excludes the related subordinate components. Accordingly, these ratios
would be lower (in the case of debt service coverage ratios) and higher (in the
case of loan-to-value ratios) if the subordinate components were included. The
principal balance of each Mortgage Loan as of the Cut-off Date assumes the
timely receipt of all principal scheduled to be paid on or before the Cut-off
Date and assumes no defaults, delinquencies or prepayments on any mortgage loan
on or before the Cut-off Date. All numerical and statistical information
presented in this prospectus supplement (including Cut-off Date Balances, each
Group Balance, loan-to-value ratios, Cut-off Date Balance per unit and debt
service coverage ratios) for the SS Component Mortgage Loan excludes the 17
State Street Note B. All numerical and statistical information presented in
this prospectus
S-70
supplement (including Cut-off Date Balances, each Group Balance, loan-to-value
ratios, Cut-off Date Balance per unit and debt service coverage ratios) for the
CBA Mortgage Loan excludes the CBA B Note. All weighted average information
provided in this prospectus supplement, unless otherwise stated, reflects
weighting by related Cut-off Date Balance. All percentages of the Mortgage
Pool, or of any specified sub-group thereof (including each Group Balance),
referred to herein without further description are approximate percentages of
the Initial Pool Balance (or if applicable, the related Group Balance). The sum
of the numerical data in any column of any table presented in this prospectus
supplement may not equal the indicated total due to rounding.
Each Mortgage Loan is evidenced by one or more promissory notes (a
"Mortgage Note") and secured by one or more mortgages, deeds of trust or other
similar security instruments (a "Mortgage") that create a first mortgage lien
on a fee simple and/or leasehold interest in real property (a "Mortgaged
Property"). Each Mortgage Loan is secured by (i) a manufactured housing
community or complex consisting of five or more rental living units or one or
more apartment buildings each consisting of five or more rental living units (a
"Multifamily Mortgaged Property", and any Mortgage Loan secured thereby, a
"Multifamily Loan") (38 Mortgage Loans (8 Mortgage Loans in Loan Group 1 and 30
Mortgage Loans in Loan Group 2), representing 35.7% of the Initial Pool Balance
(14.7% of the Group 1 Balance and 100.0% of the Group 2 Balance), or (ii) a
hotel, retail shopping mall or center, an office building or complex, an
industrial or warehouse building, a self-storage facility or a health club (a
"Commercial Mortgaged Property", and any Mortgage Loan secured thereby, a
"Commercial Loan") (56 Mortgage Loans (56 Mortgage Loans in Loan Group 1),
representing 64.3% of the Initial Pool Balance (85.3% of the Group 1 Balance)).
With respect to any Mortgage for which the related assignment of mortgage,
assignment of assignment of leases, security agreements and/or UCC financing
statements has been recorded in the name of Mortgage Electronic Registration
Systems, Inc. ("MERS") or its designee, no assignment of mortgage, assignment
of assignment of leases, security agreements and/or UCC financing statements in
favor of the Trustee will be required to be prepared or delivered and instead,
the Master Servicer, at the direction of the Mortgage Loan Seller, shall take
all actions as are necessary to cause the Trustee on behalf of the Trust to be
shown as, and the Trustee shall take all actions necessary to confirm that the
Trustee on behalf of the Trust is shown as, the owner of the related Mortgage
Loan on the records of MERS for purposes of the system of recording transfers
of beneficial ownership of mortgages maintained by MERS. The Trustee shall
include the foregoing confirmation in the certification required to be
delivered by the Trustee after the Closing Date pursuant to the Pooling
Agreement.
There is one set of cross-collateralized and cross-defaulted Mortgage
Loans (any such Mortgage Loan, a "Cross-Collateralized Mortgage Loan"). Loan
Nos. 58225 and 58226 constitute the set of crossed loans. The Mortgage Loans in
this set are cross-collateralized and cross-defaulted with the other Mortgage
Loans in that set. This set collectively represents 2.4% of the Initial Pool
Balance (9.8% of the Group 2 Balance). Each of the Cross-Collateralized
Mortgage Loans is evidenced by a separate Mortgage Note and secured by a
separate Mortgage, which Mortgage or separate cross-collateralization agreement
as the case may be, contains provisions creating the relevant
cross-collateralization and cross-default arrangements. See Annex A hereto for
information regarding the Cross-Collateralized Mortgage Loans and see "Risk
Factors--Risks Related to the Mortgage Loans--The Benefits Provided by
Cross-Collateralization May Be Limited" in this prospectus supplement.
The Mortgage Loans generally constitute non-recourse obligations of the
related borrower. Upon any such borrower's default in the payment of any amount
due under the related Mortgage Loan, the holder thereof may look only to the
related Mortgaged Property or Properties for satisfaction of the borrower's
obligation. In the case of certain Mortgage Loans where the loan documents
permit recourse to a borrower or guarantor, the Depositor has generally not
undertaken an evaluation of the financial condition of any such entity or
person, and prospective investors should thus consider all of the Mortgage
Loans to be nonrecourse. None of the Mortgage Loans is
S-71
insured or guaranteed by any person or entity, governmental or otherwise. See
"Risk Factors--Risks Related to the Mortgage Loans--Your Investment Is Not
Insured or Guaranteed" in this prospectus supplement.
Twenty-seven of the Mortgaged Properties, which constitute security for
approximately 18.2% of the Initial Pool Balance (23.1% of the Group 1 Balance
and 3.1% of the Group 2 Balance), are located in Texas; four of the Mortgaged
Properties, which constitute security for 11.8% of the Initial Pool Balance
(13.6% of the Group 1 Balance and 6.2% of Group 2 balance), are located in New
York; five of the Mortgaged Properties, which constitute security for 7.9% of
the Initial Pool Balance (4.7% of the Group 1 Balance and 17.8% of the Group 2
Balance), are located in Michigan; 23 of the Mortgaged Properties, which
constitute security for 7.7% of the Initial Pool Balance (5.9% of the Group 1
Balance and 13.4% of the Group 2 Balance), are located in Florida; and 12 of
the Mortgaged Properties, which constitute security for 7.4% of the Initial
Pool Balance (7.3% of the Group 1 Balance and 7.6% of the Group 2 Balance), are
located in California; 14 of the Mortgaged Properties, which constitute
security for 5.6% of the Initial Pool Balance (7.1% of Group 1 Balance and 1.3%
of Group 2 Balance), are located in Arizona. The remaining Mortgaged Properties
are located throughout 32 other states, with no more than 5.0% of the Initial
Pool Balance secured by Mortgaged Properties located in any such other
jurisdiction.
On or about the Delivery Date, the Mortgage Loan Seller will transfer the
Mortgage Loans, to or at the direction of the Depositor, without recourse, to
the Trustee for the benefit of the Certificateholders. See "Description of the
Mortgage Pool--The Mortgage Loan Seller" and "--Assignment of the Mortgage
Loans; Repurchases and Substitutions" in this prospectus supplement.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. Each of the Mortgage Loans provides, other than three Mortgage
Loans (two Mortgage Loans in Loan Group 1 and one Mortgage Loan in Loan Group
2), which are interest only until maturity or the anticipated repayment date
and represent 1.5% of the Initial Pool Balance (1.6% of the Group 1 Balance and
1.2% of the Group 2 Balance), for scheduled payments of principal and interest
("Monthly Payments"). Each of the Mortgage Loans provides for payments to be
due on the first day of each month (as to each such Mortgage Loan, the "Due
Date"). In addition, 20 Mortgage Loans (10 Mortgage Loans in Loan Group 1 and
10 Mortgage Loans in Loan Group 2) representing 31.4% of the Initial Pool
Balance (24.7% of the Group 1 Balance and 52.0% of the Group 2 Balance) provide
for periods of interest only payments during a portion of their respective loan
terms.
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at a rate per annum (a "Mortgage Rate") that is fixed for the
remaining term of the Mortgage Loan, except that as described below, the ARD
Loan will accrue interest at a higher rate after its Anticipated Repayment
Date. As used in this prospectus supplement, the term Mortgage Rate does not
include the incremental increase in rate at which interest may accrue on the
ARD Loan after the Antiticapted Repayment Date. As of the Cut-off Date, the
Mortgage Rates of the Mortgage Loans ranged from 4.186% per annum to 6.845% per
annum (4.290% per annum to 6.845% per annum in Loan Group 1 and 4.186% per
annum to 6.327% per annum in Loan Group 2), and the weighted average Mortgage
Rate of the Mortgage Loans (or in the case of each of the CC Component Mortgage
Loan, the SS Component Mortgage Loan and the UH Component Mortgage Loan, the
related senior component only) was 5.457% (5.527% for Loan Group 1 and 5.241%
for Loan
Group 2).
Hyperamortization. One of the Mortgage Loans (the "ARD Loan") which is in
Loan Group 1, which represents 0.6% of the Initial Pool Balance (0.7% of the
Group 1 Balance), provides for changes in payments and the accrual of interest
if it is not paid in full by a specified date (the "Anticipated Repayment
Date"). Commencing on the Anticipated Repayment Date, the ARD Loan will
generally bear interest at fixed per annum rate equal to the related Mortgage
Rate plus a rate set forth in the related Mortgage Note extending until final
maturity (the "Revised Rate"). The "Excess Interest Rate" means the difference
in rate of the Revised Rate over the Mortgage Rate.
S-72
Interest accrued at the Excess Interest Rate is referred to in this prospectus
supplement as "Excess Interest". In addition to paying interest (at the Revised
Rate) and principal (based on the amortization schedule), from and after the
Anticipated Repayment Date, the borrower generally will be required to apply
all remaining monthly cash flow ("Excess Cash Flow") from the related Mortgaged
Property, if any, after paying all permitted operating expenses and capital
expenditures, to pay accrued interest at the Revised Rate and then to principal
on the ARD Loan as called for in the related Mortgage Loan documents.
All of the Mortgage Loans, except one mortgage loan representing 0.9% of
the Initial Pool Balance and 1.2% of the Group 1 Balance, which accrues
interest on a 30/360 Basis (as defined below) (the "30/360 Mortgage Loans")
accrue interest on the basis of the actual number of days elapsed in the
relevant month of accrual and a 360-day year (an "Actual/360 Basis"). The total
amount of the Monthly Payment for each Mortgage Loan accruing interest on an
Actual/360 Basis (an "Actual/360 Mortgage Loan") is determined as though the
Mortgage Loan accrued interest on the basis of a 360-day year consisting of
twelve 30-day months (a "30/360 Basis"), and the portion of such Monthly
Payment allocated to interest is determined based on interest accrued in the
preceding month on an Actual/360 Basis with the balance allocated to amortized
principal. As a result, the full amortization term is longer than would be the
case if calculated on a 30/360 Basis, and the Balloon Payment on any such
Mortgage Loan will be larger than would be the case if interest accrued on a
30/360 Basis.
Amortization of Principal. Eighty-nine Mortgage Loans, excluding the ARD
Loan, (61 Mortgage Loans in Loan Group 1 and 28 Mortgage Loans in Loan Group
2), which represent 97.8% of the Initial Pool Balance (97.7% of the Group 1
Balance and 98.1% of the Group 2 Balance), provide for monthly payments of
principal based on amortization schedules significantly longer than the
respective remaining terms thereof, thereby leaving substantial principal
amounts due and payable (each such loan, a "Balloon Loan", and each such
payment, together with the corresponding interest payment, a "Balloon Payment")
on their respective maturity dates, unless prepaid prior thereto. In addition,
three of the Mortgage Loans (two Mortgage Loans in Loan Group 1 and one
Mortgage Loan in Loan Group 2), representing 1.5% of the Initial Pool Balance
(1.6% of the Group 1 Balance 1.2% of the Group 2 Balance), provide for payments
of interest only through to the end of their respective loan terms. One
Mortgage Loan which represent 0.2% of the Initial Pool Balance (0.7% of the
Group 2 Balance) is a fully amortizing Mortgage Loan.
The original term to stated maturity of each Mortgage Loan or in the case
of the ARD Loan, to its Anticipated Repayment Date was between 60 and 180
months. The original amortization schedules of the Mortgage Loans, other than
three Mortgage Loans which are interest only for their entire term, (calculated
in the case of Actual/360 Mortgage Loans, on a 30/360 Basis for the purposes of
the accrual of interest) ranged from 120 to 360 months (240 to 360 months in
Loan Group 1 and 120 to 360 months in Loan Group 2). As of the Cut-off Date,
the remaining term to stated maturity of the Mortgage Loans or in the case of
the ARD Loan, to its Anticipated Repayment Date will range from 52 to 179
months (55 to 179 months in Loan Group 1 and 52 to 144 months in Loan Group 2),
and the weighted average remaining term to stated maturity of the Mortgage
Loans or in the case of the ARD Loan, to its Anticipated Repayment Date will be
109 months (111 months in Loan Group 1 and 105 months in Loan Group 2). As of
the Cut-off Date, the remaining amortization terms of the Mortgage Loans, other
than three Mortgage Loans which are interest only for their entire term, will
range from 119 to 360 months (calculated on a 30/360 Basis for the accrual of
interest), and the weighted average remaining amortization term of the Mortgage
Loans will be 347 months (calculated on a 30/360 Basis for purposes of the
accrual of interest). See "Risk Factors--Risks Related to the Mortgage
Loans--Balloon Loans May Present Greater Risk than Fully Amortizing Loans" in
this prospectus supplement.
Prepayment Provisions. All of the Mortgage Loans provided as of
origination permit either (a) that voluntary prepayments are prohibited until
the final one to six scheduled monthly payments by the borrower under the
related Mortgage Loan documents including any payment due on the stated
maturity date of the related Mortgage Loan, during which voluntary prepayments
can be made without penalty, or (b) for a sequence of three periods as follows:
S-73
(1) a period (a "Lock-out Period") during which voluntary principal
prepayments are prohibited, followed by
(2) a period (a "Prepayment Premium Period") during which any voluntary
principal prepayment is to be accompanied by a premium, penalty or fee (a
"Prepayment Premium"), followed by
(3) a period (an "Open Period") during which voluntary principal
prepayments may be made without an accompanying Prepayment Premium.
Voluntary principal prepayments (after any Lock-out Period) may be made in
full or in some cases in part, subject to certain limitations and, during a
Prepayment Premium Period, payment of the applicable Prepayment Premium. As of
the Cut-off Date, the remaining Lock-out Periods ranged from 21 to 138
scheduled monthly payments, 22 to 138 scheduled monthly payments in Loan Group
1 and 21 to 138 scheduled monthly payments in Loan Group 2. As of the
Cut-off-Date the weighted average remaining Lock-out Period was 94 scheduled
monthly payments (92 scheduled monthly payments in Loan Group 1 and 100
scheduled monthly payments in Loan Group 2). As of the Cut-off Date, the Open
Period ranged from 1 to 6 scheduled monthly payments prior to and including the
final scheduled monthly payment at maturity. The weighted average Open Period
was 4 scheduled monthly payments (4 scheduled monthly payments in Loan Group 1
and 4 scheduled monthly payments in Loan Group 2). Prepayment Premiums on the
Mortgage Loans are generally calculated on the basis of a yield maintenance
formula (subject, in certain instances, to a minimum equal to a specified
percentage of the principal amount prepaid). The prepayment terms of each of
the Mortgage Loans are more particularly described in Annex A to this
prospectus supplement.
As more fully described in this prospectus supplement, Prepayment Premiums
actually collected on the Mortgage Loans will be distributed to the respective
Classes of Certificateholders in the amounts and priorities described under
"Description of the Certificates--Distributions--
Distributions of Prepayment Premiums" in this prospectus supplement. The
Depositor makes no representation as to the enforceability of the provision of
any Mortgage Loan requiring the payment of a Prepayment Premium or as to the
collectibility of any Prepayment Premium. See "Risk Factors--Risks Related to
the Mortgage Loans--Prepayment Premiums" in this prospectus supplement and
"Certain Legal Aspects of Mortgage Loans--Default Interest and Limitations on
Prepayments" in the accompanying prospectus.
Defeasance. Eighty-three Mortgage Loans (55 Mortgage Loans in Loan Group 1
and 28 Mortgage Loans in Loan Group 2), representing 86.7% of the Initial Pool
Balance (82.9% of the Group 1 Balance and 98.1% of the Group 2 Balance), permit
the applicable borrower at any time after a specified period (the "Defeasance
Lock-Out Period"), which is at least two years from the Delivery Date, provided
no event of default exists, to obtain a release of a Mortgaged Property (or a
portion thereof, if applicable) from the lien of the related Mortgage (a
"Defeasance Option"). The borrower must meet certain conditions in order to
exercise its Defeasance Option. Among other conditions the borrower must pay on
any Due Date (the "Release Date"):
(1) all interest accrued and unpaid on the principal balance of the Note
to and including the Release Date;
(2) all other sums, excluding scheduled interest or principal payments,
due under the Mortgage Loan and all other loan documents executed in
connection therewith; and
(3) an amount (the "Collateral Substitution Deposit") that will be
sufficient to (a) purchase U.S. government obligations (or in some
instances the applicable Mortgage Loan documents may require the borrower
to deliver the government obligations referenced in this clause (3))
providing for payments on or prior to, but as close as possible to, all
successive scheduled payment dates from the Release Date to the related
maturity or Anticipated Repayment Date (or, in certain cases, to the
commencement of the related Open Period) date in amounts sufficient to pay
the scheduled payments (including payments due on the subordinate
components of each of the CC Component Mortgage Loan, the SS Component
Mortgage Loan and the UH Component Mortgage Loan) due on such dates under
the Mortgage Loan or the
S-74
defeased amount thereof in the case of a partial defeasance and (b) pay any
costs and expenses incurred in connection with the purchase of such
government obligations.
In addition, the borrower must deliver a security agreement granting the
Trust Fund a first priority lien on the government securities or the Collateral
Substitution Deposit and, generally, an opinion of counsel to such effect.
Simultaneously with such actions, the related Mortgaged Property will be
released from the lien of the Mortgage Loan and the pledged government
securities (together with any Mortgaged Property not released, in the case of a
partial defeasance) will be substituted as the collateral securing the Mortgage
Loan. In general, a successor borrower established or designated pursuant to
the related loan documents will assume all of the defeased obligations of a
borrower exercising a Defeasance Option under a Mortgage Loan and the borrower
will be relieved of all of the defeased obligations thereunder. Under the
Pooling Agreement, the Master Servicer is required to enforce any provisions of
the related Mortgage Loan documents that require, as a condition to the
exercise by the mortgagor of any defeasance rights, that the mortgagor pay any
costs and expenses associated with such exercise.
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan.
The Mortgage Loans secured by more than one Mortgaged Property that permit
release of one or more of the Mortgaged Properties generally require that: (1)
prior to the release of a related Mortgaged Property, 110% of the allocated
loan amount for the Mortgaged Property be defeased and (2) certain debt service
coverage ratio and LTV Ratio tests be satisfied with respect to the remaining
Mortgaged Properties after the defeasance.
Additionally, the terms of one Mortgage Loan, representing 0.5% of the
Initial Pool Balance (representing 2.0% of Loan Group 2), permit the borrower
to release a non-material outparcel provided that the borrower complies with
certain criteria under the related Mortgage Loan documents.
RELEASE OR SUBSTITUTION OF PROPERTIES
The terms of one of the Mortgage Loans, representing approximately 9.5% of
the Initial Pool Balance (12.6% of the group 1 balance), that is secured by
mortgages on multiple mortgaged real properties permit the related borrower to
obtain a release of one of the properties from the related mortgage lien by
substituting another property of like kind and quality owned or acquired by the
borrower, provided that certain conditions have been satisfied, which
conditions include, without limitation, the following:
o the borrower will provide the lender with at least twenty (20) days but
no more than ninety (90) days prior written notice of its request to
obtain a release of the individual property;
o a wire transfer to the lender of immediately available federal funds (or
the delivery to the lender of defeasance collateral, if applicable) in an
amount equal to one hundred twenty-five percent (125%) of the loan amount
for the applicable individual property, together with (i) all accrued and
unpaid interest on the amount of principal being prepaid on the date of
such prepayment and (ii) all other sums due under the loan documents in
connection with a partial prepayment to be calculated and applied in
accordance with the loan documents;
o the borrower will submit to the lender, not less than twenty (20) days
prior to the date of such release, a release of lien for such individual
property for execution by the lender. Such release will be in a form
appropriate in the state in which the individual property is located and
will contain standard provisions, if any, protecting the rights of the
releasing lender. In addition, the borrower will provide all other
documentation the lender reasonably requires to be delivered by the
borrower in connection with such release, together with a certificate of
the borrower;
o after giving effect to such release, the lender will have determined
that the operations debt service coverage ratio for the properties then
remaining subject to the liens of the mortgages
S-75
will be at least equal to the greater of (i) 1.60x, and (ii) the lesser
of (y) the operations debt service coverage ratio for all of the then
remaining properties (including the individual property to be released)
for the twelve (12) full calendar months immediately preceding the
release of the individual property and (z) 1.85x;
o after giving effect to such release, the lender will have determined
that the debt service coverage ratio for the properties then remaining
subject to the liens of the mortgages will be at least equal to the
greater of (i) 1.69x, and (ii) the lesser of (y) the debt service
coverage ratio for all of the then remaining properties (including the
individual property to be released) for the twelve (12) full calendar
months immediately preceding the release of the individual property and
(z) 1.90x;
o after giving effect to such release, the lender will have determined
that the loan-to-value ratio with respect to the properties then
remaining subject to the lien of the mortgages will not be greater than
the lesser of (i) the aggregate loan-to-value ratio as of the closing
date with respect to all of the properties and (ii) the aggregate
loan-to-value ratio with respect to the properties remaining subject to
the lien of the mortgages immediately prior to the release of the
individual property;
o the lender will have received evidence reasonably acceptable to the
lender that the individual property to be released will be conveyed to a
person other than the borrower, borrower principal or any affiliate of
either of the foregoing;
o the lender will have received a certified copy of an amendment to the
operating lease reflecting the deletion of the individual property to be
released, but only to the extent that the operating lease does not
provide for such deletion to occur automatically; and
o the lender will have received payment of all lender's reasonable costs
and expenses, including due diligence review costs and reasonable counsel
fees and disbursements incurred in connection with the release of the
individual property from the lien of the related mortgage and the review
and approval of the documents and information required to be delivered in
connection therewith.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The Mortgage Loans
generally contain both "due-on-sale" and "due-on-encumbrance" clauses that in
each case, subject to certain limited exceptions, permit the holder of the
Mortgage to accelerate the maturity of the related Mortgage Loan if the
borrower sells or otherwise transfers or encumbers the related Mortgaged
Property or prohibit the borrower from doing so without the consent of the
mortgagee. See "--Additional Mortgage Loan Information--Subordinate Financing"
herein. Certain of the Mortgage Loans permit the transfer or further
encumbrance of the related Mortgaged Property if certain specified conditions
are satisfied or if the transfer is to a borrower reasonably acceptable to the
mortgagee. The Master Servicer and/or the Special Servicer, as applicable, will
determine, in a manner consistent with the Servicing Standard and with the
REMIC provisions, whether to exercise any right the mortgagee may have under
any such clause to accelerate payment of the related Mortgage Loan upon, or to
withhold its consent to, any transfer or further encumbrance of the related
Mortgaged Property; provided that the Master Servicer will not waive any right
that it may have, or grant any consent that it may otherwise withhold without
obtaining the consent of the Special Servicer. The Special Servicer's consent
will be deemed given if it does not respond within 15 business days following
receipt by the Special Servicer of the Master's Servicer's request for such
consent and all information reasonably requested by the Special Servicer as
such time frame may be extended if the Special Servicer is required to seek the
consent of the Directing Certificateholder, the CC Controlling Holder, the SS
Controlling Holder, the UH Controlling Holder or any Rating Agency, as
described below. In addition, the Special Servicer will not waive any right it
has, or grant any consent that it may otherwise withhold, under any related
"due-on-sale" or "due-on-encumbrance" clause for any Non-Specially Serviced
Mortgage Loan or any Specially Serviced Mortgage Loan (other than the CC
Component Mortgage Loan, the SS Component Mortgage Loan and the UH Component
Mortgage Loan, provided that a CC Control Appraisal Period, SS Control
Appraisal Period or UH Control Appraisal Period, as the case may be, does not
exist with respect to the related Mortgage Loan as
S-76
described below) unless the Directing Certificateholder has approved such
waiver and consent, which approval will be deemed given if the Directing
Certificateholder does not respond within ten business days after the Special
Servicer has given a written notice of the matter and a written explanation of
the surrounding circumstances and a request for approval of a waiver or consent
related to the "due-on-encumbrance" or "due-on-sale clause" to the Directing
Certificateholder.
With respect to the CC Component Mortgage Loan, if a CC Control Appraisal
Period does not exist, the Master Servicer with respect to those time periods
when the CC Mortgage Loan is a Non-Specially Serviced Mortgage Loan will not
waive any right that it may have, or grant any consent that it may otherwise
withhold under any related "due-on-sale" or "due-on-encumbrance" clause without
obtaining the consent of the Special Servicer, which consent by the Special
Servicer will not be given without the Special Servicer first obtaining the
consent of the CC Controlling Holder. With respect to the CC Component Mortgage
Loan, if a CC Control Appraisal Period does not exist, the Special Servicer
with respect to those time periods when the CC Component Mortgage Loan is a
Specially Serviced Mortgage Loan will not waive any right that it may have, or
grant any consent that it may otherwise withhold under any related
"due-on-sale" or "due-on-encumbrance" clause without obtaining the consent of
the CC Controlling Holder. With respect to the SS Component Mortgage Loan, if a
SS Control Appraisal Period does not exist, the Master Servicer with respect to
those time periods when the SS Mortgage Loan is a Non-Specially Serviced
Mortgage Loan will not waive any right that it may have, or grant any consent
that it may otherwise withhold under any related "due-on-sale" or
"due-on-encumbrance" clause without obtaining the consent of the Special
Servicer, which consent by the Special Servicer will not be given without the
Special Servicer first obtaining the consent of the SS Controlling Holder. With
respect to the SS Component Mortgage Loan, if a SS Control Appraisal Period
does not exist, the Special Servicer with respect to those time periods when
the SS Component Mortgage Loan is a Specially Serviced Mortgage Loan will not
waive any right that it may have, or grant any consent that it may otherwise
withhold under any related "due-on-sale" or "due-on-encumbrance" clause without
obtaining the consent of the SS Controlling Holder. With respect to the UH
Component Mortgage Loan, if a UH Control Appraisal Period does not exist, the
Master Servicer with respect to those time periods when the UH Mortgage Loan is
a Non-Specially Serviced Mortgage Loan will not waive any right that it may
have, or grant any consent that it may otherwise withhold under any related
"due-on-sale" or "due-on-encumbrance" clause without obtaining the consent of
the Special Servicer, which consent by the Special Servicer will not be given
without the Special Servicer first obtaining the consent of the UH Controlling
Holder. With respect to the UH Component Mortgage Loan, if a UH Control
Appraisal Period does not exist, the Special Servicer with respect to those
time periods when the UH Component Mortgage Loan is a Specially Serviced
Mortgage Loan will not waive any right that it may have, or grant any consent
that it may otherwise withhold under any related "due-on-sale" or
"due-on-encumbrance" clause without obtaining the consent of the UH Controlling
Holder. In each case that the consent of the CC Controlling Holder, SS
Controlling Holder or UH Controlling Holder is required with respect to a
"due-on-sale" or "due-on-encumbrance" provision, each such party's consent will
be deemed granted if such party does not respond to a request for its consent
within 10 business days of its receipt of a written notice of the matter and a
written explanation of the surrounding circumstances.
Notwithstanding the foregoing, with respect to any Mortgage Loan that (i)
represents greater than 5% of the outstanding principal balance of the Mortgage
Pool, (ii) has an outstanding principal balance of greater than $20,000,000, or
(iii) is one of the ten largest Mortgage Loans based on the then outstanding
principal balance, neither the Master Servicer nor Special Servicer may waive
any right it has, or grant any consent it is otherwise entitled to withhold,
under any related "due-on-sale" clause until it has received written
confirmation from each Rating Agency (as set forth in the Pooling Agreement)
that such action would not result in the downgrade, qualification (if
applicable) or withdrawal of the rating then assigned by such Rating Agency to
any Class of Certificates. In addition, with respect to any Mortgage Loan that
represents greater than 2% of the outstanding principal balance of the Mortgage
Pool or is one of the ten largest Mortgage Loans based on outstanding principal
balance, neither the Master Servicer nor the Special Servicer may
S-77
waive any right it has, or grant any consent it is otherwise entitled to
withhold, under any related "due-on-encumbrance" clause until it has received
written confirmation from each Rating Agency (as set forth in the Pooling
Agreement) that such action would not result in the downgrade, qualification
(if applicable) or withdrawal of the rating then assigned by such Rating Agency
to any Class of Certificates if, after taking into consideration any additional
indebtedness secured by the Mortgaged Property, the loan to value ratio for
such Mortgage Loan would be greater than 85% or the debt service coverage ratio
would be less than 1.20x. Notwithstanding the foregoing, the existence of any
additional indebtedness may increase the difficulty of refinancing the related
mortgage loan at maturity or the Anticipated Repayment Date and the possibility
that reduced cash flow could result in deferred maintenance. Also, if the
holder of the additional debt has filed for bankruptcy or been placed in
involuntary receivership, foreclosure of the related mortgage loan could be
delayed. See "The Pooling and Servicing Agreements--Due-on-Sale and
Due-on-Encumbrance Provisions" and "Certain Legal Aspects of Mortgage Loans--
Due-on-Sale and Due-on-Encumbrance" in the accompanying prospectus.
CC COMPONENT MORTGAGE LOAN
The ownership interest in Loan No. 57990 (the "CC Component Mortgage Loan")
will be split into a senior interest (the "CC Senior Component") and 6
subordinate interests (the "CC Subordinate Components"). The CC Subordinate
Components consist of the "CC-A Component", the "CC-B Component", the "CC-C
Component", the "CC-D Component", the "CC-E Component" and the "CC-F Component".
The Cut-off Date Balance of the CC Senior Component will equal approximately
$77,780,036, representing 6.7% of the Initial Pool Balance (8.9% of the Group 1
Balance). All distributions of principal and interest with respect to the CC
Senior Component will be distributed to the Certificates as described in this
prospectus supplement. The holders of the CC Subordinate Components are only
entitled on any Distribution Date to amounts collected on the CC Component
Mortgage Loan to the extent remaining after the application of such collections
to distributions on such Distribution Date in respect of the CC Senior Component
as described in this prospectus supplement under "Description of the
Certificates--Distributions--the CC Component Mortgage Loan"; provided, however,
prepayment premiums actually collected in respect of the CC Component Mortgage
Loan shall be allocated to the CC Senior Component and the CC Subordinate
Components, pro rata, based upon their outstanding principal balances.
If the CC Component Mortgage Loan becomes a Defaulted Mortgage Loan, the
CC Controlling Holder will have the option, but not the obligation, to purchase
the CC Component Mortgage Loan (including the CC Subordinate Components) from
the Trust Fund at a price equal to the Purchase Price thereof. The Purchase
Price paid in connection with such purchase will be applied as described under
"Description of the Certificates--Distributions--the CC Component Mortgage
Loan". For more information regarding the relationship between the CC Senior
Component and the CC Subordinate Components, see "Description of the
Certificates" in this prospectus supplement.
SS COMPONENT MORTGAGE LOAN
The ownership interest in Loan No. 57984 (the "SS Component Mortgage
Loan") will be split into a senior interest (the "SS Senior Component") and 4
subordinate interests (the "SS Subordinate Components"). The SS Subordinate
Components consist of the "SS-A Component", the "SS-B Component", the "SS-C
Component" and the the "SS-D Component". The Cut-off Date Balance of the SS
Senior Component will equal approximately $75,850,000, representing 6.6% of the
Initial Pool Balance (8.7% of the Group 1 Balance). All distributions of
principal and interest with respect to the SS Senior Component will be
distributed to the Certificates as described in this prospectus supplement. The
holders of the SS Subordinate Components are only entitled on any Distribution
Date to amounts collected on the SS Component Mortgage Loan to the extent
remaining after the application of such collections to distributions on such
Distribution Date in respect of the SS Senior Component as described in this
prospectus supplement under "Description of the Certificates--Distributions--the
SS Component Mortgage Loan"; provided, however, prepayment
S-78
premiums (if any) actually collected in respect of the SS Component Mortgage
Loan shall be allocated to the SS Senior Component and the SS Subordinate
Components, pro rata, based on their outstanding principal balances.
If the SS Component Mortgage Loan becomes a Defaulted Mortgage Loan, the
SS Controlling Holder will have the option, but not the obligation, to purchase
the SS Component Mortgage Loan (including the SS Subordinate Components) from
the Trust Fund at a price equal to the Purchase Price thereof. The Purchase
Price paid in connection with such purchase will be applied as described under
"Description of the Certificates--Distributions--the SS Component Mortgage
Loan". For more information regarding the relationship between the SS Senior
Component and the SS Subordinate Components, see "Description of the
Certificates" in this prospectus supplement.
UH COMPONENT MORTGAGE LOAN
The ownership interest in Loan No. 57367 (the "UH Component Mortgage Loan")
will be split into a senior interest (the "UH Senior Component")and together
with the CC Senior Component and the SS Senior Component, sometimes referred to
individually as a "Senior Component" and 9 subordinate interests (the "UH
Subordinate Components") and together with the CC Subordinate Components and the
SS Subordinate Components, sometimes referred to individually as "Subordinate
Components". The UH Subordinate Components consist of the "UH-A Component", the
"UH-B Component", the "UH-C Component", the "UH-D Component", the "UH-E
Component", the "UH-F Component", the "UH-G Component", the "UH-H Component" and
the "UH-J Component". The Cut-off Date Balance of the UH Senior Component will
equal approximately $109,538,973, representing 9.5% of the Initial Pool Balance
(12.6% of the Group 1 Balance). All distributions of principal and interest with
respect to the UH Senior Component will be distributed to the Certificates as
described in this prospectus supplement. The holders of the UH Subordinate
Components are only entitled on any Distribution Date to amounts collected on
the UH Component Mortgage Loan to the extent remaining after the application of
such collections to distributions on such Distribution Date in respect of the UH
Senior Component as described in this prospectus supplement under "Description
of the Certificates--Distributions--the UH Component Mortgage Loan"; provided,
however, prepayment premiums (if any) actually collected in respect of the UH
Component Mortgage Loan shall be allocated to the UH Senior Component and the UH
Subordinate Components, pro rata, based on their outstanding principal balances.
If the UH Component Mortgage Loan becomes a Defaulted Mortgage Loan, the
UH Controlling Holder will have the option, but not the obligation, to purchase
the UH Component Mortgage Loan (including the UH Subordinate Components) from
the Trust Fund at a price equal to the Purchase Price thereof. The Purchase
Price paid in connection with such purchase will be applied as described under
"Description of the Certificates--Distributions--the UH Component Mortgage
Loan". For more information regarding the relationship between the UH Senior
Component and the UH Subordinate Components, see "Description of the
Certificates" in this prospectus supplement.
17 STATE STREET WHOLE LOAN
The SS Component Mortgage Loan is one of two mortgage loans that are part
of a split loan structure that is secured by the same mortgage instrument on
the related mortgaged property (the "17 State Street Mortgaged Property"). Only
the SS Component Mortgage Loan is included in the Trust Fund. The other
mortgage loan's principal balance as of the date of origination was
$22,425,256. This mortgage loan (the "17 State Street Note B") is subordinated
in right of payment to the SS Component Mortgage Loan. As used in this
prospectus supplement, the term "17 State Street Whole Loan" refers to the SS
Component Mortgage Loan and the 17 State Street Note B. An intercreditor
agreement (the "17 State Street Intercreditor Agreement") between the holder of
the SS Component Mortgage Loan and the holder of the 17 State Street Note B
(the "17 State Street B Noteholder") sets forth the rights of the these
noteholders. The 17 State Street Intercreditor Agreement generally provides
that the mortgage loans that comprise the 17 State Street Whole Loan will be
serviced and administered pursuant to the Pooling Agreement by the Master
Servicer and
S-79
Special Servicer, as applicable, according to the Servicing Standard. The 17
State Street Intercreditor Agreement generally provides that expenses, losses
and shortfalls relating to the 17 State Street Whole Loan will be allocated
first, to the holder of the 17 State Street Note B, and thereafter, to the
holder of SS Component Mortgage Loan.
Pursuant to the terms of the 17 State Street Intercreditor Agreement,
prior to the occurrence of a monetary or a material event of default with
respect to the 17 State Street Whole Loan after payment, reimbursement of
certain servicing fees, trust fund expenses and/or advances and various
expenses, costs and liabilities referenced in the 17 State Street Intercreditor
Agreement, all payments and proceeds received with respect to the 17 State
Street Whole Loan will be generally paid in the following manner: The holder of
the SS Component Mortgage Loan will receive accrued and unpaid interest on the
outstanding principal balance of such Loan; then the holder of the SS Component
Mortgage Loan will receive payment of principal (from and to the extent of
principal payments on the 17 State Street Whole Loan), pro rata, based upon the
outstanding principal balances of the SS Component Mortgage Loan and the 17
State Street Note B; then the holder of the 17 State Street Note B will receive
accrued and unpaid interest on its outstanding principal balance; then the
holder of the 17 State Street Note B will receive payment of principal (from
and to the extent of principal payments on the 17 State Street Whole Loan), pro
rata, based upon the outstanding principal balance of the SS Component Mortgage
Loan and the 17 State Street Note B; then prepayment premiums to the extent
actually received in respect of the 17 State Street Whole Loan will be
distributed to the holder of the SS Component Mortgage Loan and the holder of
the 17 State Street Note B, pro rata, based upon the outstanding principal
balances of the SS Component Mortgage Loan and the 17 State Street Note B; then
default interest (in excess of interest accrued at the regular rate) and
penalty charges will be paid to the holder of the SS Component Mortgage Loan
and the 17 State Street Note B pro rata to the extent not required to offset
interest on advances or otherwise payable to the Master Servicer or Trustee
pursuant to the Pooling Agreement; pro rata, based upon the outstanding
principal balances of the SS Component Mortgage Loan and the 17 State Street
Note B; and finally any excess will be paid to the holder of the SS Component
Mortgage Loan and the holder of the 17 State Street Note B, pro rata, based
upon the outstanding principal balances of the SS Component Mortgage Loan and
the 17 State Street Note B.
Following the occurrence and during the continuance of a (x) monetary
event of default under the 17 State Street Whole Loan in accordance with the 17
State Street Intercreditor Agreement or (y) a non-monetary event of default
under the 17 State Street Whole Loan that gives rise to a Servicing Transfer
Event (provided that the 17 State Street B Noteholder has not then cured or is
not then curing any such events of default), after payment or reimbursement of
certain servicing fees, trust fund expenses and/or advances and various
expenses, costs and liabilities referenced in the 17 State Street Intercreditor
Agreement, all payments and proceeds received with respect to the 17 State
Street Note B will be subordinated to all payments under the SS Component
Mortgage Loan and the amounts received with respect to the 17 State Street
Whole Loan will generally be paid in the following manner: The holder of the SS
Component Mortgage Loan will receive accrued and unpaid interest on the
outstanding principal balance thereof; then amounts will be distributed (to the
extent of principal allocable to the 17 State Street Whole Loan) to the holder
of the SS Component Mortgage Loan until the outstanding principal balance
thereof is reduced to zero; then the holder of the 17 State Street Note B will
receive accrued and unpaid interest on the outstanding principal balance of
such note; then amounts will be distributed (to the extent of principal
allocable to the 17 State Street Whole Loan) to the holder of the 17 State
Street Note B until the outstanding principal balance of the 17 State Street
Note B is reduced to zero; then prepayment premiums to the extent actually
received with respect to the SS Component Mortgage Loan will be distributed to
the holder of the SS Component Mortgage Loan; then prepayment premiums to the
extent actually received with respect to the 17 State Street Note B will be
distributed to the holder of the 17 State Street Note B; then default interest
(in excess of interest accrued at the regular rate) and penalty charges to the
extent not required to offset interest on advances or otherwise payable to the
Master Servicer or the Trustee pursuant to the Pooling Agreement will be paid
to the holder of the SS Component Mortgage Loan and the 17 State Street Note B,
pro rata, based upon the outstanding principal
S-80
balances of the SS Component Mortgage Loan and the 17 State Street Note B; then
any excess will be paid to the holder of the SS Component Mortgage Loan and the
holder of the 17 State Street Note B, pro rata, based on the original principal
balances of the SS Component Mortgage Loan and the 17 State Street Note B.
Upon the 17 State Street Whole Loan becoming a Defaulted Mortgage Loan,
the holder of the 17 State Street Note B, the holder of the most subordinate
Class of Class SS Certificates with a then outstanding Certificate Balance at
least equal to 25% of its initial Certificate Balance, or if no such Class is
outstanding, the Class SS Certificates with the then greatest outstanding
Certificate Balance (the "17 State Street Purchase Option Holder") will have
the right (but not the obligation) to purchase the SS Component Mortgage Loan
at the 17 State Street Repurchase Price (as defined below) and, upon written
notice, the Special Servicer will be required to sell the SS Component Mortgage
Loan to the 17 State Street Purchase Option Holder at the 17 State Street
Repurchase Price, on a mutually designated date. The 17 State Street Purchase
Option Holder's rights to purchase the SS Component Mortgage Loan will
terminate upon the earliest of (1) a foreclosure sale, power of sale, or
delivery of deed-in-lieu of foreclosure with respect to the 17 State Street
Mortgaged Property and (2) the cure of the subject event of default.
The "17 State Street Repurchase Price" means, with respect to the SS
Component Mortgage Loan, a cash price equal to the sum of, without duplication,
(a) the principal balance of the SS Component Mortgage Loan, (b) accrued and
unpaid interest thereon from the payment date under the SS Component Mortgage
Loan as to which interest was last paid in full by the 17 State Street Borrower
up to and including the end of the interest accrual period relating to the
payment date next following the date the purchase occurred, (c) all
unreimbursed advances with respect to the SS Component Mortgage Loan, together
with interest thereon at the reimbursement rate under the Pooling Agreement and
any Master Servicer compensation, Special Servicer compensation, Trustee Fees
and Liquidation Fees (d) certain unreimbursed costs and expenses with respect
to the 17 State Street Whole Loan and (e) any other additional trust fund
expenses; provided, however, that 17 State Street Repurchase Price will not be
reduced by any outstanding principal and/or interest advance.
CBA WHOLE LOAN
One Mortgage Loan (Loan No. 58000, the "CBA Mortgage Loan"), representing
0.2% of the Initial Pool Balance (0.3% of the Group 1 Balance) as of the
cut-off date, is one of two mortgage loans that are part of a split loan
structure that is secured by the same mortgage instrument on the related
mortgaged property (the "CBA Mortgaged Property"). Only the CBA Mortgage Loan
is included in the Trust Fund. The other mortgage loan's principal balance as
of the date of origination was $170,000. This mortgage loan (the "CBA B Note")
is subordinated in right of payment to the CBA Mortgage Loan. As used in this
prospectus supplement, the term "CBA Whole Loan" refers to the CBA Mortgage
Loan and the CBA B Note. An intercreditor agreement (the "CBA Intercreditor
Agreement") between the holder of the CBA Mortgage Loan and the holder of the
CBA B Note (the "CBA B Noteholder") sets forth the rights of the these
noteholders. The CBA Intercreditor Agreement generally provides that the
mortgage loans that comprise the CBA Whole Loan will be serviced and
administered pursuant to the Pooling Agreement by the Master Servicer and
Special Servicer, as applicable, according to the Servicing Standard. The CBA
Intercreditor Agreement generally provides that expenses, losses and shortfalls
relating to the CBA Whole Loan will be allocated first, to the holder of the
CBA B Note, and thereafter, to the holder of CBA Mortgage Loan.
Pursuant to the terms of the CBA Intercreditor Agreement, prior to the
occurrence of (i) the acceleration of the CBA Mortgage Loan or CBA B Note, (ii)
a monetary event of default or (iii) an event of default triggered by the
bankruptcy of the borrower, the related borrower will make separate monthly
payments of principal and interest to the Trust and the CBA B Noteholder. Any
escrow and reserve payments required in respect of the CBA Mortgage Loan or CBA
B Note will be paid to the Trust.
Following the occurrence and during the continuance of (i) the
acceleration of the CBA Whole Loan or CBA B Note, (ii) a monetary event of
default or (iii) an event of default triggered by the
S-81
bankruptcy of the borrower, and subject to certain rights of the holder of the
CBA B Note to purchase the CBA Mortgage Loan from the Trust as described below,
all payments and proceeds received with respect to the CBA B Note will be
subordinated to all payments due under the CBA Mortgage Loan and the amounts
received with respect to the CBA Whole Loan will be paid, first, to the Master
Servicer, Special Servicer and Trustee, up to the amount of any unreimbursed
costs and expenses paid by such entity, including unreimbursed advances and
interest thereon; second, to the Master Servicer and Special Servicer, in an
amount equal to the accrued and unpaid servicing fees earned by such entity;
third, to the Trust, in an amount equal to interest due with respect to the CBA
Mortgage Loan; fourth, to the Trust, in an amount equal to the principal
balance of the CBA Mortgage Loan until paid in full; fifth, to the Trust, in an
amount equal to any prepayment premium, to the extent actually paid, allocable
to the CBA Mortgage Loan; sixth, to the CBA B Noteholder, up to the amount of
any unreimbursed costs and expenses paid by the CBA B Noteholder; seventh, to
the CBA B Noteholder, in an amount equal to interest due with respect to the
principal balance of the CBA B Note; eighth, to the CBA B Noteholder, in an
amount equal to the principal balance of the CBA B Note until paid in full;
ninth, to the CBA B Noteholder, in an amount equal to any prepayment premium,
to the extent actually paid, allocable to the CBA B Note; tenth, to the Trust
and the CBA B Noteholder, in an amount equal to any unpaid default interest
accrued on the CBA Mortgage Loan and CBA B Note, respectively; and eleventh,
any excess, to the Trust and the CBA B Noteholder, pro rata, based upon the
outstanding principal balances; provided that if the principal balance of the
CBA B Note is equal to zero, then based upon the initial principal balances.
In the event that (i) any payment of principal or interest on the CBA
Mortgage Loan or CBA B Note becomes 90 or more days delinquent, (ii) the
principal balance of the CBA Mortgage Loan or CBA B Note has been accelerated,
(iii) the principal balance of the CBA Mortgage Loan or CBA B Note is not paid
at maturity, (iv) the borrower declares bankruptcy or is subject to a
bankruptcy proceeding or (v) any other event where the cash flow payment under
a CBA B Note has been interrupted and payments are made pursuant to the event
of default waterfall, the holder of the CBA B Note will be entitled to purchase
the CBA Mortgage Loan from the Trust for a period of 30 days after its receipt
of a notice of such event subject to certain conditions set forth in the CBA
Intercreditor Agreement. The purchase price will generally equal the unpaid
principal balance of the CBA Mortgage Loan, together with all unpaid interest
on the CBA Mortgage Loan (other than default interest) at the related mortgage
rate and certain expenses, fees, advances and interest on advances for which
the borrower under the CBA Mortgage Loan is responsible. Unless the borrower or
an affiliate is purchasing the CBA Mortgage Loan, no prepayment consideration
will be payable in connection with the purchase of the CBA Mortgage Loan.
The Mortgage Loans, other than the CC Component Mortgage Loan, the SS
Component Mortgage Loan and the UH Component Mortgage Loan, are sometimes
referred to in this prospectus supplement as the "Non-Partitioned Mortgage
Loans". The CC Component Mortgage Loan, the SS Component Mortgage Loan and the
UH Component Mortgage Loan, following the occurrence of and during the
continuance of a CC Control Appraisal Period, SS Control Appraisal Period or UH
Control Appraisal Period, as the case may be, are sometimes referred to in this
prospectus supplement as "Post CAP Loans".
SIGNIFICANT MORTGAGE LOANS
Certain of the larger Mortgage Loans (by outstanding principal balance)
are described below in the following table and text. Terms used below relating
to underwriting or property characteristics have the meaning assigned to such
term in Annex A.
S-82
The following table and summaries describe the ten largest Mortgage Loans
or Crossed Pool in the Mortgage Pool by Cut-off Date Balance:
PERCENT OF PERCENT OF
CUT-OFF INITIAL APPLICABLE
DATE LOAN POOL LOAN
LOAN NAME BALANCE GROUP BALANCE GROUP
- ------------------------ --------------- ------- ------------ ------------
U-Haul Portfolio ....... $109,538,973 1 9.5% 12.6%
Calpine Center ......... 77,780,036 1 6.7 8.9%
17 State Street ........ 75,850,000 1 6.6 8.7%
Sun Communities --
Scio Farms ............ 40,964,950 1 3.5 4.7%
369 Lexington Avenue.... 40,839,481 1 3.5 4.7%
Sun Communities
Portfolio 9 ........... 37,351,472 2 3.2 13.1%
Quarters at
Memorial .............. 35,872,239 1 3.1 4.1%
Sun Communities
Portfolio 8/Arbor
Terrace** ............. 27,920,000 2 2.4 9.8%
Extra Space Storage --
East One Portfolio .... 27,208,000 1 2.4 3.1%
St. Clair Estates
Manufactured
Home Community......... 27,200,000 2 2.4 9.6%
------------ ----
TOTAL/WTD. AVG ......... $500,525,152 43.3%
============ ====
CUT-OFF
CUT-OFF DATE LTV
PROPERTY DATE BALANCE LTV RATIO AT UNDERWRITTEN MORTGAGE
LOAN NAME TYPE PER SF/UNIT/PADS RATIO MATURITY DSCR RATE
- ------------------------ --------------------- ------------------ ---------- ---------- -------------- -----------
U-Haul Portfolio ....... Self Storage(1) $ 2,438 37.5% 29.6% 2.78x 6.845%
Calpine Center ......... Office $ 110 48.3% 40.3% 2.29x 5.232%
17 State Street ........ Office $ 143 44.6% 38.6% 2.23x 5.247%
Sun Communities -- Manufactured
Scio Farms ............ Housing Communities $44,869 77.9% 65.7% 1.22x 5.320%
369 Lexington Avenue.... Office $ 264 79.8% 73.3% 1.23x 4.400%
Sun Communities Manufactued
Portfolio 9 ........... Housing Communities $30,244 79.3% 66.8% 1.27x 5.320%
Quarters at
Memorial .............. Multifamily $94,401 71.6% 63.6% 1.24x 4.902%
Sun Communities
Portfolio 8/Arbor Manufactured
Terrace** ............. Housing Communities $23,782 80.0% 67.4% 1.32x 5.320%
Extra Space Storage --
East One Portfolio .... Self Storage $ 6,687 80.0% 75.1% 1.41x 4.763%
St. Clair Estates
Manufactured Manufactured
Home Community......... Housing Communities $43,312 80.0% 73.5% 1.26x 4.660%
TOTAL/WTD. AVG ......... 59.6% 51.3% 1.90X 5.458%
** For crossed pools, the information is the sum or weighted average of the
information for the mortgage loans in the crossed pool.
(1) One property is a U-Haul truck rental facility.
S-83
U-HAUL PORTFOLIO
WHOLE LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $183,000,000
FIRST PAYMENT DATE: June 1, 2004
TERM/AMORTIZATION: 120/300 months
SHADOW RATING (S&P/MOODY'S): AAA/Aaa
MATURITY DATE: May 1, 2014
EXPECTED MATURITY BALANCE: $144,298,864
UH Storage (DE)
BORROWING ENTITY: Limited Partnership
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance:
114 payments
Open: 6 payments
UP-FRONT RESERVES:
TAX/INSURANCE RESERVE: Yes
DEBT SERVICE: $30,000,000
REPLACEMENT RESERVE: $600,000
OTHER RESERVE: $46,875(1)
ONGOING MONTHLY RESERVE:
TAX/INSURANCE RESERVE: Yes
LOCKBOX: Hard
(1) Ground water monitoring reserve.
FINANCIAL INFORMATION
WHOLE LOAN BALANCE*: $182,538,973
U-HAUL PORTFOLIO SENIOR COMPONENT
BALANCE*: $109,538,973
U-HAUL SUBORDINATE COMPONENT BALANCE*: $73,000,000
U-HAUL SENIOR COMPONENT SHADOW RATING
(S&P/MOODY'S): AAA/Aaa
CUT-OFF DATE LTV: 37.5%(2)
MATURITY DATE LTV: 29.6%(2)
UNDERWRITTEN DSCR**: 2.78x(2)
MORTGAGE RATE+: 6.845%
* As of the Cut-off Date.
** DSCR figures based on net cash flow unless otherwise noted.
+ The interest rate was rounded to three decimals.
With respect to the calculations of the Cut-off Date LTV and Undertwritten DSCR
with respect to the U-Haul Portfolio loan, such calculations exclude the U-Haul
Subordinate Components. If the U-Haul Portfolio Subordinate Components were
included, the Cut-off Date LTV would equal 62.4% and the Underwritten DSCR
would be 1.75x.
PROPERTY INFORMATION
PROPERTY TYPE: Self Storage(3)
PROPERTY SUB-TYPE: Self Storage(3)
LOCATION: Various
YEAR BUILT/RENOVATED: Various
UNITS: 44,931
CUT-OFF BALANCE PER UNIT: $2,438(2)
OCCUPANCY AS OF 5/1/04: 76.8%
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: U-Haul Self-Storage
Management (WPC), Inc.
U/W NET CASH FLOW: $25,806,109
APPRAISED VALUE: $292,360,000
(2) Based on the U-Haul Senior Component Balance.
(3) One property is a U-Haul truck rental facility.
S-84
U-HAUL PORTFOLIO
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TRAILING-12 FULL YEAR
UNDERWRITTEN (12/31/03) (3/31/03)
---------------- ---------------- ----------------
EFFECTIVE GROSS INCOME ............. $41,581,156 $55,340,033 $50,589,942
TOTAL EXPENSES ..................... $15,176,017 $32,833,387 $30,849,429
NET OPERATING INCOME (NOI) ......... $26,405,139 $22,506,646 $19,740,513
CASH FLOW (CF) ..................... $25,806,109 $22,506,646 $19,740,513
DSCR ON NOI (1) .................... 2.84x 2.42x 2.12x
DSCR ON CF(1) ...................... 2.78x 2.42x 2.12x
(1) Based on the U-Haul Senior Component Balance.
ADDITIONAL INFORMATION
THE LOAN:
o The U-Haul Portfolio loan is secured by a first mortgage on 77 self-storage
and truck rental properties and one truck rental facility. The 78
properties total 3,973,835 square feet and 44,931 self-storage units and
are located in 24 states.
o The U-Haul Portfolio loan is divided into a senior component and one or
more subordinate components as described herein.
o As will be set forth in more detail in the preliminary prospectus
supplement, the holder of designated classes of certificates that are
entitled to payments solely from the U-Haul Portfolio loan will be entitled
in certain instances to exercise rights analogous to the rights of the
Directing Certificateholder solely with respect to the U-Haul Portfolio
loan. Such rights may include the review and/or approval of certain actions
taken by the Master Servicer or the Special Servicer in connection with the
U-Haul Portfolio loan. In addition, such holder may (but is not obligated
to) purchase the U-Haul Portfolio loan, if the loan is then considered a
"Defaulted Mortgage Loan" as more particularly described in the preliminary
prospectus supplement, at a price generally equal to its unpaid principal
balance, plus accrued and unpaid interest on such balance, all related
unreimbursed advances (with interest, if any), and all accrued special
servicing fees and additional trust fund expenses.
THE BORROWER:
o The borrower, UH Storage (DE) Limited Partnership (the "U-Haul Portfolio
Borrower"), is a single-purpose, bankruptcy-remote entity for which the
U-Haul Portfolio Borrower's legal counsel delivered a non-consolidation
opinion at loan closing.
o The borrower principal, Corporate Property Associates 15 Incorporated
("CPA:15") is a real estate investment trust ("REIT") engaged in the
business of investing in commercial and industrial real estate. W. P. Carey
provides ongoing management services to CPA:15. W. P. Carey & Co., an
investment firm headquartered in New York City, is a provider of corporate
real estate financing solutions. W. P. Carey currently owns and/or manages
680 commercial and industrial facilities throughout the United States and
Europe, comprising more than 75 million square feet of space.
THE PROPERTY:
o The U-Haul Portfolio consists of 77 U-Haul self-storage and truck rental
properties and one U-Haul truck rental facility for a total of 78
properties representing 44,931 units, and 3,973,835 net rentable square
feet located in 24 states. Six states contain 52 out of the 78 properties
(66.7%) and 30,105 out of the 44,931 units (67.0%): Texas 15 properties
(9,351 units, 20.8%), Florida 12 properties (7,185 units, 16.0%), Arizona 9
properties (4,672 units, 10.4%), Georgia 6 properties, including the 1
rental facility (3,115 units, 6.9%), Virginia 5 properties (2,178 units,
4.8%) and Nevada 5 properties (3,604 units, 8.0%).
S-85
U-HAUL PORTFOLIO
INSURANCE:
o The U-Haul Portfolio Borrower, at its sole cost and expense, is required to
keep the U-Haul Portfolio Mortgaged Properties insured up to an amount
equal to 100% of the actual replacement value against loss or damage by
fire and other risks addressed by coverage of a comprehensive all risk
insurance policy, provided that no deductible will exceed $25,000 (except
with respect to (i) wind storm insurance for those U-Haul Portfolio
Mortgaged Properties located in Florida for which the deductible on such
insurance will not be in excess of five percent of the replacement cost of
such U-Haul Portfolio Mortgaged Properties and (ii) earthquake and flood
insurance for which the deductible on such insurance will not be in excess
of $100,000). In addition, the U-Haul Portfolio Borrower, at its sole cost
and expense, will also be required to obtain and maintain such other
policies of insurance as called for under the U-Haul Portfolio Mortgage
Loan documents, which include (but are not limited to): commercial general
liability insurance in so called "occurrence" form with a combined limit of
not less than $2,000,000 in the aggregate and $1,000,000 per occurrence,
rental loss or business interruption insurance for a period of up to 18
months (as called for in the U-Haul Portfolio Mortgage Loan documents),
statutory worker's compensation insurance, excess liability insurance in an
amount not less than $25,000,000 per occurrence and $50,000,000 aggregate,
and customer good liability insurance for amounts of not less than
$250,000. In addition, the U-Haul Portfolio Borrower must use commercially
reasonable efforts to maintain insurance coverage against losses resulting
from acts of terrorism. All policies of insurance described above are
required to be issued by an insurer having a claims paying ability rating,
as the case may be, of "A+" (or its equivalent) or better by at least two
rating agencies, one of which must be S&P, and to contain the standard
non-contribution clause naming the Trustee on behalf of the Trust Fund as
the person or entity to which all payments made by that insurance company
will be paid.
CASUALTY AND CONDEMNATION:
o The U-Haul Portfolio Mortgage Loan documents generally require that, if any
U-Haul Portfolio Mortgaged Property is damaged or destroyed, in whole or in
part, by fire, or other casualty, or if it is taken by a government
authority via eminent domain or otherwise, the U-Haul Portfolio Borrower
must promptly proceed with the repair or rebuilding of the improvements so
as to be of substantially the same equivalent quality to such U-Haul
Portfolio Mortgaged Property as of the date of origination. The mortgagee
will disburse monies, casualty or condemnation proceeds for such
restoration provided that, among other requirements, (i) no event of
default has occurred and is continuing, (ii) (a) in the event that the
proceeds are insurance proceeds, less than 20%, and in the event the
proceeds are condemnation proceeds, less than 10%, of each of the total
aggregate floor area of such U-Haul Portfolio Mortgaged Property has been
damaged, destroyed, rendered unusable as a result of a casualty or taken as
a result of a condemnation, and (iii) the operating leases shall remain in
full force and effect during and after the completion of such restoration
without abatement of rent beyond the time required for such restoration.
Any proceeds from insurance, casualty or condemnation that are not required
to be applied to the restoration and/or repair of the U-Haul Portfolio
Mortgaged Property pursuant to the U-Haul Portfolio Mortgage Loan Documents
may be applied at the sole discretion of the mortgagee to the repayment of
the U-Haul Portfolio Mortgage Loan.
TRANSFER OF PROPERTY AND INTEREST IN THE U-HAUL PORTFOLIO BORROWER:
o The U-Haul Portfolio Mortgage Loan documents generally provide that no
direct or indirect transfer of any interest in the U-Haul Portfolio
Mortgaged Properties or of greater than a 49% interest in the U-Haul
Portfolio Borrower is permitted without the prior written consent of the
mortgagee unless the U-Haul Portfolio Borrower and/or its transferee
satisfy certain conditions that are set forth in the U-Haul Portfolio
Mortgage Loan documents, which generally include payment of an assumption
and/or transfer fee, the satisfaction by the transferee of certain single
purpose entity requirements and Rating Agency approval.
PROPERTY MANAGEMENT:
o U-Haul Self-Storage Management (WPC), Inc., entered the self-storage
business in 1974 and through fiscal year ending March 31, 2003 (FYE 2003),
increased its presence in the industry through the acquisition of existing
S-86
U-HAUL PORTFOLIO
facilities and new construction. Through close to 1,000 owned and operated
self-storage locations in United States and Canada, the company rents more
than 32.5 million square feet. U-Haul has also entered into management
agreements to manage self-storage properties owned by others, including SAC
Holding Corporation, and Private Mini Storage Realty, L.P., a Texas-based
operator of self-storage properties.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o Not allowed.
S-87
CALPINE CENTER
WHOLE LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $103,000,000
FIRST PAYMENT DATE: June 1, 2004
TERM/AMORTIZATION: 120/360 months
MATURITY DATE: May 1, 2014
EXPECTED MATURITY BALANCE: $85,663,934
BORROWING ENTITY: Block 59 Limited Partnership
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout: 26 Payments
GRTR 1% PPMT or
Yield Maintenance:
88 Payments
Open: 6 Payments
UP-FRONT RESERVES:
TAX RESERVE: Yes
REPLACEMENT RESERVE: $588
TI/LC: $8,199,108
OTHER RESERVES: $2,076,333(1)
IMMEDIATE REPAIR RESERVE: $2,827,805
ONGONG MONTHLY RESERVES:
TAX RESERVE: Yes
REPLACEMENT RESERVE: $588
LOCKBOX: Soft
(1) Rent abatement reserve.
FINANCIAL INFORMATION
WHOLE LOAN BALANCE*: $102,780,036
CALPINE CENTER SENIOR COMPONENT
BALANCE*: $77,780,036
CALPINE CENTER SUBORDINATE
COMPONENT BALANCE*: $25,000,000
CALPINE CENTER SENIOR COMPONENT
SHADOW RATING (S&P/MOODY'S): AAA/A3
CUT-OFF DATE LTV: 48.3%(1)
MATURITY DATE LTV: 40.3%(1)
UNDERWRITTEN DSCR**: 2.29x(1)
MORTGAGE RATE+: 5.232%
* As of the Cut-off Date.
** DSCR figures based on net cash flow unless otherwise noted.
+ The interest rate was rounded to three decimals.
With respect to the calculations of the Cut-off Date LTV and Underwritten DSCR
with respect to the Calpine Center Loan, such calculations exclude the Calpine
Center Subordinate Components. If the Calpine Center Subordinate Components
were included, then the Cut-off Date LTV would equal 63.9% and the Underwritten
DSCR would equal 1.72x.
PROPERTY INFORMATION
PROPERTY TYPE: Office
PROPERTY SUB-TYPE: CBD
LOCATION: Houston, TX
YEAR BUILT/RENOVATED: 2003/NA
NET RENTABLE SQUARE FEET: 705,893
CUT-OFF BALANCE PER SF: $110(1)
OCCUPANCY AS OF 6/14/04: 87.0%
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: Hines Interests Limited
Partnership
U/W NET CASH FLOW: $11,799,489
APPRAISED VALUE: $160,925,000
(1) Based on the Calpine Center Senior Component Balance.
S-88
CALPINE CENTER
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ANNUALIZED
MOST RECENT
UNDERWRITTEN (3/31/04)
---------------- ----------------
Effective Gross Income ............. $20,822,863 $14,601,572
Total Expenses ..................... $ 8,187,095 $ 5,719,616
Net Operating Income (NOI) ......... $12,635,768 $ 8,881,956
Cash Flow (CF) ..................... $11,799,489 $ 8,715,700
DSCR on NOI(1) ..................... 2.46x 1.73x
DSCR on CF(1) ...................... 2.29x 1.69x
(1) Based on the Calpine Center Senior Component.
TENANT INFORMATION
- --------------------------------------------------------------------------------
RATINGS TENANT % OF POTENTIAL % POTENTIAL LEASE
TOP TENANTS+ S&P/MOODY'S TOTAL SF TOTAL SF RENT PSF RENT RENT EXPIRATION
- ------------------------ ------------- ---------- ---------- ---------- ------------- ------------- -----------
Calpine ............... B/Caa1 255,742 36.23% $23.29 $ 5,955,945 45.56% 11/30/2013
Burlington(1) ......... BBB+/Baa1 250,058 35.42% $13.00 $ 3,194,854 24.44% 6/30/2015
Jones Day ............. Not Rated 54,600 7.73% $24.42 $ 1,333,332 10.20% 11/10/2018
------- ----- ----------- -----
Totals ................ 560,400 79.39% $10,484,131 80.20%
+ Information obtained from Underwritten Rent Roll except for Ratings
(S&P/Moody's) and unless otherwise stated. Credit Ratings are of the
parent company whether or not the parent guarantees the lease.
Calculations with respect to Rent PSF, Potential Rent and % of Potential
Rent include base rent only and exclude common area maintenance expense
and reimbursement.
(1) Rent PSF does not include 4,300 square feet of rent free storage space.
LEASE ROLLOVER SCHEDULE
- --------------------------------------------------------------------------------
# OF % TOTAL CUMULATIVE CUMULATIVE BASE RENT
YEAR OF EXPIRATION++ LEASES EXPIRING EXPIRING SF SF TOTAL SF % TOTAL SF EXPIRING
- ---------------------- ----------------- ------------- --------- ------------ ------------ -------------
2010 ................ 2 22,814 3.2% 22,814 3.2% $ 476,560
2011 ................ 1 9,385 1.3% 32,199 4.6% $ 131,390
2013 ................ 9 255,742 36.2% 287,941 40.8% $5,955,945
2014 ................ 1 16,156 2.3% 304,097 43.1% $ 258,496
2015 ................ 10 250,058 35.4% 554,155 78.5% $3,194,854
2016 ................ 1 17,196 2.4% 571,351 80.9% $ 240,744
2018 ................ 2 54,600 7.7% 625,951 88.7% $1,333,332
Vacant .............. 79,942 11.3% 705,893 100.0% $1,480,361
-- ------- -----
TOTAL ............... 26 705,893 100.0%
++ Information obtained from Underwritten Rent Roll.
S-89
CALPINE CENTER
SUMMARY OF SIGNIFICANT TENANTS
o The Calpine Center is currently 87.0% occupied by 7 tenants. The three
largest tenants, Calpine (the building's namesake), Burlington and Jones
Day, representing 79.4% of the buildings' net rentable area, are:
o Calpine (NYSE:CPN; Rated B by S&P and Caa1 by Moody's) Calpine
occupies 255,742 square feet (36.2% of NRA). The lease term is through
November 30, 2013 and there are renewal options for up to 20 years in
5 or 10-year increments. Currently, the base rent is $23.29 per square
foot, which contributes 45.6% of base rental income. Established in
1984, Calpine is an electric power company headquartered in San Jose,
California and employs more than 3,000 people. Calpine generates
approximately $7.5 billion in revenue, for the year ended 2003, and
maintains approximately 89 energy centers in 22 states.
o Burlington (NYSE: BR; Rated BBB+ by S&P and Baa1 by Moody's)
Burlington has leased 250,058 square feet. (35.4% of NRA). The company
will occupy the space in two stages: 112,452 square feet (floors 15
and 18-21) in January 2004 and the remaining 135,835 square feet
(floors 22-26) in July 2004. The lease term is through June 30, 2015
and there are four 5-year renewal options. The base rent is $13.00 per
square foot, leading to 24.4% of base rental income.
Burlington is an independent oil and natural gas exploration and
production company. Headquartered in Houston, Burlington employs more
than 2,100 people, with major offices located in Calgary, London,
Farmington, Midland and Fort Worth. The company reported estimated net
income of approximately $267 million for the third quarter of 2003.
o Jones Day (Not Rated) Jones Day occupies 54,600 square feet (7.7% of
NRA) and leases floors 32 and 33. The lease term is through November
10, 2018 and there are renewal options for up to 10 years. The base
rent is $24.42 per square foot, leading to 10.2% of base rental
income.
Tracing its origins to 1893, Jones Day has more than 2,200 lawyers
residing in 29 locations. The law firm acts as principal outside
counsel to a variety of entities, including Fortune 500 companies,
privately held companies, financial institutions, investment firms,
health care providers, retail chains, foundations, educational
institutions and individuals.
S-90
CALPINE CENTER
ADDITIONAL INFORMATION
THE LOAN:
o The Calpine Center loan is secured by a first mortgage on a 33-story,
705,893 square foot office building. The building has 24 levels of office
space resting above 10 levels of parking (950 spaces), of which 2 levels
are below grade, and a 2-story lobby and a retail level. The building is
situated on 1.11 acres in the Houston central business district.
o The Calpine Center loan is divided into a senior component and one or more
subordinate components as described herein.
o As will be set forth in more detail in the preliminary prospectus
supplement, the holder of designated classes of Certificates that are
entitled to payments solely from the Calpine Center loan will be entitled
in certain instances to exercise rights analogous to the rights of the
Directing Certificateholder solely with respect to the Calpine Center loan.
Such rights may include the review and/or approval of certain actions taken
by the Master Servicer or the Special Servicer in connection with the
Calpine Center loan. In addition, such holder may (but is not obligated to)
purchase the Calpine Center loan, if the loan is then considered a
"Defaulted Mortgage Loan" as more particularly described in the preliminary
prospectus supplement, at a price generally equal to its unpaid principal
balance, plus accrued and unpaid interest on such balance, all related
unreimbursed advances (with interest, if any), and all accrued special
servicing fees and additional trust fund expenses.
THE BORROWER:
o The borrower, Block 59 Limited Partnership (the "Calpine Center Borrower"),
is a single-purpose, bankruptcy-remote entity with one independent director
for which the Calpine Center Borrower's legal counsel delivered a
substantive non-consolidation opinion at loan closing. The borrower
principals are Hines Real Estate Holdings Limited Partnership, a Texas
limited partnership and Texas Tower Limited, a Texas limited partnership
(collectively, the "Calpine Center Borrower Principal"). The general
partner of the Calpine Center Borrower Principal, Texas Tower Limited is
Prime Asset Management, LLC. Prime Asset Management is owned by Rafik
Al-Hariri.
THE PROPERTY:
o The Calpine Center Property is situated on 1.11 acres in the Downtown
Houston central business district. Calpine Center is a 33-story, 705,893
square feet office building constructed in 2003. There are 24 levels of
office space resting above 10 levels of parking (950 spaces), of which 2
levels are below grade. There is also a 2-story lobby and a retail level.
o The Calpine Center Borrower, at its sole cost and expense, is required to
keep the Calpine Center Property insured against loss or damage by fire and
other risks addressed by coverage of a comprehensive all risk insurance
policy (or separate policy) without an exclusion for acts of terrorism or
similar acts of sabotage with certain customary standard exclusions.
INSURANCE:
o The Calpine Center Borrower, at its sole cost and expense, is required to
keep the Calpine Center Mortgaged Properties insured up to an amount equal
to 100% of the actual replacement value against loss or damage by fire and
other risks addressed by coverage of a comprehensive all risk insurance
policy, provided that no deductible will exceed $100,000. In addition, the
Calpine Center Borrower, at its sole cost and expense, will also be
required to obtain and maintain such other policies of insurance as called
for under the Calpine Center Mortgage Loan documents, which include (but
are not limited to): flood insurance (if any part of the Calpine Center
Mortgaged Property is located in a special flood hazard area), commercial
general liability insurance in
S-91
CALPINE CENTER
so called "occurrence" form with a combined limit of not less than
$2,000,000 in the aggregate and $1,000,000 per occurrence, rental loss or
business interruption insurance for a period of up to 18 months, with a
12-month extended period of indemnity endorsement (as called for in the
Calpine Center Mortgage Loan documents), statutory worker's compensation
insurance, and excess liability insurance in an amount not less than
$100,000,000 per occurrence. Such policies of insurance policies may not
contain an exclusion for acts of terrorism or similar acts of sabotage, but
may exclude acts of war and nuclear, chemical and biological acts. All
policies of insurance described above are required to be issued by an
insurer having a claims paying ability rating, as the case may be, of "AA"
(or its equivalent) or better by at least two rating agencies, one of which
must be S&P, and to contain the standard non-contribution clause naming the
Trustee on behalf of the Trust Fund as the person or entity to which all
payments made by that insurance company will be paid.
CASUALTY AND CONDEMNATION:
o The Calpine Center Mortgage Loan documents generally require that, if any
Calpine Center Mortgaged Property is damaged or destroyed, in whole or in
part, by fire, or other casualty, or if it is taken by a government
authority via eminent domain or otherwise, the Calpine Center Borrower must
promptly proceed with the repair or rebuilding of the improvements so as to
be of substantially the same equivalent quality to such Calpine Center
Mortgaged Property as of the date of origination. The mortgagee will
disburse monies, casualty or condemnation proceeds for such restoration
provided that, among other requirements, (i) no event of default has
occurred and is continuing, (ii) in the event that the proceeds are
insurance proceeds, less than 35%, and in the event the proceeds are
condemnation proceeds, less than 15%, of each of (a) the fair market value
of the Calpine Center Mortgaged Property as reasonably determined by the
mortgagee, and (b) the rentable area of the improvements on the Calpine
Center Mortgaged Property have been damaged, destroyed, rendered unusable
as a result of a casualty or taken as a result of a condemnation, (iii)
leases covering in the aggregate at least 75% of the total rentable space
in the Calpine Center Mortgaged Property that have been demised under
executed and delivered leases in effect as of the date of the occurrence of
such casualty or condemnation, and each major lease in effect as of such
date, shall remain in full force and effect during and after the completion
of such restoration without abatement or rent beyond the time required for
such restoration. Any proceeds from insurance, casualty or condemnation
that are not required to be applied to the restoration and/or repair of the
Calpine Center Mortgaged Property pursuant to the Calpine Center Mortgage
Loan Documents may be applied at the sole discretion of the mortgagee to
the repayment of the Calpine Center Mortgage Loan.
TRANSFER OF PROPERTY AND INTEREST IN THE CALPINE CENTER BORROWER:
o The Calpine Center Borrower has notified the Mortgage Loan Seller that it
may market the Calpine Center Mortgaged Property for sale in the near
future. The Calpine Center Mortgage Loan documents generally provide that
no direct or indirect transfer of any interest in the Calpine Center
Mortgaged Property or of greater than a 49% interest in the Calpine Center
Borrower is permitted without the prior written consent of the mortgagee
unless the Calpine Center Borrower and/or its transferee satisfy certain
conditions that are set forth in the Calpine Center Mortgage Loan
documents, which generally include payment of an assumption and/or transfer
fee, the satisfaction by the transferee of certain single purpose entity
requirements and Rating Agency approval.
PROPERTY MANAGEMENT:
o Hines, (Hines Interests Limited Partnership) formed in 1957 by Gerald
Hines, is headquartered in Houston, Texas. The company has regional offices
located in San Francisco, New York, Chicago and Atlanta, with a physical
presence in 72 cities in the U.S. and international locations in Europe,
China, Mexico, Russia, and South America. Hines owns and/or manages over 73
million square feet of commercial space, of which 47 million square feet is
owned and 36 million square feet is third party managed, located in 168
buildings in the U.S. Hines manages ten office buildings in New York City.
Hines has over $4 billion in equity under management through relationships
with approximately 20 tax-exempt investors.
S-92
CALPINE CENTER
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o The Calpine Center Borrower may incur certain "qualified subordinate debt"
which is defined as subordinate debt incurred by the Calpine Center
Borrower in connection with further technological updates to the Calpine
Center Property, provided that (i) such debt shall not exceed $5,000,000 in
the aggregate, (ii) such debt shall be unsecured and at market rates, terms
and conditions, (iii) the Calpine Center Borrower shall deliver to the
mortgagee an intercreditor and standstill agreement (with respect to any
such debt) acceptable to the mortgagee in all respects and (iv) the
mortgagee shall receive written confirmation from the Rating Agencies that
such subordinate debt will not result in a downgrade, withdrawal or
qualification of the initial, or if higher, then current ratings of the
Certificates.
S-93
17 STATE STREET
WHOLE LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $112,000,000
FIRST PAYMENT DATE: May 1, 2004
TERM/AMORTIZATION: 120/336 months
INTEREST ONLY PERIOD: 24 months
MATURITY DATE: April 1, 2014
EXPECTED MATURITY BALANCE: $ 97,018,801
BORROWING ENTITY: RFR/SF 17 State Street L.P.
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance:
117 payments
Open: 3 payments
UP-FRONT RESERVES:
REPAIR RESERVE: $54,500
TAX RESERVE: Yes
TI/LC: $1,340,812
ONGOING MONTHLY RESERVES:
REPLACEMENT RESERVE: $5,311
TAX RESERVE: Yes
TI/LC: $26,042
LOCKBOX: Hard
FINANCIAL INFORMATION
WHOLE LOAN BALANCE*: $112,000,000
17 STATE STREET SENIOR COMPONENT
BALANCE*: $75,850,000
17 STATE STREET SUBORDINATE
COMPONENT BALANCE*: $13,724,744
17 STATE STREET SENIOR
COMPONENT SHADOW
RATING (S&P/MOODY'S): BBB+/Baa2
CUT-OFF DATE LTV: 44.6%(1)
MATURITY DATE LTV: 38.6%(1)
UNDERWRITTEN DSCR**: 2.23x(1)
MORTGAGE RATE:+ 5.247%
* As of the Cut-off Date.
** DSCR figures based on net cash flow unless otherwise noted.
+ The interest rate was rounded to three decimals.
(1) With respect to the calculations of the Cut-off Date LTV and Underwritten
DSCR with respect to the 17 State Street Whole Loan, such calculations
exclude the 17 State Street Subordinate Components and the 17 State
Street Note B. If the 17 State Street Subordinate Components and the 17
State Street Note B were included, the Cut-off Date LTV would equal 65.9%
and the Underwritten DSCR would equal 1.38x.
PROPERTY INFORMATION
PROPERTY TYPE: Office
PROPERTY SUB-TYPE: CBD
LOCATION: New York, NY
YEAR BUILT/RENOVATED: 1987/NA
NET RENTABLE SQUARE FEET: 531,521
CUT-OFF BALANCE PER SF: $143(1)
OCCUPANCY AS OF 5/6/04: 94.8%
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: RFR Realty LLC
U/W NET CASH FLOW: $11,232,779
APPRAISED VALUE: $170,000,000
(1) Based on the 17 State Street Senior Component.
S-94
17 STATE STREET
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ANNUALIZED
MOST RECENT FULL YEAR
UNDERWRITTEN (4/30/04) (12/31/03)
---------------- ---------------- ----------------
EFFECTIVE GROSS INCOME ............. $22,047,169 $21,791,041 $23,122,699
TOTAL EXPENSES ..................... $ 9,732,615 $ 9,464,778 $ 9,718,314
NET OPERATING INCOME (NOI) ......... $12,314,554 $12,326,263 $13,404,385
CASH FLOW (CF) ..................... $11,232,779 $12,225,534 $13,310,545
DSCR ON NOI(1) ..................... 2.44x 2.44x 2.66x
DSCR ON CF(1) ...................... 2.23x 2.42x 2.64x
(1) Based on the 17 State Street Senior Component.
TENANT INFORMATION
- --------------------------------------------------------------------------------
RATINGS TENANT POTENTIAL % POTENTIAL LEASE
TOP TENANTS+ S&P/MOODY'S TOTAL SF % TOTAL SF RENT PSF RENT RENT EXPIRATION
- -------------------------- ------------- ---------- ------------ ---------- ------------- ------------- -----------
AXA Reinsurance ......... A/A2 90,968 17.11% $39.34 $3,578,760 17.83% 7/1/2012
Shareholders
Communications ......... Not Rated 57,546 10.83% $37.23 $2,142,591 10.68% 2/1/2011
------ ----- ---------- -----
Totals .................. 148,514 27.94% $5,721,351 28.51%
+ Information obtained from Underwritten Rent Roll except for Ratings
(S&P/Moody's) and unless otherwise stated. Credit Ratings are of the
parent company whether or not the parent guarantees the lease.
Calculations with respect to Rent PSF, Potential Rent and % of Potential
Rent include base rent only and exclude common area maintenance expense
and reimbursement.
LEASE ROLLOVER SCHEDULE
- --------------------------------------------------------------------------------
NUMBER OF EXPIRING % TOTAL CUMULATIVE CUMULATIVE
YEAR OF EXPIRATION++ EXPIRING LEASES SF SF TOTAL SF % TOTAL SF
- ---------------------- ----------------- ---------- --------- ------------ -----------
2004 ................ 7 42,695 8.1% 42,695 8.1%
2005 ................ 5 17,332 3.3% 60,027 11.5%
2006 ................ 4 23,427 4.5% 83,454 15.9%
2007 ................ 10 49,504 9.4% 132,958 25.4%
2008 ................ 5 13,318 2.5% 146,276 27.9%
2009 ................ 9 69,071 13.2% 215,347 41.1%
2010 ................ 5 34,772 6.6% 250,119 47.7%
2011 ................ 9 66,054 12.6% 316,173 60.4%
2012 ................ 8 115,301 22.0% 431,474 82.4%
2013 ................ 1 4,422 0.8% 435,896 83.2%
2014 ................ 7 47,511 9.1% 483,407 92.3%
2015 ................ 1 13,100 2.5% 496,507 94.8%
Vacant .............. 27,387 5.2% 523,894 100.0%
-- ------- -----
Total ............... 71 523,894 100.0%
++ Information obtained from Underwritten Rent Roll.
S-95
17 STATE STREET
SUMMARY OF SIGNIFICANT TENANTS
o The subject property is 94.8% leased by forty-nine office tenants at an
average lease rate of $38.30 per square foot. The five largest tenants
representing 32.2% of the total net rentable area, are:
o AXA Reinsurance (NYSE: AXA; S&P A/Moody's A2) AXA Insurance plc "AXA"
occupies 90,968 square feet (17.1% of NRA) in 5 suites. It contributes
$3,578,760 to the base rental income (17.8%) and is one of the largest
general insurers in the UK. Launched in January 1998 as AXA Provincial
Insurance plc, the company changed its name to AXA Insurance plc in October
1998 following the 1997 merger of the UAP and AXA Group. The company
operates in more than 50 countries and serves more than 50 million
customers worldwide.
o Shareholders Communications (Not Rated) Shareholder Communications occupies
57,546 square feet (10.8% of NRA) in 6 suites. It contributes $2,142,591 to
the base rental income (10.7%). The company was established in 1935 by
Lloyd Georgeson. Georgeson Shareholder (GS), which became Shareholder
Communications in 1969, was established to facilitate communication between
corporations and shareholders.
o Computer Science Corporation (NYSE: CSC; S&P A/Moody's A3) Computer Science
Corporation "CSC" occupies 13,100 square feet (2.5% of NRA). It contributes
$589,500 of the base rental income (2.9%). The company was formed in 1959,
went public in 1963 and was listed the following year on the Pacific and
American stock exchanges. CSC offers services ranging from consulting in
the strategic uses of information technology, systems design, development
and integration and outsourcing. With approximately 90,000 employees in
locations worldwide, CSC reported revenue of approximately $13.8 billion
for the 12 months ended January 2, 2004.
o Norges Bank (Not Rated) Norges Bank occupies 5,698 square feet (1.1% of
NRA). It contributes $194,439 of the base rental income (0.97%) and is
headquarted in Oslo, Norway.
o Options Clearing Corporation (S&P AAA/Moody's NR) Options Clearing
Corporation occupies 3,775 square feet (0.7% of NRA). It contributes
$122,688 to the base rental income (0.6%). Founded in 1973, the OCC is an
equity derivatives clearing organization. The Options Clearing Corporation
is the first clearinghouse to receive S&P's 'AAA' credit rating. Operating
under the jurisdiction of the Securities and Exchange Commission and the
Commodity Futures Trading Commission, the OCC issues and clears U.S.-listed
options, futures and options on futures on a number of underlying financial
assets including common stocks, currencies, stock indexes and interest rate
composites.
S-96
17 STATE STREET
ADDITIONAL INFORMATION
THE LOAN:
o The 17 State Street Whole Loan is secured by a first mortgage on a
42-story, 531,521 square foot office building located in the Financial
District of downtown Manhattan in New York City.
o The 17 State Street Whole Loan consists of two mortgage loans that are part
of a split loan structure that is secured by the same mortgage instrument
on the 17 State Street Mortgaged Property. Only one of those mortgage
loans, the 17 State Street Mortgage Loan, also referred to herein as the SS
Component Mortgage Loan, is included in the Trust Fund. The other mortgage
loan, the 17 State Street Note B, is not included in the Trust Fund and is
subordinated in right of payment to the 17 State Street Mortgage Loan. The
17 State Street Mortgage Loan is divided into a senior component and one or
more subordinate components as described herein.
o As described herein, the holder of designated classes of Certificates that
are entitled to payments solely from the 17 State Street Whole Loan and/or
the holder of the 17 State Street Note B will be entitled in certain
instances to exercise rights analogous to the rights of the Directing
Certificateholder solely with respect to the 17 State Street Whole Loan.
Such rights may include the review and/or approval of certain actions taken
by the Master Servicer or the Special Servicer in connection with the 17
State Street Whole Loan. In addition, such holders may (but are not
obligated to) purchase the 17 State Street Whole Loan, if it is then
considered a "Defaulted Mortgage Loan" as more particularly described
herein, at a price generally equal to its unpaid principal balance, plus
accrued and unpaid interest on such balance, all related unreimbursed
advances (with interest, if any), and all accrued special servicing fees
and additional trust fund expenses.
THE BORROWER:
o The borrower, RFR/SF 17 State Street L.P., a Delaware limited partnership
(the "17 State Street Borrower") is a single-purpose, bankruptcy-remote
entity. 17 State Street Borrower is controlled and 50.66% owned by Aby
Rosen, Michael Fuchs, Harry Lis and certain other parties and is 49.34%
owned by SachenFonds USA III.
o Aby Rosen and Michael Fuchs are serving as the borrower principals for the
17 State Street Whole Loan. The Rosen and Fuchs families have also been
involved in real estate investment and development throughout Europe for
the past 50 years.
THE PROPERTY:
o The collateral for the 17 State Street Whole Loan consists of a fee simple
interest in one 42-story central business district building totaling
531,521 rentable square feet. The property was built in 1987 and is
situated on approximately 23,080 square feet (0.53 acres).
o The 17 State Street Borrower, at its sole cost and expense, is required to
keep the 17 State Street Mortgaged Property insured against loss or damage
by fire and other risks addressed by coverage of a comprehensive all risk
insurance policy (or separate policy) without an exclusion for acts of
terrorism or similar acts of sabotage with certain customary standard
exclusions.
INSURANCE:
o The 17 State Street Borrower, at its sole cost and expense, is required to
keep the 17 State Street Mortgaged Properties insured up to an amount equal
to 100% of the actual replacement value against loss or damage by fire and
other risks addressed by coverage of a comprehensive all risk insurance
policy, provided that no deductible will exceed $100,000. In addition, the
17 State Street Borrower, at its sole cost and expense, will also be
required to obtain and maintain such other policies of insurance as called
for under the 17 State Street Whole Loan documents, which include (but are
not limited to): flood insurance (if any part of the 17 State Street
Mortgaged Property is located in a special flood hazard area), (b)
earthquake insurance (if any part of the 17 State Street Mortgaged Property
is located in an area with a high degree of seismic activity), commercial
general liability
S-97
17 STATE STREET
insurance in so called "occurrence" form with a combined limit of not less
than $2,000,000 in the aggregate and $1,000,000 per occurrence, rental loss
or business interruption insurance for a period of up to 18 months, with a
6-month extended period of indemnity endorsement (as called for in the 17
State Street Whole Loan documents), statutory worker's compensation
insurance, and excess liability insurance in an amount not less than
$50,000,000 per occurrence. Such policies of insurance policies may not
contain an exclusion for acts of terrorism or similar acts of sabotage. All
policies of insurance described above are required to be issued by an
insurer having a claims paying ability rating, as the case may be, of
"AA--" (or its equivalent) or better by at least two rating agencies, one
of which must be S&P if it is rating the Certificates and one of which must
be Moody's if it is rating the Certificates, and to contain the standard
non-contribution clause naming the Trustee on behalf of the Trust Fund as
the person or entity to which all payments made by that insurance company
will be paid.
CASUALTY AND CONDEMNATION:
o The 17 State Street Whole Loan documents generally require that, if any 17
State Street Mortgaged Property is damaged or destroyed, in whole or in
part, by fire, or other casualty, or if it is taken by a government
authority via eminent domain or otherwise, the 17 State Street Borrower
must promptly proceed with the repair or rebuilding of the improvements so
as to be of substantially the same equivalent quality to such 17 State
Street Mortgaged Property as of the date of origination. The mortgagee will
disburse monies, casualty or condemnation proceeds for such restoration
provided that, among other requirements, (i) no event of default has
occurred and is continuing, (ii) in the event that the proceeds are
insurance proceeds, less than 30%, and in the event the proceeds are
condemnation proceeds, less than 15%, of each of (a) the fair market value
of the 17 State Street Mortgaged Property as reasonably determined by the
mortgagee, and (b) the rentable area of the improvements on the 17 State
Street Mortgaged Property have been damaged, destroyed, rendered unusable
as a result of a casualty or taken as a result of a condemnation, (iii)
leases covering in the aggregate at least 65% of the total rentable space
in the 17 State Street Mortgaged Property that have been demised under
executed and delivered leases in effect as of the date of the occurrence of
such casualty or condemnation shall remain in full force and effect during
and after the completion of such restoration without abatement or rent
beyond the time required for such restoration. Any proceeds from insurance,
casualty or condemnation that are not required to be applied to the
restoration and/or repair of the 17 State Street Mortgaged Property
pursuant to the 17 State Street Whole Loan Documents may be applied at the
sole discretion of the mortgagee to the repayment of the 17 State Street
Whole Loan.
TRANSFER OF PROPERTY AND INTEREST IN THE 17 STATE STREET BORROWER:
o The 17 State Street Whole Loan documents generally provide that no direct
or indirect transfer of any interest in the 17 State Street Mortgaged
Properties or in the 17 State Street Borrower is permitted without the
prior written consent of the mortgagee unless the 17 State Street Borrower
and/or its transferee satisfy certain conditions that are set forth in the
17 State Street Whole Loan documents, which generally include payment of an
assumption and/or transfer fee, the satisfaction by the transferee of
certain single purpose entity requirements and Rating Agency approval.
PROPERTY MANAGEMENT:
o The property is managed by RFR Realty LLC, which is related a entity to
RFR, a privately held, Manhattan based, real estate investment, development
and management company. Aby Rosen and Michael Fuchs are the owners of RFR.
RFR established its operation in the United States in 1991 and through
various affiliates, presently controls approximately five million square
feet of office and retail space plus approximately 2,500 luxury residential
apartments.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o Not Allowed.
S-98
SUN COMMUNITIES -- SCIO FARMS
LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $40,964,950
FIRST PAYMENT DATE: August 1, 2004
TERM/AMORTIZATION: 144/360 months
INTEREST ONLY PERIOD: 30 months
MATURITY DATE: July 1, 2016
EXPECTED MATURITY BALANCE: $34,538,058
BORROWING ENTITY: Sun Scio Farms LLC
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance:
138 payments
Open: 6 payments
LOCKBOX: Springing
FINANCIAL INFORMATION
CUT-OFF DATE BALANCE: $40,964,950
CUT-OFF DATE LTV: 77.9%
MATURITY DATE LTV: 65.7%
UNDERWRITTEN DSCR*: 1.22x
MORTGAGE RATE: 5.320%
* DSCR figures based on net cash flow
unless otherwise noted.
PROPERTY INFORMATION
PROPERTY TYPE: Manufactured Housing
Communities
PROPERTY SUB-TYPE: Manufactured Housing
Communities
LOCATION: Ann Arbor, MI
YEAR BUILT/RENOVATED: 1985/NA
PADS: 913
CUT-OFF BALANCE PER PAD: $44,869
OCCUPANCY AS OF 2/29/04: 99.6%
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: Borrower/Owner
Managed
U/W NET CASH FLOW: $3,351,442
APPRAISED VALUE: $52,600,000
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ANNUALIZED
MOST RECENT FULL YEAR
UNDERWRITTEN (2/29/04) (12/31/03)
-------------- --------------- ---------------
EFFECTIVE GROSS INCOME ............. $5,050,986 $5,135,388 $4,988,910
TOTAL EXPENSES ..................... $1,653,894 $1,642,602 $1,414,767
NET OPERATING INCOME (NOI) ......... $3,397,092 $3,492,786 $3,574,143
CASH FLOW (CF) ..................... $3,351,442 $3,492,786 $3,574,143
DSCR ON NOI ........................ 1.24x 1.28x 1.31x
DSCR ON CF ......................... 1.22x 1.28x 1.31x
S-99
SUN COMMUNITIES -- SCIO FARMS
ADDITIONAL INFORMATION
THE LOANS:
o The "Sun Communities Portfolio Loans" consist of the following Mortgage
Loans which are secured by manufactured housing community properties (each
a "Sun Communities Portfolio Property") owned by affiliates of Sun
Communities Operating Limited Partnership ("SCOLP"): the "Sun Communities -
Scio Farms Loan", "Sun Communities Portfolio 9 Loan", "Sun Communities
Portfolio 8 Loan", and "Sun Communities - Arbor Terrace Loan". The Sun
Communities - Scio Farms Loan is secured by a first mortgage on a 913-pad
manufactured housing community located in Ann Arbor, Michigan and has a
Cut-off Date Balance of $40,964,950. The Sun Communities Portfolio 9 Loan
is secured by a first mortgage on manufactured housing community properties
located in Orlando, Florida, Owosso, Michigan, Holland, Michigan and Holly,
Michigan consisting of 1,235 pads and has a Cut-off Date Balance of
$37,351,472. The Sun Communities Portfolio 8 Loan is secured by a first
mortgage on manufactured housing community properties located in Valparaiso
and Indianapolis, Indiana consisting of 772 pads and has a Cut-off Date
Balance of $22,640,000. The Sun Communities - Arbor Terrace Loan is secured
by a first mortgage on a 402-pad manufactured housing community located in
Bradenton, Florida and has a Cut-off Date Balance of $5,280,000.
o The Sun Communities Portfolio 8 is cross-collateralized and cross-defaulted
with the Sun Communities - Arbor Terrace Loan. None of the other Sun
Communities Portfolio Loans are either cross-collateralized and/or
cross-defaulted.
THE BORROWERS:
o Each of the loans in the Sun Communities Portfolio feature separate
borrowers (collectively, the "Sun Communities Portfolio Borrowers"). Each
Sun Communities Portfolio Borrower is a Michigan limited liability company
that is a single-purpose, bankruptcy-remote entity and features two
independent directors. In addition, each Sun Portfolio Borrower's legal
counsel delivered a non-consolidation opinion at the closing of the related
Sun Communities Portfolio Loan.
o Sun Communities, Inc., a Maryland corporation ("Sun"), is a fully
integrated, self-administered and self-managed real estate investment trust
which owns, operates, and develops manufactured housing communities
concentrated in the Midwestern and southeastern United States. Sun,
together with affiliates and predecessors, has been in the business since
1975. Structured as an umbrella partnership real estate investment trust,
or UPREIT, Sun is the sole general partner and holder of approximately
75.0% of the partnership interests in SCOLP, the borrower principal and the
entity through which Sun conducts substantially all of their operations,
and which owns, either directly or indirectly through subsidiaries, all of
the assets.
o As of December 31, 2003, the real estate investment trust owned and
operated a portfolio of approximately 127 properties located in seventeen
states, including 115 manufactured housing communities, five recreational
vehicle communities, and seven properties containing both manufactured
housing and recreational vehicle sites. As of December 31, 2003, the Sun
Communities Portfolio Properties contained an aggregate of 43,875 developed
sites comprised of 38,797 developed manufactured home sites and 5,078
recreational vehicle sites and an additional 6,756 manufactured home sites
suitable for development.
THE PROPERTIES:
o The collateral for each Sun Communities Portfolio Loan generally consists
of the fee simple interest in the related Sun Communities Portfolio
Property. Each Sun Communities Portfolio Property features certain
amenities, which generally include clubhouses, swimming pools, basketball
courts, volleyball courts, children's playgrounds and shuffleboard courts.
Each Sun Communities Portfolio Property features access to public
water/sewer service.
o Each Sun Communities Portfolio Borrower is generally required at its sole
cost and expense to keep the related Sun Communities Portfolio Property
insured against loss or damage by fire and other risks addressed by
coverage of a comprehensive all risk insurance policy.
S-100
SUN COMMUNITIES -- SCIO FARMS
PROPERTY MANAGEMENT:
o Each Sun Communities Portfolio Property is self managed by its related Sun
Communities Portfolio Borrower. SCOLP, through its subsidiaries, currently
manages 43,875 developed sites, consisting of 38,797 manufactured housing
sites and 5,078 RV sites, plus an additional 6,756 manufactured housing
sites suitable for development.
Each Sun Communities Portfolio Borrower neither receives nor pays any
management fee or other compensation in connection with the management of
the Sun Communities Portfolio Properties and none are subject to a formal
management agreement. In the event any Sun Communities Portfolio Borrower
elects to have the properties managed by a property manager, whether or not
affiliated with the Sun Communities Portfolio Borrower, such property
manager (if not affiliated with the Sun Communities Portfolio Borrower) is
required to be a "qualified manager" approved by the mortgagee, and the Sun
Communities Portfolio Borrower is required to enter into an acceptable
management agreement and subordination thereof that conforms to the
mortgagee's standards.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o Not allowed.
S-101
369 LEXINGTON AVENUE
LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $41,000,000
FIRST PAYMENT DATE: May 1, 2004
TERM/AMORTIZATION: 60/360 months
MATURITY DATE: April 1, 2009
EXPECTED MATURITY BALANCE: $37,520,955
BORROWING ENTITY: CPP 369 Lex LLC
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance:
57 payments
Open: 3 payments
UP-FRONT RESERVES:
TAX/INSURANCE RESERVE: Yes
IMMEDIATE REPAIR RESERVE: $10,750
OTHER: $750,800(1)
ONGOING MONTHLY RESERVES:
TAX/INSURANCE RESERVE: Yes
REPLACEMENT RESERVE: $4,247
TI/LC RESERVE: $27,778
LOCKBOX: Hard
(1) Master Lease and Sanctuary Music Reserves.
FINANCIAL INFORMATION
CUT-OFF DATE BALANCE: $40,839,481
CUT-OFF DATE LTV: 79.8%
MATURITY DATE LTV: 73.3%
UNDERWRITTEN DSCR*: 1.23x
MORTGAGE RATE: 4.400%
* DSCR figures based on net cash flow unless otherwise noted.
PROPERTY INFORMATION
PROPERTY TYPE: Office
PROPERTY SUB-TYPE: CBD
LOCATION: New York, NY
YEAR BUILT/RENOVATED: 1927/NA
NET RENTABLE SQUARE FEET: 154,429
CUT-OFF BALANCE PER SF: $264
OCCUPANCY AS OF 3/31/04: 82.2%(2)
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: Core Plus Properties LLC
U/W NET CASH FLOW: $3,042,557
APPRAISED VALUE: $51,200,000
(2) Occupancy does not include the Master Lease (as defined herein) space but
it does include two tenants who will occupy 11,176 square feet on July 1,
2004. The current occupancy, as of 3/31/04,
including the Master Lease space is 93.2%
S-102
369 LEXINGTON AVENUE
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ANNUALIZED
MOST RECENT FULL YEAR
UNDERWRITTEN (9/30/03) (12/31/02)
-------------- --------------- ---------------
EFFECTIVE GROSS INCOME ............. $6,158,000 $5,716,539 $5,546,921
TOTAL EXPENSES ..................... $2,784,716 $2,800,832 $2,484,543
NET OPERATING INCOME (NOI) ......... $3,373,284 $2,915,707 $3,062,378
CASH FLOW (CF) ..................... $3,042,557 $2,883,999 $3,033,092
DSCR ON NOI ........................ 1.37x 1.18x 1.24x
DSCR ON CF ......................... 1.23x 1.17x 1.23x
TENANT INFORMATION
- --------------------------------------------------------------------------------
RATINGS TENANT % TOTAL POTENTIAL % POTENTIAL LEASE
TOP TENANTS+ S&P/MOODY'S TOTAL SF SF RENT PSF RENT RENT EXPIRATION
- ------------------------------ ------------- ---------- ----------- ---------- ------------- ------------- -------------
Master Lease ................ Not Rated 17,000 11.01% $35.00 $ 595,000 10.44% 3/15/2009
Sanctuary Music ............. Not Rated 15,324 9.92% $38.61 $ 591,679 10.38% 10/31/2006
Private Label ............... Not Rated 13,108 8.49% $23.99 $ 314,412 5.52% 12/31/2006
Anderson & Rottenberg ....... Not Rated 9,713 6.29% $30.46 $ 295,826 5.19% 9/30/2007
------ ----- ---------- -----
TOTALS ...................... 55,145 35.71% $1,796,917 31.53%
+ Information obtained from Underwritten Rent Roll except for Ratings
(S&P/Moody's) and unless otherwise stated. Credit Ratings are of the
parent company whether or not the parent guarantees the lease.
Calculations with respect to Rent PSF, Potential Rent and % of Potential
Rent include base rent only and exclude common area maintenance expense
and reimbursement.
LEASE ROLLOVER SCHEDULE
- --------------------------------------------------------------------------------
NUMBER OF EXPIRING % TOTAL CUMULATIVE CUMULATIVE
YEAR OF EXPIRATION++ LEASES EXPIRING SF SF TOTAL SF % TOTAL SF
- ---------------------- ----------------- ---------- ----------- ------------ -----------
2004 ................ 5 18,940 12.3% 18,940 12.3%
2005 ................ 5 28,426 18.4% 47,366 30.7%
2006 ................ 6 34,772 22.5% 82,138 53.2%
2007 ................ 4 19,260 12.5% 101,398 65.7%
2009 ................ 5 35,443 23.0% 136,841 88.6%
2010 ................ 1 3,366 2.2% 140,207 90.8%
2014 ................ 1 3,744 2.4% 143,951 93.2%
Vacant .............. 10,478 6.8% 154,429 100.00%
-- ------- ------
TOTAL ............... 27 154,429 100.00%
++ Information obtained from Underwritten Rent Roll.
S-103
369 LEXINGTON AVENUE
SUMMARY OF SIGNIFICANT TENANTS
o The subject property is 82.2% leased by twenty-three tenants (excluding
Master Leased space) at lease rates ranging from $23.99/square foot to
$44.45/square foot. The three largest tenants, excluding the Master Lease,
representing 24.7% of the total net rentable area are:
o Master Lease (17,000 square feet -- 11.0% of NRA): At closing, the
mortgagee required that the borrower sign a master lease for a minimum
term of 5 years for 17,000 sf with a base rent of $35 psf ($595,000
plus reimbursements such that total annual rent shall be at least
$662,500). A cash escrow in the amount of $662,500 was required at
closing for this master leased space. The master lease shall be
decreased based on trailing 6 months cash flow from operations
achieving underwritten debt service coverage based on the actual debt
service.
o Sanctuary Music (Not Rated) Sanctuary Music occupies 15,324 square
feet (9.9% of NRA). The Sanctuary Group, the tenant's parent company,
is a developer of intellectual property rights in the fields of music,
television and entertainment. Sanctuary Music has been a tenant in the
building since 2000 and they have expanded several times.
o Private Label (Not Rated) Private Label occupies 13,108 square feet
(8.5% of NRA). The subject serves as the corporate headquarters for
Private Label, a trade organization that provides services such as
trade shows, research and industry information for manufacturers of
store brand products. Founded in 1979, Private Label Manufacturers
Association (PLMA) represents more than 2,700 companies around the
world and has been a tenant in the building since 1993.
o Anderson & Rottenberg (Not Rated) Anderson & Rottenberg occupies 9,713
square feet (6.29% of total NRA). The law firm provides legal services
covering business and corporate law, real estate, intellectual
property, family law, estate planning, bankruptcy, collections,
municipal, employment and labor law. Anderson & Rottenberg has been a
tenant in the building since 1997.
S-104
369 LEXINGTON AVENUE
ADDITIONAL INFORMATION
THE LOAN:
o The 369 Lexington Avenue loan is secured by a first mortgage on a
27-story office building constructed in 1927 which has been renovated
at several times over the ensuing years. The property has 154,429
square feet of net rentable area on a 10,419 square foot parcel of
land (0.24 acres) in Midtown Manhattan.
THE BORROWER:
o The borrowing entity, CPP 369 Lex LLC (the "369 Lexington Avenue
Borrower"), is a single-purpose, bankruptcy-remote entity. The
borrower principals are Faraj Srour and Albert Stavrach, who will have
a combined 32% interest in the 369 Lexington Avenue Borrower. These
individuals have been in the real estate business for over 20 years.
THE PROPERTY:
o The collateral for the 369 Lexington Avenue loan consists of a fee
simple interest in one 27-story building totaling 154,429 rentable
square feet. The property was originally constructed in 1927 and is
situated on approximately 10,419 square feet (0.24 acres) in Midtown
Manhattan. The site is at the southeast corner of East 41st Street and
Lexington Avenue in the Grand Central office submarket.
o The 369 Lexington Avenue Borrower, at its sole cost and expense, is
required to keep the 369 Lexington Avenue Property insured against
loss or damage by fire and other risks addressed by coverage of a
comprehensive all risk insurance policy without an exclusion for acts
of terrorism or similar acts of sabotage.
PROPERTY MANAGEMENT:
o The property is managed by Core Plus Properties LLC, an unrelated
entity, which is headquartered in Stamford, CT. The co-managers of the
company, James Millard and Frank Gallo, have a combined 48 years of
experience in asset and property management in New York, representing
over 25,000,000 square feet of office space.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o Not Allowed.
S-105
SUN COMMUNITIES PORTFOLIO 9
LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $37,351,472
FIRST PAYMENT DATE: August 1, 2004
TERM/AMORTIZATION: 144/360 months
INTEREST ONLY PERIOD: 30 months
MATURITY DATE: July 1, 2016
EXPECTED MATURITY BALANCE: $31,491,489
BORROWING ENTITY: Sun Candlewick LLC;
Sun Silver Star LLC;
Aspen-Holland Estates, LLC
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance: 138
payments
Open: 6 payments
LOCKBOX: Springing
FINANCIAL INFORMATION
CUT-OFF DATE BALANCE: $37,351,472
CUT-OFF DATE LTV: 79.3%
MATURITY DATE LTV: 66.8%
UNDERWRITTEN DSCR*: 1.27x
MORTGAGE RATE: 5.320%
* DSCR figures based on net cash flow unless otherwise noted.
PROPERTY INFORMATION
PROPERTY TYPE: Manufactured Housing
Communities
PROPERTY SUB-TYPE: Manufactured Housing
Communities
LOCATION: Florida and Michigan
YEAR BUILT/RENOVATED: Silver Star 1975/NA
Candlewick Court 1975/NA
Lincoln Estates 1969/NA
Holly Village/
Hawaiian Gardens 1980/NA
PADS: 1,235
CUT-OFF BALANCE PER PAD: $30,244
OCCUPANCY: Silver Star as of
2/29/04 98.8%
Candlewick Court as of
2/29/04 95.7%
Lincoln Estates as of
2/27/04 96.3%
Holly Village / Hawaiian
Garden as of 4/30/04 100%
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: Borrower/Owner Managed
U/W NET CASH FLOW: $3,157,476
APPRAISED VALUE: $47,125,000
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ANNUALIZED
MOST RECENT FULL YEAR
UNDERWRITTEN (2/29/04) (12/31/03)
--------------- --------------- ---------------
EFFECTIVE GROSS INCOME ............. $4,909,475 $4,856,118 $4,763,159
TOTAL EXPENSES ..................... $1,690,249 $1,367,784 $1,693,704
NET OPERATING INCOME (NOI) ......... $3,219,226 $3,488,334 $3,069,455
CASH FLOW (CF) ..................... $3,157,476 $3,488,334 $3,069,455
DSCR ON NOI ........................ 1.29x 1.40x 1.23x
DSCR ON CF ......................... 1.27x 1.40x 1.23x
S-106
QUARTERS AT MEMORIAL
LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $36,000,000
FIRST PAYMENT DATE: May 1, 2004
TERM/AMORTIZATION: 84/360 months
MATURITY DATE: April 1, 2011
EXPECTED MATURITY BALANCE: $31,853,684
BORROWING ENTITY: McCaslin Memorial I Limited
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance:
81 payments
Open: 3 payments
UP-FRONT RESERVES:
IMMEDIATE REPAIR RESERVE: $2,500
TAX/INSURANCE RESERVE(1): Yes
ONGOING RESERVES:
TAX RESERVE: Yes
REPLACEMENT RESERVE: $8,075
LOCKBOX: None
(1) The borrower has made a $98,338 initial deposit into the Insurance
Reserve and will make monthly deposits into the Insurance Reserve
following an event of default under the loan documents.
FINANCIAL INFORMATION
CUT-OFF DATE BALANCE: $35,872,239
CUT-OFF DATE LTV: 71.6%
MATURITY DATE LTV: 63.6%
UNDERWRITTEN DSCR*: 1.24x
MORTGAGE RATE: 4.902%
* DSCR figures based on net cash flow unless otherwise noted.
PROPERTY INFORMATION
PROPERTY TYPE: Multifamily
PROPERTY SUB-TYPE: Garden Style
LOCATION: Houston, TX
YEAR BUILT/RENOVATED: 2002/NA
UNITS: 380
CUT-OFF BALANCE PER UNIT: $94,401
OCCUPANCY AS OF 5/27/04: 91.8%
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: Pace Realty Corporation
U/W NET CASH FLOW: $2,838,899
APPRAISED VALUE: $50,100,000
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
FULL YEAR
UNDERWRITTEN (12/31/2003)
-------------- ---------------
EFFECTIVE GROSS INCOME .............. $5,711,866 $5,478,041
TOTAL EXPENSES ...................... $2,776,067 $2,804,547
NET OPERATING INCOME (NOI) .......... $2,935,799 $2,673,494
CASH FLOW (CF) ...................... $2,838,899 $2,661,588
DSCR ON NOI ......................... 1.28x 1.17x
DSCR ON CF .......................... 1.24x 1.16x
1 BEDROOM 2 BEDROOM 3 BEDROOM
----------- ----------- ----------
Number of Units ................. 176 186 18
Average Rent .................... 1,211 1,554 1,925
Average Unit Size (SF) .......... 951 1,387 1,587
S-107
QUARTERS AT MEMORIAL
ADDITIONAL INFORMATION
THE LOAN:
o The Quarters at Memorial Property is secured by a first mortgage on a
380-unit, apartment/townhouse community located one mile west of downtown
Houston, Texas.
THE BORROWER:
o The borrower, McCaslin Memorial I Limited, (the "Quarters at Memorial
Borrower"), is a single-purpose, bankruptcy-remote entity with at least one
independent director for which the Quarters at Memorial Borrower's legal
counsel delivered a non-consolidation opinion at loan closing.
o McCaslin Memorial, LLC owns 1% of the Quarters at Memorial Borrower,
McCaslin Development I Limited owns 29% of the Quarters at Memorial
Borrower and Millennium Growth Fund, L.L.C., a Nevada limited liability
company, owns 70% of the Quarters at Memorial Borrower.
o J.D. McCaslin and Carl G. McCaslin, Jr. are the Borrower Principals with a
combined 60 years of real estate experience. Together the two are the only
shareholders of McCaslin Development Company, a Texas corporation which has
completed the construction and lease-up of several thousand luxury
apartment homes in the Dallas-Ft. Worth area since 1994. McCaslin
Development Company is a full-service real estate service brokerage,
development and acquisition company.
THE PROPERTY:
o The collateral for the Quarters at Memorial loan consists of the fee simple
interest in a 380-unit, apartment and townhouse community consisting of
five four-story apartment buildings containing 453,968 square feet and an
additional building housing a clubhouse/leasing office. Built in 2002, the
Quarters at Memorial Property is situated on 10 acres midway between
Houston's central business district and the Galleria. The Quarters at
Memorial Property has 654 parking spaces (1.72 spaces/unit), 582 of which
are covered. Project amenities include a clubhouse, pool, spa, an outdoor
cabana, a fitness center, and a full service concierge.
o The Quarters at Memorial Borrower, at its sole cost and expense, is
required to keep the Quarters at Memorial Property insured against loss or
damage by fire and other risks addressed by coverage of a comprehensive all
risk insurance policy.
PROPERTY MANAGEMENT:
o Pace Realty Corporation, co-founded by J.D. McCaslin in 1980, an affiliate
of the Quarters at Memorial Borrower, manages the property. Headquartered
in Dallas, Texas, the company has approximately 24 years of multifamily
property management experience and currently manages approximately 9,000
units in 14 Texas cities.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o Not Allowed.
S-108
SUN COMMUNITIES PORTFOLIO 8 (CROSS-COLLATERALIZED WITH SUN COMMUNITIES - ARBOR
TERRACE)
LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $22,640,000
FIRST PAYMENT DATE: August 1, 2004
TERM/AMORTIZATION: 144/360 months
INTEREST ONLY PERIOD: 30 months
MATURITY DATE: July 1, 2016
EXPECTED MATURITY BALANCE: $19,088,065
BORROWING ENTITY: Sun Pool 8 LLC
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance: 138
Payments
Open: 6 Payments
LOCKBOX: Springing
FINANCIAL INFORMATION
CUT-OFF DATE BALANCE: $22,640,000
CUT-OFF DATE LTV: 80.0%
MATURITY DATE LTV: 67.4%
UNDERWRITTEN DSCR*: 1.34x
MORTGAGE RATE: 5.320%
* DSCR figures based on net cash flow unless otherwise noted.
PROPERTY INFORMATION
PROPERTY TYPE: Manufactured Housing
Communities
PROPERTY SUB-TYPE: Manufactured Housing
Communities
LOCATION: Valparaiso, IN
Indianapolis, IN
YEAR BUILT/RENOVATED: Liberty Farms 1965/NA
West Glen Village 1969/NA
PADS: 772
CUT-OFF BALANCE PER PAD: $29,326
OCCUPANCY AS OF: Liberty Farms (2/29/04) 99.6%
West Glen Village (2/27/04) 91.1%
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: Borrower/Owner
Managed
U/W NET CASH FLOW: $2,020,136
APPRAISED VALUE: $28,300,000
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ANNUALIZED
MOST RECENT FULL YEAR
UNDERWRITTEN (2/29/04) (12/31/03)
--------------- --------------- ---------------
EFFECTIVE GROSS INCOME ............. $3,007,379 $2,974,122 $2,962,892
TOTAL EXPENSES ..................... $ 948,643 $ 768,982 $ 718,468
NET OPERATING INCOME (NOI) ......... $2,058,736 $2,205,144 $2,244,424
CASH FLOW (CF) ..................... $2,020,136 $2,205,144 $2,244,424
DSCR ON NOI ........................ 1.36x 1.46x 1.48x
DSCR ON CF ......................... 1.34x 1.46x 1.48x
S-109
SUN COMMUNITIES - ARBOR TERRACE (CROSS-COLLATERALIZED WITH SUN COMMUNITIES
PORTFOLIO 8)
LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $5,280,000
FIRST PAYMENT DATE: August 1, 2004
TERM/AMORTIZATION: 144/360 months
INTEREST ONLY PERIOD: 30 months
MATURITY DATE: July 1, 2016
EXPECTED MATURITY BALANCE: $4,451,633
BORROWING ENTITY: Sun Arbor Terrace LLC
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance:
138 payments
Open: 6 payments
LOCKBOX: Springing
FINANCIAL INFORMATION
CUT-OFF DATE BALANCE: $5,280,000
CUT-OFF DATE LTV: 80.0%
MATURITY DATE LTV: 67.4%
UNDERWRITTEN DSCR*: 1.24x
MORTGAGE RATE: 5.320%
* DSCR figures based on net cash flow unless otherwise noted.
PROPERTY INFORMATION
PROPERTY TYPE: Manufactured Housing
Communities
PROPERTY SUB-TYPE: Manufactured Housing
Communities
LOCATION: Bradenton, FL
YEAR BUILT/RENOVATED: 1972/NA
PADS: 402
CUT-OFF BALANCE PER PAD: $13,134
OCCUPANCY AS OF 4/5/04: 100%(1)
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: Borrower/Owner
Managed
U/W NET CASH FLOW: $437,238
APPRAISED VALUE: $6,600,000
(1) The occupancy percentage reflects the occupancy at the permanent pads only.
198 of the 402 total pads are permanent. The remaining 204 are seasonal
pads.
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ANNUALIZED
MOST RECENT FULL YEAR
UNDERWRITTEN (2/29/04) (12/31/03)
------------- --------------- -------------
EFFECTIVE GROSS INCOME ............. $995,837 $1,778,538 $973,380
TOTAL EXPENSES ..................... $538,499 $ 540,858 $504,816
NET OPERATING INCOME (NOI) ......... $457,338 $1,237,680 $468,564
CASH FLOW (CF) ..................... $437,238 $1,237,680 $468,564
DSCR ON NOI ........................ 1.30x 3.51x 1.33x
DSCR ON CF ......................... 1.24x 3.51x 1.33x
S-110
EXTRA SPACE STORAGE - EAST ONE PORTFOLIO
LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $27,208,000
FIRST PAYMENT DATE: July 1, 2004
TERM/AMORTIZATION: 84/360 months
INTEREST ONLY PERIOD: 36 months
MATURITY DATE: June 1, 2011
EXPECTED MATURITY BALANCE: $25,524,976
BORROWING ENTITY: Extra Space Properties
Ten LLC
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance:
82 payments
Open: 2 payments
UP-FRONT RESERVES:
IMMEDIATE REPAIR RESERVE: $23,250
TAX/INSURANCE RESERVE: Yes
ONGOING MONTHLY RESERVES:
TAX/INSURANCE RESERVE: Yes
REPLACEMENT RESERVES: $10,430(1)
LOCKBOX: None
(1) $10,430 per month for the first two years and $3,863 per month each year
for the remainder of the loan term.
FINANCIAL INFORMATION
CUT-OFF DATE BALANCE: $27,208,000
CUT-OFF DATE LTV: 80.0%
MATURITY DATE LTV: 75.1%
UNDERWRITTEN DSCR*: 1.41x
MORTGAGE RATE**: 4.763%
* DSCR figures based on net cash flow unless otherwise noted.
** Full rate is 4.7632%.
PROPERTY INFORMATION
PROPERTY TYPE: Self Storage
PROPERTY SUB-TYPE: Self Storage
LOCATION: Massachusetts
New Jersey
Pennsylvania
YEAR BUILT/
RENOVATED: Foxboro 1996/NA
Hudson 1990/NA
Worcester 1995/NA
Auburn 1998/NA
Brockton 1999/NA
Parlin 1987/NA
Pittsburgh 1903/1979
Kennedy Township 1988/2000
Stoughton 1987/NA
UNITS: 4,069
CUT-OFF BALANCE PER
UNIT: $6,687
OCCUPANCY: Foxboro as of 4/27/04 83.8%
Hudson as of 4/27/04 81.9%
Worcester as of 4/27/04 85.6%
Auburn as of 5/6/04 82.9%
Brockton as of 5/6/04 74.9%
Parlin as of 4/27/04 84.2%
Pittsburgh as of 4/27/04 83.0%
Kennedy Township as of 4/27/04 89.5%
Stoughton as of 4/27/04 75.9%
OWNERSHIP INTEREST: Fee/Leasehold
PROPERTY Extra Space
MANAGEMENT: Management LLC
U/W NET CASH
FLOW: $2,407,658
APPRAISED VALUE: $34,010,000
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
FULL YEAR
UNDERWRITTEN (12/31/03)
-------------- ---------------
EFFECTIVE GROSS INCOME .............. $4,693,545 $4,788,580
TOTAL EXPENSES ...................... $2,216,356 $2,123,022
NET OPERATING INCOME (NOI) .......... $2,477,189 $2,665,558
CASH FLOW (CF) ...................... $2,407,658 $2,665,558
DSCR ON NOI ......................... 1.45x 1.56x
DSCR ON CF .......................... 1.41x 1.56x
S-111
EXTRA SPACE STORAGE - EAST ONE PORTFOLIO
ADDITIONAL INFORMATION
THE LOAN:
o The "Extra Space Storage - East One Portfolio Loan" consists of one
Mortgage Loan, which is secured by nine self-storage facilities (each an
"Extra Space Storage - East One Portfolio Property") and is owned by an
affiliate of Extra Space Storage LLC ("Extra Space Storage"). The Foxboro
Property is secured by a first mortgage on a 445-unit self-storage facility
located in Foxboro, Massachusetts. The Hudson Property is secured by a
first mortgage on a 348-unit self-storage facility located in Hudson,
Massachusetts. The Worcester Property is secured by a first mortgage on a
271-unit self-storage facility located in Worcester, Massachusetts. The
Auburn Property is secured by a first mortgage on a 461-unit self-storage
facility located in Auburn, Massachusetts. The Brockton Property is secured
by a first mortgage on a 375-unit self-storage facility located in
Brockton, Massachusetts. The Parlin Property is secured by a first
leasehold mortgage on a 602-unit self-storage facility located in Parlin,
New Jersey. The Pittsburgh Property is secured by a first mortgage on a
649-unit self-storage facility located in Pittsburgh, Pennsylvania. The
Kennedy Township Property is secured by a first mortgage on a 446-unit
self-storage facility located in Kennedy Township, Pennsylvania. The
Stoughton Property is secured by a first mortgage on a 472-unit
self-storage facility located in Stoughton, Massachusetts. The East One
Portfolio Loan has a Cut-off Date Balance of $27,208,000.
THE BORROWER:
o The "Extra Space Storage - East One Portfolio Borrower" is Extra Space
Properties Ten LLC, a Delaware limited liability company and a single
purpose bankruptcy remote entity. Legal counsel to the Extra Space Storage
East One Portfolio Borrower has delivered a non-consolidation opinion.
o Extra Space Storage, founded in 1979, is a privately held company based in
Salt Lake City, Utah, with regional offices in California, Massachusetts,
New Jersey and Chicago. The company is a national owner, developer,
acquirer and operator of self-storage properties, currently operating 110
self-storage facilities totaling approximately 78,000 units located in 15
states with over 30 new facilities under development.
o Extra Space Storage is in the process of structuring an initial public
offering that is expected to close in Summer 2004. Upon the closing of the
initial public offering, a transfer of equity ownership will occur, as well
as a change to the borrower principal. The loan documents allow for the
transfer, subject to the following restrictions:
o Equity ownership will be transferred to (a) a new corporation or real
estate investment trust, (b) limited partnership controlled by the real
estate investment trust and functioning as the real estate investment
trust's operating partnership or (c) Massachusetts business trust formed as
a subsidiary of the real estate investment trust for the purpose of being
the general partner and/or the limited partner of the real estate
investment trust, subject to (1) at all times the real estate investment
trust or the real estate investment trust operating partnership continues
to own and control Extra Space Storage, and Extra Space Storage continues
to own, directly or indirectly, all of the real estate investment trust,
(2) at all times the Extra Space Storage East One Portfolio Borrower shall
be controlled by Mr. Wooley, or the real estate investment trust or the
real estate investment trust's operating partnership and a "qualified
manager" (as defined under the related Mortgage Loan documents) shall
manage each individual property, (3) real estate investment trust's
operating partnership's receipt of written confirmation from the Rating
Agencies that transfer will not result in a downgrade, withdrawal or
qualification of the initial, or if higher, then current ratings of the
Certificate and (4) the mortgagee shall be reimbursed for all expenses,
including legal fees, incurred by the mortgagee in connection with the
transfer.
o Extra Space Storage proposed that the future real estate investment trust's
operating partnership be Extra Space Storage, Inc., which, as of 12/31/03,
reported liquidity of approximately $11.7 million, real estate assets of
$354.4 million and a net worth of $7.5 million.
S-112
EXTRA SPACE STORAGE - EAST ONE PORTFOLIO
ADDITIONAL INFORMATION
THE PROPERTIES:
o The collateral consists of nine self-storage facilities located throughout
Massachusetts, New Jersey and Pennsylvania containing a total of 71
buildings, 4,069 units and 472,841 net rentable square feet and situated on
a total of 33.77 acres. Most of the properties were constructed between
1903 and 2000, averaging 1992 construction. Of the 4,069 units, 3,289 (81%)
are standard storage units and 780 (19%) are climate-controlled storage
units. The average unit size is 114 square feet. In addition, there are a
total of 100 outside vehicle storage spaces. Additional improvements
typically consist of a leasing office, either incorporated into one of the
storage buildings or combined with a manager's residence in a stand-alone
building. A code-operated access gate and a video surveillance system
typically provide property protection.
PROPERTY MANAGEMENT:
o Extra Space Management LLC manages all nine facilities in the portfolio.
Extra Space Management, an Extra Space Storage -- East One Portfolio
Borrower related entity founded in 1979 and headquartered in Salt Lake
City, Utah, currently manages 122 self-storage facilities totaling
approximately 78,000 units located in 13 states.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o Not allowed.
S-113
ST. CLAIR ESTATES MANUFACTURED HOME COMMUNITY
LOAN INFORMATION
ORIGINAL PRINCIPAL BALANCE: $27,200,000
FIRST PAYMENT DATE: May 1, 2004
TERM/AMORTIZATION: 84/360 months
INTEREST ONLY PERIOD: 24 months
MATURITY DATE: April 1, 2011
EXPECTED MATURITY BALANCE: $24,994,332
BORROWING ENTITY: St. Clair Estates (Delaware), LLC
INTEREST CALCULATION: Actual/360
CALL PROTECTION: Lockout/defeasance:
78 payments
Open: 6 payments
UP-FRONT RESERVES:
TAX/INSURANCE: Yes
ONGOING RESERVES:
TAX/INSURANCE RESERVE: Yes
REPLACEMENT RESERVE: Yes(1)
LOCKBOX: None
(1) $2,224 per month for the first six years and $2,080 per month each year
for the remainder of the loan term.
FINANCIAL INFORMATION
CUT-OFF DATE BALANCE: $27,200,000
CUT-OFF DATE LTV: 80.0%
MATURITY DATE LTV: 73.5%
UNDERWRITTEN DSCR*: 1.26x
MORTGAGE RATE: 4.660%
* DSCR figures based on net cash flow unless otherwise noted.
PROPERTY INFORMATION
PROPERTY TYPE: Manufactured Housing
Communities
PROPERTY SUB-TYPE: Manufactured Housing
Communities
LOCATION: Clinton Township, MI
YEAR BUILT/RENOVATED: 1960, 2001/NA
PADS: 628
CUT-OFF BALANCE PER PAD: $43,312
OCCUPANCY AS OF 3/30/04: 81.5%(2)
OWNERSHIP INTEREST: Fee
PROPERTY MANAGEMENT: Capital First Realty, Inc.
U/W NET CASH FLOW: $2,122,964
APPRAISED VALUE: $34,000,000
(2) Occupancy does not include the Master Lease space. The current occupancy as
of 3/30/04 including the Master Lease space is 91.4%.
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
FULL YEAR FULL YEAR
UNDERWRITTEN (12/31/03) (12/31/02)
-------------- --------------- ---------------
EFFECTIVE GROSS INCOME ............. $2,760,421 $2,703,617 $2,485,873
TOTAL EXPENSES ..................... $ 611,343 $ 490,135 $ 514,138
NET OPERATING INCOME (NOI) ......... $2,149,078 $2,213,482 $1,971,735
CASH FLOW (CF) ..................... $2,122,964 $2,213,482 $1,971,735
DSCR ON NOI ........................ 1.28x 1.31x 1.17x
DSCR ON CF ......................... 1.26x 1.31x 1.17x
S-114
ST. CLAIR ESTATES MANUFACTURED HOME COMMUNITY
ADDITIONAL INFORMATION
THE LOAN:
o The St. Clair Estates Manufactured Home Community loan is secured by a
first mortgage on a 628-pad manufactured housing community located at the
outskirts of metropolitan Detroit, 25 miles north of the Detroit central
business district.
THE BORROWER:
o The borrower, St. Clair Estates (Delaware), LLC (the "St. Clair Estates
Borrower"), a Delaware limited liability company that is a single-purpose,
bankruptcy-remote entity. The borrower principal is Richard J. Klarchek,
who has over 20 years of experience owning and operating mobile home
communities. He owns 16 communities located throughout the Midwest totaling
6,250 pads, 1,000 of which are in the local market.
THE PROPERTY:
o The collateral for the St. Clair Estates Manufactured Home Community loan
consists of a fee simple interest in a 628-pad manufactured housing
community. The property was built in three phases, with construction
between the years of 1960 and 2001. The property includes such amenities as
a community center, a swimming pool, playgrounds, a basketball court,
off-street parking, visitor parking and concrete streets. The property also
features public water and sewer service.
o The St. Clair Estates Borrower is required at its sole cost and expense to
keep the St. Clair Estates MHC property insured against loss or damage by
fire and other risks addressed by coverage of a comprehensive all risk
insurance policy.
PROPERTY MANAGEMENT:
o The property is managed by Capital First Realty, Inc, where the borrower
principal Richard Klarchek serves as president. Founded in 1984 and
headquartered in Chicago, IL, Capital First Realty, Inc. currently manages
16 manufactured housing properties located throughout the Midwest
containing approximately 6,250 residential sites.
CURRENT MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o None.
FUTURE MEZZANINE OR SUBORDINATE INDEBTEDNESS:
o The direct and/or indirect owners of the St. Clair Estates Borrower ("St.
Clair Estates Mezzanine Borrower") are permitted to incur mezzanine debt
provided that 1) it is extended by a qualified financial institution, 2) it
is secured by a pledge of the St. Clair Estates Mezzanine Borrower's equity
interest in the St. Clair Estates Borrower, 3) notification to the
mortgagee, 4) mezzanine lender executes a subordination and intercreditor
agreement satisfactory to the mortgagee and the rating agencies, 5) the
aggregate principal amount of mezzanine financing and subject loan shall
not exceed a 80.0% loan-to-value ratio, and 6) the aggregate debt service
coverage ratio shall not be less than 0.83x based on a 9.25% constant and
underwritten net operating income as determined by the mortgagee.
o Additional requirements for mezzanine debt include 1) confirmation of no
downgrade from the Rating Agencies, 2) the St. Clair Estates Mezzanine
Borrower needs to be structured into the St. Clair Estates Borrower's
organizational structure in a way so as not to adversely affect the
bankruptcy remote nature of the St. Clair Estates Borrower and not be
contrary to Rating Agency criteria (and all organizational documents of the
St. Clair Estates Borrower shall be revised to the reasonable satisfaction
of the mortgagee), and 3) satisfaction of such other conditions as the
mortgagee may require and/or a delivery of a legal opinion (including, but
not limited to a revised non-consolidation opinion). All of which must be
acceptable to the mortgagee and the Rating Agencies.
S-115
ADDITIONAL MORTGAGE LOAN INFORMATION
General. For a detailed presentation of certain characteristics of the
Mortgage Loans and Mortgaged Properties, on an individual basis and in tabular
format, see Annex A hereto. Certain capitalized terms that appear herein are
defined in Annex A. See Annex B hereto for certain information with respect to
capital improvement, replacement, tax, insurance and tenant improvement reserve
accounts, as well as certain other information with respect to Multifamily
Mortgaged Properties, other than Manufactured Housing Communities.
Delinquencies. As of the Cut-off Date, none of the Mortgage Loans will
have been 30 days or more delinquent in respect of any Monthly Payment during
the past 12 months. All of the Mortgage Loans were originated during the nine
months prior to the Cut-off Date.
Tenant Matters. Thirty-four of the retail, office, industrial and
warehouse Mortgaged Properties, which represent security for 30.2% of the
Initial Pool Balance (40.1% of the Group 1 Balance), are leased in part to one
or more Major Tenants. The top concentration of Major Tenants with respect to
more than one property (groups of Mortgage Loans where the same company is a
Major Tenant of each Mortgage Loan in the group) represent 0.7% of the Initial
Pool Balance (0.9% of the Group 1 Balance). In addition, there are several
cases in which a particular entity is a tenant at multiple Mortgaged
Properties, and although it may not be a Major Tenant at any such property, it
may be significant to the success of such properties. "Major Tenants" means any
tenant at a Commercial Mortgaged Property (other than a single tenant) that
rents at least 20% of the Leasable Square Footage (as defined in Annex A) at
such property.
Certain of the Multifamily Mortgaged Properties have material
concentrations of student tenants.
Ground Leases and Other Non-Fee Interests. Seven Mortgaged Properties
(seven of the Mortgaged Properties relating to Mortgage Loans in Loan Group 1),
which represent 4.7% of the Initial Pool Balance (6.2% of the Group 1 Balance),
are, in each such case, secured in whole or in part by a Mortgage on the
applicable borrower's leasehold interest in the related Mortgaged Property.
Generally, with certain exceptions, either (i) the ground lessor has
subordinated its interest in the related Mortgaged Property to the interest of
the holder of the related Mortgage Loan or (ii) the ground lessor has agreed to
give the holder of the Mortgage Loan notice of, and has granted such holder the
right to cure, any default or breach by the lessee. See "Certain Legal Aspects
of Mortgage Loans --Foreclosure--Leasehold Considerations" in the accompanying
prospectus.
Subordinate Financing. The existence of subordinated indebtedness
encumbering a mortgaged property may increase the difficulty of refinancing the
related mortgage loan at maturity and the possibility that reduced cash flow
could result in deferred maintenance. Also, in the event that the holder of the
subordinated debt files for bankruptcy or is placed in involuntary
receivership, foreclosure on the mortgaged property could be delayed. In
general, the Mortgage Loans either prohibit the related borrower from
encumbering the Mortgaged Property with additional secured debt or require the
consent of the holder of the first lien prior to so encumbering such property
other than 16 Mortgage Loans representing 19.1% of the Initial Pool Balance
(17.9% of the Group 1 Balance and 23.0% of the Group 2 Balance), which permit
additional unsecured debt. In addition, five Mortgage Loans, representing 23.3%
of the Initial Pool Balance (30.2% of the Group 1 Balance and 2.1% of the Group
2 Balance), have existing secured subordinate debt and four Mortgage Loans
representing 2.9% of the Initial Pool Balance (2.5% of the Group 1 Balance and
3.8% of the Group 2 Balance) permit future subordinate debt secured by the
Mortgaged Property subject to certain conditions. Regardless of whether the
terms of a mortgage loan prohibit the incurrence of subordinate debt, the
related borrower may be permitted to incur additional indebtedness secured by
furniture, fixtures and equipment, and to incur additional unsecured
indebtedness. In addition, 14 of the Mortgage Loans representing 12.4% of the
Initial Pool Balance (9.1% of the Group 1 Balance and 22.3% of the Group 2
Balance) permit the members of the related borrower to incur mezzanine debt
under the circumstances set forth in the related loan agreement. Two Mortgage
Loans, representing 1.0% of the Initial Pool Balance (0.7% of the Group 1
Balance and 2.2% of the Group 2 Balance), have existing mezzanine debt. With
respect to one Mortgage Loan, representing
S-116
0.5% of the Initial Pool Balance (2.2% of the Group 2 Balance), the related
mezzanine lender has entered into a mezzanine intercreditor agreement with the
mortgagee, pursuant to which, among other things, the related mezzanine lender
(x) has agreed, under certain circumstances, not to enforce its rights to
realize upon collateral securing the mezzanine loan or take any enforcement
action with respect to the mezzanine loan without written confirmation from the
Rating Agencies that such enforcement action would not cause the downgrade,
withdrawal or qualification of the current ratings of the Certificates and (y)
has subordinated the mezzanine loan documents to the related Mortgage Loan
documents and has the option to purchase the related Mortgage Loan if such
Mortgage Loan becomes defaulted or cure the default as set forth in such
mezzanine intercreditor agreement.
The SS Component Mortgage Loan is one of two mortgage loans that are part
of a split loan structure that is secured by the same mortgage instrument on
the related mortgaged property. The other mortgage loan in this split loan
structure is not included in the trust. The other mortgage loan's principal
balance as of the date of origination was $22,425,256. This mortgage loan is
subordinate in right of payment to the mortgage loan that is included in the
trust. See "Description of the Mortgage Pool--17 State Street Whole Loan" in
this prospectus supplement.
One Mortgage Loan representing 0.2% of the Initial Pool Balance (0.3% of
the Group 1 Balance), is one of two mortgage loans that is part of a split loan
structure that is secured by the same mortgage instrument on the related
Mortgaged Property. The other mortgage loan in this split loan structure is not
included in the Trust. The other mortgage loan's principal balance as of the
date of origination was $170,000. Such mortgage loan is subordinate in right of
payment to the Mortgage Loan that is included in the Trust. See "Description of
the Mortgage Pool--The CBA Whole Loan".
Except as described above, we do not know whether the respective borrowers
under the Mortgage Loans have any other debt outstanding. See "Certain Legal
Aspects of Mortgage Loans-- Subordinate Financing" in the accompanying
prospectus.
Lender/Borrower Relationships. The Mortgage Loan Seller, the Depositor or
any of their affiliates may maintain certain banking or other relationships
with borrowers under the Mortgage Loans or their affiliates, and proceeds of
the Mortgage Loans may, in certain limited cases, be used by such borrowers or
their affiliates in whole or in part to pay indebtedness owed to the Mortgage
Loan Seller, the Depositor or such other entities.
CERTAIN UNDERWRITING MATTERS
Environmental Assessments. Each of the Mortgaged Properties was subject to
an environmental site assessment, an environmental site assessment update or a
transaction screen that was performed by an independent third-party
environmental consultant with respect to each Mortgaged Property securing a
Mortgage Loan in connection with the origination of such Mortgage Loan or was
required to have environmental insurance in lieu of an environmental site
assessment. In some cases, a third-party consultant also conducted a Phase II
environmental site assessment of a Mortgaged Property. The report of each such
assessment, update or screen is referred to herein as an "Environmental
Report". With respect to an Environmental Report, if any, (i) no such
Environmental Report provides that as of the date of the report there is a
material violation of applicable environmental laws with respect to any known
circumstances or conditions relating to the related Mortgaged Property; or (ii)
if any such Environmental Report does reveal any such circumstances or
conditions with respect to the related Mortgaged Property and such
circumstances or conditions have not been subsequently remediated in all
material respects, then generally, with certain exceptions, one or more of the
following was the case: (A) a party not related to the related borrower with
financial resources reasonably adequate to cure the circumstance or condition
in all material respects was identified as a responsible party for such
circumstance or condition, (B) the related borrower was required to provide
additional security to cure the circumstance or condition in all material
respects and to obtain and, for the period contemplated by the related Mortgage
Loan documents, maintain an operations and maintenance plan, (C) the related
borrower provided a "no further action" letter or other evidence that
applicable federal, state or local governmental
S-117
authorities had no current intention of taking any action, and are not
requiring any action, in respect of such circumstance or condition, (D) such
circumstances or conditions were investigated further and based upon such
additional investigation, an independent environmental consultant recommended
no further investigation or remediation, or recommended only the implementation
of an operations and maintenance program, which the related borrower is
required to do, (E) the expenditure of funds reasonably estimated to be
necessary to effect such remediation was the lesser of (a) an amount equal to
two percent of the outstanding principal balance of the related Mortgage Loan
and (b) $200,000, (F) an escrow of funds exists reasonably estimated to be
sufficient for purposes of effecting such remediation, (G) the related borrower
or other responsible party is currently taking such actions, if any, with
respect to such circumstances or conditions as have been required by the
applicable governmental regulatory authority, (H) the related Mortgaged
Property is insured under a policy of insurance, subject to certain per
occurrence and aggregate limits and a deductible, against certain losses
arising from such circumstances or conditions, or (I) a responsible party with
financial resources reasonably adequate to cure to cure the circumstance or
condition in all material respects provided a guaranty or indemnity to the
related borrower to cover the costs of any required investigation, testing,
monitoring or remediation. There can be no assurance, however, that a
responsible party will be financially able to address the subject condition or
compelled to do so.
The Mortgage Loan Seller will not make any representation or warranty with
respect to environmental conditions arising after the Delivery Date, and will
not be obligated to repurchase or substitute for any Mortgage Loan due to any
such condition.
Generally. Certain federal, state and local laws, regulations and
ordinances govern the management, removal, encapsulation or disturbance of
asbestos-containing materials ("ACMs"). Such laws, as well as common law, may
impose liability for releases of or exposure to ACMs and may provide for third
parties to seek recovery from owners or operators of real properties for
personal injuries associated with such releases.
Owners of residential housing constructed prior to 1978 are required by
federal law to disclose to potential residents or purchasers any known
lead-based paint hazards and violations can incur treble damages for any
failure to so notify. In addition, the ingestion of lead-based paint chips or
dust particles by children can result in lead poisoning, and the owner of a
property where such circumstances exist may be held liable for such injuries
and for the costs of removal or encapsulation of the lead-based paint. Testing
for lead-based paint or lead in the water was conducted with respect to certain
of the Mortgaged Properties, generally based on the age and/or condition
thereof.
The Environmental Protection Agency has identified certain health risks
associated with elevated radon gas in buildings, and has recommended that
certain mitigating measures be considered.
When recommended by environmental site assessments, operations and
maintenance plans (addressing in some cases ACMs, lead-based paint, and/or
radon) were generally required, except in the case of certain Mortgaged
Properties where the environmental consultant conducting the assessment also
identified the condition of the ACM as good and non-friable (i.e., not easily
crumbled). In certain instances where related Mortgage Loan documents required
the submission of operations and maintenance plans, these plans have yet to be
received. There can be no assurance that recommended operations and maintenance
plans have been or will continue to be implemented. In many cases, certain
potentially adverse environmental conditions were not tested for. For example,
lead based paint and radon were tested only with respect to Multifamily
Mortgaged Properties and only if, in the case of lead based paint, the age of
the Mortgaged Property warranted such testing and, in the case of radon, radon
is prevalent in the geographic area where the Mortgaged Property is located;
however, at several Multifamily Mortgaged Properties located in geographic
areas where radon is prevalent, radon testing was not conducted. None of the
testing referenced in the preceding sentence was conducted in connection with a
Manufactured Housing Community.
S-118
Certain of the Mortgaged Properties may have off-site leaking underground
storage tank ("UST") sites located nearby which the environmental assessments
either have indicated are not likely to contaminate the related Mortgaged
Properties but may require future monitoring or have identified a party not
related to the mortgagor (borrower) as responsible for such condition. Certain
other Mortgaged Properties may contain contaminants in the soil or groundwater
at levels which the environmental consultant has advised are below regulatory
levels or otherwise are indicative of conditions typically not of regulatory
concern and are not likely to require any further action. In some cases, there
was no further investigation of a potentially adverse environmental condition.
In certain instances where related Mortgage Loan documents required UST repair
or removal and the submission of a confirmation that this work has been
performed, the confirmations have yet to be received.
The information contained herein regarding environmental conditions at the
Mortgaged Properties is based on the environmental assessments and has not been
independently verified by the Depositor, the Mortgage Loan Seller, the
Underwriters, the Master Servicer, the Special Servicer, the Trustee, the REMIC
Administrator or any of their respective affiliates. There can be no assurance
that such environmental assessments or studies, as applicable, identified all
environmental conditions and risks, or that any such environmental conditions
will not have material adverse effect on the value or cash flow of the related
Mortgaged Property.
The Pooling Agreement requires that the Special Servicer obtain an
environmental site assessment of a Mortgaged Property prior to acquiring title
thereto or assuming its operation. In the event a Phase I assessment already
exists that is less than 12 months old, a new assessment will not be required
under the Pooling Agreement. In the event a Phase I assessment already exists
that is between 12 and 18 months old, only an updated data base search will be
required. Such requirement precludes enforcement of the security for the
related Mortgage Loan until a satisfactory environmental site assessment is
obtained (or until any required remedial action is taken), but will decrease
the likelihood that the Trust will become liable for a material adverse
environmental condition at the Mortgaged Property. However, there can be no
assurance that the requirements of the Pooling Agreement will effectively
insulate the Trust from potential liability for a materially adverse
environmental condition at any Mortgaged Property. See "Servicing of the
Mortgage Loans" in this prospectus supplement and "The Pooling and Servicing
Agreements--Realization Upon Defaulted Mortgage Loans", "Risk Factors--Certain
Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage
Loans--Adverse Environmental Conditions May Subject a Mortgage Loan to
Additional Risk" and "Certain Legal Aspects of Mortgage Loans--Environmental
Considerations" in the accompanying prospectus.
Property Condition Assessments. Inspections of each of the Mortgaged
Properties were conducted by independent licensed engineers in connection with
or subsequent to the origination of the related Mortgage Loan, except that in
connection with certain Mortgage Loans having an initial principal balance of
$2,000,000 or less, a site inspection may not have been performed in connection
with the origination of any such Mortgage Loan. Such inspections were generally
commissioned to inspect the exterior walls, roofing, interior construction,
mechanical and electrical systems and general condition of the site, buildings
and other improvements located at a Mortgaged Property. With respect to certain
of the Mortgage Loans, the resulting reports indicated a variety of deferred
maintenance items and recommended capital improvements. The estimated cost of
the necessary repairs or replacements at a Mortgaged Property was included in
the related property condition assessment; and, in the case of certain
Mortgaged Properties, such estimated cost exceeded $100,000. In general, with
limited exception, cash reserves were established, or other security obtained,
to fund or secure the payment of such estimated deferred maintenance or
replacement items. In addition, various Mortgage Loans require monthly deposits
into cash reserve accounts to fund property maintenance expenses.
Appraisals and Market Studies. An independent appraiser that was either a
member of the Appraisal Institute ("MAI") or state certified performed an
appraisal (or updated an existing appraisal) of each of the related Mortgaged
Properties in connection with the origination of each Mortgage Loan in order to
establish the appraised value of the related Mortgaged Property or
S-119
Properties. Such appraisal, appraisal update or property valuation was prepared
on or about the "Appraisal Date" indicated on Annex A hereto, and except for
certain mortgaged properties involving operating businesses, the appraiser
represented in such appraisal or in a letter or other agreement that the
appraisal conformed to the appraisal guidelines set forth in the Uniform
Standards of Professional Appraisal Practice ("USPAP"). In general, such
appraisals represent the analysis and opinions of the respective appraisers at
or before the time made, and are not guarantees of, and may not be indicative
of, present or future value. There can be no assurance that another appraiser
would not have arrived at a different valuation, even if such appraiser used
the same general approach to and same method of appraising the property. In
addition, appraisals seek to establish the amount a typically motivated buyer
would pay a typically motivated seller. Such amount could be significantly
higher than the amount obtained from the sale of a Mortgaged Property under a
distress or liquidation sale.
None of the Depositor, the Mortgage Loan Seller, the Underwriters, the
Master Servicer, the Special Servicer, the Trustee, the REMIC Administrator or
any of their respective affiliates has prepared or conducted its own separate
appraisal or reappraisal of any Mortgaged Property.
Zoning and Building Code Compliance. The Mortgage Loan Seller has
generally examined whether the use and operation of the Mortgaged Properties
were in material compliance with all zoning, land-use, ordinances, rules,
regulations and orders applicable to such Mortgaged Properties at the time such
Mortgage Loans were originated. The Mortgage Loan Seller may have considered,
among other things, legal opinions, certifications from government officials,
zoning consultant's reports and/or representations by the related borrower
contained in the related Mortgage Loan documents and information which is
contained in appraisals and surveys, title insurance endorsements, or property
condition assessments undertaken by independent licensed engineers. Certain
violations may exist, however, the Mortgage Loan Seller does not have notice of
any material existing violations with respect to the Mortgaged Properties
securing such Mortgage Loans which materially and adversely affect (i) the
value of the related Mortgaged Property as determined by the appraisal
performed in connection with the origination of the related Mortgage Loan or
(ii) the principal use of the Mortgaged Property as of the date of the related
Mortgage Loan's origination.
In some cases, the use, operation and/or structure of the related
Mortgaged Property constitutes a permitted nonconforming use and/or structure
that may not be rebuilt to its current state in the event of a material
casualty event. With respect to such Mortgaged Properties, the Mortgage Loan
Seller has determined that in the event of a material casualty affecting the
Mortgaged Property that:
(1) the extent of the nonconformity is not material;
(2) insurance proceeds together with the value of the remaining property
would be available and sufficient to pay off the related Mortgage Loan in
full;
(3) the Mortgaged Property, if permitted to be repaired or restored in
conformity with current law, would constitute adequate security for the
related Mortgage Loan; or
(4) the risk that the entire Mortgaged Property would suffer a material
casualty to such a magnitude that it could not be rebuilt to its current
state is remote.
Although the Mortgage Loan Seller expects insurance proceeds to be
available for application to the related Mortgage Loan in the event of a
material casualty, no assurance can be given that such proceeds would be
sufficient to pay off such Mortgage Loan in full. In addition, if the Mortgaged
Property were to be repaired or restored in conformity with current law, no
assurance can be given as to what its value would be relative to the remaining
balance of the related Mortgage Loan or what would be the revenue-producing
potential of the property.
Hazard, Liability and Other Insurance. The Mortgage Loans generally
require that each Mortgaged Property be insured by a hazard insurance policy in
an amount (subject to an approved deductible) at least equal to the lesser of
the outstanding principal balance of the related Mortgage
S-120
Loan and 100% of the replacement cost of the improvements located on the
related Mortgaged Property, and if applicable, that the related hazard
insurance policy contain appropriate endorsements to avoid the application of
co-insurance and not permit reduction in insurance proceeds for depreciation;
provided that, in the case of certain of the Mortgage Loans, the hazard
insurance may be in such other amounts as was required by the related
originators.
In addition, if any material improvements on any portion of a Mortgaged
Property securing any Mortgage Loan was, at the time of the origination of such
Mortgage Loan, in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards, and flood
insurance was available, a flood insurance policy meeting any requirements of
the then-current guidelines of the Federal Insurance Administration is required
to be in effect with a generally acceptable insurance carrier, in an amount
representing coverage generally not less than the least of (a) the outstanding
principal balance of the related Loan, (b) the full insurable value of the
related Mortgaged Property, (c) the maximum amount of insurance available under
the National Flood Insurance Act of 1973, as amended, or (d) 100% of the
replacement cost of the improvements located on the related Mortgaged Property.
In general, the standard form of hazard insurance policy covers physical
damage to, or destruction of, the improvements on the Mortgaged Property by
fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil
commotion, subject to the conditions and exclusions set forth in each policy.
Each Mortgage Loan generally also requires the related borrower to
maintain comprehensive general liability insurance against claims for personal
and bodily injury, death or property damage occurring on, in or about the
related Mortgaged Property in an amount generally equal to at least $1,000,000.
Each Mortgage Loan generally further requires the related borrower to
maintain business interruption insurance in an amount not less than
approximately 100% of the gross rental income from the related Mortgaged
Property for not less than 12 months.
With respect to four of the Mortgage Loans representing 1.8% of the
Initial Pool Balance (2.3% of the Group 1 Balance), the related borrower does
not maintain insurance for the Mortgaged Property. Rather, the sole tenant of
the Mortgaged Property self-insures.
In general, the Mortgage Loans (including those secured by Mortgaged
Properties located in California) do not require earthquake insurance. Thirty
of the Mortgaged Properties (27 of the Mortgaged Properties relating to
Mortgage Loans in Loan Group 1 and three of the Mortgaged Properties relating
to Mortgage Loans in Loan Group 2), securing 16.2% of the Initial Pool Balance
(18.5% of the Group 1 Balance and 9.2% of the Group 2 Balance), are located in
areas that are considered a high earthquake risk. These areas include all or
parts of the states of Washington, Oregon, California, Utah and Nevada. No
Mortgaged Property has a "probable maximum loss" ("PML") in excess of 20%.
THE MORTGAGE LOAN SELLER
Bank of America is a national banking association. The principal office of
Bank of America is in Charlotte, North Carolina. Bank of America is a
wholly-owned subsidiary of NB Holdings Corporation, which in turn is a
wholly-owned subsidiary of Bank of America Corporation.
The information set forth herein concerning Bank of America has been
provided by Bank of America. Neither the Depositor nor any Underwriter makes
any representation or warranty as to the accuracy or completeness of such
information.
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS
On or prior to the Delivery Date, by agreement with the Depositor, the
Mortgage Loan Seller (except as described in the next paragraph) will assign
and transfer the Mortgage Loans (including the CC Subordinate Components, the
SS Subordinate Components and the UH Subordinate
S-121
Components), without recourse, to or at the direction of the Depositor, to the
Trustee for the benefit of the Certificateholders. In connection with such
assignment, Bank of America will be required to deliver the following
documents, among others, to the Trustee with respect to each Mortgage Loan:
(1) the original Mortgage Note, endorsed (without recourse) to the order
of the Trustee or a lost note affidavit and an indemnity with a copy of
such Mortgage Note;
(2) the original or a copy of the related Mortgage(s) and, if
applicable, originals or copies of any intervening assignments of such
document(s), in each case (unless the particular document has not been
returned from the applicable recording office) with evidence of recording
thereon;
(3) the original or a copy of any related assignment(s), of leases and
rents (if any such item is a document separate from the Mortgage) and, if
applicable, originals or copies of any intervening assignments of such
document(s), in each case (unless the particular document has not been
returned from the applicable recording office) with evidence of recording
thereon;
(4) an assignment of each related Mortgage in favor of the Trustee, in
recordable form (except for, solely with respect to Mortgages sent for
recording but not yet returned, any missing recording information with
respect to such Mortgage) (or a certified copy of such assignment as sent
for recording);
(5) an assignment of any related assignment(s) of leases and rents (if
any such item is a document separate from the Mortgage) in favor of the
Trustee, in recordable form (except for any missing recording information
with respect to such Mortgage) (or a certified copy of such assignment as
sent for recording);
(6) a title insurance policy (or copy thereof) effective as of the date
of the recordation of the Mortgage Loan, together with all endorsements or
riders thereto (or if the policy has not yet been issued, an original or
copy or a written commitment "marked-up" at the closing of such Mortgage
Loan, interim binder or the pro forma title insurance policy evidencing a
binding commitment to issue such policy);
(7) an assignment in favor of the Trustee of each effective UCC
financing statement in the possession of the transferor (or a certified
copy of such assignment as sent for filing);
(8) in those cases where applicable, the original or a copy of the
related ground lease;
(9) in those cases where applicable, a copy of any letter of credit
relating to a Mortgage Loan;
(10) with respect to hospitality properties, a copy of the franchise
agreement, an original copy of the comfort letter and any transfer
documents with respect to such comfort letter, if any; and
(11) a copy of the related mortgage loan checklist;
provided, however, that with respect to any Mortgage for which the related
assignment of mortgage, assignment of assignment of leases, security agreements
and/or UCC financing statements have been recorded in the name of MERS or its
designee, no assignment of mortgage, assignment of leases, security agreements
and/or UCC financing statements in favor of the Trustee will be required to be
prepared or delivered and instead, the Master Servicer, at the direction of the
Mortgage Loan Seller, shall take all actions as are necessary to cause the
Trustee on behalf of the Trust to be shown as, and the Trustee shall take all
actions necessary to confirm that the Trustee on behalf of the Trust is shown
as, the owner of the related Mortgage Loan on the records of MERS for purposes
of the system of recording transfers of beneficial ownership of mortgages
maintained by MERS.
The Trustee is required to review the documents delivered thereto by Bank
of America with respect to each Mortgage Loan within a specified period
following such delivery, and the Trustee will hold the related documents in
trust. If there exists a breach of any of the delivery obligations made by the
Mortgage Loan Seller as generally described in items (1) through (9) in the
preceding
S-122
paragraph, and that breach materially and adversely affects the interests of
the Certificateholders, or any of them with respect to the affected loan,
including but not limited to, a material and adverse effect on any of the
distributions payable with respect to any of the Certificates or on the value
of those Certificates, or the Mortgage Loan then Bank of America will be
obligated, except as otherwise described below, within a period of 90 days
following its receipt of notice (an "Initial Resolution Period") of such
omission or defect to (1) deliver the missing documents or cure the defect in
all material respects, as the case may be, (2) repurchase (or cause the
repurchase of) the affected Mortgage Loan (including any Subordinate Components
thereof) at a price (the "Purchase Price") generally equal to the unpaid
principal balance of such Mortgage Loan (including any Subordinate Components
thereof), plus any accrued but unpaid interest thereon (other than Excess
Interest) at the related Mortgage Rate up to but not including the Due Date in
the Collection Period of repurchase, plus any related unreimbursed Master
Servicing Fees, Special Servicing Fees, Trustee Fees and Servicing Advances (as
defined herein), any interest on any Advances and any related Additional Trust
Fund Expenses (including any Additional Trust Fund Expense previously
reimbursed or paid by the Trust Fund but not so reimbursed by the related
mortgagor or other party from Insurance Proceeds, Condemnation Proceeds or
otherwise), and any Liquidation Fees if purchased outside of the time frame set
forth in the Pooling Agreement or (3) other than with respect to the CC
Component Mortgage Loan, the SS Component Mortgage Loan and the UH Component
Mortgage Loan, substitute a Qualified Substitute Mortgage Loan (as defined
below) for such Mortgage Loan and pay the Trustee a shortfall amount equal to
the difference between the Purchase Price of the deleted Mortgage Loan
calculated as of the date of substitution and the Stated Principal Balance of
such Qualified Substitute Mortgage Loan as of the date of substitution (the
"Substitution Shortfall Amount"). If such defect or breach is capable of being
cured but not within the Initial Resolution Period and Bank of America has
commenced and is diligently proceeding with the cure of such defect or breach
within the Initial Resolution Period, then Bank of America will have, with
respect to such Mortgage Loans only, an additional period of time referred to
as a "Resolution Extension Period" as described in this prospectus supplement
to complete such cure or, failing such cure, to repurchase (or cause the
repurchase of) or substitute for the related Mortgage Loan (provided, that the
Resolution Extension Period shall not apply in the event of a defect that
causes the Mortgage Loan not to constitute a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Internal Revenue Code of 1986, as amended
(the "Code") or not to meet certain Code-specified criteria with respect to
customary prepayment penalties or permissible defeasance). As used in this
prospectus supplement, "Resolution Extension Period" means for purposes of
remediating a breach described in the second sentence of this paragraph for any
Mortgage Loan (a) that is not a Specially Serviced Mortgage Loan prior to the
commencement of or during the applicable Initial Resolution Period, the period
of time which ends on and includes the earlier of (i) the 90th day following
the end of the applicable Initial Resolution Period and (ii) the 45th day
following receipt by the Mortgage Loan Seller of notice from either the Master
Servicer or the Special Servicer of the occurrence of any Servicing Transfer
Event with respect to such Mortgage Loan subsequent to the end of the
applicable Initial Resolution Period and (b) that is not a Specially Serviced
Mortgage Loan prior to the commencement of the applicable Initial Resolution
Period but as to a Servicing Transfer Event occurs during the applicable
Initial Resolution Period, the period that commences upon the end of the
applicable Initial Resolution Period and ends on and includes the 90th day
following receipt by the Mortgage Loan Seller of notice from the Master
Servicer or the Special Servicer of such Servicing Transfer Event. A "Qualified
Substitute Mortgage Loan" in connection with the replacement of a defective
Mortgage Loan as contemplated by the Pooling Agreement, is any other mortgage
loan which, on the date of substitution, (i) has a principal balance, after
deduction of the principal portion of any unpaid Monthly Payment due on or
before the date of substitution, not in excess of the Stated Principal Balance
of the defective Mortgage Loan; (ii) is accruing interest at a fixed rate of
interest at least equal to that of the defective Mortgage Loan; (iii) has the
same Due Date as, and a grace period for delinquent Monthly Payments that is no
longer than, the Due Date and grace period, respectively, of the defective
Mortgage Loan; (iv) is accruing interest on the same basis as the defective
Mortgage Loan (for example, on the basis of a 360-day year consisting of twelve
30-day months); (v) has a remaining
S-123
term to stated maturity not greater than, and not more than two years less
than, that of the defective Mortgage Loan and, in any event, has a maturity
date not later than two years prior to the Rated Final Distribution Date; (vi)
has a then current loan- to-value ratio not higher than, and a then current
debt service coverage ratio not lower than, the loan-to-value ratio and debt
service coverage ratio, respectively, of the defective Mortgage Loan as of the
Delivery Date; (vii) has comparable prepayment restrictions to those of the
defective Mortgage Loan, (viii) will comply (except in a manner that would not
be adverse to the interests of the Certificateholders (as a collective whole)
in or with respect to such mortgage loan), as of the date of substitution, with
all of the representations relating to the defective Mortgage Loan set forth in
or made pursuant to the Mortgage Loan Purchase and Sale Agreement; (ix) has a
Phase I Environmental Assessment and a property condition report relating to
the related Mortgaged Property in its Servicing File, which Phase I
Environmental Assessment will evidence that there is no material adverse
environmental condition or circumstance at the related Mortgaged Property for
which further remedial action may be required under applicable law, and which
property condition report will evidence that the related Mortgaged Property is
in good condition with no material damage or deferred maintenance; and (x)
constitutes a "qualified replacement mortgage" within the meaning of Section
860G(a)(4) of the Code; provided, however, that if more than one mortgage loan
is to be substituted for any defective Mortgage Loan, then all such proposed
replacement mortgage loans shall, in the aggregate, satisfy the requirement
specified in clause (i) of this definition and each such proposed replacement
mortgage loan shall, individually, satisfy each of the requirements specified
in clauses (ii) through (x) of this definition; and provided, further, that no
mortgage loan shall be substituted for a defective Mortgage Loan unless (x)
such prospective replacement mortgage loan shall be acceptable to the Directing
Certificateholder (or, if there is no Directing Certificateholder then serving,
to the Holders of Certificates representing a majority of the Voting Rights
allocated to the Controlling Class), in its (or their) sole discretion, and (y)
each Rating Agency shall have confirmed in writing to the Trustee that such
substitution will not in and of itself result in an Adverse Rating Event with
respect to any Class of Rated Certificates (such written confirmation to be
obtained by, and at the expense of, the Mortgage Loan Seller effecting the
substitution).
If (x) any Mortgage Loan is required to be repurchased or substituted as
contemplated in this prospectus supplement, (y) such Mortgage Loan is a
Crossed-Collateralized Mortgage Loan or part of a portfolio of Mortgaged
Properties (which provides that a property may be uncrossed from the other
Mortgaged Properties) and (z) the applicable defect or breach does not
constitute a defect or breach, as the case may be, as to any related
Crossed-Collateralized Mortgage Loan or applies to only specific Mortgaged
Properties included in such portfolio (without regard to this paragraph), then
the applicable defect or breach (as the case may be) will be deemed to
constitute a defect or breach (as the case may be) as to any related
Crossed-Collateralized Mortgage Loan and to each other Mortgaged Property
included in such portfolio and the Mortgage Loan Seller will be required to
repurchase or substitute for any related Crossed-Collateralized Mortgage Loan
in the manner described above unless, in the case of a breach or defect, both
of the following conditions would be satisfied if the Mortgage Loan Seller were
to repurchase or substitute for only the affected Crossed-Collateralized
Mortgage Loans or affected Mortgaged Properties as to which a breach had
occurred without regard to this paragraph: (i) the debt service coverage ratio
for any remaining Cross-Collateralized Mortgage Loans or Mortgaged Properties
for the four calendar quarters immediately preceding the repurchase or
substitution is not less than the greater of (a) the debt service coverage
ratio immediately prior to the repurchase, (b) the debt service coverage ratio
on the Closing Date, and (c) 1.25x and (ii) the loan-to-value ratio for any
remaining Crossed-Collateralized Mortgage Loans or Mortgaged Properties is not
greater than the lesser of (a) the loan-to-value ratio immediately prior to the
repurchase, (b) the loan-to-value ratio on the Closing Date, and (c) 75%. In
the event that both of the conditions set forth in the preceding sentence would
be so satisfied, the Mortgage Loan Seller may elect either to repurchase or
substitute for only the affected Crossed-Collateralized Mortgage Loan or
Mortgaged Properties as to which the defect or breach exists or to repurchase
or substitute for the aggregate Crossed-Collateralized Mortgage Loans or
Mortgaged Properties.
S-124
To the extent that the Mortgage Loan Seller repurchases or substitutes for
an affected Cross-Collateralized Mortgage Loan or Mortgaged Property in the
manner prescribed above while the Trustee continues to hold any related
Cross-Collateralized Mortgage Loans, the Mortgage Loan Seller and the Depositor
have agreed in the Mortgage Loan Purchase and Sale Agreement to either uncross
the repurchased Cross-Collateralized Mortgage Loan or affected property
provided the Depositor has received a tax opinion that uncrossing the
repurchased Cross-Collateralized Mortgage Loan will not adversely affect the
status of any of REMIC I, REMIC II or the Component Mortgage Loan REMIC as a
REMIC under the Code, or, in the case of a Cross-Collateralized Loan, to
forbear from enforcing any remedies against the other's Primary Collateral (as
defined below), but each is permitted to exercise remedies against the Primary
Collateral securing its respective affected Cross-Collateralized Mortgage Loans
or Mortgaged Properties, including, with respect to the Trustee, the Primary
Collateral securing Mortgage Loans still held by the Trustee, so long as such
exercise does not materially impair the ability of the other party to exercise
its remedies against its Primary Collateral. If the exercise of remedies by one
party would materially impair the ability of the other party to exercise its
remedies with respect to the Primary Collateral securing the
Cross-Collateralized Mortgage Loans or Mortgaged Properties held by such party,
then both parties have agreed in the Mortgage Loan Purchase and Sale Agreement
to forbear from exercising such remedies until the loan documents evidencing
and securing the Mortgage Loans can be modified in a manner that complies with
the Mortgage Loan Purchase and Sale Agreement to remove the threat of
impairment as a result of the exercise of remedies. "Primary Collateral" shall
mean the Mortgaged Property directly securing a Cross-Collateralized Mortgage
Loan or Mortgaged Property and excluding any property as to which the related
lien may only be foreclosed upon by exercise of cross-collateralization of such
loans.
The respective repurchase, substitution or cure obligations of the
Mortgage Loan Seller described in this prospectus supplement will constitute
the sole remedies available to the Certificateholders for any failure on the
part of the Mortgage Loan Seller to deliver any of the above-described
documents with respect to any Mortgage Loan or for any defect in any such
document, and neither the Depositor nor any other person will be obligated to
repurchase the affected Mortgage Loan if the Mortgage Loan Seller defaults on
its obligation to do so. Notwithstanding the foregoing, if any of the
above-described documents is not delivered with respect to any Mortgage Loan
because such document has been submitted for recording, and neither such
document nor a copy thereof, in either case with evidence of recording thereon,
can be obtained because of delays on the part of the applicable recording
office, then the Mortgage Loan Seller will not be required to repurchase (or
cause the repurchase of) the related affected Mortgage Loan on the basis of
such missing document so long as the Mortgage Loan Seller continues in good
faith to attempt to obtain such document or such copy.
The Pooling Agreement requires that, unless recorded in the name of MERS,
the assignments in favor of the Trustee with respect to each Mortgage Loan
described in clauses (4), (5) and (7) of the first paragraph under this heading
be submitted for recording in the real property records or filing with the
Secretary of State, as applicable, of the appropriate jurisdictions within a
specified number of days following the delivery at the expense of the Mortgage
Loan Seller. See "The Pooling and Servicing Agreements--Assignment of Mortgage
Loans; Repurchases" in the accompanying prospectus.
REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
Mortgage Loans. The Depositor will acquire the Mortgage Loans from the
Mortgage Loan Seller pursuant to a mortgage loan purchase and sale agreement
(the "Mortgage Loan Purchase and Sale Agreement") to be dated as of the
Delivery Date. Pursuant to the Mortgage Loan Purchase and Sale Agreement, Bank
of America will represent and warrant solely with respect to the Mortgage Loans
in each case as of the Delivery Date or as of such earlier date specifically
provided in the related representation or warranty (subject to certain
exceptions specified in the Mortgage Loan Purchase and Sale Agreement) among
other things, substantially as follows:
S-125
(1) the information set forth in the schedule of Mortgage Loans (the
"Mortgage Loan Schedule") attached to the Pooling Agreement (which will
contain a limited portion of the information set forth in Annex A) with
respect to the Mortgage Loans is true, complete and correct in all material
respects as of the Delivery Date;
(2) each Mortgage related to and delivered in connection with each
Mortgage Loan constitutes a valid and subject to (3) below enforceable
first lien on the related Mortgaged Property subject only to (a) the lien
of current real estate taxes, water charges, sewer rents and assessments
not yet due and payable, (b) covenants, conditions and restrictions, rights
of way, easements and other matters that are of public record and/or are
referred to in the related lender's title insurance policy (or, if not yet
issued, referred to in a pro forma title policy or a "marked-up"
commitment), none of which materially interferes with the security intended
to be provided by such Mortgage, the current principal use of the related
Mortgaged Property or the current ability of the related Mortgaged Property
to generate income sufficient to service such Mortgage Loan, (c) exceptions
and exclusions specifically referred to in such lender's title insurance
policy (or, if not yet issued, referred to in a pro forma title policy or
"marked-up" commitment), none of which materially interferes with the
security intended to be provided by such Mortgage, the current principal
use of the related Mortgaged Property or the current ability of the related
Mortgaged Property to generate income sufficient to service such Mortgage
Loan, (d) the rights of tenants (as tenants only) under leases (including
subleases) at the Mortgaged Property to remain following a foreclosure or
similar proceeding (provided that such tenants are performing under such
leases) and (e) if such Mortgage Loan constitutes a Cross-Collateralized
Mortgage Loan, the lien of the Mortgage for another Mortgage Loan contained
in the same cross-collateralized group (the foregoing items (a) through (e)
being herein referred to as the "Permitted Encumbrances");
(3) the Mortgage(s) and Mortgage Note for each Mortgage Loan and all
other documents executed by or on behalf of the related borrower with
respect to each Mortgage Loan are the legal, valid and binding obligations
of the related borrower (subject to any non-recourse provisions contained
in any of the foregoing agreements and any applicable state anti-deficiency
legislation), enforceable in accordance with their respective terms, except
with respect to provisions relating to default interest, late fees,
additional interest, yield maintenance charges or prepayment premiums and
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally
and by general principles of equity regardless of whether such enforcement
is considered in a proceeding in equity or at law;
(4) no Mortgage Loan was as of the Delivery Date, or during the
twelve-month period prior thereto (or since the date of origination if such
Mortgage Loan has been originated within the past 12 months), 30 days or
more past due in respect of any Monthly Payment, without giving effect to
any applicable grace period;
(5) there is no right of offset, abatement, diminution, or rescission or
valid defense or counterclaim with respect to any of the related Mortgage
Note, Mortgage(s) or other agreements executed in connection therewith,
except in each case, with respect to the enforceability of any provisions
requiring the payment of default interest, late fees, additional interest,
yield maintenance charges or prepayment premiums and, as of the Delivery
Date, to the Seller's actual knowledge no such rights have been asserted;
(6) other than payments due but not yet 30 days or more past due, there
exists no material default, breach, violation or event of acceleration
existing under any Mortgage Note or Mortgage;
(7) in the case of each Mortgage Loan, the related Mortgaged Property
(a) as of the date of origination of such Mortgage Loan, was not the
subject of any proceeding pending, and subsequent to such date, the
Mortgage Loan Seller has no actual knowledge of any proceeding pending for
the condemnation of all or any material portion of such Mortgaged Property,
and (b) to the Mortgage Loan Seller's knowledge, is free and clear of any
damage caused by fire or
S-126
other casualty which would materially and adversely affect its value as
security for such Mortgage Loan (except in any such case where an escrow of
funds or insurance coverage exists that is reasonably estimated to be
sufficient to effect the necessary repairs and maintenance);
(8) at origination, each Mortgage Loan complied with or was exempt from,
all applicable usury laws;
(9) in connection with or subsequent to the origination of the related
Mortgage Loan, one or more environmental site assessments, an update of a
previously conducted assessment or a transaction screen has been performed
with respect to each Mortgaged Property and the Mortgage Loan Seller has no
actual knowledge of any material and adverse environmental condition or
circumstance affecting such Mortgaged Property that was not disclosed in an
Environmental Report or borrower questionnaire;
(10) each Mortgaged Property securing a Mortgage Loan is covered by a
title insurance policy (or, if not yet issued a pro forma title policy or a
"marked-up" commitment) in the original principal amount of such Mortgage
Loan after all advances of principal, insuring that the related Mortgage is
a valid first priority lien on such Mortgaged Property subject only to the
exceptions stated therein;
(11) the proceeds of each Mortgage Loan have been fully disbursed
(except in those cases where the full amount of the Mortgage Loan has been
disbursed but a portion thereof is being held in escrow or reserve accounts
pending the satisfaction of certain conditions relating to leasing, repairs
or other matters with respect to the related Mortgaged Property), and there
is no obligation for future advances with respect thereto;
(12) the terms of the Mortgage have not been impaired, waived, altered,
satisfied, canceled, subordinated, rescinded or modified in any manner
which would materially interfere with the benefits of the security intended
to be provided by such Mortgage, except as specifically set forth in a
written instrument in the related Mortgage File;
(13) all taxes and governmental assessments or charges or water or sewer
bills that prior to the Cut-off Date became due and owing in respect of
each related Mortgaged Property have been paid, or if in dispute, an escrow
of funds in an amount sufficient to cover such payments has been
established;
(14) the related borrower's interest in each Mortgaged Property securing
a Mortgage Loan includes of a fee simple and/or leasehold estate or
interest in real property and the improvements thereon;
(15) no Mortgage Loan contains any equity participation by the
mortgagee, is convertible by its terms into an equity ownership interest in
the related Mortgaged Property or the related borrower, provides for any
contingent or additional interest in the form of participation in the cash
flow of the related Mortgaged Property or provides for the negative
amortization of interest; except for the ARD Loan to the extent described
under "--Certain Terms and Conditions of the Mortgage
Loans--Hyperamortization"; and
(16) the appraisal obtained in connection with the origination of each
Mortgage Loan, based upon the representation of the appraiser in a
supplemental letter or in the related appraisal, satisfies the appraisal
guidelines set forth in Title XI of the Financial Institutions Reform
Recovery and Enforcement Act of 1989 (as amended).
In the Mortgage Loan Purchase and Sale Agreement, the Mortgage Loan Seller
will make certain representations concerning the priority and certain terms of
ground leases securing those Mortgage Loans transferred by it. The Mortgage
Loan Seller will represent and warrant as of the Delivery Date, that,
immediately prior to the transfer of the Mortgage Loans, the Mortgage Loan
Seller had good and marketable title to, and was the sole owner of, each
Mortgage Loan and had full right and authority to sell, assign and transfer
such Mortgage Loan.
If the Mortgage Loan Seller discovers or is notified of a breach of any of
the foregoing representations and warranties with respect to any Mortgage Loan
and that breach materially and
S-127
adversely affects the interests of the Certificateholders, or any of them, with
respect to the affected loan, including, but not limited to, a material and
adverse effect on any of the distributions payable with respect to any of the
Certificates or on the value of those Certificates or the Mortgage Loan, then
the Mortgage Loan Seller will be obligated, within a period of 90 days
following its discovery or receipt of notice of such defect or breach to cure
such breach in all material respects, repurchase such Mortgage Loan at the
applicable Purchase Price or substitute a Qualified Substitute Mortgage Loan
and pay any Substitution Shortfall Amount as described in this prospectus
supplement. However, if such breach is capable of being cured (but not within
the 90 day period) and the Mortgage Loan Seller, has commenced and is
diligently proceeding with cure of such breach within 90 day period, the
Mortgage Loan Seller shall have up to an additional 90 days to complete such
cure or, failing such cure, to repurchase the related Mortgage Loan or
substitute a Qualified Substitute Mortgage Loan and pay any Substitution
Shortfall Amount as described in this prospectus supplement (such possible
additional cure period shall not apply on the event of a defect that causes the
Mortgage Loan not to constitute a "qualified mortgage" within the meaning of
Section 860G(a)(3) of the Code or not to meet certain Code-specified criteria
with respect to customary prepayment penalties or permissible defeasance). With
respect to any Cross- Collateralized Mortgage Loan or Mortgage Loan secured by
multiple properties, the provisions regarding repurchase, and substitution set
forth above for document defects as described under "Assignment of the Mortgage
Loans--Repurchase and Substitutions" shall also be permitted.
The foregoing cure, substitution or repurchase obligations described in
the immediately preceding paragraph will constitute the sole remedy available
to the Certificateholders for any breach of any of the foregoing
representations and warranties, and neither the Depositor nor any other person
will be obligated to repurchase any affected Mortgage Loan in connection with a
breach of such representations and warranties if the Mortgage Loan Seller
defaults on its obligation to do so. The Mortgage Loan Seller will be the sole
Warranting Party (as defined in the accompanying prospectus) in respect of the
Mortgage Loans. See "The Pooling and Servicing Agreements--Representations and
Warranties; Repurchases" in the accompanying prospectus. In addition, each of
the foregoing representations and warranties by the Mortgage Loan Seller is
made as of the Delivery Date or such earlier date specifically provided in the
related representation and warranty, and the Mortgage Loan Seller will not be
obligated to cure or repurchase any Mortgage Loan or substitute a Qualified
Substitute Mortgage Loan and pay any Substitution Shortfall Amount as described
in this prospectus supplement due to any breach arising from events subsequent
to the date as of which such representation or warranty was made.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this prospectus supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as constituted on the
Cut-off Date, as adjusted for the scheduled principal payments due on the
Mortgage Loans on or before the Cut-off Date. Prior to the issuance of the
Offered Certificates, a Mortgage Loan may be removed from the Mortgage Pool if
the Depositor deems such removal necessary or appropriate or if it is prepaid.
The Depositor believes that the information set forth herein is representative
of the characteristics of the Mortgage Pool as constituted as of the Cut-off
Date, although the range of Mortgage Rates and maturities, as well as the other
characteristics of the Mortgage Loans described herein, may vary.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Delivery Date
and will be filed, together with the Pooling Agreement, with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from the Mortgage
Pool as set forth in the proceeding paragraph, such removal will be noted in
the Form 8-K.
S-128
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, will each be required to service and administer the respective
Mortgage Loans (including the CC Subordinate Components, the SS Subordinate
Components and the UH Subordinate Components) for which it is responsible on
behalf of the Trust, in the best interests and for the benefit of the
Certificateholders (and, in the case of the CBA Whole Loan, the CBA B
Noteholder, and in the case of the 17 State Street Whole Loan, the 17 State
Street B Noteholder), in accordance with any and all applicable laws, the terms
of the Pooling Agreement, and the respective Mortgage Loans (and, in the case
of the CBA Whole Loan and the CBA B Note, the CBA Intercreditor Agreement, and
in the case of the 17 State Street Whole Loan and the 17 State Street Note B,
the 17 State Street Intercreditor Agreement) and, to the extent consistent with
the foregoing, the following standard (the "Servicing Standard"): (a) with the
same care, skill, prudence and diligence as is normal and usual in its general
mortgage servicing and REO property management activities on behalf of third
parties or on behalf of itself, whichever is higher, with respect to mortgage
loans and REO properties that are comparable to those for which it is
responsible hereunder; (b) with a view to the timely collection of all
scheduled payments of principal and interest under the Mortgage Loans, the full
collection of all Prepayment Premiums that may become payable under the
Mortgage Loans and, in the case of the Special Servicer, if a Mortgage Loan
comes into and continues in default and if, in the reasonable judgment of the
Special Servicer, no satisfactory arrangements can be made for the collection
of the delinquent payments (including payments of Prepayment Premiums), the
maximization of the recovery on such Mortgage Loan to the Certificateholders
(and, in the case of the CBA Whole Loan, the CBA B Noteholder, and in the case
of the 17 State Street Whole Loan, the 17 State Street B Noteholder), as a
collective whole, on a net present value basis; and (c) without regard to: (i)
any known relationship that the Master Servicer (or any affiliate thereof) or
the Special Servicer (or any affiliate thereof), as the case may be, may have
with the related mortgagor or with any other party to the Pooling Agreement;
(ii) the ownership of any Certificate (or any security backed by the CBA B Note
or the 17 State Street Note B) by the Master Servicer (or any affiliate
thereof) or the Special Servicer (or any affiliate thereof), as the case may
be; (iii) the obligation of the Master Servicer to make Advances, (iv) the
obligation of the Special Servicer to direct the Master Servicer to make
Servicing Advances; (v) the right of the Master Servicer (or any affiliate
thereof) or the Special Servicer (or any affiliate thereof), as the case may
be, to receive reimbursement of costs, or the sufficiency of any compensation
payable to it, hereunder or with respect to any particular transaction; (vi)
any ownership, servicing and/or management by the Master Servicer (or any
affiliate thereof) or the Special Servicer (or any affiliate thereof), as the
case may be, of any other mortgage loans or real property and (vii) any
obligation of the Master Servicer or Special Servicer, or any affiliate
thereof, to repurchase or substitute for a Mortgage Loan as a Mortgage Loan
Seller.
In general, the Master Servicer will be responsible for the servicing and
administration of all the Mortgage Loans, the 17 State Street Whole Loan and
the CBA Whole Loan as to which no Servicing Transfer Event (as defined herein)
has occurred and all Corrected Mortgage Loans (as defined herein), and the
Special Servicer will be obligated to service and administer each Mortgage
Loan, the 17 State Street Whole Loan and the CBA Whole Loan (other than a
Corrected Mortgage Loan) as to which a Servicing Transfer Event has occurred
(each, a "Specially Serviced Mortgage Loan") and each Mortgaged Property
acquired on behalf of the Certificateholders in respect of a Defaulted Mortgage
Loan through foreclosure, deed-in-lieu of foreclosure or otherwise (upon
acquisition, an "REO Property"). A "Servicing Transfer Event" with respect to
any Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole Loan
consists of any of the following events:
(a) the related mortgagor has failed to make when due any Monthly
Payment (including a Balloon Payment) or any other payment required under
the related loan documents, which failure continues, or the Master
Servicer determines, in its reasonable judgment, will continue, unremedied
(i) except in the case of a delinquent Balloon Payment, for 60 days beyond
the date on which the subject payment was due, and (ii) solely in the case
of a delinquent Balloon
S-129
Payment if (x) the Borrower is actively seeking a refinancing commitment,
(y) the Borrower continues to make its payments and (z) the Directing
Certificateholder consents, then for 60 days beyond the related maturity
date or, if the related Mortgagor has delivered to the Master Servicer, on
or before the 60th day after related maturity date, a refinancing
commitment reasonably acceptable to the Master Servicer, for such longer
period, not to exceed 120 days beyond the related maturity date, during
which the refinancing would occur; or
(b) the Master Servicer (or the Special Servicer with the consent of the
Directing Certificateholder) has determined, in its reasonable judgment,
that a default in the making of a Monthly Payment (including a Balloon
Payment) or any other material payment required under the related loan
documents is likely to occur within 30 days and either (i) the related
mortgagor has requested a material modification of the payment terms of
the loan or (ii) such default is likely to remain unremedied for at least
the period contemplated by clause (a) of this definition; or
(c) the Master Servicer (or the Special Servicer with the consent of the
Directing Certificateholder) has determined, in its reasonable judgment,
that a default, other than as described in clause (a) or (b) of this
definition, has occurred that may materially impair the value of the
related Mortgaged Property as security for the loan, which default has
continued unremedied for the applicable cure period under the terms of the
loan (or, if no cure period is specified, for 60 days); or
(d) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary action against the
related mortgagor under any present or future federal or state bankruptcy,
insolvency or similar law or the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceeding, or for the winding-up or
liquidation of its affairs, shall have been entered against the related
mortgagor and such decree or order shall have remained in force
undismissed, undischarged or unstayed; or
(e) the related mortgagor shall have consented to the appointment of a
conservator, receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceeding of or
relating to such mortgagor or of or relating to all or substantially all
of its property; or
(f) the related mortgagor shall have admitted in writing its inability
to pay its debts generally as they become due, filed a petition to take
advantage of any applicable insolvency or reorganization statute, made an
assignment for the benefit of its creditors, or voluntarily suspended
payment of its obligations; or
(g) the Master Servicer shall have received notice of the commencement
of foreclosure or similar proceedings with respect to the related Mortgaged
Property.
A Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole Loan will
cease to be a Specially Serviced Mortgage Loan (and will become a "Corrected
Mortgage Loan" as to which the Master Servicer will re-assume servicing
responsibilities) at such time as such of the following as are applicable occur
with respect to the circumstances identified above that caused the loan to be
characterized as a Specially Serviced Mortgage Loan (and provided that no other
Servicing Transfer Event then exists):
(w) in the case of the circumstances described in clause (a) above, if
and when the related mortgagor has made three consecutive full and timely
Monthly Payments under the terms of such loan (as such terms may be
changed or modified in connection with a bankruptcy or similar proceeding
involving the related mortgagor or by reason of a modification, waiver or
amendment granted or agreed to by the Master Servicer or the Special
Servicer pursuant to the Pooling Agreement);
(x) in the case of the circumstances described in clauses (b), (d), (e)
and (f) above, if and when such circumstances cease to exist in the
reasonable judgment of the Special Servicer;
S-130
(y) in the case of the circumstances described in clause (c) above, if
and when such default is cured in the reasonable judgment of the Special
Servicer; and
(z) in the case of the circumstances described in clause (g) above, if
and when such proceedings are terminated.
The Master Servicer shall continue to collect information and prepare all
reports to the Trustee required under the Pooling Agreement with respect to any
Specially Serviced Mortgage Loans and REO Properties, and further to render
incidental services with respect to any Specially Serviced Mortgage Loans and
REO Properties as are specifically provided for in the Pooling Agreement. The
Master Servicer and the Special Servicer shall not have any responsibility for
the performance by each other of their respective duties under the Pooling
Agreement.
Notwithstanding the foregoing, the commencement of a Servicing Transfer
Event for the 17 State Street Whole Loan will be delayed if (i) at the time of
the occurrence of an event described in clause (a)(i) or (c) of the definition
of Servicing Transfer Event (unless an event described in clause (a)(ii), (e)
or (g) of the second preceding paragraph is also occurring), the holder of the
17 State Street Note B is curing such event as required by the Pooling
Agreement and the 17 State Street Intercreditor Agreement; or (ii) the
occurrence of an event described in clause (b) of the definition of the
Servicing Transfer Event (unless an event described in clause (a)(i) or (c) of
the definition of Servicing Transfer Event has occurred that has not been or is
not being cured by the related borrower or unless an event described in clause
(a)(ii), (e) or (g) of the second preceding paragraph is also occurring) (each
a "17 State Street Special Servicing Delay"), within the time frame specified
in the Pooling Agreement, the holder of the 17 State Street Note B has
deposited with the Master Servicer an amount equal to the monthly debt service
payment for the 17 State Street Whole Loan due on the first due date following
such deposit, which deposit will be irrevocable at any time on or prior to such
first due date. Such deposit will be applied by the Master Servicer to debt
service in the event that the related borrower fails to make the monthly debt
service payment on such due date; however, (A) if the related borrower makes
the monthly debt service payment on the first due date but the event described
in clause (b) above is continuing, such deposit will either be retained by the
Master Servicer or upon request, will be returned to the holder of the 17 State
Street Note B (in which event there will no longer exist a 17 State Street
Special Servicing Delay) and (B) if the related borrower makes the monthly debt
service payment on the first due date and the event described in clause (b)
above is not continuing, such deposit will be returned to the holder of the 17
State Street Note B. The right of the holder of the 17 State Street Note B to
effect a 17 State Street Cure Event (as defined below) or cause a 17 State
Street Special Servicing Delay is subject to the limitation that there be no
more than an aggregate of six 17 State Street Cure Events or 17 State Street
Special Servicing Delays, in any combination, with respect to the 17 State
Street Whole Loan in any twelve calendar month period (provided that no single
17 State Street Cure Event or 17 State Street Special Servicing Delay may occur
consecutively for a total of more than three consecutive months). In addition,
so long as the 17 State Street B Noteholder is exercising its right to cure a
monetary event of default under the 17 State Street Whole Loan pursuant to the
17 State Street Intercreditor Agreement, neither the Master Servicer nor the
Special Servicer may treat such event of default as such for purposes of
accelerating the 17 State Street Whole Loan or commencing foreclosure
proceedings. A "17 State Street Cure Event" means the exercise of the rights
given to the 17 State Street B Noteholder pursuant to the 17 State Street
Intercreditor Agreement to cure a monetary event of default within five
business days following the first notice of such event of default or a material
non-monetary event of default under the 17 State Street Whole Loan that is
capable of being cured within thirty days.
The Special Servicer will prepare a report (an "Asset Status Report") for
each Mortgage Loan which becomes a Specially Serviced Mortgage Loan not later
than 45 days after the servicing of such Mortgage Loan is transferred to the
Special Servicer. Each Asset Status Report will be delivered to the Directing
Certificateholder (as defined below), the Master Servicer, the Trustee and the
Rating Agencies. If the CC Component Mortgage Loan becomes a Specially Serviced
Mortgage Loan, the Special Servicer will deliver an Asset Status Report to the
CC Controlling Holder (as defined below). If the SS Component Mortgage Loan
becomes a Specially Serviced Mortgage Loan, the Special
S-131
Servicer will deliver an Asset Status Report to the SS Controlling Holder (as
defined below). If the UH Component Mortgage Loan becomes a Specially Serviced
Mortgage Loan, the Special Servicer will deliver an Asset Status Report to the
UH Controlling Holder (as defined below). The Directing Certificateholder, the
CC Controlling Holder, the SS Controlling Holder or the UH Controlling Holder,
as applicable, may object in writing via facsimile or e-mail to any applicable
Asset Status Report within 10 business days of receipt; provided, however, the
Special Servicer (i) will, following the occurrence of an extraordinary event
with respect to the related Mortgaged Property, take any action set forth in
such Asset Status Report before the expiration of a 10 business day period if
it has reasonably determined that failure to take such action would materially
and adversely affect the interests of the Certificateholders and it has made a
reasonable effort to contact the Directing Certificateholder, the CC
Controlling Holder, the SS Controlling Holder or the UH Controlling Holder, as
applicable, and (ii) in any case, will determine whether such disapproval is
not in the best interests of all the Certificateholders as a collective whole,
the CC Controlling Holder, the SS Controlling Holder or the UH Controlling
Holder, as applicable. In connection with making such affirmative
determination, the Special Servicer may request (but is not required to
request) a vote by all Certificateholders, but shall in any event take the
recommended action after making such affirmative determination. If the
Directing Certificateholder, the CC Controlling Holder, the SS Controlling
Holder or the UH Controlling Holder, as applicable, does not disapprove an
applicable Asset Status Report within 10 business days, the Special Servicer
shall implement the recommended action as outlined in such Asset Status Report.
However, the Special Servicer may not take any action that is contrary to
applicable law or the terms of the applicable loan documents. If the Directing
Certificateholder, the CC Controlling Holder, the SS Controlling Holder or the
UH Controlling Holder, as applicable, disapproves such Asset Status Report and
the Special Servicer has not made the affirmative determination described
above, the Special Servicer will revise such Asset Status Report as soon as
practicable thereafter, but in no event later than 30 days after such
disapproval. The Special Servicer will revise such Asset Status Report until
the Directing Certificateholder, the CC Controlling Holder, the SS Controlling
Holder or the UH Controlling Holder, as applicable, fails to disapprove such
revised Asset Status Report as described above or until the earliest to occur
of (i) the Special Servicer, in accordance with the Servicing Standard, makes a
determination that such objection is not in the best interests of the
Certificateholders and, if the 17 State Street Whole Loan is involved, the 17
State Street B Noteholder, and, if the CBA Whole Loan is involved, the CBA B
Noteholder, as a collective whole, (ii) following the occurrence of an
extraordinary event with respect to the related Mortgaged Property, the failure
to take any action set forth in such Asset Status Report before the expiration
of a 10 business day period would materially and adversely affect the interests
of the Certificateholders and, if the 17 State Street Whole Loan is involved,
the 17 State Street B Noteholder, and, if the CBA Whole Loan is involved, the
CBA B Noteholder, as a collective whole, and it has made a reasonable effort to
contact the Directing Certificateholder, the CC Controlling Holder, the SS
Controlling Holder or the UH Controlling Holder, as applicable, and (iii) the
passage of 90 days from the date of preparation of the initial version of the
Asset Status Report. Following the earliest of such events, the Special
Servicer will implement the recommended action as outlined in the most recent
version of such Asset Status Report. In addition as more fully set forth in the
Pooling Agreement, any action which is required to be taken (or not to be
taken) by the Special Servicer in connection with an Asset Status Report (or
otherwise) will be in each and every case in accordance with the Servicing
Standard and applicable law, and the Special Servicer will be required to
disregard the direction, or any failure to approve or consent, of any party
that would cause the Special Servicer to violate the Servicing Standard or
applicable law.
The "Directing Certificateholder" is the Controlling Class
Certificateholder selected by the majority Certificateholder of the Controlling
Class, as certified by the Trustee from time to time; provided, however, that
(i) absent such selection, or (ii) until a Directing Certificateholder is so
selected, or (iii) upon receipt of a notice from a majority of the Controlling
Class, by Certificate Balance, that a Directing Certificateholder is no longer
designated, the Controlling Class Certificateholder that owns the largest
aggregate Certificate Balance of the Controlling Class will be the Directing
Certificateholder.
S-132
A "Controlling Class Certificateholder" is each Holder (or Certificate
Owner, if applicable) of a Certificate of the Controlling Class as certified to
the Trustee from time to time by such Holder (or Certificate Owner).
The "Controlling Class" will be, as of any date of determination, the
outstanding Class of Sequential Pay Certificates with the lowest payment
priority (the Class A Certificates being treated as a single class for this
purpose) that has a then outstanding Certificate Balance at least equal to 25%
of its initial Certificate Balance (or, if no Class of Sequential Pay
Certificates has a Certificate Balance at least equal to 25% of its initial
Certificate Balance, then the Controlling Class shall be the outstanding Class
of Sequential Pay Certificates with the then largest outstanding Class
principal balance). The Controlling Class as of the Delivery Date will be the
Class P Certificates.
The "CC Controlling Class" will be, as of any date of determination, the
outstanding Class of Class CC Certificates with the lowest payment priority
that has a then outstanding Certificate Balance at least equal to 25% of its
initial Certificate Balance (or, if no Class of Class CC Certificates has a
Certificate Balance at least equal to 25% of its initial Certificate Balance,
then the CC Controlling Class will be the outstanding Class of Class CC
Certificates with the then largest outstanding Class principal balance). The CC
Controlling Class as of the Delivery Date will be the Class CC-F Certificates.
The "CC Controlling Holder" will be (a) prior to the occurrence of an CC
Control Appraisal Period, holders of a majority percentage interest in the CC
Controlling Class, and (b) during the occurrence and the continuation of an CC
Control Appraisal Period, the Directing Certificateholder.
A "CC Control Appraisal Period" will exist if the outstanding aggregate
principal balance of all of the CC Subordinate Components of the CC Component
Mortgage Loan (net of any Appraisal Reduction Amounts, principal payments,
realized losses and unreimbursed additional trust fund expenses) is less than
25% of its original principal balance.
The "SS Controlling Class" will be, as of any date of determination, the
outstanding Class of Class SS Certificates with the lowest payment priority
that has a then outstanding Certificate Balance at least equal to 25% of its
initial Certificate Balance (or, if no Class of Class SS Certificates has a
Certificate Balance at least equal to 25% of its initial Certificate Balance,
then the SS Controlling Class will be the outstanding Class of Class SS
Certificates with the then largest outstanding Class principal balance). The SS
Controlling Class as of the Delivery Date will be the Class SS-D Certificates.
The "SS Controlling Holder" will be (a) prior to the occurrence of a 17
State Street Control Appraisal Period, the holder of the 17 State Street Note
B, (b) during the occurrence and the continuation of a 17 State Street Control
Appraisal Period but prior to the occurrence of an SS Control Appraisal Period,
holders of a majority percentage interest in the SS Controlling Class, and (c)
during the occurrence and the continuation of both a 17 State Street Control
Appraisal Period and an SS Control Appraisal Period, the Directing
Certificateholder.
A "17 State Street Control Appraisal Period" will exist if the initial
principal balance of the 17 State Street Note B, minus the sum of (1) any
payments of principal (whether as principal prepayments or otherwise) allocated
to, and received on, the 17 State Street Note B, (2) any Appraisal Reduction
Amounts for the Mortgage Loan and (3) any Realized Losses and unreimbursed
Additional Trust Fund Expenses on the 17 State Street Whole Loan, is less than
or equal to 25% of the amount equal to (x) the then outstanding 17 State Street
Note B Principal Balance minus (y) any payments of principal (whether as
principal payments or otherwise) allocated to and received on the 17 State
Street Note B.
An "SS Control Appraisal Period" will exist if the outstanding aggregate
principal balance of all of the SS Subordinate Components of the SS Component
Mortgage Loan (net of any Appraisal Reduction Amounts, principal payments,
realized losses and unreimbursed additional trust fund expenses) is less than
25% of its original principal balance.
The "UH Controlling Class" will be, as of any date of determination, the
outstanding Class of Class UH Certificates with the lowest payment priority
that has a then outstanding Certificate
S-133
Balance at least equal to 25% of its initial Certificate Balance (or, if no
Class of Class UH Certificates has a Certificate Balance at least equal to 25%
of its initial Certificate Balance, then the UH Controlling Class will be the
outstanding Class of Class UH Certificates with the then largest outstanding
Class principal balance). The UH Controlling Class as of the Delivery Date will
be the Class UH-J Certificates.
The "UH Controlling Holder" will be (a) prior to the occurrence of an UH
Control Appraisal Period, holders of a majority percentage interest in the UH
Controlling Class, and (b) during the occurrence and the continuation of an UH
Control Appraisal Period, the Directing Certificateholder.
A "UH Control Appraisal Period" will exist if the outstanding aggregate
principal balance of all of the UH Subordinate Components of the UH Component
Mortgage Loan (net of any Appraisal Reduction Amounts, principal payments,
realized losses and unreimbursed additional trust fund expenses) is less than
25% of its original principal balance.
Pursuant to the Pooling Agreement, each holder of a majority percentage
interest in each of the CC Controlling Class (the "CC Controlling Class
Holder"), the SS Controlling Class (the "SS Controlling Class Holder") and the
UH Controlling Class (the "UH Controlling Class Holder" and, together with the
CC Controlling Class Holder and the SS Controlling Class Holder, the "Loan
Specific Controlling Class Holders"), will be permitted to appoint an operating
advisor ("Operating Advisor"), which may be the related Controlling Holder or
any holder of the controlling interest in the Controlling Class, any
Certificateholder, or an unrelated third party for such Mortgage Loan, with
respect to any action which is to be taken with respect to the CC Component
Mortgage Loan, the SS Component Mortgage Loan and the UH Component Mortgage
Loan, as applicable, and requires the related Loan Specific Controlling Class
Holder's consent in its capacity as the Controlling Holder. The related
Operating Advisor will be permitted to exercise all of the rights of the
related Loan Specific Controlling Class Holder subject to any limitations set
forth in the Pooling Agreement. Any reference in this prospectus supplement to
any action to be taken by each Loan Specific Controlling Class Holder in its
capacity as a Controlling Holder will mean such Controlling Holder acting
through its related Operating Advisor if one has so been appointed. The term
"Controlling Holder" refers to the CC Controlling Class Holder, the SS
Controlling Class Holder or the UH Controlling Class Holder, as applicable.
Subject to the limitations below, the Directing Certificateholder and,
with respect to (a) the CC Component Mortgage Loan (so long as CC Control
Appraisal Period does not exist), the CC Controlling Holder, (b) the SS
Component Mortgage Loan (so long as SS Control Appraisal Period does not
exist), the SS Controlling Holder, and (c) the UH Component Mortgage Loan (so
long as UH Control Appraisal Period does not exist), the UH Controlling Holder,
is entitled to advise the Special Servicer and Master Servicer with respect to
the following actions (the "Special Actions"). Neither the Special Servicer nor
the Master Servicer, as applicable, will be permitted to take any of the
following actions without complying with the Approval Provisions (as defined
below) (provided that if such response has not been received within such time
period by the Special Servicer or the Master Servicer, as applicable, then the
required party's approval will be deemed to have been given):
(i) any proposed or actual foreclosure upon or comparable conversion
(which may include acquisitions of an REO Property) of the ownership of
properties securing such of the Specially Serviced Mortgage Loans as come
into and continue in default;
(ii) any modification or waiver of a term of a mortgage loan;
(iii) any proposed or actual sale of a defaulted Mortgage Loan or REO
Property (other than in connection with the termination of the Trust Fund
as described under "Description of the Certificates--Termination;
Retirement of Certificates" or pursuant to a Purchase Option as described
below under "--Defaulted Mortgage Loans; Purchase Option" in this
prospectus supplement);
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous materials
located at an REO Property;
(v) any acceptance of substitute or additional collateral for a
mortgage loan unless the lender is required to accept such collateral by
the underlying loan documents;
S-134
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause
(subject to certain exceptions set forth in the Pooling Agreement);
(vii) any acceptance or approval of acceptance or consent to
acceptance of an assumption agreement releasing a borrower from liability
under a mortgage loan (subject to certain exceptions set forth in the
Pooling Agreement);
(viii) any acceptance of any discounted payoffs;
(ix) any release of earnout reserve funds;
(x) the release of any letters of credit that the lender is not
required to accept based on the satisfaction of specific requirements set
forth in the related underlying Mortgage Loan documentation;
(xi) any approval of a material lease (in excess of 20% of leasable
space); and
(xii) any change in property manager or franchise.
The "Approval Provisions" mean the approvals and consents necessary in
connection with a Special Action or the extension of the maturity date of a
mortgage loan as described below:
(i) with respect to any Non-Specially Serviced Mortgage Loan, the
Master Servicer will be required to obtain the approval or consent of the
Special Servicer in connection with a Special Action;
(ii) with respect to (A) any Non-Partitioned Mortgage Loan that is a
Non-Specially Serviced Mortgage Loan or Post CAP Loan that involves an
extension of the maturity date of such mortgage loan or (B) in connection
with a Special Action for any Non-Partitioned Mortgage Loan or any Post CAP
Loan, the Master Servicer will be required to obtain the approval and
consent of the Special Servicer and the Special Servicer will be required
to obtain the approval and consent of the Directing Certificateholder;
(iii) with respect to any Non-Partitioned Mortgage Loan or Post CAP
Loan that is a Specially Serviced Mortgage Loan, the Special Servicer will
be required to seek the approval and consent of the Directing
Certificateholder in connection with a Special Action;
(iv) with respect to the CC Component Mortgage Loan during any time
period that a CC Control Appraisal Period does not exist, the Master
Servicer, if the CC Component Mortgage Loan is a then Non-Specially
Serviced Mortgage Loan, will be required to seek the approval and consent
of the Special Servicer, which consent will not be granted without the
Special Servicer first obtaining the consent of the CC Controlling Holder,
in connection with a Special Action;
(v) with respect to the SS Component Mortgage Loan during any time
period that a SS Control Appraisal Period does not exist, the Master
Servicer, if the SS Component Mortgage Loan is a then Non-Specially
Serviced Mortgage Loan, will be required to seek the approval and consent
of the Special Servicer, which consent will not be granted without the
Special Servicer first obtaining the consent of the SS Controlling Holder,
in connection with a Special Action;
(vi) with respect to the UH Component Mortgage Loan during any time
period that a UH Control Appraisal Period does not exist, the Master
Servicer, if the UH Component Mortgage Loan is a then Non-Specially
Serviced Mortgage Loan, will be required to seek the approval and consent
of the Special Servicer, which consent will not be granted without the
Special Servicer first obtaining the consent of the UH Controlling Holder,
in connection with a Special Action;
(vii) with respect to the CC Component Mortgage Loan during any time
period that an CC Control Appraisal Period does not exist, the Special
Servicer, if the CC Component Mortgage Loan is a then Specially Serviced
Mortgage Loan, will be required to seek the approval and consent of the CC
Controlling Holder in connection with a Special Action;
(viii) with respect to the SS Component Mortgage Loan during any time
period that an SS Control Appraisal Period does not exist, the Special
Servicer, if the SS Component Mortgage Loan
S-135
is a then Specially Serviced Mortgage Loan, will be required to seek the
approval and consent of the SS Controlling Holder in connection with a
Special Action; and
(ix) with respect to the UH Component Mortgage Loan during any time
period that an UH Control Appraisal Period does not exist, the Special
Servicer, if the UH Component Mortgage Loan is a then Specially Serviced
Mortgage Loan, will be required to seek the approval and consent of the UH
Controlling Holder in connection with a Special Action.
With respect to any extension or Special Action described in clause (ii)
above, the Special Servicer will respond to the Master Servicer of its decision
to grant or deny the Master Servicer's request for approval and consent within
ten business days of its receipt of such request and all information reasonably
requested by the Special Servicer as such time frame may be extended if the
Special Servicer is required to seek the consent of the Directing
Certificateholder, the CC Controlling Holder, the SS Controlling Holder and the
UH Controlling Holder, as described below or, if the consent of the Rating
Agencies may be required. If the Special Servicer so fails to respond to the
Master Servicer within the time period referenced in the preceding sentence,
such approval and consent will be deemed granted. In addition in connection
with clause (ii), the Directing Certificateholder will respond to the Special
Servicer of its decision to grant or deny the Special Servicer's request for
approval and consent within ten business days of its receipt of such request.
With respect to any Special Action described in clause (iii) above, the
Directing Certificateholder will respond to the Special Servicer within ten
business days of its receipt of such request and such request will be deemed
granted if the Directing Certificateholder does not respond in such time frame.
With respect to any Special Action described in clauses (iv) through (ix)
above, the Directing Certificateholder, the CC Controlling Holder, the SS
Controlling Holder and the UH Controlling Holder, as applicable, will respond
to the Master Servicer or the Special Servicer, as applicable, within ten
business days of its receipt of a request for its approval and consent, and
such request will be deemed granted if the required party does not respond in
such time frame.
The Directing Certificateholder, the CC Controlling Holder, the SS
Controlling Holder, the UH Controlling Holder, and the CBA B Noteholder, as
applicable, may direct the Special Servicer to take, or to refrain from taking,
certain actions as the Directing Certificateholder, the CC Controlling Holder,
the SS Controlling Holder, the UH Controlling Holder, or the CBA B Noteholder,
as applicable, may deem advisable or as to which provision is otherwise made in
the Pooling Agreement; provided that no such direction and no objection
contemplated above or in this paragraph may require or cause the Special
Servicer or the Master Servicer, as applicable, to violate any REMIC
provisions, any provision of the Pooling Agreement or applicable law, including
the Special Servicer's or the Master Servicer's, as applicable, obligation to
act in accordance with the Servicing Standard or expose the Master Servicer,
the Special Servicer, the Trust Fund or the Trustee to liability, or materially
expand the scope of the Special Servicer's responsibilities under the Pooling
Agreement or cause the Special Servicer to act or fail to act in a manner
which, in the reasonable judgment of the Special Servicer, is not in the best
interests of the Certificateholders in which event the Special Servicer or the
Master Servicer, as applicable, shall disregard any such direction or
objection.
None of the Directing Certificateholder, the CC Controlling Holder, the SS
Controlling Holder or the UH Controlling Holder will have any liability
whatsoever to the trust fund or any Certificateholders other than the
Controlling Class Certificateholders and shall have no liability to any
Controlling Class Certificateholder for any action taken, or for refraining
from the taking of any action, pursuant to the Pooling Agreement, or for errors
in judgment; provided, however, that with respect to Controlling Class
Certificateholders, none of the Directing Certificateholder, the CC Controlling
Holder, the SS Controlling Holder or the UH Controlling Holder will be
protected against any liability to the Controlling Class Certificateholders
which would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations or duties. Each Certificateholder acknowledges and agrees, by its
acceptance of its Certificates, (i) that the Directing Certificateholder, the
CC Controlling Holder, the SS Controlling Holder or the UH Controlling Holder
may have special relationships and interests that conflict with those of
holders of one or more classes of Certificates, (ii) that the Directing
Certificateholder, the CC Controlling Holder, the SS Controlling Holder or the
UH Controlling Holder may act solely in the interests of the holders of the
Controlling Class, the CC Controlling Class, the SS Controlling Class or the UH
Controlling Class, as applicable, (iii)
S-136
that the Directing Certificateholder, the CC Controlling Holder, the SS
Controlling Holder or the UH Controlling Holder does not have any duties to the
holders of any class of Certificates other than the Controlling Class, the CC
Controlling Class, the SS Controlling Class or the UH Controlling Class, as
applicable, (iv) that the Directing Certificateholder, the CC Controlling
Holder, the SS Controlling Holder or the UH Controlling Holder may take actions
that favor the interests of the holders of the Controlling Class, the CC
Controlling Class, the SS Controlling Class or the UH Controlling Class, as
applicable, over the interests of the holders of one or more other classes of
Certificates, (v) that none of the Directing Certificateholder, the CC
Controlling Holder, the SS Controlling Holder or the UH Controlling Holder will
have any liability whatsoever by reason of its having acted solely in the
interests of the CC Controlling Class, the SS Controlling Class or the UH
Controlling Class, as applicable, and (vi) that no Certificateholder may take
any action whatsoever against the Directing Certificateholder, the CC
Controlling Holder, the SS Controlling Holder or the UH Controlling Holder or
any director, officer, employee, agent or principal of the Directing
Certificateholder, the CC Controlling Holder, the SS Controlling Holder or the
UH Controlling Holder for having so acted.
At any time that there is no Directing Certificateholder, CC Controlling
Holder, SS Controlling Holder, UH Controlling Holder, CBA B Noteholder, or
Operating Advisor for any of them, or that any such party has not been properly
identified to the Master Servicer and/or the Special Servicer, such servicer(s)
will not have any duty to provide any notice to or seek the consent or approval
of such party with respect to any matter.
The Master Servicer and Special Servicer will each be required to service
and administer any group of related Cross-Collateralized Mortgage Loans as a
single Mortgage Loan as and when it deems necessary and appropriate, consistent
with the Servicing Standard. If any Cross-Collateralized Mortgage Loan becomes
a Specially Serviced Mortgage Loan, then each other Mortgage Loan that is
cross-collateralized with it shall also become a Specially Serviced Mortgage
Loan. Similarly, no Cross-Collateralized Mortgage Loan shall subsequently
become a Corrected Mortgage Loan, unless and until all Servicing Transfer
Events in respect of each other Mortgage Loan with which it is
cross-collateralized, are remediated or otherwise addressed as contemplated
above.
Set forth below is a description of certain pertinent provisions of the
Pooling Agreement relating to the servicing of the Mortgage Loans. Reference is
also made to the accompanying prospectus, in particular to the section
captioned "The Pooling and Servicing Agreements," for additional important
information regarding the terms and conditions of the Pooling Agreement as such
terms and conditions relate to the rights and obligations of the Master
Servicer and the Special Servicer thereunder.
THE MASTER SERVICER
Bank of America, N.A. will be the Master Servicer. Bank of America, N.A.
will be the Master Servicer through its Capital Markets Servicing Group
("BOA-CMSG"), a division of Bank of America, N.A. BOA-CMSG's principal offices
are located at NC1-026-06-01, 900 West Trade Street, Suite 650, Charlotte,
North Carolina 28255. BOA-CMSG was formed in 1994 as a result of the Security
Pacific National Bank and Bank of America NT&SA merger, combining term loan
portfolios from bank units, affiliates and the CMBS portfolio from the Bank of
America NT&SA's trust group. As a result of the merger between Bank of America
NT&SA and NationsBank, N.A., BOA-CMSG was reorganized to perform warehouse and
primary servicing for Bank of America N.A.'s conduit platform. As of March 31,
2004, BOA-CMSG acted as a full, master or primary servicer on approximately
3,325 loans which total approximately $20,465 billion. Bank of America, N.A.
has been approved as a master servicer by S&P, Moody's and Fitch Ratings
("Fitch").
The information set forth herein concerning the Master Servicer has been
provided by the Master Servicer. Neither the Depositor nor any Underwriter or
other person other than the Master Servicer makes any representation or
warranty as to the accuracy or completeness of such information.
THE SPECIAL SERVICER
Midland Loan Services, Inc. ("Midland") will be the Special Servicer under
the Pooling and Servicing Agreement. Midland, a wholly owned subsidiary of PNC
Bank, National Association, was
S-137
incorporated under the laws of the State of Delaware in 1998. Its principle
servicing offices are located at 10851 Mastin Street Building 82, Suite 700,
Overland Park, Kansas 66210. As of May 31, 2004, Midland was servicing
approximately 13,897 commercial and multifamily loans with an aggregate
principal balance of approximately $90.7 billion. The collateral for such loans
is located in all 50 states, the District of Columbia, Puerto Rico, Guam and
Canada. With respect to those loans, approximately 8,915 of the loans, with an
aggregate principal balance of approximately $63.7 billion, pertain to
commercial and multifamily mortgage-backed securities. The related loan pools
include multifamily, office, retail, hospitality and other income-producing
properties. As of May 31, 2004, Midland was the named special servicer in
approximately 80 commercial mortgage-backed securities transactions with an
aggregate outstanding principal balance of approximately $45.1 billion. With
respect to such transactions as of such date, Midland was administering
approximately 146 assets with an outstanding principal balance of approximately
$970.4 million. Midland is approved as a master servicer, special servicer and
primary servicer for investment-grade rated commercial and multifamily
mortgage-backed securities rated by Moody's, Fitch and S&P and has received the
highest rankings as a master, primary and special servicer from S&P and Fitch.
The information set forth herein concerning the Special Servicer has been
provided by the Special Servicer and neither the Depositor nor any Underwriter
makes any representation or warranty as to the accuracy or completeness of such
information.
SUB-SERVICERS
The Master Servicer and Special Servicer may each delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that the Master
Servicer or Special Servicer, as the case may be, will remain obligated under
the Pooling Agreement for such delegated duties. A majority of the Mortgage
Loans are currently being primary serviced by third-party servicers that are
entitled to and will become Sub-Servicers of such loans on behalf of the Master
Servicer. Each sub-servicing agreement between the Master Servicer or Special
Servicer, as the case may be, and a Sub-Servicer (each, a "Sub-Servicing
Agreement") must provide that, if for any reason the Master Servicer or Special
Servicer, as the case may be, is no longer acting in such capacity, the Trustee
or any successor to such Master Servicer or Special Servicer will assume such
party's rights and obligations under such Sub-Servicing Agreement if the
Sub-Servicer meets certain conditions set forth in the Pooling Agreement. The
Master Servicer and Special Servicer will each be required to monitor the
performance of Sub-Servicers retained by it.
The Trust will not be responsible for any fees owed to any Sub-Servicer
retained by the Master Servicer or the Special Servicer. Each Sub-Servicer
retained thereby will be reimbursed by the Master Servicer or Special Servicer,
as the case may be, for certain expenditures which it makes, generally to the
same extent the Master Servicer or Special Servicer would be reimbursed under
the Pooling Agreement. See "Servicing of the Mortgage Loans--Servicing and
Other Compensation and Payment of Expenses" in this prospectus supplement.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its master servicing activities will be the Master Servicing Fee. As mentioned
above, the CC Subordinate Components, the SS Subordinate Components and the UH
Subordinate Components will be serviced and administered under the Pooling
Agreement as if each were one Mortgage Loan. Accordingly, the Master Servicer
or the Special Servicer, as the case may be, will be entitled to receive the
servicing fees and other forms of compensation as described below. The Master
Servicer will be entitled to receive a Master Servicing Fee on the CC
Subordinate Components, the SS Subordinate Components and the UH Subordinate
Components.
The "Master Servicing Fee" will be payable monthly on a loan-by-loan basis
from amounts received in respect of interest on each Mortgage Loan, the 17
State Street Whole Loan or the CBA Whole Loan (including Specially Serviced
Mortgage Loans, the 17 State Street Whole Loan, the CBA
S-138
Whole Loan and Mortgage Loans as to which the related Mortgaged Property has
become an REO Property), for each calendar month commencing with July 2004 or
any applicable portion thereof, will accrue at the applicable Master Servicing
Fee Rate and will be computed on the same principal amount as interest accrues
from time to time during such calendar month (or portion thereof) on such
Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole Loan or is
deemed to accrue from time to time during such calendar month (or portion
thereof) on such REO Loan, as the case may be, and shall be calculated on the
same Interest Accrual Basis as is applicable for such Mortgage Loan, the 17
State Street Whole Loan, the CBA Whole Loan or REO Loan, as the case may be and
without giving effect to any Excess Interest that may accrue on the ARD Loan on
or after its Anticipated Repayment Date. The "Master Servicing Fee Rate" will
range from approximately 0.0400% to 0.1100% per annum, on a loan-by-loan basis,
with a weighted average Master Servicing Fee Rate of 0.0938% per annum as of
the Cut-off Date. As additional servicing compensation, the Master Servicer
will be entitled to retain Prepayment Interest Excesses (as described below)
collected on the Mortgage Loans. In addition, the Master Servicer will be
authorized to invest or direct the investment of funds held in any and all
accounts maintained by it that constitute part of the Certificate Account, in
certain government securities and other investment grade obligations specified
in the Pooling Agreement ("Permitted Investments"), and the Master Servicer
will be entitled to retain any interest or other income earned on such funds,
but will be required to cover any losses from its own funds without any right
to reimbursement, except to the extent such losses are incurred solely as the
result of the insolvency of the federal or state chartered depository
institution or trust company that holds such investment accounts, so long as
such depository institution or trust company satisfied the qualifications set
forth in the Pooling Agreement in the definition of "eligible account" at the
time such investment was made.
If a borrower prepays a Mortgage Loan, in whole or in part, after the Due
Date but on or before the Determination Date in any calendar month, the amount
of interest (net of related Master Servicing Fees and any Excess Interest)
accrued on such prepayment from such Due Date to, but not including, the date
of prepayment (or any later date through which interest accrues) will, to the
extent actually collected, constitute a "Prepayment Interest Excess".
Conversely, if a borrower prepays a Mortgage Loan, in whole or in part, after
the Determination Date in any calendar month and does not pay interest on such
prepayment through the end of such calendar month, then the shortfall in a full
month's interest (net of related Master Servicing Fees) on such prepayment will
constitute a "Prepayment Interest Shortfall". Prepayment Interest Excesses (to
the extent not offset by Prepayment Interest Shortfalls) collected on the
Mortgage Loans will be retained by the Master Servicer as additional servicing
compensation. The Master Servicer will deliver to the Trustee for deposit in
the Distribution Account on each Master Servicer Remittance Date, without any
right of reimbursement thereafter, a cash payment (a "Compensating Interest
Payment") in an amount equal to the sum of (i) the aggregate amount of Balloon
Payment Interest Shortfalls, if any, incurred in connection with Balloon
Payments received in respect of the Mortgage Loans during the most recently
ended Collection Period, plus (ii) the lesser of (A) the aggregate amount of
Prepayment Interest Shortfalls, if any, incurred in connection with principal
prepayments received in respect of the Mortgage Loan during the most recently
ended Collection Period, and (B) the aggregate of (1) that portion of its
Master Servicing Fees for the related Collection Period that is, in the case of
each and every Mortgage Loan and REO Loan for which such Master Servicing Fees
are being paid in such Collection Period, calculated at 0.02% per annum, and
(2) all Prepayment Interest Excesses received in respect of the Mortgage Loans
during the most recently ended Collection Period, plus (iii) in the event that
any principal prepayment was received on the last business day of the second
most recently ended Collection Period, but for any reason was not included as
part of the Master Servicer Remittance Amount for the preceding Master Servicer
Remittance Date (other than because of application of the subject principal
prepayment for another purpose), the total of all interest and other income
accrued or earned on the amount of such principal prepayment while it is on
deposit with the Master Servicer, provided, however, that if a Prepayment
Interest Shortfall occurs as a result of the Master Servicer's allowing the
related Borrower to deviate from the terms of the related Mortgage Loan
documents regarding principal prepayments (other than (v) on a Specially
Serviced Mortgage Loan, (w) a payment of insurance proceeds or condemnation
proceeds, (x) a payment
S-139
subsequent to a default under the related Mortgage loan documents (provided the
Master Servicer reasonably believes that acceptance of such payment is
consistent with the Servicing Standard and has obtained the consent of the
Special Servicer), (y) pursuant to applicable law or a court order, or (z) at
the request or with the consent of the Directing Certificateholder), then, for
purposes of calculating the Compensating Interest Payment for the subject
Collection Period, the amount in clause (ii) above shall be the aggregate of
(A) all Master Servicing Fees for such Collection Period and (B) all Prepayment
Interest Excesses and, to the extent earned on principal prepayments, Net
Investment Earnings received by the Master Servicer during such Collection
Period; and provided, further, that the rights of the Certificateholders to
offset of the aggregate Prepayment Interest Shortfalls shall not be cumulative.
A "Balloon Payment Interest Shortfall" is, with respect to any Balloon
Loan with a Maturity Date that occurs after, or that provides for a grace
period for its Balloon Payment that runs past, the Determination Date in any
calendar month, and as to which the Balloon Payment is actually received after
the Determination Date in such calendar month (but no later than its Maturity
Date or, if there is an applicable grace period, beyond the end of such grace
period), the amount of interest, to the extent not collected from the related
Determination Date, that would have accrued on the principal portion of such
Balloon Payment during the period from the related Maturity Date to, but not
including, the first day of the calendar month following the month of maturity
(less the amount of related Master Servicing Fees that would have been payable
from that uncollected interest and, if applicable, exclusive of any portion of
that uncollected interest that would have been Default Interest). In no event
will the rights of the Certificateholders to offset of the aggregate Prepayment
Interest Shortfalls be cumulative.
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the Special Servicing Fee, the
Workout Fee and the Liquidation Fee. The "Special Servicing Fee" for any
particular calendar month or applicable portion thereof will accrue with
respect to each Specially Serviced Mortgage Loan (including, if applicable, the
17 State Street Note B and the CBA B Note) and each Mortgage Loan, the CBA
Whole Loan and the 17 State Street Whole Loan as to which the related Mortgaged
Property has become an REO Property, at a rate equal to 0.25% (25 basis points)
per annum (the "Special Servicing Fee Rate"), on the same principal amount as
interest accrues from time to time during such calendar month (or portion
thereof) on such Specially Serviced Mortgage Loan or is deemed to accrue from
time to time during such calendar month (or portion thereof) on such REO Loan,
as the case may be, and shall be calculated on the same Interest Accrual Basis
as is applicable for such Specially Serviced Mortgage Loan or REO Loan, as the
case may be and without giving effect to any Excess Interest that may accrue on
the ARD Loan on or after its Anticipated Repayment Date. All such Special
Servicing Fees will be payable monthly from general collections on the Mortgage
Loans and any REO Properties on deposit in the Certificate Account (or in the
case of the CBA B Note, the related custodial account) from time to time. A
"Workout Fee" will in general be payable with respect to each Corrected
Mortgage Loan. As to each Corrected Mortgage Loan (including if applicable, the
17 State Street Note B and the CBA B Note), the Workout Fee will be payable out
of, and will be calculated by application of a "Workout Fee Rate" of 1.0% (100
basis points) to, each collection of interest (other than Default Interest (as
defined below) and Excess Interest) and principal (including scheduled
payments, prepayments, Balloon Payments, Liquidation Proceeds (other than in
connection with Liquidation Proceeds paid by the Master Servicer, the Special
Servicer a Class CC Certificateholder, a Class SS Certificateholder, a Class UH
Certificateholder or the holder or holders of Certificates evidencing a
majority interest in such Controlling Class) and payments at maturity) received
on such Mortgage Loan for so long as it remains a Corrected Mortgage Loan. The
Workout Fee with respect to any Corrected Mortgage Loan will cease to be
payable if such loan again becomes a Specially Serviced Mortgage Loan or if the
related Mortgaged Property becomes an REO Property; provided that a new Workout
Fee will become payable if and when such Mortgage Loan again becomes a
Corrected Mortgage Loan. If the Special Servicer is terminated, resigns or is
replaced, it shall retain the right to receive any and all Workout Fees payable
with respect to (i) any Mortgage Loans serviced by it that became Corrected
Mortgage Loans during the period that it acted as Special Servicer and were
still such at the time of
S-140
such termination or resignation and (ii) (other than if it was terminated for
cause in which case only the preceding clause (i) shall apply) any Specially
Serviced Mortgage Loans for which the Special Servicer has resolved all of the
circumstances and/or conditions causing any such Mortgage Loan to be a
Specially Serviced Mortgage Loan but which had not as of the time the Special
Servicer was terminated become a Corrected Mortgage Loan solely because the
related mortgagor had not made three consecutive timely Monthly Payments and
which subsequently becomes a Corrected Mortgage Loan as a result of the related
mortgagor making such three consecutive timely monthly payments (and the
successor to the Special Servicer shall not be entitled to any portion of such
Workout Fees), in each case until the Workout Fee for any such loan ceases to
be payable in accordance with the preceding sentence. A "Liquidation Fee" will
be payable with respect to each Specially Serviced Mortgage Loan as to which
the Special Servicer obtains a full or discounted payoff or unscheduled or
partial payments in lieu thereof with respect thereto from the related borrower
and, except as otherwise described below, with respect to any Specially
Serviced Mortgage Loan or REO Property as to which the Special Servicer
receives any Liquidation Proceeds, Insurance Proceeds or Condemnation Proceeds.
As to each such Specially Serviced Mortgage Loan and REO Property, the
Liquidation Fee will be payable from, and will be calculated by application of
a "Liquidation Fee Rate" of 1.0% (100 basis points) to, the related payment or
proceeds (other than any portion thereof that represents accrued but unpaid
Default Interest or Excess Interest). Notwithstanding anything to the contrary
described above, no Liquidation Fee will be payable based on, or out of,
Liquidation Proceeds received in connection with (i) the repurchase of any
Mortgage Loan by the Mortgage Loan Seller, for a breach of representation or
warranty or for defective or deficient Mortgage Loan documentation so long as
such repurchase occurs within the time frame set forth in the Pooling
Agreement, (ii) the purchase of any Specially Serviced Mortgage Loan by the
Master Servicer, the Special Servicer, any holder or holders of Certificates
evidencing a majority interest in the Controlling Class, the CC Controlling
Holder, the SS Controlling Holder, the UH Controlling Holder or any mezzanine
lender which purchase occurs not later than 90 days following the Special
Servicer's determination of fair value, as discussed below in "--Defaulted
Mortgage Loans; Purchase Option", or (iii) the purchase of all of the Mortgage
Loans and REO Properties by the Master Servicer, the Special Servicer or any
holder or holders of Certificates evidencing a majority interest in the
Controlling Class in connection with the termination of the Trust. The Special
Servicer will be authorized to invest or direct the investment of funds held in
any accounts maintained by it that constitute part of the Certificate Account,
in Permitted Investments, and the Special Servicer will be entitled to retain
any interest or other income earned on such funds, but will be required to
cover any losses from its own funds without any right to reimbursement.
The Master Servicer and the Special Servicer will each be responsible for
the fees of any Sub-Servicers retained by it (without right of reimbursement
therefor). As additional servicing compensation, the Master Servicer and the
Special Servicer, as set forth in the Pooling Agreement, generally will be
entitled to retain all assumption and modification fees, charges for
beneficiary statements or demands and any similar fees, in each case to the
extent actually paid by the borrowers with respect to such Mortgage Loans (and,
accordingly, such amounts will not be available for distribution to
Certificateholders). In addition, the Master Servicer as to Non-Specially
Serviced Mortgage Loans and the Special Servicer as to Specially Serviced
Mortgage Loans will also be entitled to retain as additional servicing
compensation "Default Interest" (that is, interest (other than Excess Interest)
in excess of interest at the related Mortgage Rate accrued as a result of a
default) and late payment charges (late payment charges and Default Interest
are referred to in this prospectus supplement as "Default Charges") only after
such Default Charges has been applied: (1) to pay the Master Servicer, the
Special Servicer or the Trustee, as applicable, any unpaid interest on advances
made by that party with respect to any REO Loan or Mortgage Loan in the
Mortgage Pool, (2) to reimburse the Trust Fund for any interest on advances
that were made with respect to any Mortgage Loan, since the Delivery Date
during the 12-month period preceding receipt of such Default Charges, which
interest was paid to the Master Servicer, the Special Servicer or the Trustee,
as applicable, from a source of funds other than Default Charges collected on
the Mortgage Pool, (3) to reimburse the Special Servicer for Servicing Advances
made for the cost of inspection on a Specially Serviced Mortgage Loan and (4)
to pay, or to reimburse the Trust Fund for, any other Additional
S-141
Trust Fund Expenses incurred with respect to any Mortgage Loan during the
12-month period preceding receipt of such Default Charges, which expense if
paid from a source of funds other than Default Charges collected on the
Mortgage Pool, is or will be an Additional Trust Fund Expense. Any Default
Charges remaining after the application described in the immediately preceding
clause (1) through (4) will be allocated as Additional Servicing Compensation
between the Master Servicer and the Special Servicer as set forth in the
Pooling Agreement. The Master Servicer (except to the extent the Sub-Servicers
are entitled thereto pursuant to the applicable Sub-Servicing Agreement) (or,
with respect to accounts held by the Special Servicer, the Special Servicer)
shall be entitled to receive all amounts collected for checks returned for
insufficient funds with respect to the Mortgage Loans as additional servicing
compensation. In addition, collections on a Mortgage Loan are to be applied to
interest (at the related Mortgage Rate) and principal then due and owing prior
to being applied to Default Charges. The Master Servicer (or if applicable a
Sub-Servicer) may grant a one time waiver of Default Charges in connection with
a late payment by a borrower provided that for any waiver thereafter with
respect to any loan that is 30 days or more past due and with respect to which
Advances, Advance Interest or Additional Trust Fund Expenses (including any
Additional Trust Fund Expense previously reimbursed or paid by the Trust Fund,
but not so reimbursed by the related mortgagor or other party from Insurance
Proceeds, Condemnation Proceeds or otherwise) that have been incurred and are
outstanding, the Master Servicer must seek the consent of the Directing
Certificateholder. Some or all of the items referred to in the prior paragraphs
that are collected in respect of the 17 State Street Note B and/or the CBA B
Note may also be paid to, and allocated between, the Master Servicer and the
Special Servicer, as additional compensation, as provided in the Pooling
Agreement.
The Master Servicer and the Special Servicer will, in general, each be
required to pay its expenses incurred by it in connection with its servicing
activities under the Pooling Agreement, and neither will be entitled to
reimbursement therefor except as expressly provided in the Pooling Agreement.
In general, customary, reasonable and necessary "out of pocket" costs and
expenses incurred by the Master Servicer or Special Servicer in connection with
the servicing of a Mortgage Loan, the 17 State Street Whole Loan, or the CBA
Whole Loan after a default, delinquency or other unanticipated event, or in
connection with the administration of any REO Property, will constitute
"Servicing Advances" (Servicing Advances and P&I Advances, collectively,
"Advances") and, in all cases (subject to recoverability), will be reimbursable
from future payments and other collections, including in the form of Insurance
Proceeds, Condemnation Proceeds and Liquidation Proceeds, on or in respect of
the related Mortgage Loan, the 17 State Street Whole Loan, or the CBA Whole
Loan or REO Property ("Related Proceeds"). Notwithstanding the foregoing, the
Master Servicer and the Special Servicer will each be permitted to pay, or to
direct the payment of, certain servicing expenses directly out of the
Certificate Account and at times without regard to the relationship between the
expense and the funds from which it is being paid (including in connection with
the remediation of any adverse environmental circumstance or condition at a
Mortgaged Property or an REO Property, although in such specific circumstances
the Master Servicer may advance the costs thereof). The Special Servicer will
be required to direct the Master Servicer to make Servicing Advances (which
include certain Servicing Advances that must be made within five business days
in order to avoid a material adverse consequence to the Trust Fund (any such
Advance, an "Emergency Advance")); provided that the Special Servicer may, at
its option, make such Servicing Advance itself (including Emergency Advances).
The Special Servicer is, however, obligated to make any Servicing Advance with
respect to Specially Serviced Mortgage Loans and REO Properties which it fails
to timely request the Master Servicer to make. The Special Servicer may no more
than once per calendar month require the Master Servicer to reimburse it for
any Servicing Advance (including an Emergency Advance) made by the Special
Servicer (after reimbursement, such Servicing Advance will be deemed to have
been made by the Master Servicer) to the extent such Servicing Advance is not a
Nonrecoverable Advance. The Special Servicer will be relieved of any
obligations with respect to a Servicing Advance that it timely requests the
Master Servicer to make (regardless of whether or not the Master Servicer makes
that Advance).
S-142
If the Master Servicer or the Special Servicer is required under the
Pooling Agreement to make a Servicing Advance, but neither does so within 10
days after such Advance is required to be made, then the Trustee will, if it
has actual knowledge of such failure, be required to give the Master Servicer
or Special Servicer, as the case may be, notice of such failure and, if such
failure continues for three more business days, the Trustee will be required to
make such Servicing Advance.
The Master Servicer, the Special Servicer and the Trustee will be
obligated to make Servicing Advances only to the extent that such Servicing
Advances are, in the reasonable judgment of the Master Servicer, the Special
Servicer or the Trustee, as the case may be, ultimately recoverable from
Related Proceeds (any Servicing Advance not so recoverable, a "Nonrecoverable
Servicing Advance"). The Trustee will be permitted to rely on any
nonrecoverability determination made by the Master Servicer or the Special
Servicer.
The foregoing paragraph notwithstanding, the Master Servicer may,
including at the direction of the Special Servicer, if a Specially Serviced
Mortgage Loan or an REO Property is involved, pay directly out of the
Certificate Account (or, if the 17 State Street Whole Loan or the CBA Whole
Loan is involved, out of the related Custodial Account) any servicing expense
that, if paid by the Master Servicer or the Special Servicer, would constitute
a Nonrecoverable Servicing Advance; provided that the Master Servicer (or the
Special Servicer if a Specially Serviced Mortgage Loan or an REO Property is
involved) has determined in accordance with the Servicing Standard that making
such payment is in the best interests of the Certificateholders and, if the 17
State Street Whole Loan is involved, the 17 State Street B Noteholder, and, if
the CBA Whole Loan is involved, the CBA B Noteholder (as a collective whole),
as evidenced by an officer's certificate delivered promptly to the Trustee, the
Depositor and the Rating Agencies, setting forth the basis for such
determination and accompanied by any supporting information the Master Servicer
or the Special Servicer may have obtained.
As and to the extent described herein, the Master Servicer, the Special
Servicer and the Trustee are each entitled to receive interest at the
Reimbursement Rate (compounded monthly) on Servicing Advances made thereby. See
"The Pooling and Servicing Agreements--Certificate Account" and "--Servicing
Compensation and Payment of Expenses" in the accompanying prospectus and
"Description of the Certificates--P&I Advances" in this prospectus supplement.
EVIDENCE AS TO COMPLIANCE
On or before April 30 of each year, beginning April 30, 2005 (or, as to
any such year, such earlier date as is contemplated by the Pooling Agreement),
each of the Master Servicer and the Special Servicer, at its expense, shall
cause a firm of independent public accountants (which may also render other
Services to the Master Servicer or the Special Servicer, as the case may be)
and that is a member of the American Institute of Certified Public Accountants,
to furnish a statement to the Depositor and the Trustee to the effect that (i)
it has obtained a letter of representation regarding certain matters from the
management of the Master Servicer and the Special Servicer, as the case may be,
which includes an assertion that the Master Servicer and the Special Servicer,
as the case may be, has complied with certain minimum mortgage loan servicing
standards (to the extent applicable to commercial and multifamily mortgage
loans) identified in the Uniform Single Association Program for Mortgage
Bankers established by the Mortgage Bankers Association of America, with
respect to the servicing of commercial and multifamily mortgage loans during
the most recently completed calendar year and (ii) on the basis of an
examination conducted by such firm in accordance with standards established by
the American Institute of Certified Public Accountants, such representation is
fairly stated in all material respects, subject to such exceptions and other
qualifications that may be appropriate. In rendering its report such firm may
rely, as to matters relating to the direct servicing of commercial and
multifamily mortgage loans by Sub-Servicers, upon comparable reports of firms
of independent certified public accountants rendered on the basis of
examinations conducted in accordance with the same standards (rendered within
one year of such report) with respect to those sub-servicers.
The Pooling Agreement also requires that, on or before a specified date in
each year, commencing in 2005, each of the Master Servicer and the Special
Servicer deliver to the Trustee a statement signed by one or more officers
thereof to the effect that the Master Servicer or Special Servicer, as the case
may
S-143
be, has fulfilled its material obligations under the Pooling Agreement in all
material respects throughout the preceding calendar year or the portion thereof
during which the Certificates were outstanding.
MODIFICATIONS, WAIVERS, AMENDMENTS AND CONSENTS
The Master Servicer (as to Mortgage Loans, the 17 State Street Whole Loan
or the CBA Whole Loan which are not Specially Serviced Mortgage Loans (each a
"Non-Specially Serviced Mortgage Loan")) (subject to obtaining the consent of
the Special Servicer, the CC Controlling Holder, the SS Controlling Holder, the
UH Controlling Holder, as applicable) and the Special Servicer (as to Specially
Serviced Mortgage Loans subject to the requirements regarding the resolution of
Defaulted Mortgage Loans described below under "--Defaulted Mortgage Loans;
Purchase Option" in this prospectus supplement) each may, consistent with the
Servicing Standard, agree to any modification, waiver or amendment of any term
of, forgive or defer the payment of interest on and principal of, permit the
release, addition or substitution of collateral securing, and/or permit the
release of the borrower on or any guarantor of any Mortgage Loan it is required
to service and administer, without the consent of the Trustee, subject,
however, to the rights of consent provided to the Directing Certificateholder,
the CC Controlling Holder, the SS Controlling Holder, the UH Controlling
Holder, any mezzanine lender, or the CBA B Noteholder, as applicable, and to
each of the following limitations, conditions and restrictions:
(i) with limited exception (including as described below with respect
to Excess Interest) the Master Servicer shall not agree to any
modification, waiver or amendment of any term of, or take any of the other
above referenced acts with respect to, any Mortgage Loan or the CBA Whole
Loan, that would affect the amount or timing of any related payment of
principal, interest or other amount payable under such Mortgage Loan, the
17 State Street Whole Loan or the CBA Whole Loan or affect the security for
such Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole Loan,
unless the Master Servicer has obtained the consent of the Special Servicer
(it being understood and agreed that (A) the Master Servicer shall promptly
provide the Special Servicer with notice of any borrower request for such
modification, waiver or amendment, the Master Servicer's recommendations
and analysis, and with all information reasonably available to the Master
Servicer that the Special Servicer may reasonably request in order to
withhold or grant any such consent, each of which shall be provided
reasonably promptly in accordance with the Servicing Standard, (B) the
Special Servicer shall decide whether to withhold or grant such consent in
accordance with the Servicing Standard and (C) if any such consent has not
been expressly responded to within 10 business days of the Special
Servicer's receipt from the Master Servicer of the Master Servicer's
recommendations and analysis and all information reasonably requested
thereby as such time frame may be extended if the Special Servicer is
required to seek the consent of the Directing Certificateholder, the CC
Controlling Holder, the SS Controlling Holder, the UH Controlling Holder,
or the Rating Agencies, as the case may be in order to make an informed
decision (or, if the Special Servicer did not request any information,
within ten business days from such notice), such consent shall be deemed to
have been granted);
(ii) the Master Servicer may (with the consent of the Directing
Certificateholder) extend the maturity date of any Mortgage Loan (including
the 17 State Street Whole Loan and the CBA Whole Loan, if applicable)
having a term of five years or less for up to 6 months (but no more than
two such extensions by the Master Servicer shall occur);
(iii) with limited exception the Special Servicer may not agree to (or
in the case of a Non-Specially Serviced Mortgage Loan, consent to the
Master Servicer's agreeing to) any modification, waiver or amendment of any
term of, or take (or in the case of a Non-Specially Serviced Mortgage Loan,
consent to the Master Servicer's taking) any of the other above referenced
actions with respect to, any Mortgage Loan, the 17 State Street Whole Loan
or the CBA Whole Loan it is required to service and administer that would
affect the amount or timing of any related payment of principal, interest
or other amount payable thereunder or, in the reasonable judgment of the
Special Servicer would materially impair the security for such Mortgage
Loan, the 17 State Street Whole Loan or the CBA Whole Loan, unless a
material default on such Mortgage Loan, the 17 State Street Whole Loan or
the CBA Whole Loan has occurred or, in the reasonable judgment of
S-144
the Special Servicer, a default in respect of payment on such Mortgage Loan
is reasonably foreseeable, and such modification, waiver, amendment or
other action is reasonably likely to produce a greater recovery to
Certificateholders and, if the 17 State Street Whole Loan is involved, the
17 State Street B Noteholder, and, if the CBA Whole Loan is involved, the
CBA B Noteholder, on a net present value basis than would liquidation as
certified to the Trustee in an officer's certificate;
(iv) the Special Servicer shall not extend (or in the case of a
Non-Specially Serviced Mortgage Loan, the 17 State Street Whole Loan or the
CBA Whole Loan, consent to the Master Servicer's extending) the date on
which any Balloon Payment is scheduled to be due on any Mortgage Loan
beyond the earliest of (A) two years prior to the Rated Final Distribution
Date or with respect to the CC Component Mortgage Loan, the SS Component
Mortgage Loan and the UH Component Mortgage Loan, the related date set
forth in the Pooling Agreement, and (B) if such Mortgage Loan, the 17 State
Street Whole Loan or the CBA Whole Loan is secured by a Mortgage solely or
primarily on the related mortgagor's leasehold interest in the related
Mortgaged Property, 20 years (or, to the extent consistent with the
Servicing Standard, giving due consideration to the remaining term of the
ground lease, 10 years) prior to the end of the then current term of the
related ground lease (plus any unilateral options to extend);
(v) neither the Master Servicer nor the Special Servicer shall make or
permit any modification, waiver or amendment of any term of, or take any of
the other above referenced actions with respect to, any Mortgage Loan that
would result in an adverse REMIC event with respect to the Component
Mortgage Loan REMIC, REMIC I or REMIC II;
(vi) subject to applicable law, the related Mortgage Loan documents
and the Servicing Standard, neither the Master Servicer nor the Special
Servicer shall permit any modification, waiver or amendment of any term of
any Mortgage Loan or the CBA Whole Loan unless all related fees and
expenses are paid by the related borrower;
(vii) except for substitutions contemplated by the terms of the
Mortgage Loans, the 17 State Street Whole Loan or the CBA Whole Loan, the
Special Servicer shall not permit (or, in the case of a Non-Specially
Serviced Mortgage Loan, consent to the Master Servicer's permitting) any
borrower to add or substitute real estate collateral for its Mortgage Loan,
the 17 State Street Whole Loan or the CBA Whole Loan unless the Special
Servicer shall have first determined in its reasonable judgment, based upon
a Phase I environmental assessment (and any additional environmental
testing as the Special Servicer deems necessary and appropriate), that such
additional or substitute collateral is in compliance with applicable
environmental laws and regulations and that there are no circumstances or
conditions present with respect to such new collateral relating to the use,
management or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation would be required
under any then applicable environmental laws and/or regulations;
(viii) with limited exceptions, including a permitted defeasance as
described above under "Description of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans-- Defeasance" in this prospectus
supplement and specific releases contemplated by the terms of the mortgage
loans in effect on the Delivery Date, the Special Servicer shall not permit
the release (or, in the case of a Non-Specially Serviced Mortgage Loan,
consent to the Master Servicer's releasing), including in connection with a
substitution contemplated by clause (vi) above, any collateral securing a
performing Mortgage Loan; except where a Mortgage Loan (or, in the case of
a group of Cross-Collateralized Mortgage Loans, where such entire group of
Cross-Collateralized Mortgage Loans) is satisfied, or except in the case of
a release where (A) either (1) the use of the collateral to be released
will not, in the reasonable judgment of the Special Servicer, materially
and adversely affect the net operating income being generated by or the use
of the related Mortgaged Property, or (2) there is a corresponding
principal pay down of such Mortgage Loan, the 17 State Street Whole Loan or
the CBA Whole Loan in an amount at least equal to the appraised value of
the collateral to be released (or substitute collateral with an appraised
value at least equal to that of the collateral to be released, is
delivered), (B) the remaining Mortgaged Property (together with any
S-145
substitute collateral) is, in the Special Servicer's reasonable judgment,
adequate security for the remaining Mortgage Loan, the 17 State Street
Whole Loan or the CBA Whole Loan and (C) such release would not, in and of
itself, result in an adverse rating event with respect to any Class of
Offered Certificates (as confirmed in writing to the Trustee by each Rating
Agency);
provided that the limitations, conditions and restrictions set forth in clauses
(i) through (viii) above shall not apply to any act or event (including,
without limitation, a release, substitution or addition of collateral) in
respect of any Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole
Loan that either occurs automatically, or results from the exercise of a
unilateral option by the related mortgagor within the meaning of Treasury
Regulations Section 1.1001-3(c)(2)(iii), in any event under the terms of such
Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole Loan in effect
on the Delivery Date (or, in the case of a replacement Mortgage Loan, on the
related date of substitution); and provided, further, that, notwithstanding
clauses (i) through (viii) above, neither the Master Servicer nor the Special
Servicer shall be required to oppose the confirmation of a plan in any
bankruptcy or similar proceeding involving a mortgagor if, in its reasonable
judgment, such opposition would not ultimately prevent the confirmation of such
plan or one substantially similar; and provided, further, that, notwithstanding
clause (viii) above, neither the Master Servicer nor the Special Servicer shall
be required to obtain any confirmation of the Certificate ratings from the
Rating Agencies in order to grant easements that do not materially affect the
use or value of a Mortgaged Property or the mortgagor's ability to make any
payments with respect to the related Mortgage Loan.
With respect to the ARD Loan, the Master Servicer will be permitted to
waive all or any accrued Excess Interest if, prior to the related maturity
date, the related borrower has requested the right to prepay such Mortgage Loan
in full together with all other payments required by such Mortgage Loan in
connection with such prepayment except for all or a portion of accrued Excess
Interest, provided that the Master Servicer's determination to waive the right
to such Excess Interest is reasonably likely to produce a greater payment to
Certificateholders on a present value basis than a refusal to waive the right
to such Excess Interest. Any such waiver will not be effective until such
prepayment is tendered. The Master Servicer will have no liability to the
Trust, the Certificateholders or any other person so long as such determination
is based on such criteria. Notwithstanding the foregoing, pursuant to the
Pooling Agreement, the Master Servicer will be required to seek the consent of
the Directing Certificateholder prior to waiving any Excess Interest. The
Directing Certificateholder's consent to a waiver request will be deemed
granted if the Directing Certificateholder fails to respond to such request
within ten business days of its receipt of such request. Except as permitted by
clauses (i) through (viii) of the preceding paragraph, the Special Servicer
will have no right to waive the payment or Excess Interest.
Any modification, extension, waiver or amendment of the payment terms of
the CBA Whole Loan or the 17 State Street Whole Loan, as applicable, will be
required to be structured so as to be consistent with the allocation and
payment priorities in the related loan documents and the related Intercreditor
Agreement, such that neither the Trust as holder of the CBA Mortgage Loan or
the 17 State Street Whole Loan, as applicable, nor the CBA B Noteholder or the
17 State Street B Noteholder, as applicable, gains a priority over the other
such holder that is not reflected in the related loan documents and the related
Intercreditor Agreement.
Further, to the extent consistent with the Servicing Standard, taking into
account the subordinate position of the 17 State Street Note B or CBA B Note:
(i) no waiver, reduction or deferral of any amounts due on the SS
Component Mortgage Loan or CBA Mortgage Loan, as applicable, will be
permitted to be effected prior to the waiver, reduction or deferral of the
entire corresponding item in respect of the 17 State Street Note B or CBA B
Note, as applicable, and
(ii) no reduction of the mortgage interest rate of the SS Component
Mortgage Loan or the CBA Mortgage Loan, as applicable, will be permitted to
be effected prior to the reduction of the mortgage interest rate of 17
State Street Note B or the CBA B Note, as applicable, to the maximum extent
possible.
The Master Servicer will not be required to seek the consent of any
Certificateholder or the Special Servicer in order to approve certain minor or
routine modifications, waivers or amendments of the
S-146
Mortgage Loans, the 17 State Street Whole Loan or the CBA Whole Loan, including
waivers of minor covenant defaults, releases of non-material parcels of a
Mortgaged Property, grants of easements that do not materially affect the use
or value of a Mortgaged Property or a borrower's ability to make any payments
with respect to the related Mortgage Loan and other routine approvals including
the granting of subordination, non-disturbance and attornment agreements and
leasing consents, typically performed by a master servicer on a routine basis;
provided that any such modification, waiver or amendment may not affect a
payment term of the Certificates, constitute a "significant modification" of
such Mortgage Loan pursuant to Treasury Regulations Section 1.860G-2(b) or
otherwise have an adverse REMIC effect, be inconsistent with the Servicing
Standard, or violate the terms, provisions or limitations of the Pooling
Agreement or related Intercreditor Agreement.
DEFAULTED MORTGAGE LOANS; PURCHASE OPTION
Within 30 days after a Mortgage Loan becomes a Defaulted Mortgage Loan,
the Special Servicer will be required to determine the fair value of the
Mortgage Loan in accordance with the Servicing Standard. The Special Servicer
will be permitted to change, from time to time thereafter, its determination of
the fair value of a Defaulted Mortgage Loan based upon changed circumstances,
or new information, in accordance with the Servicing Standard. A "Defaulted
Mortgage Loan" is a Mortgage Loan (i) that is delinquent 60 days or more in
respect to a Monthly Payment (not including the Balloon Payment) or (ii) is
more than 60 days delinquent in respect of its Balloon Payment unless (w) the
related borrower is actively seeking a refinancing commitment, (x) the related
borrower continues to make payments in the amount of its Monthly Payment, (y)
the Directing Certificateholder consents, and (z) the related borrower has
delivered to the Master Servicer, on or before the 60th day after the Due Date
of such Balloon Payment, a refinancing commitment reasonably acceptable to the
Master Servicer, for such longer period, not to exceed 120 days beyond the Due
Date of such Balloon Payment (provided that if such refinancing does not occur
during such time specified in the commitment, the related Mortgage Loan will
immediately become a Defaulted Mortgage Loan), in either case such delinquency
to be determined without giving effect to any grace period permitted by the
related Mortgage or Mortgage Note and without regard to any acceleration of
payments under the related Mortgage and Mortgage Note, or (iii) as to which the
Master Servicer or Special Servicer has, by written notice to the related
mortgagor, accelerated the maturity of the indebtedness evidenced by the
related Mortgage Note.
In the event a Mortgage Loan becomes a Defaulted Mortgage Loan, any
majority Certificateholder of the Controlling Class or the Special Servicer
will each have an assignable option (such option will only be assignable after
such option arises) (a "Purchase Option") to purchase the Defaulted Mortgage
Loan, subject to the purchase rights of the the CC Controlling Holder, in the
case of the CC Component Mortgage Loan, the SS Controlling Holder, in the case
of the SS Component Mortgage Loan, the UH Controlling Holder, in the case of
the UH Component Mortgage Loan, the 17 State Street B Noteholder, in the case
of the 17 State Street Whole Loan, and the CBA B Noteholder, in the case of the
CBA Whole Loan, from the Trust Fund at a price (the "Option Price") generally
equal to (i) the unpaid principal balance of the Defaulted Mortgage Loan, plus
accrued and unpaid interest on such balance, all related unreimbursed Advances
(and interest on Advances), and all accrued Master Servicing Fees, Special
Servicing Fees, Trustee Fees and Additional Trust Fund Expenses allocable to
such Defaulted Mortgage Loan whether paid or unpaid, if the Special Servicer
has not yet determined the fair value of the Defaulted Mortgage Loan, or (ii)
the fair value of the Defaulted Mortgage Loan as determined by the Special
Servicer, if the Special Servicer has made such fair value determination. The
Special Servicer will, from time to time, but not less often than every ninety
(90) days, adjust its fair value determination based upon changed
circumstances, new information, and other relevant factors, in each instance in
accordance with the Servicing Standard. The majority Certificateholder of the
Controlling Class may have an exclusive right to exercise the Purchase Option
for a specified period of time.
Unless and until the Purchase Option with respect to a Defaulted Mortgage
Loan is exercised, the Special Servicer will be required to pursue such other
resolution strategies available under the Pooling Agreement, consistent with
the Servicing Standard, but the Special Servicer will not be permitted to sell
the Defaulted Mortgage Loan other than pursuant to the exercise of the Purchase
Option.
S-147
If not exercised sooner, the Purchase Option with respect to any Defaulted
Mortgage Loan will automatically terminate upon (i) the related mortgagor's
cure of all related defaults on the Defaulted Mortgage Loan, (ii) the
acquisition on behalf of the Trust Fund of title to the related Mortgaged
Property by foreclosure or deed in lieu of foreclosure or (iii) the
modification or pay-off (full or discounted) of the Defaulted Mortgage Loan in
connection with a workout. In addition, the Purchase Option with respect to a
Defaulted Mortgage Loan held by any person will terminate upon the exercise of
the Purchase Option by any other holder of a Purchase Option.
If (a) a Purchase Option is exercised with respect to a Defaulted Mortgage
Loan and the person expected to acquire the Defaulted Mortgage Loan pursuant to
such exercise is the majority Certificateholder of the Controlling Class, the
Special Servicer, or any affiliate of any of them (in other words, the Purchase
Option has not been assigned to another unaffiliated person) and (b) the Option
Price is based on the Special Servicer's determination of the fair value of the
Defaulted Mortgage Loan, then the determination of whether the Option Price
represents a fair value of the Defaulted Mortgage Loan will be made in the
manner set forth in the Pooling Agreement.
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders pursuant to foreclosure proceedings instituted by the
Special Servicer or otherwise, the Special Servicer, after notice to the
Directing Certificateholder, shall use its reasonable efforts to sell any REO
Property as soon as practicable in accordance with the Servicing Standard but
prior to the end of the third calendar year following the year of acquisition,
unless (i) the Internal Revenue Service grants an extension of time to sell
such property (an "REO Extension") or (ii) it obtains an opinion of counsel
generally to the effect that the holding of the property for more than three
years after the end of the calendar year in which it was acquired will not
result in the imposition of a tax on the Trust Fund or cause any REMIC created
pursuant to the Pooling Agreement to fail to qualify as a REMIC under the Code.
If the Special Servicer on behalf of the Trustee has not received an REO
Extension or such Opinion of Counsel and the Special Servicer is not able to
sell such REO Property within the period specified above, or if an REO
Extension has been granted and the Special Servicer is unable to sell such REO
Property within the extended time period, the Special Servicer shall auction
the property pursuant to the auction procedure set forth below.
The Special Servicer shall give the Directing Certificateholder, the
Master Servicer and the Trustee not less than 10 days' prior written notice of
its intention to sell any such REO Property, and shall sell the REO Property to
the highest offeror (which may be the Special Servicer) in accordance with the
Servicing Standard; provided, however, that the Master Servicer, Special
Servicer, holder (or holders) of Certificates evidencing a majority interest in
the Controlling Class, any independent contractor engaged by the Master
Servicer or the Special Servicer pursuant to the Pooling Agreement (or any
officer or affiliate thereof) shall not be permitted to purchase the REO
Property at a price less than the outstanding principal balance of such
Mortgage Loan as of the date of purchase, plus all accrued but unpaid interest
and related fees and expenses, except in limited circumstances set forth in the
Pooling Agreement; and provided, further that if the Special Servicer intends
to make an offer on any REO Property, (i) the Special Servicer shall notify the
Trustee of such intent, (ii) the Trustee or an agent on its behalf shall
promptly obtain, at the expense of the Trust an appraisal of such REO Property
and (iii) the Special Servicer shall not offer less than (x) the fair market
value set forth in such appraisal or (y) the outstanding principal balance of
such Mortgage Loan, plus all accrued but unpaid interest and related fees and
expenses and unreimbursed Advances and interest on Advances.
Subject to the REMIC provisions, the Special Servicer shall act on behalf
of the Trust in negotiating and taking any other action necessary or
appropriate in connection with the sale of any REO Property or the exercise of
the Purchase Option, including the collection of all amounts payable in
connection therewith. Notwithstanding anything to the contrary herein, neither
the Trustee, in its individual capacity, nor any of its Affiliates may bid for
any REO Property or purchase any Defaulted Mortgage Loan. Any sale of a
Defaulted Mortgage Loan (pursuant to the Purchase Option) or REO Property shall
be without recourse to, or representation or warranty by, the Trustee, the
Depositor, any Mortgage Loan Seller, the Special Servicer, the Master Servicer
or the Trust other than customary representations and warranties of title,
condition and authority (if liability for breach thereof is limited to recourse
against the Trust). Notwithstanding the foregoing, nothing herein shall limit
the liability of the Master Servicer,
S-148
the Special Servicer or the Trustee to the Trust and the Certificateholders for
failure to perform its duties in accordance herewith. None of the Special
Servicer, the Master Servicer, the Depositor or the Trustee shall have any
liability to the Trust or any Certificateholder with respect to the price at
which a Defaulted Mortgage Loan is sold if the sale is consummated in
accordance with the terms of the Pooling Agreement.
REO PROPERTIES
In general, the Special Servicer will be obligated to cause any Mortgaged
Property acquired as REO Property to be operated and managed in a manner that
would, to the extent commercially feasible, maximize the Trust's net after-tax
proceeds from such property. The Special Servicer could determine that it would
not be commercially feasible to manage and operate such property in a manner
that would avoid the imposition of a tax on "net income from foreclosure
property". Generally, net income from foreclosure property means income which
does not qualify as "rents from real property" within the meaning of Code
Section 856(c)(3)(A) and Treasury regulations thereunder or as income from the
sale of such REO Property. "Rents from real property" do not include the
portion of any rental based on the net income or gain of any tenant or
sub-tenant. No determination has been made whether rent on any of the Mortgaged
Properties meets this requirement. "Rents from real property" include charges
for services customarily furnished or rendered in connection with the rental of
real property, whether or not the charges are separately stated. Services
furnished to the tenants of a particular building will be considered as
customary if, in the geographic market in which the building is located,
tenants in buildings which are of similar class are customarily provided with
the service. No determination has been made whether the services furnished to
the tenants of the Mortgaged Properties are "customary" within the meaning of
applicable regulations. It is therefore possible that a portion of the rental
income with respect to a Mortgaged Property owned by the Trust Fund, would not
constitute "rents from real property," or that all of such income would fail to
so qualify if a separate charge is not stated for such non-customary services
or such services are not performed by an independent contractor. In addition to
the foregoing, any net income from a trade or business operated or managed by
an independent contractor on a Mortgaged Property owned by the Component
Mortgage Loan REMIC or REMIC I, such as a hotel or self-storage facility, will
not constitute "rents from real property." Any of the foregoing types of income
instead constitute "net income from foreclosure property," which would be
taxable to such REMIC at the highest marginal federal corporate rate (currently
35%) and may also be subject to state or local taxes. Any such taxes would be
chargeable against the related income for purposes of determining the Net REO
Proceeds available for distribution to holders of Certificates. See "Certain
Federal Income Tax Consequences--REMICs--Prohibited Transactions Tax and Other
Taxes" in the accompanying prospectus.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
Commencing in 2005, the Master Servicer is required to perform (or cause
to be performed) physical inspections of each Mortgaged Property (other than
REO Properties and Mortgaged Properties securing Specially Serviced Mortgage
Loans) at least once every two years (or, if the related Mortgage Loan has a
then-current balance greater than $4,000,000, at least once every year) (or an
entity employed by the Master Servicer for such purpose). In addition, the
Special Servicer, subject to statutory limitations or limitations set forth in
the related loan documents, is required to perform a physical inspection of
each Mortgaged Property as soon as practicable after servicing of the related
Mortgage Loan is transferred thereto and will be required to perform a yearly
physical inspection of each such Mortgaged Property so long as the related
Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole Loan is a
Specially Serviced Mortgage Loan. The Special Servicer will be entitled to
receive reimbursement for such expense as a Servicing Advance payable, first
from Default Charges from the related Mortgage Loan and then from general
collections. The Special Servicer and the Master Servicer will each be required
to prepare (or cause to be prepared) as soon as reasonably possible a written
report of each such inspection performed thereby describing the condition of
the Mortgaged Property.
With respect to each Mortgage Loan, the 17 State Street Whole Loan or the
CBA Whole Loan that requires the borrower to deliver quarterly, annual or other
periodic operating statements with respect
S-149
to the related Mortgaged Property, the Master Servicer or the Special Servicer,
depending on which is obligated to service such Mortgage Loan, is also required
to make reasonable efforts to collect and review such statements. However,
there can be no assurance that any operating statements required to be
delivered will in fact be so delivered, nor is the Master Servicer or the
Special Servicer likely to have any practical means of compelling such delivery
in the case of an otherwise performing Mortgage Loan.
TERMINATION OF THE SPECIAL SERVICER
The holder or holders of Certificates evidencing a majority interest in
the Controlling Class may at any time replace any Special Servicer. Such
holder(s) shall designate a replacement to so serve by the delivery to the
Trustee of a written notice stating such designation. The Trustee shall,
promptly after receiving any such notice, so notify the Rating Agencies. The
designated replacement shall become the Special Servicer as of the date the
Trustee shall have received: (i) written confirmation from each Rating Agency
stating that if the designated replacement were to serve as Special Servicer
under the Pooling Agreement, the then-current rating or ratings of one or more
Classes of the Certificates would not be qualified, downgraded or withdrawn as
a result thereof; (ii) a written acceptance of all obligations of the Special
Servicer, executed by the designated replacement; and (iii) an opinion of
counsel to the effect that the designation of such replacement to serve as
Special Servicer is in compliance with the Pooling Agreement, that the
designated replacement will be bound by the terms of the Pooling Agreement and
that the Pooling Agreement will be enforceable against such designated
replacement in accordance with its terms. The existing Special Servicer shall
be deemed to have resigned simultaneously with such designated replacement's
becoming the Special Servicer under the Pooling Agreement.
S-150
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Depositor will issue its Commercial Mortgage Pass-Through
Certificates, Series 2004-3, on July 14, 2004 (the "Delivery Date") pursuant to
a Pooling and Servicing Agreement, dated as of July 1, 2004, among the
Depositor, the Master Servicer, the Special Servicer, the Trustee and the REMIC
Administrator (the "Pooling Agreement").
The Offered Certificates, together with the Private Certificates, will
represent in the aggregate the entire beneficial interest in a trust (the
"Trust"), the assets of which (such assets collectively, the "Trust Fund")
include: (i) the Mortgage Loans (including the CC Subordinate Components, the
SS Subordinate Components and the UH Subordinate Components) and all payments
thereunder and proceeds thereof due or received after the Cut-off Date
(exclusive of payments of principal, interest and other amounts due thereon on
or before the Cut-off Date); (ii) any REO Properties; (iii) such funds or
assets as from time to time are deposited in the Certificate Account and the
Interest Reserve Account and (iv) the Excess Liquidation Proceeds Reserve
Account (see "The Pooling and Servicing Agreements--Certificate Account" in the
accompanying prospectus).
The Certificates will consist of 42 classes to be designated as: (i) 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 and the Class A-1A
Certificates (collectively, the "Class A Certificates" and together with the
Class X Certificates, the "Senior Certificates"); (ii) the Class B
Certificates, the Class C Certificates, the Class D Certificates, the Class E
Certificates, the Class F Certificates, the Class G Certificates, the Class H
Certificates, the Class J Certificates, the Class K Certificates, the Class L
Certificates, the Class M Certificates, the Class N Certificates, the Class O
Certificates and the Class P Certificates (collectively with the Class A
Certificates, the "Sequential Pay Certificates"); (iii) the Class X
Certificates (collectively with the Sequential Pay Certificates, the "REMIC II
Certificates"); (iv) the Class CC-A, Class CC-B, Class CC-C, Class CC-D, Class
CC-E and Class CC-F Certificates (collectively, the "Class CC Certificates");
(v) the Class SS-A, Class SS-B, Class SS-C and Class SS-D Certificates
(collectively, the "Class SS Certificates"); (vi) the Class UH-A, Class UH-B,
Class UH-C, Class UH-D, Class UH-E, Class UH-F, Class UH-G, Class UH-H and
Class UH-J Certificates (collectively, the "Class UH Certificates"); and (vii)
the Class R-I Certificates and the Class R-II Certificates, (the Class R-I and
Class R-II Certificates collectively, the "REMIC Residual Certificates"). Only
the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class B, Class C,
Class D and Class E Certificates (collectively, the "Offered Certificates") are
offered hereby. Each Class of Certificates is sometimes referred to in this
prospectus supplement as a "Class".
The Class A-1A, Class X, Class F, Class G, Class H, Class J, Class K,
Class L, Class M, Class N, Class O, Class P, Class CC, Class SS, Class UH, and
the REMIC Residual Certificates (collectively, the "Private Certificates") have
not been registered under the Securities Act and are not offered hereby.
Accordingly, to the extent this prospectus supplement contains information
regarding the terms of the Private Certificates, such information is provided
because of its potential relevance to a prospective purchaser of an Offered
Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format in
denominations of: (i) in the case of the Class A-1, Class A-2, Class A-3, Class
A-4 and Class A-5 Certificates, $10,000 actual principal amount and in any
whole dollar denomination in excess thereof; and (ii) in the case of the other
Offered Certificates, $100,000 actual principal amount and in any whole dollar
denomination in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more Certificates registered in the name of the nominee of The Depository Trust
Company ("DTC"). The Depositor has been informed by DTC that DTC's nominee will
be Cede & Co. No beneficial owner of an Offered Certificate (each, a
"Certificate Owner") will be entitled to receive a fully registered physical
S-151
certificate (a "Definitive Certificate") representing its interest in such
Class, except under the limited circumstances described under "Description of
the Certificates--Book-Entry Registration and Definitive Certificates" in the
accompanying prospectus. Unless and until Definitive Certificates are issued in
respect of the Offered Certificates, beneficial ownership interests in each
such Class of Certificates will be maintained and transferred on the book-entry
records of DTC and its participating organizations (its "Participants"), and
all references to actions by holders of each such Class of Certificates will
refer to actions taken by DTC upon instructions received from the related
Certificate Owners through its Participants in accordance with DTC procedures,
and all references herein to payments, notices, reports and statements to
holders of each such Class of Certificates will refer to payments, notices,
reports and statements to DTC or Cede & Co., as the registered holder thereof,
for distribution to the related Certificate Owners through its Participants in
accordance with DTC procedures. The form of such payments and transfers may
result in certain delays in receipt of payments by an investor and may restrict
an investor's ability to pledge its securities. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
accompanying prospectus.
The Trustee will initially serve as registrar (in such capacity, the
"Certificate Registrar") for purposes of recording and otherwise providing for
the registration of the Offered Certificates, and of transfers and exchanges of
the Offered Certificates.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
On the Delivery Date (assuming receipt of all scheduled payments through
the Delivery Date and assuming there are no prepayments other than those
actually received prior to the Delivery Date), the respective classes of
Certificates described below will have the following characteristics as
described in the immediately below table (in each case, subject to a variance
of plus or minus 10%):
APPROXIMATE
CERTIFICATE PERCENTAGE OF APPROXIMATE
BALANCE OR POOL CREDIT
CLASS NOTIONAL AMOUNT BALANCE SUPPORT
- --------------------- ----------------------- --------------- ------------
A-1 ............... $ 23,000,000 1.991% 14.250%
A-2 ............... $ 34,000,000 2.943% 14.250%
A-3 ............... $ 125,000,000 10.821% 14.250%
A-4 ............... $ 110,000,000 9.522% 14.250%
A-5 ............... $ 414,397,485 35.873% 14.250%
B ................. $ 28,879,200 2.500% 11.750%
C ................. $ 11,551,680 1.000% 10.750%
D ................. $ 24,547,319 2.125% 8.625%
E ................. $ 11,551,680 1.000% 7.625%
A-1A .............. $ 284,159,066 24.599% 14.250%
F ................. $ 15,883,560 1.375% 6.250%
G ................. $ 11,551,680 1.000% 5.250%
H ................. $ 15,883,560 1.375% 3.875%
J ................. $ 4,331,880 0.375% 3.500%
K ................. $ 5,775,840 0.500% 3.000%
L ................. $ 5,775,840 0.500% 2.500%
M ................. $ 4,331,880 0.375% 2.125%
N ................. $ 2,887,920 0.250% 1.875%
O ................. $ 2,887,920 0.250% 1.625%
P ................. $ 18,771,480 1.625% 0.000%
X ................. $1,155,167,990(1) N/A N/A
- ----------------
(1) Notional Amount.
The "Certificate Balance" of any Class of Sequential Pay Certificates
outstanding at any time will be the then aggregate stated principal amount
thereof. On each Distribution Date, the Certificate Balance of each Class of
Sequential Pay Certificates will be reduced by any distributions of principal
actually made on such Class on such Distribution Date, and will be further
reduced by any Realized
S-152
Losses and certain Additional Trust Fund Expenses allocated to such Class on
such Distribution Date. See "--Distributions" and "--Subordination; Allocation
of Losses and Certain Expenses" below.
The Class X Certificates will not have a Certificate Balance. For purposes
of calculating the amount of accrued interest, however, the Class X
Certificates will have a notional amount (a "Notional Amount").
The Notional Amount of the Class X Certificates will equal the aggregate
Certificate Balances of the Sequential Pay Certificates outstanding from time
to time. The total initial Notional Amount of the Class X Certificates will be
approximately $1,155,167,990, although it may be as much as 10% larger or
smaller.
The REMIC Residual Certificates will not have a Certificate Balance or a
Notional Amount.
A Class of Offered Certificates will be considered to be outstanding until
its Certificate Balance is reduced to zero; provided, however, that, under very
limited circumstances, reimbursement of any previously allocated Realized
Losses and Additional Trust Fund Expenses may thereafter be made with respect
thereto.
For purposes of calculating the allocation of collections on the CC
Component Mortgage Loan between the CC Senior Component, on the one hand, and
the CC Subordinate Components on the other hand, the CC Senior Component will
be deemed to have a principal balance (the "CC Senior Balance") and each CC
Subordinate Component will be deemed to have a principal balance (each, a "CC
Subordinate Balance") equal to the amounts described under "Description of the
Mortgage Pool--CC Component Mortgage Loan". The CC Senior Component will accrue
interest during each interest accrual period on the amount of the CC Senior
Balance thereof outstanding immediately prior to the related Distribution Date
at a per annum rate equal to approximately 5.23172577464479% as of the
commencement of such interest accrual period. The CC Subordinate Components
will accrue interest during each interest accrual period on the amount of the
related CC Subordinate Balances thereof outstanding immediately prior to the
related Distribution Date at a per annum rate equal to the Pass-Through Rate in
effect for the related Class of Class CC Certificates as of the commencement of
such interest accrual period. The CC Senior Balance will be reduced on each
Distribution Date by all distributions of principal made in respect thereof on
such Distribution Date as described under "Description of the Certificates --
Distributions -- Class CC Certificates and the CC Component Mortgage Loan," and
the CC Subordinate Balances will be reduced on each Distribution Date by all
distributions of principal made in respect thereof on such Distribution Date as
described under "Description of the Certificates -- Distributions -- Class CC
Certificates and the CC Component Mortgage Loan."
For purposes of calculating the allocation of collections on the SS
Component Mortgage Loan between the SS Senior Component, on the one hand, and
the SS Subordinate Components on the other hand, the SS Senior Component will
be deemed to have a principal balance (the "SS Senior Balance") and each SS
Subordinate Component will be deemed to have a principal balance (each, a "SS
Subordinate Balance") equal to the amounts described under "Description of the
Mortgage Pool -- SS Component Mortgage Loan". The SS Senior Component will
accrue interest during each interest accrual period on the amount of the SS
Senior Balance thereof outstanding immediately prior to the related
Distribution Date at a per annum rate equal to approximately 5.24724493342123%
as of the commencement of such interest accrual period. The SS Subordinate
Components will accrue interest during each interest accrual period on the
amount of the related SS Subordinate Balances thereof outstanding immediately
prior to the related Distribution Date at a per annum rate equal to the
Pass-Through Rate in effect for the related Class of Class SS Certificates as
of the commencement of such interest accrual period. The SS Senior Balance will
be reduced on each Distribution Date by all distributions of principal made in
respect thereof on such Distribution Date as described under "Description of
the Certificates -- Distributions -- Class SS Certificates and the SS Component
Mortgage Loan," and the SS Subordinate Balances will be reduced on each
S-153
Distribution Date by all distributions of principal made in respect thereof on
such Distribution Date as described under "Description of the Certificates --
Distributions -- Class SS Certificates and the SS Component Mortgage Loan."
For purposes of calculating the allocation of collections on the UH
Component Mortgage Loan between the UH Senior Component, on the one hand, and
the UH Subordinate Components on the other hand, the UH Senior Component will
be deemed to have a principal balance (the "UH Senior Balance") and each UH
Subordinate Component will be deemed to have a principal balance (each, a "UH
Subordinate Balance") equal to the amounts described under "Description of the
Mortgage Pool -- UH Component Mortgage Loan". The UH Senior Component will
accrue interest during each interest accrual period on the amount of the UH
Senior Balance thereof outstanding immediately prior to the related
Distribution Date at a per annum rate equal to approximately 6.84458095976106%
as of the commencement of such interest accrual period. The UH Subordinate
Components will accrue interest during each interest accrual period on the
amount of the related UH Subordinate Balances thereof outstanding immediately
prior to the related Distribution Date at a per annum rate equal to the
Pass-Through Rate in effect for the related Class of Class UH Certificates as
of the commencement of such interest accrual period. The UH Senior Balance will
be reduced on each Distribution Date by all distributions of principal made in
respect thereof on such Distribution Date as described under "Description of
the Certificates -- Distributions -- Class UH Certificates and the UH Component
Mortgage Loan," and the UH Subordinate Balances will be reduced on each
Distribution Date by all distributions of principal made in respect thereof on
such Distribution Date as described under "Description of the Certificates --
Distributions -- Class UH Certificates and the UH Component Mortgage Loan."
PASS-THROUGH RATES
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class A-3
and Class A-4 Certificates on any Distribution Date will be the Pass-Through
Rates indicated on the cover page of this prospectus supplement.
The Pass-Through Rate applicable to the Class X Certificates for the
initial Distribution Date will equal approximately 0.31064% per annum. The
Pass-Through Rate applicable to the Class X Certificates for any interest
accrual period subsequent to the initial Distribution Date will, in general,
equal the excess, if any, of (1) the Weighted Average Net Mortgage Rate, over
(2) the weighted average of the Pass-Through Rates applicable to all the
classes of Sequential Pay Certificates.
The approximate initial Pass-Through Rates for the Class A-5 Certificates
is a per annum rate equal to 5.4836%. For any subsequent date, the Class A-5
Certificates will accrue interest at the Weighted Average Net Mortgage Rate
less 0.055%.
The approximate initial Pass-Through Rate for each of the Class B, Class
C, Class D, Class E, Class F, Class G and Class H Certificates is a per annum
rate equal to 5.5386%. For any subsequent date, the Class B, Class C, Class D,
Class E, Class F, Class G and Class H Certificates will accrue interest at the
Weighted Average Net Mortgage Rate.
The Pass-Through Rate for the Class A-1A, Class J, Class K, Class L, Class
M, Class N, Class O and Class P Certificates will accrue interest at a fixed
per annum rate equal to 5.2070%, 5.1020%, 5.1020%, 5.1020%, 5.1020%, 5.1020%,
5.1020% and 5.1020%, respectively, subject to a cap at the Weighted Average Net
Mortage Rate.
The Pass-Through Rates for the Class CC, Class SS and Class UH
Certificates will be set forth in the Pooling Agreement.
The Class P Certificates and only the Class P Certificates will be
entitled to receive distributions in respect of Excess Interest.
"Weighted Average Net Mortgage Rate" for any Distribution Date means the
weighted average of the Net Mortgage Rates for all the Mortgage Loans
(excluding the interest rates and principal
S-154
balances of the CC Subordinate Components, the SS Subordinate Components and
the UH Subordinate Components) immediately following the preceding Distribution
Date (weighted on the basis of their respective Stated Principal Balances (as
defined in this prospectus supplement) (excluding the principal balances of the
CC Subordinate Components, the SS Subordinate Components and the UH Subordinate
Components) immediately following the preceding Distribution Date).
The "Net Mortgage Rate" with respect to any Mortgage Loan (or, in the case
of the CC Component Mortgage Loan, the SS Component Mortgage Loan, and the UH
Component Mortgage Loan, the related Senior Component) is, in general, a per
annum rate equal to the related Mortgage Rate minus the Administrative Fee
Rate, with respect to the CC Senior Component, approximately 5.180% per annum,
with respect to the SS Senior Component, approximately 5.195% per annum, and
with respect to the UH Senior Component, approximately 6.733% per annum, minus
the Administrative Fee Rate; provided, however, that for purposes of
calculating the Pass-Through Rate for each Class of REMIC II Certificates from
time to time, the Net Mortgage Rate for any Mortgage Loan will be calculated
without regard to any modification, waiver or amendment of the terms of such
Mortgage Loan subsequent to the Delivery Date; and provided, further, however,
that if any Mortgage Loan or Senior Component does not accrue interest on the
basis of a 360-day year consisting of twelve 30-day months, which is the basis
on which interest accrues in respect of the REMIC II Certificates, then the Net
Mortgage Rate of such Mortgage Loan or Senior Component for any one-month
period preceding a related Due Date will be the annualized rate at which
interest would have to accrue in respect of such loan on the basis of a 360-day
year consisting of twelve 30-day months in order to produce the aggregate
amount of interest actually accrued in respect of such loan during such
one-month period at the related Mortgage Rate (net of the related
Administrative Fee Rate); provided, however, that with respect to such Mortgage
Loans or Senior Components, the Mortgage Rate for the one month period (a)
prior to the due dates in January and February in any year which is not a leap
year or in February in any year which is a leap year will be the per annum rate
stated in the related Mortgage Note and (b) prior to the due date in March will
be determined inclusive of one day of interest retained for the one month
period prior to the due dates in January and February in any year which is not
a leap year or February in any year which is a leap year. As of the Cut-off
Date (without regard to the adjustment described above), the Net Mortgage Rates
for the Mortgage Loans ranged from 4.074% per annum to 6.733% per annum, with a
Weighted Average Net Mortgage Rate of 5.361% per annum. See "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of Expenses" in
this prospectus supplement. The "Administrative Fee Rate" is the sum of the
applicable Master Servicing Fee Rate and the per annum rate at which the
monthly Trustee Fee is calculated (as more particularly described in Annex A to
this prospectus supplement).
The "Stated Principal Balance" of each Mortgage Loan will initially equal
the outstanding principal balance of the Mortgage Loans as of the Cut-off Date
and will be permanently reduced (to not less than zero) on each Distribution
Date by (i) any payments or other collections (or advances in lieu thereof) of
principal on such Mortgage Loan that have been distributed on the Certificates
on such date, and (ii) the principal portion of any Realized Loss incurred in
respect of such Mortgage Loan during the related Collection Period.
The "Collection Period" for each Distribution Date is the period that
begins immediately following the Determination Date in the calendar month
preceding the month in which such Distribution Date occurs and ending on and
including the Determination Date in the calendar month in which such
Distribution Date occurs. The first Collection Period applicable to the Offered
Certificates will begin immediately following the Cut-off Date and will end on
the Determination Date in August 2004. The "Determination Date" for each
Distribution Date will be the earlier of (i) the sixth day of the month in
which the related Distribution Date occurs, or if such sixth day is not a
business day, then the immediately preceding business day, and (ii) the fourth
business day prior to the related Distribution Date.
S-155
DISTRIBUTIONS
General. Distributions on or with respect to the Certificates will be made
by the Trustee, to the extent of available funds, on the 10th day of each month
or, if any such 10th day is not a business day, then on the next succeeding
business day (each, a "Distribution Date"). The first Distribution Date with
respect to the Offered Certificates will occur in August 2004. Except as
otherwise described below, all such distributions will be made to the persons
in whose names the Certificates are registered at the close of business on the
related Record Date and, as to each such person, will be made by wire transfer
in immediately available funds to the account specified by the
Certificateholder at a bank or other entity having appropriate facilities
therefor. Until Definitive Certificates are issued in respect thereof, Cede &
Co. will be the registered holder of the Offered Certificates. See
"--Registration and Denominations" above. The final distribution on any
Certificate (determined without regard to any possible future reimbursement of
any Realized Losses or Additional Trust Fund Expense previously allocated to
such Certificate) will be made in like manner, but only upon presentation and
surrender of such Certificate at the location that will be specified in a
notice of the pendency of such final distribution. Any distribution that is to
be made with respect to a Certificate in reimbursement of a Realized Loss or
Additional Trust Fund Expense previously allocated thereto, which reimbursement
is to occur after the date on which such Certificate is surrendered as
contemplated by the preceding sentence (the likelihood of any such distribution
being remote), will be made by check mailed to the Certificateholder that
surrendered such Certificate. All distributions made on or with respect to a
Class of Certificates will be allocated pro rata among such Certificates based
on their respective percentage interests in such Class.
With respect to any Distribution Date and any Class of Certificates, the
"Record Date" will be the last business day of the calendar month immediately
preceding the month in which such Distribution Date occurs.
Class CC Certificates and the CC Component Mortgage Loan. Each Class of
Class CC Certificates will be entitled only to distributions from amounts
collected on the CC Component Mortgage Loan, and only in the priority set forth
below. All collections of principal and interest on the CC Component Mortgage
Loan (including on the CC Subordinate Components thereof) received by the
Master Servicer during any Collection Period (net of any portion allocable to
reimburse any outstanding P&I Advances and Servicing Advances, or pay any
Master Servicing Fees, Special Servicing Fees, Trustee Fees, Workout Fees,
Liquidation Fees, interest on Advances and any other Additional Trust Fund
Expenses, in respect of the CC Component Mortgage Loan (including on the CC
Subordinate Components thereof)), will be remitted to the Trustee on the Master
Servicer Remittance Date and applied by the Trustee on the related Distribution
Date, together with any P&I Advance or payment by the Master Servicer to cover
Prepayment Interest Shortfalls made in respect of such Mortgage Loan, for the
following purposes and in the following order of priority:
(i) to the Trustee for the benefit of the REMIC II Certificateholders as
part of the Available Distribution Amount for such Distribution Date, up to
an amount equal to all CC Component Distributable Interest in respect of
the CC Senior Component for such Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates;
(ii) to the Trustee for the benefit of the REMIC II Certificateholders
as part of the Available Distribution Amount for such Distribution Date, up
to an amount equal to the CC Component Principal Entitlement for the CC
Senior Component for such Distribution Date (the "CC Senior Component
Principal Distribution Amount");
(iii) to the Trustee for the benefit of the REMIC II Certificateholders
as part of the Available Distribution Amount for such Distribution Date, to
reimburse the CC Senior Component for all Realized Losses and Additional
Trust Fund Expenses, if any, previously allocated with respect to the CC
Component Mortgage Loan to the CC Senior Component and for which no
reimbursement has previously been received;
(iv) to pay interest on the CC-A Component, up to an amount equal to all
CC Component Distributable Interest in respect of the CC-A Component for
such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
S-156
(v) to pay principal on the CC-A Component, up to an amount equal to the
CC Component Principal Entitlement for the CC-A Component for such
Distribution Date;
(vi) to reimburse the CC-A Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the CC Component Mortgage Loan to the CC-A Component and for which no
reimbursement has previously been received;
(vii) to pay interest to the CC-B Component, up to an amount equal to
all CC Component Distributable Interest in respect of the CC-B Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(viii) to pay principal on the CC-B Component, up to an amount equal to
the CC Component Principal Entitlement for the CC-B Component for such
Distribution Date;
(ix) to reimburse the holders of the CC-B Component for all Realized
Losses and Additional Trust Fund Expenses, if any, previously allocated
with respect to the CC Component Mortgage Loan to the CC-B Component and
for which no reimbursement has previously been received;
(x) to pay interest to the CC-C Component, up to an amount equal to all
CC Component Distributable Interest in respect of the CC-C Component for
such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xi) to pay principal on the CC-C Component, up to an amount equal to
the CC Component Principal Entitlement for the CC-C Component for such
Distribution Date;
(xii) to reimburse the CC-C Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the CC Component Mortgage Loan to the CC-C Component and for which no
reimbursement has previously been received;
(xiii) to pay interest on the CC-D Component, up to an amount equal to
all CC Component Distributable Interest in respect of the CC-D Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xiv) to pay principal on the CC-D Component, up to an amount equal to
the CC Component Principal Entitlement for the CC-D Component for such
Distribution Date;
(xv) to reimburse the CC-D Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the CC Component Mortgage Loan to the CC-D Component and for which no
reimbursement has previously been received;
(xvi) to pay interest on the CC-E Component, up to an amount equal to
all CC Component Distributable Interest in respect of the CC-E Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xvii) to pay principal on the CC-E Component, up to an amount equal to
the CC Component Principal Entitlement for the CC-E Component for such
Distribution Date;
(xviii) to reimburse the CC-E Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the CC Component Mortgage Loan to the CC-E Component and for which no
reimbursement has previously been received;
(xix) to pay interest on the CC-F Component, up to an amount equal to
all CC Component Distributable Interest in respect of the CC-F Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xx) to pay principal on the CC-F Component, up to an amount equal to
the CC Component Principal Entitlement for the CC-F Component for such
Distribution Date;
(xxi) to reimburse the CC-F Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the CC Component Mortgage Loan to the CC-F Component and for which no
reimbursement has previously been received; and
(xxii) with respect to the CC Component Mortgage Loan, to distribute to
the holders of the Class R-I Certificates any excess after allocation of
the distributions set forth in clauses (i) through (xxi) above.
S-157
All distributions on the CC-A Component, the CC-B Component, the CC-C
Component, the CC-D Component, the CC-E Component and the CC-F Component
referenced in clauses (iv) through (xxi) above shall be made to the
corresponding holders of the Class CC-A Certificates, the Class CC-B
Certificates, the Class CC-C Certificates, the Class CC-D Certificates, the
Class CC-E Certificates and the Class CC-F Certificates, respectively.
The "CC Component Distributable Interest" in respect of the Components is
equal to the CC Accrued Component Interest in respect of each CC Component
reduced by such component's allocable share (calculated as described below) of
any Prepayment Interest Shortfall for such Distribution Date.
The "CC Accrued Component Interest" in respect of the CC Components for
each Distribution Date is equal to one calendar month's interest at the
applicable interest rate (net of the Administrative Fee Rate) for each CC
Component, which in the case of the CC Senior Component is equal to
approximately 5.232% per annum and in the case of the CC-A Component, the CC-B
Component, the CC-C Component, the CC-D Component, the CC-E Component and the
CC-F Component, respectively, is equal to the Pass-Through Rate of the Class
CC-A Certificates, the Class CC-B Certificates, the Class CC-C Certificates,
the Class CC-D Certificates, the Class CC-E Certificates and the Class CC-F
Certificates, respectively.
In the absence of a monetary or other material event of default under the
CC Component Mortgage Loan, principal will be paid on the CC Senior Component
and the CC-A Component, the CC-B Component, the CC-C Component, the CC-D
Component, the CC-E Component and the CC-F Component, pro rata (in accordance
with their respective outstanding principal balances). If any of the events of
default described in the prior sentence exists, principal will be paid first to
the CC Senior Component until its outstanding principal balance is reduced to
zero and then sequentially to each of the CC-A Component, the CC-B Component,
the CC-C Component, the CC-D Component, the CC-E Component and the CC-F
Component until the principal balance of each such component is reduced to
zero. Accordingly the "CC Component Principal Entitlement" with respect to any
Component is (a) prior to any of the events of default described in the first
sentence of this paragraph, an amount equal to such CC Component's pro rata
share of the CC Principal Distribution Amount and (b) after any of the events
of default described in the first sentence of this paragraph, an amount equal
to the lesser of (i) the outstanding principal balance of such CC Component and
(ii) the portion of the CC Principal Distribution Amount remaining after giving
effect to all distributions of higher priority on such Distribution Date.
For purposes of determining the actual amount allocable to principal as
referenced in this paragraph, the payment of principal and interest under the
CC Component Mortgage Loan is based on an interest rate under the whole loan of
5.288% per annum (with the accrual of interest calculated on an Actual/360
Basis), a 30-year amortization term with each respective scheduled monthly
payment made by the borrower calculated on a 30/360 Basis (the "CC Schedule").
The "CC Principal Distribution Amount" for any Distribution Date will, in
general, equal the aggregate of the following:
(a) the principal portions of all Monthly Payments (other than a Balloon
Payment) and any Assumed Monthly Payments due or deemed due, as the case
may be, in respect of the CC Component Mortgage Loan for the Due Date
occurring during the related Collection Period;
(b) all voluntary principal prepayments received on the CC Component
Mortgage Loan during the related Collection Period;
(c) with respect to the CC Component Mortgage Loan if its stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal (exclusive of any voluntary principal prepayment
and any amount described in clause (d) below) made by or on behalf of the
borrower during the related Collection Period, net of any portion of such
payment that represents a recovery of the principal portion of any Monthly
Payment (other than a Balloon Payment) due, or the principal portion of any
Assumed Monthly Payment deemed due, in respect of the CC Component Mortgage
Loan on a Due Date during or prior to the related Collection Period and not
previously recovered;
S-158
(d) all Liquidation Proceeds and Insurance and Condemnation Proceeds
received on the CC Component Mortgage Loan during the related Collection
Period that were identified and applied by the Master Servicer as
recoveries of principal thereof, in each case net of any portion of such
amounts that represents recovery of the principal portion of any Monthly
Payment (other than a Balloon Payment) due, or the principal portion of any
Assumed Monthly Payment deemed due, in respect of the CC Component Mortgage
Loan on a Due Date during or prior to the related Collection Period and not
previously recovered; and
(e) the portion any amount described in clause (e) of the definition of
Principal Distribution Amount, as described in this prospectus supplement
under "-- Principal Distribution Amounts" that is attributable to the CC
Component Mortgage Loan.
Class SS Certificates and the SS Component Mortgage Loan. Each Class of
Class SS Certificates will be entitled only to distributions from amounts
collected on the SS Component Mortgage Loan, and only in the priority set forth
below. All collections of principal and interest on the SS Component Mortgage
Loan (including on the SS Subordinate Components thereof) received by the
Master Servicer during any Collection Period (net of any portion allocable to
reimburse any outstanding P&I Advances and Servicing Advances, or pay any
Master Servicing Fees, Special Servicing Fees, Trustee Fees, Workout Fees,
Liquidation Fees, interest on Advances and any other Additional Trust Fund
Expenses, in respect of the SS Component Mortgage Loan (including on the SS
Subordinate Components thereof)), will be remitted to the Trustee on the Master
Servicer Remittance Date and applied by the Trustee on the related Distribution
Date, together with any P&I Advance or payment by the Master Servicer to cover
Prepayment Interest Shortfalls made in respect of such Mortgage Loan, for the
following purposes and in the following order of priority:
(i) to the Trustee for the benefit of the REMIC II Certificateholders as
part of the Available Distribution Amount for such Distribution Date, up to
an amount equal to all SS Component Distributable Interest in respect of
the SS Senior Component for such Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates;
(ii) to the Trustee for the benefit of the REMIC II Certificateholders
as part of the Available Distribution Amount for such Distribution Date, up
to an amount equal to the SS Component Principal Entitlement for the SS
Senior Component for such Distribution Date (the "SS Senior Component
Principal Distribution Amount");
(iii) to the Trustee for the benefit of the REMIC II Certificateholders
as part of the Available Distribution Amount for such Distribution Date, to
reimburse the SS Senior Component for all Realized Losses and Additional
Trust Fund Expenses, if any, previously allocated with respect to the SS
Component Mortgage Loan to the SS Senior Component and for which no
reimbursement has previously been received;
(iv) to pay interest on the SS-A Component, up to an amount equal to all
SS Component Distributable Interest in respect of the SS-A Component for
such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(v) to pay principal on the SS-A Component, up to an amount equal to the
SS Component Principal Entitlement for the SS-A Component for such
Distribution Date;
(vi) to reimburse the SS-A Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the SS Component Mortgage Loan to the SS-A Component and for which no
reimbursement has previously been received;
(vii) to pay interest to the SS-B Component, up to an amount equal to
all SS Component Distributable Interest in respect of the SS-B Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(viii) to pay principal on the SS-B Component, up to an amount equal to
the SS Component Principal Entitlement for the SS-B Component for such
Distribution Date;
(ix) to reimburse the holders of the SS-B Component for all Realized
Losses and Additional Trust Fund Expenses, if any, previously allocated
with respect to the SS Component Mortgage Loan to the SS-B Component and
for which no reimbursement has previously been received;
S-159
(x) to pay interest to the SS-C Component, up to an amount equal to all
SS Component Distributable Interest in respect of the SS-C Component for
such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xi) to pay principal on the SS-C Component, up to an amount equal to
the SS Component Principal Entitlement for the SS-C Component for such
Distribution Date;
(xii) to reimburse the SS-C Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the SS Component Mortgage Loan to the SS-C Component and for which no
reimbursement has previously been received;
(xiii) to pay interest on the SS-D Component, up to an amount equal to
all SS Component Distributable Interest in respect of the SS-D Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xiv) to pay principal on the SS-D Component, up to an amount equal to
the SS Component Principal Entitlement for the SS-D Component for such
Distribution Date;
(xv) to reimburse the SS-D Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the SS Component Mortgage Loan to the SS-D Component and for which no
reimbursement has previously been received; and
(xvi) with respect to the SS Component Mortgage Loan, to distribute to
the holders of the Class R-I Certificates any excess after allocation of
the distributions set forth in clauses (i) through (xvii) above.
All distributions on the SS-A Component, the SS-B Component, the SS-C
Component, the SS-D Component, SS-E Component, SS-F Component, SS-G Component
and the SS-H Component referenced in clauses (iv) through (xv) above shall be
made to the corresponding holders of the Class SS-A Certificates, the Class
SS-B Certificates, the Class SS-C Certificates and the Class SS-D Certificates,
respectively.
The "SS Component Distributable Interest" in respect of the Components is
equal to the SS Accrued Component Interest in respect of each SS Component
reduced by such component's allocable share (calculated as described below) of
any Prepayment Interest Shortfall for such Distribution Date.
The "SS Accrued Component Interest" in respect of the SS Components for
each Distribution Date is equal to one calendar month's interest at the
applicable interest rate (net of the Administrative Fee Rate) for each SS
Component, which in the case of the SS Senior Component is equal to
approximately 5.247% per annum and in the case of the SS-A Component, the SS-B
Component, the SS-C Component and the SS-D Component, respectively, is equal to
the Pass-Through Rate of the Class SS-A Certificates, the Class SS-B
Certificates, the Class SS-C Certificates and the Class SS-D Certificates,
respectively.
In the absence of a monetary or other material event of default under the
SS Component Mortgage Loan, principal will be paid on the SS Senior Component
and the SS-A Component, the SS-B Component, the SS-C Component and the SS-D
Component, pro rata (in accordance with their respective outstanding principal
balances). If any of the events of default described in the prior sentence
exists, principal will be paid first to the SS Senior Component until its
outstanding principal balance is reduced to zero and then sequentially to each
of the SS-A Component, the SS-B Component, the SS-C Component and the SS-D
Component until the principal balance of each such component is reduced to
zero. Accordingly the "SS Component Principal Entitlement" with respect to any
Component is (a) prior to any of the events of default described in the first
sentence of this paragraph, an amount equal to such SS Component's pro rata
share of the SS Principal Distribution Amount and (b) after any of the events
of default described in the first sentence of this paragraph, an amount equal
to the lesser of (i) the outstanding principal balance of such SS Component and
(ii) the portion of the SS Principal Distribution Amount remaining after giving
effect to all distributions of higher priority on such Distribution Date.
For purposes of determining the actual amount allocable to principal as
referenced in this paragraph, the payment of principal and interest under the
SS Component Mortgage Loan is based
S-160
on an interest rate under the whole loan of 5.877% per annum (with the accrual
of interest calculated on an Actual/360 Basis), a 28-year amortization term
with each respective scheduled monthly payment made by the borrower calculated
on a 30/360 Basis (the "SS Schedule").
The "SS Principal Distribution Amount" for any Distribution Date will, in
general, equal the aggregate of the following:
(a) the principal portions of all Monthly Payments (other than a Balloon
Payment) and any Assumed Monthly Payments due or deemed due, as the case
may be, in respect of the SS Component Mortgage Loan for the Due Date
occurring during the related Collection Period;
(b) all voluntary principal prepayments received on the SS Component
Mortgage Loan during the related Collection Period;
(c) with respect to the SS Component Mortgage Loan if its stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal (exclusive of any voluntary principal prepayment
and any amount described in clause (d) below) made by or on behalf of the
borrower during the related Collection Period, net of any portion of such
payment that represents a recovery of the principal portion of any Monthly
Payment (other than a Balloon Payment) due, or the principal portion of any
Assumed Monthly Payment deemed due, in respect of the SS Component Mortgage
Loan on a Due Date during or prior to the related Collection Period and not
previously recovered;
(d) all Liquidation Proceeds and Insurance and Condemnation Proceeds
received on the SS Component Mortgage Loan during the related Collection
Period that were identified and applied by the Master Servicer as
recoveries of principal thereof, in each case net of any portion of such
amounts that represents recovery of the principal portion of any Monthly
Payment (other than a Balloon Payment) due, or the principal portion of any
Assumed Monthly Payment deemed due, in respect of the SS Component Mortgage
Loan on a Due Date during or prior to the related Collection Period and not
previously recovered; and
(e) the portion any amount described in clause (e) of the definition of
Principal Distribution Amount, as described in this prospectus supplement
under "--Principal Distribution Amounts" that is attributable to the SS
Component Mortgage Loan.
Class UH Certificates and the UH Component Mortgage Loan. Each Class of
Class UH Certificates will be entitled only to distributions from amounts
collected on the UH Component Mortgage Loan, and only in the priority set forth
below. All collections of principal and interest on the UH Component Mortgage
Loan (including on the UH Subordinate Components thereof) received by the
Master Servicer during any Collection Period (net of any portion allocable to
reimburse any outstanding P&I Advances and Servicing Advances, or pay any
Master Servicing Fees, Special Servicing Fees, Trustee Fees, Workout Fees,
Liquidation Fees, interest on Advances and any other Additional Trust Fund
Expenses, in respect of the UH Component Mortgage Loan (including on the UH
Subordinate Components thereof)), will be remitted to the Trustee on the Master
Servicer Remittance Date and applied by the Trustee on the related Distribution
Date, together with any P&I Advance or payment by the Master Servicer to cover
Prepayment Interest Shortfalls made in respect of such Mortgage Loan, for the
following purposes and in the following order of priority:
(i) to the Trustee for the benefit of the REMIC II Certificateholders as
part of the Available Distribution Amount for such Distribution Date, up to
an amount equal to all UH Component Distributable Interest in respect of
the UH Senior Component for such Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates;
(ii) to the Trustee for the benefit of the REMIC II Certificateholders
as part of the Available Distribution Amount for such Distribution Date, up
to an amount equal to the UH Component Principal Entitlement for the UH
Senior Component for such Distribution Date (the "UH Senior Component
Principal Distribution Amount");
(iii) to the Trustee for the benefit of the REMIC II Certificateholders
as part of the Available Distribution Amount for such Distribution Date, to
reimburse the UH Senior Component for all
S-161
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated with respect to the UH Component Mortgage Loan to the UH Senior
Component and for which no reimbursement has previously been received;
(iv) to pay interest on the UH-A Component, up to an amount equal to all
UH Component Distributable Interest in respect of the UH-A Component for
such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(v) to pay principal on the UH-A Component, up to an amount equal to the
UH Component Principal Entitlement for the UH-A Component for such
Distribution Date;
(vi) to reimburse the UH-A Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the UH Component Mortgage Loan to the UH-A Component and for which no
reimbursement has previously been received;
(vii) to pay interest to the UH-B Component, up to an amount equal to
all UH Component Distributable Interest in respect of the UH-B Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(viii) to pay principal on the UH-B Component, up to an amount equal to
the UH Component Principal Entitlement for the UH-B Component for such
Distribution Date;
(ix) to reimburse the holders of the UH-B Component for all Realized
Losses and Additional Trust Fund Expenses, if any, previously allocated
with respect to the UH Component Mortgage Loan to the UH-B Component and
for which no reimbursement has previously been received;
(x) to pay interest to the UH-C Component, up to an amount equal to all
UH Component Distributable Interest in respect of the UH-C Component for
such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xi) to pay principal on the UH-C Component, up to an amount equal to
the UH Component Principal Entitlement for the UH-C Component for such
Distribution Date;
(xii) to reimburse the UH-C Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the UH Component Mortgage Loan to the UH-C Component and for which no
reimbursement has previously been received;
(xiii) to pay interest on the UH-D Component, up to an amount equal to
all UH Component Distributable Interest in respect of the UH-D Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xiv) to pay principal on the UH-D Component, up to an amount equal to
the UH Component Principal Entitlement for the UH-D Component for such
Distribution Date;
(xv) to reimburse the UH-D Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the UH Component Mortgage Loan to the UH-D Component and for which no
reimbursement has previously been received;
(xvi) to pay interest on the UH-E Component, up to an amount equal to
all UH Component Distributable Interest in respect of the UH-E Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xvii) to pay principal on the UH-E Component, up to an amount equal to
the UH Component Principal Entitlement for the UH-E Component for such
Distribution Date;
(xviii) to reimburse the UH-E Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the UH Component Mortgage Loan to the UH-E Component and for which no
reimbursement has previously been received;
(xix) to pay interest on the UH-F Component, up to an amount equal to
all UH Component Distributable Interest in respect of the UH-F Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
S-162
(xx) to pay principal on the UH-F Component, up to an amount equal to
the UH Component Principal Entitlement for the UH-F Component for such
Distribution Date;
(xxi) to reimburse the UH-F Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the UH Component Mortgage Loan to the UH-F Component and for which no
reimbursement has previously been received;
(xxii) to pay interest on the UH-G Component, up to an amount equal to
all UH Component Distributable Interest in respect of the UH-G Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xxiii) to pay principal on the UH-G Component, up to an amount equal to
the UH Component Principal Entitlement for the UH-G Component for such
Distribution Date;
(xxiv) to reimburse the UH-G Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the UH Component Mortgage Loan to the UH-G Component and for which no
reimbursement has previously been received;
(xxv) to pay interest on the UH-H Component, up to an amount equal to
all UH Component Distributable Interest in respect of the UH-H Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xxvi) to pay principal on the UH-H Component, up to an amount equal to
the UH Component Principal Entitlement for the UH-H Component for such
Distribution Date;
(xxvii) to reimburse the UH-H Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the UH Component Mortgage Loan to the UH-H Component and for which no
reimbursement has previously been received;
(xxviii) to pay interest on the UH-J Component, up to an amount equal to
all UH Component Distributable Interest in respect of the UH-J Component
for such Distribution Date and, to the extent not previously paid, for all
prior Distribution Dates;
(xxix) to pay principal on the UH-J Component, up to an amount equal to
the UH Component Principal Entitlement for the UH-J Component for such
Distribution Date;
(xxx) to reimburse the UH-J Component for all Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated with respect
to the UH Component Mortgage Loan to the UH-J Component and for which no
reimbursement has previously been received; and
(xxxi) with respect to the UH Component Mortgage Loan, to distribute to
the holders of the Class R-I Certificates any excess after allocation of
the distributions set forth in clauses (i) through (xxx) above.
All distributions on the UH-A Component, the UH-B Component, the UH-C
Component, the UH-D Component, UH-E Component, UH-F Component, UH-G Component,
UH-H Component and the UH-J Component referenced in clauses (iv) through (xxx)
above shall be made to the corresponding holders of the Class UH-A
Certificates, the Class UH-B Certificates, the Class UH-C Certificates, the
Class UH-D Certificates, UH-E Certificates, UH-F Certificates, UH-G
Certificates, UH-H Certificates and the Class UH-J Certificates, respectively.
The "UH Component Distributable Interest" in respect of the Components is
equal to the UH Accrued Component Interest in respect of each UH Component
reduced by such component's allocable share (calculated as described below) of
any Prepayment Interest Shortfall for such Distribution Date.
The "UH Accrued Component Interest" in respect of the UH Components for
each Distribution Date is equal to one calendar month's interest at the
applicable interest rate (net of the Administrative Fee Rate) for each UH
Component, which in the case of the UH Senior Component is equal to
approximately 6.845% per annum and in the case of the UH-A Component, the UH-B
Component, the UH-C Component, the UH-D Component, UH-E Component, UH-F
Component, UH-G Component, UH-H Component and the UH-J Component, respectively,
is equal to the
S-163
Pass-Through Rate of the Class UH-A Certificates, the Class UH-B Certificates,
the Class UH-C Certificates, the Class UH-D Certificates, UH-E Certificates,
UH-F Certificates, UH-G Certificates, UH-H Certificates and the Class UH-J
Certificates, respectively.
In the absence of a monetary or other material event of default under the
UH Component Mortgage Loan, principal will be paid on the UH Senior Component
and the UH-A Component, the UH-B Component, the UH-C Component, the UH-D
Component, UH-E Component, UH-F Component, UH-G Component, UH-H Component and
the UH-J Component, pro rata (in accordance with their respective outstanding
principal balances). If any of the events of default described in the prior
sentence exists, principal will be paid first to the UH Senior Component until
its outstanding principal balance is reduced to zero and then sequentially to
each of the UH-A Component, the UH-B Component, the UH-C Component, the UH-D
Component, UH-E Component, UH-F Component, UH-G Component, UH-H Component and
the UH-J Component until the principal balance of each such component is
reduced to zero. Accordingly the "UH Component Principal Entitlement" with
respect to any Component is (a) prior to any of the events of default described
in the first sentence of this paragraph, an amount equal to such UH Component's
pro rata share of the UH Principal Distribution Amount and (b) after any of the
events of default described in the first sentence of this paragraph, an amount
equal to the lesser of (i) the outstanding principal balance of such UH
Component and (ii) the portion of the UH Principal Distribution Amount
remaining after giving effect to all distributions of higher priority on such
Distribution Date.
For purposes of determining the actual amount allocable to principal as
referenced in this paragraph, the payment of principal and interest under the
UH Component Mortgage Loan is based on an interest rate under the whole loan of
6.449% per annum (with the accrual of interest calculated on an Actual/360
Basis), a 25-year amortization term with each respective scheduled monthly
payment made by the borrower calculated on a 30/360 Basis (the "UH Schedule").
The "UH Principal Distribution Amount" for any Distribution Date will, in
general, equal the aggregate of the following:
(a) the principal portions of all Monthly Payments (other than a Balloon
Payment) and any Assumed Monthly Payments due or deemed due, as the case
may be, in respect of the UH Component Mortgage Loan for the Due Date
occurring during the related Collection Period;
(b) all voluntary principal prepayments received on the UH Component
Mortgage Loan during the related Collection Period;
(c) with respect to the UH Component Mortgage Loan if its stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal (exclusive of any voluntary principal prepayment
and any amount described in clause (d) below) made by or on behalf of the
borrower during the related Collection Period, net of any portion of such
payment that represents a recovery of the principal portion of any Monthly
Payment (other than a Balloon Payment) due, or the principal portion of any
Assumed Monthly Payment deemed due, in respect of the UH Component Mortgage
Loan on a Due Date during or prior to the related Collection Period and not
previously recovered;
(d) all Liquidation Proceeds and Insurance and Condemnation Proceeds
received on the UH Component Mortgage Loan during the related Collection
Period that were identified and applied by the Master Servicer as
recoveries of principal thereof, in each case net of any portion of such
amounts that represents recovery of the principal portion of any Monthly
Payment (other than a Balloon Payment) due, or the principal portion of any
Assumed Monthly Payment deemed due, in respect of the UH Component Mortgage
Loan on a Due Date during or prior to the related Collection Period and not
previously recovered; and
(e) the portion any amount described in clause (e) of the definition of
Principal Distribution Amount, as described in this prospectus supplement
under "--Principal Distribution Amounts" that is attributable to the UH
Component Mortgage Loan.
S-164
The Available Distribution Amount. With respect to any Distribution Date,
distributions of interest on and principal of the Certificates will be made
from the Available Distribution Amount for such Distribution Date. The
"Available Distribution Amount" for any Distribution Date will, in general,
equal
(a) all amounts on deposit in the Certificate Account as of the close of
business on the related Determination Date, exclusive of any portion
thereof that represents one or more of the following:
(i) Monthly Payments collected but due on a Due Date subsequent to
the related Collection Period;
(ii) any payments of principal and interest, Liquidation Proceeds and
Insurance and Condemnation Proceeds received after the end of the
related Collection Period;
(iii) Prepayment Premiums (which are separately distributable on the
Certificates as hereinafter described);
(iv) Excess Interest (which is distributable solely to the Class P
Certificates as described in this prospectus supplement);
(v) amounts that are payable or reimbursable to any person other than
the Certificateholders (including amounts payable to the Master
Servicer, the Special Servicer, any Sub-Servicers or the Trustee as
compensation (including Trustee Fees, Master Servicing Fees, Special
Servicing Fees, Workout Fees, Liquidation Fees and Default Charges) (to
the extent Default Charges are not otherwise applied to cover interest
on Advances or other expenses), assumption fees and modification fees),
amounts payable in reimbursement of outstanding Advances, together with
interest thereon, and amounts payable in respect of other Additional
Trust Fund Expenses);
(vi) amounts deposited in the Certificate Account in error;
(vii) all funds released from the Excess Liquidation Proceeds Account
with respect to such Distribution Date;
(viii) with respect to each Mortgage Loan which accrues interest on
an Actual/360 Basis and any Distribution Date relating to the one month
period preceding the Distribution Date in each February (and in any
January of a year which is not a leap year), an amount equal to the
related Withheld Amount;
(ix) any amounts distributable to the Class CC Certificates in
respect of the CC Component Mortgage Loan as described in clauses (iv)
through (xviii) under "Description of the
Certificates--Distributions--Class CC Certificates and the CC Component
Mortgage Loan";
(x) any amounts distributable to the Class SS Certificates in respect
of the SS Component Mortgage Loan as described in clauses (iv) through
(xviii) under "Description of the Certificates--Distributions--Class SS
Certificates and the SS Component Mortgage Loan"; and
(xi) any amounts distributable to the Class UH Certificates in
respect of the UH Component Mortgage Loan as described in clauses (iv)
through (xviii) under "Description of the
Certificates--Distributions--Class UH Certificates and the UH Component
Mortgage Loan".
(b) to the extent not already included in clause (a), any P&I Advances
made with respect to such Distribution Date, any Compensating Interest
Payments made by the Master Servicer to cover Prepayment Interest
Shortfalls incurred during the related Collection Period and for the
Distribution Date occurring in each March, the related Withheld Amounts
remitted to the Trustee for distribution to the Certificateholders as
described under "Description of the Certificates--Interest Reserve
Account."
S-165
See "The Pooling and Servicing Agreements--Certificate Account" in the
accompanying prospectus.
Application of the Available Distribution Amount. On each Distribution
Date, the Trustee will apply the Available Distribution Amount for such date
for the following purposes and in the following order of priority:
(1) concurrently, to distributions of interest (i) from the portion of
the Available Distribution Amount for such Distribution Date attributable
to Mortgage Loans in Loan Group 1, to the holders of the Class A-1
Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4
Certificates and Class A-5 Certificates, pro rata, in accordance with the
respective amounts of Distributable Certificate Interest in respect of such
Classes of Certificates on such Distribution Date, in an amount equal to
all Distributable Certificate Interest in respect of such Classes of
Certificates for such Distribution Date and, to the extent not previously
paid, for all prior Distribution Dates, (ii) from the portion of the
Available Distribution Amount for such Distribution Date attributable to
Mortgage Loans in Loan Group 2, to the holders of the Class A-1A
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates, and (iii)
from the entire Available Distribution Amount for such Distribution Date
relating to the entire Mortgage Pool, to the holders of the Class X
Certificates in accordance with the respective amounts of Distributable
Certificate Interest in respect of such Class of Certificates on such
Distribution Date, in an amount equal to all Distributable Certificate
Interest in respect of such Class of Certificates for such Distribution
Date and, to the extent not previously paid, for all prior Distribution
Dates; provided, however, on any Distribution Date where the Available
Distribution Amount (or applicable portion thereof) is not sufficient to
make distributions in full to the related Classes of Certificates as
described above, the Available Distribution Amount will be allocated among
the above Classes of Certificates without regard to Loan Group, pro rata,
in accordance with the respective amounts of Distributable Certificate
Interest in respect of such Classes of Certificates on such Distribution
Date, in an amount equal to all Distributable Certificate Interest in
respect of each such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(2) to pay principal to Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5 and Class A-1A Certificates, in reduction of the Certificate
Balances thereof: (i)(A) first, to the Class A-1 Certificates, in an amount
equal to the Group 1 Principal Distribution Amount for such Distribution
Date and, after the Class A-1A Certificates have been reduced to zero, the
Group 2 Principal Distribution Amount remaining after payments to the Class
A-1A Certificates have been made on such Distribution Date, until the Class
A-1 Certificates are reduced to zero, (B) then, to the Class A-2
Certificates, in an amount equal to the Group 1 Principal Distribution
Amount (or the portion of it remaining after distributions on the Class A-1
Certificates) for such Distribution Date and, after the Class A-1A
Certificates have been reduced to zero, the Group 2 Principal Distribution
Amount remaining after payments to the Class A-1A and Class A-1
Certificates have been made on such Distribution Date, until the Class A-2
Certificates are reduced to zero, (C) then, to the Class A-3 Certificates,
in an amount equal to the Group 1 Principal Distribution Amount (or the
portion of it remaining after distributions on the Class A-1 and Class A-2
Certificates) for such Distribution Date and, after the Class A-1A
Certificates have been reduced to zero, the Group 2 Principal Distribution
Amount remaining after payments to the Class A-1A, Class A-1 and Class A-2
have been made on such Distribution Date, until the Class A-3 Certificates
are reduced to zero, (D) then, to the Class A-4 Certificates, in an amount
equal to the Group 1 Principal Distribution Amount (or the portion of it
remaining after distributions on the Class A-1, Class A-2 and Class A-3
Certificates) for such Distribution Date and, after the Class A-1A
Certificates have been reduced to zero, the Group 2 Principal Distribution
Amount remaining after payments to the Class A-1A, Class A-1, Class A-2 and
Class A-3 Certificates have been made on the Distribution Date, until the
Class A-4 Certificates are reduced to zero and (E) then, to the Class A-5
Certificates, available principal
S-166
received from loan group 1 remaining after distributions in respect of
principal to the Class A-1, Class A-2, Class A-3 and Class A-4 Certificates
and, after the Class A-1A Certificates have been reduced to zero, available
principal received from loan group 2 remaining after payments to the Class
A-1A, Class A-1, Class A-2, Class A-3, and Class A-4 Certificates have been
made, until the principal balance of the Class A-5 Certificates is reduced
to zero; and (ii) to the Class A-1A Certificates, in an amount equal to the
Group 2 Principal Distribution Amount for such Distribution Date and, after
the Class A-5 Certificates have been reduced to zero, the Group 1 Principal
Distribution Amount remaining after payments to the Class A-1, Class A-2,
Class A-3, Class A-4 and Class A-5 Certificates have been made on such
Distribution Date, until the class A-1A Certificates are reduced to zero;
(3) to reimburse the holders of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates and Class A-1A Certificates up to an amount equal to, and pro
rata as among such Classes in accordance with, the respective amounts of
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Classes and for which no reimbursement has previously
been paid; and
(4) to make payments on the other Classes of Certificates (collectively,
the "Subordinate Certificates") as contemplated below;
provided that, on each Distribution Date as of which the aggregate Certificate
Balance of the Subordinate Certificates is to be or has been reduced to zero,
and in any event on the final Distribution Date in connection with a
termination of the Trust (see "--Termination; Retirement of Certificates"
below), the payments of principal to be made as contemplated by clause (2)
above with respect to the Class A-1 Certificates, Class A-2 Certificates, Class
A-3 Certificates, Class A-4 Certificates, Class A-5 Certificates and Class A-1A
Certificates will be so made (subject to available funds) to the holders of
such Classes, up to an amount equal to, and pro rata as between such Classes in
accordance with, the respective then outstanding Certificate Balances of such
Classes.
On each Distribution Date, following the above-described distributions on
the Senior Certificates, the Trustee will apply the remaining portion, if any,
of the Available Distribution Amount for such date for the following purposes
and in the following order of priority:
(1) to pay interest to the holders of the Class B Certificates, up to an
amount equal to all Distributable Certificate Interest in respect of such
Class of Certificates for such Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates;
(2) if the Certificate Balances of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates and Class A-1A Certificates have been reduced to zero, to pay
principal to the holders of the Class B Certificates, up to an amount equal
to the lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date;
(3) to reimburse the holders of the Class B Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been paid;
(4) to pay interest to the holders of the Class C Certificates, up to an
amount equal to all Distributable Certificate Interest in respect of such
Class of Certificates for such Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates;
(5) if the Certificate Balances of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates and Class B Certificates have been
reduced to zero, to pay principal to the holders of the Class C
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
S-167
(6) to reimburse the holders of the Class C Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(7) to pay interest to the holders of the Class D Certificates, up to an
amount equal to all Distributable Certificate Interest in respect of such
Class of Certificates for such Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates;
(8) if the Certificate Balances of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates and Class C
Certificates have been reduced to zero, to pay principal to the holder of
the Class D Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(9) to reimburse the holders of the Class D Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(10) to pay interest to the holders of the Class E Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(11) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates and Class D Certificates have been reduced to zero, to pay
principal to the holders of the Class E Certificates, up to an amount equal
to the lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date;
(12) to reimburse the holders of the Class E Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(13) to pay interest to the holders of the Class F Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(14) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates and Class E Certificates have been
reduced to zero, to pay principal to the holders of the Class F
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(15) to reimburse the holders of the Class F Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(16) to pay interest to the holders of the Class G Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(17) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates and Class F
S-168
Certificates have been reduced to zero, to pay principal to the holders of
the Class G Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(18) to reimburse the holders of the Class G Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(19) to pay interest to the holders of the Class H Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(20) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F
Certificates and Class G Certificates have been reduced to zero, to pay
principal to the holders of the Class H Certificates, up to an amount equal
to the lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date;
(21) to reimburse the holders of the Class H Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(22) to pay interest to the holders of the Class J Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(23) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F
Certificates, Class G Certificates and Class H Certificates have been
reduced to zero, to pay principal to the holders of the Class J
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(24) to reimburse the holders of the Class J Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(25) to pay interest to the holders of the Class K Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(26) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F
Certificates, Class G Certificates, Class H Certificates and Class J
Certificates have been reduced to zero, to pay principal to the holders of
the Class K Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(27) to reimburse the holders of the Class K Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
S-169
(28) to pay interest to the holders of the Class L Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(29) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F
Certificates, Class G Certificates, Class H Certificates, Class J
Certificates and Class K Certificates have been reduced to zero, to pay
principal to the holders of the Class L Certificates, up to an amount equal
to the lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date;
(30) to reimburse the holders of the Class L Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(31) to pay interest to the holders of the Class M Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(32) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F
Certificates, Class G Certificates, Class H Certificates, Class J
Certificates, Class K Certificates and Class L Certificates have been
reduced to zero, to pay principal to the holders of the Class M
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(33) to reimburse the holders of the Class M Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(34) to pay interest to the holders of the Class N Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(35) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F
Certificates, Class G Certificates, Class H Certificates, Class J
Certificates, Class K Certificates, Class L Certificates and Class M
Certificates have been reduced to zero, to pay principal to the holders of
the Class N Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(36) to reimburse the holders of the Class N Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(37) to pay interest to the holders of the Class O Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(38) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F
Certificates,
S-170
Class G Certificates, Class H Certificates, Class J Certificates, Class K
Certificates, Class L Certificates, Class M Certificates and Class N
Certificates have been reduced to zero, to pay principal to the holders of
the Class O Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(39) to reimburse the holders of the Class O Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(40) to pay interest to the holders of the Class P Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(41) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-1A Certificates, Class B Certificates, Class C
Certificates, Class D Certificates, Class E Certificates, Class F
Certificates, Class G Certificates, Class H Certificates, Class J
Certificates, Class K Certificates, Class L Certificates, Class M
Certificates, Class N Certificates and Class O Certificates have been
reduced to zero, to pay principal to the holders of the Class P
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(42) to reimburse the holders of the Class P Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
and
(43) to pay to the holders of the Class R-I Certificates and the Class
R-II Certificates, the balance, if any, of the Available Distribution
Amount in REMIC I and REMIC II, respectively, for such Distribution Date;
provided that, on the final Distribution Date in connection with a termination
of the Trust, the payments of principal to be made as contemplated by any of
clauses (2), (5), (8), (11), (14), (17), (20), (23), (26), (29), (32), (35),
(38) and (41) above with respect to any Class of Sequential Pay Certificates
will be so made (subject to available funds) up to an amount equal to the
entire then outstanding Certificate Balance of such Class of Certificates.
Excess Liquidation Proceeds. Except to the extent Realized Losses or
Additional Trust Fund Expenses have been allocated to any class of
Certificates, Excess Liquidation Proceeds will not be available for
distribution from an account (the "Excess Liquidation Proceeds Reserve
Account") to the Holders of the Certificates. "Excess Liquidation Proceeds" are
the excess of (i) proceeds from the sale or liquidation of a mortgage loan or
REO Property, net of expenses, unpaid servicing compensation and related
Advances and interest on Advances, over (ii) the amount that would have been
received if payment had been made in full on the Due Date immediately following
the date upon which the proceeds were received.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC II Certificates for each
Distribution Date is equal to the Accrued Certificate Interest in respect of
such Class of Certificates for such Distribution Date, reduced by such Class'
allocable share (calculated as described below) of any Net Aggregate Prepayment
Interest Shortfall for such Distribution Date.
The "Accrued Certificate Interest" in respect of each Class of REMIC II
Certificates for each Distribution Date is equal to one calendar month's
interest at the Pass-Through Rate applicable to such Class of Certificates for
such Distribution Date accrued on the related Certificate Balance or Notional
Amount, as the case may be, outstanding immediately prior to such Distribution
Date. Accrued Certificate Interest will be calculated on the basis of a 360-day
year consisting of twelve 30-day months for each of the Classes of
Certificates.
S-171
The Master Servicer will be required to make Compensating Interest
Payments in connection with Prepayment Interest Shortfalls as described in this
prospectus supplement. The "Net Aggregate Prepayment Interest Shortfall" for
any Distribution Date will be the amount, if any, by which (a) the aggregate of
all Prepayment Interest Shortfalls incurred during the related Collection
Period, exceeds (b) any such payment made by the Master Servicer with respect
to such Distribution Date to cover such Prepayment Interest Shortfalls. See
"Servicing of the Mortgage Loans--Servicing and Other Compensation and Payment
of Expenses" in this prospectus supplement. The Net Aggregate Prepayment
Interest Shortfall, if any, for each Distribution Date will be allocated on
such Distribution Date to all classes of Certificates (other than the REMIC
Residual Certificates). In each case, such allocations will be made pro rata to
such classes on the basis of Accrued Certificate Interest otherwise
distributable for each such Class for such Distribution Date and will reduce
the respective amounts of Accrued Certificate Interest for each such Class for
such Distribution Date.
With respect to the CC Component Mortgage Loan, Prepayment Interest
Shortfalls will be allocated in reverse sequential order to the CC Subordinate
Components and then to the CC Senior Component. Compensating Interest Payments
made by the Master Servicer to cover Prepayment Interest Shortfalls with
respect to the CC Component Mortgage Loan for any Distribution Date will be
used first, to cover the Prepayment Interest Shortfalls incurred during the
related Collection Period allocated to the CC Senior Component, and then, to
cover any Prepayment Interest Shortfalls incurred during the related Collection
Period allocated sequentially to the CC Subordinate Components. Any such
Prepayment Interest Shortfalls allocated to the CC Subordinate Components, to
the extent not covered by the Master Servicer on such Distribution Date, will
reduce such CC Subordinate Components' interest entitlement for the related
Distribution Date. Any such Prepayment Interest Shortfalls allocated to the CC
Senior Component, to the extent not covered by the Master Servicer on such
Distribution Date, will be allocated to the Classes of Certificates as
described above.
With respect to the SS Component Mortgage Loan, Prepayment Interest
Shortfalls will be allocated in reverse sequential order to the SS Subordinate
Components and then to the SS Senior Component. Compensating Interest Payments
made by the Master Servicer to cover Prepayment Interest Shortfalls with
respect to the SS Component Mortgage Loan for any Distribution Date will be
used first, to cover the Prepayment Interest Shortfalls incurred during the
related Collection Period allocated to the SS Senior Component, and then, to
cover any Prepayment Interest Shortfalls incurred during the related Collection
Period allocated sequentially to the SS Subordinate Components. Any such
Prepayment Interest Shortfalls allocated to the SS Subordinate Components, to
the extent not covered by the Master Servicer on such Distribution Date, will
reduce such SS Subordinate Components' interest entitlement for the related
Distribution Date. Any such Prepayment Interest Shortfalls allocated to the SS
Senior Component, to the extent not covered by the Master Servicer on such
Distribution Date, will be allocated to the Classes of Certificates as
described above.
With respect to the UH Component Mortgage Loan, Prepayment Interest
Shortfalls will be allocated in reverse sequential order to the UH Subordinate
Components and then to the UH Senior Component. Compensating Interest Payments
made by the Master Servicer to cover Prepayment Interest Shortfalls with
respect to the UH Component Mortgage Loan for any Distribution Date will be
used first, to cover the Prepayment Interest Shortfalls incurred during the
related Collection Period allocated to the UH Senior Component, and then, to
cover any Prepayment Interest Shortfalls incurred during the related Collection
Period allocated sequentially to the UH Subordinate Components. Any such
Prepayment Interest Shortfalls allocated to the UH Subordinate Components, to
the extent not covered by the Master Servicer on such Distribution Date, will
reduce such UH Subordinate Components' interest entitlement for the related
Distribution Date. Any such Prepayment Interest Shortfalls allocated to the UH
Senior Component, to the extent not covered by the Master Servicer on such
Distribution Date, will be allocated to the Classes of Certificates as
described above.
Principal Distribution Amount. So long as both the Class A-5 and Class
A-1A Certificates remain outstanding, the Principal Distribution Amount for
each Distribution Date will be calculated on a
S-172
Loan Group-by-Loan Group basis (the "Group 1 Principal Distribution Amount" and
"Group 2 Principal Distribution Amount," respectively). On each Distribution
Date after the Certificate Balances of either the Class A-5 or Class A-1A
Certificates have been reduced to zero, a single Principal Distribution Amount
will be calculated in the aggregate for both Loan Groups. The "Principal
Distribution Amount" for any Distribution Date will, in general with respect to
a Loan Group or the Mortgage Pool, equal the aggregate of the following
(excluding, (1) except with respect to clause (f) below, any amounts received
in respect of the CC Component Mortgage Loan, (2) except with respect to clause
(g) below, any amounts received in respect of the SS Component Mortgage Loan,
and (3) except with respect to clause (h) below, any amounts received in
respect of the UH Component Mortgage Loan):
(a) the principal portions of all Monthly Payments (other than Balloon
Payments) and any Assumed Monthly Payments due or deemed due, as the case
may be, in respect of the Mortgage Loans in the Mortgage Pool or in such
Loan Group, as applicable for their respective Due Dates occurring during
the related Collection Period;
(b) all voluntary principal prepayments received on the Mortgage Loans
in the Mortgage Pool or in such Loan Group, as applicable during the
related Collection Period;
(c) with respect to any Balloon Loan in the Mortgage Pool or in such
Loan Group, as applicable as to which the related stated maturity date
occurred during or prior to the related Collection Period, any payment of
principal (exclusive of any voluntary principal prepayment and any amount
described in clause (d) below) made by or on behalf of the related borrower
during the related Collection Period, net of any portion of such payment
that represents a recovery of the principal portion of any Monthly Payment
(other than a Balloon Payment) due, or the principal portion of any Assumed
Monthly Payment deemed due, in respect of such Mortgage Loan on a Due Date
during or prior to the related Collection Period and not previously
recovered;
(d) all Liquidation Proceeds and Insurance and Condemnation Proceeds
received on the Mortgage Loans in the Mortgage Pool or in such Loan Group,
as applicable during the related Collection Period that were identified and
applied by the Master Servicer as recoveries of principal thereof, in each
case net of any portion of such amounts that represents a recovery of the
principal portion of any Monthly Payment (other than a Balloon Payment)
due, or the principal portion of any Assumed Monthly Payment deemed due, in
respect of the related Mortgage Loan on a Due Date during or prior to the
related Collection Period and not previously recovered;
(e) the excess, if any, of (i) the Group 1 Principal Distribution
Amount, the Group 2 Principal Distribution Amount and Principal
Distribution Amount, as the case may be for the immediately preceding
Distribution Date, over (ii) the aggregate distributions of principal made
on the Sequential Pay Certificates in respect of such Group 1 Principal
Distribution Amount, the Group 2 Principal Distribution Amount and the
Principal Distribution Amount, as the case may be on such immediately
preceding Distribution Date;
(f) with respect to the CC Component Mortgage Loan, the CC Senior
Component Principal Distribution Amount for such Distribution Date;
(g) with respect to the SS Component Mortgage Loan, the SS Senior
Component Principal Distribution Amount for such Distribution Date; and
(h) with respect to the UH Component Mortgage Loan, the UH Senior
Component Principal Distribution Amount for such Distribution Date.
For purposes of the foregoing, the Monthly Payment due on any Mortgage
Loan on any related Due Date will reflect any waiver, modification or amendment
of the terms of such Mortgage Loan, whether agreed to by the Master Servicer or
Special Servicer or resulting from a bankruptcy, insolvency or similar
proceeding involving the related borrower.
S-173
Notwithstanding the foregoing, unless otherwise noted, where Principal
Distribution Amount is used in this prospectus supplement without specific
reference to any Loan Group, it refers to the Principal Distribution Amount
with respect to the entire Mortgage Pool.
An "Assumed Monthly Payment" is an amount deemed due in respect of: (i)
any Mortgage Loan that is delinquent in respect of its Balloon Payment beyond
the first Determination Date that follows its stated maturity date and as to
which no arrangements have been agreed to for collection of the delinquent
amounts; or (ii) any Mortgage Loan as to which the related Mortgaged Property
has become an REO Property. The Assumed Monthly Payment deemed due on any such
Mortgage Loan delinquent as to its Balloon Payment, for its stated maturity
date and for each successive Due Date that it remains outstanding, will equal
the Monthly Payment that would have been due thereon on such date if the
related Balloon Payment had not come due, but rather such Mortgage Loan had
continued to amortize in accordance with its amortization schedule, if any, in
effect immediately prior to maturity and had continued to accrue interest in
accordance with such loan's terms in effect immediately prior to maturity. The
Assumed Monthly Payment deemed due on any such Mortgage Loan as to which the
related Mortgaged Property has become an REO Property, for each Due Date that
such REO Property remains part of the Trust Fund, will equal the Monthly
Payment (or, in the case of a Mortgage Loan delinquent in respect of its
Balloon Payment as described in the prior sentence, the Assumed Monthly
Payment) due on the last Due Date prior to the acquisition of such REO
Property.
Excess Interest. On each Distribution Date, Excess Interest received in
the related Collection Period will be distributed solely to the Class P
Certificates to the extent set forth in the Pooling Agreement, and will not be
available for distribution to holders of the Offered Certificates.
Distributions of Prepayment Premiums. On each Distribution Date,
Prepayment Premiums collected on the Mortgage Loans included in Loan Group 1
during the related Prepayment Period will be distributed by the Trustee to the
following Classes: to the Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class B, Class C, Class D, Class E, Class F, Class G and Class H
Certificates, in an amount equal to the product of (a) a fraction, not greater
than 1, whose numerator is the amount distributed as principal to such Class on
such Distribution Date, and whose denominator is the total amount distributed
as principal to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5,
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class
K, Class L, Class M, Class N, Class O and Class P Certificates on such
Distribution Date, (b) the Base Interest Fraction for the related principal
payment on such Class of Certificates, and (c) the amount of Prepayment Premium
collected on such principal prepayment during the related Prepayment Period.
Any Prepayment Premiums collected during the related Prepayment Period
remaining after such distributions will be distributed to the holders of the
Class X Certificates.
On each Distribution Date, Prepayment Premiums collected in respect of
Mortgage Loans included in Loan Group 2 during the related Prepayment Period
will be required to be distributed by the Trustee to the holders of the Class
A-1A Certificates in the following manner: Such holders will receive the
product of (a) a fraction whose numerator is the amount of principal
distributed to such Class on such Distribution Date and whose denominator is
the total amount of principal payments received in respect of such Distribution
Date for all mortgage loans included in Loan Group 2 on such Distribution Date,
(b) the Base Interest Fraction for the related principal prepayment and such
Class of Certificates and (c) the Prepayment Premiums collected on such
principal prepayment during the related Prepayment Period. Any Prepayment
Premiums collected during the related Prepayment Period remaining after such
distributions shall be distributed to the holders of the Class X Certificates.
No Prepayment Premiums in respect of Mortgage Loans included in Loan Group 2
will be distributed to holders of any other Class of Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any class of Offered Certificates is a
fraction (a) whose numerator is the amount, if any, by which (i) the
Pass-Through Rate on such Class of Certificates exceeds (ii) the discount rate
used in accordance with the related Mortgage Loan documents in calculating the
Prepayment Premium with respect to such principal prepayment and (b) whose
denominator is the amount, if
S-174
any, by which (i) the Mortgage Rate on such Mortgage Loan exceeds (ii) the
discount rate used in accordance with the related Mortgage Loan documents in
calculating the yield maintenance charge with respect to such principal
prepayment. However, under no circumstances shall the Base Interest Fraction be
greater than one. If such discount rate is greater than or equal to the lesser
of (x) the Mortgage Rate on such Mortgage Loan and (y) the Pass-Through Rate
described in the preceding sentence, then the Base Interest Fraction will equal
zero.
No Prepayment Premiums will be distributed to the holders of the Class J,
Class K, Class L, Class M, Class N, Class O or Class P Certificates. Instead,
after the Certificate Balances of the Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-1A, Class B, Class C, Class D, Class E, Class F, Class
G and Class H Certificates have been reduced to zero, all prepayment premiums
and yield maintenance charges with respect to the Mortgage Loans will be
distributed to the holders of the Class X Certificates.
Prepayment Premiums will be distributed on any Distribution Date only to
the extent they are received in respect of the Mortgage Loans in the related
Prepayment Period.
The Depositor makes no representation as to the enforceability of the
provision of any Mortgage Note requiring the payment of a Prepayment Premium or
of the collectibility of any Prepayment Premium. See "Description of the
Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" and "Risk Factors--Risks Related to the Mortgage Loans-- Prepayment
Premiums" in this prospectus supplement.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated, for
purposes of, among other things, determining distributions on the Certificates,
allocations of Realized Losses and Additional Trust Fund Expenses to the
Certificates, and the amount of Master Servicing Fees, Special Servicing Fees
and Trustee Fees payable under the Pooling Agreement, as having remained
outstanding until such REO Property is liquidated. Among other things, such
Mortgage Loan will be taken into account when determining the Principal
Distribution Amount for each Distribution Date. In connection therewith,
operating revenues and other proceeds derived from such REO Property (after
application thereof to pay certain costs and taxes, including certain
reimbursements payable to the Master Servicer, the Special Servicer and/or the
Trustee, incurred in connection with the operation and disposition of such REO
Property) will be "applied" by the Master Servicer as principal, interest and
other amounts "due" on such Mortgage Loan; and, subject to the recoverability
determination described below (see "--P&I Advances"), the Master Servicer and
the Trustee will be required to make P&I Advances in respect of such Mortgage
Loan, in all cases as if such Mortgage Loan had remained outstanding.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
As and to the extent described herein, the rights of holders of the
Subordinate Certificates to receive distributions of amounts collected or
advanced on the Mortgage Loans will, in the case of each Class thereof, be
subordinated to the rights of holders of the Senior Certificates and, further,
to the rights of holders of each other Class of Subordinate Certificates, if
any, with an earlier alphabetical Class designation. This subordination
provided by the Subordinate Certificates is intended to enhance the likelihood
of timely receipt by holders of the respective Classes of Senior Certificates
of the full amount of Distributable Certificate Interest payable in respect of
their Certificates on each Distribution Date, and the ultimate receipt by
holders of the Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates, Class A-4 Certificates, Class A-5 Certificates, and Class A-1A
Certificates, of principal equal to, in each such case, the entire related
Certificate Balance. Similarly, but to decreasing degrees, this subordination
is also intended to enhance the likelihood of timely receipt by holders of the
other Classes of Offered Certificates of the full amount of Distributable
Certificate Interest payable in respect of their Certificates on each
Distribution Date, and the ultimate receipt by holders of the other Classes of
Offered Certificates of principal equal to, in each such case, the entire
related Certificate Balance. The subordination of any Class of Subordinate
Certificates will be accomplished by, among other things, the application of
the
S-175
Available Distribution Amount on each Distribution Date in the order of
priority described under "--Distributions--The Available Distribution Amount"
above. No other form of credit support will be available for the benefit of
holders of the Offered Certificates.
Each CC Subordinate Component, and thus the related Class of Class CC
Certificates, will represent interests in, and will be payable only out of
payments, advances and other collections on, the CC Component Mortgage Loan.
The rights of the holders of the Class CC Certificates to receive distributions
of amounts collected or advanced on the CC Component Mortgage Loan will be
subordinated, to the extent described in this prospectus supplement, to the
rights of the holders of the REMIC II Certificates. Each SS Subordinate
Component, and thus the related Class of Class SS Certificates, will represent
interests in, and will be payable only out of payments, advances and other
collections on, the SS Component Mortgage Loan. The rights of the holders of
the Class SS Certificates to receive distributions of amounts collected or
advanced on the SS Component Mortgage Loan will be subordinated, to the extent
described in this prospectus supplement, to the rights of the holders of the
REMIC II Certificates. Each UH Subordinate Component, and thus the related
Class of Class UH Certificates, will represent interests in, and will be
payable only out of payments, advances and other collections on, the UH
Component Mortgage Loan. The rights of the holders of the Class UH Certificates
to receive distributions of amounts collected or advanced on the UH Component
Mortgage Loan will be subordinated, to the extent described in this prospectus
supplement, to the rights of the holders of the REMIC II Certificates.
This subordination provided by the Subordinate Certificates and, to the
extent described herein, with respect to the related Mortgage Loans, the Class
CC Certificates, the Class SS Certificates and the Class UH Certificates is
intended to enhance the likelihood of timely receipt by holders of the
respective Classes of Senior Certificates of the full amount of Distributable
Certificate Interest payable in respect of their Certificates on each
Distribution Date, and the ultimate receipt by holders of the Class A-1
Certificates, Class A-2 Certificates, Class A-3 Certificates, Class A-4
Certificates, Class A-5 Certificates, and Class A-1A Certificates, of principal
equal to, in each such case, the entire related Certificate Balance. Similarly,
but to decreasing degrees, this subordination is also intended to enhance the
likelihood of timely receipt by holders of the other Classes of Offered
Certificates of the full amount of Distributable Certificate Interest payable
in respect of their Certificates on each Distribution Date, and the ultimate
receipt by holders of the other Classes of Offered Certificates of principal
equal to, in each such case, the entire related Certificate Balance. The
subordination of any Class of Subordinate Certificates will be accomplished by,
among other things, the application of the Available Distribution Amount on
each Distribution Date in the order of priority described under
"--Distributions--The Available Distribution Amount" above. No other form of
credit support will be available for the benefit of holders of the Offered
Certificates. If, following the distributions to be made in respect of the
Certificates on any Distribution Date, the aggregate Stated Principal Balance
of the Mortgage Pool that will be outstanding immediately following such
Distribution Date minus the then outstanding CC Subordinate Balance, the then
outstanding SS Subordinate Balance and the then outstanding UH Subordinate
Balance, is less than the then aggregate Certificate Balance of the Sequential
Pay Certificates, the Certificate Balances of the Class P, Class O, Class N,
Class M, Class L, Class K, Class J, Class H, Class G, Class F, Class E, Class
D, Class C and Class B Certificates will be reduced, sequentially in that
order, in the case of each such Class until such deficit (or the related
Certificate Balance) is reduced to zero (whichever occurs first) provided,
however, that (i) any Realized Losses with respect to the CC Component Mortgage
Loan will first be allocated in reverse sequential order to the CC Subordinate
Components, prior to being allocated to any Class of Sequential Pay
Certificates, (ii) any Realized Losses with respect to the SS Component
Mortgage Loan will first be allocated in reverse sequential order to the SS
Subordinate Components, prior to being allocated to any Class of Sequential Pay
Certificates, and (iii) any Realized Losses with respect to the UH Component
Mortgage Loan will first be allocated in reverse sequential order to the UH
Subordinate Components, prior to being allocated to any Class of Sequential Pay
Certificates. If any portion of such deficit remains at such time as the
Certificate Balances of such Classes of Certificates are reduced to zero, then
the respective Certificate Balances of the Class A-1 Certificates, Class A-2
Certificates Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, and Class A-1A
S-176
Certificates will be reduced, pro rata in accordance with the relative sizes of
the remaining Certificate Balances of such Classes until such deficit (or each
such Certificate Balance) is reduced to zero. Any such deficit will, in
general, be the result of Realized Losses incurred in respect of the Mortgage
Loans and/or Additional Trust Fund Expenses to the extent paid from funds which
would otherwise have been used to make distributions of principal. Accordingly,
the foregoing reductions in the Certificate Balances of the respective Classes
of the Sequential Pay Certificates will constitute an allocation of any such
Realized Losses and Additional Trust Fund Expenses. Realized Losses and
Additional Trust Fund Expenses with respect to the CC Component Mortgage Loan
will first be allocated to the CC Subordinate Components (and thus, the related
Class of Class CC Certificates) in reverse sequential order prior to being
allocated to the CC Senior Component (and thus, the Sequential Pay
Certificates). Realized Losses and Additional Trust Fund Expenses with respect
to the SS Component Mortgage Loan will first be allocated to the SS Subordinate
Components (and thus, the related Class of Class SS Certificates) in reverse
sequential order prior to being allocated to the SS Senior Component (and thus,
the Sequential Pay Certificates). Realized Losses and Additional Trust Fund
Expenses with respect to the UH Component Mortgage Loan will first be allocated
to the UH Subordinate Components (and thus, the related Class of Class UH
Certificates) in reverse sequential order prior to being allocated to the UH
Senior Component (and thus, the Sequential Pay Certificates).
"Realized Losses" are losses on or in respect of the Mortgage Loans, the
17 State Street Whole Loan or the CBA Whole Loan arising from the inability of
the Master Servicer and/or the Special Servicer to collect all amounts due and
owing under any such Mortgage Loan, including by reason of the fraud or
bankruptcy of a borrower or a casualty of any nature at a Mortgaged Property,
to the extent not covered by insurance. The Realized Loss in respect of any
Defaulted Mortgage Loan (or any Mortgage Loan, the 17 State Street Whole Loan
or the CBA Whole Loan as to which the related Mortgaged Property has become an
REO Property (an "REO Loan")) as to which a final recovery determination has
been made is an amount generally equal to (i) the unpaid principal balance of
such Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole Loan (or
REO Loan) as of the Due Date related to the Collection Period in which the
final recovery determination was made, plus (ii) all accrued but unpaid
interest (excluding Excess Interest) on such Mortgage Loan (or REO Loan) at the
related Mortgage Rate to but not including the Due Date related to the
Collection Period in which the final recovery determination was made, plus
(iii) any related unreimbursed Servicing Advances as of the commencement of the
Collection Period in which the final recovery determination was made, together
with any new related Servicing Advances made during such Collection Period,
minus (iv) all payments and proceeds, if any, received in respect of such
Collection Period related to the Mortgage Loan, the 17 State Street Whole Loan
or the CBA Whole Loan (or REO Loan) during the Collection Period in which such
final recovery determination was made (net of any related Liquidation Expenses
paid therefrom). If any portion of the debt due under a Mortgage Loan, the 17
State Street Whole Loan or the CBA Whole Loan is forgiven, whether in
connection with a modification, waiver or amendment granted or agreed to by the
Master Servicer or the Special Servicer or in connection with the bankruptcy or
similar proceeding involving the related borrower, the amount so forgiven also
will be treated as a Realized Loss.
"Additional Trust Fund Expenses" include, among other things, (i) all
Special Servicing Fees, Workout Fees and Liquidation Fees paid to the Special
Servicer, (ii) any interest paid to the Master Servicer, the Special Servicer
and/or the Trustee in respect of unreimbursed Advances, (iii) the cost of
various opinions of counsel required or permitted to be obtained in connection
with the servicing of the Mortgage Loans and the administration of the Trust
Fund, (iv) property inspection costs incurred by the Special Servicer for
Specially Serviced Mortgage Loans to the extent paid out of general
collections, (v) certain unanticipated, non-Mortgage Loan specific expenses of
the Trust, including certain reimbursements and indemnifications to the Trustee
as described under "The Trustee--Indemnification" and under "The Pooling and
Servicing Agreements--Certain Matters Regarding the Trustee" in the
accompanying prospectus, certain reimbursements to the Master Servicer, the
Special Servicer, the REMIC Administrator and the Depositor as described under
"The Pooling and Servicing Agreements--Certain Matters Regarding the Master
Servicer, the Special
S-177
Servicer, the REMIC Administrator and the Depositor" in the accompanying
prospectus and certain federal, state and local taxes, and certain tax-related
expenses, payable out of the Trust Fund as described under "Certain Federal
Income Tax Consequences--Possible Taxes on Income From Foreclosure Property and
Other Taxes" herein and "Certain Federal Income Tax Consequences--
REMICs--Prohibited Transactions Tax and Other Taxes" in the accompanying
prospectus, (vi) if not advanced by the Master Servicer, any amounts expended
on behalf of the Trust to remediate an adverse environmental condition at any
Mortgaged Property securing a Defaulted Mortgage Loan (see "The Pooling and
Servicing Agreements--Realization Upon Defaulted Mortgage Loans" in the
accompanying prospectus), and (vii) any other expense of the Trust Fund not
specifically included in the calculation of "Realized Loss" for which there is
no corresponding collection from a borrower. Additional Trust Fund Expenses
will reduce amounts payable to Certificateholders and, consequently, may result
in a loss on the Offered Certificates.
EXCESS INTEREST DISTRIBUTION ACCOUNT
The Trustee is required to establish and maintain an "Excess Interest
Distribution Account" (which may be a sub-account of the Distribution Account)
in the name of the Trustee for the benefit of the Class P Certificateholders.
Prior to the applicable Distribution Date, the Master Servicer is required to
remit to the Trustee for deposit into the Excess Interest Distribution Account
an amount equal to the Excess Interest received during the related Collection
Period. Amounts on deposit in the Excess Interest Distribution Account may be
invested only in Permitted Investments. The Trustee will have no obligation to
invest the funds on deposit in the Excess Interest Distribution Account.
INTEREST RESERVE ACCOUNT
The Master Servicer will be required to establish and maintain an
"Interest Reserve Account" (which may be a sub-account of the Certificate
Account) in the name of the Trustee for the benefit of the holders of the
Certificates. On each Master Servicer Remittance Date occurring in February and
in January of any year which is not a leap year, an amount will be required to
be withdrawn from the Certificate Account, in respect of each Mortgage Loan,
other than the Subordinate Components of the CC Component Mortgage Loan, the SS
Component Mortgage Loan, and the UH Component Mortgage Loan, that accrues
interest on an Actual/360 Basis, for deposit into the Interest Reserve Account,
equal to one day's interest at the related Net Mortgage Rate on the respective
Stated Principal Balance, as of the Due Date in the month preceding the month
in which such Master Servicer Remittance Date occurs, of each such Mortgage
Loan, to the extent a Monthly Payment or P&I Advance is made in respect thereof
(all amounts so withdrawn in any consecutive January (if applicable) and
February, the "Withheld Amount"). The "Master Servicer Remittance Date" for any
month is the business day preceding each Distribution Date. On each Master
Servicer Remittance Date occurring in March, the Master Servicer will be
required to withdraw from the Interest Reserve Account an amount equal to the
Withheld Amounts from the preceding January (if applicable) and February, if
any, and deposit such amount into the Certificate Account. The Master Servicer
may invest amounts on deposit in the Interest Reserve Account in Permitted
Investments for its own account.
P&I ADVANCES
With respect to each Distribution Date, the Master Servicer will be
obligated, subject to the recoverability determination described below, to make
advances (each, a "P&I Advance") out of its own funds or, subject to the
replacement thereof as and to the extent provided in the Pooling Agreement,
funds held in the Certificate Account (or with respect to the 17 State Street
Whole Loan or the CBA Whole Loan, the separate custodial account created with
respect thereto) that are not required to be part of the Available Distribution
Amount for such Distribution Date, in an amount generally equal to the
aggregate of all Monthly Payments (other than Balloon Payments and Excess
Interest) and any Assumed Monthly Payments, in each case net of related Master
Servicing Fees that were due or deemed due, as the case may be, in respect of
the Mortgage Loans during the related Collection Period and that were not paid
by or on behalf of the related borrowers or otherwise
S-178
collected as of the close of business on the business day prior to the Master
Servicer Remittance Date. The Master Servicer's obligations to make P&I
Advances in respect of any Mortgage Loan will continue through liquidation of
such Mortgage Loan or disposition of any REO Property acquired in respect
thereof. Notwithstanding the foregoing, if it is determined that an Appraisal
Reduction Amount (as defined below) exists with respect to any Required
Appraisal Loan (as defined below), then, with respect to the Distribution Date
immediately following the date of such determination and with respect to each
subsequent Distribution Date for so long as such Appraisal Reduction Amount
exists, in the event of subsequent delinquencies on such Mortgage Loan, the
interest portion of the P&I Advance required to be made in respect of such
Mortgage Loan will be reduced (no reduction to be made in the principal
portion, however) to an amount equal to the product of (i) the amount of the
interest portion of such P&I Advance that would otherwise be required to be
made for such Distribution Date without regard to this sentence, multiplied by
(ii) a fraction (expressed as a percentage), the numerator of which is equal to
the Stated Principal Balance of such Mortgage Loan, net of such Appraisal
Reduction Amount, and the denominator of which is equal to the Stated Principal
Balance of such Mortgage Loan. For purposes of determining its advancing
obligations in this regard, including calculation of any Appraisal Reduction
Amount, the Master Servicer will treat the CBA Whole Loan as a single mortgage
loan. Neither the Master Servicer nor the Trustee will be required to make a
P&I Advance with respect to the 17 State Street Note B or the CBA B Note. See
"Description of the Certificates--Appraisal Reductions" in this prospectus
supplement. Subject to the recoverability determination described below, if the
Master Servicer fails to make a required P&I Advance, the Trustee will be
required to make such P&I Advance. See "The Trustee--The Trustee" in this
prospectus supplement.
The Master Servicer and the Trustee will each be entitled to recover any
P&I Advance made out of its own funds from any Related Proceeds (or, with
respect to the 17 State Street Note B or the CBA B Note, from the custodial
account maintained with respect to the 17 State Street Whole Loan and the CBA
Whole Loan, respectively). Notwithstanding the foregoing, neither the Master
Servicer nor the Trustee will be obligated to make any P&I Advance that it (or
the Special Servicer) determines in its reasonable good faith judgment would,
if made, not be recoverable out of Related Proceeds (a "Nonrecoverable P&I
Advance"; and, together with a Nonrecoverable Servicing Advance,
"Nonrecoverable Advances"). The Trustee will be entitled to rely on any
non-recoverability determination made by the Master Servicer and the Trustee
and Master Servicer will be entitled to rely on the determination made by the
Special Servicer. Neither the Master Servicer nor the Trustee will make a P&I
Advance for Excess Interest or a Prepayment Premium. The Master Servicer, the
Special Servicer and Trustee, as applicable, will be entitled to recover any
Advance that at any time is determined to be a Nonrecoverable Advance (and
interest thereon) out of funds received on or in respect of other Mortgage
Loans. Upon the determination that a previously made Advance is a
Nonrecoverable Advance, instead of obtaining reimbursement out of general
collections immediately, the Master Servicer, the Special Servicer or the
Trustee, as applicable, may, in its sole discretion, elect to obtain
reimbursement for such Nonrecoverable Advance over time and the unreimbursed
portion of such Advance will accrue interest at the Reimbursement Rate. If such
an election to obtain reimbursement over time is made, the Master Servicer, the
Special Servicer or Trustee, as applicable, will, during the first six months
after such nonrecoverability determination was made, only seek reimbursement
for such Nonrecoverable Advance from collections of principal (with such
Nonrecoverable Advances being reimbursed before Workout-Delayed Reimbursement
Amounts (as defined below)). After such initial six months, the Master
Servicer, the Special Servicer or Trustee, as applicable, may continue to seek
reimbursement for such Nonrecoverable Advance solely from collections of
principal or may seek reimbursement for such Nonrecoverable Advance from
general collections, in each case for a period of time not to exceed an
additional six months (with such Nonrecoverable Advances being reimbursed
before Workout-Delayed Reimbursement Amounts). In the event that the Master
Servicer, the Special Servicer or Trustee, as applicable, wishes to seek
reimbursement over time after the second six-month period discussed in the
preceding sentence, then the Master Servicer, the Special Servicer or Trustee,
as applicable, may continue to seek reimbursement for such Nonrecoverable
Advance solely from collections of principal or may seek reimbursement for such
Nonrecoverable Advance
S-179
from general collections, in either case for such a longer period of time as
agreed to by the Master Servicer, the Special Servicer or the Trustee, as
applicable, and the Directing Certificateholder, each in its sole discretion
(with such Nonrecoverable Advances being reimbursed before Workout-Delayed
Reimbursement Amounts). Notwithstanding the foregoing, at any time after such a
determination to obtain reimbursement over time, the Master Servicer, the
Special Servicer or the Trustee, as applicable, may, in its sole discretion,
decide to obtain reimbursement immediately. The fact that a decision to recover
such Nonrecoverable Advances over time, or not to do so, benefits some Classes
of Certificateholders to the detriment of other Classes shall not, with respect
to the Master Servicer, constitute a violation of the Servicing Standard and/or
with respect to the Trustee, constitute a violation of any fiduciary duty to
Certificateholders or contractual duty under the Pooling Agreement. The Master
Servicer, the Special Servicer or the Trustee, as applicable, will give each
Rating Agency three weeks prior notice of its intent to obtain reimbursement of
Nonrecoverable Advances from general collections as described above unless (1)
the Master Servicer or Special Servicer (or Trustee, if applicable) determines
in its sole discretion that waiting three weeks after such a notice could
jeopardize the Master Servicer's or the Special Servicer's (or Trustee's, if
applicable) ability to recover Nonrecoverable Advances, (2) changed
circumstances or new or different information becomes known to the Master
Servicer or Special Servicer (or Trustee, if applicable) that could affect or
cause a determination of whether any Advance is a Nonrecoverable Advance,
whether to defer reimbursement of a Nonrecoverable Advance or the determination
in clause (1) above, or (3) the Master Servicer or Special Servicer has not
timely received from the Trustee information requested by the Master Servicer
or Special Servicer to consider in determining whether to defer reimbursement
of a Nonrecoverable Advance; provided that, if clause (1), (2) or (3) apply,
the Master Servicer or the Special Servicer (or Trustee, if applicable) shall
give each Rating Agency notice of an anticipated reimbursement to it of
Nonrecoverable Advances from amounts in the Certificate Account allocable to
interest on the Mortgage Loans as soon as reasonably practicable in such
circumstances. The Master Servicer or the Special Servicer (or Trustee, if
applicable) shall have no liability for any loss, liability or expense
resulting from any notice provided to each Rating Agency contemplated by the
immediately preceding sentence.
If the Master Servicer, the Special Servicer or the Trustee, as
applicable, is reimbursed out of general collections for any unreimbursed
Advances that are determined to be Nonrecoverable Advances (together with any
interest accrued and payable thereon), then (for purposes of calculating
distributions on the Certificates) such reimbursement and payment of interest
shall be deemed to have been made: first, out of the Principal Distribution
Amount, which, but for its application to reimburse a Nonrecoverable Advance
and/or to pay interest thereon, would be included in the Available Distribution
Amount for any subsequent Distribution Date, and second, out of other amounts
which, but for their application to reimburse a Nonrecoverable Advance and/or
to pay interest thereon, would be included in the Available Distribution Amount
for any subsequent Distribution Date.
If and to the extent that any payment is deemed to be applied as
contemplated in the paragraph above to reimburse a Nonrecoverable Advance or to
pay interest thereon, then the Principal Distribution Amount for such
Distribution Date shall be reduced, to not less than zero, by the amount of
such reimbursement. If and to the extent (i) any Advance is determined to be a
Nonrecoverable Advance, (ii) such Advance and/or interest thereon is reimbursed
out of the Principal Distribution Amount as contemplated above and (iii) the
particular item for which such Advance was originally made is subsequently
collected out of payments or other collections in respect of the related
Mortgage Loan, then the Principal Distribution Amount for the Distribution date
that corresponds to the Due Period in which such item was recovered shall be
increased by an amount equal to the lesser of (A) the amount of such item and
(B) any previous reduction in the Principal Distribution Amount for a prior
Distribution Date as contemplated in the paragraph above resulting from the
reimbursement of the subject Advance and/or the payment of interest thereon.
If one or more unreimbursed Workout-Delayed Reimbursement Amounts (as
defined below) exist, then such Workout-Delayed Reimbursement Amounts will be
reimbursable only from amounts
S-180
in the Certificate Account that represent collections of principal on the
Mortgage Loans; provided, however, that on any Distribution Date when (1) less
than 10% of the initial aggregate Stated Principal Balance of the Mortgage Pool
is outstanding and (2) the sum of the aggregate unpaid Nonrecoverable Advances
plus the aggregate unpaid Workout-Delayed Reimbursement Amounts, which have not
been reimbursed to the Master Servicer, Special Servicer or Trustee, as
applicable, exceeds 20% of the aggregate Stated Principal Balance of the
Mortgage Pool then outstanding, then the Master Servicer, the Special Servicer
or the Trustee, as applicable, may obtain reimbursement of any outstanding
Workout-Delayed Reimbursement Amount from principal collections or any other
amounts in the Certificate Account, including but not limited to interest
collected on the Mortgage Loans, if principal is not sufficient to pay such
amounts; provided, further, however, that the foregoing shall not in any manner
limit the right of the Master Servicer, Special Servicer or Trustee, as
applicable, to choose voluntarily to seek reimbursement of Workout-Delayed
Reimbursement Amounts solely from collections of principal. The Master
Servicer, Special Servicer or Trustee, as applicable, will give each Rating
Agency three weeks prior notice of its intent to obtain reimbursement of
Workout-Delayed Reimbursement Amounts from interest collections as described in
the preceding sentence. As used in the second preceding sentence,
"Workout-Delayed Reimbursement Amount" means, with respect to any mortgage
loan, the amount of any Advance made with respect to such mortgage loan on or
before the date such mortgage loan becomes (or, but for the making of 3 monthly
payments under its modified terms, would then constitute) a Corrected Mortgage
Loan, together with (to the extent accrued and unpaid) interest on such
Advances, to the extent that (i) such Advance is not reimbursed to the person
who made such Advance on or before the date, if any, on which such mortgage
loan becomes a Corrected Mortgage Loan and (ii) the amount of such Advance
becomes an obligation of the related borrower to pay such amount under the
terms of the modified loan documents. That any amount constitutes all or a
portion of any Workout-Delayed Reimbursement Amount will not in any manner
limit the right of any person hereunder to determine that such amount instead
constitutes a Nonrecoverable Advance recoverable in the same manner as any
other Nonrecoverable Advance. See "Description of the Certificates-- Advances
in Respect of Delinquencies" and "The Pooling and Servicing
Agreements--Certificate Account" in the accompanying prospectus.
The Master Servicer and the Trustee will each be entitled with respect to
any Advance made thereby, and the Special Servicer will be entitled with
respect to any Servicing Advance made thereby, to interest accrued on the
amount of such Advance for so long as it is outstanding at a rate per annum
(the "Reimbursement Rate") equal to the "prime rate" as published in the "Money
Rates" section of The Wall Street Journal, as such "prime rate" may change from
time to time except that no interest will be payable with respect to any P&I
Advance of a payment due on a Mortgage Loan during the applicable grace period.
The interest referred to in the immediately preceding sentence is referred to
in this prospectus supplement as "Advance Interest". Such interest on any
Advance will be payable to the Master Servicer, the Special Servicer or the
Trustee, as the case may be, first, out of Default Charges collected on the
related Mortgage Loan and, second, at any time coinciding with or following the
reimbursement of such Advance, out of any amounts then on deposit in the
Certificate Account. To the extent not offset by Default Charges accrued and
actually collected on the related Mortgage Loan as described above, interest
accrued on outstanding Advances will result in a reduction in amounts payable
on the Certificates.
APPRAISAL REDUCTIONS
Promptly following the occurrence of any of the following events (1) any
Mortgage Loan, the 17 State Street Whole Loan or the CBA Whole Loan becoming a
Modified Mortgage Loan; (2) any Monthly Payment with respect to any Mortgage
Loan, the 17 State Street Whole Loan or the CBA Whole Loan remains unpaid for
60 days past the Due Date for such payment; (3) the passage of 60 days after
the Special Servicer receives notice that the mortgagor under such Mortgage
Loan becomes the subject of bankruptcy, insolvency or similar proceedings,
which remain undischarged and undismissed; (4) the passage of 60 days after the
Special Servicer receives notice that a receiver or similar official is
appointed with respect to the related Mortgaged Property; (5) the related
Mortgaged Property becoming an REO Property or (6) if a Mortgage Loan or the
CBA Whole Loan
S-181
has been extended three times upon the 60th day after the third extension (an
"Appraisal Trigger Event") with respect to any Mortgage Loan, the 17 State
Street Whole Loan or the CBA Whole Loan (each such loan, a "Required Appraisal
Loan"), the Special Servicer will be required to obtain (or, if such Mortgage
Loan, the 17 State Street Whole Loan or the CBA Whole Loan has a Stated
Principal Balance of $2,000,000 or less, at its discretion, conduct) an
appraisal of the related Mortgaged Property from an independent MAI-designated
appraiser, unless such an appraisal had previously been obtained (or if
applicable, conducted) within the prior twelve months and there has been no
subsequent material change in the circumstances surrounding the related
Mortgaged Property that, in the Special Servicer's judgment, would materially
affect the value of the Mortgaged Property, and shall deliver a copy of such
appraisal to the Trustee, the Master Servicer and the Directing
Certificateholder), the CC Controlling Holder (only if the CC Component
Mortgage Loan has become a Required Appraisal Loan), the SS Controlling Holder
(only if the SS Component Mortgage Loan has become a Required Appraisal Loan),
and the UH Controlling Holder (only if the UH Component Mortgage Loan has
become a Required Appraisal Loan). If such appraisal is obtained from a
qualified appraiser, the cost of such appraisal will be covered by, and
reimbursable as a Servicing Advance. As a result of any such appraisal, it may
be determined that an Appraisal Reduction Amount exists with respect to the
related Required Appraisal Loan. The "Appraisal Reduction Amount" for any
Required Appraisal Loan will, in general, be an amount (calculated as of the
Determination Date immediately following the later of the date on which the
most recent relevant appraisal was obtained by the Special Servicer pursuant to
the Pooling Agreement and the date of the most recent Appraisal Trigger Event
with respect to such Required Appraisal Loan) equal to the excess, if any, of:
(1) the sum of (a) the Stated Principal Balance of such Required
Appraisal Loan as of such Determination Date, (b) to the extent not
previously advanced by or on behalf of the Master Servicer, or the Trustee,
all unpaid interest (net of Default Interest) accrued on such Required
Appraisal Loan through the most recent Due Date prior to such Determination
Date, (c) all unpaid Master Servicing Fees, Special Servicing Fees, Trustee
Fees and Additional Trust Fund Expenses accrued with respect to such
Required Appraisal Loan, (d) all related unreimbursed Advances made by or
on behalf of the Master Servicer, the Special Servicer or, the Trustee with
respect to such Required Appraisal Loan and reimbursable out of the Trust
Fund, together with all unpaid Advance Interest accrued on such Advances,
and (e) all currently due but unpaid real estate taxes and assessments,
insurance premiums and, if applicable, ground rents in respect of the
related Mortgaged Property or REO Property, as applicable, for which
neither the Master Servicer nor the Special Servicer holds any escrow
payments or Reserve Funds; over
(2) the sum of (x) the excess, if any, of (i) 90% of the Appraisal Value
of the related Mortgaged Property or REO Property (subject to such downward
adjustments as the applicable Special Servicer may deem appropriate
(without implying any obligation to do so) based upon its review of the
related appraisal and such other information as such Special Servicer deems
appropriate), as applicable, as determined by the most recent relevant
appraisal acceptable for purposes of the Pooling Agreement, over (ii) the
amount of any obligation(s) secured by any liens on such Mortgaged Property
or REO Property, as applicable, that are prior to the lien of such Required
Appraisal Loan, and (y) any escrow payments reserve funds and/or letters of
credit held by the Master Servicer or the Special Servicer with respect to
such Required Appraisal Loan, the related Mortgaged Property or any related
REO Property (exclusive of any such items that are to be applied to real
estate taxes, assessments, insurance premiums and/or ground rents or that
were taken into account in determining the Appraised Value of the related
Mortgaged Property or REO Property, as applicable, referred to in clause
(2)(x)(i) above).
If the Special Servicer has not obtained a new appraisal (or performed an
internal valuation, if applicable) within the time limit described above, the
Appraisal Reduction Amount for the related Mortgage Loan will equal 25% of the
principal balance of such Mortgage Loan, to be adjusted upon receipt of the new
appraisal (or internal valuation, if applicable).
For so long as any Mortgage Loan, the 17 State Street Whole Loan or the
CBA Whole Loan or REO Loan remains a Required Appraisal Loan, the Special
Servicer is required, within 30 days of
S-182
each anniversary of such Mortgage Loan having become a Required Appraisal Loan,
to obtain (or, if such Required Appraisal Loan has a Stated Principal Balance
of $2,000,000 or less, at its discretion, conduct) an update of the prior
appraisal, and shall deliver a copy of such update to the Trustee, the Master
Servicer, the Directing Certificateholder, the CC Controlling Holder (only if
such Required Appraisal Loan is the CC Component Mortgage Loan), the SS
Controlling Holder (only if such Required Appraisal Loan is the SS Component
Mortgage Loan), and the UH Controlling Holder (only if such Required Appraisal
Loan is the UH Component Mortgage Loan). If such update is obtained from a
qualified appraiser, the cost thereof shall be covered by, and be reimbursed
as, a Servicing Advance. Promptly following the receipt of, and based upon,
such update, the Special Servicer shall redetermine and report to the Trustee,
the Master Servicer, the Directing Certificateholder and, applicable, the CC
Controlling Holder, the SS Controlling Holder and the UH Controlling Holder the
then applicable Appraisal Reduction Amount, if any, with respect to the subject
Required Appraisal Loan.
The Directing Certificateholder with respect to the Mortgage Loans, other
than the CC Component Mortgage Loan during which period no CC Control Appraisal
Period exists, the SS Component Mortgage Loan during which period no SS Control
Appraisal Period exists, and the UH Component Mortgage Loan during which period
no UH Control Appraisal Period exists, will have the right at any time to
require that the Special Servicer obtain a new appraisal of the subject
Mortgaged Property in accordance with MAI standards, at the expense of the
Controlling Class Certificateholder. Upon receipt of such appraisal the Special
Servicer will deliver a copy thereof to the Trustee, the Master Servicer, the
Directing Certificateholder. Promptly following the receipt of, and based upon,
such appraisal, the Special Servicer will redetermine and report to the
Trustee, the Master Servicer, the Directing Certificateholder the then
applicable Appraisal Reduction Amount, if any, with respect to the subject
Required Appraisal Loan.
Each of the CC Controlling Holder, the SS Controlling Holder and the UH
Controlling Holder, as applicable, will have the right, at its expense at any
time within six months of the date of the receipt of any appraisal to require
that the Special Servicer obtain a new appraisal of the subject Mortgaged
Property in accordance with MAI standards. Upon receipt of such appraisal the
Special Servicer shall deliver a copy thereof to the Trustee, the Master
Servicer, the Directing Certificateholder, the CC Controlling Holder, the SS
Controlling Holder and the UH Controlling Holder, as applicable. Promptly
following the receipt of, and based upon, such appraisal, the Special Servicer
shall redetermine and report to the Trustee, the Master Servicer, the Directing
Certificateholder, the CC Controlling Holder, the SS Controlling Holder and the
UH Controlling Holder, as applicable, the then applicable Appraisal Reduction
Amount, if any, with respect to the subject Required Appraisal Loan.
The 17 State Street Whole Loan will be treated as a single mortgage loan
for purposes of calculating an Appraisal Reduction Amount with respect to the
mortgage loans that comprise the 17 State Street Whole Loan. Any Appraisal
Reduction Amount in respect of the 17 State Street Whole Loan that exceeds the
aggregate balance of the 17 State Street Note B will be allocated to the SS
Component Mortgage Loan.
The CBA Whole Loan will be treated as a single mortgage loan for purposes
of calculating an Appraisal Reduction Amount with respect to the mortgage loans
that comprise the CBA Whole Loan. Any Appraisal Reduction Amount in respect of
the CBA Whole Loan that exceeds the aggregate balance of the CBA B Note will be
allocated to the CBA Mortgage Loan.
A "Modified Mortgage Loan" is any Mortgage Loan, the 17 State Street Whole
Loan or the CBA Whole Loan as to which any Servicing Transfer Event has
occurred and which has been modified by the Special Servicer in a manner that:
(A) affects the amount or timing of any payment of principal or interest due
thereon (other than, or in addition to, bringing current Monthly Payments with
respect to such Mortgage Loan); (B) except as expressly contemplated by the
related Mortgage, results in a release of the lien of the Mortgage on any
material portion of the related Mortgaged Property without a corresponding
principal prepayment in an amount not less than the fair market value (as is)
of the property to be released; or (C) in the reasonable judgment of the
Special Servicer,
S-183
otherwise materially impairs the security for such Mortgage Loan or reduces the
likelihood of timely payment of amounts due thereon.
REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
Trustee Reports. Based on information provided in monthly reports prepared
by the Master Servicer and the Special Servicer and delivered to the Trustee,
on each Distribution Date the Trustee will be required to deliver or make
available electronically to each Certificateholder and Certificate Owner (so
long as such Certificate Owner provides the Trustee with or submits
electronically to the Trustee with a certification in the form set forth in the
Pooling Agreement which discloses such Certificate Owner's status as a holder),
the following statements and reports (collectively, the "Distribution Date
Statement") substantially in the forms set forth in Annex C (although such
forms may be subject to change over time) and substantially containing the
information below:
(1) A statement setting forth, among other things: (i) the amount of
distributions, if any, made on such Distribution Date to the holders of
each Class of REMIC II Certificates and applied to reduce the respective
Certificate Balances thereof; (ii) the amount of distributions, if any,
made on such Distribution Date to the holders of each Class of REMIC II
Certificates allocable to Distributable Certificate Interest and Prepayment
Premiums; (iii) the Available Distribution Amount for such Distribution
Date; (iv) the aggregate amount of P&I Advances made in respect of the
immediately preceding Determination Date, the aggregate amount of P&I
Advances made as of the Master Servicer Remittance Date ("Payment After
Determination Date Report"), the aggregate amount of P&I Advances and other
Servicing Advances made in respect of the immediately preceding
Distribution Date; (v) the aggregate Stated Principal Balance of the
Mortgage Pool (less the Subordinate Balances of the CC Subordinate
Components, the SS Subordinate Components, and the UH Subordinate
Components) outstanding immediately before and immediately after such
Distribution Date; (vi) the number, aggregate principal balance, weighted
average remaining term to maturity and weighted average Mortgage Rate of
the Mortgage Pool as of the end of the Collection Period for the prior
Determination Date; (vii) as of the end of the Collection Period for the
immediately preceding Distribution Date, the number and aggregate ending
scheduled principal balance of Mortgage Loans (A) delinquent 30-59 days,
(B) delinquent 60-89 days, (C) delinquent 90 days or more, (D) as to which
foreclosure proceedings have been commenced (except with respect to REO
Properties) and (E) any bankruptcy by a borrower; (viii) with respect to
any REO Property included in the Trust Fund as of the end of the Collection
Period for such Distribution Date, the principal balance of the Mortgage
Loan as of the date such Mortgage Loan became delinquent; (ix) the Accrued
Certificate Interest and Distributable Certificate Interest in respect of
each Class of REMIC II Certificates for such Distribution Date; (x) the
aggregate amount of Distributable Certificate Interest payable in respect
of each Class of REMIC II Certificates on such Distribution Date,
including, without limitation, any Distributable Certificate Interest
remaining unpaid from prior Distribution Dates; (xi) any unpaid
Distributable Certificate Interest in respect of such Class of REMIC II
Certificates after giving effect to the distributions made on such
Distribution Date; (xii) the Pass-Through Rate for each Class of REMIC II
Certificates for such Distribution Date; (xiii) the Principal Distribution
Amount for such Distribution Date, separately identifying the respective
components of such amount; (xiv) the aggregate of all Realized Losses
incurred during the related Collection Period and all Additional Trust Fund
Expenses incurred during the related Collection Period; (xv) the
Certificate Balance or Notional Amount, as the case may be, of each Class
of REMIC II Certificates outstanding immediately before and immediately
after such Distribution Date, separately identifying any reduction therein
due to the allocation of Realized Losses and Additional Trust Fund Expenses
on such Distribution Date; (xvi) the aggregate amount of servicing fees
paid to the Master Servicer and the Special Servicer, collectively and
separately, during the Collection Period for the prior Distribution Date;
(xvii) a brief description of any material waiver, modification or
amendment of any Mortgage Loan entered into by the Master Servicer or
Special Servicer pursuant to the Pooling Agreement during the related
Collection Period; (xviii) current and cumulative outstanding Advances;
(xix) current prepayments and curtailments; (xx) the number and
S-184
aggregate principal balance of Mortgage Loans as to which foreclosure
proceedings have been commenced as to the related Mortgaged Property; (xxi)
the amounts held in the Excess Liquidation Proceeds Reserve Account; (xxii)
the ratings from all Rating Agencies for all Classes of Certificates; and
(xxiii) the amounts, if any, distributed with respect to the Class CC
Certificates, the Class SS Certificates and the Class UH Certificates on
such Distribution Date. In the case of information furnished pursuant to
clauses (i) and (ii) above, the amounts shall be expressed as a dollar
amount in the aggregate for all Certificates of each applicable Class and
per a specified denomination.
(2) A report containing information regarding the Mortgage Loans as of
the close of business on the immediately preceding Determination Date,
which report shall contain certain of the categories of information
regarding the Mortgage Loans set forth in this prospectus supplement in the
tables under the caption "Annex A: Certain Characteristics of the Mortgage
Loans" (calculated, where applicable, on the basis of the most recent
relevant information provided by the borrowers to the Master Servicer or
the Special Servicer and by the Master Servicer or the Special Servicer, as
the case may be, to the Trustee) and such information shall be presented in
a loan-by-loan and tabular format substantially similar to the formats
utilized in this prospectus supplement on Annex A (provided that no
information will be provided as to any repair and replacement or other cash
reserve and the only financial information to be reported on an ongoing
basis will be actual expenses, occupancy, actual revenues and actual net
operating income for the respective Mortgaged Properties and a debt service
coverage ratio calculated on the basis thereof).
Servicer Reports. The Master Servicer is required to deliver to the
Trustee on the second business day following each Determination Date, and the
Trustee is to provide or make available on each Distribution Date, either in
electronic format or by first-class mail (if requested in writing) to each
Certificateholder, and any potential investor in the Certificates who certifies
their identity as such, on each Distribution Date, a CMSA loan setup file, a
CMSA loan periodic update file, a CMSA property file, and a CMSA financial file
(in electronic format and substance provided by the Master Servicer and/or the
Special Servicer) setting forth certain information with respect to the
Mortgage Loans and the Mortgaged Properties, and certain CMSA supplemental
reports set forth in the Pooling Agreement containing certain information
regarding the Mortgage Loans and the Mortgaged Properties all of which will be
made available electronically (i) to any interested party including the Rating
Agencies, the Underwriters and any party to the Pooling Agreement via the
Trustee's Website or, (ii) to authorized persons identified by the Trustee to
the Master Servicer and parties to the Pooling Agreement, via the Master
Servicer's Website, if the Master Servicer elects to maintain a website, in its
sole discretion, with the use of a username and a password provided by the
Master Servicer to such Person upon delivery to the Trustee with a copy to the
Master Servicer of a certification in the form attached to the Pooling
Agreement.
The servicer reports will not include any information that the Master
Servicer or the Special Servicer, as applicable, deems to be confidential. The
information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Master Servicer prior to the related
Distribution Date. None of the Master Servicer, the Special Servicer or the
Trustee shall be responsible for the accuracy or completeness of any
information supplied to it by a borrower or other third party that is included
in any reports, statements, materials or information prepared or provided by
the Master Servicer, the Special Servicer or the Trustee, as applicable.
Within 60 days after receipt by the Master Servicer from the related
borrowers or otherwise, as to Non-Specially Serviced Mortgage Loans, and within
45 days after receipt by the Master Servicer from the Special Servicer or
otherwise, as to Specially Serviced Mortgage Loans and REO Properties, of any
annual operating statements or rent rolls with respect to any Mortgaged
Property or REO Property, the Master Servicer (or the Special Servicer, with
respect to Specially Serviced Mortgage Loan) shall, based upon such operating
statements or rent rolls, prepare (or, if previously prepared, update) a report
(the "CMSA Operating Statement Analysis Report") and the Master Servicer shall
remit a copy of each CMSA Operating Statement Analysis Report prepared or
updated by it (within
S-185
10 days following initial preparation and each update thereof), together with,
if so requested, the underlying operating statements and rent rolls, to the
Special Servicer in a format reasonably acceptable to the Trustee and Special
Servicer.
Within 60 days after receipt by the Master Servicer (or 30 days in the
case of items received by the Special Servicer with respect to Specially
Serviced Mortgage Loans and REO Properties) of any quarterly or annual
operating statements with respect to any Mortgaged Property or REO Property,
the Master Servicer (or the Special Servicer, with respect to Specially
Serviced Mortgage Loans) shall prepare or update and forward to the Special
Servicer and the Directing Certificateholder (in an electronic format
reasonably acceptable to the Special Servicer) a report (the "CMSA NOI
Adjustment Worksheet") to normalize the full year net operating income and debt
service coverage numbers for such Mortgaged Property or REO Property, together
with, if so requested, the related operating statements.
All CMSA Operating Statement Analysis Reports and CMSA NOI Adjustment
Worksheets will be prepared substantially in the form as set forth in the
Pooling Agreement and will be maintained by the Master Servicer with respect to
each Mortgaged Property and REO Property, and the Master Servicer will forward
electronic copies (to the extent available) to the Directing Certificateholder,
the Trustee upon request, each Rating Agency upon request, and any
Certificateholder, upon request, or to the extent a beneficial owner of an
Offered Certificate (a "Certificate Owner") has confirmed its ownership
interest in the Certificates held thereby, such Certificate Owner, together
with the related operating statement or rent rolls. Each CMSA Operating
Statement Analysis Report and CMSA NOI Adjustment Worksheet will be prepared
using normalized year-to-date CMSA methodology as in effect on the Delivery
Date and as modified and reasonably agreeable to the Master Servicer from time
to time. Conveyance of notices and other communications by DTC to Participants,
and by Participants to Certificate Owners, will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time. The Master Servicer, the Special Servicer, the
Trustee, the Depositor, the REMIC Administrator, the Mortgage Loan Seller and
the Certificate Registrar are required to recognize as Certificateholders only
those persons in whose names the Certificates are registered on the books and
records of the Certificate Registrar.
To the extent set forth in the Pooling Agreement the Trustee will make
available each month, to the general public, the Distribution Date Statement
(and any additional files containing the same information in an alternative
format), the servicer reports, Mortgage Loan information as presented in the
CMSA loan setup file, CMSA loan periodic update file, all other CMSA reports
provided to it by the Master Servicer and any other item at the request of the
Depositor to any interested party via the Trustee's Website initially located
at "www.ctslink.com". In addition, pursuant to the Pooling Agreement, the
Trustee will make available, as a convenience to the general public (and not in
furtherance of the distribution of the accompanying prospectus or the
prospectus supplement under the securities laws), the Pooling Agreement, the
accompanying prospectus and the prospectus supplement via the Trustee's
Website. For assistance with the above-referenced services, interested parties
may call (301) 815-6600. The Trustee will make no representations or warranties
as to the accuracy or completeness of such documents and will assume no
responsibility therefor.
In connection with providing access to the Trustee's Website, the Trustee
may require registration and the acceptance of a disclaimer. The Trustee shall
not be liable for the dissemination of information in accordance with the
Pooling Agreement.
For a discussion of certain annual information reports to be furnished by
the Trustee to persons who at any time during the prior calendar year were
holders of the Offered Certificates, see "Description of the
Certificates--Reports to Certificateholders" in the accompanying prospectus.
Other Information. The Pooling Agreement requires that the Trustee make
available at its offices, during normal business hours, upon reasonable advance
written notice, for review by any holder or Certificate Owner of an Offered
Certificate or any person identified to the Trustee by any such holder or
Certificate Owner as a prospective transferee of an Offered Certificate or any
interest therein, originals or copies of, among other things, the following
items to the extent in its possession: (a) all officer's certificates delivered
to the Trustee since the Delivery Date as described
S-186
under "Servicing of the Mortgage Loans--Evidence as to Compliance" in this
prospectus supplement, (b) all accountant's reports delivered to the Trustee
since the Delivery Date as described under "Servicing of the Mortgage
Loans--Evidence as to Compliance" in this prospectus supplement, and (c) the
Mortgage Note, Mortgage and other legal documents relating to each Mortgage
Loan, including any and all modifications, waivers and amendments of the terms
of a Mortgage Loan entered into by the Master Servicer or the Special Servicer
and delivered to the Trustee. In addition, the Master Servicer is required to
make available, during normal business hours, upon reasonable advance written
notice, for review by any holder or Certificate Owner of an Offered Certificate
(as confirmed to the Master Servicer by the Trustee) or any person identified
to the Master Servicer by the Trustee as a prospective transferee of an Offered
Certificate or any interest therein, originals or copies of any and all
documents (in the case of documents generated by the Special Servicer, to the
extent received therefrom) that constitute the servicing file for each Mortgage
Loan, in each case except to the extent the Master Servicer in its reasonable,
good faith determination believes that any item of information contained in
such servicing file is of a nature that it should be conveyed to all
Certificateholders at the same time, in which case the Master Servicer is
required, as soon as reasonably possible following its receipt of any such item
of information, to disclose such item of information to the Trustee for
inclusion by the Trustee along with the Distribution Date Statement referred to
under "Description of the Certificates--Reports to Certificateholders; Certain
Available Information--Trustee Reports" in this prospectus supplement; provided
that, until the Trustee has either disclosed such information to all
Certificateholders along with the Distribution Date Statement or has properly
filed such information with the Securities and Exchange Commission on behalf of
the Trust under the Securities Exchange Act of 1934, the Master Servicer is
entitled to withhold such item of information from any Certificateholder or
Certificate Owner or prospective transferee of a Certificate or an interest
therein; and, provided, further, that the Master Servicer is not required to
make information contained in any servicing file available to any person to the
extent that doing so is prohibited by applicable law or by any documents
related to a Mortgage Loan.
The Trustee, subject to the last sentence of the prior paragraph, will
make available, upon reasonable advance written notice and at the expense of
the requesting party, originals or copies of the items referred to in the prior
paragraph that are maintained thereby, to Certificateholders, Certificate
Owners and prospective purchasers of Certificates and interests therein;
provided that the Trustee may require (a) in the case of a Certificate Owner, a
written confirmation executed by the requesting person or entity, in a form
reasonably acceptable to the Trustee generally to the effect that such person
or entity is a beneficial owner of Offered Certificates and will keep such
information confidential, and (b) in the case of a prospective purchaser,
confirmation executed by the requesting person or entity, in a form reasonably
acceptable to the Trustee generally to the effect that such person or entity is
a prospective purchaser of Offered Certificates or an interest therein, is
requesting the information solely for use in evaluating a possible investment
in such Certificates and will otherwise keep such information confidential.
Certificateholders, by the acceptance of their Certificates, will be deemed to
have agreed to keep such information confidential.
VOTING RIGHTS
At all times during the term of the Pooling Agreement, 98% of the voting
rights for the Certificates (the "Voting Rights") shall be allocated among the
holders of the respective Classes of Sequential Pay Certificates in proportion
to the Certificate Balances of their Certificates and 2% of the Voting Rights
shall be allocated to the holders of the Class X Certificates in proportion to
their Notional Amounts. No Voting Rights will be assigned to the the Class CC
Certificates, the Class SS Certificates, the Class UH Certificates or the REMIC
Residual Certificates. See "Description of the Certificates--Voting Rights" in
the accompanying prospectus.
TERMINATION; RETIREMENT OF CERTIFICATES
The obligations created by the Pooling Agreement will terminate following
the earliest of (i) the final payment (or advance in respect thereof) or other
liquidation of the last Mortgage Loan or related REO Property remaining in the
Trust Fund, (ii) the purchase or exchange of all of the
S-187
Mortgage Loans that constitute the Initial Pool Balance and REO Properties
remaining in the Trust Fund by the Master Servicer, Special Servicer or by any
holder or holders (other than the Depositor or the Mortgage Loan Seller) of
Certificates representing a majority interest in the Controlling Class or (iii)
the exchange of all the then outstanding Certificates (other than the Class
R-I, Class R-II, Class CC, Class SS or Class UH Certificates) for the Mortgage
Loans remaining in the Trust. Written notice of termination of the Pooling
Agreement will be given to each Certificateholder, and the final distribution
with respect to each Certificate will be made only upon surrender and
cancellation of such Certificate at the office of the Certificate Registrar or
other location specified in such notice of termination.
Any such purchase by the Master Servicer, Special Servicer or the majority
holder(s) of the Controlling Class of all the Mortgage Loans and REO Properties
remaining in the Trust Fund is required to be made at a price equal to (a) the
sum of (i) the aggregate Purchase Price of all the Mortgage Loans that
constitute the Initial Pool Balance then included in the Trust Fund (other than
any Mortgage Loans as to which the related Mortgaged Properties have become REO
Properties) and (ii) the fair market value of all REO Properties then included
in the Trust Fund, as determined by an appraiser mutually agreed upon by the
Master Servicer and the Trustee, minus (b) (solely in the case of a purchase by
the Master Servicer) the aggregate of all amounts payable or reimbursable to
the Master Servicer under the Pooling Agreement. Such purchase will effect
early retirement of the then outstanding Certificates, but the right of the
Master Servicer or the majority holder(s) of the Controlling Class to effect
such termination is subject to the requirement that the then aggregate Stated
Principal Balance of the Mortgage Pool be less than 1.0% of the Initial Pool
Balance as of the Delivery Date. The purchase price paid by the Master Servicer
or the majority holder(s) of the Controlling Class, exclusive of any portion
thereof payable or reimbursable to any person other than the
Certificateholders, will constitute part of the Available Distribution Amount
for the final Distribution Date. The exchange of all the then outstanding
Certificates (other than the Class R-I, Class R-II, Class CC, Class SS or Class
UH Certificates) for the Mortgage Loans remaining in the Trust (i) is limited
to certain Classes of Certificates and (ii) requires that all
Certificateholders must voluntarily participate.
On the final Distribution Date, the aggregate amount paid by any Special
Servicer or the Master Servicer, as the case may be, for the Mortgage Loans and
other assets in the Trust Fund (if the Trust Fund is to be terminated as a
result of the purchase described in the preceding paragraph), together with all
other amounts on deposit in the Certificate Account and not otherwise payable
to a person other than the Certificateholders (see "Description of the Pooling
Agreements--Certificate Account" in the prospectus supplement), will be applied
generally as described under "--Distributions" above.
Any optional termination by the Special Servicer or the Master Servicer
would result in prepayment in full of the Certificates and would have an
adverse effect on the yield of the Class X Certificates because a termination
would have an effect similar to a principal prepayment in full of the mortgage
loans without the receipt of any Yield Maintenance Charges and, as a result,
investors in the Class X Certificates and any other Certificates purchased at a
premium might not fully recoup their initial investment. See "Yield and
Maturity Considerations" in this prospectus supplement.
S-188
THE TRUSTEE
THE TRUSTEE
Wells Fargo Bank, N.A. ("Wells Fargo"), a national banking association,
will act as Trustee on behalf of the certificateholders. Wells Fargo maintains
an office and conducts certificate transfer services at Wells Fargo Center,
Sixth and Marquette, Minneapolis, Minnesota 55479-0113. Wells Fargo otherwise
conducts trustee and securities administration services at its offices in
Columbia, Maryland. Its address there is 9062 Old Annapolis Road, Columbia,
Maryland 21045-1951. As compensation for its services, the Trustee will be
entitled to receive a fee payable from funds on deposit in the Distribution
Account. In addition, the Trustee will be obligated to make any advance
required to be made, but not made, by the Master Servicer under the Pooling
Agreement (including a Servicing Advance, to the extent the Trustee has actual
knowledge of the failure of the Master Servicer to make such Servicing
Advance), provided that the Trustee will not be obligated to make any advance
that it determines to be nonrecoverable. The Trustee will be entitled to rely
conclusively on any determination by the Master Servicer or the Special
Servicer that an advance, if made, would be nonrecoverable. The Trustee will be
entitled to reimbursement (with interest thereon at the Reimbursement Rate) for
each advance made by it in the same manner and to the same extent as, but prior
to, the Master Servicer.
The Trustee will make no representation as to the validity or sufficiency
of the Pooling Agreement, the certificates, the Mortgage Loans or related
documents or the sufficiency of this prospectus supplement and will not be
accountable for the use or application by or on behalf of the Master Servicer
or the Special Servicer of any funds paid to the Master Servicer or the Special
Servicer in respect of the certificates or the Mortgage Loans, or any funds
deposited into or withdrawn from the Certificate Account or any other account
maintained by or on behalf of the Master Servicer or the Special Servicer. If
no Event of Default has occurred and is continuing, the Trustee will be
required to perform only those duties specifically required under the Pooling
Agreement. However, upon receipt of any of the various resolutions, statements,
opinions, reports, documents, orders or other instruments required to be
furnished to it pursuant to the Pooling Agreement, the Trustee will be required
to examine such documents and to determine whether they conform to the
requirements of the Pooling Agreement (to the extent set forth therein) without
responsibility for investigating the contents thereof.
Wells Fargo Bank, N.A. is rated "Aaa" by Moody's and "AA" by S&P.
The information set forth herein concerning the Trustee has been provided
by the Trustee and neither the Depositor nor any Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information.
Pursuant to the Pooling Agreement, the Trustee will be entitled to a
monthly fee (the "Trustee Fee"; and, together with the Master Servicing Fee,
the "Administrative Fees") payable out of general collections on the Mortgage
Loans and any REO Properties. The Administrative Fees will be computed for the
same period for which interest payments on the Mortgage Loans are computed.
The Trustee will also have certain duties with respect to REMIC
administration (in such capacity the "REMIC Administrator"). See "Certain
Federal Income Tax Consequences--REMICs --Reporting and Other Administrative
Matters" and "The Pooling and Servicing Agreements-- Certain Matters Regarding
the Master Servicer, the Special Servicer, the REMIC Administrator and the
Depositor", "--Events of Default" and "--Rights Upon Event of Default" in the
accompanying prospectus.
INDEMNIFICATION
The Trustee will be entitled to indemnification, from amounts held in the
Certificate Account, for any loss, liability, damages, claim or expense arising
in respect of the Pooling Agreement or the certificates other than those
resulting from the negligence, fraud, bad faith or willful misconduct of the
Trustee. Any such indemnification payments will be Additional Trust Fund
Expenses that will
S-189
reduce the amount available to be distributed to Certificateholders as
described under "Description of the Certificates--Subordination; Allocation of
Losses and Certain Expenses" in this prospectus supplement.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on (a) the price
at which such Certificate is purchased by an investor and (b) the rate, timing
and amount of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will in turn depend on, among other
things, (v) the Pass-Through Rate for such Certificate, (w) the rate and timing
of principal payments (including principal prepayments) and other principal
collections on or in respect of the Mortgage Loans and the extent to which such
amounts are to be applied or otherwise result in reduction of the Certificate
Balance of the Class of Certificates to which such Certificate belongs, (x) the
rate, timing and severity of Realized Losses on or in respect of the Mortgage
Loans and of Additional Trust Fund Expenses and Appraisal Reductions and the
extent to which such losses, expenses and reductions are allocable to or
otherwise result in the nonpayment or deferred payment of interest on, or
reduction of the Certificate Balance or Notional Amount of, the Class of
Certificates to which such Certificate belongs, (y) the timing and severity of
any Net Aggregate Prepayment Interest Shortfalls and the extent to which such
shortfalls are allocable in reduction of the Distributable Certificate Interest
payable on the Class of Certificates to which such Certificate belongs and (z)
the extent to which Prepayment Premiums are collected and, in turn, distributed
on the Class of Certificates to which such Certificate belongs.
Rate and Timing of Principal Payments. The yield to holders of any Class
of Offered Certificates that are Sequential Pay Certificates purchased at a
discount or premium will be affected by the rate and timing of reductions of
the Certificate Balances of such Class of Certificates. As described in this
prospectus supplement, the Group 1 Principal Distribution Amount (and, after
the Class A-1A Certificates have been reduced to zero, any remaining Group 2
Principal Distribution Amount) for each Distribution Date will be distributable
entirely in respect of the Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates, Class A-4 Certificates and Class A-5 Certificates until
the related Certificate Balances thereof are reduced to zero, and the Group 2
Principal Distribution Amount (and after the Class A-5 Certificates have been
reduced to zero, any remaining Group 1 Principal Distribution Amount) for each
Distribution Date will be generally distributable to the Class A-1A
Certificates. Following retirement of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates and Class A-1A Certificates, the Principal Distribution Amount for
each Distribution Date will be distributable entirely in respect of the
remaining Classes of Sequential Pay Certificates, sequentially in alphabetical
order of Class designation, in each such case until the related Certificate
Balance is reduced to zero. Consequently, the rate and timing of reductions of
the Certificate Balance of each Class of Offered Certificates will depend on
the rate and timing of principal payments on or in respect of the Mortgage
Loans, which will in turn be affected by the amortization schedules thereof,
the dates on which any Balloon Payments are due and the rate and timing of
principal prepayments and other unscheduled collections thereon (including for
this purpose, collections made in connection with liquidations of Mortgage
Loans due to defaults, casualties or condemnations affecting the Mortgaged
Properties, or purchases of Mortgage Loans out of the Trust Fund). Furthermore,
because the amount of principal that will be distributed to the Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5 and Class A-1A Certificates will
generally be based upon the particular Loan Group that the related Mortgage
Loan is deemed to be in, the yield on the Class A-1, Class A-2, Class A-3,
Class A-4 and Class A-5 Certificates will be particularly sensitive to
prepayments on Mortgage Loans in Loan Group 1 and the yield on the Class A-1A
Certificates will be particularly sensitive to prepayments on Mortgage Loans in
Loan Group 2. Prepayments and, assuming the respective stated maturity dates
therefor have not occurred, liquidations of the Mortgage Loans will result in
distributions on the Sequential Pay Certificates of amounts that would
otherwise be distributed over the remaining terms of the
S-190
Mortgage Loans and will tend to shorten the weighted average lives of those
Certificates. Failure of the borrower under the ARD Loan to repay its Mortgage
Loan by or shortly after its Anticipated Repayment Date, for whatever reason,
will also tend to lengthen the weighted average lives of the Sequential Pay
Certificates. Although the ARD Loan includes incentives for the related
borrower to repay the Mortgage Loan by its Anticipated Repayment Date (e.g., an
increase in the interest rate of the loan above the Mortgage Rate and the
application of all excess cash (net of approved property expenses and any
required reserves) from the related Mortgaged Property to pay down the Mortgage
loan, in each case following the passage of such date), there can be no
assurance that the related borrower will want, or be able, to repay the
Mortgage Loan in full. Defaults on the Mortgage Loans, particularly in the case
of Balloon Loans at or near their stated maturity dates, may result in
significant delays in payments of principal on the Mortgage Loans (and,
accordingly, on the Sequential Pay Certificates) while workouts are negotiated
or foreclosures are completed, and such delays will tend to lengthen the
weighted average lives of those Certificates. See "Servicing of the Mortgage
Loans--Modifications, Waivers, Amendments and Consents" herein and "The Pooling
and Servicing Agreements--Realization Upon Defaulted Mortgage Loans" and
"Certain Legal Aspects of Mortgage Loans--Foreclosure" in the accompanying
prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on or in respect of the Mortgage Loans (and,
with respect to the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates, which Loan Group such Mortgage Loan is deemed to be in) are
distributed or otherwise result in a reduction of the Certificate Balance of
such Certificates. An investor should consider, in the case of any Offered
Certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the Mortgage Loans could result in an actual
yield to such investor that is lower than the anticipated yield and, in the
case of any Offered Certificate purchased at a premium, the risk that a faster
than anticipated rate of principal payments on the Mortgage Loans could result
in an actual yield to such investor that is lower than the anticipated yield.
In general, the earlier a payment of principal on or in respect of the Mortgage
Loans is distributed or otherwise results in reduction of the principal balance
of any other Offered Certificate purchased at a discount or premium, the
greater will be the effect on an investor's yield to maturity. As a result, the
effect on an investor's yield of principal payments occurring at a rate higher
(or lower) than the rate anticipated by the investor during any particular
period may not be fully offset by a subsequent like reduction (or increase) in
the rate of principal payments. Because the rate of principal payments on or in
respect of the Mortgage Loans will depend on future events and a variety of
factors (as described more fully below), no assurance can be given as to such
rate or the rate of principal prepayments in particular. The Depositor is not
aware of any relevant publicly available or authoritative statistics with
respect to the historical prepayment experience of a large group of mortgage
loans comparable to the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. As and to the extent
described herein, Realized Losses and Additional Trust Fund Expenses will be
allocated (i) with respect to Realized Losses and Additional Trust Fund
Expenses attributable to the CC Component Mortgage Loan, to the related Classes
of Class CC Certificates in reverse sequential order to the extent described in
this prospectus supplement, (ii) with respect to Realized Losses and Additional
Trust Fund Expenses attributable to the SS Component Mortgage Loan, to the
related Classes of Class SS Certificates in reverse sequential order to the
extent described in this prospectus supplement, (iii) with respect to Realized
Losses and Additional Trust Fund Expenses attributable to the UH Component
Mortgage Loan, to the related Classes of Class UH Certificates in reverse
sequential order to the extent described in this prospectus supplement, and
(iv) with respect to Realized Losses and Additional Trust Fund Expenses
attributable to each Mortgage Loan (other than the CC Component Mortgage Loan,
the SS Component Mortgage Loan and the UH Component Mortgage Loan in which the
related Subordinate Balances have not been reduced to zero and with respect to
Realized Losses and Additional Trust Fund Expenses allocable
S-191
to the Mortgage Pool generally, to the respective Classes of Sequential Pay
Certificates (which allocation will, in general, reduce the amount of interest
distributable thereto in the case of Additional Trust Fund Expenses and reduce
the Certificate Balance thereof in the case of Realized Losses) in the
following order: first, to each Class of Sequential Pay Certificates (other
than the Class A Certificates), in reverse alphabetical order of Class
designation, until the Certificate Balance thereof has been reduced to zero;
then, to the Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates, Class A-4 Certificates, Class A-5 Certificates and Class A-1A
Certificates, pro rata in accordance with their respective remaining
Certificate Balances, until the remaining Certificate Balance of each such
Class has been reduced to zero.
The Net Aggregate Prepayment Interest Shortfall, if any, for each
Distribution Date will be allocated to (i) with respect to Net Aggregate
Prepayment Interest Shortfalls attributable to the CC Component Mortgage Loan,
to the related Class of Class CC Certificates in reverse sequential order to
the extent described in this prospectus supplement, (ii) with respect to Net
Aggregate Prepayment Interest Shortfalls attributable to the SS Component
Mortgage Loan, to the related Class of Class SS Certificates in reverse
sequential order to the extent described in this prospectus supplement, (iii)
with respect to Net Aggregate Prepayment Interest Shortfalls attributable to
the UH Component Mortgage Loan, to the related Class of Class UH Certificates
in reverse sequential order to the extent described in this prospectus
supplement, and (iv) with respect to Net Aggregate Prepayment Interest
Shortfalls attributable to each Mortgage Loan (other the CC Component Mortgage
Loan, the SS Component Mortgage Loan or the UH Component Mortgage Loan in which
the related Subordinate Balance has not been reduced to zero), and with respect
to Net Aggregate Prepayment Interest Shortfalls allocable to the Mortgage Pool
generally, to all classes of Certificates (other than the REMIC Residual
Certificates). In each case, such allocations will be made pro rata to such
classes on the basis of Accrued Certificate Interest otherwise distributable
for each such Class for such Distribution Date and will reduce the respective
amounts of Accrued Certificate Interest for each such Class for such
Distribution Date.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on or in respect of the Mortgage Loans may
be affected by a number of factors, including, without limitation, prevailing
interest rates, the terms of the Mortgage Loans (for example, Prepayment
Premiums, Lock-out Periods and amortization terms that require Balloon
Payments), the demographics and relative economic vitality of the areas in
which the Mortgaged Properties are located and the general supply and demand
for retail shopping space, rental apartments, hotel rooms, industrial or
warehouse space, health care facility beds, senior living units or office
space, as the case may be, in such areas, the quality of management of the
Mortgaged Properties, the servicing of the Mortgage Loans, possible changes in
tax laws and other opportunities for investment. See "Risk Factors--Risks
Related to the Mortgage Loans", "Description of the Mortgage Pool" and
"Servicing of the Mortgage Loans" herein and "The Pooling and Servicing
Agreements" and "Yield and Maturity Considerations--Yield and Prepayment
Considerations" in the accompanying prospectus.
The rate of prepayment on the Mortgage Loans is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below the Mortgage
Rate (or, in the case of the ARD Loan after its Anticipated Repayment Date, the
Revised Rate) at which a Mortgage Loan accrues interest, a borrower may have an
increased incentive to refinance such Mortgage Loan. Conversely, to the extent
prevailing market interest rates exceed the applicable Mortgage Rate for any
Mortgage Loan, such Mortgage Loan may be less likely to prepay (other than, in
the case of the ARD Loan, out of certain net cash flow from the related
Mortgaged Property). Accordingly, there can be no assurance that a Mortgage
Loan will be prepaid prior to maturity.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash
flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
S-192
If a Mortgage Loan is not in a Lock-out Period, any Prepayment Premium in
respect of such Mortgage Loan may not be sufficient economic disincentive to
prevent the related borrower from voluntarily prepaying the loan as part of a
refinancing thereof or a sale of the related Mortgaged Property. See
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans" in this prospectus supplement.
The Depositor makes no representation or warranty as to the particular
factors that will affect the rate and timing of prepayments and defaults on the
Mortgage Loans, as to the relative importance of such factors, as to the
percentage of the principal balance of the Mortgage Loans that will be prepaid
or as to which a default will have occurred as of any date or as to the overall
rate of prepayment or default on the Mortgage Loans.
WEIGHTED AVERAGE LIVES
The weighted average life of any Offered Certificate refers to the average
amount of time that will elapse from the date of its issuance until each dollar
to be applied in reduction of the principal balance of such Certificate is
distributed to the investor. For purposes of this prospectus supplement, the
weighted average life of any such Offered Certificate is determined by (i)
multiplying the amount of each principal distribution thereon by the number of
years from the assumed Settlement Date (as defined below) to the related
Distribution Date, (ii) summing the results and (iii) dividing the sum by the
aggregate amount of the reductions in the principal balance of such
Certificate. Accordingly, the weighted average life of any such Offered
Certificate will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid or otherwise collected or advanced and
the extent to which such payments, collections and/or advances of principal are
in turn applied in reduction of the Certificate Balance of the Class of
Certificates to which such Offered Certificate belongs. As described in this
prospectus supplement, the Group 1 Principal Distribution Amount (and, after
the Class A-1A Certificates have been retired, any remaining Group 2 Principal
Distribution Amount) for each Distribution Date will generally be distributable
first in respect of the Class A-1 Certificates until the Certificate Balance
thereof is reduced to zero, then, to the Class A-2 Certificates until the
Certificate Balances thereof is reduced to zero, then, to the Class A-3
Certificates until the Certificate Balance thereof is reduced to zero, then, to
the Class A-4 Certificates until the Certificate Balance thereof is reduced to
zero, and then, to the Class A-5 Certificates until the Certificate Balance
thereof is reduced to zero, the Group 2 Principal Distribution Amount (and,
after the Class A-5 Certificates have been retired, any remaining Group 1
Principal Distribution Amount) for each Distribution Date will generally be
distributable first to the Class A-1A Certificates. After those distributions,
the remaining Principal Distribution Amount with respect to the Mortgage Pool
will generally be distributable entirely in respect of the remaining Classes of
Sequential Pay Certificates, sequentially in alphabetical order of Class
designation, in each such case until the related Certificate Balance is reduced
to zero. As a consequence of the foregoing, the weighted average lives of the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class A-1A
Certificates may be shorter, and the weighted average lives of the Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class
L, Class M, Class N, Class O and Class P Certificates may be longer, than would
otherwise be the case if the Principal Distribution Amount for each
Distribution Date was being distributed on a pro rata basis among the
respective Classes of Sequential Pay Certificates.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this prospectus supplement is the CPR model (as
described in the accompanying prospectus). As used in each of the following
tables, the column headed "0%" assumes that none of the Mortgage Loans is
prepaid before maturity. The columns headed "25%", "50%", "75%", "100%" assume
that no prepayments are made on any Mortgage Loan during such Mortgage Loan's
Lock-out Period, if any, or during such Mortgage Loan's yield maintenance
period, if any, and are otherwise made on each of the Mortgage Loans at the
indicated CPRs.
There is no assurance, however, that prepayments of the Mortgage Loans
(whether or not in a Lock-out Period or a yield maintenance period) will
conform to any particular CPR, and no representation is made that the Mortgage
Loans will prepay in accordance with the assumptions at
S-193
any of the CPRs shown or at any other particular prepayment rate, that all the
Mortgage Loans will prepay in accordance with the assumptions at the same rate
or that Mortgage Loans that are in a Lock-out Period or a yield maintenance
period will not prepay as a result of involuntary liquidations upon default or
otherwise. A "yield maintenance period" is any period during which a Mortgage
Loan provides that voluntary prepayments be accompanied by a Prepayment Premium
calculated on the basis of a yield maintenance formula.
The following tables indicate the percentages of the initial Certificate
Balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class B,
Class C, Class D and Class E Certificates that would be outstanding after each
of the dates shown at various CPRs, and the corresponding weighted average
lives of such Classes of Certificates, under the following assumptions (the
"Maturity Assumptions"): (i) the Mortgage Loans have the characteristics set
forth on Annex A as of the Cut-off Date, (ii) the Pass-Through Rate and the
initial Certificate Balance (such initial Certificate Balance referred to
herein for purposes of the Maturity Assumptions as the "Initial Certificate
Balance"), as the case may be, of each Class of Offered Certificates are as
described herein, (iii) the scheduled Monthly Payments for each Mortgage Loan
that accrues interest on the basis of actual number of days elapsed during the
month of accrual in a 360-day year are the actual contractual Monthly Payments
(adjusted to take into account the addition or subtraction of any Withheld
Amounts as described under "Description of the Certificates--Interest Reserve
Account"), (iv) there are no delinquencies or losses in respect of the Mortgage
Loans, there are no modifications, extensions, waivers or amendments affecting
the payment by borrowers of principal or interest on the Mortgage Loans, there
are no Appraisal Reduction Amounts with respect to the Mortgage Loans and there
are no casualties or condemnations affecting the Mortgaged Properties, (v)
scheduled Monthly Payments on the Mortgage Loans are timely received, (vi) no
voluntary or involuntary prepayments are received as to any Mortgage Loan
during such Mortgage Loan's Lock-out Period ("LOP"), if any, Defeasance Lockout
Period ("DLP"), if any, or, yield maintenance period ("YMP"), if any, and the
ARD Loan is paid in full on its Anticipated Repayment Date otherwise,
prepayments are made on each of the Mortgage Loans at the indicated CPRs set
forth in the tables (without regard to any limitations in such Mortgage Loans
on partial voluntary principal prepayments), (vii) none of the Master Servicer,
the Special Servicer nor any majority holder(s) of the Controlling Class
exercises its or exercise their right of optional termination described herein,
(viii) no Mortgage Loan is required to be repurchased by the Mortgage Loan
Seller, (ix) no Prepayment Interest Shortfalls are incurred, (x) there are no
Additional Trust Fund Expenses, (xi) distributions on the Offered Certificates
are made on the 10th day of each month, commencing in August 2004 and (xii) the
Offered Certificates are settled on July 14, 2004 (the "Settlement Date"). To
the extent that the Mortgage Loans have characteristics that differ from those
assumed in preparing the tables set forth below, Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class B, Class C, Class D, Class E Certificates may
mature earlier or later than indicated by the tables. It is highly unlikely
that the Mortgage Loans will prepay in accordance with the above assumptions at
any of the specified CPRs until maturity or that all the Mortgage Loans will so
prepay at the same rate. The indicated prepayment speeds were assumed for each
Mortgage Loan for any period for which a fixed prepayment premium would apply
under such Mortgage Loan. In addition, variations in the actual prepayment
experience and the balance of the Mortgage Loans that prepay may increase or
decrease the percentages of the Initial Certificate Balances (and weighted
average lives) shown in the following tables. Such variations may occur even if
the average prepayment experience of the Mortgage Loans were to conform to the
assumptions and be equal to any of the specified CPRs. Investors are urged to
conduct their own analyses of the rates at which the Mortgage Loans may be
expected to prepay.
S-194
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-1 CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 60.24 60.24 60.24 60.24 60.24
July 10, 2006 .......................... 16.26 16.26 16.26 16.26 16.26
July 10, 2007 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 1.26 1.26 1.26 1.26 1.26
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2 CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2006 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2007 .......................... 75.29 75.29 75.29 75.29 75.29
July 10, 2008 .......................... 34.91 34.91 34.91 34.91 34.91
July 10, 2009 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 3.64 3.64 3.63 3.63 3.62
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-3 CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2006 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2007 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2008 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2009 .......................... 52.85 52.85 52.85 52.85 52.85
July 10, 2010 .......................... 41.23 40.66 39.89 38.70 28.95
July 10, 2011 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 5.56 5.55 5.55 5.54 5.43
S-195
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-4 CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2006 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2007 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2008 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2009 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2010 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2011 .......................... 31.14 31.14 31.14 31.14 31.14
July 10, 2012 .......................... 18.57 18.57 18.57 18.57 18.57
July 10, 2013 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 7.23 7.23 7.23 7.23 7.16
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-5 CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2006 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2007 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2008 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2009 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2010 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2011 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2012 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2013 .......................... 98.57 98.57 98.57 98.57 98.57
July 10, 2014 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 9.72 9.71 9.69 9.65 9.46
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2006 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2007 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2008 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2009 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2010 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2011 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2012 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2013 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2014 .......................... 21.52 21.52 21.52 21.52 21.52
July 10, 2015 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 10.02 10.02 10.02 10.01 9.89
S-196
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS C CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2006 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2007 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2008 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2009 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2010 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2011 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2012 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2013 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2014 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2015 .......................... 81.32 81.32 81.32 81.32 81.32
July 10, 2016 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 11.19 11.18 11.17 11.16 11.07
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2006 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2007 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2008 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2009 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2010 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2011 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2012 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2013 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2014 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2015 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2016 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 11.61 11.51 11.48 11.46 11.37
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DLP AND YMP, THEN THE FOLLOWING CPR)
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------------------------
DATE 0% 25% 50% 75% 100%
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
Initial Percentage ..................... 100.00% 100.00% 100.00% 100.00% 100.00%
July 10, 2005 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2006 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2007 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2008 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2009 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2010 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2011 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2012 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2013 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2014 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2015 .......................... 100.00 100.00 100.00 100.00 100.00
July 10, 2016 .......................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years) .......... 11.99 11.97 11.78 11.66 11.57
S-197
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered
Certificates will be used by the Depositor to purchase the Mortgage Loans as
described under "Description of the Certificates-- General" in this prospectus
supplement, and to pay certain expenses in connection with the issuance of the
Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
For federal income tax purposes, three separate "real estate mortgage
investment conduit" ("REMIC") elections will be made with respect to designated
portions of the Trust Fund, the resulting REMICs being herein referred to as
the "Component Mortgage Loan REMIC", "REMIC I" and "REMIC II", respectively.
The assets of the Component Mortgage Loan REMIC will generally include the CC
Component Mortgage Loan, the SS Component Mortgage Loan, the UH Component
Mortgage Loan, the Trust's interest in any related REO Properties and amounts
with respect thereto contained in the Certificate Account, the Interest Reserve
Account (as to the related Senior Component only) and any REO Accounts. The CC
Senior Component, the SS Senior Component and the UH Senior Component and each
Class of Class CC Certificates, Class SS Certificates and Class UH Certificates
will represent "regular interests" in the Component Mortgage Loan REMIC. The
assets of REMIC I generally will include the Mortgage Loans (the CC Senior
Component in the case of the CC Component Mortgage Loan, the SS Senior
Component in the case of the SS Component Mortgage Loan and the UH Senior
Component in the case of the UH Component Mortgage Loan), the Trust's interest
in any REO Properties acquired on behalf of the Certificateholders (other than
with respect to the CC Component Mortgage Loan, the SS Component Mortgage Loan
and the UH Component Mortgage Loan) and amounts with respect thereto contained
in the Certificate Account, the Interest Reserve Account and the REO Accounts
(each as defined in the accompanying prospectus). The assets of REMIC II will
consist of certain uncertificated "regular interests" in REMIC I and amounts in
the Certificate Account with respect thereto. For federal income tax purposes,
(i) the REMIC II Certificates will evidence the "regular interests" in, and
generally will be treated as debt obligations of, REMIC II (other than the
portion of the Class P Certificates representing Excess Interest) and (ii) the
Class R-II Certificates will represent the sole class of "residual interest" in
REMIC II and (iii) the Class R-I Certificates will represent the sole class of
"residual interests" in the Component Mortgage Loan REMIC and REMIC I. Upon
issuance of the Offered Certificates, Cadwalader, Wickersham & Taft LLP,
special tax counsel to the Depositor, will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the Pooling Agreement,
for federal income tax purposes, the Component Mortgage Loan REMIC, REMIC I and
REMIC II each will qualify as a REMIC under the Code. In addition, in the
opinion of Cadwalader, Wickersham & Taft LLP, the portion of the trust fund
consisting of the Excess Interest and the Excess Interest Distribution Account
will be treated as a grantor trust for federal income tax purposes under
subpart E, Part I of subchapter J of the Code, and the Class P Certificates, in
addition to evidencing a regular interest in REMIC II, will evidence beneficial
ownership of such Excess Interest and the Excess Interest Distribution Account.
See "Certain Federal Income Tax Consequences--REMICs" in the accompanying
prospectus.
DISCOUNT AND PREMIUM; PREPAYMENT PREMIUMS
The Offered Certificates generally will be treated as newly originated
debt instruments originated on the related Startup Day for federal income tax
purposes. The "Startup Day" of the Component Mortgage Loan REMIC, REMIC I and
REMIC II is the Delivery Date. Beneficial owners of the Offered Certificates
will be required to report income on such regular interests in accordance with
the accrual method of accounting. It is anticipated that the Class A-1, Class
A-2, Class A-3, Class A-4, Class A-5 and Class B Certificates will be issued at
a premium, that the Class C and Class D Certificates will be issued with a de
minimis amount of original issue discount and that the Class E Certificates
will be issued with more than a de minimis amount of original issue discount
for
S-198
federal income tax purposes. See "Certain Federal Income Tax Consequences--
REMICs--Taxation of Owners of REMIC Regular Certificates--Original Issue
Discount" and "--Premium" in the accompanying prospectus.
For purposes of accruing original issue discount, if any, determining
whether such original issue discount is de minimis and amortizing any premium
on the Offered Certificates, the Prepayment Assumption will be 0% CPR (except
that the ARD Loan will be assumed to be repaid on its Anticipated Repayment
Date). See "Yield and Maturity Considerations--Weighted Average Lives" herein.
No representation is made as to the rate, if any, at which the Mortgage Loans
will prepay.
Prepayment Premiums actually collected will be distributed among the
holders of the respective classes of Certificates as described under
"Description of the Certificates--Distributions of Prepayment Premiums" in this
prospectus supplement. It is not entirely clear under the Code when the amount
of Prepayment Premiums so allocated should be taxed to the holder of an Offered
Certificate, but it is not expected, for federal income tax reporting purposes,
that Prepayment Premiums will be treated as giving rise to any income to the
holder of an Offered Certificate prior to the Master Servicer's actual receipt
of a Prepayment Premium. Prepayment Premiums, if any, may be treated as
ordinary income, although authority exists for treating such amounts as capital
gain if they are treated as paid upon the retirement or partial retirement of
an offered Certificate. Certificateholders should consult their own tax
advisers concerning the treatment of Prepayment Premiums.
CHARACTERIZATION OF INVESTMENTS IN OFFERED CERTIFICATES
Generally, except to the extent noted below, the Offered Certificates will
be "real estate assets" within the meaning of Section 856(c)(5)(B) of the Code
for a real estate investment trust ("REIT") in the same proportion that the
assets of the Trust would be so treated. In addition, interest (including
original issue discount, if any) on the Offered Certificates will be interest
described in Section 856(c)(3)(B) of the Code for a REIT to the extent that
such Certificates are treated as "real estate assets" within the meaning of
Section 856(c)(5)(B) of the Code. If 95% or more of the Mortgage Loans are
treated as assets described in Section 856(c)(5)(B) of the Code, the Offered
Certificates will be treated as such assets in their entirety. The Offered
Certificates will generally only be considered assets described in Section
7701(a)(19)(C) of the Code for a domestic building and loan association to the
extent that the Mortgage Loans are secured by residential property. It is
anticipated that as of the Cut-off Date, 16.0% and 19.7%, of the Initial Pool
Balance will represent Mortgage Loans secured by multifamily properties and
manufactured housing communities, respectively. None of the foregoing
characterizations will apply to the extent of any Mortgage Loans that have been
defeased. Accordingly, an investment in the Offered Certificates may not be
suitable for some thrift institutions. The Offered Certificates will be treated
as "qualified mortgages" for another REMIC under Section 860G(a)(3)(C) of the
Code. The Offered Certificates will be treated as "permitted assets" for a
financial asset securitization investment trust under Section 860L(c) of the
Code. See "Description of the Mortgage Pool" in this prospectus supplement and
"Certain Federal Income Tax Consequences--REMICs--Characterization of
Investments in REMIC Certificates" in the accompanying prospectus.
POSSIBLE TAXES ON INCOME FROM FORECLOSURE PROPERTY
In general, the Special Servicer will be obligated to operate and manage
any Mortgaged Property acquired as REO Property in a manner that would, to the
extent commercially feasible, maximize the Trust's net after-tax proceeds from
such property. After the Special Servicer reviews the operation of such
property and consults with the REMIC Administrator to determine the Trust's
federal income tax reporting position with respect to income it is anticipated
that the Trust would derive from such property, the Special Servicer could
determine that it would not be commercially feasible to manage and operate such
property in a manner that would avoid the imposition of a tax on "net income
from foreclosure property" (generally, income not derived from renting or
selling
S-199
real property) within the meaning of the REMIC provisions (an "REO Tax"). To
the extent that income the Trust receives from an REO Property is subject to a
tax on "net income from foreclosure property," such income would be subject to
federal tax at the highest marginal corporate tax rate (currently 35%). The
determination as to whether income from an REO Property would be subject to an
REO Tax will depend on the specific facts and circumstances relating to the
management and operation of each REO Property. These considerations will be of
particular relevance with respect to any health care facilities or hotels that
become REO Property. Any REO Tax imposed on the Trust's income from an REO
Property would reduce the amount available for distribution to
Certificateholders. Certificateholders are advised to consult their own tax
advisors regarding the possible imposition of REO Taxes in connection with the
operation of commercial REO Properties by REMICs.
REPORTING AND OTHER ADMINISTRATIVE MATTERS
Reporting of interest income, including any original issue discount, if
any, with respect to the Offered Certificates is required annually, and may be
required more frequently under Treasury regulations. These information reports
generally are required to be sent to individual holders of the Offered
Certificates and the IRS; holders of REMIC II Certificates that are
corporations, trusts, securities dealers and certain other non-individuals will
be provided interest and original issue discount income information and the
information set forth in the following paragraph upon request in accordance
with the requirements of the applicable regulations. The information must be
provided by the later of 30 days after the end of the quarter for which the
information was requested, or two weeks after the receipt of the request.
Reporting regarding qualification of the REMIC's assets as set forth above
under "--Characterization of Investments in Offered Certificates" will be made
as required under the Treasury regulations, generally on an annual basis.
As applicable, the Offered Certificate information reports will include a
statement of the adjusted issue price of the Offered Certificate at the
beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of
any market discount. Because exact computation of the accrual of market
discount on a constant yield method would require information relating to the
holder's purchase price that the REMIC Administrator may not have, such
regulations only require that information pertaining to the appropriate
proportionate method of accruing market discount be provided.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences--REMICs" in the accompanying prospectus.
CERTAIN ERISA CONSIDERATIONS
A fiduciary of any retirement plan or other employee benefit plan or
arrangement, including individual retirement accounts and individual retirement
annuities, Keogh plans and collective investment funds and separate accounts in
which such plans, accounts or arrangements are invested, including insurance
company general accounts, that is subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
(each, a "Plan") should carefully review with its legal advisors whether the
purchase or holding of Offered Certificates could give rise to a transaction
that is prohibited or is not otherwise permitted either under ERISA or Section
4975 of the Code or whether there exists any statutory or administrative
exemption applicable thereto. Certain fiduciary and prohibited transaction
issues arise only if the assets of the Trust constitute "plan assets" for
purposes of Part 4 of Title I of ERISA and Section 4975 of the Code ("Plan
Assets"). Whether the assets of the Trust will constitute Plan Assets at any
time will depend on a number of factors, including the portion of any Class of
Certificates that are held by "benefit plan investors" (as defined in U.S.
Department of Labor Regulation Section 2510.3-101).
The U.S. Department of Labor issued individual prohibited transaction
exemptions to NationsBank Corporation (predecessor in interest to Bank of
America Corporation), Prohibited
S-200
Transaction Exemption ("PTE") 93-31, to Bear, Stearns & Co. Inc., PTE 90-30,
and to Goldman, Sachs & Co., PTE 89-88, each as amended by PTE 97-34, PTE
2000-58 and PTE 2002-41 (collectively, the "Exemption"), which generally exempt
from the application of the prohibited transaction provisions of Sections
406(a) and (b) and 407(a) of ERISA, and the excise taxes imposed on such
prohibited transactions pursuant to Sections 4975(a) and (b) of the Code,
certain transactions, among others, relating to the servicing and operation of
mortgage pools, such as the Mortgage Pool, and the purchase, sale and holding
of mortgage pass-through certificates, such as the Offered Certificates,
underwritten by an Exemption-Favored Party (as hereinafter defined), provided
that certain conditions set forth in the Exemption are satisfied.
"Exemption-Favored Party" shall include
(a) Bank of America Corporation, (b) each of the Underwriters, (c) any person
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with Bank of America Corporation (such as
Banc of America Securities LLC) or any other Underwriter, and
(d) any member of the underwriting syndicate or selling group of which a person
described in (a), (b) or (c) is a manager or co-manager with respect to the
Offered Certificates.
The Exemption sets forth five general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of an Offered
Certificate to be eligible for exemptive relief thereunder. First, the
acquisition of such Offered Certificate by a Plan must be on terms that are at
least as favorable to the Plan as they would be in an arm's-length transaction
with an unrelated party. Second, such Offered Certificate at the time of
acquisition by the Plan must be rated in one of the four highest generic rating
categories by Fitch, Moody's Investors Service, Inc. ("Moody's"), or S&P.
Third, the Trustee cannot be an affiliate of any other member of the Restricted
Group other than an underwriter; the "Restricted Group" consists of any
Exemption-Favored Party, the Trustee, the Depositor, the Master Servicer, the
Special Servicer, any sub-servicer, the Mortgage Loan Seller, any borrower with
respect to Mortgage Loans constituting more than 5% of the aggregate
unamortized principal balance of the Mortgage Pool as of the date of initial
issuance of the Certificates and any affiliate of any of the aforementioned
persons. Fourth, the sum of all payments made to and retained by the
Exemption-Favored Parties must represent not more than reasonable compensation
for underwriting the Offered Certificates; the sum of all payments made to and
retained by the Depositor pursuant to the assignment of the Mortgage Loans to
the Trust must represent not more than the fair market value of such
obligations; and the sum of all payments made to and retained by the Master
Servicer, the Special Servicer and any sub-servicer must represent not more
than reasonable compensation for such person's services under the Pooling
Agreement and reimbursement of such person's reasonable expenses in connection
therewith. Fifth, the investing Plan must be an accredited investor as defined
in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act.
A fiduciary of a Plan contemplating a purchase of any Class of Offered
Certificates in the secondary market must make its own determination that, at
the time of such purchase, such Certificate continues to satisfy the second and
third general conditions set forth above. A fiduciary of a Plan contemplating
purchasing any Class of Offered Certificates, whether in the initial issuance
of such Certificate or in the secondary market, must make its own determination
that the first and fourth general conditions set forth above will be satisfied
with respect to such Certificates as of the date of such purchase. A Plan's
authorizing fiduciary will be deemed to make a representation regarding
satisfaction of the fifth general condition set forth above in connection with
the purchase of any Class of Offered Certificates.
The Exemption also requires that the Trust meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates evidencing
interests in such other investment pools must have been rated in one of the
four highest categories of Fitch, Moody's or S&P for at least one year prior to
the Plan's acquisition of an Offered Certificate; and (iii) certificates
evidencing interests in such other investment pools must have been purchased by
investors other than Plans for at least one year prior to any Plan's
acquisition of such Certificate. The Depositor has confirmed to its
satisfaction that such requirements have been satisfied as of the date hereof.
S-201
If the general conditions of the Exemption are satisfied, the Exemption
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA, as well as the excise taxes imposed by Sections 4975(a) and
(b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code, in
connection with (i) the direct or indirect sale, exchange or transfer of
Offered Certificates in the initial issuance of Offered Certificates between
the Depositor or an Exemption-Favored Party and a Plan when the Depositor, an
Exemption-Favored Party, the Trustee, the Master Servicer, the Special
Servicer, a sub-servicer, the Mortgage Loan Seller or a borrower is a party in
interest (within the meaning of Section 3(14) of ERISA) or a disqualified
person (within the meaning of Section 4975(e)(2) of the Code) (a "Party in
Interest") with respect to the investing Plan, (ii) the direct or indirect
acquisition or disposition in the secondary market of the Offered Certificates
by a Plan and (iii) the continued holding of the Offered Certificates by a
Plan. However, no exemption is provided from the restrictions of Sections
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of an
Offered Certificate on behalf of an Excluded Plan (as defined in the next
sentence) by any person who has discretionary authority or renders investment
advice with respect to the assets of such Excluded Plan. For purposes hereof,
an "Excluded Plan" is a Plan sponsored by any member of the Restricted Group.
Moreover, if the general conditions of the Exemption, as well as certain
other specific conditions set forth in the Exemption, are satisfied, the
Exemption may also provide an exemption from the restrictions imposed by
Sections 406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the
Code, in connection with (1) the direct or indirect sale, exchange or transfer
of the Offered Certificates in the initial issuance of the Offered Certificates
between the Depositor or an Exemption-Favored Party and a Plan when the person
who has discretionary authority or renders investment advice with respect to
the investment of Plan assets in such Certificates is (a) a borrower with
respect to 5% or less of the fair market value of the Mortgage Pool or (b) an
affiliate of such a person, (2) the direct or indirect acquisition or
disposition in the secondary market of Offered Certificates by a Plan and (3)
the continued holding of the Offered Certificates by a Plan.
Further, if the general conditions of the Exemption, as well as certain
other conditions set forth in the Exemption, are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a), 406(b)
and 407(a) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Section 4975(c) of the Code, for transactions in
connection with the servicing, management and operation of the Mortgage Pool.
Lastly, if the general conditions of the Exemption are satisfied, the
Exemption also may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Sections 4975(c)(1) (A) through (D) of
the Code, if such restrictions are deemed to otherwise apply merely because a
person is deemed to be a Party in Interest with respect to an investing Plan by
virtue of providing services to the Plan (or by virtue of having certain
specified relationships to such a person) solely as a result of the Plan's
ownership of Offered Certificates.
Before purchasing an Offered Certificate, a fiduciary of a Plan should
itself confirm that (i) the Offered Certificates constitute "securities" for
purposes of the Exemption and (ii) the specific and general conditions and the
other requirements set forth in the Exemption would be satisfied. In addition
to making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction class exemptions. See "Certain ERISA
Considerations" in the accompanying prospectus. There can be no assurance that
any such class exemptions will apply with respect to any particular Plan
investment in the Offered Certificates or, even if it were deemed to apply,
that any exemption would apply to all transactions that may occur in connection
with such investment.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
Title I of ERISA or Section 4975 of the Code. However, such a governmental plan
may be subject to a federal, state or local law which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code ("Similar Law"). A
fiduciary of a governmental plan should make its own determination as to the
need for and the availability of any exemptive relief under Similar Law.
S-202
Any Plan fiduciary considering whether to purchase an Offered Certificate
on behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA
and the Code to such investment.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Depositor or the Underwriters that this investment meets
all relevant legal requirements with respect to investments by Plans generally
or by any particular Plan, or that this investment is appropriate for Plans
generally or for any particular Plan.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. The appropriate characterization of the offered certificates under
various legal investment restrictions, and thus the ability of investors
subject to these restrictions to purchase certificates, is subject to
significant interpretive uncertainties.
No representations are made as to the proper characterization of the
Offered Certificates for legal investment, financial institution regulatory or
other purposes, or as to the ability of particular investors to purchase the
Offered Certificates under applicable legal investment or other restrictions.
The uncertainties described above (and any unfavorable future determinations
concerning the legal investment or financial institution regulatory
characteristics of the offered certificates) may adversely affect the liquidity
of the offered certificates.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors
in determining whether and to what extent the Offered Certificates constitute
legal investments for them or are subject to investment, capital or other
restrictions.
See "Legal Investment" in the accompanying prospectus.
S-203
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") among the Depositor and Banc of
America Securities LLC ("Banc of America"), Bear, Stearns & Co. Inc. ("Bear")
and Goldman, Sachs & Co. ("Goldman Sachs") (collectively, the "Underwriters"),
the Depositor has agreed to sell to each of Banc of America, Bear, and Goldman
Sachs and each of Banc of America, Bear, and Goldman Sachs has agreed to
purchase, severally but not jointly, the respective Certificate Balances or
Notional Amount as applicable, of each Class of the Offered Certificates as set
forth below subject in each case to a variance of 10%.
BANC OF AMERICA BEAR GOLDMAN SACHS
----------------- -------------- --------------
Class A-1 .......... $ 23,000,000 $ 0 $ 0
Class A-2 .......... $ 34,000,000 $ 0 $ 0
Class A-3 .......... $125,000,000 $ 0 $ 0
Class A-4 .......... $110,000,000 $ 0 $ 0
Class A-5 .......... $364,397,485 $25,000,000 $25,000,000
Class B ............ $ 28,879,200 $ 0 $ 0
Class C ............ $ 11,551,680 $ 0 $ 0
Class D ............ $ 24,547,319 $ 0 $ 0
Class E ............ $ 11,551,680 $ 0 $ 0
With respect to the Offered Certificates, Banc of America is acting as
sole lead manager and bookrunner. Bear and Goldman Sachs are each acting as a
co-manager, and Banc of America will be the sole bookrunner for any other
classes of certificates, none of which are offered by this prospectus
supplement.
Banc of America is an affiliate of the Depositor. Proceeds to the
Depositor from the sale of the Offered Certificates, before deducting expenses
payable by the Depositor, will be an amount equal to approximately 100.32% of
the initial aggregate Certificate Balance of the Offered Certificates, plus
accrued interest on all of the Offered Certificates, before deducting expenses
payable by the Depositor.
Distribution of the Offered Certificates will be made by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriters may effect such
transactions by selling the Offered Certificates to or through dealers, and
such dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriters. In connection with the
purchase and sale of the Offered Certificates, the Underwriters may be deemed
to have received compensation from the Depositor in the form of underwriting
discounts. The Underwriters and any dealers that participate with the
Underwriters in the distribution of the Offered Certificates may be deemed to
be underwriters and any profit on the resale of the Offered Certificates
positioned by them may be deemed to be underwriting discounts and commissions
under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities Act in connection with
reoffers and sales by them of Offered Certificates. Certificateholders should
consult with their legal advisors in this regard prior to any such reoffer or
sale.
The Depositor also has been advised by the Underwriters that the
Underwriters presently intend to make a market in the Offered Certificates;
however, the Underwriters have no obligation to do so, any market making may be
discontinued at any time and there can be no assurance that an active public
market for the Offered Certificates will develop. See "Risk Factors--Risks
Related to the Certificates--Liquidity for Certificates May Be Limited" in this
prospectus supplement and "Risk Factors--Limited Liquidity of Certificates" in
the accompanying prospectus.
The Depositor and the Mortgage Loan Seller have agreed to indemnify the
Underwriters and each person, if any, who controls the Underwriters within the
meaning of Section 15 of the
S-204
Securities Act against, or make contributions to the Underwriters and the such
controlling person with respect to, certain liabilities, including certain
liabilities under the Securities Act. The Mortgage Loan Seller has agreed to
indemnify the Depositor, its officers and directors, the Underwriters and each
person, if any, who controls the Depositor or the Underwriters within the
meaning of Section 15 of the Securities Act, with respect to certain
liabilities, including certain liabilities under the Securities Act, relating
to the Mortgage Loans sold by the Mortgage Loan Seller.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Cadwalader,
Wickersham & Taft LLP, Charlotte, North Carolina and for the Underwriters by
Thacher Proffitt & Wood LLP, New York, New York.
RATINGS
It is a condition to their issuance that the Offered Certificates receive
the credit ratings indicated below from Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P"; and, together with Moody's, the "Rating
Agencies"):
CLASS MOODY'S S&P
- ----------------------- --------- -----
Class A-1 .......... Aaa AAA
Class A-2 .......... Aaa AAA
Class A-3 .......... Aaa AAA
Class A-4 .......... Aaa AAA
Class A-5 .......... Aaa AAA
Class B ............ Aa2 AA
Class C ............ Aa3 AA--
Class D ............ A2 A
Class E ............ A3 A--
The ratings of the Offered Certificates address the likelihood of the
timely receipt by holders thereof of all payments of interest to which they are
entitled on each Distribution Date and the ultimate receipt by holders thereof
of all payments of principal to which they are entitled by the Distribution
Date in June 2039 (the "Rated Final Distribution Date"). The ratings take into
consideration the credit quality of the Mortgage Pool, structural and legal
aspects associated with the Certificates, and the extent to which the payment
stream from the Mortgage Pool is adequate to make payments of principal and/or
interest, as applicable, required under the Offered Certificates. The ratings
of the Offered Certificates do not, however, represent any assessments of (i)
the likelihood or frequency of voluntary or involuntary principal prepayments
on the Mortgage Loans, (ii) the degree to which such prepayments might differ
from those originally anticipated or (iii) whether and to what extent
Prepayment Premiums will be collected on the Mortgage Loans in connection with
such prepayments or the corresponding effect on yield to investors, or (iv)
whether and to what extent Default Interest will be received or Net Aggregate
Prepayment Interest Shortfalls will be realized, or (v) payments of Excess
Interest.
There is no assurance that any rating assigned to the Offered Certificates
by a Rating Agency will not be lowered, qualified (if applicable) or withdrawn
by such Rating Agency, if, in its judgment, circumstances so warrant. There can
be no assurance as to whether any rating agency not requested to rate the
Offered Certificates will nonetheless issue a rating to any Class thereof and,
if so, what such rating would be. In this regard, a rating assigned to any
Class of Offered Certificates by a rating agency that has not been requested by
the Depositor to do so may be lower than the ratings assigned thereto by
Moody's or S&P.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. 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. See "Risk
Factors--Limited Nature of Ratings" in the accompanying prospectus.
S-205
INDEX OF PRINCIPAL DEFINITIONS
17 State Street B Noteholder ............... S-79
17 State Street Borrower ................... S-97
17 State Street Control Appraisal
Period .................................. S-133
17 State Street Cure Event ................. S-131
17 State Street Intercreditor
Agreement ............................... S-79
17 State Street Mortgaged Property ......... S-79
17 State Street Note B ..................... S-79
17 State Street Purchase Option
Holder .................................. S-81
17 State Street Repurchase Price ........... S-81
17 State Street Special Servicing
Delay ................................... S-131
17 State Street Whole Loan ................. S-79
30/360 Basis ............................... S-73
30/360 Mortgage Loans ...................... S-73
369 Lexington Avenue Borrower .............. S-105
Accrued Certificate Interest ............... S-171
ACMs ....................................... S-118
Actual/360 Basis ........................... S-73
Actual/360 Mortgage Loan ................... S-73
Additional Trust Fund Expenses ............. S-177
S-155,
Administrative Fee Rate .................... A-1
Administrative Fees ........................ S-189
Advance Interest ........................... S-181
Advances ................................... S-142
Annual Debt Service ........................ A-1
Annualized Most Recent ..................... A-3
Anticipated Repayment Date ................. S-72
Appraisal Date ............................. S-120
Appraisal Reduction Amount ................. S-182
Appraisal Trigger Event .................... S-182
Appraisal Value ............................ A-1
Approval Provisions ........................ S-135
ARD Loan ................................... S-72
Asset Status Report ........................ S-131
Assumed Monthly Payment .................... S-174
Balloon .................................... A-1
Balloon Loan ............................... S-73
Balloon Payment ............................ S-73
Balloon Payment Interest Shortfall ......... S-140
Banc of America ............................ S-204
Bank of America ............................ S-70
Base Interest Fraction ..................... S-174
Bear ....................................... S-204
BOA-Bridger Mortgage Loans ................. S-70
BOA-CMSG ................................... S-137
BOA-Originated Mortgage Loans .............. S-70
Bridger .................................... S-70
Calpine Center Borrower .................... S-91
Calpine Center Borrower Principal .......... S-91
Cash Flow .................................. A-1
CBA B Note ................................. S-81
CBA B Noteholder ........................... S-81
CBA Intercreditor Agreement ................ S-81
CBA Mortgage Loan .......................... S-81
CBA Mortgaged Property ..................... S-81
CBA Whole Loan ............................. S-81
CC Accrued Component Interest .............. S-158
CC Component Distributable
Interest ................................ S-158
CC Component Mortgage Loan ................. S-78
CC Component Principal
Entitlement ............................. S-158
CC Control Appraisal Period ................ S-133
CC Controlling Class ....................... S-133
CC Controlling Class Holder ................ S-134
CC Controlling Holder ...................... S-133
CC Principal Distribution Amount ........... S-158
CC Schedule ................................ S-158
CC Senior Balance .......................... S-153
CC Senior Component ........................ S-78
CC Senior Component Principal
Distribution Amount ..................... S-156
CC Subordinate Balance ..................... S-153
CC Subordinate Components .................. S-78
CC-A Component ............................. S-78
CC-B Component ............................. S-78
CC-C Component ............................. S-78
CC-D Component ............................. S-78
CC-E Component ............................. S-78
CC-F Component ............................. S-78
Certificate Balance ........................ S-152
S-151,
Certificate Owner .......................... S-186
Certificate Registrar ...................... S-152
Class ...................................... S-151
Class A Certificates ....................... S-151
Class CC Certificates ...................... S-151
Class SS Certificates ...................... S-151
Class UH Certificates ...................... S-151
CMSA NOI Adjustment Worksheet .............. S-186
CMSA Operating Statement Analysis
Report .................................. S-185
Code ....................................... S-123
Collateral Substitution Deposit ............ S-74
S-12,
Collection Period .......................... S-155
S-206
Commercial Loan ......................... S-71
Commercial Mortgaged Property ........... S-71
Compensating Interest Payment ........... S-139
Component Mortgage Loan REMIC............ S-198
Controlling Class ....................... S-133
Controlling Class Certificateholder ..... S-133
Controlling Holder ...................... S-134
Corrected Mortgage Loan ................. S-130
CPA:15 .................................. S-85
Cross-Collateralized Mortgage Loan....... S-71
S-11,
Cut-off Date ............................ S-70
Cut-off Date Balance .................... S-70
Cut-off Date Loan-to-Value Ratio ........ A-2
Cut-off Date LTV ........................ A-2
Cut-off Date LTV Ratio .................. A-2
Default Charges ......................... S-141
Default Interest ........................ S-141
Defaulted Mortgage Loan ................. S-147
DEFEASANCE .............................. A-2
Defeasance Lock-Out Period .............. S-74
Defeasance Option ....................... S-74
Definitive Certificate .................. S-152
S-11,
Delivery Date ........................... S-151
Depositor ............................... S-11
S-12,
Determination Date ...................... S-155
Directing Certificateholder ............. S-132
Discount Rate ........................... A-2
Distributable Certificate Interest ...... S-171
S-11,
Distribution Date ....................... S-156
Distribution Date Statement ............. S-184
DLP ..................................... S-194
DTC ..................................... S-151
Due Date ................................ S-72
Emergency Advance ....................... S-142
Environmental Report .................... S-117
ERISA ................................... S-200
Excess Cash Flow ........................ S-73
Excess Interest ......................... S-73
Excess Interest Distribution Account..... S-178
Excess Interest Rate .................... S-72
Excess Liquidation Proceeds ............. S-171
Excess Liquidation Proceeds Reserve
Account .............................. S-171
Excluded Plan ........................... S-202
Exemption ............................... S-201
Exemption-Favored Party ................. S-201
Expenses ................................ A-1
Extra Space Storage ..................... S-112
Extra Space Storage - East One
Portfolio Borrower ................... S-112
Extra Space Storage - East One
Portfolio Loan ....................... S-112
Extra Space Storage - East One
Portfolio Property ................... S-112
Fitch ................................... S-137
Form 8-K ................................ S-128
Full Year ............................... A-3
Full Year Cash Flow ..................... A-2
Full Year End Date ...................... A-2
Full Year Expenses ...................... A-2
Full Year Revenues ...................... A-2
Fully Amortizing ........................ A-2
GAAP .................................... A-2
Goldman Sachs ........................... S-204
Group 1 Balance ......................... S-70
Group 1 Principal Distribution
Amount ............................... S-173
Group 2 Balance ......................... S-70
Group 2 Principal Distribution
Amount ............................... S-173
Group Balance ........................... S-70
Group Balances .......................... S-70
Hyper Am ................................ A-2
Initial Certificate Balance ............. S-194
Initial Pool Balance .................... S-70
Initial Resolution Period ............... S-123
Int Diff (BEY) - B ...................... A-3
Int Diff (MEY) .......................... A-4
Interest Only ........................... A-2
Interest Reserve Account ................ S-178
IO, Balloon ............................. A-2
Leasable Square Footage ................. A-2
Liquidation Fee ......................... S-141
Liquidation Fee Rate .................... S-141
Loan Group 1 ............................ S-70
Loan Group 2 ............................ S-70
Loan Groups ............................. S-70
Loan Specific Controlling Class
Holders .............................. S-134
Lock-out Period ......................... S-74
LOP ..................................... S-194
MAI ..................................... S-119
Major Tenants ........................... S-116
Master Servicer ......................... S-11
Master Servicer Remittance Date ......... S-178
Master Servicing Fee .................... S-138
Master Servicing Fee Rate ............... S-139
Maturity ................................ A-2
S-207
Maturity Assumptions .................. S-194
Maturity Date ......................... A-2
Maturity Date Balance ................. A-2
Maturity Date Loan-to-Value Ratio ..... A-2
Maturity Date LTV ..................... A-2
MERS .................................. S-71
Midland ............................... S-137
Modified Mortgage Loan ................ S-183
Money Rates ........................... S-181
Monthly Payments ...................... S-72
S-201,
Moody's ............................... S-205
Mortgage .............................. S-71
Mortgage Loan Purchase and Sale
Agreement .......................... S-125
Mortgage Loan Schedule ................ S-126
Mortgage Loan Seller .................. S-11
Mortgage Loans ........................ S-70
Mortgage Note ......................... S-71
Mortgage Pool ......................... S-70
Mortgage Rate ......................... S-72
Mortgaged Property .................... S-71
Most Recent Cash Flow ................. A-3
Most Recent DSCR ...................... A-3
Most Recent End Date .................. A-3
Most Recent Expenses .................. A-3
Most Recent Financial End Date ........ A-3
Most Recent Revenues .................. A-3
Most Recent Statement Type ............ A-3
Multifamily Loan ...................... S-71
Multifamily Mortgaged Property ........ S-71
Net Aggregate Prepayment Interest
Shortfall .......................... S-172
Net Mortgage Rate ..................... S-155
Net Rentable Area (SF) ................ A-2
Non-Partitioned Mortgage Loans ........ S-82
Nonrecoverable Advances ............... S-179
Nonrecoverable P&I Advance ............ S-179
Nonrecoverable Servicing Advance ...... S-143
Non-Specially Serviced Mortgage
Loan ............................... S-144
Notional Amount ....................... S-153
NPV (BEY) ............................. A-3
Occupancy Percent ..................... A-4
Occupancy % ........................... A-4
Offered Certificates .................. S-151
OPEN .................................. A-4
Open Period ........................... S-74
Operating Advisor ..................... S-134
Option Price .......................... S-147
Pads .................................. A-4
Participants .......................... S-152
Party in Interest ..................... S-202
Payment After Determination Date
Report ............................. S-184
Periodic Treasury Yield ............... A-4
Permitted Encumbrances ................ S-126
Permitted Investments ................. S-139
P&I Advance ........................... S-178
Plan .................................. S-200
Plan Assets ........................... S-200
PML ................................... S-121
Pooling Agreement ..................... S-151
Post CAP Loans ........................ S-82
Prepayment Interest Excess ............ S-139
Prepayment Interest Shortfall ......... S-139
Prepayment Premium .................... S-74
Prepayment Premium Period ............. S-74
Primary Collateral .................... S-125
prime rate ............................ S-181
Principal Distribution Amount ......... S-173
Private Certificates .................. S-151
PTE ................................... S-201
Purchase Option ....................... S-147
Purchase Price ........................ S-123
Qualified Substitute Mortgage Loan..... S-123
Quarters at Memorial Borrower ......... S-108
Rated Final Distribution Date ......... S-205
Rating Agencies ....................... S-205
Realized Losses ....................... S-177
S-11,
Record Date ........................... S-156
Reimbursement Rate .................... S-181
S-85,
REIT .................................. S-199
Related Loans ......................... A-4
Related Proceeds ...................... S-142
Release Date .......................... S-74
REMIC ................................. S-198
REMIC Administrator ................... S-189
REMIC I ............................... S-198
REMIC II .............................. S-198
REMIC II Certificates ................. S-151
REMIC Residual Certificates ........... S-151
REO Extension ......................... S-148
REO Loan .............................. S-177
REO Property .......................... S-129
REO Tax ............................... S-200
Required Appraisal Loan ............... S-182
Resolution Extension Period ........... S-123
Restricted Group ...................... S-201
Revenues .............................. A-1
S-208
Revised Rate ........................... S-72
Rooms .................................. A-4
SCOLP .................................. S-100
Senior Certificates .................... S-151
Senior Component ....................... S-79
S-17,
Sequential Pay Certificates ............ S-151
Servicing Advances ..................... S-142
Servicing Standard ..................... S-129
Servicing Transfer Event ............... S-129
Settlement Date ........................ S-194
Similar Law ............................ S-202
S&P .................................... S-205
Special Actions ........................ S-134
Special Servicer ....................... S-11
Special Servicing Fee .................. S-140
Special Servicing Fee Rate ............. S-140
Specially Serviced Mortgage Loan ....... S-129
SS Accrued Component Interest .......... S-160
SS Component Distributable Interest..... S-160
SS Component Mortgage Loan ............. S-78
SS Component Principal Entitlement...... S-160
SS Control Appraisal Period ............ S-133
SS Controlling Class ................... S-133
SS Controlling Class Holder ............ S-134
SS Controlling Holder .................. S-133
SS Principal Distribution Amount ....... S-161
SS Schedule ............................ S-161
SS Senior Balance ...................... S-153
SS Senior Component .................... S-78
SS Senior Component Principal
Distribution Amount ................. S-159
SS Subordinate Balance ................. S-153
SS Subordinate Components .............. S-78
SS-A Component ......................... S-78
SS-B Component ......................... S-78
SS-C Component ......................... S-78
SS-D Component ......................... S-78
St. Clair Estates Borrower ............. S-115
St. Clair Estates Mezzanine
Borrower ............................ S-115
Stated Principal Balance ............... S-155
Subordinate Certificates ............... S-167
Subordinate Components ................. S-79
Sub-Servicer ........................... S-138
Sub-Servicing Agreement ................ S-138
Sub-Servicing Fee Rate ................. A-1
Substitution Shortfall Amount .......... S-123
Sun .................................... S-100
Sun Communities - Arbor Terrace
Loan ................................ S-100
Sun Communities - Scio Farms Loan....... S-100
Sun Communities Portfolio 8 Loan ....... S-100
Sun Communities Portfolio 9 Loan ....... S-100
Sun Communities Portfolio
Borrowers ........................... S-100
Sun Communities Portfolio Loans ........ S-100
Sun Communities Portfolio Property...... S-100
Trailing 12 Months ..................... A-3
Trust .................................. S-151
Trust Fund ............................. S-151
Trustee ................................ S-11
Trustee Fee ............................ S-189
UH Accrued Component Interest .......... S-163
UH Component Distributable
Interest ............................ S-163
UH Component Mortgage Loan ............. S-79
UH Component Principal
Entitlement ......................... S-164
UH Control Appraisal Period ............ S-134
UH Controlling Class ................... S-133
UH Controlling Class Holder ............ S-134
UH Controlling Holder .................. S-134
UH Principal Distribution Amount ....... S-164
UH Schedule ............................ S-164
UH Senior Balance ...................... S-154
UH Senior Component .................... S-79
UH Senior Component Principal
Distribution Amount ................. S-161
UH Subordinate Balance ................. S-154
UH Subordinate Components .............. S-79
UH-A Component ......................... S-79
U-Haul Portfolio Borrower .............. S-85
UH-B Component ......................... S-79
UH-C Component ......................... S-79
UH-D Component ......................... S-79
UH-E Component ......................... S-79
UH-F Component ......................... S-79
UH-G Component ......................... S-79
UH-H Component ......................... S-79
UH-J Component ......................... S-79
Underwriters ........................... S-204
Underwriting Agreement ................. S-204
Underwriting Cash Flow ................. A-5
Underwriting Debt Service Coverage
Ratio ............................... A-4
Underwriting DSCR ...................... A-4
Underwritten Cash Flow ................. A-5
Underwritten Debt Service Coverage
Ratio ............................... A-4
Underwritten DSCR ...................... A-4
Units .................................. A-4
S-209
UPB .............................. A-4
USPAP ............................ S-120
UST .............................. S-119
U/W Cash Flow .................... A-5
U/W DSCR ......................... A-4
U/W Expenses ..................... A-5
U/W Replacement Reserves ......... A-6
U/W Replacement Reserves Per
Unit .......................... A-6
U/W Revenues ..................... A-5
Voting Rights .................... S-187
Weighted Average Net Mortgage
Rate .......................... S-154
Wells Fargo ...................... S-189
Withheld Amount .................. S-178
Workout Fee ...................... S-140
Workout Fee Rate ................. S-140
Workout-Delayed Reimbursement
Amount ........................ S-181
Yield Rate ....................... A-4
YM ............................... A-6
YMP .............................. S-194
S-210
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
The schedule and tables appearing in this Annex A set forth certain
information with respect to the Mortgage Loans and Mortgaged Properties. Unless
otherwise indicated, such information is presented as of the Cut-off Date. The
statistics in such schedule and tables were derived, in many cases, from
information and operating statements furnished by or on behalf of the
respective borrowers. Such information and operating statements were generally
unaudited and have not been independently verified by the Depositor or any
Underwriter, or any of their respective affiliates or any other person.
For purposes of the prospectus supplement, including the schedule and
tables in this Annex A, the indicated terms shall have the following meanings
and the schedules and tables in this Annex A will be qualified by the
following:
1. "Administrative Fee Rate" means the sum of the Master Servicing Fee
Rate (including the per annum rates at which the monthly sub-servicing fee
is payable to the related Sub-Servicer (the "Sub-Servicing Fee Rate")),
plus the per annum rate applicable to the calculation of the Trustee Fee.
2. "Annual Debt Service" means the amount derived by multiplying the
Monthly Payment set forth for each Mortgage Loan in this Annex A by twelve.
3. "Appraisal Value" means, for any Mortgaged Property, the appraiser's
value as stated in the appraisal available to the Depositor as of the date
specified on the schedule.
4. "Balloon" means a loan that has a significant outstanding balance at
maturity.
5. "Cash Flow" means with respect to any Mortgaged Property, the total
cash flow available for Annual Debt Service on the related Mortgage Loan,
generally calculated as the excess of Revenues over Expenses, capital
expenditures and tenant improvements and leasing commissions.
(i) "Revenues" generally consist of certain revenues received in
respect of a Mortgaged Property, including, for example, (A) for the
Multifamily Mortgaged Properties, rental and other revenues; (B) for the
Commercial Mortgaged Properties, base rent (less mark-to-market
adjustments in some cases), percentage rent, expense reimbursements and
other revenues; and (C) for hotel Mortgaged Properties, guest room rates,
food and beverage charges, telephone charges and other revenues.
(ii) "Expenses" generally consist of all expenses incurred for a
Mortgaged Property, including for example, salaries and wages, the costs
or fees of utilities, repairs and maintenance, marketing, insurance,
management, landscaping, security (if provided at the Mortgaged Property)
and the amount of real estate taxes, general and administrative expenses,
ground lease payments, and other costs but without any deductions for
debt service, depreciation and amortization or capital expenditures
therefor. In the case of hotel Mortgaged Properties, Expenses include,
for example, expenses relating to guest rooms (hotels only), food and
beverage costs, telephone bills, and rental and other expenses, and such
operating expenses as general and administrative, marketing and franchise
fees.
In certain cases, Full Year Cash Flow, Most Recent Cash Flow and/or U/W
Cash Flow have been adjusted by removing certain non-recurring expenses and
revenue or by certain other normalizations. Such Cash Flow does not necessarily
reflect accrual of certain costs such as capital expenditures and leasing
commissions and does not reflect non-cash items such as depreciation or
amortization. In some cases, capital expenditures and non-recurring items may
have been treated by a borrower as an expense but were deducted from Most
Recent Expenses, Full Year Expenses or U/W Expenses to reflect normalized Most
Recent Cash Flow, Full Year Cash Flow or U/W Cash Flow, as the case may be. The
Depositor has not made any attempt to verify the accuracy of any information
provided by each borrower or to reflect changes that may have occurred since
the date
A-1
of the information provided by each borrower for the related Mortgaged
Property. Such Cash Flow was not necessarily determined in accordance with
generally accepted accounting principles ("GAAP"). Such Cash Flow is not a
substitute for net income determined in accordance with GAAP as a measure of
the results of a Mortgaged Property's operations or a substitute for cash flows
from operating activities determined in accordance with GAAP as a measure of
liquidity. Moreover, in certain cases such Cash Flow may reflect partial-year
annualizations.
6. "Cut-off Date Loan-to-Value Ratio", "Cut-off Date LTV Ratio" or
"Cut-off Date LTV" means, with respect to any Mortgage Loan, the Cut-off
Date Balance of such Mortgage Loan divided by the Appraisal Value of the
related Mortgaged Property.
7. "DEFEASANCE" means, with respect to any Mortgage Loan, that such
Mortgage Loan is subject to a Defeasance Option.
8. "Discount Rate" means, with respect to any prepayment premium
calculation, the yield on the U.S. Treasury issue with a maturity date
closest to the maturity date for the Mortgage Loan being prepaid, or an
interpolation thereof.
9. "Full Year End Date" means, with respect to each Mortgage Loan, the
date indicated on Annex A as the "Full Year End Date" with respect to such
Mortgage Loan, which date is generally the end date with respect to the
period covered by the latest available annual operating statement provided
by the related borrower.
10. "Full Year Cash Flow" means, with respect to any Mortgaged Property,
the Cash Flow derived therefrom that was available for debt service,
calculated as Full Year Revenues less Full Year Expenses, Full Year capital
expenditures and Full Year tenant improvements and leasing commissions. See
also "Cash Flow" above.
(i) "Full Year Revenues" are the Revenues received (or annualized or
estimated in certain cases) in respect of a Mortgaged Property for the
12-month period ended as of the Full Year End Date, based upon the latest
available annual operating statement and other information furnished by
the borrower for its most recently ended fiscal year.
(ii) "Full Year Expenses" are the Expenses incurred (or annualized or
estimated in certain cases) for a Mortgaged Property for the 12-month
period ended as of the Full Year End Date, based upon the latest
available annual operating statement and other information furnished by
the borrower for its most recently ended fiscal year.
11. "Fully Amortizing" means fully amortizing Mortgage Loan; except that
such Mortgage Loan may have a payment due at its maturity in excess of its
scheduled Monthly Payment.
12. "Hyper Am" means ARD Loan.
13. "Interest Only": Any Mortgage Loan which requires scheduled payments
of interest only until the related Maturity Date, or Anticipated Repayment
Date.
14. "IO, Balloon": Any Mortgage Loan which requires only scheduled
payments of interest for some (but not all) of the term of the related
Mortgage Loan and that has a significant outstanding balance at maturity.
15. "Leasable Square Footage" or "Net Rentable Area (SF)" means, in the
case of a Mortgaged Property operated as a retail center, office complex or
industrial or warehouse facility, the square footage of the net leasable
area.
16. "Maturity" or "Maturity Date" means, with respect to any Mortgage
Loan, the date specified in the related Mortgage Note as its stated
maturity date, or with respect to the ARD Loan, its Anticipated Repayment
Date.
17. "Maturity Date Balance" means, with respect to any Mortgage Loan, the
balance due at maturity, assuming no prepayments, defaults or extensions.
18. "Maturity Date Loan-to-Value Ratio" or "Maturity Date LTV" means,
with respect to any Mortgage Loan, the Maturity Date Balance, divided by
the Appraisal Value of the related Mortgaged Property.
A-2
19. "Most Recent Cash Flow" means, with respect to any Mortgaged
Property, the Cash Flow derived therefrom that was available for debt
service, calculated as Most Recent Revenues less Most Recent Expenses, Most
Recent capital expenditures and Most Recent tenant improvements and leasing
commissions. See also "Cash Flow" above.
(i) "Most Recent Revenues" are the Revenues received (or annualized or
estimated in certain cases) in respect of a Mortgaged Property for the
12-month period ended on the Most Recent Date, based upon operating
statements and other information furnished by the related borrower.
(ii) "Most Recent Expenses" are the Expenses incurred (or annualized
or estimated in certain cases) for a Mortgaged Property for the 12-month
period ended on the Most Recent Date, based upon operating statements and
other information furnished by the related borrower.
20. "Most Recent DSCR" means, with respect to any Mortgage Loan, (a) the
Most Recent Cash Flow for the related Mortgaged Property, divided by (b)
the Annual Debt Service for such Mortgage Loan.
21. "Most Recent Financial End Date" means, with respect to any Mortgage
Loan, the date indicated on Annex A as the "Most Recent End Date" with
respect to such Mortgage Loan which date is generally the end date with
respect to the period covered by the latest available operating statement
provided by the related borrower.
22. "Most Recent Statement Type" means certain financial information with
respect to the Mortgaged Properties as set forth in the three categories
listed in (i) through (iii) immediately below.
(i) "Full Year" means certain financial information regarding the
Mortgaged Properties presented as of the date which is presented in the
Most Recent Financial End Date.
(ii) "Annualized Most Recent" means certain financial information
regarding the Mortgaged Properties which has been annualized based upon
one month or more of financial data.
(iii) "Trailing 12 Months" means certain financial information
regarding a Mortgaged Properties which is presented for the trailing 12
months prior to the Most Recent Financial End Date.
23. "NPV (BEY)" refers to a method of calculation of a yield maintenance
premium. Under this method prepayment premiums are generally equal to an
amount equal to the greater of (a) an amount equal to one percent (1%) of
the then outstanding principal balance of the related Mortgage Loan or (b)
an amount equal to (y) the sum of the present values as of the date of
prepayment of the related Mortgage Loan of all unpaid principal and
interest payments required under this note, calculated by discounting such
payments from their respective scheduled payment dates back to the date of
prepayment of the related Mortgage Loan at a discount rate equal to the
Periodic Treasury Yield, minus (z) the outstanding principal balance of the
loan as of the date of prepayment of the related Mortgage Loan. Loan No.
8828 has been assumed to be included in this category for purposes of Annex
A.
24. "Int Diff (BEY) - B" refers to a method of calculation of a yield
maintenance premium. Under this method prepayment premiums are generally
equal to an amount equal to the greater of (a) one percent (1%) of the
principal amount being prepaid or (b) the product obtained by multiplying
(x) the principal amount being prepaid, times (y) the difference obtained
by subtracting (I) the Yield Rate (plus 100 basis points in the case of
Loan No. 57952) from (II) the mortgage rate of the related Mortgage Note,
times (z) the present value factor calculated using the following formula:
(-n)
1--(1+r)
-----------
r
A-3
where r is equal to the Yield Rate and n is equal to the number of years
and any fraction thereof, remaining between the date the prepayment is made
and the maturity date of the related Mortgage Note.
As used in this definition, "Yield Rate" means the yield rate for the
specified United States Treasury security, as reported in The Wall Street
Journal on the fifth business day preceding the date the prepayment is required
in the related Mortgage Loan documents. Loan Nos. 57990, 57829, 57952, 57968,
57983, 57823, 57821 and 57893 have been assumed to be included in this category
for purposes of Annex A.
25. "Int Diff (MEY)" refers to a method of calculation of a yield
maintenance premium. Under this method, "Yield Maintenance" means a
prepayment premium in an amount equal to the greater of (i) one percent
(1%) of the portion of the Loan being prepaid, and (ii) the present value
as of the Prepayment Calculation Date of a series of monthly payments over
the remaining term of the Loan being prepaid assuming a per annum interest
rate equal to the excess of the Note Rate over the Reinvestment Yield, and
discounted at the Reinvestment Yield. As used herein, "Reinvestment Yield"
means the yield rate for the specified United States Treasury security as
described in the underlying Note converted to a monthly compounded nominal
yield. The "Prepayment Calculation Date" means, as applicable, the date on
which (i) Lender applies any prepayment to the reduction of the outstanding
principal amount of this Note, (ii) Lender accelerates the Loan, in the
case of a prepayment resulting from acceleration, or (iii) Lender applies
funds held under any Reserve Account, in the case of a prepayment resulting
from such an application (other than in connection with acceleration of the
Loan). Loan Nos. 58014 and 58106 have been assumed to be included in this
category for purposes of Annex A.
26. "Occupancy %" or "Occupancy Percent" means the percentage of Leasable
Square Footage or Total Units/Rooms/Pads, as the case may be, of the
Mortgaged Property that was occupied as of a specified date, as specified
by the borrower or as derived from the Mortgaged Property's rent rolls,
which generally are calculated by physical presence or, alternatively,
collected rents as a percentage of potential rental revenues.
27. "OPEN" means, with respect to any Mortgage Loan that such Mortgage
Loan may be voluntarily prepaid without a Prepayment Premium.
28. "Periodic Treasury Yield" means (a) the annual yield to maturity of
the actively traded noncallable United States Treasury fixed interest rate
security (other than such security which can be surrendered at the option
of the holder at face value in payment of federal estate tax or which was
issued at a substantial discount) that has a maturity closest to (whether
before, on or after) the maturity date (or if two or more securities have
maturity dates equally close to the maturity date, the average annual yield
to maturity of all such securities), as reported in The Wall Street Journal
or other authoritative publication or news retrieval service on the fifth
business day preceding the prepayment date, divided by (b) twelve, if
scheduled payment dates are monthly, or four, if scheduled payment dates
are quarterly.
29. "Related Loans" means two or more Mortgage Loans with respect to
which the related Mortgaged Properties are either owned by the same entity
or owned by two or more entities controlled by the same key principals.
30. "UPB" means, with respect to any Mortgage Loan, its unpaid principal
balance.
31. "Units", "Rooms" and "Pads" respectively, mean: (i) in the case of a
Mortgaged Property operated as multifamily housing, the number of
apartments, regardless of the size of or number of rooms in such apartment
(referred to in the schedule as "Units"); (ii) in the case of a Mortgaged
Property operated as a hotel, the number of rooms (referred to in the
schedule as "Rooms"); and (iii) in the case of a Mortgaged Property
operated as a Manufactured Housing Community, the number of pads (referred
to in the schedule as "Pads").
32. "U/W DSCR", "Underwritten DSCR", "Underwritten Debt Service Coverage
Ratio", "Underwriting DSCR" or "Underwriting Debt Service Coverage Ratio"
means, with respect to
A-4
any Mortgage Loan, (a) the U/W Cash Flow for the related Mortgaged Property
divided by (b) the Annual Debt Service for such Mortgage Loan.
33. "U/W Cash Flow", "Underwritten Cash Flow" or "Underwriting Cash Flow"
means, with respect to any Mortgaged Property, the Cash Flow derived
therefrom that was available for debt service, calculated as U/W Revenues
less U/W Expenses, U/W Reserves and U/W tenant improvements and leasing
commissions. See also "Cash Flow" above.
(i) "U/W Revenues" are the anticipated Revenues in respect of a
Mortgaged Property, generally determined by means of an estimate made at
the origination of such Mortgage Loan or, as in some instances, as have
been subsequently updated. U/W Revenues have generally been calculated
(a) assuming that the occupancy rate for the Mortgaged Property was
consistent with the Mortgaged Property's current or historical rate, or
the relevant market rate, if such rate was less than the occupancy rate
reflected in the most recent rent roll or operating statements, as the
case may be, furnished by the related borrower, and (b) in the case of
retail, office, industrial and warehouse Mortgaged Properties, assuming a
level of reimbursements from tenants consistent with the terms of the
related leases or historical trends at the Mortgaged Property, and in
certain cases, assuming that a specified percentage of rent will become
defaulted or otherwise uncollectible. In addition, in the case of retail,
office, industrial and warehouse Mortgaged Properties, upward adjustments
may have been made with respect to such revenues to account for all or a
portion of the rents provided for under any new leases scheduled to take
effect later in the year. Also, in the case of certain Mortgaged
Properties that are operated as nursing home or hotel properties and are
subject to an operating lease with a single operator, U/W Revenues were
calculated based on revenues received by the operator rather than rental
payments received by the related borrower under the operating lease.
(ii) "U/W Expenses" are the anticipated Expenses in respect of a
Mortgaged Property, generally determined by means of an estimate made at
the origination of such Mortgage Loan or as in some instances as may be
updated. U/W Expenses were generally assumed to be equal to historical
annual expenses reflected in the operating statements and other
information furnished by the borrower, except that such expenses were
generally modified by (a) if there was no management fee or a below
market management fee, assuming that a management fee was payable with
respect to the Mortgaged Property in an amount approximately equal to a
percentage of assumed gross revenues for the year, (b) adjusting certain
historical expense items upwards or downwards to amounts that reflect
industry norms for the particular type of property and/or taking into
consideration material changes in the operating position of the related
Mortgaged Property (such as newly signed leases and market data) and (c)
adjusting for non-recurring items (such as capital expenditures) and
tenant improvement and leasing commissions, if applicable (in the case of
certain retail, office, industrial and warehouse Mortgaged Properties,
adjustments may have been made to account for tenant improvements and
leasing commissions at costs consistent with historical trends or
prevailing market conditions and, in other cases, operating expenses did
not include such costs).
Actual conditions at the Mortgaged Properties will differ, and may differ
substantially, from the assumed conditions used in calculating U/W Cash Flow.
In particular, the assumptions regarding tenant vacancies, tenant improvements
and leasing commissions, future rental rates, future expenses and other
conditions if and to the extent used in calculating U/W Cash Flow for a
Mortgaged Property, may differ substantially from actual conditions with
respect to such Mortgaged Property. There can be no assurance that the actual
costs of reletting and capital improvements will not exceed those estimated or
assumed in connection with the origination or purchase of the Mortgage Loans.
In most cases, U/W Cash Flow describes the cash flow available after
deductions for capital expenditures such as tenant improvements, leasing
commissions and structural reserves. In those cases where such "reserves" were
so included, no cash may have been actually escrowed. No
A-5
representation is made as to the future net cash flow of the properties, nor is
U/W Cash Flow set forth herein intended to represent such future net cash flow.
34. "U/W Replacement Reserves" means, with respect to any Mortgaged
Property, the aggregate amount of on-going reserves (generally for capital
improvements and replacements) assumed to be maintained with respect to
such Mortgaged Property. In each case, actual reserves, if any, may be less
than the amount of U/W Reserves.
35. "U/W Replacement Reserves Per Unit" means, with respect to any
Mortgaged Property, (a) the related U/W Reserves, divided by (b) the number
of Units, Rooms, Leasable Square Feet or Pads, as applicable.
36. "YM" means, with respect to any Mortgage Loan, a yield maintenance
premium.
37. For purposes of the calculation of the Net Mortgage Rate in Annex A
to this prospectus supplement, such values were calculated without regard
to the adjustment described in the definition of Net Mortgage Rates in this
prospectus supplement.
A-6
(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
BASED ON OUTSTANDING PRINCIPAL BALANCE(1)(2)(3)
ALL MORTGAGE LOANS
JUL-04 JUL-05 JUL-06 JUL-07
--------------- --------------- --------------- ---------------
Locked Out ............ 100.00% 100.00% 90.44% 89.50%
Yield
Maintenance(4) ....... 0.00% 0.00% 9.56% 10.50%
Open .................. 0.00% 0.00% 0.00% 0.00%
--------- --------- --------- ---------
Total ................. 100.00% 100.00% 100.00% 100.00%
--------- --------- --------- ---------
Total Balance as of
the Cut-off Date
(in millions) ........ $ 1,155.17 $ 1,144.09 $ 1,131.74 $ 1,115.91
---------- ---------- ---------- ----------
Percent of
Mortgage Pool
Balance .............. 100.00% 99.04% 97.97% 96.60%
---------- ---------- ---------- ----------
JUL-08 JUL-09 JUL-10 JUL-11 JUL-12 JUL-13 JUL-14
--------------- ------------- ------------- ------------- ------------- ------------- -------------
Locked Out ............ 85.73% 86.48% 84.84% 84.41% 83.23% 83.74% 86.63%
Yield
Maintenance(4) ....... 12.44% 13.52% 13.54% 15.59% 15.98% 16.26% 13.37%
Open .................. 1.83% 0.00% 1.62% 0.00% 0.80% 0.00% 0.00%
--------- ------- ------- ------- ------- ------- -------
Total ................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
--------- ------- ------- ------- ------- ------- -------
Total Balance as of
the Cut-off Date
(in millions) ........ $ 1,097.86 $ 965.10 $ 946.88 $ 784.53 $ 749.46 $ 719.77 $ 141.95
---------- -------- -------- -------- -------- -------- --------
Percent of
Mortgage Pool
Balance .............. 95.04% 83.55% 81.97% 67.92% 64.88% 62.31% 12.29%
---------- -------- -------- -------- -------- -------- --------
JUL-15 JUL-16 JUL-17 JUL-18 JUL-19
------------- ------------- ------------- ------------- ----------
Locked Out ............ 86.12% 0.00% 0.00% 0.00% 0.00%
Yield
Maintenance(4) ....... 13.88% 100.00% 100.00% 100.00% 0.00%
Open .................. 0.00% 0.00% 0.00% 0.00% 0.00%
------- ------ ------ ------ -----
Total ................. 100.00% 100.00% 100.00% 100.00% 0.00%
------- ------ ------ ------ -----
Total Balance as of
the Cut-off Date
(in millions) ........ $ 133.57 $ 18.09 $ 17.61 $ 17.10 $ 0.00
-------- ------- ------- ------- ------
Percent of
Mortgage Pool
Balance .............. 11.56% 1.57% 1.52% 1.48% 0.00%
-------- ------- ------- ------- ------
- -------
(1) Prepayment provisions in effect as a percentage of outstanding loan
balances as of the indicated date assuming no prepayments on the Mortgage
Loans, if any.
(2) As of the Cut-off Date.
(3) Numbers may not total to 100% due to rounding.
(4) As of the Cut-off Date, 11 Mortgage Loans, representing 13.3% of the
initial pool balance, are subject to yield maintenance prepayment
provisions after the lockout period. The remaining Mortgage Loans,
representing 86.7% of the initial pool balance, are subject to defeasance
after an initial restriction period.
A-7
MORTGAGE POOL PROPERTY TYPE
% OF WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE
MORTGAGED CUT-OFF DATE POOL UNDERWRITTEN
PROPERTY TYPE PROPERTIES BALANCE BALANCE DSCR
- ----------------------- ------------ ----------------- --------- --------------
Office ................ 25 $ 366,920,409 31.8% 1.75x
Manufactured
Housing .............. 21 227,221,308 19.7 1.26x
Self Storage .......... 99 190,623,356 16.5 2.21x
Multifamily ........... 21 184,854,996 16.0 1.29x
Retail ................ 19 147,726,906 12.8 1.44x
Anchored ............. 11 100,062,956 8.7 1.48x
Shadow
Anchored ............. 6 36,804,644 3.2 1.36x
Unanchored ........... 2 10,859,306 0.9 1.44x
Industrial ............ 3 23,396,310 2.0 1.65x
Hotel ................. 1 14,424,707 1.2 1.58x
-- -------------- -----
Total/Wtd Avg ......... 189 $1,155,167,991 100.0% 1.61x
=== ============== =====
WEIGHTED WEIGHTED
MIN/MAX AVERAGE MIN/MAX AVERAGE
UNDERWRITTEN CUT-OFF DATE CUT-OFF DATE MORTGAGE
PROPERTY TYPE DSCR LTV RATIO LTV RATIO RATE
- ----------------------- ---------------------- -------------- ---------------- ---------
Office ................ 1.23x/2.29x 61.5% 44.6%/79.8% 5.339
Manufactured
Housing .............. 1.20x/1.65x 77.9% 37.0%/80.9% 5.382%
Self Storage .......... 1.23x/2.78x 54.4% 37.5%/80.0% 6.090%
Multifamily ........... 1.15x/1.57x 76.0% 48.1%/80.0% 5.078%
Retail ................ 1.25x/1.92x 71.8% 46.9%/79.9% 5.481%
Anchored ............. 1.25x/1.92x 72.0% 46.9%/79.9% 5.474%
Shadow
Anchored ............. 1.26x/1.64x 71.1% 60.4%/79.8% 5.558%
Unanchored ........... 1.35x/1.48x 71.6% 67.0%/73.7% 5.284%
Industrial ............ 1.28x/1.79x 64.8% 63.7%/67.8% 5.184%
Hotel ................. 1.58x/1.58x 53.0% 53.0%/53.0% 6.309%
Total/Wtd Avg ......... 1.15x/2.78x 67.2% 37.0%/80.9% 5.457%
LOAN GROUP 1 PROPERTY TYPE
% OF
INITIAL WEIGHTED
NUMBER OF AGGREGATE LOAN AVERAGE
MORTGAGED CUT-OFF DATE GROUP 1 UNDERWRITTEN
PROPERTY TYPE PROPERTIES BALANCE BALANCE DSCR
- ----------------------- ------------ -------------- --------- --------------
Office ................ 25 $366,920,409 42.1% 1.75x
Self Storage .......... 99 190,623,356 21.9 2.21x
Retail ................ 19 147,726,906 17.0 1.44x
Anchored ............. 11 100,062,956 11.5 1.48x
Shadow
Anchored ............. 6 36,804,644 4.2 1.36x
Unanchored ........... 2 10,859,306 1.2 1.44x
Manufactured
Housing .............. 5 66,878,324 7.7 1.23x
Multifamily ........... 3 61,038,914 7.0 1.23x
Industrial ............ 3 23,396,310 2.7 1.65x
Hotel ................. 1 14,424,707 1.7 1.58x
-- ------------ -----
Total/Wtd Avg ......... 155 $871,008,925 100.0% 1.72x
=== ============ =====
WEIGHTED WEIGHTED
MIN/MAX AVERAGE MIN/MAX AVERAGE
UNDERWRITTEN CUT-OFF DATE CUT-OFF DATE MORTGAGE
PROPERTY TYPE DSCR LTV RATIO LTV RATIO RATE
- ----------------------- ---------------------- -------------- ---------------- -----------
Office ................ 1.23x/2.29x 61.5% 44.6%/79.8% 5.339%
Self Storage .......... 1.23x/2.78x 54.4% 37.5%/80.0% 6.090%
Retail ................ 1.25x/1.92x 71.8% 46.9%/79.9% 5.481%
Anchored ............. 1.25x/1.92x 72.0% 46.9%/79.9% 5.474%
Shadow
Anchored ............. 1.26x/1.64x 71.1% 60.4%/79.8% 5.558%
Unanchored ........... 1.35x/1.48x 71.6% 67.0%/73.7% 5.284%
Manufactured
Housing .............. 1.20x/1.29x 77.1% 64.7%/80.9% 5.505%
Multifamily ........... 1.22x/1.26x 74.7% 71.6%/79.9% 4.985%
Industrial ............ 1.28x/1.79x 64.8% 63.7%/67.8% 5.184%
Hotel ................. 1.58x/1.58x 53.0% 53.0%/53.0% 6.309%
Total/Wtd Avg ......... 1.20x/2.78x 63.8% 37.5%/80.9% 5.527%
LOAN GROUP 2 PROPERTY TYPE
% OF
INITIAL WEIGHTED
NUMBER OF AGGREGATE LOAN AVERAGE
MORTGAGED CUT-OFF DATE GROUP 2 UNDERWRITTEN
PROPERTY TYPE PROPERTIES BALANCE BALANCE DSCR
- ----------------------- ------------ -------------- --------- --------------
Manufactured
Housing .............. 16 $160,342,984 56.4% 1.27x
Multifamily ........... 18 123,816,082 43.6 1.32x
-- ------------ -----
Total/Wtd Avg ......... 34 $284,159,066 100.0% 1.29x
== ============ =====
WEIGHTED WEIGHTED
MIN/MAX AVERAGE MIN/MAX AVERAGE
UNDERWRITTEN CUT-OFF DATE CUT-OFF DATE MORTGAGE
PROPERTY TYPE DSCR LTV RATIO LTV RATIO RATE
- ----------------------- ---------------------- -------------- ---------------- -----------
Manufactured
Housing .............. 1.20x/1.65x 78.2% 37.0%/80.7% 5.331%
Multifamily ........... 1.15x/1.57x 76.7% 48.1%/80.0% 5.124%
Total/Wtd Avg ......... 1.15x/1.65x 77.5% 37.0%/80.7% 5.241%
A-8
MORTGAGE POOL CUT-OFF DATE BALANCES
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
BALANCES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------------ ----------- ----------------- --------- -------------- -------------- -----------
$1,635,476 -- $1,999,999...... 4 $ 7,488,117 0.6% 1.45x 56.5% 5.265%
$2,000,000 -- $2,999,999...... 7 17,644,323 1.5 1.29x 77.8% 5.684%
$3,000,000 -- $3,999,999...... 12 42,536,266 3.7 1.45x 68.6% 5.319%
$4,000,000 -- $4,999,999...... 8 35,845,422 3.1 1.34x 70.9% 5.893%
$5,000,000 -- $7,499,999...... 19 117,565,770 10.2 1.40x 73.1% 5.565%
$7,500,000 -- $9,999,999...... 11 98,364,662 8.5 1.47x 72.1% 5.463%
$10,000,000 -- $14,999,999.... 13 146,436,074 12.7 1.42x 69.6% 5.448%
$15,000,000 -- $19,999,999.... 6 104,679,349 9.1 1.30x 76.2% 5.453%
$20,000,000 -- $29,999,999.... 7 166,410,857 14.4 1.33x 79.6% 5.043%
$30,000,000 -- $49,999,999.... 4 155,028,143 13.4 1.24x 77.3% 4.981%
$50,000,000 -- $99,999,999.... 2 153,630,036 13.3 2.26x 46.5% 5.239%
$100,000,000 -- $109,538,973.. 1 109,538,973 9.5 2.78x 37.5% 6.845%
-- -------------- -----
Total/Wtd Avg ................ 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
LOAN GROUP 1 CUT-OFF DATE BALANCES
% OF
INITIAL WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE LOAN AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
BALANCES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- --------------------------------- ----------- -------------- --------- -------------- -------------- -----------
$1,635,476 -- $1,999,999......... 2 $ 3,505,476 0.4% 1.28x 72.4% 5.474%
$2,000,000 -- $2,999,999......... 5 12,618,106 1.4 1.31x 77.3% 5.778%
$3,000,000 -- $3,999,999......... 6 21,307,353 2.4 1.58x 64.8% 5.242%
$4,000,000 -- $4,999,999......... 7 31,185,016 3.6 1.35x 70.5% 5.869%
$5,000,000 -- $7,499,999......... 13 80,860,884 9.3 1.43x 70.4% 5.675%
$7,500,000 -- $9,999,999......... 7 63,074,600 7.2 1.57x 69.0% 5.472%
$10,000,000 -- $14,999,999....... 10 113,241,831 13.0 1.45x 67.3% 5.623%
$15,000,000 -- $19,999,999....... 4 68,115,373 7.8 1.32x 75.6% 5.553%
$20,000,000 -- $29,999,999....... 4 96,254,607 11.1 1.37x 79.7% 4.990%
$30,000,000 -- $49,999,999....... 3 117,676,671 13.5 1.23x 76.6% 4.873%
$50,000,000 -- $99,999,999....... 2 153,630,036 17.6 2.26x 46.5% 5.239%
$100,000,000 -- $109,538,973..... 1 109,538,973 12.6 2.78x 37.5% 6.845%
-- ------------ -----
Total/Wtd Avg ................... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
LOAN GROUP 2 CUT-OFF DATE BALANCES
% OF
INITIAL WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE LOAN AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
BALANCES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------------------ ----------- -------------- --------- -------------- -------------- -----------
$1,987,369 -- $1,999,999............ 2 $ 3,982,640 1.4% 1.59x 42.5% 5.081%
$2,000,000 -- $2,999,999............ 2 5,026,217 1.8 1.25x 79.2% 5.447%
$3,000,000 -- $3,999,999............ 6 21,228,913 7.5 1.32x 72.5% 5.396%
$4,000,000 -- $4,999,999............ 1 4,660,406 1.6 1.25x 73.3% 6.057%
$5,000,000 -- $7,499,999............ 6 36,704,886 12.9 1.32x 79.2% 5.322%
$7,500,000 -- $9,999,999............ 4 35,290,063 12.4 1.28x 77.7% 5.447%
$10,000,000 -- $14,999,999.......... 3 33,194,243 11.7 1.33x 77.7% 4.854%
$15,000,000 -- $19,999,999 ......... 2 36,563,975 12.9 1.26x 77.3% 5.268%
$20,000,000 -- $29,999,999.......... 3 70,156,250 24.7 1.27x 79.4% 5.115%
$30,000,000 -- $37,351,472.......... 1 37,351,472 13.1 1.27x 79.3% 5.320%
- ------------ -----
Total/Wtd Avg ...................... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
A-9
MORTGAGE POOL GEOGRAPHIC DISTRIBUTION
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGED CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
MORTGAGED PROPERTY LOCATION PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------------- ------------ ----------------- --------- -------------- -------------- -----------
Texas ....................... 27 $ 210,332,973 18.2% 1.85x 59.2% 5.468%
New York .................... 4 136,342,202 11.8 1.81x 59.3% 5.031%
Michigan .................... 5 91,624,950 7.9 1.25x 78.9% 5.124%
Florida ..................... 23 89,111,522 7.7 1.65x 65.0% 5.913%
California .................. 12 85,556,196 7.4 1.41x 71.5% 5.518%
Arizona ..................... 14 65,197,976 5.6 1.52x 69.2% 5.734%
Nevada ...................... 11 53,612,825 4.6 1.63x 65.2% 5.836%
Massachusetts ............... 11 36,529,936 3.2 1.51x 76.3% 5.089%
Indiana ..................... 5 35,617,607 3.1 1.39x 77.8% 5.398%
New Jersey .................. 6 33,836,341 2.9 1.42x 76.3% 5.218%
Virginia .................... 6 27,732,220 2.4 1.63x 67.0% 5.855%
Georgia ..................... 8 26,015,950 2.3 1.77x 67.2% 5.049%
Tennessee ................... 5 25,797,913 2.2 1.39x 72.3% 5.805%
Pennsylvania ................ 4 24,678,000 2.1 1.30x 79.7% 5.354%
Illinois .................... 6 22,798,181 2.0 1.84x 60.2% 6.241%
Connecticut ................. 1 20,916,858 1.8 1.35x 79.8% 5.460%
Minnesota ................... 2 20,109,068 1.7 1.35x 74.7% 5.284%
North Carolina .............. 3 19,988,417 1.7 1.70x 66.0% 5.393%
Washington .................. 3 18,573,158 1.6 1.29x 74.4% 5.845%
Maryland .................... 3 16,294,191 1.4 1.72x 62.7% 5.358%
Oregon ...................... 2 16,052,002 1.4 1.40x 62.6% 5.678%
Louisiana ................... 4 14,046,111 1.2 1.90x 62.0% 5.275%
Utah ........................ 2 13,241,454 1.1 1.76x 58.4% 4.642%
Alabama ..................... 3 8,638,027 0.7 1.90x 60.6% 5.193%
South Carolina .............. 1 7,009,556 0.6 1.45x 79.7% 5.250%
Colorado .................... 4 6,456,981 0.6 2.28x 49.6% 6.545%
Ohio ........................ 2 6,452,874 0.6 1.42x 74.0% 5.387%
New Hampshire ............... 1 3,752,000 0.3 1.45x 80.0% 4.774%
South Dakota ................ 1 3,190,639 0.3 1.35x 77.8% 5.260%
Missouri .................... 2 2,772,671 0.2 2.78x 37.5% 6.845%
North Dakota ................ 1 2,716,926 0.2 1.26x 79.9% 5.330%
Delaware .................... 1 2,710,354 0.2 1.20x 80.9% 6.327%
Kentucky .................... 1 2,708,337 0.2 1.25x 79.2% 5.290%
Iowa ........................ 1 1,870,000 0.2 1.20x 74.8% 5.787%
Kansas ...................... 1 1,515,727 0.1 2.78x 37.5% 6.845%
New Mexico .................. 1 720,894 0.1 2.78x 37.5% 6.845%
Oklahoma .................... 1 480,596 0.0 2.78x 37.5% 6.845%
Mississippi ................. 1 166,360 0.0 2.78x 37.5% 6.845%
-- -------------- -----
Total Wtd/Avg ............... 189 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
=== ============== =====
- ----------
[X] The Mortgaged Properties are located throughout 38 states.
A-10
LOAN GROUP 1 GEOGRAPHIC DISTRIBUTION
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGED CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
MORTGAGED PROPERTY LOCATION PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------------- ------------ -------------- -------------- -------------- -------------- -----------
Texas ......................... 25 $201,537,702 23.1% 1.86x 58.6% 5.518%
New York ...................... 3 118,778,227 13.6 1.89x 56.6% 4.984%
California .................... 10 63,981,804 7.3 1.47x 69.2% 5.440%
Arizona ....................... 13 61,440,027 7.1 1.54x 69.7% 5.757%
Nevada ........................ 11 53,612,825 6.2 1.63x 65.2% 5.836%
Florida ....................... 17 50,998,297 5.9 1.95x 54.7% 6.245%
Michigan ...................... 1 40,964,950 4.7 1.22x 77.9% 5.320%
New Jersey .................... 6 33,836,341 3.9 1.42x 76.3% 5.218%
Massachusetts ................. 10 33,029,936 3.8 1.53x 77.5% 5.067%
Pennsylvania .................. 4 24,678,000 2.8 1.30x 79.7% 5.354%
Illinois ...................... 6 22,798,181 2.6 1.84x 60.2% 6.241%
Connecticut ................... 1 20,916,858 2.4 1.35x 79.8% 5.460%
North Carolina ................ 3 19,988,417 2.3 1.70x 66.0% 5.393%
Oregon ........................ 2 16,052,002 1.8 1.40x 62.6% 5.678%
Washington .................... 2 13,912,752 1.6 1.31x 74.8% 5.773%
Utah .......................... 2 13,241,454 1.5 1.76x 58.4% 4.642%
Tennessee ..................... 3 10,837,913 1.2 1.58x 67.6% 5.912%
Louisiana ..................... 3 10,752,208 1.2 2.01x 57.4% 5.067%
Alabama ....................... 3 8,638,027 1.0 1.90x 60.6% 5.193%
Georgia ....................... 6 7,438,151 0.9 2.78x 37.5% 6.845%
Virginia ...................... 5 7,415,970 0.9 2.78x 37.5% 6.845%
Colorado ...................... 4 6,456,981 0.7 2.28x 49.6% 6.545%
Ohio .......................... 2 6,452,874 0.7 1.42x 74.0% 5.387%
Maryland ...................... 1 3,844,770 0.4 2.78x 37.5% 6.845%
New Hampshire ................. 1 3,752,000 0.4 1.45x 80.0% 4.774%
Missouri ...................... 2 2,772,671 0.3 2.78x 37.5% 6.845%
North Dakota .................. 1 2,716,926 0.3 1.26x 79.9% 5.330%
Delaware ...................... 1 2,710,354 0.3 1.20x 80.9% 6.327%
Iowa .......................... 1 1,870,000 0.2 1.20x 74.8% 5.787%
Indiana ....................... 1 1,589,664 0.2 2.78x 37.5% 6.845%
Kansas ........................ 1 1,515,727 0.2 2.78x 37.5% 6.845%
Minnesota ..................... 1 1,109,068 0.1 2.78x 37.5% 6.845%
New Mexico .................... 1 720,894 0.1 2.78x 37.5% 6.845%
Oklahoma ...................... 1 480,596 0.1 2.78x 37.5% 6.845%
Mississippi ................... 1 166,360 0.0 2.78x 37.5% 6.845%
-- ------------ -----
Total Wtd/Avg ................. 155 $871,008,925 100.0% 1.72x 63.8% 5.527%
=== ============ =====
- ----------
[X] The Mortgaged Properties are located throughout 35 states.
A-11
LOAN GROUP 2 GEOGRAPHIC DISTRIBUTION
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGED CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
MORTGAGED PROPERTY LOCATION PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------------- ------------ -------------- -------------- -------------- -------------- -----------
Michigan .................... 4 $ 50,660,000 17.8% 1.26x 79.7% 4.966%
Florida ..................... 6 38,113,225 13.4 1.24x 78.7% 5.469%
Indiana ..................... 4 34,027,943 12.0 1.32x 79.7% 5.330%
California .................. 2 21,574,392 7.6 1.22x 78.4% 5.752%
Virginia .................... 1 20,316,250 7.1 1.21x 77.8% 5.494%
Minnesota ................... 1 19,000,000 6.7 1.27x 76.9% 5.193%
Georgia ..................... 2 18,577,799 6.5 1.36x 79.1% 4.330%
New York .................... 1 17,563,975 6.2 1.25x 77.7% 5.350%
Tennessee ................... 2 14,960,000 5.3 1.26x 75.7% 5.728%
Maryland .................... 2 12,449,421 4.4 1.40x 70.5% 4.898%
Texas ....................... 2 8,795,271 3.1 1.56x 72.0% 4.325%
South Carolina .............. 1 7,009,556 2.5 1.45x 79.7% 5.250%
Washington .................. 1 4,660,406 1.6 1.25x 73.3% 6.057%
Arizona ..................... 1 3,757,949 1.3 1.25x 60.6% 5.350%
Massachussetts .............. 1 3,500,000 1.2 1.36x 64.8% 5.293%
Louisiana ................... 1 3,293,904 1.2 1.53x 77.1% 5.954%
South Dakota ................ 1 3,190,639 1.1 1.35x 77.8% 5.260%
Kentucky .................... 1 2,708,337 1.0 1.25x 79.2% 5.290%
- ------------ -----
Total Wtd/Avg ............... 34 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
- ----------
[X] The Mortgaged Properties are located throughout 18 states.
MORTGAGE POOL UNDERWRITTEN DEBT SERVICE COVERAGE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
RANGE OF MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
UNDERWRITTEN DSCR(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------ ----------- ----------------- --------- -------------- -------------- -----------
1.15x -- 1.19x ......... 2 $ 9,875,833 0.9% 1.17x 78.4% 5.587%
1.20x -- 1.24x ......... 17 245,535,381 21.3 1.23x 77.5% 5.213%
1.25x -- 1.29x ......... 18 178,055,392 15.4 1.27x 75.9% 5.352%
1.30x -- 1.34x ......... 13 116,782,597 10.1 1.33x 75.7% 5.541%
1.35x -- 1.39x ......... 12 95,589,357 8.3 1.37x 75.0% 5.542%
1.40x -- 1.49x ......... 11 128,737,229 11.1 1.44x 75.2% 5.154%
1.50x -- 1.59x ......... 8 49,325,940 4.3 1.55x 67.2% 5.558%
1.60x -- 1.69x ......... 4 26,105,300 2.3 1.68x 60.4% 5.400%
1.70x -- 1.79x ......... 1 7,639,865 0.7 1.79x 63.7% 4.978%
1.80x -- 1.89x ......... 2 20,588,198 1.8 1.84x 56.1% 4.684%
1.90x -- 1.99x ......... 3 13,763,891 1.2 1.94x 59.1% 5.146%
2.00x -- 2.78x ......... 3 263,169,009 22.8 2.48x 42.7% 5.908%
-- -------------- -----
Total Wtd/Avg .......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
A-12
LOAN GROUP 1 UNDERWRITTEN DEBT SERVICE COVERAGE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
RANGE OF MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
UNDERWRITTEN DSCR(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------ ----------- -------------- -------------- -------------- -------------- -----------
1.20x -- 1.24x ......... 9 $166,637,097 19.1% 1.23x 77.2% 5.046%
1.25x -- 1.29x ......... 10 72,177,094 8.3 1.27x 72.7% 5.750%
1.30x -- 1.34x ......... 8 62,619,844 7.2 1.33x 73.7% 5.766%
1.35x -- 1.39x ......... 11 92,089,357 10.6 1.37x 75.4% 5.551%
1.40x -- 1.49x ......... 9 110,969,875 12.7 1.45x 74.5% 5.220%
1.50x -- 1.59x ......... 5 37,236,766 4.3 1.55x 65.2% 5.815%
1.60x -- 1.69x ......... 3 24,117,930 2.8 1.68x 62.3% 5.403%
1.70x -- 1.79x ......... 1 7,639,865 0.9 1.79x 63.7% 4.978%
1.80x -- 1.89x ......... 2 20,588,198 2.4 1.84x 56.1% 4.684%
1.90x -- 1.99x ......... 3 13,763,891 1.6 1.94x 59.1% 5.146%
2.00x -- 2.78x ......... 3 263,169,009 30.2 2.48x 42.7% 5.908%
-- ------------ -----
Total Wtd/Avg .......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
LOAN GROUP 2 UNDERWRITTEN DEBT SERVICE COVERAGE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
RANGE OF MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
UNDERWRITTEN DSCR(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------ ----------- -------------- -------------- -------------- -------------- -----------
1.15x -- 1.19x ......... 2 $ 9,875,833 3.5% 1.17x 78.4% 5.587%
1.20x -- 1.24x ......... 8 78,898,284 27.8 1.23x 78.2% 5.564%
1.25x -- 1.29x ......... 8 105,878,297 37.3 1.26x 78.0% 5.081%
1.30x -- 1.34x ......... 5 54,162,753 19.1 1.33x 77.9% 5.281%
1.35x -- 1.39x ......... 1 3,500,000 1.2 1.36x 64.8% 5.293%
1.40x -- 1.49x ......... 2 17,767,355 6.3 1.44x 79.7% 4.741%
1.50x -- 1.59x ......... 3 12,089,175 4.3 1.55x 73.4% 4.769%
1.60x -- 1.65x ......... 1 1,987,369 0.7 1.65x 37.0% 5.364%
- ------------ -----
Total Wtd/Avg .......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
MORTGAGE POOL CUT-OFF DATE LOAN-TO-VALUE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------ ----------- ----------------- --------- -------------- -------------- -----------
37.0% -- 49.9% ......... 6 $ 270,151,649 23.4% 2.46x 42.8% 5.885%
50.0% -- 59.9% ......... 6 53,469,046 4.6 1.72x 55.9% 5.522%
60.0% -- 64.9% ......... 9 57,088,447 4.9 1.58x 63.1% 5.251%
65.0% -- 69.9% ......... 8 47,628,996 4.1 1.38x 68.9% 5.784%
70.0% -- 74.9% ......... 23 205,129,622 17.8 1.32x 73.3% 5.530%
75.0% -- 79.9% ......... 34 395,221,876 34.2 1.29x 78.4% 5.233%
80.0% -- 80.9% ......... 8 126,478,354 10.9 1.34x 80.1% 5.064%
-- -------------- -----
Total Wtd/Avg .......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
A-13
LOAN GROUP 1 CUT-OFF DATE LOAN-TO-VALUE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------ ----------- -------------- -------------- -------------- -------------- -----------
37.5% -- 49.9% ......... 4 $266,169,009 30.6% 2.47x 42.8% 5.897%
50.0% -- 59.9% ......... 6 53,469,046 6.1 1.72x 55.9% 5.522%
60.0% -- 64.9% ......... 7 49,830,499 5.7 1.62x 63.2% 5.240%
65.0% -- 69.9% ......... 8 47,628,996 5.5 1.38x 68.9% 5.784%
70.0% -- 74.9% ......... 21 191,669,216 22.0 1.33x 73.3% 5.508%
75.0% -- 79.9% ......... 15 206,643,806 23.7 1.29x 78.7% 5.265%
80.0% -- 80.9% ......... 3 55,598,354 6.4 1.42x 80.0% 4.844%
-- ------------ -----
Total Wtd/Avg .......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
LOAN GROUP 2 CUT-OFF DATE LOAN-TO-VALUE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------ ----------- -------------- -------------- -------------- -------------- -----------
37.0% -- 49.9% ......... 2 $ 3,982,640 1.4% 1.59x 42.5% 5.081%
60.0% -- 64.9% ......... 2 7,257,949 2.6 1.30x 62.6% 5.323%
70.0% -- 74.9% ......... 2 13,460,406 4.7 1.30x 72.9% 5.857%
75.0% -- 79.9% ......... 19 188,578,070 66.4 1.29x 78.2% 5.199%
80.0% -- 80.7% ......... 5 70,880,000 24.9 1.27x 80.1% 5.236%
-- ------------ -----
Total Wtd/Avg .......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
MORTGAGE POOL MATURITY DATE LOAN-TO-VALUE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN MATURITY DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- -------------------------- ----------- ----------------- --------- -------------- --------------- -----------
Fully Amortizing ......... 1 $ 1,987,369 0.2% 1.65x 0.6% 5.364%
25.0% -- 49.9% ........... 10 305,178,003 26.4 2.36x 36.7% 5.908%
50.0% -- 59.9% ........... 22 158,550,573 13.7 1.49x 55.3% 5.478%
60.0% -- 64.9% ........... 20 184,561,113 16.0 1.32x 62.6% 5.468%
65.0% -- 69.9% ........... 27 300,191,784 26.0 1.30x 66.9% 5.380%
70.0% -- 74.9% ........... 11 145,011,148 12.6 1.26x 72.7% 4.940%
75.0% -- 75.1% ........... 3 59,688,000 5.2 1.45x 75.1% 4.702%
-- -------------- -----
Total Wtd/Avg(a) ......... 94 $1,155,167,991 100.0% 1.61x 57.8% 5.457%
== ============== =====
(a) Excludes the mortgage loan that is fully amortizing with respect to
calculating the weighted average maturity date LTV Ratio.
A-14
LOAN GROUP 1 MATURITY DATE LOAN-TO-VALUE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY DATE MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN MATURITY DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------ ----------- ---------------- -------------- -------------- --------------- -----------
29.6% -- 49.9% ......... 9 $ 303,182,732 34.8% 2.36x 36.7% 5.916%
50.0% -- 59.9% ......... 21 154,792,625 17.8 1.50x 55.3% 5.481%
60.0% -- 64.9% ......... 15 145,164,263 16.7 1.33x 62.5% 5.499%
65.0% -- 69.9% ......... 14 156,081,471 17.9 1.31x 66.5% 5.366%
70.0% -- 74.9% ......... 3 58,899,835 6.8 1.23x 72.4% 4.830%
75.0% -- 75.1% ......... 2 52,888,000 6.1 1.43x 75.1% 4.768%
-- ------------- -----
Total Wtd/Avg .......... 64 $ 871,008,925 100.0% 1.72x 54.4% 5.527%
== ============= =====
LOAN GROUP 2 MATURITY DATE LOAN-TO-VALUE RATIO
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY DATE MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN MATURITY DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- -------------------------- ----------- -------------- -------------- -------------- --------------- -----------
Fully Amortizing ......... 1 $ 1,987,369 0.7% 1.65x 0.6% 5.364%
25.0% -- 49.9% ........... 1 1,995,271 0.7 1.53x 44.4% 4.800%
50.0% -- 59.9% ........... 1 3,757,949 1.3 1.25x 56.8% 5.350%
60.0% -- 64.9% ........... 5 39,396,850 13.9 1.29x 63.0% 5.357%
65.0% -- 69.9% ........... 13 144,110,314 50.7 1.28x 67.4% 5.396%
70.0% -- 74.9% ........... 8 86,111,313 30.3 1.27x 72.9% 5.015%
75.0% -- 75.1% ........... 1 6,800,000 2.4 1.57x 75.1% 4.186%
-- ------------ -----
Total Wtd/Avg(a) ......... 30 $284,159,066 100.0% 1.29x 68.3% 5.241%
== ============ =====
(a) Excludes the mortgage loan that is fully amortizing with respect to
calculating the weighted average maturity date LTV Ratio.
MORTGAGE POOL MORTGAGE RATES
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
RATES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- -------------------------- ----------- ----------------- --------- -------------- -------------- -----------
4.186% -- 4.499% ......... 5 $ 76,807,280 6.6% 1.38x 76.0% 4.349%
4.500% -- 4.749% ......... 2 30,950,000 2.7 1.27x 79.4% 4.660%
4.750% -- 4.999% ......... 9 122,142,236 10.6 1.44x 73.5% 4.841%
5.000% -- 5.249% ......... 10 235,269,807 20.4 1.96x 55.8% 5.195%
5.250% -- 5.499% ......... 23 264,226,318 22.9 1.29x 77.3% 5.356%
5.500% -- 5.749% ......... 17 145,372,701 12.6 1.38x 72.2% 5.630%
5.750% -- 5.999% ......... 15 90,308,265 7.8 1.34x 72.8% 5.858%
6.000% -- 6.249% ......... 7 42,080,340 3.6 1.40x 69.6% 6.062%
6.250% -- 6.499% ......... 4 32,507,275 2.8 1.38x 68.2% 6.319%
6.500% -- 6.845% ......... 2 115,503,769 10.0 2.70x 39.5% 6.827%
-- -------------- -----
Total Wtd/Avg ............ 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
A-15
LOAN GROUP 1 MORTGAGE RATES
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGE MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
RATES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- -------------------------- ----------- -------------- -------------- -------------- -------------- -----------
4.290% -- 4.499% ......... 2 $ 51,429,481 5.9% 1.37x 74.5% 4.377%
4.500% -- 4.749% ......... 1 3,750,000 0.4 1.36x 74.9% 4.660%
4.750% -- 4.999% ......... 7 109,684,913 12.6 1.45x 73.6% 4.845%
5.000% -- 5.249% ......... 8 212,499,217 24.4 2.04x 53.5% 5.196%
5.250% -- 5.499% ......... 8 108,477,368 12.5 1.31x 77.3% 5.378%
5.500% -- 5.749% ......... 15 136,894,821 15.7 1.39x 71.7% 5.627%
5.750% -- 5.999% ......... 13 78,214,361 9.0 1.33x 72.6% 5.866%
6.000% -- 6.249% ......... 6 37,419,934 4.3 1.41x 69.2% 6.063%
6.250% -- 6.499% ......... 2 17,135,061 2.0 1.52x 57.4% 6.312%
6.500% -- 6.845% ......... 2 115,503,769 13.3 2.70x 39.5% 6.827%
-- ------------ -----
Total/Wtd Avg ............ 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
LOAN GROUP 2 MORTGAGE RATES
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGE MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
RATES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- -------------------------- ----------- -------------- -------------- -------------- -------------- -----------
4.186% -- 4.499% ......... 3 $ 25,377,799 8.9% 1.42x 79.1% 4.291%
4.500% -- 4.749% ......... 1 27,200,000 9.6 1.26x 80.0% 4.660%
4.750% -- 4.999% ......... 2 12,457,323 4.4 1.38x 72.3% 4.808%
5.000% -- 5.249% ......... 2 22,770,590 8.0 1.27x 77.3% 5.186%
5.250% -- 5.499% ......... 15 155,748,950 54.8 1.28x 77.3% 5.341%
5.500% -- 5.749% ......... 2 8,477,880 3.0 1.18x 79.8% 5.677%
5.750% -- 5.999% ......... 2 12,093,904 4.3 1.38x 73.9% 5.806%
6.000% -- 6.249% ......... 1 4,660,406 1.6 1.25x 73.3% 6.057%
6.250% -- 6.327% ......... 2 15,372,214 5.4 1.22x 80.3% 6.327%
-- ------------ -----
Total/Wtd Avg ............ 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
MORTGAGE POOL ORIGINAL TERM TO MATURITY
% OF WEIGHTED WEIGHTED WEIGHTED
ORIGINAL TERM NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TO MATURITY MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- ----------------- --------- -------------- -------------- -----------
60 -- 83 .............. 14 $ 139,181,362 12.0% 1.35x 75.2% 4.774%
84 -- 99 .............. 10 160,617,210 13.9 1.35x 75.9% 4.927%
100 -- 120 ............ 59 693,941,986 60.1 1.80x 61.1% 5.693%
121 -- 179 ............ 9 139,627,432 12.1 1.28x 77.9% 5.517%
180 ................... 2 21,800,000 1.9 1.30x 76.5% 5.828%
-- -------------- -----
Total/Wtd Avg ......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
A-16
LOAN GROUP 1 ORIGINAL TERM TO MATURITY
% OF WEIGHTED WEIGHTED WEIGHTED
ORIGINAL TERM NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TO MATURITY MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
60 -- 83 .............. 5 $ 77,316,830 8.9% 1.37x 74.4% 4.682%
84 -- 99 .............. 6 106,410,321 12.2 1.40x 74.7% 4.865%
100 -- 120 ............ 48 612,658,028 70.3 1.86x 59.1% 5.740%
121 -- 179 ............ 3 52,823,746 6.1 1.30x 74.9% 5.505%
180 ................... 2 21,800,000 2.5 1.30x 76.5% 5.828%
-- ------------ -----
Total/Wtd Avg ......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
LOAN GROUP 2 ORIGINAL TERM TO MATURITY
% OF WEIGHTED WEIGHTED WEIGHTED
ORIGINAL TERM NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TO MATURITY MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
60 -- 83 .............. 9 $ 61,864,532 21.8% 1.33x 76.2% 4.889%
84 -- 99 .............. 4 54,206,889 19.1 1.25x 78.1% 5.049%
100 -- 120 ............ 11 81,283,959 28.6 1.32x 75.8% 5.333%
121 -- 144 ............ 6 86,803,686 30.5 1.27x 79.7% 5.525%
-- ------------ -----
Total/Wtd Avg ......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
MORTGAGE POOL ORIGINAL AMORTIZATION TERM (1)
ORIGINAL % OF WEIGHTED WEIGHTED WEIGHTED
AMORTIZATION NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TERM MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- ----------------- --------- -------------- -------------- -----------
Interest Only ......... 3 $ 17,090,000 1.5% 1.78x 55.2% 4.615%
120 -- 143 ............ 1 1,987,369 0.2 1.65x 37.0% 5.364%
240 -- 299 ............ 1 4,132,874 0.4 1.28x 67.8% 6.084%
300 -- 359 ............ 11 241,190,174 20.9 2.28x 46.4% 6.121%
360 ................... 78 890,767,574 77.1 1.43x 73.1% 5.290%
-- -------------- -----
Total/Wtd Avg ......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
LOAN GROUP 1 ORIGINAL AMORTIZATION TERM (1)
ORIGINAL % OF WEIGHTED WEIGHTED WEIGHTED
AMORTIZATION NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TERM MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
Interest Only ......... 2 $ 13,590,000 1.6% 1.88x 52.7% 4.440%
240 -- 299 ............ 1 4,132,874 0.5 1.28x 67.8% 6.084%
300 -- 359 ............ 11 241,190,174 27.7 2.28x 46.4% 6.121%
360 ................... 50 612,095,877 70.3 1.49x 70.9% 5.314%
-- ------------ -----
Total/Wtd Avg ......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
- ----------
(1) For Mortgage Loans that accrue interest on the basis of actual days
elapsed during each calendar month and a 360-day year, the amortization
term is the term in which the loan would amortize if interest is paid on
the basis of a 30-day month and a 360-day year. The actual amortization
term would be longer.
A-17
LOAN GROUP 2 ORIGINAL AMORTIZATION TERM (1)
ORIGINAL % OF WEIGHTED WEIGHTED WEIGHTED
AMORTIZATION NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TERM MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
Interest Only ......... 1 $ 3,500,000 1.2% 1.36x 64.8% 5.293%
120 -- 143 ............ 1 1,987,369 0.7 1.65x 37.0% 5.364%
360 ................... 28 278,671,696 98.1 1.29x 78.0% 5.239%
-- ------------ -----
Total Wtd/Avg ......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
- ----------
(1) For Mortgage Loans that accrue interest on the basis of actual days
elapsed during each calendar month and a 360-day year, the amortization
term is the term in which the loan would amortize if interest is paid on
the basis of a 30-day month and a 360-day year. The actual amortization
term would be longer.
MORTGAGE POOL REMAINING TERM TO MATURITY
RANGE OF
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
TERMS TO NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- ----------------- --------- -------------- -------------- -----------
52 -- 59 .............. 13 $ 122,304,245 10.6% 1.35x 75.2% 4.690%
60 -- 79 .............. 2 20,067,756 1.7 1.32x 75.3% 5.364%
80 -- 99 .............. 10 164,365,462 14.2 1.37x 75.3% 4.919%
100 -- 109 ............ 1 6,740,678 0.6 1.44x 74.5% 5.820%
110 -- 119 ............ 55 667,637,418 57.8 1.81x 60.8% 5.699%
120 -- 139 ............ 7 46,016,010 4.0 1.38x 73.0% 6.036%
140 -- 159 ............ 4 106,236,422 9.2 1.26x 78.9% 5.320%
160 -- 179 ............ 2 21,800,000 1.9 1.30x 76.5% 5.828%
-- -------------- -----
Total Wtd/Avg ......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
LOAN GROUP 1 REMAINING TERM TO MATURITY
RANGE OF
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
TERMS TO NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
55 -- 59 .............. 4 $ 60,439,713 6.9% 1.38x 74.3% 4.486%
60 -- 79 .............. 1 16,877,117 1.9 1.32x 74.8% 5.384%
80 -- 99 .............. 7 113,349,212 13.0 1.43x 74.1% 4.867%
100 -- 109 ............ 1 6,740,678 0.8 1.44x 74.5% 5.820%
110 -- 119 ............ 45 595,153,459 68.3 1.87x 58.9% 5.749%
120 -- 139 ............ 3 15,683,796 1.8 1.66x 63.3% 6.043%
140 -- 159 ............ 1 40,964,950 4.7 1.22x 77.9% 5.320%
160 -- 179 ............ 2 21,800,000 2.5 1.30x 76.5% 5.828%
-- ------------ -----
Total Wtd/Avg ......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
A-18
LOAN GROUP 2 REMAINING TERM TO MATURITY
RANGE OF
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
TERMS TO NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
52 -- 59 .............. 9 $ 61,864,532 21.8% 1.33x 76.2% 4.889%
60 -- 79 .............. 1 3,190,639 1.1 1.35x 77.8% 5.260%
80 -- 99 .............. 3 51,016,250 18.0 1.25x 78.1% 5.036%
110 -- 119 ............ 10 72,483,959 25.5 1.32x 76.2% 5.283%
120 -- 139 ............ 4 30,332,214 10.7 1.24x 78.0% 6.032%
140 -- 144 ............ 3 65,271,472 23.0 1.29x 79.6% 5.320%
-- ------------ -----
Total Wtd/Avg ......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
MORTGAGE POOL REMAINING STATED AMORTIZATION TERMS
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
STATED NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
AMORTIZATION MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
TERMS (MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- ----------------- --------- -------------- -------------- -----------
Interest Only ......... 3 $ 17,090,000 1.5% 1.78x 55.2% 4.615%
119 -- 149 ............ 1 1,987,369 0.2 1.65x 37.0% 5.364%
225 -- 249 ............ 1 4,132,874 0.4 1.28x 67.8% 6.084%
275 -- 299 ............ 8 159,495,528 13.8 2.35x 46.2% 6.573%
300 -- 324 ............ 1 2,094,646 0.2 1.24x 74.8% 5.920%
325 -- 349 ............ 2 79,600,000 6.9 2.18x 46.0% 5.220%
350 -- 360 ............ 78 890,767,574 77.1 1.43x 73.1% 5.290%
-- -------------- -----
Total Wtd/Avg ......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
LOAN GROUP 1 REMAINING STATED AMORTIZATION TERMS
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
STATED NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
AMORTIZATION MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
TERMS (MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
Interest only ......... 2 $ 13,590,000 1.6% 1.88x 52.7% 4.440%
225 -- 249 ............ 1 4,132,874 0.5 1.28x 67.8% 6.084%
275 -- 299 ............ 8 159,495,528 18.3 2.35x 46.2% 6.573%
300 -- 324 ............ 1 2,094,646 0.2 1.24x 74.8% 5.920%
325 -- 349 ............ 2 79,600,000 9.1 2.18x 46.0% 5.220%
350 -- 360 ............ 50 612,095,877 70.3 1.49x 70.9% 5.314%
-- ------------ -----
Total Wtd/Avg ......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
LOAN GROUP 2 REMAINING STATED AMORTIZATION TERMS
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
STATED NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
AMORTIZATION MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
TERMS (MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
Interest Only ......... 1 $ 3,500,000 1.2% 1.36x 64.8% 5.293%
119 -- 149 ............ 1 1,987,369 0.7 1.65x 37.0% 5.364%
350 -- 360 ............ 28 278,671,696 98.1 1.29x 78.0% 5.239%
-- ------------ -----
Total Wtd/Avg ......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
A-19
MORTGAGE POOL SEASONING
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
SEASONING MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- ----------------- --------- -------------- -------------- -----------
0 -- 4 ................ 77 $1,041,739,426 90.2% 1.64x 66.5% 5.419%
5 -- 8 ................ 17 113,428,565 9.8 1.34x 73.3% 5.801%
-- -------------- -----
Total Wtd/Avg ......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
LOAN GROUP 1 SEASONING
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
SEASONING MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
0 -- 4 ................ 54 $809,308,253 92.9% 1.74x 63.3% 5.498%
5 -- 8 ................ 10 61,700,672 7.1 1.43x 69.8% 5.905%
-- ------------ -----
Total Wtd/Avg ......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
LOAN GROUP 2 SEASONING
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
SEASONING MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
0 -- 4 ................ 23 $232,431,173 81.8% 1.30x 77.6% 5.144%
5 -- 8 ................ 7 51,727,892 18.2 1.23x 77.4% 5.676%
-- ------------ -----
Total Wtd/Avg ......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
MORTGAGE POOL YEAR OF MORTGAGE ORIGINATION
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF-DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
ORIGINATION LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- ---------------- --------- -------------- -------------- -----------
2003 .................. 12 $ 78,162,163 6.8% 1.31x 75.1% 5.826%
2004 .................. 82 1,077,005,828 93.2 1.63x 66.6% 5.430%
-- -------------- -----
Total Wtd/Avg ......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
LOAN GROUP 1 YEAR OF MORTGAGE ORIGINATION
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF-DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
ORIGINATION LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
2003 .................. 5 $ 26,434,271 3.0% 1.46x 70.5% 6.119%
2004 .................. 59 844,574,654 97.0 1.72x 63.6% 5.509%
-- ------------ -----
Total Wtd/Avg ......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
A-20
LOAN GROUP 2 YEAR OF MORTGAGE ORIGINATION
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF-DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
ORIGINATION LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
2003 .................. 7 $ 51,727,892 18.2% 1.23x 77.4% 5.676%
2004 .................. 23 232,431,173 81.8 1.30x 77.6% 5.144%
-- ------------ -----
Total Wtd/Avg ......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
MORTGAGE POOL YEAR OF MORTGAGE MATURITY
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF DATE POOL UNDERWRITTEN CUT-OFF DATE MORTGAGE
MATURITY LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- ----------------- --------- -------------- -------------- -----------
2008 .................. 3 $ 27,005,040 2.3% 1.25x 75.1% 5.350%
2009 .................. 10 95,299,205 8.2 1.38x 75.3% 4.503%
2010 .................. 1 16,877,117 1.5 1.32x 74.8% 5.384%
2011 .................. 9 140,300,960 12.1 1.37x 75.6% 4.845%
2012 .................. 3 33,995,819 2.9 1.41x 74.4% 5.438%
2013 .................. 2 7,834,797 0.7 1.29x 76.1% 6.337%
2014 .................. 56 678,587,621 58.7 1.80x 60.9% 5.692%
2015 .................. 3 18,082,568 1.6 1.21x 80.4% 6.327%
2016 .................. 5 115,384,864 10.0 1.30x 77.4% 5.381%
2019 .................. 2 21,800,000 1.9 1.30x 76.5% 5.828%
-- -------------- -----
Total/Wtd Avg ......... 94 $1,155,167,991 100.0% 1.61x 67.2% 5.457%
== ============== =====
LOAN GROUP 1 YEAR OF MORTGAGE MATURITY
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF DATE LOAN GROUP 1 UNDERWRITTEN CUT-OFF DATE MORTGAGE
MATURITY LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
2009 .................. 4 $ 60,439,713 6.9% 1.38x 74.3% 4.486%
2010 .................. 1 16,877,117 1.9 1.32x 74.8% 5.384%
2011 .................. 6 106,410,321 12.2 1.40x 74.7% 4.865%
2012 .................. 2 13,679,569 1.6 1.70x 69.3% 5.353%
2013 .................. 2 7,834,797 0.9 1.29x 76.1% 6.337%
2014 .................. 44 591,143,662 67.9 1.88x 58.7% 5.741%
2015 .................. 1 2,710,354 0.3 1.20x 80.9% 6.327%
2016 .................. 2 50,113,392 5.8 1.31x 74.6% 5.461%
2019 .................. 2 21,800,000 2.5 1.30x 76.5% 5.828%
-- ------------ -----
Total/Wtd Avg ......... 64 $871,008,925 100.0% 1.72x 63.8% 5.527%
== ============ =====
A-21
LOAN GROUP 2 YEAR OF MORTGAGE MATURITY
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF DATE LOAN GROUP 2 UNDERWRITTEN CUT-OFF DATE MORTGAGE
MATURITY LOANS BALANCE BALANCE DSCR LTV RATIO RATE
- ----------------------- ----------- -------------- -------------- -------------- -------------- -----------
2008 .................. 3 $ 27,005,040 9.5% 1.25x 75.1% 5.350%
2009 .................. 6 34,859,492 12.3 1.38x 77.0% 4.533%
2011 .................. 3 33,890,639 11.9 1.28x 78.2% 4.782%
2012 .................. 1 20,316,250 7.1 1.21x 77.8% 5.494%
2014 .................. 12 87,443,959 30.8 1.31x 76.1% 5.359%
2015 .................. 2 15,372,214 5.4 1.22x 80.3% 6.327%
2016 .................. 3 65,271,472 23.0 1.29x 79.6% 5.320%
-- ------------ -----
Total/Wtd Avg ......... 30 $284,159,066 100.0% 1.29x 77.5% 5.241%
== ============ =====
A-22
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN
SEQUENCE NUMBER PROPERTY NAME LOAN GROUP PROPERTY ADDRESS
- -------- ------ ------------- ---------- ----------------
1 57998 Quarters at Memorial 1 3003 Memorial Court
2 58006 Golf Villas at Oro Valley 1 10950 N. La Canada Drive
3 58103 GrandMarc at Seven Corners 2 1849 Washington Avenue South
4 58015 Woodlawn Gardens 2 535 Woodlawn Avenue
5 57963 Aspen Apartments 2 425 Riverbend Parkway
6 58026 River Pointe Apartments 2 8310 Indian Head Highway
7 57978 Lexington Park Apartments 2 9060 East 39th Place
8 8190 Orchards at Collierville 2 400 Orchard Circle West
9 58095 Silver Tree Apartments 2 100 North River Drive
10 57330 Fairway Ridge Apartments 2 101 Fairway Ridge
11 58016 Williamstown Apartments 2 9200 Bissonnet Street
12 55800 CLK - Ashford Place Apartments 2 2190 Memorial Drive
13 8547 Bowling Green Apartments 2 3310 East Spring Street
14 8838 Mission Trace Apartments 2 3801 Mission Trace Boulevard
15 8844 Landmark Apartments - Tallahassee, FL 2 2125 Jackson Bluff Road
16 58106 89-95 Park Drive Apartments 2 89-95 Park Drive
17 8267 Cordova Court 2 900 Westgate Drive
18 58000 Times Square Townhomes 1 1911-1940 Times Square Way and 1204-1233 Broad Way and Queens Way
19 57943 Cameron Park Apartments 2 2702 Industrial Drive
20 7343 Pavilion Heights Apartments 2 219 East 7th Street
21 8828 Greentree Apartments - Pasadena, TX 2 502 East Beltway 8
22 57582 Milford Plaza 1 200 Cherry Street
23 58014 The Shops at Camp Lowell 1 3275 North Swan Road
24 8356 Centennial Plaza 1 1401-1465 West Lake Street
25 57952 Foothill Park Plaza 1 140 West Foothill Boulevard
26 57968 Promenade at Red Cliff 1 245 Red Cliffs Drive
27 57983 Mountain View Marketplace 1 3131 East Thunderbird Road
28 57986 Shoppes at Broad Street 1 1841 -1929 E Broad Street
29 57927 Boston Commons Plaza 1 800 Boston Road
30 57964 Columbus Corners Shopping Center 1 104-326 Columbus Corners Drive
31 8530 Paseo Plaza - Las Vegas, NV 1 2600, 2610 & 2650 West Sahara Avenue
32 57685 Kirby Richmond Shopping Center 1 3443 Kirby Drive
33 58092 Sterling Pointe Shopping Center 1 2300 Treasury Drive
34 57741 Sunrise Place 1 425 S. Sunrise Way
35 6033 Oakley Town Center 1 2515-2591 Main Street
36 57949 Walgreens - Nashville, TN 1 2500 Gallatin Avenue
37 6461 Advocate Health Building 1 6400 West North Avenue
38 6981 Calvine Corners Shopping Center 1 8339-8345 and 8359 Elk Grove-Florin Road
39 8948 Walgreens Chalmette 1 100 West Judge Perez Drive
40 8658 North Meridian Retail Center 1 1100 North Meridian
41 57990 Calpine Center 1 717 Texas Avenue
42 57984 17 State Street 1 17 State Street
43 57999 369 Lexington Avenue 1 369 Lexington Avenue
44 8304 The Pines Corporate Center 1 7211-7391 West Charleston Boulevard
45.1 57815 University Office Plaza II 1 3705 Quakerbridge Road
45.2 57815 University Office Plaza I 1 3635 Quakerbridge Road
45 57815 UNIVERSITY OFFICE PLAZA I AND II (ROLL UP) 1 Multiple
46 57913 Woodland Park Plaza Office Building 1 11490 Westheimer Road
47 6381 6500 Linderson 1 6500 Linderson Way SW
48 57829 West Houston Medical Center 1 12121 Richmond Avenue
49 57969 T-Mobile Customer Care Center 1 2999 SW 6th Street
50 55598 Nextel Office Building - Temple, TX 1 1600 Eberhardt Road
51 57917 Wilshire-Kenmore Building 1 3345 Wilshire Boulevard
CUT-OFF MATURITY
ZIP PROPERTY ORIGINAL DATE DATE
SEQUENCE COUNTY CITY STATE CODE TYPE BALANCE BALANCE BALANCE
- -------- ------ ---- ----- ---- ---- ------- ------- -------
1 Harris Houston TX 77007 Multifamily $36,000,000 $35,872,239 $31,853,684
2 Pima Tucson AZ 85737 Multifamily 22,500,000 22,449,748 18,587,035
3 Hennepin Minneapolis MN 55454 Multifamily 19,000,000 19,000,000 16,550,721
4 San Diego Chula Vista CA 91910 Multifamily 12,000,000 11,974,392 9,981,361
5 Clarke Athens GA 30605 Multifamily 10,800,000 10,757,799 9,885,145
6 Prince Georges Fort Washington MD 20744 Multifamily 10,500,000 10,462,052 8,597,760
7 Marion Indianapolis IN 46235 Multifamily 9,100,000 9,070,063 7,564,971
8 Shelby Collierville TN 38017 Multifamily 8,800,000 8,800,000 7,423,544
9 Fulton Atlanta GA 30350 Multifamily 7,820,000 7,820,000 7,431,658
10 Aiken Aiken SC 29803 Multifamily 7,040,000 7,009,556 5,849,990
11 Harris Houston TX 77074 Multifamily 6,800,000 6,800,000 6,461,060
12 Montgomery Clarksville TN 37043 Multifamily 6,160,000 6,160,000 5,311,361
13 King Seattle WA 98122 Multifamily 4,665,000 4,660,406 3,969,971
14 Leon Tallahassee FL 32303 Multifamily 3,775,000 3,770,590 3,494,502
15 Leon Tallahassee FL 32304 Multifamily 3,719,976 3,715,833 3,456,171
16 Suffolk Boston MA 02215 Multifamily 3,500,000 3,500,000 3,500,000
17 Bossier Bossier City LA 71112 Multifamily 3,300,000 3,293,904 2,800,694
18 Cass West Fargo ND 58078 Multifamily 2,720,000 2,716,926 2,264,677
19 Warren Bowling Green KY 42101 Multifamily 2,720,000 2,708,337 2,263,078
20 Monroe Bloomington IN 47408 Multifamily 2,325,000 2,317,880 1,953,788
21 Harris Pasadena TX 77503 Multifamily 2,000,000 1,995,271 1,842,019
22 New Haven Milford CT 06460 Retail 20,960,000 20,916,858 17,526,135
23 Pima Tucson AZ 85712 Retail 11,500,000 11,500,000 8,994,382
24 Du Page Addison IL 60101 Retail 11,500,000 11,457,730 9,776,620
25 Los Angeles Monrovia CA 91016 Retail 10,700,000 10,666,143 8,948,072
26 Washington St. George UT 84790 Retail 10,590,000 10,590,000 10,590,000
27 Maricopa Phoenix AZ 85032 Retail 10,300,000 10,300,000 7,699,363
28 Iredell Statesville NC 28625 Retail 10,010,000 9,998,198 8,895,157
29 Hampden Springfield MA 01119 Retail 10,000,000 9,988,763 8,333,814
30 Columbus Whiteville NC 28472 Retail 8,640,000 8,622,369 7,233,424
31 Clark Las Vegas NV 89102 Retail 7,400,000 7,374,755 6,845,001
32 Harris Houston TX 77098 Retail 6,000,000 5,964,797 5,174,170
33 Bradley Cleveland TN 37323 Retail 5,200,000 5,194,792 4,413,822
34 Riverside Palm Springs CA 92262 Retail 4,750,000 4,745,170 4,022,522
35 Contra Costa Oakley CA 94561 Retail 4,243,000 4,230,253 3,554,669
36 Davidson Nashville TN 37206 Retail 3,910,000 3,901,884 3,498,445
37 Cook Chicago IL 60639 Retail 3,500,000 3,484,551 2,688,895
38 Sacramento Sacramento CA 94829 Retail 3,350,000 3,345,918 2,753,315
39 St. Bernard Parish Chalmette LA 70043 Retail 3,000,000 3,000,000 3,000,000
40 Pierce Puyallup WA 98371 Retail 2,450,000 2,444,726 2,035,232
41 Harris Houston TX 77002 Office 78,000,000 77,780,036 64,827,219
42 New York New York NY 10004 Office 75,850,000 75,850,000 65,704,250
43 New York New York NY 10017 Office 41,000,000 40,839,481 37,520,955
44 Clark Las Vegas NV 89117 Office 18,000,000 17,944,387 15,106,370
45.1 Mercer Hamilton NJ 08619 Office 11,278,008 11,242,839 9,452,008
45.2 Mercer Hamilton NJ 08619 Office 6,721,992 6,701,030 5,633,647
45 Mercer Hamilton NJ 08619 Office 18,000,000 17,943,869 15,085,655
46 Harris Houston TX 77077 Office 16,912,500 16,877,117 15,349,083
47 Thurston Tumwater WA 98501 Office 11,500,000 11,468,025 8,900,773
48 Harris Houston TX 77082 Office 11,200,000 11,142,674 9,443,983
49 Deschutes Redmond OR 97756 Office 10,100,000 10,068,981 8,483,822
50 Bell Temple TX 76504 Office 9,200,000 9,148,442 7,446,395
51 Los Angeles Los Angeles CA 90010 Office 9,000,000 8,971,749 7,535,442
FIRST INTEREST
LOAN MORTGAGE ADMINISTRATIVE SUB-SERVICING NET NOTE PAYMENT ACCRUAL MONTHLY
SEQUENCE TYPE RATE FEE RATE (I) FEE RATE MORTGAGE RATE DATE DATE METHOD PAYMENT
- -------- ---- ---- ------------ -------- ------------- ---- ---- ------ -------
1 Balloon 4.902% 0.062% 0.050% 4.840% 3/25/2004 5/1/2004 ACT/360 $191,105
2 Balloon 5.075% 0.112% 0.100% 4.963% 4/30/2004 6/1/2004 ACT/360 121,818
3 IO, Balloon 5.193% 0.112% 0.100% 5.081% 5/25/2004 7/1/2004 ACT/360 104,249
4 Balloon 5.291% 0.112% 0.100% 5.179% 4/13/2004 6/1/2004 ACT/360 66,570
5 Balloon 4.410% 0.062% 0.050% 4.348% 3/16/2004 5/1/2004 ACT/360 54,146
6 Balloon 4.810% 0.062% 0.050% 4.748% 4/1/2004 5/1/2004 ACT/360 55,153
7 Balloon 5.280% 0.112% 0.100% 5.168% 3/31/2004 5/1/2004 ACT/360 50,420
8 Balloon 5.751% 0.042% 0.030% 5.709% 6/1/2004 8/1/2004 ACT/360 51,360
9 IO, Balloon 4.220% 0.112% 0.100% 4.108% 5/11/2004 7/1/2004 ACT/360 38,332
10 Balloon 5.250% 0.112% 0.100% 5.138% 2/27/2004 4/1/2004 ACT/360 38,875
11 IO, Balloon 4.186% 0.112% 0.100% 4.074% 4/8/2004 6/1/2004 ACT/360 33,198
12 IO, Balloon 5.695% 0.112% 0.100% 5.583% 10/16/2003 12/1/2003 ACT/360 35,733
13 Balloon 6.057% 0.062% 0.050% 5.995% 5/19/2004 7/1/2004 ACT/360 28,140
14 Balloon 5.152% 0.082% 0.070% 5.070% 5/14/2004 7/1/2004 ACT/360 20,617
15 Balloon 5.407% 0.082% 0.070% 5.325% 5/14/2004 7/1/2004 ACT/360 20,905
16 Interest Only 5.293% 0.112% 0.100% 5.181% 5/27/2004 7/1/2004 ACT/360
17 Balloon 5.954% 0.062% 0.050% 5.892% 4/29/2004 6/1/2004 ACT/360 19,688
18 Balloon 5.330% 0.112% 0.100% 5.218% 5/3/2004 7/1/2004 ACT/360 15,155
19 Balloon 5.290% 0.112% 0.100% 5.178% 2/18/2004 4/1/2004 ACT/360 15,087
20 Balloon 5.630% 0.092% 0.080% 5.538% 3/15/2004 5/1/2004 ACT/360 13,391
21 Balloon 4.800% 0.092% 0.080% 4.708% 4/29/2004 6/1/2004 ACT/360 10,493
22 Balloon 5.460% 0.112% 0.100% 5.348% 4/8/2004 6/1/2004 ACT/360 118,483
23 IO, Balloon 5.960% 0.112% 0.100% 5.848% 5/13/2004 7/1/2004 ACT/360 68,653
24 Balloon 6.000% 0.062% 0.050% 5.938% 2/24/2004 4/1/2004 ACT/360 68,948
25 Balloon 5.471% 0.112% 0.100% 5.359% 3/2/2004 5/1/2004 ACT/360 60,559
26 Interest Only 4.290% 0.112% 0.100% 4.178% 4/8/2004 6/1/2004 30/360
27 IO, Balloon 5.680% 0.112% 0.100% 5.568% 4/1/2004 5/1/2004 ACT/360 59,651
28 Balloon 5.102% 0.112% 0.100% 4.990% 5/11/2004 7/1/2004 ACT/360 54,362
29 Balloon 5.360% 0.112% 0.100% 5.248% 5/4/2004 7/1/2004 ACT/360 55,904
30 Balloon 5.500% 0.112% 0.100% 5.388% 4/16/2004 6/1/2004 ACT/360 49,057
31 Balloon 5.100% 0.062% 0.050% 5.038% 3/1/2004 5/1/2004 ACT/360 40,178
32 Balloon 6.510% 0.072% 0.060% 6.438% 11/25/2003 1/1/2004 ACT/360 37,964
33 Balloon 5.968% 0.112% 0.100% 5.856% 5/25/2004 7/1/2004 ACT/360 31,070
34 Balloon 5.889% 0.112% 0.100% 5.777% 5/21/2004 7/1/2004 ACT/360 28,141
35 Balloon 5.521% 0.062% 0.050% 5.459% 3/10/2004 5/1/2004 ACT/360 24,147
36 Balloon 5.421% 0.112% 0.100% 5.309% 4/12/2004 6/1/2004 ACT/360 22,007
37 Balloon 5.674% 0.062% 0.050% 5.612% 3/5/2004 5/1/2004 ACT/360 21,858
38 Balloon 4.924% 0.062% 0.050% 4.862% 5/4/2004 7/1/2004 ACT/360 17,828
39 Interest Only 4.970% 0.082% 0.070% 4.888% 5/12/2004 7/1/2004 ACT/360
40 Balloon 5.250% 0.062% 0.050% 5.188% 4/22/2004 6/1/2004 ACT/360 13,529
41 Balloon 5.232% 0.052% 0.040% 5.180% 4/8/2004 6/1/2004 ACT/360 428,592
42 IO, Balloon 5.247% 0.052% 0.040% 5.195% 3/5/2004 5/1/2004 ACT/360 420,593
43 Balloon 4.400% 0.112% 0.100% 4.288% 3/31/2004 5/1/2004 ACT/360 205,312
44 Balloon 5.587% 0.062% 0.050% 5.525% 3/15/2004 5/1/2004 ACT/360 103,187
45.1
45.2
45 Balloon 5.542% 0.112% 0.100% 5.430% 3/10/2004 5/1/2004 ACT/360 102,677
46 Balloon 5.384% 0.112% 0.100% 5.272% 4/21/2004 6/1/2004 ACT/360 94,800
47 Balloon 5.885% 0.062% 0.050% 5.823% 4/5/2004 6/1/2004 ACT/360 73,288
48 Balloon 5.743% 0.112% 0.100% 5.631% 1/20/2004 3/1/2004 ACT/360 65,313
49 Balloon 5.616% 0.112% 0.100% 5.504% 3/11/2004 5/1/2004 ACT/360 58,084
50 Balloon 6.090% 0.112% 0.100% 5.978% 12/3/2003 2/1/2004 ACT/360 55,692
51 Balloon 5.510% 0.112% 0.100% 5.398% 3/24/2004 5/1/2004 ACT/360 51,157
ORIGINAL ORIGINAL REMAINING
TERM TO AMORTIZATION TERM TO
MATURITY TERM INTEREST ONLY SEASONING MATURITY MATURITY CROSS-COLLATERALIZED RELATED
SEQUENCE (MONTHS) (MONTHS) (II) PERIOD (MONTHS) (MONTHS) DATE LOANS LOANS
- -------- -------- ------------- ------ -------- -------- ---- ----- -----
1 84 360 3 81 4/1/2011 No No
2 120 360 2 118 5/1/2014 No No
3 120 360 24 1 119 6/1/2014 No No
4 120 360 2 118 5/1/2014 No No
5 60 360 3 57 4/1/2009 No No
6 120 360 3 117 4/1/2014 No No
7 120 360 3 117 4/1/2014 No No
8 120 360 120 7/1/2014 No No
9 60 360 24 1 59 6/1/2009 No No
10 120 360 4 116 3/1/2014 No Yes(BACM 04-3-G)
11 60 360 24 2 58 5/1/2009 No No
12 132 360 24 8 124 11/1/2014 No No
13 120 360 1 119 6/1/2014 No No
14 60 360 1 59 6/1/2009 No No
15 60 360 1 59 6/1/2009 No No
16 84 84 1 83 6/1/2011 No No
17 120 360 2 118 5/1/2014 No No
18 120 360 1 119 6/1/2014 No No
19 120 360 4 116 3/1/2014 No Yes(BACM 04-3-G)
20 120 360 3 117 4/1/2014 No No
21 60 360 2 58 5/1/2009 No No
22 120 360 2 118 5/1/2014 No No
23 180 360 24 1 179 6/1/2019 No Yes(BACM 04-3-E)
24 120 360 4 116 3/1/2014 No No
25 120 360 3 117 4/1/2014 No No
26 60 60 2 58 5/1/2009 No No
27 180 360 12 3 177 4/1/2019 No Yes(BACM 04-3-E)
28 84 360 1 83 6/1/2011 No No
29 120 360 1 119 6/1/2014 No No
30 120 360 2 118 5/1/2014 No No
31 60 360 3 57 4/1/2009 No No
32 120 360 7 113 12/1/2013 No No
33 120 360 1 119 6/1/2014 No No
34 120 360 1 119 6/1/2014 No No
35 120 360 3 117 4/1/2014 No No
36 84 360 2 82 5/1/2011 No No
37 120 300 3 117 4/1/2014 No No
38 120 360 1 119 6/1/2014 No No
39 120 120 1 119 6/1/2014 No No
40 120 360 2 118 5/1/2014 No No
41 120 360 2 118 5/1/2014 No No
42 120 336 24 3 117 4/1/2014 No No
43 60 360 3 57 4/1/2009 No No
44 120 360 3 117 4/1/2014 No No
45.1 No
45.2 No
45 120 360 3 117 4/1/2014 No No
46 75 360 2 73 8/1/2010 No No
47 120 300 2 118 5/1/2014 No No
48 120 360 5 115 2/1/2014 No Yes(BACM 04-3-A)
49 120 360 3 117 4/1/2014 No Yes(BACM 04-3-F)
50 144 360 6 138 1/1/2016 No No
51 120 360 3 117 4/1/2014 No No
LOCKOUT
SEQUENCE EXPIRATION PREPAYMENT PENALTY DESCRIPTION (MONTHS) YIELD MAINTENANCE TYPE
- -------- ---------- --------------------------------------- ----------------------
1 1/1/2011 LO(81)/OPEN(3)/DEFEASANCE
2 2/1/2014 LO(117)/OPEN(3)/DEFEASANCE
3 3/1/2014 LO(117)/OPEN(3)/DEFEASANCE
4 2/1/2014 LO(117)/OPEN(3)/DEFEASANCE
5 2/1/2009 LO(58)/OPEN(2)/DEFEASANCE
6 1/1/2014 LO(117)/OPEN(3)/DEFEASANCE
7 2/1/2014 LO(118)/OPEN(2)/DEFEASANCE
8 3/31/2014 LO(116)/OPEN(4)/DEFEASANCE
9 4/1/2009 LO(58)/OPEN(2)/DEFEASANCE
10 12/1/2013 LO(117)/OPEN(3)/DEFEASANCE
11 2/1/2009 LO(57)/OPEN(3)/DEFEASANCE
12 8/1/2014 LO(129)/OPEN(3)/DEFEASANCE
13 2/28/2014 LO(116)/OPEN(4)/DEFEASANCE
14 2/28/2009 LO(56)/OPEN(4)/DEFEASANCE
15 2/28/2009 LO(56)/OPEN(4)/DEFEASANCE
16 6/1/2006 LO(24)/GRTR1%PPMTorYM(56)/OPEN(4) Int Diff (MEY)
17 1/31/2014 LO(116)/OPEN(4)/DEFEASANCE
18 4/1/2014 LO(118)/OPEN(2)/DEFEASANCE
19 12/1/2013 LO(117)/OPEN(3)/DEFEASANCE
20 12/31/2013 LO(116)/OPEN(4)/DEFEASANCE
21 4/30/2006 LO(23)/GRTR1%PPMTorYM(33)/OPEN(4) NPV (BEY)
22 11/1/2013 LO(114)/OPEN(6)/DEFEASANCE
23 7/1/2008 LO(49)/GRTR1%PPMTorYM(128)/OPEN(3) Int Diff (MEY)
24 11/30/2013 LO(116)/OPEN(4)/DEFEASANCE
25 3/31/2009 LO(59)/GRTR1%PPMTorYM(58)/OPEN(3) Int Diff (BEY) - B
26 4/30/2007 LO(35)/GRTR1%PPMTorYM(22)/OPEN(3) Int Diff (BEY) - B
27 4/1/2008 LO(48)/GRTR1%PPMTorYM(129)/OPEN(3) Int Diff (BEY) - B
28 4/1/2011 LO(82)/OPEN(2)/DEFEASANCE
29 3/1/2014 LO(117)/OPEN(3)/DEFEASANCE
30 3/1/2014 LO(118)/OPEN(2)/DEFEASANCE
31 12/31/2008 LO(56)/OPEN(4)/DEFEASANCE
32 10/1/2013 LO(118)/OPEN(2)/DEFEASANCE
33 3/1/2014 LO(117)/OPEN(3)/DEFEASANCE
34 4/1/2014 LO(118)/OPEN(2)/DEFEASANCE
35 12/31/2013 LO(116)/OPEN(4)/DEFEASANCE
36 1/1/1900 LO(82)/OPEN(2)/DEFEASANCE
37 12/31/2013 LO(116)/OPEN(4)/DEFEASANCE
38 2/28/2014 LO(116)/OPEN(4)/DEFEASANCE
39 2/28/2014 LO(116)/OPEN(4)/DEFEASANCE
40 1/31/2014 LO(116)/OPEN(4)/DEFEASANCE
41 7/31/2006 LO(26)/GRTR1%PPMTorYM(88)/OPEN(6) Int Diff (BEY) - B
42 1/1/2014 LO(117)/OPEN(3)/DEFEASANCE
43 1/31/2009 LO(57)/OPEN(3)/DEFEASANCE
44 12/31/2013 LO(116)/OPEN(4)/DEFEASANCE
45.1
45.2
45 1/1/2014 LO(117)/OPEN(3)/DEFEASANCE
46 5/1/2010 LO(72)/OPEN(3)/DEFEASANCE
47 1/31/2014 LO(116)/OPEN(4)/DEFEASANCE
48 5/1/2006 LO(27)/GRTR1%PPMTorYM(92)/OPEN(1) Int Diff (BEY) - B
49 1/1/2014 LO(117)/OPEN(3)/DEFEASANCE
50 10/1/2015 LO(141)/OPEN(3)/DEFEASANCE
51 2/1/2014 LO(118)/OPEN(2)/DEFEASANCE
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN APPRAISAL APPRAISAL CUT-OFF DATE YEAR BUILT/
SEQUENCE NUMBER PROPERTY NAME VALUE DATE LTV RATIO RENOVATED
- -------- ------ ------------- ----- ---- --------- ---------
1 57998 Quarters at Memorial $50,100,000 2/19/2004 71.6% 2002
2 58006 Golf Villas at Oro Valley 28,400,000 2/26/2004 79.0% 1998
3 58103 GrandMarc at Seven Corners 24,700,000 4/7/2004 76.9% 2000
4 58015 Woodlawn Gardens 15,650,000 2/26/2004 76.5% 1958
5 57963 Aspen Apartments 13,500,000 1/20/2004 79.7% 1989/2001
6 58026 River Pointe Apartments 13,600,000 2/26/2004 76.9% 1969/2002
7 57978 Lexington Park Apartments 11,490,000 2/5/2004 78.9% 1964/2003
8 8190 Orchards at Collierville 12,100,000 4/14/2004 72.7% 1991/2001
9 58095 Silver Tree Apartments 10,000,000 4/4/2004 78.2% 1971/2003
10 57330 Fairway Ridge Apartments 8,800,000 1/13/2004 79.7% 1985
11 58016 Williamstown Apartments 8,600,000 2/24/2004 79.1% 1978
12 55800 CLK - Ashford Place Apartments 7,700,000 8/12/2003 80.0% 1974/2000
13 8547 Bowling Green Apartments 6,360,000 3/2/2004 73.3% 2003
14 8838 Mission Trace Apartments 4,750,000 3/23/2004 79.4% 1989/2003
15 8844 Landmark Apartments - Tallahassee, FL 4,900,000 3/23/2004 75.8% 1967/1999
16 58106 89-95 Park Drive Apartments 5,400,000 4/21/2004 64.8% 1923/2002
17 8267 Cordova Court 4,270,000 2/4/2004 77.1% 1965/2002
18 58000 Times Square Townhomes 3,400,000 2/16/2004 79.9% 2003
19 57943 Cameron Park Apartments 3,420,000 1/13/2004 79.2% 1965/2003
20 7343 Pavilion Heights Apartments 2,930,000 10/31/2003 79.1% 2002
21 8828 Greentree Apartments - Pasadena, TX 4,150,000 3/5/2004 48.1% 1983/2001
22 57582 Milford Plaza 26,200,000 3/4/2004 79.8% 1958
23 58014 The Shops at Camp Lowell 15,310,000 2/23/2004 75.1% 2002
24 8356 Centennial Plaza 15,560,000 4/1/2004 73.6% 1968/2004
25 57952 Foothill Park Plaza 14,860,000 1/17/2004 71.8% 1985/2001
26 57968 Promenade at Red Cliff 19,500,000 2/16/2004 54.3% 1997
27 57983 Mountain View Marketplace 13,200,000 1/2/2004 78.0% 1988
28 57986 Shoppes at Broad Street 17,250,000 2/23/2004 58.0% 2001
29 57927 Boston Commons Plaza 12,500,000 1/8/2004 79.9% 1993
30 57964 Columbus Corners Shopping Center 10,800,000 2/6/2004 79.8% 2003
31 8530 Paseo Plaza - Las Vegas, NV 10,000,000 1/19/2004 73.7% 1996
32 57685 Kirby Richmond Shopping Center 7,800,000 9/20/2003 76.5% 1978
33 58092 Sterling Pointe Shopping Center 7,200,000 4/19/2004 72.1% 2003
34 57741 Sunrise Place 6,900,000 12/14/2003 68.8% 2003
35 6033 Oakley Town Center 7,000,000 1/9/2004 60.4% 1990/1998
36 57949 Walgreens - Nashville, TN 5,200,000 1/27/2004 75.0% 2003
37 6461 Advocate Health Building 5,200,000 4/1/2004 67.0% 1996
38 6981 Calvine Corners Shopping Center 5,450,000 4/6/2004 61.4% 1997
39 8948 Walgreens Chalmette 6,400,000 3/31/2004 46.9% 2003
40 8658 North Meridian Retail Center 3,250,000 2/26/2004 75.2% 2003
41 57990 Calpine Center 160,925,000 3/5/2004 48.3% 2003
42 57984 17 State Street 170,000,000 2/11/2004 44.6% 1987
43 57999 369 Lexington Avenue 51,200,000 2/16/2004 79.8% 1927
44 8304 The Pines Corporate Center 24,200,000 2/9/2004 74.2% 2000
45.1 57815 University Office Plaza II 15,100,000 12/9/2003 1989
45.2 57815 University Office Plaza I 9,000,000 12/9/2003 1984
45 57815 UNIVERSITY OFFICE PLAZA I AND II (ROLL UP) 24,100,000 12/9/2003 74.5% Multiple
46 57913 Woodland Park Plaza Office Building 22,550,000 1/1/2004 74.8% 1983
47 6381 6500 Linderson 15,350,000 1/21/2004 74.7% 2003
48 57829 West Houston Medical Center 16,000,000 12/9/2003 69.6% 1985
49 57969 T-Mobile Customer Care Center 16,425,000 2/17/2004 61.3% 2004
50 55598 Nextel Office Building - Temple, TX 15,300,000 7/17/2003 59.8% 2001
51 57917 Wilshire-Kenmore Building 12,400,000 12/30/2003 72.4% 1967/2002
TOTAL
UNITS/ UNITS/ LOAN
SF/ SF/ BALANCE PER OCCUPANCY
PADS/ PADS/ NET RENTABLE UNIT/SF/PAD/ OCCUPANCY AS OF U/W U/W U/W U/W
SEQUENCE ROOMS ROOMS AREA (SF) ROOMS PERCENT DATE REVENUES EXPENSES CASH FLOW DSCR
- -------- ----- ----- --------- ----- ------- ---- -------- -------- --------- ----
1 380 Units 453,968 $94,401 91.8% 5/27/2004 $5,711,866 $2,776,067 $2,838,899 1.24x
2 281 Units 309,048 79,892 93.6% 4/21/2004 2,992,702 1,154,908 1,781,594 1.22
3 183 Units 175,896 103,825 92.6% 4/25/2004 3,742,683 2,010,618 1,589,325 1.27
4 150 Units 111,127 79,829 97.3% 2/5/2004 1,667,455 650,230 975,675 1.22
5 120 Units 143,300 89,648 96.9% 1/20/2004 1,728,516 754,581 931,935 1.43
6 170 Units 117,781 61,541 94.7% 3/4/2004 1,917,857 970,078 891,509 1.35
7 362 Units 313,257 25,055 92.8% 3/29/2004 1,823,321 938,646 794,175 1.31
8 226 Units 232,922 38,938 98.2% 4/15/2004 1,824,308 926,041 818,715 1.33
9 133 Units 171,420 58,797 96.2% 4/30/2004 1,165,763 548,816 583,697 1.27
10 222 Units 216,450 31,575 96.9% 3/25/2004 1,545,867 801,826 675,776 1.45
11 272 Units 205,376 25,000 89.0% 3/20/2004 1,575,434 861,797 624,693 1.57
12 248 Units 234,036 24,839 94.4% 3/25/2004 1,312,425 756,374 494,051 1.15
13 34 Units 29,454 137,071 94.1% 4/13/2004 570,437 129,229 423,441 1.25
14 96 Units 104,400 39,277 91.7% 5/16/2004 679,493 329,009 311,508 1.26
15 128 Units 118,400 29,030 89.1% 5/12/2004 814,413 473,738 300,227 1.20
16 49 Units 21,650 71,429 95.9% 4/5/2004 678,418 349,529 316,003 1.36
17 156 Units 134,796 21,115 97.4% 4/29/2004 866,016 457,471 361,433 1.53
18 32 Units 53,760 84,904 96.9% 4/13/2004 403,080 166,127 228,953 1.26
19 127 Units 112,300 21,325 99.2% 3/25/2004 700,992 437,021 225,571 1.25
20 28 Units 20,535 82,781 100.0% 4/7/2004 324,187 115,812 201,375 1.25
21 144 Units 106,800 13,856 82.6% 4/8/2004 831,370 602,177 193,193 1.53
22 178,884 SF 178,884 117 94.9% 5/18/2004 2,819,756 744,294 1,926,257 1.35
23 85,38 SF 85,388 135 95.6% 4/20/2004 1,600,817 535,166 1,030,559 1.25
24 121,984 SF 121,984 94 96.2% 2/24/2004 1,565,806 375,471 1,110,657 1.34
25 43,53 SF 43,530 245 100.0% 5/1/2004 1,262,439 309,993 917,692 1.26
26 94,94 SF 94,947 112 92.3% 4/5/2004 1,792,286 537,525 1,176,249 1.87
27 123,172 SF 123,172 84 91.0% 2/29/2004 1,479,031 421,833 965,095 1.35
28 142,953 SF 142,953 70 94.5% 5/11/2004 1,668,227 372,314 1,180,012 1.81
29 103,070 SF 103,070 97 100.0% 4/27/2004 1,675,308 619,468 1,014,498 1.51
30 93,50 SF 93,500 92 92.7% 5/1/2004 1,057,705 180,620 822,104 1.40
31 45,76 SF 45,769 161 100.0% 2/25/2004 1,007,074 238,707 714,326 1.48
32 54,3 SF 54,321 110 92.4% 12/31/2003 1,065,893 413,146 603,230 1.32
33 45,00 SF 45,000 115 87.4% 6/2/2004 693,751 158,250 506,661 1.36
34 18,8 SF 18,867 252 85.9% 5/1/2004 622,663 159,563 440,271 1.30
35 27,47 SF 27,478 154 100.0% 4/2/2004 769,516 340,209 389,014 1.34
36 14,5 SF 14,560 268 100.0% 4/1/2004 371,347 12,427 357,464 1.35
37 26,50 SF 26,500 131 100.0% 3/9/2004 590,630 204,067 355,192 1.35
38 19,2 SF 19,232 174 100.0% 3/30/2004 511,709 139,809 351,050 1.64
39 15, SF0 15,120 198 100.0% 3/31/2004 384,199 12,282 370,405 1.92
40 11 SF91 11,291 217 100.0% 3/2/2004 326,522 67,900 246,648 1.52
41 705,893 SF 705,893 110 87.0% 6/14/2004 20,822,863 8,187,095 11,799,489 2.29
42 531,521 SF 531,521 143 94.9% 5/6/2004 22,047,169 9,732,615 11,232,779 2.23
43 154,429 SF 154,429 264 82.2% 3/31/2004 6,158,000 2,784,716 3,042,557 1.23
44 100,240 SF 100,240 179 95.4% 3/15/2004 2,445,927 624,594 1,712,657 1.38
45.1 115,492 SF 115,492 92.1% 5/1/2004
45.2 76,68 SF 76,688 100.0% 5/1/2004
45 192,180 SF 192,180 93 95.3% 5/1/2004 3,329,610 1,341,210 1,676,303 1.36
46 224,178 SF 224,178 75 93.5% 5/28/2004 3,664,925 1,725,489 1,498,402 1.32
47 96,1 SF 96,103 119 100.0% 3/2/2004 1,464,514 235,050 1,111,256 1.26
48 160,433 SF 160,433 69 100.0% 5/19/2004 2,759,798 1,439,755 1,104,114 1.41
49 77,48 SF 77,484 130 100.0% 10/3/2003 1,368,793 251,045 1,020,645 1.46
50 108,800 SF 108,800 84 100.0% 3/31/2004 1,903,106 691,932 1,131,052 1.69
51 151,19 SF 151,197 59 93.7% 5/1/2004 2,087,144 984,486 917,440 1.49
U/W
REPLACEMENT
RESERVES
U/W PER UNIT/ MOST MOST FULL FULL
REPLACEMENT SF/ PAD/ RECENT MOST RECENT RECENT YEAR YEAR
SEQUENCE RESERVES ROOM STATEMENT TYPE END DATE NOI END DATE NOI
- -------- -------- ---- -------------- -------- --- -------- ---
1 $96,900 $255.00 Annualized Most Recent 1/31/2004 $3,305,112 12/31/2003 $2,673,494
2 56,200 200.00 Annualized Most Recent 1/31/2004 2,099,220 12/31/2003 1,889,439
3 142,740 780.00 Annualized Most Recent 3/31/2004 2,114,500 12/31/2003 1,573,301
4 41,550 277.00 Full Year 2/28/2004 1,029,804 2/28/2003 1,016,793
5 42,000 350.00 Annualized Most Recent 1/31/2004 1,151,880 12/31/2003 925,525
6 56,270 331.00 Annualized Most Recent 2/29/2004 938,832 12/31/2003 945,584
7 90,500 250.00 Full Year 2/29/2004 537,752
8 79,552 352.00 Annualized Most Recent 4/30/2004 994,676 12/31/2003 826,946
9 33,250 250.00 Annualized Most Recent 3/31/2004 594,788 12/31/2003 230,939
10 68,265 307.50 Annualized Most Recent 3/25/2004 861,964 12/31/2002 526,453
11 88,944 327.00 Annualized Most Recent 3/20/2004 724,784 12/31/2003 699,570
12 62,000 250.00 Annualized Most Recent 3/31/2004 644,024 12/31/2003 584,659
13 17,767 522.56 Annualized Most Recent 2/28/2004 478,220
14 38,976 406.00 Annualized Most Recent 4/30/2004 364,920 12/31/2003 358,044
15 40,448 316.00 Annualized Most Recent 4/30/2004 391,059 12/31/2003 314,125
16 12,887 263.00 Annualized Most Recent 3/31/2004 379,252 12/31/2003 373,344
17 47,112 302.00 Annualized Most Recent 3/31/2004 487,249 12/31/2003 399,365
18 8,000 250.00 Annualized Most Recent 3/31/2004 281,633
19 38,400 302.36 Annualized Most Recent 3/25/2004 309,480 12/31/2003 173,849
20 7,000 250.00 Annualized Most Recent 3/31/2004 253,443 12/31/2003 245,912
21 36,000 250.00 Annualized Most Recent 4/30/2004 187,049 12/31/2003 247,664
22 35,777 0.20 Annualized Most Recent 3/31/2004 2,649,856 12/31/2003 1,970,108
23 10,759 0.13 Annualized Most Recent 2/29/2004 811,644 12/31/2003 703,671
24 18,298 0.15 Annualized Most Recent 1/31/2004 1,242,573 12/31/2003 938,053
25 5,659 0.13 Annualized Most Recent 3/31/2004 1,094,928 12/31/2003 954,973
26 14,238 0.15 Full Year 12/31/2003 1,099,842 12/31/2002 859,621
27 27,714 0.23 Annualized Most Recent 2/29/2004 1,032,684 12/31/2003 1,179,777
28 20,013 0.14 Annualized Most Recent 3/31/2004 1,631,540 12/31/2003 1,324,438
29 15,461 0.15 Annualized Most Recent 3/31/2004 1,063,044 12/31/2003 924,399
30 13,090 0.14
31 6,865 0.15 Annualized Most Recent 3/31/2004 879,194 12/31/2003 866,178
32 19,012 0.35 Annualized Most Recent 12/31/2003 712,508 12/31/2002 590,358
33 7,650 0.17 Annualized Most Recent 4/30/2004 156,675
34 1,887 0.10
35 9,068 0.33 Annualized Most Recent 3/31/2004 416,949 12/31/2003 357,809
36 1,456 0.10
37 5,089 0.19 Annualized Most Recent 1/31/2004 406,576 12/31/2003 390,915
38 4,616 0.24 Annualized Most Recent 3/31/2004 380,644 12/31/2003 357,916
39 1,512 0.10
40 1,694 0.15 Annualized Most Recent 4/30/2004 152,082
41 211,768 0.30 Annualized Most Recent 3/31/2004 8,881,956
42 185,894 0.35 Annualized Most Recent 4/30/2004 12,326,263 12/31/2003 13,404,385
43 50,962 0.33 Annualized Most Recent 9/30/2003 2,915,707 12/31/2002 3,062,378
44 15,036 0.15 Annualized Most Recent 2/29/2004 1,839,950 12/31/2003 1,777,843
45.1
45.2
45 38,436 0.20 Annualized Most Recent 3/31/2004 1,954,932 12/31/2003 2,113,128
46 44,871 0.20 Full Year 12/31/2003 1,229,017 12/31/2002 1,559,316
47 14,415 0.15 Annualized Most Recent 12/31/2003 928,830
48 31,943 0.20 Annualized Most Recent 3/31/2004 1,732,013 12/31/2003 1,625,190
49 13,172 0.17
50 13,056 0.12 Annualized Most Recent 3/31/2004 1,864,248 12/31/2002 1,339,341
51 34,649 0.23 Annualized Most Recent 3/31/2004 1,631,864 12/31/2003 1,155,003
LARGEST
LARGEST TENANT
TENANT % OF LARGEST TENANT
LEASED TOTAL LEASE
SEQUENCE LARGEST TENANT SF SF EXPIRATION SECOND LARGEST TENANT
- -------- -------------- -- -- ---------- ---------------------
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22 Shop Rite Supermarket 57,837 32% 1/31/2019 Bob's Stores
23 Basha's 54,398 64% 12/27/2022 Brake Max
24 Food Harbor 40,000 33% 4/30/2013 Millenium Fitness
25 Washington Mutual (WAMU) 5,544 13% 12/31/2006 Tuesday Morning
26 Staples 22,959 24% 5/1/2012 Old Navy
27 Safeway 43,737 36% 7/31/2008 Walgreens
28 BI-LO 42,104 29% 12/15/2021 Rugged Warehouse
29 Big Y Foods 64,260 62% 9/30/2018 CVS
30 Goodys 20,000 21% 3/10/2014 BC Moore
31 David's Bridal 12,600 28% 12/31/2005 Landry's Seafood House #34
32 Office Depot 24,212 45% 5/31/2010 Floridita Seafood Grill
33 New China Buffet 6,760 15% 12/31/2013 US Dollar Mart
34 Video Depot 2,860 15% 3/31/2007 Panda Express
35 Hollywood Video 4,750 17% 1/31/2009 Washington Mutual Bank
36 Walgreen Co. 14,560 100% 9/30/2028
37 Advocate Health Care Services 14,000 53% 9/30/2008 Hollywood Video
38 Blockbuster #06846 5,200 27% 10/31/2008 Round Table Pizza
39 Walgreens 15,120 100% 4/30/2079
40 Hollywood Entertainment 5,905 52% 2/23/2014 Payless Shoes
41 Calpine 255,742 36% 11/30/2013 Burlington
42 AXA Reinsurance 90,968 17% 7/1/2012 Shareholders Communications
43 Master Lease 17,000 11% 3/15/2009 Sanctuary Music
44 Santec Consulting 37,464 37% 4/30/2008 Las Vegas Metro Police Dept
45.1 Unisys Corp 55,524 48% 8/1/2005 Value Options
45.2 NJ Department of Health 54,589 71% 7/31/2005 Riviera East
45
46 Global Industries 55,773 25% 7/30/2013 Brown & Gay Engineers
47 State of Washington 96,103 100% 5/31/2013
48 HCA 15,787 10% 12/31/2004 Metro Medical Assoc, PLLC
49 VoiceStream 77,484 100% 3/31/2019
50 Nextel of Texas, Inc. 108,800 100% 1/31/2016
51 YWCA 9,012 6% 7/31/2005 Goldschmid, Silver & Spindel
SECOND THIRD
SECOND LARGEST SECOND THIRD LARGEST THIRD
LARGEST TENANT LARGEST LARGEST TENANT LARGEST
TENANT % OF TENANT TENANT % OF TENANT
LEASED TOTAL LEASE LEASED TOTAL LEASE
SEQUENCE SF SF EXPIRATION THIRD LARGEST TENANT SF SF EXPIRATION
- -------- -- -- ---------- -------------------- -- -- ----------
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22 50,325 28% 1/31/2006 Jo Ann Fabrics 12,500 7% 1/31/2008
23 5,000 6% 11/30/2024 McDonald's (Ground Lease) 4,300 5% 12/10/2022
24 14,752 12% 3/31/2008 Optimal Health Institute 10,000 8% 10/31/2013
25 5,527 13% 1/14/2005 Southern Calif. Gas 2,677 6% 7/31/2004
26 19,317 20% 11/1/2008 Big 5 Sporting Goods 10,058 11% 1/31/2007
27 13,557 11% 7/31/2008 Arizona Dollar Store 6,130 5% 6/30/2006
28 12,000 8% 7/31/2007 Dollar Tree Stores 10,000 7% 2/28/2007
29 10,880 11% 1/31/2024 Family Dollar Stores 9,680 9% 12/31/2006
30 18,000 19% 7/31/2018 Blockbuster Video 5,800 6% 6/30/2013
31 11,000 24% 1/31/2026 McDonalds Corporation 3,000 7% 12/1/2005
32 5,000 9% 4/30/2011 Sue Mills 2,865 5% 6/30/2005
33 5,600 12% 5/1/2009 Cato 4,160 9% 12/31/2008
34 2,800 15% 2/13/2014 Tsunami Wash (AR Equipment) 1,818 10% 3/31/2014
35 4,080 15% 6/1/2013 Golden Chopsticks 2,660 10% 6/30/2008
36
37 7,000 26% 4/30/2008 Austin Bank of Chicago 5,500 21% 5/31/2018
38 3,000 16% 10/31/2008 Sally Beauty Supply #2494 1,625 8% 7/31/2009
39
40 2,900 26% 12/31/2013 Subway 1,191 11% 2/5/2009
41 250,058 35% 6/30/2015 Jones Day 54,600 8% 11/10/2018
42 57,546 11% 2/1/2011 Fitch, Inc. 20,749 4% 12/31/2004
43 15,324 10% 10/31/2006 Private Label 13,108 8% 12/31/2006
44 11,760 12% 4/30/2007 Mountain View Mortgage 7,560 8% 6/30/2006
45.1 11,984 10% 9/1/2004 Novosoft 6,600 6% 9/1/2004
45.2 5,249 7% 2/1/2006 JPS of NJ 4,944 6% 2/29/2008
45
46 46,303 21% 7/30/2006 Science Applications International 23,344 10% 12/31/2005
47
48 7,965 5% 7/31/2006 Brazos Orthopedics 7,030 4% 5/31/2005
49
50
51 8,039 5% 8/31/2007 R.E. Group 7,527 5% 9/3/2005
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN
SEQUENCE NUMBER PROPERTY NAME LOAN GROUP PROPERTY ADDRESS
- -------- ------ ------------- ---------- ----------------
52 57823 Columbia Medical Center - Plano 1 1600 Coit Road
53 57686 4120 International Business Park VIII 1 4120 International Parkway
54 58037 Cingular Wireless Office Building 1 4455 American Way
55 58021 Hancock Medical Buidling 1 25150 Hancock Avenue
56 57821 Las Colinas Medical Center I 1 6750 N. MacArthur Boulevard
57 8158 Goodyear Financial Center 1 250 North Litchfield Road
58 9149 US Bank Building - Bedford, OH 1 17500 Rockside Road
59 57787 Quail Business Park 1 5301 Longley Lane
60 57910 Plumas Quail Office Park 1 1855 - 1895 Plumas Street
61 8769 Summit Medical Plaza 1 1000 South Rainbow Boulevard
62 6942 Layton Market Office 1 1916 North 700 West
63 8937 Lakepoint Office Center 1 29001-29029 Upper Bear Creek Road
64 57893 Womens Pavillion 1 3240 Fort Worth
65 58036 Ashworth Distribution Facility 1 4010 Oceanside Boulevard
66 57388 TNT Logistics Warehouse - Moody, AL 1 2415 US Highway 78
67 8662 Wynn Office & Warehouse 1 4625 Wynn Road
68 58229 Sun Communities - Scio Farms 1 6655 Jackson Rd.
69.1 58227 Sun Communities Portfolio 9 - Silver Star 2 2530 N. Hiawassee Rd
69.2 58227 Sun Communities Portfolio 9 - Candlewick Court 2 1800 Candlewick Dr.
69.3 58227 Sun Communities Portfolio 9 - Lincoln Estates 2 1139 Lincoln Ave.
69.4 58227 Sun Communities Portfolio 9 - Holly Village/Hawaiian Gardens 2 4269 Grange Hall Rd
69 58227 SUN COMMUNITIES PORTFOLIO 9 (ROLL UP) 2 Multiple
70 57989 St. Clair Estates Manufactured Home Community 2 23680 Sandpiper Drive
71.1 58226 Sun Communities Portfolio 8 - Liberty Farms 2 76 E. U.S. Highway 6
71.2 58226 Sun Communities Portfolio 8 - West Glen Village 2 1207 Rushmore Blvd East
71 58226 SUN COMMUNITIES PORTFOLIO 8 (ROLL UP) 2 Multiple
72 58225 Sun Communities - Arbor Terrace 2 405 57th Ave West
SUB-TOTAL CROSSED LOANS
73 57803 Kellam - Foxwood Village Manufactured Home Community 2 153 Staffordboro Boulevard, L6A
74 57650 MHC Portfolio - Greenwood Village 2 370 Chapman Boulevard
75 57598 Continental Communities - Hickory Hills MHC 1 121 Hickory Hills Drive
76 57656 MHC Portfolio - Rancho Mesa 2 450 East Bradley Avenue
77 8403 Thunderbird MHC 1 28155 SW Pueblo Terrace
78 57665 MHC Portfolio - Oak Bend 2 10620 SW 27th Avenue
79 57667 MHC Portfolio - Southern Palms RV Resort 2 1 Avocado Lane
80 57639 MHC Portfolio - Countryside RV Resort 2 2701 South Idaho Road
81 57716 Pine Meadows Mobile Home Park 2 6300 West Pine Meadows Place
82 57658 MHC Portfolio - McNicol Place 1 Sussex County Rd 269
83 8448 Southeast MHC - Camp Springs, MD 2 8601 Temple Hill Road
84 57603 Continental Communities - Timber Valley MHC 1 2550 Smith Avenue
85.1 57367 U-Haul Center of Central Avenue 1 8671 Central Avenue
85.2 57367 U-Haul Center of Newington 1 8207 Terminal Road
85.3 57367 U-Haul Center of Naperville 1 11238 South Route 59
85.4 57367 U-Haul Storage Rainbow 1 2450 North Rainbow Boulevard
85.5 57367 U-Haul Center Hunters Creek 1 13301 South Orange Blossom Trail
85.6 57367 U-Haul Center Bruckner & 138Th St. 1 780 East 138th Street
85.7 57367 U-Haul Center of Grapevine 1 3517 William D Tate Avenue
85.8 57367 U-Haul Center West Craig Rd 1 160 West Craig Road
85.9 57367 U-Haul Center Kirkman Road 1 600 South Kirkman Road
85.10 57367 U-Haul Center of Crystal Lake 1 4504 West Northwest Highway
CUT-OFF
ZIP PROPERTY ORIGINAL DATE
SEQUENCE COUNTY CITY STATE CODE TYPE BALANCE BALANCE
- -------- ------ ---- ----- ---- ---- ------- -------
52 Collin Plano TX 75075 Office 8,750,000 8,705,214
53 Denton Carrollton TX 75007 Office 7,500,000 7,445,641
54 East Baton Rouge Parish Baton Rouge LA 70816 Office 6,955,000 6,938,891
55 Riverside Murrietta CA 92562 Office 6,400,000 6,393,323
56 Dallas Irving TX 75039 Office 6,370,000 6,337,396
57 Maricopa Goodyear AZ 85338 Office 5,850,000 5,833,420
58 Cuyahoga Bedford OH 44146 Office 5,800,000 5,787,433
59 Washoe Reno NV 89511 Office 5,500,000 5,482,700
60 Washoe Reno NV 89509 Office 5,400,000 5,384,038
61 Clark Las Vegas NV 89145 Office 4,200,000 4,196,013
62 Davis Layton UT 84037 Office 2,662,500 2,651,454
63 Jefferson Evergreen CO 80439 Office 2,100,000 2,094,646
64 Nueces Corpus Christi TX 78411 Office 1,645,000 1,635,476
65 San Diego Oceanside CA 92056 Industrial 11,650,000 11,623,570
66 Saint Clair Moody AL 35004 Industrial 7,675,000 7,639,865
67 Clark Las Vegas NV 89103 Industrial 4,150,000 4,132,874
68 Washtenaw Ann Arbor MI 48103 Manufactured Housing Communities 40,964,950 40,964,950
69.1 Orange Orlando FL 32818 Manufactured Housing Communities 13,891,472 13,891,472
69.2 Shiwawassee Owosso MI 48867 Manufactured Housing Communities 6,080,000 6,080,000
69.3 Allegan Holland MI 49423 Manufactured Housing Communities 5,460,000 5,460,000
69.4 Oakland Holly MI 48442 Manufactured Housing Communities 11,920,000 11,920,000
69 Multiple Multiple Multiple Multiple Manufactured Housing Communities 37,351,472 37,351,472
70 Macomb Clinton Township MI 48036 Manufactured Housing Communities 27,200,000 27,200,000
71.1 Porter Valparaiso IN 46383 Manufactured Housing Communities 6,080,000 6,080,000
71.2 Marion Indianapolis IN 46234 Manufactured Housing Communities 16,560,000 16,560,000
71 Multiple Multiple IN Multiple Manufactured Housing Communities 22,640,000 22,640,000
72 Manatee Bradenton FL 34207 Manufactured Housing Communities 5,280,000 5,280,000
---------------------------
27,920,000 27,920,000
73 Stafford Stafford VA 22554 Manufactured Housing Communities 20,400,000 20,316,250
74 Suffolk Manorville NY 11949 Manufactured Housing Communities 17,718,064 17,563,975
75 Northampton Bath PA 18014 Manufactured Housing Communities 15,350,000 15,350,000
76 San Diego El Cajon CA 92021 Manufactured Housing Communities 9,600,000 9,600,000
77 Clackamas Wilsonville OR 97070 Manufactured Housing Communities 6,000,000 5,983,020
78 Marion Ocala FL 34476 Manufactured Housing Communities 5,772,214 5,772,214
79 Lake Eustis FL 32726 Manufactured Housing Communities 5,732,974 5,683,116
80 Pinal County Apache Junction AZ 85219 Manufactured Housing Communities 3,790,917 3,757,949
81 Minnehaha Sioux Falls SD 57107 Manufactured Housing Communities 3,212,000 3,190,639
82 Sussex Rehoboth Beach DE 19971 Manufactured Housing Communities 2,710,354 2,710,354
83 Prince Georges Camp Springs MD 20748 Manufactured Housing Communities 2,000,000 1,987,369
84 Marshall Marshalltown IA 50158 Manufactured Housing Communities 1,870,000 1,870,000
85.1 Prince Georges Capitol Heights MD 20743 Self Storage 3,860,952 3,844,770
85.2 Fairfax Newington VA 22122 Self Storage 2,598,718 2,587,826
85.3 Will Naperville IL 60564 Self Storage 2,505,906 2,495,404
85.4 Clark Las Vegas NV 89108 Self Storage 2,450,219 2,439,950
85.5 Orange Orlando FL 32837 Self Storage 2,134,661 2,125,714
85.6 Bronx Bronx NY 10454 Self Storage 2,097,536 2,088,745
85.7 Tarrant Grapevine TX 76051 Self Storage 2,052,987 2,044,382
85.8 Clark Las Vegas NV 89032 Self Storage 2,041,849 2,033,292
85.9 Orange Orlando FL 32811 Self Storage 2,004,725 1,996,323
85.10 McHenry Crystal Lake IL 60014 Self Storage 1,893,351 1,885,416
MATURITY FIRST INTEREST
DATE LOAN MORTGAGE ADMINISTRATIVE SUB-SERVICING NET NOTE PAYMENT ACCRUAL MONTHLY
SEQUENCE BALANCE TYPE RATE FEE RATE (I) FEE RATE MORTGAGE RATE DATE DATE METHOD PAYMENT
- -------- ------- ---- ---- ------------ -------- ------------- ---- ---- ------ -------
52 7,378,112 Balloon 5.743% 0.112% 0.100% 5.631% 1/20/2004 3/1/2004 ACT/360 51,025
53 5,804,163 Balloon 5.890% 0.112% 0.100% 5.778% 1/28/2004 3/1/2004 ACT/360 47,820
54 5,955,451 Balloon 4.900% 0.112% 0.100% 4.788% 4/16/2004 6/1/2004 ACT/360 36,912
55 5,398,148 Hyper Am 5.754% 0.112% 0.100% 5.642% 5/25/2004 7/1/2004 ACT/360 37,365
56 5,371,266 Balloon 5.743% 0.112% 0.100% 5.631% 1/20/2004 3/1/2004 ACT/360 37,146
57 4,970,311 Balloon 6.000% 0.062% 0.050% 5.938% 3/3/2004 5/1/2004 ACT/360 35,074
58 4,813,382 Balloon 5.219% 0.072% 0.060% 5.147% 4/28/2004 6/1/2004 ACT/360 31,917
59 4,603,579 Balloon 5.500% 0.112% 0.100% 5.388% 3/12/2004 5/1/2004 ACT/360 31,228
60 4,561,046 Balloon 5.800% 0.112% 0.100% 5.688% 3/26/2004 5/1/2004 ACT/360 31,685
61 3,593,870 Balloon 6.248% 0.082% 0.070% 6.166% 5/28/2004 7/1/2004 ACT/360 25,855
62 2,071,597 Balloon 6.050% 0.062% 0.050% 5.988% 3/10/2004 5/1/2004 ACT/360 17,236
63 1,663,623 Balloon 5.920% 0.062% 0.050% 5.858% 4/22/2004 6/1/2004 ACT/360 13,204
64 1,522,109 Balloon 5.116% 0.112% 0.100% 5.004% 1/20/2004 3/1/2004 ACT/360 8,947
65 9,600,698 Balloon 5.000% 0.112% 0.100% 4.888% 4/2/2004 6/1/2004 ACT/360 62,540
66 6,349,983 Balloon 4.978% 0.112% 0.100% 4.866% 2/27/2004 4/1/2004 ACT/360 41,096
67 2,745,830 Balloon 6.084% 0.062% 0.050% 6.022% 4/27/2004 6/1/2004 ACT/360 29,933
68 34,538,058 IO, Balloon 5.320% 0.112% 0.100% 5.208% 6/9/2004 8/1/2004 ACT/360 227,989
69.1 11,712,072
69.2 5,126,123
69.3 4,603,394
69.4 10,049,900
69 31,491,489 IO, Balloon 5.320% 0.112% 0.100% 5.208% 6/9/2004 8/1/2004 ACT/360 207,879
70 24,994,332 IO, Balloon 4.660% 0.112% 0.100% 4.548% 3/31/2004 5/1/2004 ACT/360 140,416
71.1 5,126,123
71.2 13,961,941
71 19,088,065 IO, Balloon 5.320% 0.112% 0.100% 5.208% 6/9/2004 8/1/2004 ACT/360 126,002
72 4,451,633 IO, Balloon 5.320% 0.112% 0.100% 5.208% 6/9/2004 8/1/2004 ACT/360 29,386
------------
23,539,698
73 17,905,572 Balloon 5.494% 0.112% 0.100% 5.382% 2/4/2004 4/1/2004 ACT/360 115,756
74 16,450,638 Balloon 5.350% 0.112% 0.100% 5.238% 10/17/2003 12/1/2003 ACT/360 98,940
75 13,544,675 IO, Balloon 5.711% 0.112% 0.100% 5.599% 2/2/2004 4/1/2004 ACT/360 89,199
76 8,412,852 IO, Balloon 6.327% 0.112% 0.100% 6.215% 10/17/2003 12/1/2003 ACT/360 59,590
77 4,627,708 Balloon 5.782% 0.062% 0.050% 5.720% 4/16/2004 6/1/2004 ACT/360 37,863
78 5,058,414 IO, Balloon 6.327% 0.112% 0.100% 6.215% 10/17/2003 12/1/2003 ACT/360 35,830
79 5,322,878 Balloon 5.350% 0.112% 0.100% 5.238% 10/17/2003 12/1/2003 ACT/360 32,014
80 3,519,741 Balloon 5.350% 0.112% 0.100% 5.238% 10/17/2003 12/1/2003 ACT/360 21,169
81 2,864,154 Balloon 5.260% 0.112% 0.100% 5.148% 12/23/2003 2/1/2004 ACT/360 17,757
82 2,375,189 IO, Balloon 6.327% 0.112% 0.100% 6.215% 10/17/2003 12/1/2003 ACT/360 16,824
83 33,657 Fully Amortizing 5.364% 0.062% 0.050% 5.302% 5/3/2004 7/1/2004 ACT/360 21,571
84 1,651,805 IO, Balloon 5.787% 0.112% 0.100% 5.675% 10/23/2003 12/1/2003 ACT/360 10,957
85.1 3,039,329
85.2 2,045,702
85.3 1,972,641
85.4 1,928,805
85.5 1,680,398
85.6 1,651,174
85.7 1,616,105
85.8 1,607,337
85.9 1,578,113
85.10 1,490,440
ORIGINAL ORIGINAL REMAINING
TERM TO AMORTIZATION TERM TO
MATURITY TERM INTEREST ONLY SEASONING MATURITY MATURITY CROSS-COLLATERALIZED RELATED
SEQUENCE (MONTHS) (MONTHS) (II) PERIOD (MONTHS) (MONTHS) DATE LOANS LOANS
- -------- -------- ------------- ------ -------- -------- ---- ----- -----
52 120 360 5 115 2/1/2014 No Yes(BACM 04-3-A)
53 120 300 5 115 2/1/2014 No No
54 101 360 2 99 10/1/2012 No Yes(BACM 04-3-F)
55 120 360 1 119 6/1/2014 No No
56 120 360 5 115 2/1/2014 No Yes(BACM 04-3-A)
57 120 360 3 117 4/1/2014 No No
58 120 360 2 118 5/1/2014 No No
59 120 360 3 117 4/1/2014 No No
60 120 360 3 117 4/1/2014 No No
61 120 360 1 119 6/1/2014 No No
62 120 300 3 117 4/1/2014 No No
63 120 312 2 118 5/1/2014 No No
64 60 360 5 55 2/1/2009 No Yes(BACM 04-3-A)
65 120 360 2 118 5/1/2014 No No
66 118 360 4 114 1/1/2014 No No
67 120 240 2 118 5/1/2014 No No
68 144 360 30 144 7/1/2016 No Yes(BACM 04-3-I)
69.1 No
69.2 No
69.3 No
69.4 No
69 144 360 30 144 7/1/2016 No Yes(BACM 04-3-I)
70 84 360 24 3 81 4/1/2011 No No
71.1 Yes(BACM 04-3-A)
71.2 Yes(BACM 04-3-A)
71 144 360 30 144 7/1/2016 Yes(BACM 04-3-A) Yes(BACM 04-3-I)
72 144 360 30 144 7/1/2016 Yes(BACM 04-3-A) Yes(BACM 04-3-I)
73 96 360 4 92 3/1/2012 No No
74 60 360 8 52 11/1/2008 No Yes(BACM 04-3-B)
75 120 360 24 4 116 3/1/2014 No Yes(BACM 04-3-C)
76 144 360 36 8 136 11/1/2015 No Yes(BACM 04-3-B)
77 120 300 2 118 5/1/2014 No No
78 144 360 36 8 136 11/1/2015 No Yes(BACM 04-3-B)
79 60 360 8 52 11/1/2008 No Yes(BACM 04-3-B)
80 60 360 8 52 11/1/2008 No Yes(BACM 04-3-B)
81 84 360 6 78 1/1/2011 No No
82 144 360 36 8 136 11/1/2015 No Yes(BACM 04-3-B)
83 120 120 1 119 6/1/2014 No No
84 120 360 24 8 112 11/1/2013 No Yes(BACM 04-3-C)
85.1 No
85.2 No
85.3 No
85.4 No
85.5 No
85.6 No
85.7 No
85.8 No
85.9 No
85.10 No
LOCKOUT
SEQUENCE EXPIRATION PREPAYMENT PENALTY DESCRIPTION (MONTHS) YIELD MAINTENANCE TYPE
- -------- ---------- --------------------------------------- ----------------------
52 5/1/2006 LO(27)/GRTR1%PPMTorYM(92)/OPEN(1) Int Diff (BEY) - B
53 11/1/2013 LO(117)/OPEN(3)/DEFEASANCE
54 7/1/2012 LO(98)/OPEN(3)/DEFEASANCE
55 4/1/2014 LO(118)/OPEN(2)/DEFEASANCE
56 5/1/2006 LO(27)/GRTR1%PPMTorYM(92)/OPEN(1) Int Diff (BEY) - B
57 12/31/2013 LO(116)/OPEN(4)/DEFEASANCE
58 1/31/2014 LO(116)/OPEN(4)/DEFEASANCE
59 2/1/2014 LO(118)/OPEN(2)/DEFEASANCE
60 2/1/2014 LO(118)/OPEN(2)/DEFEASANCE
61 2/28/2014 LO(116)/OPEN(4)/DEFEASANCE
62 12/31/2013 LO(116)/OPEN(4)/DEFEASANCE
63 1/31/2014 LO(116)/OPEN(4)/DEFEASANCE
64 5/1/2006 LO(27)/GRTR1%PPMTorYM(32)/OPEN(1) Int Diff (BEY) - B
65 3/1/2014 LO(118)/OPEN(2)/DEFEASANCE
66 10/1/2013 LO(115)/OPEN(3)/DEFEASANCE
67 1/31/2014 LO(116)/OPEN(4)/DEFEASANCE
68 1/1/2016 LO(138)/OPEN(6)/DEFEASANCE
69.1
69.2
69.3
69.4
69 1/1/2016 LO(138)/OPEN(6)/DEFEASANCE
70 10/1/2010 LO(78)/OPEN(6)/DEFEASANCE
71.1
71.2
71 1/1/2016 LO(138)/OPEN(6)/DEFEASANCE
72 1/1/2016 LO(138)/OPEN(6)/DEFEASANCE
73 12/1/2011 LO(93)/OPEN(3)/DEFEASANCE
74 7/31/2008 LO(56)/OPEN(4)/DEFEASANCE
75 12/1/2013 LO(117)/OPEN(3)/DEFEASANCE
76 8/1/2015 LO(141)/OPEN(3)/DEFEASANCE
77 1/31/2014 LO(116)/OPEN(4)/DEFEASANCE
78 8/1/2015 LO(141)/OPEN(3)/DEFEASANCE
79 8/1/2008 LO(57)/OPEN(3)/DEFEASANCE
80 7/31/2008 LO(56)/OPEN(4)/DEFEASANCE
81 11/1/2010 LO(82)/OPEN(2)/DEFEASANCE
82 8/1/2015 LO(141)/OPEN(3)/DEFEASANCE
83 2/28/2014 LO(116)/OPEN(4)/DEFEASANCE
84 8/1/2013 LO(117)/OPEN(3)/DEFEASANCE
85.1
85.2
85.3
85.4
85.5
85.6
85.7
85.8
85.9
85.10
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN APPRAISAL APPRAISAL CUT-OFF DATE YEAR BUILT/
SEQUENCE NUMBER PROPERTY NAME VALUE DATE LTV RATIO RENOVATED
- -------- ------ ------------- ----- ---- --------- ---------
52 57823 Columbia Medical Center - Plano 12,500,000 12/1/2003 69.6% 1995
53 57686 4120 International Business Park VIII 11,000,000 11/23/2003 67.7% 2001
54 58037 Cingular Wireless Office Building 10,800,000 3/10/2004 64.2% 1997
55 58021 Hancock Medical Buidling 8,700,000 5/15/2004 73.5% 2004
56 57821 Las Colinas Medical Center I 9,100,000 12/2/2003 69.6% 1996
57 8158 Goodyear Financial Center 8,150,000 1/8/2004 71.6% 2001
58 9149 US Bank Building - Bedford, OH 7,400,000 4/1/2004 78.2% 1993
59 57787 Quail Business Park 10,135,000 12/2/2003 54.1% 1987/2003
60 57910 Plumas Quail Office Park 7,250,000 12/16/2003 74.3% 2001
61 8769 Summit Medical Plaza 5,815,000 3/9/2004 72.2% 1995
62 6942 Layton Market Office 3,550,000 1/31/2004 74.7% 2002
63 8937 Lakepoint Office Center 2,800,000 3/23/2004 74.8% 1978/1986
64 57893 Womens Pavillion 2,350,000 12/10/2003 69.6% 1970/1985
65 58036 Ashworth Distribution Facility 18,000,000 3/12/2004 64.6% 2004
66 57388 TNT Logistics Warehouse - Moody, AL 12,000,000 12/2/2003 63.7% 2003
67 8662 Wynn Office & Warehouse 6,100,000 3/26/2004 67.8% 1984
68 58229 Sun Communities - Scio Farms 52,600,000 5/1/2004 77.9% 1985
69.1 58227 Sun Communities Portfolio 9 - Silver Star 17,800,000 5/1/2004 1975
69.2 58227 Sun Communities Portfolio 9 - Candlewick Court 7,600,000 5/1/2004 1975
69.3 58227 Sun Communities Portfolio 9 - Lincoln Estates 6,825,000 5/1/2004 1969
69.4 58227 Sun Communities Portfolio 9 - Holly Village/Hawaiian Gardens 14,900,000 6/1/2004 1980
69 58227 SUN COMMUNITIES PORTFOLIO 9 (ROLL UP) 47,125,000 Multiple 79.3% Multiple
70 57989 St. Clair Estates Manufactured Home Community 34,000,000 2/8/2004 80.0% 1960
71.1 58226 Sun Communities Portfolio 8 - Liberty Farms 7,600,000 5/1/2004 1965
71.2 58226 Sun Communities Portfolio 8 - West Glen Village 20,700,000 5/1/2004 1969
71 58226 SUN COMMUNITIES PORTFOLIO 8 (ROLL UP) 28,300,000 5/1/2004 80.0% Multiple
72 58225 Sun Communities - Arbor Terrace 6,600,000 5/1/2004 80.0% 1972
------------
SUB-TOTAL CROSSED LOANS 34,900,000
73 57803 Kellam - Foxwood Village Manufactured Home Community 26,100,000 12/31/2003 77.8% 1960
74 57650 MHC Portfolio - Greenwood Village 22,600,000 9/1/2003 77.7% 1981
75 57598 Continental Communities - Hickory Hills MHC 19,300,000 3/1/2004 79.5% 1968/2003
76 57656 MHC Portfolio - Rancho Mesa 11,900,000 9/9/2003 80.7% 1970
77 8403 Thunderbird MHC 9,250,000 2/9/2004 64.7% 1961/2004
78 57665 MHC Portfolio - Oak Bend 7,250,000 9/3/2003 79.6% 1983
79 57667 MHC Portfolio - Southern Palms RV Resort 7,400,000 9/3/2003 76.8% 1970/1984
80 57639 MHC Portfolio - Countryside RV Resort 6,200,000 9/28/2003 60.6% 1979/1989
81 57716 Pine Meadows Mobile Home Park 4,100,000 10/12/2003 77.8% 1985
82 57658 MHC Portfolio - McNicol Place 3,350,000 8/28/2003 80.9% 1969
83 8448 Southeast MHC - Camp Springs, MD 5,375,000 2/4/2004 37.0% 1964/2003
84 57603 Continental Communities - Timber Valley MHC 2,500,000 9/3/2003 74.8% 1972/2003
85.1 57367 U-Haul Center of Central Avenue 10,400,000 11/15/2003 1999
85.2 57367 U-Haul Center of Newington 6,140,000 11/15/2003 2003
85.3 57367 U-Haul Center of Naperville 6,425,000 11/15/2003 2002
85.4 57367 U-Haul Storage Rainbow 6,600,000 11/15/2003 1996
85.5 57367 U-Haul Center Hunters Creek 5,750,000 1/15/2004 2000
85.6 57367 U-Haul Center Bruckner & 138Th St. 5,630,000 11/15/2003 1920/2000
85.7 57367 U-Haul Center of Grapevine 5,530,000 11/15/2003 1999
85.8 57367 U-Haul Center West Craig Rd 5,500,000 11/15/2003 2000
85.9 57367 U-Haul Center Kirkman Road 5,400,000 5/15/2004 1999
85.10 57367 U-Haul Center of Crystal Lake 5,100,000 11/15/2003 1961/1999
TOTAL
UNITS/ UNITS/ LOAN
SF/ SF/ BALANCE PER OCCUPANCY
PADS/ PADS/ NET RENTABLE UNIT/SF/PAD/ OCCUPANCY AS OF U/W U/W U/W U/W
SEQUENCE ROOMS ROOMS AREA (SF) ROOMS PERCENT DATE REVENUES EXPENSES CASH FLOW DSCR
- -------- ----- ----- --------- ----- ------- ---- -------- -------- --------- ----
52 118,279 SF 118,279 74 97.8% 5/19/2004 1,951,900 1,039,980 786,171 1.28
53 101,478 SF 101,478 73 84.4% 5/19/2004 1,659,430 697,948 829,337 1.45
54 70,1 SF 70,100 99 100.0% 3/9/2004 1,364,321 447,545 865,093 1.95
55 32,85 SF 32,853 195 90.0% 5/31/2004 910,434 290,457 584,014 1.30
56 66,02 SF 66,029 96 97.5% 5/19/2004 1,412,983 647,578 666,077 1.49
57 43,54 SF 43,549 134 99.4% 3/3/2004 927,574 310,693 538,322 1.28
58 78,50 SF 78,500 74 100.0% 4/27/2004 522,025 19,586 485,169 1.27
59 169,634 SF 169,634 32 86.0% 5/15/2004 1,076,995 374,847 590,189 1.57
60 37,4 SF 37,410 144 93.1% 5/21/2004 733,705 163,665 491,863 1.29
61 24,25 SF 24,253 173 100.0% 5/1/2004 602,221 140,402 423,666 1.37
62 30,1 SF 30,170 88 100.0% 2/10/2004 452,164 125,443 276,010 1.33
63 27,3 SF 27,314 77 100.0% 3/1/2004 399,898 172,473 196,144 1.24
64 31,3 SF 31,392 52 85.3% 5/19/2004 394,505 204,063 148,148 1.38
65 03,779 SF 203,779 57 100.0% 4/14/2004 1,825,350 499,435 1,267,582 1.69
66 00,000 SF 600,000 13 100.0% 2/27/2004 1,353,219 370,384 883,232 1.79
67 96,62 SF 96,626 43 90.0% 4/27/2004 683,218 163,093 459,602 1.28
68 913 Pads 44,869 99.6% 2/29/2004 5,050,986 1,653,894 3,351,442 1.22
69.1 408 Pads 98.8% 2/29/2004
69.2 211 Pads 95.7% 2/29/2004
69.3 191 Pads 96.3% 2/27/2004
69.4 425 Pads 100.0% 4/30/2004
69 35 Pads 30,244 98.5% 4,909,475 1,690,249 3,157,476 1.27
70 628 Pads 43,312 81.5% 3/30/2004 2,760,421 611,343 2,122,964 1.26
71.1 220 Pads 99.6% 2/29/2004
71.2 552 Pads 91.1% 2/27/2004
71 772 Pads 29,326 93.5% Multiple 3,007,379 948,643 2,020,136 1.34
72 402 Pads 13,134 100.0% 4/5/2004 995,837 538,499 437,238 1.24
73 498 Pads 40,796 97.8% 3/31/2004 2,263,078 555,225 1,682,953 1.21
74 508 Pads 34,575 99.6% 3/31/2004 2,742,612 1,233,111 1,484,101 1.25
75 354 Pads 43,362 95.5% 3/31/2004 1,949,263 624,097 1,307,516 1.22
76 158 Pads 60,759 98.7% 3/31/2004 1,409,254 523,260 878,094 1.23
77 270 Pads 22,159 93.7% 4/16/2004 1,241,792 641,305 586,987 1.29
78 262 Pads 22,031 87.4% 4/30/2004 892,532 363,467 515,965 1.20
79 950 Pads 5,982 63.3% 10/7/2003 1,651,957 1,124,252 480,205 1.25
80 560 Pads 6,711 57.6% 10/8/2003 815,829 470,294 317,535 1.25
81 152 Pads 20,991 97.4% 3/26/2004 459,192 164,586 287,006 1.35
82 93 Pads 29,144 98.9% 3/31/2004 313,968 67,046 242,272 1.20
83 123 Pads 16,157 96.8% 5/1/2004 658,605 222,668 427,081 1.65
84 145 Pads 12,897 82.8% 3/1/2004 302,025 136,867 157,908 1.20
85.1 96 Units 77,505 88.0% 5/1/2004
85.2 785 Units 59,875 34.1% 5/1/2004
85.3 700 Units 90,070 48.2% 5/1/2004
85.4 725 Units 79,080 95.2% 5/1/2004
85.5 746 Units 58,500 86.6% 5/1/2004
85.6 754 Units 41,665 66.7% 5/1/2004
85.7 629 Units 50,550 94.3% 5/1/2004
85.8 741 Units 60,300 88.8% 5/1/2004
85.9 581 Units 77,165 73.7% 5/1/2004
85.10 747 Units 77,500 84.6% 5/1/2004
U/W
REPLACEMENT
RESERVES
U/W PER UNIT/ MOST MOST FULL FULL
REPLACEMENT SF/ PAD/ RECENT MOST RECENT RECENT YEAR YEAR
SEQUENCE RESERVES ROOM STATEMENT TYPE END DATE NOI END DATE NOI
- -------- -------- ---- -------------- -------- --- -------- ---
52 21,254 0.18 Annualized Most Recent 3/31/2004 1,224,888 12/31/2003 1,250,588
53 15,047 0.15 Annualized Most Recent 3/31/2004 1,195,756 12/31/2003 1,156,226
54 14,020 0.20
55 4,928 0.15
56 12,656 0.19 Annualized Most Recent 3/31/2004 967,076 12/31/2003 753,170
57 6,532 0.15 Annualized Most Recent 4/30/2004 569,394 12/31/2003 431,078
58 17,270 0.22
59 33,198 0.20 Full Year 12/31/2003 801,727 12/31/2002 848,480
60 5,612 0.15 Full Year 12/31/2003 411,485 12/31/2002 289,717
61 14,139 0.58
62 4,526 0.15 Annualized Most Recent 4/30/2004 211,991
63 6,555 0.24 Annualized Most Recent 2/29/2004 267,749 12/31/2003 264,456
64 6,279 0.20 Annualized Most Recent 3/31/2004 320,336 12/31/2003 269,111
65 10,189 0.05
66 60,000 0.10
67 14,494 0.15 Annualized Most Recent 3/31/2004 497,425 12/31/2003 440,364
68 45,650 50.00 Annualized Most Recent 2/29/2004 3,492,786 12/31/2003 3,574,143
69.1
69.2
69.3
69.4
69 61,750 50.00 Annualized Most Recent 2/29/2004 3,488,334 12/31/2003 3,069,455
70 26,114 41.58 Full Year 12/31/2003 2,213,482 12/31/2002 1,971,735
71.1
71.2
71 38,600 50.00 Annualized Most Recent 2/29/2004 2,205,144 12/31/2003 2,244,424
72 20,100 50.00 Annualized Most Recent 2/29/2004 1,237,680 12/31/2003 468,564
73 24,900 50.00 Annualized Most Recent 3/31/2004 1,697,104 12/31/2003 1,692,531
74 25,400 50.00 Annualized Most Recent 3/31/2004 1,899,922 12/31/2003 1,651,318
75 17,650 49.86 Annualized Most Recent 3/31/2004 1,481,822 12/31/2003 1,223,823
76 7,900 50.00 Annualized Most Recent 3/31/2004 986,752 12/31/2003 859,824
77 13,500 50.00 Annualized Most Recent 2/29/2004 825,391 12/31/2003 634,394
78 13,100 50.00 Annualized Most Recent 3/31/2004 469,134 12/31/2003 512,234
79 47,500 50.00 Annualized Most Recent 3/31/2004 1,792,200 12/31/2003 636,060
80 28,000 50.00 Annualized Most Recent 3/31/2004 830,163 12/31/2003 496,953
81 7,600 50.00 Annualized Most Recent 3/31/2004 355,660 12/31/2002 301,324
82 4,650 50.00 Annualized Most Recent 3/31/2004 252,720 12/31/2003 261,879
83 8,856 72.00 Annualized Most Recent 4/30/2004 421,371 12/31/2003 372,600
84 7,250 50.00 Annualized Most Recent 3/31/2004 151,938 12/31/2003 154,338
85.1
85.2
85.3
85.4
85.5
85.6
85.7
85.8
85.9
85.10
LARGEST
LARGEST TENANT
TENANT % OF LARGEST TENANT
LEASED TOTAL LEASE
SEQUENCE LARGEST TENANT SF SF EXPIRATION SECOND LARGEST TENANT
- -------- -------------- -- -- ---------- ---------------------
52 HCA 14,707 12% 2/28/2005 Plano Women's Healthcare, P.A.
53 Informatica Corp 29,211 29% 1/31/2006 VoiceStream
54 BellSouth Mobility, Inc. dba Cingular Wireless 70,100 100% 10/31/2012
55 Rancho PT 9,918 30% 4/28/2016 Orthopedic
56 HCA 23,323 35% 12/31/2005 Las Colinas Obstetric - gyn
57 White Tanks Physical Therapy 4,577 11% 9/30/2011 National Benefits Alliance
58 US Bank 78,500 100% 1/31/2019
59 Cheapo Depot 15,733 9% 9/30/2004 The Mattress Store
60 Masquerade French Quarters 5,230 14% 6/30/2006 Beckley Singleton, CHTD
61 Summit Medical Group 16,341 67% 12/31/2017 PIPA Holdings, LLC
62 Cantamar Executive Suites 7,179 24% 12/30/2008 Lady Fitness
63 BrokerOne Real Estate 4,575 17% 9/30/2005 Frank & Finger
64 Nueces County Women's Clinic 19,643 63% 12/31/2004 Hospital Services
65 Ashworth 203,779 100% 3/31/2024
66 TNT Logistics North America, Inc. 600,000 100% 12/31/2013
67 Classic Door 34,960 36% 10/14/2006 City Lites
68
69.1
69.2
69.3
69.4
69
70
71.1
71.2
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85.1
85.2
85.3
85.4
85.5
85.6
85.7
85.8
85.9
85.10
SECOND THIRD
SECOND LARGEST SECOND THIRD LARGEST THIRD
LARGEST TENANT LARGEST LARGEST TENANT LARGEST
TENANT % OF TENANT TENANT % OF TENANT
LEASED TOTAL LEASE LEASED TOTAL LEASE
SEQUENCE SF SF EXPIRATION THIRD LARGEST TENANT SF SF EXPIRATION
- -------- -- -- ---------- -------------------- -- -- ----------
52 13,079 11% 8/31/2004 Keith J. Reisler, M.D. 11,250 10% 2/28/2005
53 23,472 23% 9/30/2008 CDG Holding Co 10,695 11% 4/30/2008
54
55 5,005 15% 4/28/2015 Endoscopy 4,745 14% 5/31/2018
56 7,962 12% 8/31/2005 MRM OB/GYN Associates LLP 5,335 8% 1/31/2008
57 3,346 8% 4/30/2013 Goodyear Financial Center Management 3,218 7% 12/31/2007
58
59 6,992 4% 1/31/2006 California Closets 5,882 3% 5/31/2008
60 4,560 12% 11/30/2006 Sunshine Litigation Services 3,040 8% 1/31/2007
61 5,000 21% 3/31/2008 Desert Point Dental 2,912 12% 12/31/2005
62 6,325 21% 6/30/2008 World Group Securities 4,365 14% 12/30/2008
63 4,148 15% 11/30/2005 Chong's Coalmine Dragon 2,700 10% 4/30/2007
64 6,584 21% 6/30/2005
65
66
67 14,760 15% 1/31/2007 Sonepes 4,400 5% 8/31/2006
68
69.1
69.2
69.3
69.4
69
70
71.1
71.2
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85.1
85.2
85.3
85.4
85.5
85.6
85.7
85.8
85.9
85.10
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN
SEQUENCE NUMBER PROPERTY NAME LOAN GROUP PROPERTY ADDRESS
- -------- ------ ------------- ---------- ----------------
85.11 57367 U-Haul Storage Colonial Blvd 1 4457 Kernel Circle
85.12 57367 U-Haul - Highway 6 South 1 8518 Highway 6 South
85.13 57367 U-Haul Center of Fox Valley 1 195 South Route 59
85.14 57367 U-Haul Center Chantilly 1 3995 Westfax Drive
85.15 57367 U-Haul - Cool Springs 1 1619 Mallory Lane
85.16 57367 U-Haul Center Gandy Blvd 1 3939 W Gandy Blvd
85.17 57367 U-Haul Center Tollway 1 1501 North Dallas Parkway
85.18 57367 U-Haul Center Kennesaw 1 2085 Cobb Parkway
85.19 57367 U-Haul Center Ocoee 1 11410 West Colonial Drive
85.20 57367 U-Haul Center Nellis Blvd 1 333 North Nellis Boulevard
85.21 57367 U-Haul Center of Alsip 1 11855 South Cicero Avenue
85.22 57367 U-Haul Center John T. White 1 1101 East Loop 820
85.23 57367 U-Haul Center Chamber Road 1 15250 East 40th Ave
85.24 57367 U-Haul Bell Rd and Grand 1 13440 West Bell Road
85.25 57367 U-Haul Center Merrillville 1 1650 West 81st Avenue
85.26 57367 U-Haul Storage Highway 85 1 7242 Highway 85
85.27 57367 U-Haul Center Dumfries 1 10480 Dumfries Road
85.28 57367 U-Haul Center Gatorland 1 14651 Gatorland Drive
85.29 57367 U-Haul Center Orange City 1 2395 South Volusia Avenue
85.30 57367 U-Haul Center Cave Creek 1 20618 North Cave Creek Road
85.31 57367 U-Haul Highlands Ranch 1 1750 East County Line Road
85.32 57367 U-Haul Center Prescott 1 2122 East Highway 69
85.33 57367 U-Haul Center Las Vegas Blvd. 1 8620 South Las Vegas Boulevard
85.34 57367 U-Haul Storage Fountain Hills 1 9264 Technology Drive
85.35 57367 U-Haul Center Of Lenexa 1 9250 Marshall Drive
85.36 57367 U-Haul Center Stoughton 1 224 Washington Street
85.37 57367 U-Haul Center Slaughter Lane 1 9001 South Interstate Highway 35 North
85.38 57367 U-Haul Center Lake Mary 1 3851 South Orlando Drive
85.39 57367 U-Haul Center of Lewisville 1 525 North Stemmons Freeway
85.40 57367 U-Haul Center I-17 & Deer Valley 1 21621 North 26th Avenue
85.41 57367 U-Haul - O' Fallon 1 2000 Highway K
85.42 57367 U-Haul Center Henderson 1 1098 Stephanie Place
85.43 57367 U-Haul Center of Semoran 1 2055 Semoran Boulevard
85.44 57367 U-Haul Center Anthem Way 1 42301 North 41st Drive
85.45 57367 U-Haul Center of Pleasant Hill 1 1290 Pleasant Hill Road
85.46 57367 U-Haul Center of Arlington 1 2729 North Collins Street
85.47 57367 U-Haul Center of Mckinney 1 10061 West University Drive
85.48 57367 U-Haul Center of Conyers 1 1150 Dogwood Drive
85.49 57367 U-Haul Center of League City 1 351 Gulf Freeway South
85.50 57367 U-Haul - Gastonia 1 3919 East Franklin Boulevard
85.51 57367 U-Haul Center Katy 1 20435 Katy Freeway
85.52 57367 U-Haul Center St Peters 1 3990 North Service Road
85.53 57367 U-Haul Center of Key Largo 1 103530 Overseas Highway
85.54 57367 U-Haul - Highway 290 1 14225 Northwest Freeway
85.55 57367 U-Haul Center Buckley Road 1 750 South Buckley Road
85.56 57367 U-Haul Center 87Th & Bell 1 8746 West Bell
85.57 57367 U-Haul Center of Highway 124 1 2040 Scenic Highway North
85.58 57367 U-Haul Center Cen-Tex 1 3501 East Central Texas Expressway
85.59 57367 U-Haul Center & Storage of Montana 1 8450 Montana Avenue
85.60 57367 U-Haul Center Mandarin 1 11490 San Jose Boulevard
85.61 57367 U-Haul Center of Maitland 1 7815 North Orange Blossom Trail
85.62 57367 U-Haul Center Apple Valley 1 6895 - 151st Street West
85.63 57367 U-Haul Center Potomic Mills 1 14523 Telegraph Road
85.64 57367 U-Haul Center at Kingsley & Jupiter 1 11383 Amanda Lane
85.65 57367 U-Haul Center Barksdale 1 4100 Barksdale Boulevard
CUT-OFF MATURITY
ZIP PROPERTY ORIGINAL DATE DATE
SEQUENCE COUNTY CITY STATE CODE TYPE BALANCE BALANCE BALANCE
- -------- ------ ---- ----- ---- ---- ------- ------- -------
85.11 Lee Fort Myers FL 33916 Self Storage 1,863,652 1,855,841 1,467,061
85.12 Harris Houston TX 77083 Self Storage 1,856,227 1,848,447 1,461,216
85.13 Du Page Aurora IL 60504 Self Storage 1,856,227 1,848,447 1,461,216
85.14 Fairfax Chantilly VA 20151 Self Storage 1,781,978 1,774,509 1,402,767
85.15 Williamson Brentwood TN 37027 Self Storage 1,748,566 1,741,237 1,376,465
85.16 Hillsborough Tampa FL 33611 Self Storage 1,744,853 1,737,540 1,373,543
85.17 Collin Plano TX 75093 Self Storage 1,741,141 1,733,843 1,370,620
85.18 Cobb Kennesaw GA 30152 Self Storage 1,707,729 1,700,571 1,344,318
85.19 Orange Ocoee FL 34761 Self Storage 1,670,604 1,663,602 1,315,094
85.20 Clark Las Vegas NV 89110 Self Storage 1,637,192 1,630,330 1,288,792
85.21 Cook Alsip IL 60803 Self Storage 1,633,480 1,626,633 1,285,870
85.22 Tarrant Fort Worth TX 76120 Self Storage 1,618,630 1,611,846 1,274,180
85.23 Denver Denver CO 80239 Self Storage 1,614,917 1,608,149 1,271,258
85.24 Maricopa Surprise AZ 85374 Self Storage 1,596,355 1,589,664 1,256,645
85.25 Lake Merrillville IN 46410 Self Storage 1,596,355 1,589,664 1,256,645
85.26 Clayton Riverdale GA 30274 Self Storage 1,588,930 1,582,271 1,250,801
85.27 Manassas City Manassas VA 20110 Self Storage 1,588,930 1,582,271 1,250,801
85.28 Orange Orlando FL 32837 Self Storage 1,574,080 1,567,483 1,239,111
85.29 Volushia Orange City FL 32763 Self Storage 1,566,655 1,560,089 1,233,266
85.30 Maricopa Phoenix AZ 85024 Self Storage 1,559,231 1,552,696 1,227,421
85.31 Douglas Littleton CO 80126 Self Storage 1,559,231 1,552,696 1,227,421
85.32 Yavapai Prescott AZ 86301 Self Storage 1,559,231 1,552,696 1,227,421
85.33 Clark Las Vegas NV 89123 Self Storage 1,522,106 1,515,727 1,198,197
85.34 Maricopa Fountain Hills AZ 85268 Self Storage 1,522,106 1,515,727 1,198,197
85.35 Johnson Lenexa KS 66215 Self Storage 1,522,106 1,515,727 1,198,197
85.36 Norfolk Stoughton MA 02072 Self Storage 1,518,394 1,512,030 1,195,274
85.37 Travis Austin TX 78744 Self Storage 1,503,544 1,497,242 1,183,585
85.38 Seminole Sanford FL 32773 Self Storage 1,484,981 1,478,758 1,168,973
85.39 Denton Lewisville TX 75067 Self Storage 1,484,981 1,478,758 1,168,973
85.40 Maricopa Phoenix AZ 85027 Self Storage 1,484,981 1,478,758 1,168,973
85.41 St. Charles O' Fallon MO 63366 Self Storage 1,484,981 1,478,758 1,168,973
85.42 Clark Henderson NV 89014 Self Storage 1,484,981 1,478,758 1,168,973
85.43 Seminole Winter Park FL 32792 Self Storage 1,484,981 1,478,758 1,168,973
85.44 Maricopa Anthem AZ 85086 Self Storage 1,414,445 1,408,517 1,113,446
85.45 Gwinnett Lawrenceville GA 30244 Self Storage 1,410,732 1,404,820 1,110,524
85.46 Tarrant Arlington TX 76006 Self Storage 1,410,732 1,404,820 1,110,524
85.47 Collin McKinney TX 75071 Self Storage 1,410,732 1,404,820 1,110,524
85.48 Rockdale Conyers GA 30012 Self Storage 1,392,170 1,386,335 1,095,912
85.49 Galveston League City TX 77573 Self Storage 1,377,320 1,371,548 1,084,222
85.50 Gaston Gastonia NC 28056 Self Storage 1,373,608 1,367,851 1,081,300
85.51 Harris Katy TX 77450 Self Storage 1,306,784 1,301,307 1,028,696
85.52 St. Charles St. Charles MO 63301 Self Storage 1,299,359 1,293,913 1,022,851
85.53 Monroe Key Largo FL 33037 Self Storage 1,265,947 1,260,641 996,549
85.54 Harris Houston TX 77040 Self Storage 1,262,234 1,256,944 993,627
85.55 Arapahoe Aurora CO 80017 Self Storage 1,206,547 1,201,491 949,790
85.56 Maricopa Peoria AZ 85382 Self Storage 1,191,698 1,186,703 938,100
85.57 Gwinnett Snellville GA 30078 Self Storage 1,187,985 1,183,006 935,178
85.58 Bell Killeen TX 76543 Self Storage 1,184,273 1,179,309 932,256
85.59 El Paso El Paso TX 79925 Self Storage 1,169,423 1,164,522 920,566
85.60 Duval Jacksonville FL 32223 Self Storage 1,113,736 1,109,068 876,729
85.61 Orange Orlando FL 32810 Self Storage 1,113,736 1,109,068 876,729
85.62 Dakota Apple Valley MN 55124 Self Storage 1,113,736 1,109,068 876,729
85.63 Prince William Woodbridge VA 22192 Self Storage 1,061,762 1,057,312 835,815
85.64 Dallas Dallas TX 75238 Self Storage 965,238 961,192 759,832
85.65 Bossier Bossier City LA 71112 Self Storage 816,740 813,317 642,935
FIRST INTEREST
LOAN MORTGAGE ADMINISTRATIVE SUB-SERVICING NET NOTE PAYMENT ACCRUAL MONTHLY
SEQUENCE TYPE RATE FEE RATE (I) FEE RATE MORTGAGE RATE DATE DATE METHOD PAYMENT
- -------- ---- ---- ------------ -------- ------------- ---- ---- ------ -------
85.11
85.12
85.13
85.14
85.15
85.16
85.17
85.18
85.19
85.20
85.21
85.22
85.23
85.24
85.25
85.26
85.27
85.28
85.29
85.30
85.31
85.32
85.33
85.34
85.35
85.36
85.37
85.38
85.39
85.40
85.41
85.42
85.43
85.44
85.45
85.46
85.47
85.48
85.49
85.50
85.51
85.52
85.53
85.54
85.55
85.56
85.57
85.58
85.59
85.60
85.61
85.62
85.63
85.64
85.65
ORIGINAL ORIGINAL REMAINING
TERM TO AMORTIZATION TERM TO
MATURITY TERM INTEREST ONLY SEASONING MATURITY MATURITY CROSS-COLLATERALIZED RELATED
SEQUENCE (MONTHS) (MONTHS) (II) PERIOD (MONTHS) (MONTHS) DATE LOANS LOANS
- -------- -------- ------------- ------ -------- -------- ---- ----- -----
85.11 No
85.12 No
85.13 No
85.14 No
85.15 No
85.16 No
85.17 No
85.18 No
85.19 No
85.20 No
85.21 No
85.22 No
85.23 No
85.24 No
85.25 No
85.26 No
85.27 No
85.28 No
85.29 No
85.30 No
85.31 No
85.32 No
85.33 No
85.34 No
85.35 No
85.36 No
85.37 No
85.38 No
85.39 No
85.40 No
85.41 No
85.42 No
85.43 No
85.44 No
85.45 No
85.46 No
85.47 No
85.48 No
85.49 No
85.50 No
85.51 No
85.52 No
85.53 No
85.54 No
85.55 No
85.56 No
85.57 No
85.58 No
85.59 No
85.60 No
85.61 No
85.62 No
85.63 No
85.64 No
85.65 No
LOCKOUT
SEQUENCE EXPIRATION PREPAYMENT PENALTY DESCRIPTION (MONTHS) YIELD MAINTENANCE TYPE
- -------- ---------- --------------------------------------- ----------------------
85.11
85.12
85.13
85.14
85.15
85.16
85.17
85.18
85.19
85.20
85.21
85.22
85.23
85.24
85.25
85.26
85.27
85.28
85.29
85.30
85.31
85.32
85.33
85.34
85.35
85.36
85.37
85.38
85.39
85.40
85.41
85.42
85.43
85.44
85.45
85.46
85.47
85.48
85.49
85.50
85.51
85.52
85.53
85.54
85.55
85.56
85.57
85.58
85.59
85.60
85.61
85.62
85.63
85.64
85.65
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN APPRAISAL APPRAISAL CUT-OFF DATE YEAR BUILT/
SEQUENCE NUMBER PROPERTY NAME VALUE DATE LTV RATIO RENOVATED
- -------- ------ ------------- ----- ---- --------- ---------
85.11 57367 U-Haul Storage Colonial Blvd 5,020,000 11/15/2003 1997
85.12 57367 U-Haul - Highway 6 South 5,000,000 3/15/2004 1980/1997
85.13 57367 U-Haul Center of Fox Valley 4,880,000 11/15/2003 2002
85.14 57367 U-Haul Center Chantilly 4,800,000 11/15/2003 1999
85.15 57367 U-Haul - Cool Springs 4,590,000 11/15/2003 2003
85.16 57367 U-Haul Center Gandy Blvd 4,700,000 5/15/2004 1969/2000
85.17 57367 U-Haul Center Tollway 4,690,000 11/15/2003 1998
85.18 57367 U-Haul Center Kennesaw 4,600,000 4/15/2004 1999
85.19 57367 U-Haul Center Ocoee 4,500,000 3/15/2004 2000
85.20 57367 U-Haul Center Nellis Blvd 4,410,000 11/15/2003 2000
85.21 57367 U-Haul Center of Alsip 4,320,000 11/15/2003 2001
85.22 57367 U-Haul Center John T. White 4,360,000 11/15/2003 1998
85.23 57367 U-Haul Center Chamber Road 4,230,000 11/15/2003 2000
85.24 57367 U-Haul Bell Rd and Grand 4,300,000 11/15/2003 1998
85.25 57367 U-Haul Center Merrillville 4,300,000 11/15/2003 1990/2000
85.26 57367 U-Haul Storage Highway 85 4,280,000 11/15/2003 1977/1996
85.27 57367 U-Haul Center Dumfries 4,280,000 11/15/2003 1997
85.28 57367 U-Haul Center Gatorland 4,240,000 11/15/2003 1998
85.29 57367 U-Haul Center Orange City 3,550,000 11/15/2003 2003
85.30 57367 U-Haul Center Cave Creek 4,200,000 11/15/2003 1999
85.31 57367 U-Haul Highlands Ranch 4,200,000 11/15/2003 1999
85.32 57367 U-Haul Center Prescott 4,140,000 11/15/2003 2002
85.33 57367 U-Haul Center Las Vegas Blvd. 4,100,000 3/15/2004 1999
85.34 57367 U-Haul Storage Fountain Hills 3,940,000 11/15/2003 2001
85.35 57367 U-Haul Center Of Lenexa 3,730,000 11/15/2003 1973/2000
85.36 57367 U-Haul Center Stoughton 3,990,000 11/15/2003 2001
85.37 57367 U-Haul Center Slaughter Lane 4,050,000 11/15/2003 1999
85.38 57367 U-Haul Center Lake Mary 4,000,000 3/15/2004 1995
85.39 57367 U-Haul Center of Lewisville 4,000,000 11/15/2003 1997
85.40 57367 U-Haul Center I-17 & Deer Valley 4,000,000 3/15/2004 2000
85.41 57367 U-Haul - O' Fallon 3,940,000 11/15/2003 2001
85.42 57367 U-Haul Center Henderson 3,900,000 11/15/2003 2000
85.43 57367 U-Haul Center of Semoran 3,670,000 11/15/2003 2002
85.44 57367 U-Haul Center Anthem Way 3,700,000 11/15/2003 2002
85.45 57367 U-Haul Center of Pleasant Hill 3,800,000 11/15/2003 1998
85.46 57367 U-Haul Center of Arlington 3,800,000 11/15/2003 1997
85.47 57367 U-Haul Center of Mckinney 3,725,000 11/15/2003 2001
85.48 57367 U-Haul Center of Conyers 3,750,000 11/15/2003 1999
85.49 57367 U-Haul Center of League City 3,710,000 11/15/2003 1997
85.50 57367 U-Haul - Gastonia 3,700,000 11/15/2003 1998
85.51 57367 U-Haul Center Katy 3,520,000 11/15/2003 2000
85.52 57367 U-Haul Center St Peters 3,500,000 2/15/2004 1999
85.53 57367 U-Haul Center of Key Largo 3,410,000 11/15/2003 1975
85.54 57367 U-Haul - Highway 290 3,400,000 1/15/2004 1998
85.55 57367 U-Haul Center Buckley Road 3,250,000 11/15/2003 1998
85.56 57367 U-Haul Center 87Th & Bell 3,210,000 11/15/2003 1999
85.57 57367 U-Haul Center of Highway 124 3,200,000 11/15/2003 2000
85.58 57367 U-Haul Center Cen-Tex 3,190,000 11/15/2003 1983/2001
85.59 57367 U-Haul Center & Storage of Montana 3,150,000 11/15/2003 1998
85.60 57367 U-Haul Center Mandarin 3,000,000 11/15/2003 2000
85.61 57367 U-Haul Center of Maitland 3,000,000 11/15/2003 1989
85.62 57367 U-Haul Center Apple Valley 2,980,000 11/15/2003 2001
85.63 57367 U-Haul Center Potomic Mills 2,860,000 11/15/2003 1977/1996
85.64 57367 U-Haul Center at Kingsley & Jupiter 2,510,000 11/15/2003 1996
85.65 57367 U-Haul Center Barksdale 2,200,000 11/15/2003 1981/1997
TOTAL
UNITS/ UNITS/ LOAN
SF/ SF/ BALANCE PER OCCUPANCY
PADS/ PADS/ NET RENTABLE UNIT/SF/PAD/ OCCUPANCY AS OF U/W U/W U/W U/W
SEQUENCE ROOMS ROOMS AREA (SF) ROOMS PERCENT DATE REVENUES EXPENSES CASH FLOW DSCR
- -------- ----- ----- --------- ----- ------- ---- -------- -------- --------- ----
85.11 597 Units 74,480 94.0% 5/1/2004
85.12 231 Units 94,850 64.3% 5/1/2004
85.13 806 Units 57,425 71.4% 5/1/2004
85.14 450 Units 35,975 56.9% 5/1/2004
85.15 641 Units 53,100 67.8% 5/1/2004
85.16 987 Units 56,966 82.7% 5/1/2004
85.17 611 Units 46,300 86.1% 5/1/2004
85.18 782 Units 63,125 73.2% 5/1/2004
85.19 692 Units 54,325 76.4% 5/1/2004
85.20 753 Units 58,615 93.7% 5/1/2004
85.21 656 Units 50,675 82.7% 5/1/2004
85.22 719 Units 59,750 79.0% 5/1/2004
85.23 830 Units 62,175 71.2% 5/1/2004
85.24 564 Units 47,575 94.7% 5/1/2004
85.25 516 Units 57,800 93.6% 5/1/2004
85.26 634 Units 55,812 76.1% 5/1/2004
85.27 515 Units 38,725 82.7% 5/1/2004
85.28 354 Units 53,512 81.0% 5/1/2004
85.29 525 Units 52,785 27.4% 5/1/2004
85.30 530 Units 40,100 90.9% 5/1/2004
85.31 633 Units 47,275 82.6% 5/1/2004
85.32 730 Units 67,754 82.3% 5/1/2004
85.33 699 Units 51,475 87.7% 5/1/2004
85.34 655 Units 60,775 56.6% 5/1/2004
85.35 916 Units 73,460 49.2% 5/1/2004
85.36 564 Units 44,435 68.4% 5/1/2004
85.37 555 Units 41,150 94.9% 5/1/2004
85.38 816 Units 70,600 71.2% 5/1/2004
85.39 699 Units 53,950 85.5% 5/1/2004
85.40 699 Units 52,990 80.6% 5/1/2004
85.41 645 Units 55,375 80.5% 5/1/2004
85.42 686 Units 54,125 80.3% 5/1/2004
85.43 620 Units 47,650 46.0% 5/1/2004
85.44 523 Units 38,042 54.0% 5/1/2004
85.45 579 Units 50,525 77.4% 5/1/2004
85.46 654 Units 77,080 70.6% 5/1/2004
85.47 543 Units 57,400 47.2% 5/1/2004
85.48 620 Units 52,000 87.5% 5/1/2004
85.49 648 Units 55,850 84.7% 5/1/2004
85.50 686 Units 56,100 69.0% 5/1/2004
85.51 597 Units 52,525 66.2% 5/1/2004
85.52 651 Units 48,355 94.1% 5/1/2004
85.53 405 Units 45,180 83.6% 5/1/2004
85.54 636 Units 52,815 72.1% 5/1/2004
85.55 595 Units 40,900 77.2% 5/1/2004
85.56 509 Units 41,600 96.6% 5/1/2004
85.57 500 Units 42,100 91.1% 5/1/2004
85.58 500 Units 70,935 92.0% 5/1/2004
85.59 529 Units 43,400 99.6% 5/1/2004
85.60 469 Units 36,750 98.9% 5/1/2004
85.61 393 Units 53,861 85.4% 5/1/2004
85.62 515 Units 46,149 88.6% 5/1/2004
85.63 186 Units 23,076 75.8% 5/1/2004
85.64 531 Units 47,175 57.1% 5/1/2004
85.65 288 Units 36,350 81.3% 5/1/2004
U/W
REPLACEMENT
RESERVES
U/W PER UNIT/ MOST MOST FULL FULL
REPLACEMENT SF/ PAD/ RECENT MOST RECENT RECENT YEAR YEAR
SEQUENCE RESERVES ROOM STATEMENT TYPE END DATE NOI END DATE NOI
- -------- -------- ---- -------------- -------- --- -------- ---
85.11
85.12
85.13
85.14
85.15
85.16
85.17
85.18
85.19
85.20
85.21
85.22
85.23
85.24
85.25
85.26
85.27
85.28
85.29
85.30
85.31
85.32
85.33
85.34
85.35
85.36
85.37
85.38
85.39
85.40
85.41
85.42
85.43
85.44
85.45
85.46
85.47
85.48
85.49
85.50
85.51
85.52
85.53
85.54
85.55
85.56
85.57
85.58
85.59
85.60
85.61
85.62
85.63
85.64
85.65
LARGEST
LARGEST TENANT
TENANT % OF LARGEST TENANT
LEASED TOTAL LEASE
SEQUENCE LARGEST TENANT SF SF EXPIRATION SECOND LARGEST TENANT
- -------- -------------- -- -- ---------- ---------------------
85.11
85.12
85.13
85.14
85.15
85.16
85.17
85.18
85.19
85.20
85.21
85.22
85.23
85.24
85.25
85.26
85.27
85.28
85.29
85.30
85.31
85.32
85.33
85.34
85.35
85.36
85.37
85.38
85.39
85.40
85.41
85.42
85.43
85.44
85.45
85.46
85.47
85.48
85.49
85.50
85.51
85.52
85.53
85.54
85.55
85.56
85.57
85.58
85.59
85.60
85.61
85.62
85.63
85.64
85.65
SECOND THIRD
SECOND LARGEST SECOND THIRD LARGEST THIRD
LARGEST TENANT LARGEST LARGEST TENANT LARGEST
TENANT % OF TENANT TENANT % OF TENANT
LEASED TOTAL LEASE LEASED TOTAL LEASE
SEQUENCE SF SF EXPIRATION THIRD LARGEST TENANT SF SF EXPIRATION
- -------- -- -- ---------- -------------------- -- -- ----------
85.11
85.12
85.13
85.14
85.15
85.16
85.17
85.18
85.19
85.20
85.21
85.22
85.23
85.24
85.25
85.26
85.27
85.28
85.29
85.30
85.31
85.32
85.33
85.34
85.35
85.36
85.37
85.38
85.39
85.40
85.41
85.42
85.43
85.44
85.45
85.46
85.47
85.48
85.49
85.50
85.51
85.52
85.53
85.54
85.55
85.56
85.57
85.58
85.59
85.60
85.61
85.62
85.63
85.64
85.65
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN
SEQUENCE NUMBER PROPERTY NAME LOAN GROUP PROPERTY ADDRESS
- -------- ------ ------------- ---------- ----------------
85.66 57367 U-Haul Storage Oxford 1 523 Hamric Drive West
85.67 57367 U-Haul Center Rio Rancho 1 1401 Rio Rancho Boulevard Southeast
85.68 57367 U-Haul Center Anthem RV 1 42102 North Vision Way
85.69 57367 U-Haul Center Northern Lights 1 3850 Cleveland Avenue
85.70 57367 U-Haul Storage Hylton Road 1 8505 North Cresent Boulevard
85.71 57367 U-Haul - Stillwater 1 5715 West 6th Street
85.72 57367 U-Haul Center Montgomery Park 1 499 Montgomery Street
85.73 57367 U-Haul Center of Southpark 1 804 West Roslyn Road
85.74 57367 U-Haul Storage South 40th Street 1 3425 South 40th Street
85.75 57367 U-Haul Center of DeSoto 1 1245 South Beckley Avenue
85.76 57367 U-Haul Center Government Street 1 2505 Government Boulevard
85.77 57367 U-Haul Center South Cobb & I-285 1 5285 South Cobb Drive
85.78 57367 U-Haul Storage Hattiesburg 1 1303 West 7th Street
85 57367 U-HAUL PORTFOLIO (ROLL UP) 1 Multiple
86.1 58029 Extra Space Storage - Foxboro 1 147 Green Street
86.2 58029 Extra Space Storage - Hudson 1 565 Main Street
86.3 58029 Extra Space Storage - Worcester 1 1180 Millbury Street
86.4 58029 Extra Space Storage - Auburn 1 245 Washington Street
86.5 58029 Extra Space Storage - Brockton 1 885 Centre Street
86.6 58029 Extra Space Storage - Parlin 1 501 Cheesequake Road
86.7 58029 Extra Space Storage - Pittsburgh 1 7535 Penn. Ave
86.8 58029 Extra Space Storage - Kennedy Township 1 110 Kisow Drive
86.9 58029 Extra Space Storage - Stoughton 1 20 Washington Street
86 58029 EXTRA SPACE STORAGE - EAST ONE PORTFOLIO (ROLL UP) 1 Multiple
87.1 58027 Extra Space Storage - Raynham 1 1664 New State Highway
87.2 58027 Extra Space Storage - Doylestown 1 390 North Broad Street
87.3 58027 Extra Space Storage - Glen Rock 1 500 Broad Street
87.4 58027 Extra Space Storage - Lyndhurst 1 501 Schuyler Avenue
87.5 58027 Extra Space Storage - Fontana 1 15713 Valley Boulevard
87.6 58027 Extra Space Storage - Merrimack 1 751 Daniel Webster Highway
87 58027 EXTRA SPACE STORAGE - ESP5 PORTFOLIO (ROLL UP) 1 Multiple
88 57627 Anchor Self Storage and Industrial Park 1 7520 and 7530 Alondra Boulevard and 16100 Garfield Avenue
89 57930 Storage USA - Crossroads 1 965 South Semoran Boulevard
90 8014 Capitol Self Storage 1 3585 Highway 17
91 8320 Stadium Storage 1 420 NW Peacock Boulevard
92 57912 Shurgard - Rancho San Diego 1 3750 Willow Glen Drive
93 58045 Storage Connection 1 501 NW Business Center Drive
94 57468 Doubletree Surfcomber Hotel 1 1717 Collins Avenue
-----------------------------------------------------------------------------------------------------------------------------
TOTALS/WEIGHTED AVERAGE 94 LOANS
=============================================================================================================================
CUT-OFF MATURITY
ZIP PROPERTY ORIGINAL DATE DATE
SEQUENCE COUNTY CITY STATE CODE TYPE BALANCE BALANCE BALANCE
- -------- ------ ---- ----- ---- ---- ------- ------- -------
85.66 Calhoun Oxford AL 36203 Self Storage 742,491 739,379 584,486
85.67 Sandoval Rio Rancho NM 87124 Self Storage 723,928 720,894 569,874
85.68 Maricopa Anthem AZ 85086 Self Storage 705,366 702,410 555,262
85.69 Franklin Columbus OH 43224 Self Storage 668,242 665,441 526,038
85.70 Camden Pennsauken NJ 08110 Self Storage 631,117 628,472 496,813
85.71 Payne Stillwater OK 74074 Self Storage 482,619 480,596 379,916
85.72 Hampden Chicopee MA 01020 Self Storage 426,932 425,143 336,080
85.73 Colonial Heights City Colonial Heights VA 23834 Self Storage 415,795 414,052 327,312
85.74 Maricopa Phoenix AZ 85040 Self Storage 371,245 369,689 292,243
85.75 Dallas DeSoto TX 75115 Self Storage 371,245 369,689 292,243
85.76 Mobile Mobile AL 36606 Self Storage 259,872 258,783 204,570
85.77 Cobb Smyrna GA 30080 Self Storage 181,910 181,148 143,199
85.78 Forrest Hattiesburg MS 39401 Self Storage 167,060 166,360 131,509
85 Multiple Multiple Multiple Multiple Self Storage 110,000,000 109,538,973 86,591,642
86.1 Norfolk Foxboro MA 02035 Self Storage 3,680,000 3,680,000 3,452,364
86.2 Middlesex Hudson MA 01749 Self Storage 2,800,000 2,800,000 2,626,798
86.3 Worcester Worcester MA 01607 Self Storage 1,784,000 1,784,000 1,673,646
86.4 Worcester Auburn MA 01501 Self Storage 3,680,000 3,680,000 3,452,364
86.5 Plymouth Brockton MA 02302 Self Storage 2,440,000 2,440,000 2,289,067
86.6 Middlesex Parlin NJ 08859 Self Storage 4,240,000 4,240,000 3,977,723
86.7 Allegheny Pittsburgh PA 15208 Self Storage 2,960,000 2,960,000 2,776,901
86.8 Allegheny Kennedy Township PA 15205 Self Storage 2,544,000 2,544,000 2,386,634
86.9 Norfolk Stoughton MA 02072 Self Storage 3,080,000 3,080,000 2,889,478
86 Multiple Multiple Multiple Multiple Self Storage 27,208,000 27,208,000 25,524,976
87.1 Bristol Raynham MA 02767 Self Storage 3,640,000 3,640,000 3,415,272
87.2 Bucks Doylestown PA 18901 Self Storage 3,824,000 3,824,000 3,587,912
87.3 Bergen Glen Rock NJ 07452 Self Storage 4,080,000 4,080,000 3,828,107
87.4 Bergen Lyndhurst NJ 07071 Self Storage 6,944,000 6,944,000 6,515,289
87.5 San Bernardino Fontana CA 92335 Self Storage 3,440,000 3,440,000 3,227,620
87.6 Hillsborough Merrimack NH 03054 Self Storage 3,752,000 3,752,000 3,520,358
87 Multiple Multiple Multiple Multiple Self Storage 25,680,000 25,680,000 24,094,559
88 Los Angeles Paramount CA 90723 Self Storage 6,787,000 6,740,678 5,874,052
89 Orange Winter Park FL 32792 Self Storage 4,905,000 4,895,870 4,158,693
90 Clay Orange Park FL 32003 Self Storage 4,525,000 4,499,158 3,488,420
91 Saint Lucie Port Saint Lucie FL 34986 Self Storage 4,500,000 4,485,678 3,785,499
92 San Diego Rancho San Diego CA 92019 Self Storage 3,825,000 3,825,000 3,224,680
93 St Lucie Port St. Lucie FL 34986 Self Storage 3,750,000 3,750,000 3,461,672
94 Miami-Dade Miami Beach FL 33139 Hotel 14,500,000 14,424,707 11,386,027
---------------------------------------------------------------------------------------------------------------------------
$1,157,890,921 $1,155,167,991 $986,754,427
===========================================================================================================================
FIRST INTEREST
LOAN MORTGAGE ADMINISTRATIVE SUB-SERVICING NET NOTE PAYMENT ACCRUAL MONTHLY
SEQUENCE TYPE RATE FEE RATE (I) FEE RATE MORTGAGE RATE DATE DATE METHOD PAYMENT
- -------- ---- ---- ------------ -------- ------------- ---- ---- ------ -------
85.66
85.67
85.68
85.69
85.70
85.71
85.72
85.73
85.74
85.75
85.76
85.77
85.78
85 Balloon 6.845% 0.112% 0.100% 6.733% 4/29/2004 6/1/2004 ACT/360 774,340
86.1
86.2
86.3
86.4
86.5
86.6
86.7
86.8
86.9
86 IO, Balloon 4.763% 0.112% 0.100% 4.651% 5/4/2004 7/1/2004 ACT/360 142,146
87.1
87.2
87.3
87.4
87.5
87.6
87 IO, Balloon 4.774% 0.112% 0.100% 4.662% 5/4/2004 7/1/2004 ACT/360 134,328
88 Balloon 5.820% 0.072% 0.060% 5.748% 11/3/2003 1/1/2004 ACT/360 39,909
89 Balloon 5.920% 0.112% 0.100% 5.808% 4/23/2004 6/1/2004 ACT/360 29,156
90 Balloon 5.758% 0.092% 0.080% 5.666% 3/1/2004 4/1/2004 ACT/360 28,489
91 Balloon 5.678% 0.092% 0.080% 5.586% 3/5/2004 5/1/2004 ACT/360 26,057
92 Balloon 5.730% 0.112% 0.100% 5.618% 6/3/2004 8/1/2004 ACT/360 22,273
93 IO, Balloon 4.660% 0.112% 0.100% 4.548% 4/30/2004 6/1/2004 ACT/360 19,667
94 Balloon 6.309% 0.112% 0.100% 6.197% 2/27/2004 4/1/2004 ACT/360 96,182
--------------------------------------------------------------------------------------------------------------------
5.457% 0.096% 0.084% 5.361%
====================================================================================================================
ORIGINAL ORIGINAL REMAINING
TERM TO AMORTIZATION TERM TO
MATURITY TERM INTEREST ONLY SEASONING MATURITY MATURITY CROSS-COLLATERALIZED RELATED
SEQUENCE (MONTHS) (MONTHS) (II) PERIOD (MONTHS) (MONTHS) DATE LOANS LOANS
- -------- -------- ------------- ------ -------- -------- ---- ----- -----
85.66 No
85.67 No
85.68 No
85.69 No
85.70 No
85.71 No
85.72 No
85.73 No
85.74 No
85.75 No
85.76 No
85.77 No
85.78 No
85 120 300 2 118 5/1/2014 No No
86.1 No
86.2 No
86.3 No
86.4 No
86.5 No
86.6 No
86.7 No
86.8 No
86.9 No
86 84 360 36 1 83 6/1/2011 No Yes(BACM 04-3-H)
87.1 No
87.2 No
87.3 No
87.4 No
87.5 No
87.6 No
87 84 360 36 1 83 6/1/2011 No Yes(BACM 04-3-H)
88 108 360 7 101 12/1/2012 No No
89 120 360 2 118 5/1/2014 No No
90 120 300 4 116 3/1/2014 No No
91 120 360 3 117 4/1/2014 No No
92 120 360 120 7/1/2014 No No
93 84 348 30 2 82 5/1/2011 No No
94 120 300 4 116 3/1/2014 No No
---------------------------------------------------------------------------------------------------------------------------
112 344 3 109
===========================================================================================================================
LOCKOUT
SEQUENCE EXPIRATION PREPAYMENT PENALTY DESCRIPTION (MONTHS) YIELD MAINTENANCE TYPE
- -------- ---------- --------------------------------------- ----------------------
85.66
85.67
85.68
85.69
85.70
85.71
85.72
85.73
85.74
85.75
85.76
85.77
85.78
85 11/1/2013 LO(114)/OPEN(6)/DEFEASANCE
86.1
86.2
86.3
86.4
86.5
86.6
86.7
86.8
86.9
86 4/1/2011 LO(82)/OPEN(2)/DEFEASANCE
87.1
87.2
87.3
87.4
87.5
87.6
87 4/1/2011 LO(82)/OPEN(2)/DEFEASANCE
88 10/1/2012 LO(106)/OPEN(2)/DEFEASANCE
89 3/1/2014 LO(118)/OPEN(2)/DEFEASANCE
90 11/30/2013 LO(116)/OPEN(4)/DEFEASANCE
91 12/31/2013 LO(116)/OPEN(4)/DEFEASANCE
92 5/1/2014 LO(118)/OPEN(2)/DEFEASANCE
93 2/1/2011 LO(81)/OPEN(3)/DEFEASANCE
94 1/1/2014 LO(118)/OPEN(2)/DEFEASANCE
--------------------------------------------------------------------------------------------------
==================================================================================================
(i) Administrative Fee Rate includes the Sub-Servicing Fee Rate.
(ii) For Mortgage Loans which accrue interest on the basis of actual days
elapsed each calendar month and a 360-day yr. or a 365-day yr., the
amortization term is the term over which the Mortgage Loans would amortize
if interest accrued and was paid on the basis of a 360-day yr. consisting
of twelve 30-day months. The actual amortization would be longer.
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN APPRAISAL APPRAISAL CUT-OFF DATE YEAR BUILT/
SEQUENCE NUMBER PROPERTY NAME VALUE DATE LTV RATIO RENOVATED
- -------- ------ ------------- ----- ---- --------- ---------
85.66 57367 U-Haul Storage Oxford 2,000,000 11/15/2003 1985
85.67 57367 U-Haul Center Rio Rancho 1,950,000 11/15/2003 1985
85.68 57367 U-Haul Center Anthem RV 1,800,000 11/15/2003 2002
85.69 57367 U-Haul Center Northern Lights 1,750,000 11/15/2003 1999
85.70 57367 U-Haul Storage Hylton Road 1,700,000 11/15/2003 1964/1994
85.71 57367 U-Haul - Stillwater 1,300,000 11/15/2003 1995
85.72 57367 U-Haul Center Montgomery Park 1,150,000 11/15/2003 1960/2000
85.73 57367 U-Haul Center of Southpark 1,120,000 11/15/2003 1960/1997
85.74 57367 U-Haul Storage South 40th Street 1,000,000 11/15/2003 1979
85.75 57367 U-Haul Center of DeSoto 1,000,000 11/15/2003 1984
85.76 57367 U-Haul Center Government Street 700,000 11/15/2003 2000
85.77 57367 U-Haul Center South Cobb & I-285 490,000 11/15/2003 1969
85.78 57367 U-Haul Storage Hattiesburg 450,000 11/15/2003 1980/1996
85 57367 U-HAUL PORTFOLIO (ROLL UP) 292,360,000 11/15/2003 37.5% Multiple
86.1 58029 Extra Space Storage - Foxboro 4,600,000 3/18/2004 1996
86.2 58029 Extra Space Storage - Hudson 3,500,000 3/18/2004 1990
86.3 58029 Extra Space Storage - Worcester 2,230,000 3/3/2004 1995
86.4 58029 Extra Space Storage - Auburn 4,600,000 3/3/2004 1998
86.5 58029 Extra Space Storage - Brockton 3,050,000 3/4/2004 1999
86.6 58029 Extra Space Storage - Parlin 5,300,000 3/5/2004 1987
86.7 58029 Extra Space Storage - Pittsburgh 3,700,000 3/3/2004 1903/1979
86.8 58029 Extra Space Storage - Kennedy Township 3,180,000 3/3/2004 1988/2000
86.9 58029 Extra Space Storage - Stoughton 3,850,000 3/4/2004 1987
86 58029 EXTRA SPACE STORAGE - EAST ONE PORTFOLIO (ROLL UP) 34,010,000 Multiple 80.0% Multiple
87.1 58027 Extra Space Storage - Raynham 4,550,000 3/4/2004 1999
87.2 58027 Extra Space Storage - Doylestown 4,780,000 3/8/2004 1988
87.3 58027 Extra Space Storage - Glen Rock 5,100,000 3/5/2004 1998
87.4 58027 Extra Space Storage - Lyndhurst 8,680,000 3/5/2004 1999
87.5 58027 Extra Space Storage - Fontana 4,300,000 3/25/2004 2000
87.6 58027 Extra Space Storage - Merrimack 4,690,000 3/17/2004 1998
87 58027 EXTRA SPACE STORAGE - ESP5 PORTFOLIO (ROLL UP) 32,100,000 Multiple 80.0% Multiple
88 57627 Anchor Self Storage and Industrial Park 9,050,000 9/25/2003 74.5% 1978/2003
89 57930 Storage USA - Crossroads 6,250,000 1/13/2004 78.3% 1998
90 8014 Capitol Self Storage 6,400,000 1/1/2004 70.3% 2000
91 8320 Stadium Storage 6,020,000 1/12/2004 74.5% 2000
92 57912 Shurgard - Rancho San Diego 6,450,000 1/8/2004 59.3% 2002
93 58045 Storage Connection 5,010,000 3/15/2004 74.9% 1997
94 57468 Doubletree Surfcomber Hotel 27,200,000 2/20/2004 53.0% 1948/2002
--------------------------------------------------------------------------------------------------------------------------
TOTALS/WEIGHTED AVERAGE
==========================================================================================================================
TOTAL
UNITS/ UNITS/ LOAN
SF/ SF/ BALANCE PER OCCUPANCY
PADS/ PADS/ NET RENTABLE UNIT/SF/PAD/ OCCUPANCY AS OF U/W U/W U/W U/W
SEQUENCE ROOMS ROOMS AREA (SF) ROOMS PERCENT DATE REVENUES EXPENSES CASH FLOW DSCR
- -------- ----- ----- --------- ----- ------- ---- -------- -------- --------- ----
85.66 430 Units 53,450 79.3% 5/1/2004
85.67 312 Units 47,661 95.2% 5/1/2004
85.68 214 Units 45,698 54.0% 5/1/2004
85.69 369 Units 41,575 45.4% 5/1/2004
85.70 506 Units 24,225 78.9% 5/1/2004
85.71 331 Units 38,720 95.8% 5/1/2004
85.72 349 Units 16,824 88.4% 5/1/2004
85.73 242 Units 23,556 96.7% 5/1/2004
85.74 248 Units 31,266 60.4% 5/1/2004
85.75 269 Units 35,179 78.8% 5/1/2004
85.76 134 Units 17,125 89.6% 5/1/2004
85.77 - Units 1,914
85.78 156 Units 21,180 71.2% 5/1/2004
85 44,931 Units 3,973,835 2,438 76.8% 5/1/2004 41,581,156 15,176,017 25,806,109 2.78
86.1 445 Units 51,240 83.8% /27/2004
86.2 348 Units 46,570 81.9% /27/2004
86.3 271 Units 50,400 85.6% /27/2004
86.4 461 Units 55,750 82.9% 5/6/2004
86.5 375 Units 44,400 74.9% 5/6/2004
86.6 602 Units 66,180 84.2% /27/2004
86.7 649 Units 49,226 83.0% /27/2004
86.8 446 Units 56,250 89.5% /27/2004
86.9 472 Units 52,825 75.9% /27/2004
86 4,069 Units 472,841 6,687 82.5% Multiple 4,693,545 2,216,356 2,407,658 1.41
87.1 525 Units 56,100 73.1% /27/2004
87.2 501 Units 63,725 89.0% /27/2004
87.3 331 Units 35,285 91.5% /27/2004
87.4 608 Units 59,175 96.4% /27/2004
87.5 709 Units 86,155 82.8% /27/2004
87.6 596 Units 72,600 86.2% /27/2004
87 3,270 Units 373,040 7,853 86.2% /27/2004 3,946,021 1,547,554 2,340,853 1.45
88 640 Units 119,277 10,532 85.5% 6/6/2004 1,159,786 449,526 691,622 1.44
89 776 Units 70,963 6,309 90.2% 5/3/2004 817,790 274,890 532,196 1.52
90 953 Units 88,150 4,721 85.4% 1/15/2004 752,838 266,318 472,225 1.38
91 544 Units 72,347 8,246 88.2% 4/15/2004 647,504 250,944 385,644 1.23
92 491 Units 62,543 7,790 92.1% 4/25/2004 826,869 310,343 513,089 1.92
93 609 Units 71,725 6,158 97.4% 5/13/2004 724,168 392,409 321,000 1.36
94 185 Rooms 88,410 77,971 88.9% 4/30/2004 7,389,763 5,255,762 1,821,660 1.58
--------------------------------------------------------------------------------------------------------------------------
1.61x
==========================================================================================================================
U/W
REPLACEMENT
RESERVES
U/W PER UNIT/ MOST MOST FULL FULL
REPLACEMENT SF/ PAD/ RECENT MOST RECENT RECENT YEAR YEAR
SEQUENCE RESERVES ROOM STATEMENT TYPE END DATE NOI END DATE NOI
- -------- -------- ---- -------------- -------- --- -------- ---
85.66
85.67
85.68
85.69
85.70
85.71
85.72
85.73
85.74
85.75
85.76
85.77
85.78
85 599,030 13.33 Trailing 12 Months 12/31/2003 22,506,646 3/31/2003 19,740,513
86.1
86.2
86.3
86.4
86.5
86.6
86.7
86.8
86.9
86 69,531 17.09 Annualized Most Recent 1/31/2004 2,259,996 12/31/2003 2,665,558
87.1
87.2
87.3
87.4
87.5
87.6
87 57,614 17.62 Annualized Most Recent 1/31/2004 2,312,160 12/31/2003 2,470,825
88 18,638 29.12 Full Year 12/31/2003 752,787 12/31/2002 741,837
89 10,704 13.79 Annualized Most Recent 2/29/2004 582,600 12/31/2002 521,894
90 14,295 15.00 12/31/2003 452,426
91 10,916 20.07 Annualized Most Recent 4/30/2004 355,413 12/31/2003 339,852
92 3,437 7.00 Full Year 12/31/2003 503,651 12/31/2002 14,049
93 10,759 17.67 Annualized Most Recent 2/29/2004 324,666 12/31/2003 394,178
94 295,591 1597.79 Annualized Most Recent 4/30/2004 1,887,569 12/31/2003 2,857,218
--------------------------------------------------------------------------------------------------------------------------
==========================================================================================================================
LARGEST
LARGEST TENANT
TENANT % OF LARGEST TENANT
LEASED TOTAL LEASE
SEQUENCE LARGEST TENANT SF SF EXPIRATION SECOND LARGEST TENANT
- -------- -------------- -- -- ---------- ---------------------
85.66
85.67
85.68
85.69
85.70
85.71
85.72
85.73
85.74
85.75
85.76
85.77
85.78
85
86.1
86.2
86.3
86.4
86.5
86.6
86.7
86.8
86.9
86
87.1
87.2
87.3
87.4
87.5
87.6
87
88
89
90
91
92
93
94
SECOND THIRD
SECOND LARGEST SECOND THIRD LARGEST THIRD
LARGEST TENANT LARGEST LARGEST TENANT LARGEST
TENANT % OF TENANT TENANT % OF TENANT
LEASED TOTAL LEASE LEASED TOTAL LEASE
SEQUENCE SF SF EXPIRATION THIRD LARGEST TENANT SF SF EXPIRATION
- -------- -- -- ---------- -------------------- -- -- ----------
85.66
85.67
85.68
85.69
85.70
85.71
85.72
85.73
85.74
85.75
85.76
85.77
85.78
85
86.1
86.2
86.3
86.4
86.5
86.6
86.7
86.8
86.9
86
87.1
87.2
87.3
87.4
87.5
87.6
87
88
89
90
91
92
93
94
ANNEX B
MULTIFAMILY SCHEDULE
SEQUENCE LOAN PROPERTY
NUMBER NAME CUT-OFF BALANCE
- -----------------------------------------------------------------------------------------------------
1 57998 Quarters at Memorial $35,872,239
2 58006 Golf Villas at Oro Valley 22,449,748
3 58103 GrandMarc at Seven Corners 19,000,000
4 58015 Woodlawn Gardens 11,974,392
5 57963 Aspen Apartments 10,757,799
6 58026 River Pointe Apartments 10,462,052
7 57978 Lexington Park Apartments 9,070,063
8 8190 Orchards at Collierville 8,800,000
9 58095 Silver Tree Apartments 7,820,000
10 57330 Fairway Ridge Apartments 7,009,556
11 58016 Williamstown Apartments 6,800,000
12 55800 CLK - Ashford Place Apartments 6,160,000
13 8547 Bowling Green Apartments 4,660,406
14 8838 Mission Trace Apartments 3,770,590
15 8844 Landmark Apartments - Tallahassee, FL 3,715,833
16 58106 89-95 Park Drive Apartments 3,500,000
17 8267 Cordova Court 3,293,904
18 58000 Times Square Townhomes 2,716,926
19 57943 Cameron Park Apartments 2,708,337
20 7343 Pavilion Heights Apartments 2,317,880
21 8828 Greentree Apartments - Pasadena, TX 1,995,271
- -----------------------------------------------------------------------------------------------------
TOTAL MULTIFAMILY LOANS $184,854,996
STUDIO 1 BEDROOM 2 BEDROOM 3 BEDROOM
----------------------------------------------------------------------
# OF AVG # OF AVG # OF AVG # OF
SEQUENCE UTILITIES TENANT PAYS/PAYMENT OF UTILITIES UNITS RENT UNITS RENT UNIT RENT UNITS
- ------------------------------------------------------------------------------------------------------------------------------------
1 Electric, Sewer, Water 176 $1,211 186 $1,554 18
2 Electric, Gas, Water 64 738 168 953 49
3 Electric, Gas, Sewer, Water 3 $850 35 1,131 124 1,751
4 Electric, Gas, Sewer 2 670 37 784 94 874 17
5 Electric, Gas, Sewer, Water
6 Electric, Gas 17 755 84 856 51
7 Electric, Gas 121 369 240 511 1
8 Electric, Gas 56 675 130 782 40
9 Electric, Gas, Sewer, Water 118 710 15
10 Electric, Gas 56 556 136 630 30
11 Electric, Sewer, Water 160 461 112 577
12 Electric, Gas, Sewer, Water 82 406 146 509 20
13 Sewer, Water 10 694 20 986 4 1,133
14 Electric 40 632 56
15 Electric 32 509 88 611 8
16 Electric 17 1,034 30 1,290 2 1,688
17 Electric 52 465 104 511
18 Electric, Gas 32 1,131
19 Electric, Gas 30 397 69 472 28
20 Electric, Gas, Sewer, Water 3 648 17 752 8 1,502
21 Electric, Sewer, Water 96 538 48 730
- ------------------------------------------------------------------------------------------------------------------------------------
3 BEDROOM 4 BEDROOM
----------------------------
AVG # OF AVG LOAN
SEQUENCE RENT UNITS RENT ELEVATORS GROUP
- ----------------------------------------------------------------------
1 $1,925 Yes 1
2 1,191 No 1
3 21 $2,780 Yes 2
4 1,072 No 2
5 120 316 No 2
6 963 18 1,049 No 2
7 645 No 2
8 919 No 2
9 939 No 2
10 747 No 2
11 No 2
12 616 No 2
13 Yes 2
14 669 No 2
15 778 No 2
16 No 2
17 No 2
18 No 1
19 579 No 2
20 Yes 2
21 No 2
- ----------------------------------------------------------------------
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS*
SEQUENCE LOAN NUMBER PROPERTY NAME
- ------------------------------------------------------------------------------------------------------
1 57998 Quarters at Memorial
2 58006 Golf Villas at Oro Valley
3 58103 GrandMarc at Seven Corners
4 58015 Woodlawn Gardens
5 57963 Aspen Apartments
6 58026 River Pointe Apartments
7 57978 Lexington Park Apartments
8 8190 Orchards at Collierville
9 58095 Silver Tree Apartments
10 57330 Fairway Ridge Apartments
11 58016 Williamstown Apartments
12 55800 CLK - Ashford Place Apartments
13 8547 Bowling Green Apartments
14 8838 Mission Trace Apartments
15 8844 Landmark Apartments - Tallahassee, FL
16 58106 89-95 Park Drive Apartments
17 8267 Cordova Court
18 58000 Times Square Townhomes
19 57943 Cameron Park Apartments
20 7343 Pavilion Heights Apartments
21 8828 Greentree Apartments - Pasadena, TX
22 57582 Milford Plaza
23 58014 The Shops at Camp Lowell
24 8356 Centennial Plaza
25 57952 Foothill Park Plaza
26 57968 Promenade at Red Cliff
27 57983 Mountain View Marketplace
28 57986 Shoppes at Broad Street
29 57927 Boston Commons Plaza
30 57964 Columbus Corners Shopping Center
31 8530 Paseo Plaza - Las Vegas, NV
32 57685 Kirby Richmond Shopping Center
33 58092 Sterling Pointe Shopping Center
34 57741 Sunrise Place
35 6033 Oakley Town Center
36 57949 Walgreens - Nashville, TN
37 6461 Advocate Health Building
38 6981 Calvine Corners Shopping Center
39 8948 Walgreens Chalmette
40 8658 North Meridian Retail Center
41 57990 Calpine Center
42 57984 17 State Street
43 57999 369 Lexington Avenue
44 8304 The Pines Corporate Center
45 57815 University Office Plaza I and II (Roll Up)
46 57913 Woodland Park Plaza Office Building
47 6381 6500 Linderson
48 57829 West Houston Medical Center
49 57969 T-Mobile Customer Care Center
50 55598 Nextel Office Building - Temple, TX
INITIAL DEPOSIT TO CAPITAL INITIAL DEPOSIT TO ANNUAL DEPOSIT TO
SEQUENCE PROPERTY TYPE IMPROVEMENT RESERVES REPLACEMENT RESERVES REPLACEMENT RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
1 Multifamily $2,500 $96,900
2 Multifamily 56,200
3 Multifamily 44,750 142,740
4 Multifamily 41,550
5 Multifamily 24,775 $91,000 42,000
6 Multifamily 21,313 56,277
7 Multifamily 90,500
8 Multifamily 8,438 62,148
9 Multifamily 33,250
10 Multifamily 22,875 73,260
11 Multifamily 88,944
12 Multifamily 5,773 155,000 67,270
13 Multifamily 8,510
14 Multifamily 6,189 53,568
15 Multifamily 2,813 55,776
16 Multifamily 14,625 23,373
17 Multifamily 57,438 20,000 78,500
18 Multifamily 3,516
19 Multifamily 38,400
20 Multifamily 7,000
21 Multifamily 8,750 36,000
22 Retail 26,832
23 Retail 10,759
24 Retail 18,300
25 Retail 5,659
26 Retail
27 Retail 8,000 24,634
28 Retail
29 Retail 10,307
30 Retail 13,090
31 Retail 6,865
32 Retail 19,335 21,732
33 Retail
34 Retail 1,320
35 Retail 8,793
36 Retail
37 Retail 8,125 5,088
38 Retail
39 Retail
40 Retail 1,128
41 Office 2,827,805 588 7,059
42 Office 54,500 63,735
43 Office 10,750 50,962
44 Office
45 Office 174,525 24,028
46 Office 95,156 36,233
47 Office 14,415
48 Office 534,000
49 Office
50 Office
TAX AND INITIAL DEPOSIT TO ANNUALS DEPOSIT TO LOAN
SEQUENCE INSURANCE ESCROW TI/LC ESCROW TI/LC ESCROW GROUP
- -----------------------------------------------------------------------------------------------
1 Yes 1
2 Yes 1
3 Tax Only 2
4 Yes 2
5 Yes 2
6 Yes 2
7 Yes 2
8 Yes 2
9 Yes 2
10 Yes 2
11 Yes 2
12 Tax Only 2
13 Yes $7,980 2
14 Yes 2
15 Yes 2
16 Tax Only 2
17 Yes 2
18 Yes 1
19 Yes 2
20 Yes 2
21 Yes 2
22 Tax Only 1
23 Yes 1
24 Yes 52,572 1
25 Yes $100,000 1
26 No 1
27 Yes 1
28 No 1
29 Tax Only 1
30 Yes 36,000 1
31 Yes 30,000 1
32 Tax Only 40,000 90,000 1
33 Tax Only 1
34 Yes 31,032 1
35 Yes 29,596 1
36 No 1
37 Yes 30,000 1
38 Yes 25,000 1
39 No 1
40 Yes 10,279 1
41 Tax Only 8,199,108 1
42 Tax Only 1,340,812 312,504 1
43 Yes 333,333 1
44 Yes 1
45 Yes 550,000 600,000 1
46 Yes 287,045 99,996 1
47 Yes 55,000 1
48 No 1
49 No 1
50 No 1
B-2
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS*
SEQUENCE LOAN NUMBER PROPERTY NAME
- ------------------------------------------------------------------------------------------------------
51 57917 Wilshire-Kenmore Building
52 57823 Columbia Medical Center - Plano
53 57686 4120 International Business Park VIII
54 58037 Cingular Wireless Office Building
55 58021 Hancock Medical Buidling
56 57821 Las Colinas Medical Center I
57 8158 Goodyear Financial Center
58 9149 US Bank Building - Bedford, OH
59 57787 Quail Business Park
60 57910 Plumas Quail Office Park
61 8769 Summit Medical Plaza
62 6942 Layton Market Office
63 8937 Lakepoint Office Center
64 57893 Womens Pavillion
65 58036 Ashworth Distribution Facility
66 57388 TNT Logistics Warehouse - Moody, AL
67 8662 Wynn Office & Warehouse
68 58229 Sun Communities - Scio Farms
69 58227 Sun Communities Portfolio 9 (Roll Up)
70 57989 St. Clair Estates Manufactured Home Community
71 58226 Sun Communities Portfolio 8 (Roll Up)
72 58225 Sun Communities - Arbor Terrace
73 57803 Kellam - Foxwood Village Manufactured Home Community
74 57650 MHC Portfolio - Greenwood Village
75 57598 Continental Communities - Hickory Hills MHC
76 57656 MHC Portfolio - Rancho Mesa
77 8403 Thunderbird MHC
78 57665 MHC Portfolio - Oak Bend
79 57667 MHC Portfolio - Southern Palms RV Resort
80 57639 MHC Portfolio - Countryside RV Resort
81 57716 Pine Meadows Mobile Home Park
82 57658 MHC Portfolio - McNicol Place
83 8448 Southeast MHC - Camp Springs, MD
84 57603 Continental Communities - Timber Valley MHC
85 57367 U-Haul Portfolio (Roll Up)
86 58029 Extra Space Storage - East One Portfolio (Roll Up)
87 58027 Extra Space Storage - ESP5 Portfolio (Roll Up)
88 57627 Anchor Self Storage and Industrial Park
89 57930 Storage USA - Crossroads
90 8014 Capitol Self Storage
91 8320 Stadium Storage
92 57912 Shurgard - Rancho San Diego
93 58045 Storage Connection
94 57468 Doubletree Surfcomber Hotel
- ------------------------------------------------------------------------------------------------------
TOTALS
INITIAL DEPOSIT TO CAPITAL INITIAL DEPOSIT TO ANNUAL DEPOSIT TO
SEQUENCE PROPERTY TYPE IMPROVEMENT RESERVES REPLACEMENT RESERVES REPLACEMENT RESERVES
- ------------------------------------------------------------------------------------------------------------------------------------
51 Office 23,125 37,799
52 Office
53 Office 15,036
54 Office 24,425
55 Office 3,778
56 Office
57 Office 3,000 6,532
58 Office 56,962
59 Office 21,576
60 Office 5,612
61 Office 14,147
62 Office 6,034
63 Office 50,000 14,472
64 Office
65 Industrial
66 Industrial
67 Industrial 25,000 14,494
68 Manufactured Housing Communities
69 Manufactured Housing Communities
70 Manufactured Housing Communities 26,690
71 Manufactured Housing Communities
72 Manufactured Housing Communities
73 Manufactured Housing Communities 24,900
74 Manufactured Housing Communities
75 Manufactured Housing Communities 9,200 15,532
76 Manufactured Housing Communities
77 Manufactured Housing Communities 368,906 175,000 13,500
78 Manufactured Housing Communities
79 Manufactured Housing Communities
80 Manufactured Housing Communities
81 Manufactured Housing Communities 54,563 6,840
82 Manufactured Housing Communities
83 Manufactured Housing Communities
84 Manufactured Housing Communities 11,500 7,248
85 Self Storage 600,000
86 Self Storage 23,250 125,156
87 Self Storage 38,409
88 Self Storage 55,750 6,216
89 Self Storage 8,813 4,995
90 Self Storage 13,224
91 Self Storage 10,914
92 Self Storage
93 Self Storage 14,340
94 Hotel 73,896
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS $4,054,929 $1,653,588 $2,027,961
TAX AND INITIAL DEPOSIT TO ANNUALS DEPOSIT TO LOAN
SEQUENCE INSURANCE ESCROW TI/LC ESCROW TI/LC ESCROW GROUP
- -----------------------------------------------------------------------------------------------
51 Yes 100,000 1
52 No 1
53 Yes 250,000 1
54 No 1
55 Yes 500,000 1
56 No 1
57 Yes 72,521 1
58 Yes 1
59 Yes 1
60 Tax Only 1
61 Yes 24,015 1
62 Yes 43,000 1
63 Yes 33,000 33,000 1
64 No 57,155 1
65 No 1
66 No 1
67 Yes 50,000 47,633 1
68 No 1
69 No 2
70 Yes 2
71 No 2
72 No 2
73 Yes 2
74 No 2
75 Yes 1
76 No 2
77 Yes 1
78 No 2
79 No 2
80 No 2
81 Yes 2
82 No 1
83 Yes 2
84 Tax Only 1
85 Yes 1
86 Yes 1
87 Yes 1
88 Yes 1
89 Yes 1
90 Yes 1
91 Yes 1
92 Tax Only 1
93 Yes 1
94 Yes 1
- -----------------------------------------------------------------------------------------------
$11,487,120 $1,983,461
* Certain monthly reserves may be subject to caps.
B-3
ANNEX C
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTION DATE STATEMENT
TABLE OF CONTENTS
---------------------------------------------------------------------------------
STATEMENT SECTIONS PAGE(S)
------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Cash Reconciliation Detail 6
Ratings Detail 7
Current Mortgage Loan and Property Stratification Tables 8-10
Mortgage Loan Detail 11
Principal Prepayment Detail 12
Historical Detail 13
Delinquency Loan Detail 14
Specially Serviced Loan Detail 15-16
Modified Loan Detail 17
Liquidated Loan Detail 18
---------------------------------------------------------------------------------
DEPOSITOR MASTER SERVICER SPECIAL SERVICER
- --------------------------------------------- ----------------------------------------- --------------------------------------
Banc of America Commercial Mortgage Inc. Bank of America, N.A. Midland Loan Services, Inc.
214 North Tryon Street 555 South Flower Street 10851 Mastin Street, Bldg. 82
Charlotte, NC 28255 6th Floor Suite 700
Los Angeles, CA 90071 Overland Park, KS 66210
Contact: David Gertner Contact: Anita Roglich Contact: Brad Hauger
Phone Number: (704) 388-3621 Phone Number: (213) 345-7357 Phone Number: (913) 253-9000
- --------------------------------------------- ----------------------------------------- --------------------------------------
This report has been compiled from information provided to Wells Fargo Bank, N.A. by various third parties, which may include the
Master Servicer, Special Servicer and others. Wells Fargo Bank, N.A. has not independently confirmed the accuracy of information
received from these third parties and assumes no duty to do so. Wells Fargo Bank, N.A. expressly disclaims any responsibility for
the accuracy or completeness of information furnished by third parties.
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 1 of 18
C-1
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE DISTRIBUTION DETAIL
Pass-Through Original Beginning Principal Interest
Class CUSIP Rate Balance Balance Distribution Distribution
- --------- ----- ---- ------- ------- ------------ ------------
A-1 0.000000% 0.00 0.00 0.00 0.00
A-1A 0.000000% 0.00 0.00 0.00 0.00
A-2 0.000000% 0.00 0.00 0.00 0.00
A-3 0.000000% 0.00 0.00 0.00 0.00
A-4 0.000000% 0.00 0.00 0.00 0.00
A-5 0.000000% 0.00 0.00 0.00 0.00
B 0.000000% 0.00 0.00 0.00 0.00
C 0.000000% 0.00 0.00 0.00 0.00
D 0.000000% 0.00 0.00 0.00 0.00
E 0.000000% 0.00 0.00 0.00 0.00
F 0.000000% 0.00 0.00 0.00 0.00
G 0.000000% 0.00 0.00 0.00 0.00
H 0.000000% 0.00 0.00 0.00 0.00
J 0.000000% 0.00 0.00 0.00 0.00
K 0.000000% 0.00 0.00 0.00 0.00
L 0.000000% 0.00 0.00 0.00 0.00
M 0.000000% 0.00 0.00 0.00 0.00
N 0.000000% 0.00 0.00 0.00 0.00
O 0.000000% 0.00 0.00 0.00 0.00
P 0.000000% 0.00 0.00 0.00 0.00
R-I 0.000000% 0.00 0.00 0.00 0.00
R-II 0.000000% 0.00 0.00 0.00 0.00
----- --------- ---- ---- ---- ----
Totals 0.00 0.00 0.00 0.00
----- --------- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
Realized Loss/ Current
Prepayment Additional Trust Total Ending Subordination
Class Premium Fund Expenses Distribution Balance Level (1)
- -------- ------- ------------- ------------ ------- ---------
A-1 0.00 0.00 0.00 0.00 0.00
A-1A 0.00 0.00 0.00 0.00 0.00
A-2 0.00 0.00 0.00 0.00 0.00
A-3 0.00 0.00 0.00 0.00 0.00
A-4 0.00 0.00 0.00 0.00 0.00
A-5 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00
C 0.00 0.00 0.00 0.00 0.00
D 0.00 0.00 0.00 0.00 0.00
E 0.00 0.00 0.00 0.00 0.00
F 0.00 0.00 0.00 0.00 0.00
G 0.00 0.00 0.00 0.00 0.00
H 0.00 0.00 0.00 0.00 0.00
J 0.00 0.00 0.00 0.00 0.00
K 0.00 0.00 0.00 0.00 0.00
L 0.00 0.00 0.00 0.00 0.00
M 0.00 0.00 0.00 0.00 0.00
N 0.00 0.00 0.00 0.00 0.00
O 0.00 0.00 0.00 0.00 0.00
P 0.00 0.00 0.00 0.00 0.00
R-I 0.00 0.00 0.00 0.00 0.00
R-II 0.00 0.00 0.00 0.00 0.00
----- ---- ---- ---- ---- ----
Totals 0.00 0.00 0.00 0.00 0.00
----- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Original Beginning Ending
Class CUSIP Pass-Through Notional Notional Interest Prepayment Total Notional
Rate Amount Amount Distribution Premium Distribution Amount
- ----- ----- ---- ------ ------ ------------ ------- ------------ ------
X 0.000000 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Calculated by taking (A) the sum of the ending certificate balance of all classes less (B) the sum of (i) the ending balance of
the designated class and (ii) the ending certificate balance of all classes which are not subordinate to the designated class and
dividing the result by (A).
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 2 of 18
C-2
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE FACTOR DETAIL
Realized Loss/
Class\ Beginning Principal Interest Prepayment Additional Trust Ending
Component CUSIP Balance Distribution Distribution Premium Fund Expenses Balance
- --------- ----- ------- ------------ ------------ ------- ------------- -------
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-1A 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-3 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-4 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-5 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
L 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
M 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
N 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
O 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
P 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Premium Amount
- ----- ----- ------ ------------ ------- ------
X 0.00000000 0.00000000 0.00000000 0.00000000
------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 3 of 18
C-3
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION DETAIL
ADVANCE SUMMARY MASTER SERVICING FEE SUMMARY
P & I Advances Outstanding 0.00 Current Period Accrued Master Servicing Fees 0.00
Servicing Advances Outstanding 0.00 Less Master Servicing Fees on Delinquent Payments 0.00
Less Reductions to Master Servicing Fees 0.00
Reimbursements for Interest on P&I 0.00 Plus Master Servicing Fees on Delinquent Payments Received 0.00
Advances paid from general collections Plus Adjustments for Prior Master Servicing Calculation 0.00
Total Master Servicing Fees Collected 0.00
Reimbursements for Interest on Servicing 0.00
Advances paid from general collections
CERTIFICATE INTEREST RECONCILIATION
- ------------------------------------------------------------------------------------------------------------- ---------------------
Accrued Net Aggregate Distributable Distributable Additional Remaining Unpaid
Certificate Prepayment Certificate Certificate Interest Trust Fund Interest Distributable
Class Interest Interest Shortfall Interest Adjustment Expenses Distribution Certificate Interest
- ------------------------------------------------------------------------------------------------------------- ---------------------
A-1 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-1A 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-3 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-4 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-5 0.00 0.00 0.00 0.00 0.00 0.00 0.00
X 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.00 0.00 0.00 0.00 0.00 0.00 0.00
L 0.00 0.00 0.00 0.00 0.00 0.00 0.00
M 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N 0.00 0.00 0.00 0.00 0.00 0.00 0.00
O 0.00 0.00 0.00 0.00 0.00 0.00 0.00
P 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-I 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-II 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------- ---------------------
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------- ---------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 4 of 18
C-4
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER REQUIRED INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Available Distribution Amount(1) 0.00 Additional Trust Fund Expenses 0.00
(i) Fees Paid to Special Servicer 0.00
Principal Distribution Amount 0.00 (ii) Interest on Advances 0.00
(a) Principal portion of Monthly Payments 0.00 (iii)Other Expenses of Trust 0.00
and any Assumed Monthly Payments
(b) Principal Prepayments 0.00
(c) Collection of Principal on a Ballon 0.00 Appraisal Reduction Amount
Loan after its stated Maturity Date -------------------------------------------------------
Appraisal Cumulative Most Recent
(d) Liquidation Proceeds and Insurance 0.00 Loan Reduction ASER App. Red.
Proceeds received on a Mortgage Loan Number Effected Amount Date
-------------------------------------------------------
(e) Liquidiation Proceeds, Insurance Proceeds, 0.00
Plus the excess of the prior Principal 0.00
Distribution Amount over the principal paid to
the Sequential Pay Certificates
Aggregate Number of Outstanding Loans 0.00
Aggregate Stated Principal Balance of the Mortgage Pool 0.00
before distribution
Aggregate Stated Principal Balance of the Mortgage Pool 0.00
after distribution
-------------------------------------------------------
Total Master Servicing and Special Servicing Fee paid 0.00 Total
Master Servicing Fee paid 0.00 -------------------------------------------------------
Special Servicing Fee paid 0.00
Trustee Fee paid 0.00
Interest Reserve Deposit 0.00
Interest Reserve Withdrawal 0.00
(1) The Available Distribution Amount includes any Prepayment Premiums.
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 5 of 18
C-5
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
CASH RECONCILIATION DETAIL
TOTAL FUNDS COLLECTED TOTAL FUNDS DISTRIBUTED
INTEREST: FEES:
Interest paid or advanced 0.00 Master Servicing Fee 0.00
Interest reductions due to Non-Recoverability Trustee Fee 0.00
Determinations 0.00 Certificate Administration Fee 0.00
Interest Adjustments 0.00 Insurer Fee 0.00
Deferred Interest 0.00 Miscellaneous Fee 0.00
Net Prepayment Interest Shortfall 0.00 ------
Net Prepayment Interest Excess 0.00 TOTAL FEES
Extension Interest 0.00 ADDITIONAL TRUST FUND EXPENSES:
Interest Reserve Withdrawal 0.00 Reimbursement for Interest on Advances 0.00
------ ASER Amount 0.00
TOTAL INTEREST COLLECTED 0.00 Special Servicing Fee 0.00
PRINCIPAL: Reduction of funds due to Non-Recoverability 0.00
Scheduled Principal 0.00 Rating Agency Expenses 0.00
Unscheduled Principal 0.00 Attorney's Fees & Expenses 0.00
Principal Prepayments 0.00 Bankruptcy Expense 0.00
Collection of Principal after Maturity Date 0.00 Taxes Imposed on Trust Fund 0.00
Recoveries from Liquidation and Insurance Non-Recoverable Advances 0.00
Proceeds 0.00 Other Expenses 0.00
Excess of Prior Principal Amounts paid 0.00 ------
Curtailments 0.00 TOTAL ADDITIONAL TRUST FUND EXPENSES
Negative Amortization 0.00 INTEREST RESERVE DEPOSIT
Principal Adjustments 0.00
------ PAYMENTS TO CERTIFICATE HOLDERS & OTHERS:
TOTAL PRINCIPAL COLLECTED 0.00 Interest Distribution 0.00
OTHER: Principal Distribution 0.00
Prepayment Penalties/Yield Maintenance 0.00 Prepayment Penalties/Yield Maintenance 0.00
Repayment Fees 0.00 Borrower Option Extension Fees 0.00
Borrower Option Extension Fees 0.00 Equity Payments Paid 0.00
Equity Payments Received 0.00 Net Swap Counterparty Payments Paid 0.00
Net Swap Counterparty Payments Received 0.00 ------
------ TOTAL PAYMENTS TO CERTIFICATEHOLDERS & OTHERS
TOTAL OTHER COLLECTED: 0.00 ------
------
TOTAL FUNDS COLLECTED 0.00 TOTAL FUNDS DISTRIBUTED ======
======
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 6 of 18
C-6
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
RATINGS DETAIL
----------------------------------------------------------------------------------------------------------
Original Ratings Current Ratings (1)
Class CUSIP --------------------------------- ----------------------------------
Fitch Moody's S & P Fitch Moody's S & P
----------------------------------------------------------------------------------------------------------
A-1
A-1A
A-2
A-3
A-4
A-5
X
B
C
D
E
F
G
H
J
K
L
M
N
O
P
----------------------------------------------------------------------------------------------------------
NR - Designates that the class was not rated by the above agency at the time of original issuance.
X - Designates that the above rating agency did not rate any classes in this transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any particular rating agency, no request has been made
subsequent to issuance to obtain rating information, if any, from such rating agency. The current ratings were obtained
directly from the applicable rating agency within 30 days of the payment date listed above. The ratings may have changed since
they were obtained. Because the ratings may have changed, you may want to obtain current ratings directly from the rating
agencies.
Fitch, Inc. Moody's Investors Service Standard & Poor's Rating Services
One State Street Plaza 99 Church Street 55 Water Street
New York, New York 10004 New York, New York 10007 New York, New York 10041
(212) 908-0500 (212) 553-0300 (212) 438-2430
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 7 of 18
C-7
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
SCHEDULED BALANCE STATE (3)
- ---------- ------------------------------------------------------- --------- -----------------------------------------------------
% of % of
Scheduled # of Scheduled Agg. WAM Weighted # of Scheduled Agg. WAM Weighted
Balance loans Balance Bal. (2) WAC Avg DSCR (1) State Props. Balance Bal. (2) WAC Avg DSCR (1)
- ---------- ------------------------------------------------------- --------- -----------------------------------------------------
- ---------- ------------------------------------------------------- --------- -----------------------------------------------------
Totals Totals
- ---------- ------------------------------------------------------- --------- -----------------------------------------------------
See footnotes on last page of this section.
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 8 of 18
C-8
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO PROPERTY TYPE (3)
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
% of % of
Debt Service # of Scheduled Agg. WAM Weighted # of Scheduled Agg. WAM Weighted
Coverage Ratio loans Balance Bal. (2) WAC Avg DSCR (1) Property Type Props. Balance Bal. (2) WAC Avg DSCR (1)
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
Totals Totals
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
NOTE RATE SEASONING
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
% of % of
Note # of Scheduled Agg. WAM Weighted # of Scheduled Agg. WAM Weighted
Rate loans Balance Bal. (2) WAC Avg DSCR (1) Seasoning loans Balance Bal. (2) WAC Avg DSCR (1)
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
Totals Totals
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
See footnotes on last page of this section.
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 9 of 18
C-9
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE SECURITIES INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
ANTICIPATED REMAINING TERM (ARD AND BALLOON LOANS) REMAINING STATED TERM (FULLY AMORTIZING LOANS)
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
Anticipated % of Remaining % of
Remaining # of Scheduled Agg. WAM Weighted Stated # of Scheduled Agg. WAM Weighted
Term (2) loans Balance Bal. (2) WAC Avg DSCR (1) Term loans Balance Bal. (2) WAC Avg DSCR (1)
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
Totals Totals
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
REMAINING AMORTIZATION TERM (ARD AND BALLOON LOANS) AGE OF MOST RECENT FINANCIAL INFORMATION
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
Age of Most
Remaining % of Recent % of
Amortization # of Scheduled Agg. WAM Weighted Financial # of Scheduled Agg. WAM Weighted
Term loans Balance Bal. (2) WAC Avg DSCR (1) Information loans Balance Bal. (2) WAC Avg DSCR (1)
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
Totals Totals
- -------------- -------------------------------------------------- ------------- ------------------------------------------------
(1) Debt Service Coverage Ratios are updated periodically as new financial information becomes available from borrowers on an asset
level. In all cases the most recent DSCR provided by the Servicer is used. To the extent that no DSCR is provided by the Servicer,
information from the offering document is used. The Trustee makes no representations as to the accuracy of the data provided for
this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term from the current month to the earlier of the
Anticipated Repayment Date, if applicable, and the maturity date.
(3) Data in this table was calculated by allocating pro-rata the current loan information to the properties based upon the Cut-off
Date balance of each property as disclosed in the offering document.
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 10 of 18
C-10
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE LOAN DETAIL
Anticipated Neg.
Loan Property Interest Principal Gross Repayment Maturity Amort
Number ODCR Type (1) City State Payment Payment Coupon Date Date (Y/N)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Totals
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning Ending Paid Appraisal Appraisal Res. Mod.
Loan Scheduled Scheduled Thru Reduction Reduction Strat. Code
Number Balance Balance Date Date Amount (2) (3)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Totals
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Property Type Code (2) Resolution Strategy Code (3) Modification Code
---------------------- ---------------------------- ---------------------
MF - Multi-Family OF - Office 1 - Modification 6 - DPO 10 - Deed In Lieu Of 1 - Maturity Date Extension
RT - Retail MU - Mixed Use 2 - Foreclosure 7 - REO Foreclosure 2 - Authorization Change
HC - Health Care LO - Lodging 3 - Bankruptcy 8 - Resolved 11 - Full Payoff 3 - Principal Write-Off
IN - Industrial SS - Self Storage 4 - Extension 9 - Pending Return 12 - Reps and Warranties 4 - Combination
WH - Warehouse OT - Other 5 - Note Sale to Master 13 - Other or TBD
Servicer
MH - Mobile Home Park
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 11 of 18
C-11
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PREPAYMENT DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Prepayment Amount Prepayment Penalties
Offering Document --------------------------------------- --------------------------------------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Prepayment Premium Yield Maintenance Charge
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Totals
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 12 of 18
C-12
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
HISTORICAL DETAIL
- -------------------------------------------------------------------------------------------------------------
Delinquencies
- -------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications
Date # Balance # Balance # Balance # Balance # Balance # Balance
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Prepayments Rate and Maturities
- --------------------------------------------------------------------------------
Curtailments Payoff Next Weighted Avg.
# Balance # Balance Coupon Remit WAM
- --------------------------------------------------------------------------------
Note: Foreclosure and REO Totals are excluded from the delinquencies aging categories.
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 13 of 18
C-13
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
DELINQUENCY LOAN DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Offering # of Current Outstanding Status of
Document Months Paid Through P & I P & I Mortgage
Loan Number Cross-Reference Delinq. Date Advances Advances Loan (1)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Totals
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Resolution Currnet Outstanding
Strategy Servicing Foreclosure Servicing Servicing Bankruptcy REO
Loan Number Code (2) Transfer Date Date Advances Advances Date Date
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Totals
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Status of Mortgage Loan (2) Resolution Strategy Code
--------------------------- ----------------------------
A - Payments Not Received 2 - Two Months Delinquent 1 - Modification 6 - DPO 10 - Deed In Lieu Of
But Still in Grace Period 3 - Three or More Months Delinquent 2 - Foreclosure 7 - REO Master Servicer
B - Late Payment But Less 4 - Assumed Scheduled Payment 3 - Bankruptcy 8 - Resolved 11 - Full Payoff
Than 1 Month Delinquent (Performing Matured Loan) 4 - Extension 9 - Pending Return 12 - Reps and Warranties
0 - Current 7 - Foreclosure 5 - Note Sale to Master Servicer 13 - Other or TBD
1 - One Month Delinquent 9 - REO
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 14 of 18
C-14
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALLY SERVICED LOAN DETAIL - PART 1
- ------------------------------------------------------------------------------------------------------------------------------------
Offering Servicing Resolution
Distribution Loan Document Transfer Strategy Scheduled Property
Date Number Cross-Reference Date Code (1) Balance Type (2) State
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Remaining
Interest Actual Operating NOI Note Maturity Amortization
Rate Balance Income Date DSCR Date Date Term
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Resolution Strategy Code (2) Property Type Code
---------------------------- ----------------------
1 - Modification 6 - DPO 10 - Deed In Lieu Of MF - Multi-Family OF - Office
2 - Foreclosure 7 - REO Foreclosure RT - Retail MU - Mixed use
3 - Bankruptcy 8 - Resolved 11 - Full Payoff HC - Health Care LO - Lodging
4 - Extension 9 - Pending Return 12 - Reps and Warranties IN - Industrial SS - Self Storage
5 - Note Sale to Master Servicer 13 - Other or TBD WH - Warehouse OT - Other
MH - Mobile Home Park
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 15 of 18
C-15
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALLY SERVICED LOAN DETAIL - PART 2
- ------------------------------------------------------------------------------------------------------------------------------------
Offering Resolution Site
Distribution Loan Document Strategy Inspection Appraisal Appraisal Other REO
Date Number Cross-Reference Code (1) Date Phase 1 Date Date Value Property Revenue Comment
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1) Resolution Strategy Code
---------------------------
1 - Modification 6 - DPO 10 - Deed In Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 16 of 18
C-16
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
MODIFIED LOAN DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Offering
Loan Document Pre-Modification
Number Cross-Reference Balance Modification Date Modification Description
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Totals
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 17 of 18
C-17
-------------------------------------------
[WELLS FARGO LOGO] BANC OF AMERICA COMMERCIAL MORTGAGE INC. For Additional Information please contact
WELLS FARGO BANK, N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES CTSLink Customer Service
CORPORATE TRUST SERVICES SERIES 2004-3 (301) 815-6600
9062 OLD ANNAPOLIS ROAD Reports Available on the World Wide Web
COLUMBIA, MD 21045-1951 @ www.ctslink.com/cmbs
-------------------------------------------
PAYMENT DATE: 07/12/2004
RECORD DATE: 06/30/2004
- ------------------------------------------------------------------------------------------------------------------------------------
LIQUIDATED LOAN DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Final Recovery Offering
Loan Determination Document Appraisal Appraisal Actual Gross
Number Date Cross-Reference Date Value Balance Proceeds
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current Total
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative Total
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Proceeds Aggregate Net Net Proceeds Repurchased
Loan as a % of Liquidation Liquidation as a % of Realized by Seller
Number Actual Balance Expenses * Proceeds Actual Balance Loss (Y/N)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current Total
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative Total
- ------------------------------------------------------------------------------------------------------------------------------------
* Aggregate liquidation expenses also include outstanding P & I advances and unpaid fees (servicing, trustee, etc.).
- ------------------------------------------------------------------------------------------------------------------------------------
Copyright, Wells Fargo Bank, N.A. Page 18 of 18
C-18
ANNEX D-1
AMORTIZATION SCHEDULE
OF THE U-HAUL PORTFOLIO SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
0 5/1/2004 110,000,000.00 -
1 6/1/2004 109,786,451.32 213,548.68
2 7/1/2004 109,538,972.57 247,478.75
3 8/1/2004 109,409,288.77 129,683.80
4 9/1/2004 109,278,884.79 130,403.98
5 10/1/2004 109,128,180.54 150,704.25
6 11/1/2004 108,996,215.48 131,965.06
7 12/1/2004 108,843,992.12 152,223.36
8 1/1/2005 108,710,448.88 133,543.24
9 2/1/2005 108,576,164.03 134,284.85
10 3/1/2005 108,382,782.82 193,381.21
11 4/1/2005 108,246,678.34 136,104.48
12 5/1/2005 108,090,426.84 156,251.50
13 6/1/2005 107,952,698.82 137,728.02
14 7/1/2005 107,794,867.43 157,831.39
15 8/1/2005 107,655,498.08 139,369.35
16 9/1/2005 107,515,354.77 140,143.31
17 10/1/2005 107,355,173.02 160,181.75
18 11/1/2005 107,213,361.91 141,811.11
19 12/1/2005 107,051,557.20 161,804.71
20 1/1/2006 106,908,060.02 143,497.18
21 2/1/2006 106,763,765.96 144,294.06
22 3/1/2006 106,561,293.96 202,472.00
23 4/1/2006 106,415,074.20 146,219.76
24 5/1/2006 106,248,979.36 166,094.84
25 6/1/2006 106,101,025.22 147,954.14
26 7/1/2006 105,933,242.63 167,782.59
27 8/1/2006 105,783,535.11 149,707.52
28 9/1/2006 105,632,996.22 150,538.89
29 10/1/2006 105,462,698.36 170,297.86
30 11/1/2006 105,310,377.76 152,320.60
31 12/1/2006 105,138,346.09 172,031.67
32 1/1/2007 104,984,224.27 154,121.82
33 2/1/2007 104,829,246.56 154,977.71
34 3/1/2007 104,617,071.23 212,175.33
35 4/1/2007 104,460,054.61 157,016.62
36 5/1/2007 104,283,453.17 176,601.44
37 6/1/2007 104,124,583.86 158,869.31
38 7/1/2007 103,946,179.54 178,404.32
39 8/1/2007 103,785,437.25 160,742.29
40 9/1/2007 103,623,802.31 161,634.94
41 10/1/2007 103,442,706.71 181,095.60
42 11/1/2007 103,279,168.48 163,538.23
43 12/1/2007 103,096,220.76 182,947.72
44 1/1/2008 102,930,758.39 165,462.37
45 2/1/2008 102,764,377.16 166,381.23
46 3/1/2008 102,560,253.77 204,123.39
47 4/1/2008 102,391,815.01 168,438.76
D-1-1
AMORTIZATION SCHEDULE
OF THE U-HAUL PORTFOLIO SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
48 5/1/2008 102,204,098.50 187,716.51
49 6/1/2008 102,033,681.90 170,416.60
50 7/1/2008 101,844,040.73 189,641.17
51 8/1/2008 101,671,624.62 172,416.11
52 9/1/2008 101,498,251.03 173,373.59
53 10/1/2008 101,305,732.36 192,518.67
54 11/1/2008 101,130,326.86 175,405.50
55 12/1/2008 100,935,830.91 194,495.95
56 1/1/2009 100,758,371.24 177,459.67
57 2/1/2009 100,579,926.08 178,445.16
58 3/1/2009 100,346,436.62 233,489.46
59 4/1/2009 100,165,703.86 180,732.76
60 5/1/2009 99,966,023.86 199,680.00
61 6/1/2009 99,783,178.55 182,845.31
62 7/1/2009 99,581,442.79 201,735.76
63 8/1/2009 99,396,461.78 184,981.01
64 9/1/2009 99,210,453.52 186,008.26
65 10/1/2009 99,005,639.85 204,813.67
66 11/1/2009 98,817,461.24 188,178.61
67 12/1/2009 98,610,535.56 206,925.68
68 1/1/2010 98,420,162.81 190,372.75
69 2/1/2010 98,228,732.86 191,429.95
70 3/1/2010 97,983,450.08 245,282.78
71 4/1/2010 97,789,594.93 193,855.15
72 5/1/2010 97,577,145.33 212,449.60
73 6/1/2010 97,381,033.84 196,111.49
74 7/1/2010 97,166,388.56 214,645.28
75 8/1/2010 96,967,996.02 198,392.54
76 9/1/2010 96,768,501.74 199,494.28
77 10/1/2010 96,550,564.61 217,937.13
78 11/1/2010 96,348,752.21 201,812.40
79 12/1/2010 96,128,559.27 220,192.94
80 1/1/2011 95,924,403.35 204,155.92
81 2/1/2011 95,719,113.68 205,289.67
82 3/1/2011 95,461,242.94 257,870.74
83 4/1/2011 95,253,381.21 207,861.73
84 5/1/2011 95,027,301.57 226,079.64
85 6/1/2011 94,817,030.03 210,271.54
86 7/1/2011 94,588,605.37 228,424.66
87 8/1/2011 94,375,897.61 212,707.76
88 9/1/2011 94,162,008.62 213,888.99
89 10/1/2011 93,930,063.76 231,944.86
90 11/1/2011 93,713,698.92 216,364.84
91 12/1/2011 93,479,344.77 234,354.15
92 1/1/2012 93,260,476.95 218,867.82
93 2/1/2012 93,040,393.69 220,083.26
94 3/1/2012 92,785,753.93 254,639.76
D-1-2
AMORTIZATION SCHEDULE
OF THE U-HAUL PORTFOLIO SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
95 4/1/2012 92,563,034.39 222,719.54
96 5/1/2012 92,322,496.38 240,538.01
97 6/1/2012 92,097,204.22 225,292.16
98 7/1/2012 91,854,162.76 243,041.46
99 8/1/2012 91,626,269.80 227,892.96
100 9/1/2012 91,397,111.29 229,158.51
101 10/1/2012 91,150,307.41 246,803.88
102 11/1/2012 90,918,505.73 231,801.68
103 12/1/2012 90,669,129.75 249,375.98
104 1/1/2013 90,434,655.94 234,473.81
105 2/1/2013 90,198,880.03 235,775.91
106 3/1/2013 89,913,320.40 285,559.63
107 4/1/2013 89,674,649.36 238,671.04
108 5/1/2013 89,418,588.68 256,060.68
109 6/1/2013 89,177,170.24 241,418.44
110 7/1/2013 88,918,436.03 258,734.21
111 8/1/2013 88,674,240.09 244,195.94
112 9/1/2013 88,428,688.05 245,552.04
113 10/1/2013 88,165,931.37 262,756.68
114 11/1/2013 87,917,556.54 248,374.83
115 12/1/2013 87,652,052.95 265,503.59
116 1/1/2014 87,400,824.39 251,228.56
117 2/1/2014 87,148,200.69 252,623.70
118 3/1/2014 86,847,339.20 300,861.49
119 4/1/2014 86,591,641.83 255,697.37
120 5/1/2014 - 86,591,641.83
D-1-3
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX D-2
AMORTIZATION SCHEDULE
OF THE CALPINE CENTER SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
0 5/1/2004 78,000,000.00 0
1 6/1/2004 77,897,807.37 102,192.63
2 7/1/2004 77,780,036.32 117,771.05
3 8/1/2004 77,701,942.89 78,093.43
4 9/1/2004 77,623,493.90 78,448.99
5 10/1/2004 77,533,286.77 90,207.13
6 11/1/2004 77,454,069.86 79,216.91
7 12/1/2004 77,363,116.20 90,953.66
8 1/1/2005 77,283,124.49 79,991.71
9 2/1/2005 77,202,768.56 80,355.93
10 3/1/2005 77,088,029.29 114,739.27
11 4/1/2005 77,006,785.07 81,244.22
12 5/1/2005 76,913,860.56 92,924.51
13 6/1/2005 76,831,823.33 82,037.23
14 7/1/2005 76,738,127.90 93,695.43
15 8/1/2005 76,655,290.53 82,837.37
16 9/1/2005 76,572,075.99 83,214.54
17 10/1/2005 76,477,236.04 94,839.95
18 11/1/2005 76,393,210.80 84,025.24
19 12/1/2005 76,297,582.73 95,628.07
20 1/1/2006 76,212,739.50 84,843.23
21 2/1/2006 76,127,509.98 85,229.52
22 3/1/2006 76,008,348.71 119,161.27
23 4/1/2006 75,922,188.57 86,160.14
24 5/1/2006 75,824,485.06 97,703.51
25 6/1/2006 75,737,487.76 86,997.30
26 7/1/2006 75,638,970.41 98,517.35
27 8/1/2006 75,551,128.44 87,841.97
28 9/1/2006 75,462,886.51 88,241.93
29 10/1/2006 75,363,159.20 99,727.31
30 11/1/2006 75,274,061.43 89,097.77
31 12/1/2006 75,173,502.11 100,559.32
32 1/1/2007 75,083,540.80 89,961.31
33 2/1/2007 74,993,169.89 90,370.91
34 3/1/2007 74,869,343.65 123,826.24
35 4/1/2007 74,777,997.48 91,346.17
36 5/1/2007 74,675,252.37 102,745.11
37 6/1/2007 74,583,022.47 92,229.90
38 7/1/2007 74,479,418.26 103,604.21
39 8/1/2007 74,386,296.71 93,121.55
40 9/1/2007 74,292,751.16 93,545.55
41 10/1/2007 74,187,867.94 104,883.22
42 11/1/2007 74,093,418.92 94,449.02
43 12/1/2007 73,987,657.39 105,761.53
44 1/1/2008 73,892,296.79 95,360.60
45 2/1/2008 73,796,502.00 95,794.79
46 3/1/2008 73,678,593.32 117,908.68
47 4/1/2008 73,581,825.51 96,767.81
D-2-1
AMORTIZATION SCHEDULE
OF THE CALPINE CENTER SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
48 5/1/2008 73,473,809.78 108,015.73
49 6/1/2008 73,376,109.57 97,700.21
50 7/1/2008 73,267,187.40 108,922.17
51 8/1/2008 73,168,546.40 98,641.00
52 9/1/2008 73,069,456.28 99,090.12
53 10/1/2008 72,959,182.92 110,273.36
54 11/1/2008 72,859,139.55 100,043.37
55 12/1/2008 72,747,939.48 111,200.07
56 1/1/2009 72,646,934.28 101,005.20
57 2/1/2009 72,545,469.20 101,465.08
58 3/1/2009 72,411,576.79 133,892.41
59 4/1/2009 72,309,040.10 102,536.69
60 5/1/2009 72,195,416.15 113,623.95
61 6/1/2009 72,091,895.25 103,520.90
62 7/1/2009 71,977,314.51 114,580.74
63 8/1/2009 71,872,800.56 104,513.95
64 9/1/2009 71,767,810.75 104,989.81
65 10/1/2009 71,651,802.01 116,008.74
66 11/1/2009 71,545,805.97 105,996.04
67 12/1/2009 71,428,819.02 116,986.95
68 1/1/2010 71,321,807.71 107,011.31
69 2/1/2010 71,214,309.16 107,498.55
70 3/1/2010 71,074,942.35 139,366.81
71 4/1/2010 70,966,319.79 108,622.56
72 5/1/2010 70,846,779.48 119,540.31
73 6/1/2010 70,737,118.07 109,661.41
74 7/1/2010 70,616,567.84 120,550.23
75 8/1/2010 70,505,858.24 110,709.60
76 9/1/2010 70,394,644.57 111,213.67
77 10/1/2010 70,272,585.32 122,059.25
78 11/1/2010 70,160,309.53 112,275.79
79 12/1/2010 70,037,217.74 123,091.79
80 1/1/2011 69,923,870.29 113,347.45
81 2/1/2011 69,810,006.76 113,863.53
82 3/1/2011 69,664,864.76 145,142.00
83 4/1/2011 69,549,821.94 115,042.82
84 5/1/2011 69,424,040.19 125,781.75
85 6/1/2011 69,307,900.87 116,139.32
86 7/1/2011 69,181,053.16 126,847.71
87 8/1/2011 69,063,807.49 117,245.67
88 9/1/2011 68,946,027.98 117,779.51
89 10/1/2011 68,817,585.76 128,442.22
90 11/1/2011 68,698,685.18 118,900.58
91 12/1/2011 68,569,153.11 129,532.07
92 1/1/2012 68,449,121.38 120,031.73
93 2/1/2012 68,328,543.13 120,578.25
94 3/1/2012 68,187,344.36 141,198.77
D-2-2
AMORTIZATION SCHEDULE
OF THE CALPINE CENTER SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
95 4/1/2012 68,065,574.21 121,770.15
96 5/1/2012 67,933,252.49 132,321.72
97 6/1/2012 67,810,325.42 122,927.07
98 7/1/2012 67,676,879.01 133,446.41
99 8/1/2012 67,552,784.65 124,094.36
100 9/1/2012 67,428,125.26 124,659.39
101 10/1/2012 67,292,994.78 135,130.48
102 11/1/2012 67,167,152.55 125,842.23
103 12/1/2012 67,030,872.16 136,280.39
104 1/1/2013 66,903,836.44 127,035.72
105 2/1/2013 66,776,222.31 127,614.13
106 3/1/2013 66,618,603.87 157,618.44
107 4/1/2013 66,489,691.04 128,912.83
108 5/1/2013 66,350,425.59 139,265.45
109 6/1/2013 66,220,291.72 130,133.87
110 7/1/2013 66,079,839.22 140,452.50
111 8/1/2013 65,948,473.33 131,365.89
112 9/1/2013 65,816,509.32 131,964.01
113 10/1/2013 65,674,277.66 142,231.66
114 11/1/2013 65,541,065.20 133,212.46
115 12/1/2013 65,397,619.86 143,445.34
116 1/1/2014 65,263,147.74 134,472.12
117 2/1/2014 65,128,063.35 135,084.39
118 3/1/2014 64,963,666.86 164,396.49
119 4/1/2014 64,827,218.90 136,447.96
120 5/1/2014 - 64,827,218.90
D-2-3
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNEX D-3
AMORTIZATION SCHEDULE
OF THE 17 STATE STREET SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
0 4/1/2004 75,850,000.00 0
1 5/1/2004 75,850,000.00 -
2 6/1/2004 75,850,000.00 -
3 7/1/2004 75,850,000.00 -
4 8/1/2004 75,850,000.00 -
5 9/1/2004 75,850,000.00 -
6 10/1/2004 75,850,000.00 -
7 11/1/2004 75,850,000.00 -
8 12/1/2004 75,850,000.00 -
9 1/1/2005 75,850,000.00 -
10 2/1/2005 75,850,000.00 -
11 3/1/2005 75,850,000.00 -
12 4/1/2005 75,850,000.00 -
13 5/1/2005 75,850,000.00 -
14 6/1/2005 75,850,000.00 -
15 7/1/2005 75,850,000.00 -
16 8/1/2005 75,850,000.00 -
17 9/1/2005 75,850,000.00 -
18 10/1/2005 75,850,000.00 -
19 11/1/2005 75,850,000.00 -
20 12/1/2005 75,850,000.00 -
21 1/1/2006 75,850,000.00 -
22 2/1/2006 75,850,000.00 -
23 3/1/2006 75,850,000.00 -
24 4/1/2006 75,850,000.00 -
25 5/1/2006 75,760,770.24 89,229.76
26 6/1/2006 75,683,471.42 77,298.82
27 7/1/2006 75,593,426.08 90,045.34
28 8/1/2006 75,515,280.37 78,145.71
29 9/1/2006 75,436,739.18 78,541.19
30 10/1/2006 75,345,485.47 91,253.71
31 11/1/2006 75,266,085.00 79,400.47
32 12/1/2006 75,173,995.51 92,089.49
33 1/1/2007 75,093,727.17 80,268.34
34 2/1/2007 75,013,052.61 80,674.56
35 3/1/2007 74,895,232.14 117,820.47
36 4/1/2007 74,813,553.05 81,679.09
37 5/1/2007 74,719,247.29 94,305.76
38 6/1/2007 74,636,677.58 82,569.71
39 7/1/2007 74,541,505.57 95,172.01
40 8/1/2007 74,458,036.36 83,469.21
41 9/1/2007 74,374,144.73 83,891.63
42 10/1/2007 74,277,686.96 96,457.77
43 11/1/2007 74,192,882.62 84,804.34
44 12/1/2007 74,095,537.12 97,345.50
45 1/1/2008 74,009,810.97 85,726.15
46 2/1/2008 73,923,650.98 86,159.99
47 3/1/2008 73,812,918.89 110,732.09
D-3-1
AMORTIZATION SCHEDULE
OF THE 17 STATE STREET SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
48 4/1/2008 73,725,762.48 87,156.41
49 5/1/2008 73,626,129.27 99,633.21
50 6/1/2008 73,538,027.56 88,101.71
51 7/1/2008 73,437,474.91 100,552.65
52 8/1/2008 73,348,418.47 89,056.44
53 9/1/2008 73,258,911.34 89,507.13
54 10/1/2008 73,156,991.72 101,919.62
55 11/1/2008 73,066,515.83 90,475.89
56 12/1/2008 72,963,653.95 102,861.88
57 1/1/2009 72,872,199.62 91,454.33
58 2/1/2009 72,780,282.46 91,917.16
59 3/1/2009 72,652,255.99 128,026.47
60 4/1/2009 72,559,225.76 93,030.23
61 5/1/2009 72,453,879.43 105,346.33
62 6/1/2009 72,359,845.26 94,034.17
63 7/1/2009 72,253,522.46 106,322.80
64 8/1/2009 72,158,474.34 95,048.12
65 9/1/2009 72,062,945.20 95,529.14
66 10/1/2009 71,955,168.34 107,776.86
67 11/1/2009 71,858,610.32 96,558.02
68 12/1/2009 71,749,832.72 108,777.60
69 1/1/2010 71,652,235.55 97,597.17
70 2/1/2010 71,554,144.46 98,091.09
71 3/1/2010 71,420,513.32 133,631.14
72 4/1/2010 71,321,249.54 99,263.78
73 5/1/2010 71,209,840.22 111,409.32
74 6/1/2010 71,109,510.28 100,329.94
75 7/1/2010 70,997,063.97 112,446.31
76 8/1/2010 70,895,657.22 101,406.75
77 9/1/2010 70,793,737.28 101,919.94
78 10/1/2010 70,679,744.47 113,992.81
79 11/1/2010 70,576,731.85 103,012.62
80 12/1/2010 70,461,676.26 115,055.59
81 1/1/2011 70,357,560.05 104,116.21
82 2/1/2011 70,252,916.94 104,643.11
83 3/1/2011 70,113,337.89 139,579.05
84 4/1/2011 70,007,458.83 105,879.06
85 5/1/2011 69,889,615.22 117,843.61
86 6/1/2011 69,782,603.95 107,011.27
87 7/1/2011 69,663,659.12 118,944.83
88 8/1/2011 69,555,504.34 108,154.78
89 9/1/2011 69,446,802.22 108,702.12
90 10/1/2011 69,326,212.80 120,589.42
91 11/1/2011 69,216,350.29 109,862.51
92 12/1/2011 69,094,632.22 121,718.07
93 1/1/2012 68,983,597.74 111,034.48
94 2/1/2012 68,872,001.34 111,596.40
95 3/1/2012 68,737,353.48 134,647.86
96 4/1/2012 68,624,510.90 112,842.58
97 5/1/2012 68,499,894.30 124,616.60
98 6/1/2012 68,385,850.00 114,044.30
99 7/1/2012 68,260,064.56 125,785.44
D-3-2
AMORTIZATION SCHEDULE
OF THE 17 STATE STREET SENIOR COMPONENT
PERIOD DATE ENDING BALANCE PRINCIPAL
100 8/1/2012 68,144,806.54 115,258.02
101 9/1/2012 68,028,965.23 115,841.31
102 10/1/2012 67,901,431.95 127,533.28
103 11/1/2012 67,784,358.99 117,072.96
104 12/1/2012 67,655,627.75 128,731.24
105 1/1/2013 67,537,310.83 118,316.92
106 2/1/2013 67,418,395.14 118,915.69
107 3/1/2013 67,265,859.48 152,535.66
108 4/1/2013 67,145,570.04 120,289.44
109 5/1/2013 67,013,710.33 131,859.71
110 6/1/2013 66,892,144.82 121,565.51
111 7/1/2013 66,759,043.96 133,100.86
112 8/1/2013 66,636,189.65 122,854.31
113 9/1/2013 66,512,713.61 123,476.04
114 10/1/2013 66,377,754.48 134,959.13
115 11/1/2013 66,252,970.56 124,783.92
116 12/1/2013 66,116,739.34 136,231.22
117 1/1/2014 65,990,634.49 126,104.85
118 2/1/2014 65,863,891.46 126,743.03
119 3/1/2014 65,704,250.17 159,641.29
120 4/1/2014 65,576,057.81
D-3-3
(THIS PAGE INTENTIONALLY LEFT BLANK)
Prospectus
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
- --------------------------------------------------------------------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 11 IN THIS PROSPECTUS.
Neither the certificates nor the underlying mortgage loans are insured by any
governmental agency.
The certificates will represent interests only in the related trust and will
not represent interests in or obligations of Banc of America Commercial
Mortgage Inc. or any of its affiliates, including Bank of America Corporation.
This prospectus may be used to offer and sell any series of certificates only
if accompanied by the prospectus supplement for that series.
- --------------------------------------------------------------------------------
THE TRUST --
o may periodically issue mortgage pass-through certificates in one or more
series with one or more classes; and
o will own --
o multifamily and commercial mortgage loans;
o mortgage-backed securities; and
o other property described in the accompanying prospectus supplement.
THE CERTIFICATES --
o will represent interests in the trust and will be paid only from the trust
assets;
o provide for the accrual of interest based on a fixed, variable or
adjustable interest rate;
o may be offered through underwriters, which may include Banc of America
Securities LLC, an affiliate of Banc of America Commercial Mortgage Inc.;
and
o will not be listed on any securities exchange.
THE CERTIFICATEHOLDERS --
o will receive interest and principal payments based on the rate of payment
of principal and the timing of receipt of payments on mortgage loans.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
June 18, 2004
(This Page Intentionally Left Blank)
2
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
Banc of America Commercial Mortgage Inc. has filed with the SEC additional
registration materials relating to the certificates. You may read and copy any
of these materials at the SEC's Public Reference Room at the following
locations:
o SEC Public Reference Section
450 Fifth Street, N.W.
Room 1204
Washington, D.C. 20549
o SEC Midwest Regional Offices
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that
contains reports, proxy and information statements, and other information that
has been filed electronically with the SEC. The Internet address is
http://www.sec.gov.
You may also contact Banc of America Commercial Mortgage Inc. in writing at
Bank of America Corporate Center, 214 North Tryon Street, Charlotte, North
Carolina 28255, or by telephone at (704) 386-2400.
See also the sections captioned "Available Information" and "Incorporation of
Certain Information by Reference" appearing at the end of this prospectus.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
-----
SUMMARY OF PROSPECTUS ....................................... 6
RISK FACTORS ................................................ 11
The Limited Liquidity of Your Certificates May Have
an Adverse Impact on Your Ability to Sell Your
Certificates ........................................... 11
The Limited Assets of Each Trust May Adversely
Impact Your Ability To Recover Your Investment in
the Event of Loss on the Underlying Mortgage
Assets ................................................. 11
Credit Support is Limited and May Not Be Sufficient
to Prevent Loss on Your Certificates ................... 12
Prepayments on the Underlying Mortgage Loans
Will Affect the Average Life of Your Certificates,
and the Rate and Timing of those Prepayments
May Be Highly Unpredictable ............................ 12
Certificates Purchased at a Premium or a Discount
Will Be Sensitive to the Rate of Principal Payment...... 13
The Nature of Ratings Are Limited and Will Not
Guarantee that You Will Receive Any Projected
Return on Your Certificates ............................ 14
Certain Factors Affecting Delinquency, Foreclosure
and Loss of the Mortgage Loans ......................... 14
Inclusion of Delinquent Mortgage Loans in a
Mortgage Asset Pool .................................... 18
PROSPECTUS SUPPLEMENT ....................................... 18
CAPITALIZED TERMS USED IN THIS PROSPECTUS ................... 19
DESCRIPTION OF THE TRUST FUNDS .............................. 20
General ................................................... 20
Mortgage Loans ............................................ 20
MBS ....................................................... 24
Certificate Accounts ...................................... 25
Credit Support ............................................ 25
Cash Flow Agreements ...................................... 25
YIELD AND MATURITY CONSIDERATIONS ........................... 26
General ................................................... 26
Pass-Through Rate ......................................... 26
Payment Delays ............................................ 26
Certain Shortfalls in Collections of Interest ............. 26
Yield and Prepayment Considerations ....................... 26
Weighted Average Life and Maturity ........................ 28
Other Factors Affecting Yield, Weighted Average Life
and Maturity ........................................... 29
THE DEPOSITOR ............................................... 31
DESCRIPTION OF THE CERTIFICATES ............................. 31
General ................................................... 31
Distributions ............................................. 32
Distributions of Interest on the Certificates ............. 32
Distributions of Principal of the Certificates ............ 33
3
PAGE
-----
Distributions on the Certificates Concerning
Prepayment Premiums or Concerning Equity
Participations ........................................ 34
Allocation of Losses and Shortfalls ..................... 34
Advances in Respect of Delinquencies .................... 34
Reports to Certificateholders ........................... 35
Voting Rights ........................................... 37
Termination ............................................. 37
Book-Entry Registration and Definitive Certificates ..... 37
THE POOLING AND SERVICING AGREEMENTS ....................... 39
General ................................................. 39
Assignment of Mortgage Loans; Repurchases ............... 39
Representations and Warranties; Repurchases ............. 41
Collection and Other Servicing Procedures ............... 42
Sub-Servicers ........................................... 44
Certificate Account ..................................... 44
Modifications, Waivers and Amendments of
Mortgage Loans ........................................ 47
Realization Upon Defaulted Mortgage Loans ............... 47
Hazard Insurance Policies ............................... 49
Due-on-Sale and Due-on-Encumbrance Provisions ........... 50
Servicing Compensation and Payment of Expenses .......... 50
Evidence as to Compliance ............................... 51
Certain Matters Regarding the Master Servicer, the
Special Servicer, the REMIC Administrator and the
Depositor ............................................. 52
Events of Default ....................................... 53
Rights Upon Event of Default ............................ 54
Amendment ............................................... 54
List of Certificateholders .............................. 55
The Trustee ............................................. 56
Duties of the Trustee ................................... 56
Certain Matters Regarding the Trustee ................... 56
Resignation and Removal of the Trustee .................. 56
DESCRIPTION OF CREDIT SUPPORT .............................. 57
General ................................................. 57
Subordinate Certificates ................................ 57
Insurance or Guarantees Concerning the Mortgage
Loans ................................................. 58
Letter of Credit ........................................ 58
Certificate Insurance and Surety Bonds .................. 58
Reserve Funds ........................................... 58
Cash Collateral Account ................................. 59
Credit Support with respect to MBS ...................... 59
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS..................... 60
General ................................................. 60
Types of Mortgage Instruments ........................... 60
Leases and Rents ........................................ 60
Personalty .............................................. 61
Foreclosure ............................................. 61
4
PAGE
-----
Bankruptcy Laws ..................................... 64
Environmental Considerations ........................ 66
Due-on-Sale and Due-on-Encumbrance Provisions ....... 68
Junior Liens; Rights of Holders of Senior Liens ..... 68
Subordinate Financing ............................... 69
Default Interest and Limitations on Prepayments ..... 69
Applicability of Usury Laws ......................... 70
Certain Laws and Regulations ........................ 70
Americans with Disabilities Act ..................... 70
Servicemembers Civil Relief Act ..................... 71
Forfeiture for Drug and Money Laundering
Violations ........................................ 71
Federal Deposit Insurance Act; Commercial
Mortgage Loan Servicing ........................... 71
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................. 72
General ............................................. 72
REMICs .............................................. 73
Grantor Trust Funds ................................. 90
STATE AND OTHER TAX CONSEQUENCES ....................... 99
CERTAIN ERISA CONSIDERATIONS ........................... 100
General ............................................. 100
Plan Asset Regulations .............................. 100
Insurance Company General Accounts .................. 101
Consultation With Counsel ........................... 102
Tax Exempt Investors ................................ 102
LEGAL INVESTMENT ....................................... 102
USE OF PROCEEDS ........................................ 104
METHOD OF DISTRIBUTION ................................. 104
LEGAL MATTERS .......................................... 105
FINANCIAL INFORMATION .................................. 105
RATING ................................................. 105
AVAILABLE INFORMATION .................................. 106
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE ........................................... 107
GLOSSARY ............................................... 108
5
SUMMARY OF PROSPECTUS
This summary highlights selected information from this prospectus. It does
not contain all the information you need to consider in making your investment
decision. You should carefully review this prospectus and the related
prospectus supplement in their entirety before making any investment in the
certificates of any series. As used in this prospectus, "you" refers to a
prospective investor in certificates, and "we" refers to the depositor, Banc of
America Commercial Mortgage Inc. A "Glossary" appears at the end of this
prospectus.
SECURITIES OFFERED
Mortgage pass-through certificates.
DEPOSITOR
Banc of America Commercial Mortgage Inc., a Delaware corporation and a
subsidiary of Bank of America, N.A., has its principal executive offices at 214
North Tryon Street, Charlotte, North Carolina 28255, and its telephone number
is (704) 386-2400.
TRUSTEE
The trustee for each series of certificates will be named in the related
prospectus supplement.
MASTER SERVICER
If the trust includes mortgage loans, the master servicer for the corresponding
series of certificates will be named in the prospectus supplement.
SPECIAL SERVICER
If the trust includes mortgage loans, the special servicer for the
corresponding series of certificates will be named, or the circumstances under
which a special servicer may be appointed, will be described in the prospectus
supplement.
MBS ADMINISTRATOR
If the trust includes mortgage-backed securities, the entity responsible for
administering the mortgage-backed securities will be named in the prospectus
supplement.
REMIC ADMINISTRATOR
The person responsible for the various tax-related administration duties for a
series of certificates concerning real estate mortgage investment conduits will
be named in the prospectus supplement.
THE MORTGAGE LOANS
Each series of certificates will, in general, consist of a pool of mortgage
loans referred to as a mortgage asset pool secured by first or junior liens
on--
o residential properties consisting of five or more rental or
cooperatively-owned dwelling units in high-rise, mid-rise or garden
apartment buildings or other residential structures; or
o office buildings, retail stores, hotels or motels, nursing homes,
hospitals or other health care-related facilities, recreational vehicle
and mobile home parks, warehouse facilities, mini-warehouse facilities,
self-storage facilities, industrial plants, parking lots, entertainment or
sports arenas, restaurants, marinas, mixed use or various other types of
income-producing properties or unimproved land.
6
However, no one of the following types of properties will be overly-represented
in the trust at the time the trust is formed:
(1) restaurants; (2) entertainment or sports arenas; (3) marinas; or (4)
nursing homes, hospitals or other health care-related facilities.
The mortgage loans will not be guaranteed or insured by Banc of America
Commercial Mortgage Inc. or any of its affiliates or, unless otherwise provided
in the prospectus supplement, by any governmental agency or by any other
person.
If specified in the prospectus supplement, some mortgage loans may be
delinquent as of the date the trust is formed.
As described in the prospectus supplement, a mortgage loan may--
o provide for no accrual of interest or for accrual of interest at an
interest rate that is fixed over its term or that adjusts from time to
time, or that may be converted at the borrower's election from an
adjustable to a fixed mortgage rate, or from a fixed to an adjustable
mortgage rate;
o provide for level payments to maturity or for payments that adjust from
time to time to accommodate changes in the mortgage rate or to reflect the
occurrence of certain events, and may permit negative amortization;
o be fully amortizing or may be partially amortizing or nonamortizing, with
a balloon payment due on its stated maturity date;
o may prohibit over its term or for a certain period prepayments and/or
require payment of a premium or a yield maintenance payment in connection
with certain prepayments; and
o provide for payments of principal, interest or both, on due dates that
occur monthly, quarterly, semi-annually or at any other interval as
specified in the prospectus supplement.
Each mortgage loan will have had an original term to maturity of not more than
40 years. No mortgage loan will have been originated by Banc of America
Commercial Mortgage Inc., although one of its affiliates may have originated
some of the mortgage loans.
If any mortgage loan, or group of related mortgage loans, involves unusual
credit risk, financial statements or other financial information concerning the
related mortgaged property will be included in the related prospectus
supplement.
As described in the prospectus supplement, the trust may also consist of
mortgage participations, mortgage pass-through certificates and/or other
mortgage-backed securities that evidence an interest in, or are secured by a
pledge of, one or more mortgage loans similar to the other mortgage loans in
the trust and which may or may not be issued, insured or guaranteed by the
United States or any governmental agency.
THE CERTIFICATES
Each series of certificates will be issued in one or more classes pursuant to a
pooling and servicing agreement or other agreement specified in the prospectus
supplement and will represent in total the entire beneficial ownership interest
in the trust.
As described in the prospectus supplement, the certificates of each series may
consist of one or more classes that--
o are senior or subordinate to one or more other classes of certificates in
entitlement to certain distributions on the certificates;
o are "stripped principal certificates" entitled to distributions of
principal, with disproportionate, nominal or no distributions of interest;
o are "stripped interest certificates" entitled to distributions of
interest, with disproportionate, nominal or no distributions of principal;
7
o provide for distributions of interest or principal that commence only
after the occurrence of certain events, such as the retirement of one or
more other classes of certificates of that series;
o provide for distributions of principal to be made, from time to time or
for designated periods, at a rate that is faster (and, in some cases,
substantially faster) or slower (and, in some cases, substantially slower)
than the rate at which payments or other collections of principal are
received on the mortgage assets in the trust;
o provide for distributions of principal to be made, subject to available
funds, based on a specified principal payment schedule or other
methodology; or
o provide for distribution based on collections on the mortgage assets in
the trust attributable to prepayment premiums, yield maintenance payments
or equity participations.
If specified in the prospectus supplement, a series of certificates may include
one or more "controlled amortization classes," which will entitle the holders
to receive principal distributions according to a specified principal payment
schedule. Although prepayment risk cannot be eliminated entirely for any class
of certificates, a controlled amortization class will generally provide a
relatively stable cash flow so long as the actual rate of prepayment on the
mortgage loans in the trust remains relatively constant at the rate of
prepayment used to establish the specific principal payment schedule for those
certificates. Prepayment risk with respect to a given mortgage asset pool does
not disappear, however, and the stability afforded to a controlled amortization
class comes at the expense of one or more other classes of the same series.
Each class of certificates, other than certain classes of stripped interest
certificates and certain classes of REMIC residual certificates will have an
initial stated principal amount. Each class of certificates, other than certain
classes of stripped principal certificates and certain classes of REMIC
residual certificates, will accrue interest on its certificate balance or, in
the case of certain classes of stripped interest certificates, on a notional
amount, based on a pass-through rate which may be fixed, variable or
adjustable. The prospectus supplement will specify the certificate balance,
notional amount and/or pass-through rate for each class of certificates.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Interest on each class of certificates (other than certain classes of stripped
principal certificates and certain classes of REMIC residual certificates) of
each series will accrue at the applicable pass-through rate on the certificate
balance and will be paid on a distribution date. However, in the case of
certain classes of stripped interest certificates, the notional amount
outstanding from time to time will be paid to certificateholders as provided in
the prospectus supplement on a specified distribution date.
Distributions of interest concerning one or more classes of certificates may
not commence until the occurrence of certain events, such as the retirement of
one or more other classes of certificates. Interest accrued concerning a class
of accrual certificates prior to the occurrence of such an event will either be
added to the certificate balance or otherwise deferred as described in the
prospectus supplement. Distributions of interest concerning one or more classes
of certificates may be reduced to the extent of certain delinquencies, losses
and other contingencies described in this prospectus and in the prospectus
supplement.
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
Each class of certificates of each series (other than certain classes of
stripped interest certificates and certain classes of REMIC residual
certificates) will have a certificate balance. The certificate balance of a
class of certificates outstanding from time to time will represent the maximum
amount that the holders are then entitled to receive in respect of principal
from future cash flow on the assets in the trust. The initial total certificate
balance of all classes of a series of certificates will not be greater
8
than the outstanding principal balance of the related mortgage assets as of a
specified cut-off date, after application of scheduled payments due on or
before that date, whether or not received. As described in the prospectus
supplement, distributions of principal with respect to the related series of
certificates will be made on each distribution date to the holders of the class
certificates of the series then entitled until the certificate balances of
those certificates have been reduced to zero. Distributions of principal with
respect to one or more classes of certificates--
o may be made at a rate that is faster (and, in some cases, substantially
faster) or slower (and, in some cases, substantially slower) than the rate
at which payments or other collections of principal are received on the
assets in the trust;
o may not commence until the occurrence of certain events, such as the
retirement of one or more other classes of certificates of the same
series;
o may be made, subject to certain limitations, based on a specified
principal payment schedule; or
o may be contingent on the specified principal payment schedule for another
class of the same series and the rate at which payments and other
collections of principal on the mortgage assets in the trust are received.
Unless otherwise specified in the prospectus supplement, distributions of
principal of any class of certificates will be made on a pro rata basis
among all of the certificates of that class.
CREDIT SUPPORT AND CASH FLOW AGREEMENTS
If specified in the prospectus supplement, partial or full protection against
certain defaults and losses on the assets in the trust may be provided to one
or more classes of certificates by (1) subordination of one or more other
classes of certificates to classes in the same series, or by (2) one or more
other types of credit support, such as a letter of credit, insurance policy,
guarantee, reserve fund, cash collateral account, overcollateralization or
other credit support. If so provided in the prospectus supplement, the trust
may include--
o guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at
a specified rate; or
o certain other agreements, such as interest rate exchange agreements,
interest rate cap or floor agreements, or other agreements designed to
reduce the effects of interest rate fluctuations on the mortgage assets or
on one or more classes of certificates.
Certain relevant information regarding any applicable credit support or cash
flow agreement will be set forth in the prospectus supplement for a series of
certificates.
ADVANCES
As specified in the prospectus supplement, if the trust includes mortgage
loans, the master servicer, the special servicer, the trustee, any provider of
credit support, and/or another specified person may be obligated to make, or
have the option of making, certain advances concerning delinquent scheduled
payments of principal and/or interest on mortgage loans. Any advances made
concerning a particular mortgage loan will be reimbursable from subsequent
recoveries relating to the particular mortgage loan and as described in the
prospectus supplement. If specified in the prospectus supplement, any entity
making advances may be entitled to receive interest for a specified period
during which those advances are outstanding, payable from amounts in the trust.
If the trust includes mortgaged-backed securities, any comparable advancing
obligation of a party to the related pooling and servicing agreement, or of a
party to the related mortgage-backed securities agreement, will be described in
the prospectus supplement.
OPTIONAL TERMINATION
If specified in the prospectus supplement, a series of certificates may be
subject to optional early termination through the repurchase of the mortgage
assets in the trust. If provided in the related
9
prospectus supplement, upon the reduction of the certificate balance of a
specified class or classes of certificates by a specified percentage or amount,
a specified party may be authorized or required to solicit bids for the
purchase of all of the assets of the trust, or of a sufficient portion of those
assets to retire that class or classes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The certificates of each series will constitute or evidence ownership of
either--
o "regular interests" and "residual interests" in the trust, or a
designated portion of the trust, treated as a REMIC under Sections 860A
through 860G of the Code; or
o certificates in a trust treated as a grantor trust under applicable
provisions of the Code.
Investors are advised to consult their tax advisors and to review "Certain
Federal Income Tax Consequences" in this prospectus and in the prospectus
supplement.
CERTAIN ERISA CONSIDERATIONS
Fiduciaries of retirement plans and certain other employee benefit plans and
arrangements, including individual retirement accounts, individual retirement
annuities, Keogh plans, and collective investment funds and separate individual
retirement accounts in which such plans, accounts, annuities or arrangements
are invested, that are subject to the Employee Retirement Income Security Act
of 1974, as amended, Section 4975 of the Internal Revenue Code of 1986, or any
materially similar provisions of federal, state or local law should review with
their legal advisors whether the purchase or holding of certificates could give
rise to a transaction that is prohibited.
LEGAL INVESTMENT
If so specified in the prospectus supplement, certain classes of certificates
will constitute "mortgage related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984, as amended. All investors whose
investment activities are subject to legal investment laws and regulations,
regulatory capital requirements, or review by regulatory authorities should
consult with their own legal advisors for assistance in determining whether and
to what extent the certificates constitute legal investments for them.
See "Legal Investment" in this prospectus.
RATING
At their respective dates of issuance, each class of certificates will be rated
as of investment grade by one or more nationally recognized statistical rating
agencies.
10
RISK FACTORS
In considering an investment in the certificates of any series, you should
consider carefully the following risk factors and the risk factors in the
prospectus supplement.
THE LIMITED LIQUIDITY OF YOUR CERTIFICATES MAY HAVE AN ADVERSE IMPACT ON YOUR
ABILITY TO SELL YOUR CERTIFICATES.
The certificates of any series may have limited or no liquidity. You may
be forced to bear the risk of investing in the certificates for an indefinite
period of time. In addition, you may have no redemption rights, and the
certificates are subject to early retirement only under certain circumstances.
Lack of a Secondary Market May Limit the Liquidity of Your Certificate. We
cannot assure you that a secondary market for the certificates will develop or,
if it does develop, that it will provide certificateholders with liquidity of
investment or that it will continue for as long as the certificates remain
outstanding.
The prospectus supplement may indicate that an underwriter intends to
establish a secondary market in the certificates, although no underwriter will
be obligated to do so. Any secondary market may provide less liquidity to
investors than any comparable market for securities relating to single-family
mortgage loans. Unless specified in the prospectus supplement, the certificates
will not be listed on any securities exchange.
The Limited Nature of Ongoing Information Regarding Your Certificate May
Adversely Affect Liquidity. The primary source of ongoing information regarding
the certificates, including information regarding the status of the related
mortgage assets and any credit support for the certificates, will be the
periodic reports to certificateholders to be delivered pursuant to the related
pooling and servicing agreement.
We cannot assure you that any additional ongoing information regarding the
certificates will be available through any other source. The limited nature of
the information concerning a series of certificates may adversely affect
liquidity, even if a secondary market for the certificates does develop.
The Liquidity of Your Certificate May Be Affected by External Sources
Including Interest Rate Movement. If a secondary market does develop for the
certificates, the market value of the certificates will be affected by several
factors, including--
o perceived liquidity;
o the anticipated cash flow (which may vary widely depending upon the
prepayment and default assumptions concerning the underlying mortgage
loans); and
o prevailing interest rates.
The price payable at any given time for certain classes of certificates
may be extremely sensitive to small fluctuations in prevailing interest rates.
The relative change in price for a certificate in response to an upward or
downward movement in prevailing interest rates may not necessarily equal the
relative change in price for the certificate in response to an equal but
opposite movement in those rates. Therefore, the sale of certificates by a
holder in any secondary market that may develop may be at a discount from the
price paid by the holder. We are not aware of any source through which price
information about the certificates will be generally available on an ongoing
basis.
THE LIMITED ASSETS OF EACH TRUST MAY ADVERSELY IMPACT YOUR ABILITY TO RECOVER
YOUR INVESTMENT IN THE EVENT OF LOSS ON THE UNDERLYING MORTGAGE ASSETS.
Unless specified in the prospectus supplement, neither the certificates
nor the mortgage assets in the trust will be guaranteed or insured by Banc of
America Commercial Mortgage Inc. or any of its affiliates, by any governmental
agency or by any other person or entity. No certificate will
11
represent a claim against or security interest in the trust funds for any other
series. Therefore, if the related trust fund has insufficient assets to make
payments, no other assets will be available for payment of the deficiency, and
the holders of one or more classes of the certificates will be required to bear
the consequent loss.
Amounts on deposit from time to time in certain accounts constituting part
of the trust, including the certificate account and any accounts maintained as
credit support, may be withdrawn for purposes other than the payment of
principal of or interest on the related series of certificates under certain
conditions. On any distribution occurring after losses or shortfalls in
collections on the mortgage assets have been incurred, all or a portion of
those losses or shortfalls will be borne on a disproportionate basis among
classes of certificates.
CREDIT SUPPORT IS LIMITED AND MAY NOT BE SUFFICIENT TO PREVENT LOSS ON YOUR
CERTIFICATES.
The prospectus supplement for a series of certificates will describe any
credit support. The credit support may not cover all potential losses. For
example, credit support may or may not cover loss by reason of fraud or
negligence by a mortgage loan originator or other parties. Any losses not
covered by credit support may, at least in part, be allocated to one or more
classes of certificates.
A series of certificates may include one or more classes of subordinate
certificates, if provided in the prospectus supplement. Although subordination
is intended to reduce the likelihood of temporary shortfalls and ultimate
losses to holders of senior certificates, the amount of subordination will be
limited and may decline under certain circumstances. In addition, if principal
payments on one or more classes of certificates of a series are made in a
specified order of priority, any related credit support may be exhausted before
the principal of the later-paid classes of certificates of that series have
been repaid in full.
The impact of losses and shortfalls experienced with respect to the
mortgage assets may fall primarily upon those classes of certificates having a
later right of payment.
If a form of credit support covers the certificates of more than one
series and losses on the related mortgage assets exceed the amount of the
credit support, it is possible that the holders of certificates of one (or
more) series will disproportionately benefit from that credit support, to the
detriment of the holders of certificates of one (or more) other series.
The amount of any applicable credit support supporting one or more classes
of certificates will be determined on the basis of criteria established by each
rating agency rating such classes of certificates based on an assumed level of
defaults, delinquencies and losses on the underlying mortgage assets and
certain other factors. However, we cannot assure you that the loss experience
on the related mortgage assets will not exceed such assumed levels. If the
losses on the related mortgage assets do exceed such assumed levels, the
holders of one or more classes of certificates will be required to bear such
additional losses.
PREPAYMENTS ON THE UNDERLYING MORTGAGE LOANS WILL AFFECT THE AVERAGE LIFE OF
YOUR CERTIFICATES, AND THE RATE AND TIMING OF THOSE PREPAYMENTS MAY BE HIGHLY
UNPREDICTABLE.
As a result of prepayments on the mortgage loans in the trust, the amount
and timing of distributions of principal and/or interest on the certificates of
the related series may be highly unpredictable. Prepayments on the mortgage
loans in the trust will result in a faster rate of principal payments on one or
more classes of the related series of certificates than if payments on those
mortgage loans were made as scheduled. Therefore, the prepayment experience on
the mortgage loans in the trust may affect the average life of one or more
classes of certificates of the related series.
The rate of principal payments on pools of mortgage loans varies among
pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax and legal factors. For example, if
prevailing interest rates fall significantly below the mortgage rates borne by
the mortgage loans included in the trust, principal prepayments on those
mortgage loans are likely
12
to be higher than if prevailing interest rates remain at or above the rates
borne by those mortgage loans. Conversely, if prevailing interest rates rise
significantly above the mortgage rates borne by the mortgage loans included in
the trust, then principal prepayments on those mortgage loans are likely to be
lower than if prevailing interest rates remain at or below the mortgage rates
borne by those mortgage loans.
We cannot assure you what as to the actual rate of prepayment on the
mortgage loans in the trust will be, or that the rate of prepayment will
conform to any model in any prospectus supplement. As a result, depending on
the anticipated rate of prepayment for the mortgage loans in the trust, the
retirement of any class of certificates of the related series could occur
significantly earlier or later, and its average life could be significantly
shorter or longer, than expected.
The extent to which prepayments on the mortgage loans in trust ultimately
affect the average life of any class of certificates of the related series will
depend on the terms and provisions of the certificates. A class of certificates
may provide that on any distribution date the holders of the certificates are
entitled to a pro rata share of the prepayments on the mortgage loans in the
trust fund that are distributable on that date.
A class of certificates that entitles the holders to a disproportionately
large share of the prepayments on the mortgage loans in the trust increases the
likelihood of early retirement of that class if the rate of prepayment is
relatively fast. This type of early retirement risk is sometimes referred to as
"call risk."
A class of certificates that entitles its holders to a disproportionately
small share of the prepayments on the mortgage loans in the trust increases the
likelihood of an extended average life of that class if the rate of prepayment
is relatively slow. This type of prolonged retirement risk is sometimes
referred to as "extension risk."
As described in the prospectus supplement, the respective entitlements of
the various classes of certificate-holders of any series to receive payments
(and, in particular, prepayments) of principal of the mortgage loans in the
trust may vary based on the occurrence of certain events (e.g., the retirement
of one or more classes of certificates of that series) or subject to certain
contingencies (e.g., prepayment and default rates with respect to those
mortgage loans).
A series of certificates may include one or more controlled amortization
classes, which will entitle the holders to receive principal distributions
according to a specified principal payment schedule. Although prepayment risk
cannot be eliminated entirely for any class of certificates, a controlled
amortization class will generally provide a relatively stable cash flow so long
as the actual rate of prepayment on the mortgage loans in the trust remains
relatively constant at the rate of prepayment used to establish the specific
principal payment schedule for the certificates. Prepayment risk concerning a
given mortgage asset pool does not disappear, however, and the stability
afforded to a controlled amortization class comes at the expense of one or more
companion classes of the same series.
As described in the prospectus supplement, a companion class may entitle
the holders to a disproportionately large share of prepayments on the mortgage
loans in the trust when the rate of prepayment is relatively fast, and/or may
entitle the holders to a disproportionately small share of prepayments on the
mortgage loans in the trust when the rate of prepayment is relatively slow. A
companion class absorbs some (but not all) of the call risk and/or extension
risk that would otherwise belong to the related controlled amortization class
if all payments of principal of the mortgage loans in the trust were allocated
on a pro rata basis.
CERTIFICATES PURCHASED AT A PREMIUM OR A DISCOUNT WILL BE SENSITIVE TO THE RATE
OF PRINCIPAL PAYMENT.
A series of certificates may include one or more classes offered at a
premium or discount. Yields on those classes of certificates will be sensitive,
and in some cases extremely sensitive, to prepayments on the mortgage loans in
the trust fund. If the amount of interest payable with respect to a class is
disproportionately large as compared to the amount of principal, as with
certain classes
13
of stripped interest certificates, a holder might fail to recover its original
investment under some prepayment scenarios. The yield to maturity of any class
of certificates may vary from the anticipated yield due to the degree to which
the certificates are purchased at a discount or premium and the amount and
timing of distributions.
You should consider, in the case of any certificate purchased at a
discount, the risk that a slower than anticipated rate of principal payments on
the mortgage loans could result in an actual yield to such investor that is
lower than the anticipated yield. In the case of any certificate purchased at a
premium, you should consider the risk that a faster than anticipated rate of
principal payments could result in an actual yield to such investor that is
lower than the anticipated yield.
THE NATURE OF RATINGS ARE LIMITED AND WILL NOT GUARANTEE THAT YOU WILL RECEIVE
ANY PROJECTED RETURN ON YOUR CERTIFICATES.
Any rating assigned by a rating agency to a class of certificates will
reflect only its assessment of the likelihood that holders of the certificates
will receive payments to which the certificateholders are entitled under the
related pooling and servicing agreement. Such rating will not constitute an
assessment of the likelihood that--
o principal prepayments on the related mortgage loans will be made;
o the degree to which the rate of such prepayments might differ from that
originally anticipated; or
o the likelihood of early optional termination of the trust.
Any rating will not address the possibility that prepayment of the
mortgage loans at a higher or lower rate than anticipated by an investor may
cause such investor to experience a lower than anticipated yield or that an
investor purchasing a certificate at a significant premium might fail to
recover its initial investment under certain prepayment scenarios. Therefore, a
rating assigned by a rating agency does not guarantee or ensure the realization
of any anticipated yield on a class of certificates.
The amount, type and nature of credit support given a series of
certificates will be determined on the basis of criteria established by each
rating agency rating classes of the certificates of such series. Those criteria
are sometimes based upon an actuarial analysis of the behavior of mortgage
loans in a larger group. There can be no assurance that the historical data
supporting any such actuarial analysis will accurately reflect future
experience, or that the data derived from a large pool of mortgage loans will
accurately predict the delinquency, foreclosure or loss experience of any
particular pool of mortgage loans. In other cases, such criteria may be based
upon determinations of the values of the properties that provide security for
the mortgage loans. However, we cannot assure you that those values will not
decline in the future. As a result, the credit support required in respect of
the certificates of any series may be insufficient to fully protect the holders
of such certificates from losses on the related mortgage asset pool.
CERTAIN FACTORS AFFECTING DELINQUENCY, FORECLOSURE AND LOSS OF THE MORTGAGE
LOANS.
Mortgage loans made on the security of multifamily or commercial property
may have a greater likelihood of delinquency and foreclosure, and a greater
likelihood of loss than loans made on the security of an owner-occupied
single-family property. The ability of a borrower to repay a loan secured by an
income-producing property typically is dependent primarily upon the successful
operation of such property rather than upon the existence of independent income
or assets of the borrower. Therefore, the value of an income-producing property
is directly related to the net operating income derived from such property.
If the net operating income of the property is reduced (for example, if
rental or occupancy rates decline or real estate tax rates or other operating
expenses increase), the borrower's ability to repay the loan may be impaired. A
number of the mortgage loans may be secured by liens on owner-occupied
properties or on properties leased to a single tenant or in which only a few
tenants
14
produce a material amount of the rental income. As the primary component of the
net operating income of a property, rental income (and maintenance payments
from tenant stockholders of a Cooperative) and the value of any property are
subject to the vagaries of the applicable real estate market and/or business
climate. Properties typically leased, occupied or used on a short-term basis,
such as health care-related facilities, hotels and motels, and mini-warehouse
and self-storage facilities, tend to be affected more rapidly by changes in
market or business conditions than do properties leased, occupied or used for
longer periods, such as (typically) warehouses, retail stores, office buildings
and industrial plants. Commercial Properties may be secured by owner-occupied
properties or properties leased to a single tenant. Therefore, a decline in the
financial condition of the borrower or a single tenant may have a
disproportionately greater effect on the net operating income from such
properties than would be the case with respect to properties with multiple
tenants.
Changes in the expense components of the net operating income of a
property due to the general economic climate or economic conditions in a
locality or industry segment, such as (1) increases in interest rates, real
estate and personal property tax rates and other operating expenses including
energy costs, (2) changes in governmental rules, regulations and fiscal
policies, including environmental legislation, and (3) acts of God may also
affect the net operating income and the value of the property and the risk of
default on the related mortgage loan. In some cases leases of properties may
provide that the lessee, rather than the mortgagor, is responsible for payment
of certain of these expenses. However, because leases are subject to default
risks as well as when a tenant's income is insufficient to cover its rent and
operating expenses, the existence of such "net of expense" provisions will only
temper, not eliminate, the impact of expense increases on the performance of
the related mortgage loan.
Additional considerations may be presented by the type and use of a
particular property. For instance, properties that operate as hospitals and
nursing homes are subject to significant governmental regulation of the
ownership, operation, maintenance and financing of health care institutions.
Hotel, motel and restaurant properties are often operated pursuant to
franchise, management or operating agreements that may be terminable by the
franchisor or operator. The transferability of a hotel's or restaurant's
operating, liquor and other licenses upon a transfer of the hotel or the
restaurant, whether through purchase or foreclosure, is subject to local law
requirements.
In addition, the concentration of default, foreclosure and loss risks in
mortgage loans in the trust will generally be greater than for pools of
single-family loans because mortgage loans in the trust generally will consist
of a smaller number of higher balance loans than would a pool of single-family
loans of comparable aggregate unpaid principal balance.
Limited Recourse Nature of the Mortgage Loans May Make Recovery Difficult
in the Event that a Mortgage Loan Defaults. We anticipate that some or all of
the mortgage loans included in any trust fund will be nonrecourse loans or
loans for which recourse may be restricted or unenforceable. In this type of
mortgage loan, recourse in the event of borrower default will be limited to the
specific real property and other assets that were pledged to secure the
mortgage loan. However, even with respect to those mortgage loans that provide
for recourse against the borrower and its assets, we cannot assure you that
enforcement of such recourse provisions will be practicable, or that the assets
of the borrower will be sufficient to permit a recovery concerning a defaulted
mortgage loan in excess of the liquidation value of the related property.
Cross-Collateralization Provisions May Have Limitations on Their
Enforceability. A mortgage pool may include groups of mortgage loans which are
cross-collateralized and cross-defaulted. These arrangements are designed
primarily to ensure that all of the collateral pledged to secure the respective
mortgage loans in a cross-collateralized group. Cash flows generated on these
type of mortgage loans are available to support debt service on, and ultimate
repayment of, the total indebtedness. These arrangements seek to reduce the
risk that the inability of one or more of the mortgaged properties securing any
such group of mortgage loans to generate net operating income sufficient to pay
debt service will result in defaults and ultimate losses.
15
If the properties securing a group of mortgage loans which are
cross-collateralized are not all owned by the same entity, creditors of one or
more of the related borrowers could challenge the cross-collateralization
arrangement as a fraudulent conveyance. Under federal and state fraudulent
conveyance statutes, the incurring of an obligation or the transfer of property
by a person will be subject to avoidance under certain circumstances if the
person did not receive fair consideration or reasonably equivalent value in
exchange for such obligation or transfer and was then insolvent, was rendered
insolvent by such obligation or transfer or had unreasonably small capital for
its business. A creditor seeking to enforce remedies against a property subject
to such cross-collateralization to repay such creditor's claim against the
related borrower could assert that--
o such borrower was insolvent at the time the cross-collateralized
mortgage loans were made; and
o such borrower did not, when it allowed its property to be encumbered by
a lien securing the indebtedness represented by the other mortgage loans
in the group of cross-collateralized mortgage loans, receive fair
consideration or reasonably equivalent value for, in effect,
"guaranteeing" the performance of the other borrowers.
Although the borrower making such "guarantee" will be receiving
"guarantees" from each of the other borrowers in return, we cannot assure you
that such exchanged "guarantees" would be found to constitute fair
consideration or be of reasonably equivalent value.
The cross-collateralized mortgage loans may be secured by mortgage liens
on properties located in different states. Because of various state laws
governing foreclosure or the exercise of a power of sale and because
foreclosure actions are usually brought in state court, and the courts of one
state cannot exercise jurisdiction over property in another state, it may be
necessary upon a default under any such mortgage loan to foreclose on the
related mortgaged properties in a particular order rather than simultaneously
in order to ensure that the lien of the related mortgages is not impaired or
released.
Increased Risk of Default Associated With Balloon Payments. Some of the
mortgage loans included in the trust may be nonamortizing or only partially
amortizing over their terms to maturity. These types of mortgage loans will
require substantial payments of principal and interest (that is, balloon
payments) at their stated maturity. These loans involve a greater likelihood of
default than self-amortizing loans because the ability of a borrower to make a
balloon payment typically will depend upon its ability either to refinance the
loan or to sell the related property. The ability of a borrower to accomplish
either of these goals will be affected by--
o the value of the related property;
o the level of available mortgage rates at the time of sale or
refinancing;
o the borrower's equity in the related property;
o the financial condition and operating history of the borrower and the
related property;
o tax laws;
o rent control laws (pertaining to certain residential properties);
o Medicaid and Medicare reimbursement rates (pertaining to hospitals and
nursing homes);
o prevailing general economic conditions; and
o the availability of credit for loans secured by multifamily or
commercial property.
Neither Banc of America Commercial Mortgage Inc. nor any of its affiliates
will be required to refinance any mortgage loan.
As specified in the prospectus supplement, the master servicer or the
special servicer will be permitted (within prescribed limits) to extend and
modify mortgage loans that are in default or as to which a payment default is
imminent. Although the master servicer or the special servicer generally will
be required to determine that any such extension or modification is reasonably
likely
16
to produce a greater recovery than liquidation, taking into account the time
value of money, we cannot assure you that any such extension or modification
will in fact increase the present value of receipts from or proceeds of the
affected mortgage loans.
The Lender Under a Mortgage Loan May Have Difficulty Collecting Rents Upon
the Default and/or Bankruptcy of the Related Borrower. Each mortgage loan
included in the trust secured by property that is subject to leases typically
will be secured by an assignment of leases and rents. Under such an assignment,
the mortgagor assigns to the mortgagee its right, title and interest as lessor
under the leases of the related property, and the income derived, as further
security for the related mortgage loan, while retaining a license to collect
rents for so long as there is no default. If the borrower defaults, the license
terminates and the lender is entitled to collect rents. Some state laws may
require that the lender take possession of the property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect
of the borrower, the lender's ability to collect the rents may be adversely
affected.
The Enforceability of Due-on-Sale and Debt-Acceleration Clauses May Be
Limited in Certain Situations. Mortgages may contain a due-on-sale clause,
which permits the lender to accelerate the maturity of the mortgage loan if the
borrower sells, transfers or conveys the related property or its interest in
the property. Mortgages also may include a debt-acceleration clause, which
permits the lender to accelerate the debt upon a monetary or nonmonetary
default of the mortgagor. Such clauses are generally enforceable subject to
certain exceptions. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
when an acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render the acceleration unconscionable.
Adverse Environmental Conditions May Subject a Mortgage Loan to Additional
Risk. Under the laws of certain states, contamination of real property may give
rise to a lien on the property to assure the costs of cleanup. In several
states, such a lien has priority over an existing mortgage lien on such
property. In addition, under the laws of some states and under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, a lender may be liable, as an "owner" or "operator", for costs of
addressing releases or threatened releases of hazardous substances at a
property, if agents or employees of the lender have become sufficiently
involved in the operations of the borrower, regardless of whether the
environmental damage or threat was caused by the borrower or a prior owner. A
lender also risks such liability on foreclosure of the mortgage.
Certain Special Hazard Losses May Subject Your Certificates to an
Increased Risk of Loss. Unless otherwise specified in a prospectus supplement,
the master servicer and special servicer for the trust will be required to
cause the borrower on each mortgage loan in the trust to maintain such
insurance coverage in respect of the property as is required under the related
mortgage, including hazard insurance. As described in the prospectus
supplement, the master servicer and the special servicer may satisfy its
obligation to cause hazard insurance to be maintained with respect to any
property through acquisition of a blanket policy.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the properties will be underwritten by different
insurers under different state laws in accordance with different applicable
state forms, and therefore will not contain identical terms and conditions,
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water- related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry
rot, vermin, domestic animals and certain other kinds of risks. Unless the
mortgage specifically requires the mortgagor to insure against physical damage
arising from such causes, then, to the extent any consequent losses are not
covered by credit support, such losses may be borne, at least in part, by the
holders of one or more classes of certificates of the related series.
17
The Recording of the Mortgages in the Name of MERS May Affect the Yield on
the Certificates. The mortgages or assignments of mortgage for some of the
mortgage loans have been or may be recorded in the name of Mortgage Electronic
Registration Systems, Inc. or MERS, solely as nominee for the mortgage loan
seller and its successors and assigns. Subsequent assignments of those
mortgages are registered electronically through the MERS system. However, if
MERS discontinues the MERS system and it becomes necessary to record an
assignment of mortgage to the trustee, then any related expenses will be paid
by the trust and will reduce the amount available to pay principal of and
interest on the certificates.
The recording of mortgages in the name of MERS is a new practice in the
commercial mortgage lending industry. Public recording officers and others may
have limited, if any, experience with lenders seeking to foreclose mortgages,
assignments of which are registered with MERS. Accordingly, delays and
additional costs in commencing, prosecuting and completing foreclosure
proceedings and conducting foreclosure sales of the mortgaged properties could
result. Those delays and the additional costs could in turn delay the
distribution of liquidation proceeds to certificateholders and increase the
amount of losses on the loans.
INCLUSION OF DELINQUENT MORTGAGE LOANS IN A MORTGAGE ASSET POOL.
If provided in the prospectus supplement, the trust fund for a particular
series of certificates may include mortgage loans that are past due. As
specified in the related prospectus supplement, the servicing of such mortgage
loans will be performed by the special servicer. The same entity may act as
both master servicer and special servicer. Credit support provided with respect
to a particular series of certificates may not cover all losses related to such
delinquent mortgage loans, and investors should consider the risk that the
inclusion of such mortgage loans in the trust fund may adversely affect the
rate of defaults and prepayments concerning the subject mortgage asset pool and
the yield on the certificates of such series.
PROSPECTUS SUPPLEMENT
To the extent appropriate, the prospectus supplement relating to each
series of offered certificates will contain--
o a description of the class or classes of such offered certificates,
including the payment provisions with respect to each such class, the
aggregate principal amount (if any) of each such class, the rate at which
interest accrues from time to time (if at all), with respect to each such
class or the method of determining such rate, and whether interest with
respect to each such class will accrue from time to time on its aggregate
principal amount (if any) or on a specified notional amount (if at all);
o information with respect to any other classes of certificates of the
same series;
o the respective dates on which distributions are to be made;
o information as to the assets, including the mortgage assets,
constituting the related trust fund;
o the circumstances, if any, under which the related trust fund may be
subject to early termination;
o additional information with respect to the method of distribution of
such offered certificates;
o whether one or more REMIC elections will be made and the designation of
the "regular interests" and "residual interests" in each REMIC to be
created and the identity of the person responsible for the various
tax-related duties in respect of each REMIC to be created;
o the initial percentage ownership interest in the related trust fund to
be evidenced by each class of certificates of such series;
o information concerning the trustee of the related trust fund;
18
o if the related trust fund includes mortgage loans, information
concerning the master servicer and any special servicer of such mortgage
loans and the circumstances under which all or a portion, as specified,
of the servicing of a mortgage loan would transfer from the master
servicer to the special servicer;
o information as to the nature and extent of subordination of any class of
certificates of such series, including a class of offered certificates;
and
o whether such offered certificates will be initially issued in definitive
or book-entry form.
CAPITALIZED TERMS USED IN THIS PROSPECTUS
From time to time we use capitalized terms in this prospectus. Each of
those capitalized terms will have the meaning assigned to it in the "Glossary"
attached to this prospectus.
19
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust fund will consist of mortgage assets
which will include--
o various types of multifamily or commercial mortgage loans;
o mortgage participations, pass-through certificates or other
mortgage-backed securities that evidence interests in, or that are
secured by pledges of, one or more of various types of multifamily or
commercial mortgage loans; or
o a combination of such mortgage loans and mortgage backed securities.
We will establish each trust fund and select each mortgage asset. We will
purchase mortgage assets to be included in the trust fund and select each
mortgage asset from the Mortgage Asset Seller who may not have originated the
mortgage asset or issued the MBS and may be our affiliate.
We will not insure or guaranty the mortgage assets nor will any of its
affiliates or, unless otherwise provided in the related prospectus supplement,
by any governmental agency or instrumentality or by any other person. The
discussion below under the heading "-- Mortgage Loans", unless otherwise noted,
applies equally to mortgage loans underlying any MBS included in a particular
trust fund.
MORTGAGE LOANS
General. The mortgage loans will be evidenced by promissory notes
(referred to in this prospectus as mortgage notes) notes secured by mortgages,
deeds of trust or similar security instruments (referred to in this prospectus
as mortgages) that create first or junior liens on fee or leasehold estates in
properties consisting of--
o residential properties consisting of five or more rental or
cooperatively-owned dwelling units in high-rise, mid-rise or garden
apartment buildings or other residential structures; or
o office buildings, retail stores and establishments, hotels or motels,
nursing homes, hospitals or other health care-related facilities,
recreational vehicle and mobile home parks, warehouse facilities,
mini-warehouse facilities, self-storage facilities, industrial plants,
parking lots, entertainment or sports arenas, restaurants, marinas, mixed
use or various other types of income-producing properties or unimproved
land.
These multifamily properties may include mixed commercial and residential
structures and apartment buildings owned by private cooperative housing
corporations. However, no one of the following types of commercial properties
will represent security for a material concentration of the mortgage loans in
any trust fund, based on principal balance at the time such trust fund is
formed: (1) restaurants; (2) entertainment or sports arenas; (3) marinas; or
(4) nursing homes, hospitals or other health care-related facilities. Unless
otherwise specified in the related prospectus supplement, each mortgage will
create a first priority mortgage lien on a borrower's fee estate in a mortgaged
property. If a mortgage creates a lien on a borrower's leasehold estate in a
property, then, unless otherwise specified in the related prospectus
supplement, the term of any such leasehold will exceed the term of the mortgage
note by at least ten years. Unless otherwise specified in the related
prospectus supplement, each mortgage loan will have been originated by a person
other than us; however, such person may be or may have been our affiliate.
If so provided in the related prospectus supplement, mortgage assets for a
series of certificates may include mortgage loans secured by junior liens, and
the loans secured by the related senior liens may not be included in the
mortgage pool. The primary risk to holders of mortgage loans secured by junior
liens is the possibility that adequate funds will not be received in connection
with a foreclosure of the related senior liens to satisfy fully both the senior
liens and the mortgage loan. In the event that a holder of a senior lien
forecloses on a mortgaged property, the proceeds of the foreclosure or similar
sale will be applied first to the payment of court costs and fees in connection
20
with the foreclosure, second to real estate taxes, third in satisfaction of all
principal, interest, prepayment or acceleration penalties, if any, and any
other sums due and owing to the holder of the senior liens. The claims of the
holders of the senior liens will be satisfied in full out of proceeds of the
liquidation of the related mortgaged property, if such proceeds are sufficient,
before the trust fund as holder of the junior lien receives any payments in
respect of the mortgage loan. If the master servicer were to foreclose on any
mortgage loan, it would do so subject to any related senior liens. In order for
the debt related to such mortgage loan to be paid in full at such sale, a
bidder at the foreclosure sale of such mortgage loan would have to bid an
amount sufficient to pay off all sums due under the mortgage loan and any
senior liens or purchase the mortgaged property subject to such senior liens.
In the event that such proceeds from a foreclosure or similar sale of the
related mortgaged property are insufficient to satisfy all senior liens and the
mortgage loan in the aggregate, the trust fund, as the holder of the junior
lien, and, accordingly, holders of one or more classes of the certificates of
the related series bear--
o the risk of delay in distributions while a deficiency judgment against
the borrower is obtained; and
o the risk of loss if the deficiency judgment is not obtained and
satisfied. Moreover, deficiency judgments may not be available in certain
jurisdictions, or the particular mortgage loan may be a nonrecourse loan,
which means that, absent special facts, recourse in the case of default
will be limited to the mortgaged property and such other assets, if any,
that were pledged to secure repayment of the mortgage loan.
If so specified in the related prospectus supplement, the mortgage assets
for a particular series of certificates may include mortgage loans that are
delinquent as of the date such certificates are issued. In that case, the
related prospectus supplement will set forth, as to each such mortgage loan,
available information as to the period of such delinquency, any forbearance
arrangement then in effect, the condition of the related mortgaged property and
the ability of the mortgaged property to generate income to service the
mortgage debt.
Default and Loss Considerations with Respect to the Mortgage
Loans. Mortgage loans secured by liens on income-producing properties are
substantially different from loans made on the security of owner-occupied
single-family homes. The repayment of a loan secured by a lien on an
income-producing property is typically dependent upon the successful operation
of such property (that is, its ability to generate income). Moreover, as noted
above, some or all of the mortgage loans included in a particular trust fund
may be nonrecourse loans.
Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important factor in evaluating the
likelihood of default on such a loan. The Net Operating Income of a mortgaged
property will generally fluctuate over time and may or may not be sufficient to
cover debt service on the related mortgage loan at any given time. As the
primary source of the operating revenues of a nonowner occupied,
income-producing property, rental income (and, with respect to a mortgage loan
secured by a cooperative apartment building, maintenance payments from
tenant-stockholders of a Cooperative) may be affected by the condition of the
applicable real estate market and/or area economy. In addition, properties
typically leased, occupied or used on a short-term basis, such as certain
health care-related facilities, hotels and motels, and mini-warehouse and
self-storage facilities, tend to be affected more rapidly by changes in market
or business conditions than do properties typically leased for longer periods,
such as warehouses, retail stores, office buildings and industrial plants.
Commercial Properties may be owner-occupied or leased to a small number of
tenants. Thus, the Net Operating Income of such a mortgaged property may depend
substantially on the financial condition of the borrower or a tenant, and
mortgage loans secured by liens on such properties may pose a greater
likelihood of default and loss than loans secured by liens on Multifamily
Properties or on multi-tenant Commercial Properties.
Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs, labor costs and other
operating expenses, and/or to changes in governmental rules, regulations and
21
fiscal policies, may also affect the likelihood of default on a mortgage loan.
As may be further described in the related prospectus supplement, in some cases
leases of mortgaged properties may provide that the lessee, rather than the
borrower/landlord, is responsible for payment of operating expenses. However,
the existence of such "net of expense" provisions will result in stable Net
Operating Income to the borrower/landlord only to the extent that the lessee is
able to absorb operating expense increases while continuing to make rent
payments.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a
factor in evaluating the likelihood of loss if a property must be liquidated
following a default. The lower the Loan-to-Value Ratio, the greater the
percentage of the borrower's equity in a mortgaged property, and thus (a) the
greater the incentive of the borrower to perform under the terms of the related
mortgage loan (in order to protect such equity) and (b) the greater the cushion
provided to the lender against loss on liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure
of the likelihood of liquidation loss in a pool of mortgage loans. For example,
the value of a mortgaged property as of the date of initial issuance of the
related series of certificates may be less than the value determined at loan
origination, and will likely continue to fluctuate from time to time based upon
certain factors including changes in economic conditions and the real estate
market. Moreover, even when current, an appraisal is not necessarily a reliable
estimate of value. Appraised values of income-producing properties are
generally based on--
o the market comparison method (recent resale value of comparable
properties at the date of the appraisal), the cost replacement method
(the cost of replacing the property at such date);
o the income capitalization method (a projection of value based upon the
property's projected net cash flow); and
o or upon a selection from or interpolation of the values derived from
such methods.
Each of these appraisal methods can present analytical difficulties. It is
often difficult to find truly comparable properties that have recently been
sold; the replacement cost of a property may have little to do with its current
market value; and income capitalization is inherently based on inexact
projections of income and expense and the selection of an appropriate
capitalization rate and discount rate. Where more than one of these appraisal
methods are used and provide significantly different results, an accurate
determination of value and, correspondingly, a reliable analysis of the
likelihood of default and loss, is even more difficult.
Although there may be multiple methods for determining the value of a
mortgaged property, value will in all cases be affected by property
performance. As a result, if a mortgage loan defaults because the income
generated by the related mortgaged property is insufficient to cover operating
costs and expenses and pay debt service, then the value of the mortgaged
property will reflect that and a liquidation loss may occur.
While we believe that the foregoing considerations are important factors
that generally distinguish loans secured by liens on income-producing real
estate from single-family mortgage loans, there can be no assurance that all of
such factors will in fact have been prudently considered by the originators of
the mortgage loans, or that, for a particular mortgage loan, they are complete
or relevant. See "Risk Factors--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--General" and "--Certain Factors
Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans--Increased
Risk of Default Associated With Balloon Payments".
Payment Provisions of the Mortgage Loans. All of the mortgage loans will
(1) have had original terms to maturity of not more than 40 years and (2)
provide for scheduled payments of principal, interest or both, to be made on
specified dates that occur monthly, quarterly, semi-annually or annually. A
mortgage loan may--
o provide for no accrual of interest or for accrual of interest at an
interest rate that is fixed over its term or that adjusts from time to
time, or that may be converted at the borrower's election from an
adjustable to a fixed Mortgage Rate, or from a fixed to an adjustable
Mortgage Rate;
22
o provide for level payments to maturity or for payments that adjust from
time to time to accommodate changes in its interest rate or to reflect
the occurrence of certain events, and may permit negative amortization;
o may be fully amortizing or may be partially amortizing or nonamortizing,
with a balloon payment due on its stated maturity date; and
o may prohibit over its term or for a certain period prepayments and/or
require payment of a premium or a yield maintenance payment in connection
with certain prepayments, in each case as described in the related
prospectus supplement.
A mortgage loan may also contain a provision that entitles the lender to a
share of appreciation of the related mortgaged property, or profits realized
from the operation or disposition of such mortgaged property or the benefit, if
any, resulting from the refinancing of the mortgage loan, as described in the
related prospectus supplement. See "Certain Legal Aspects of the Mortgage
Loans--Default Interest and Limitations on Prepayments" in the prospectus
regarding the enforceability of prepayment premiums and yield maintenance
charges.
Mortgage Loan Information in Prospectus Supplements. Each prospectus
supplement will contain certain information pertaining to the mortgage loans in
the related trust fund, which, to the extent then applicable, will generally
include the following:
o the aggregate outstanding principal balance and the largest, smallest
and average outstanding principal balance of the mortgage loans;
o the type or types of property that provide security for repayment of the
mortgage loans;
o the earliest and latest origination date and maturity date of the
mortgage loans;
o the original and remaining terms to maturity of the mortgage loans, or
the respective ranges of such terms to maturity, and the weighted average
original and remaining terms to maturity of the mortgage loans;
o the Loan-to-Value Ratios of the mortgage loans (either at origination or
as of a more recent date), or the range of the Loan-to-Value-Ratios, and
the weighted average of such Loan-to-Value Ratios;
o the Mortgage Rates borne by the mortgage loans, or the range of the
Mortgage Rate, and the weighted average Mortgage Rate borne by the
mortgage loans;
o with respect to mortgage loans with adjustable Mortgage Rates, the index
or indices upon which such adjustments are based, the adjustment dates,
the range of gross margins and the weighted average gross margin, and any
limits on Mortgage Rate adjustments at the time of any adjustment and
over the life of such mortgage loan;
o information regarding the payment characteristics of the mortgage loans,
including, without limitation, balloon payment and other amortization
provisions, Lock-out Periods and Prepayment Premiums;
o the Debt Service Coverage Ratios of the mortgage loans (either at
origination or as of a more recent date), or the range Debt Service
Coverage Ratios, and the weighted average of such Debt Service Coverage
Ratios, and
o the geographic distribution of the mortgaged properties on a
state-by-state basis. In appropriate cases, the related prospectus
supplement will also contain certain information available us that
pertains to the provisions of leases and the nature of tenants of the
mortgaged properties. If we are unable to provide the specific
information described above at the time any offered certificates of a
series are initially offered, more general information of the nature
described above will be provided in the related prospectus supplement,
and specific information will be set forth in a report which will be
available to purchasers of those certificates at or before their initial
issuance and will be filed as part of a Current Report on Form 8-K with
the Securities and Exchange Commission within fifteen days following
their issuance.
23
If any mortgage loan, or group of related mortgage loans, constitutes a
concentration of credit risk, financial statements or other financial
information with respect to the related mortgaged property or mortgaged
properties will be included in the related prospectus supplement.
If and to the extent available and relevant to an investment decision in
the offered certificates of the related series, information regarding the
prepayment experience of a master servicer's multifamily and/or commercial
mortgage loan servicing portfolio will be included in the related prospectus
supplement. However, many servicers do not maintain records regarding such
matters or, at least, not in a format that can be readily aggregated. In
addition, the relevant characteristics of a master servicer's servicing
portfolio may be so materially different from those of the related mortgage
asset pool that such prepayment experience would not be meaningful to an
investor. For example, differences in geographic dispersion, property type
and/or loan terms (e.g., mortgage rates, terms to maturity and/or prepayment
restrictions) between the two pools of loans could render the master servicer's
prepayment experience irrelevant. Because of the nature of the assets to be
serviced and administered by a special servicer, no comparable prepayment
information will be presented with respect to the special servicer's
multifamily and/or commercial mortgage loan servicing portfolio.
MBS
MBS may include (1) private-label (that is, not issued, insured or
guaranteed by the United States or any agency or instrumentality of the United
States) mortgage participations, mortgage pass-through certificates or other
mortgage-backed securities or (2) certificates issued and/or insured or
guaranteed by the Federal Home Loan Mortgage Corporation, the Federal National
Mortgage Association, the Governmental National Mortgage Association or the
Federal Agricultural Mortgage Corporation, provided that, unless otherwise
specified in the related prospectus supplement, each MBS will evidence an
interest in, or will be secured by a pledge of, mortgage loans that conform to
the descriptions of the mortgage loans contained in this prospectus.
Except in the case of a pro rata mortgage participation in a single
mortgage loan or a pool of mortgage loans, each MBS included in a mortgage
asset pool: (a) either will (1) have been previously registered under the
Securities Act of 1933, as amended, (2) be exempt from such registration
requirements or (3) have been held for at least the holding period specified in
Rule 144(k) under the Securities Act of 1933, as amended; and (b) will have
been acquired (other than from us or any of our affiliates) in bona fide
secondary market transactions.
Any MBS will have been issued pursuant to a MBS agreement which is a
participation and servicing agreement, a pooling and servicing agreement, an
indenture or similar agreement. The issuer of the MBS and/or the servicer of
the underlying mortgage loans will be parties to the MBS agreement, generally
together with a trustee or, in the alternative, with the original purchaser or
purchasers of the MBS.
The MBS may have been issued in one or more classes with characteristics
similar to the classes of the offered certificates described in this
prospectus. Distributions in respect of the MBS will be made by the issuer of
the MBS, the servicer of the MBS, or the trustee of the MBS agreement or the
MBS trustee on the dates specified in the related prospectus supplement. The
issuer of the MBS or the MBS servicer or another person specified in the
related prospectus supplement may have the right or obligation to repurchase or
substitute assets underlying the MBS after a certain date or under other
circumstances specified in the related prospectus supplement.
Reserve funds, subordination or other credit support similar to that
described for the offered certificates under "Description of Credit Support"
may have been provided with respect to the MBS. The type, characteristics and
amount of such credit support, if any, will be a function of the
characteristics of the underlying mortgage loans and other factors and
generally will have been established on the basis of the requirements of any
rating agency that may have assigned a rating to the MBS, or by the initial
purchasers of the MBS.
24
The prospectus supplement for a series of certificates that evidence
interests in MBS will specify, to the extent available--
o the aggregate approximate initial and outstanding principal amount(s)
and type of the MBS to be included in the trust fund;
o the original and remaining term(s) to stated maturity of the MBS, if
applicable;
o the pass-through or bond rate(s) of the MBS or the formula for
determining such rate(s);
o the payment characteristics of the MBS;
o the issuer of the MBS, servicer of the MBS and trustee of the MBS, as
applicable, of each of the MBS;
o a description of the related credit support, if any;
o the circumstances under which the related underlying mortgage loans, or
the MBS themselves, may be purchased prior to their maturity;
o the terms on which mortgage loans may be substituted for those
originally underlying the MBS;
o the type of mortgage loans underlying the MBS and, to the extent
available and appropriate under the circumstances, such other information
in respect of the underlying mortgage loans described under "--Mortgage
Loans--Mortgage Loan Information in Prospectus Supplements"; and
o the characteristics of any cash flow agreements that relate to the MBS.
CERTIFICATE ACCOUNTS
Each trust fund will include one or more accounts established and
maintained on behalf of the certificateholders into which all payments and
collections received or advanced with respect to the mortgage assets and other
assets in the trust fund will be deposited to the extent described in this
prospectus and in the related prospectus supplement. See "The Pooling and
Servicing Agreements-- Certificate Account".
CREDIT SUPPORT
If so provided in the prospectus supplement for a series of certificates,
partial or full protection against certain defaults and losses on the mortgage
assets in the related trust fund may be provided to one or more classes of
certificates of such series in the form of subordination of one or more other
classes of certificates of such series or by one or more other types of credit
support, such as a letter of credit, insurance policy, guarantee or reserve
fund, among others, or a combination of subordination and credit support. The
amount and types of credit support, the identity of the entity providing it (if
applicable) and related information with respect to each type of credit
support, if any, will be set forth in the prospectus supplement for a series of
certificates. See "Risk Factors-- Credit Support Limitations" and "Description
of Credit Support".
CASH FLOW AGREEMENTS
If so provided in the prospectus supplement for a series of certificates,
the related trust fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for such series will be
invested at a specified rate. The related trust fund may also include certain
other agreements, such as interest rate exchange agreements, interest rate cap
or floor agreements, or other agreements designed to reduce the effects of
interest rate fluctuations on the mortgage assets on one or more classes of
certificates. The principal terms of any such cash flow agreement, including,
without limitation, provisions relating to the timing, manner and amount of
payments and provisions relating to the termination of the cash flow agreement,
will be described in the related prospectus supplement. The related prospectus
supplement will also identify the obligor under any such cash flow agreement.
25
YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any offered certificate will depend on the price paid by the
certificateholder, the pass-through rate of the certificate and the amount and
timing of distributions on the Certificate. See "Risk Factors--Effect of
Prepayments on Average Life of Certificates". The following discussion
contemplates a trust fund that consists solely of mortgage loans. While the
characteristics and behavior of mortgage loans underlying an MBS can generally
be expected to have the same effect on the yield to maturity and/or weighted
average life of a class of certificates as will the characteristics and
behavior of comparable mortgage loans, the effect may differ due to the payment
characteristics of the MBS. If a trust fund includes MBS, the related
prospectus supplement will discuss the effect, if any, that the payment
characteristics of the MBS may have on the yield to maturity and weighted
average lives of the offered certificates of the related series.
PASS-THROUGH RATE
The certificates of any class within a series may have a fixed, variable
or adjustable pass-through rate, which may or may not be based upon the
interest rates borne by the mortgage loans in the related trust fund.
The prospectus supplement with respect to any series of certificates will
specify the pass-through rate for each class of offered certificates of such
series or, in the case of a class of offered certificates with a variable or
adjustable pass-through rate, the method of determining the pass-through rate;
the effect, if any, of the prepayment of any mortgage loan on the pass-through
rate of one or more classes of offered certificates; and whether the
distributions of interest on the offered certificates of any class will be
dependent, in whole or in part, on the performance of any obligor under a cash
flow agreement.
PAYMENT DELAYS
With respect to any series of certificates, a period of time will elapse
between the date upon which payments on the mortgage loans in the related trust
fund are due and the Distribution Date on which such payments are passed
through to certificateholders. That delay will effectively reduce the yield
that would otherwise be produced if payments on such mortgage loans were
distributed to certificateholders on the date they were due.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a mortgage loan,
the borrower is generally charged interest on the amount of such prepayment
only through the date of such prepayment, instead of through the Due Date for
the next succeeding scheduled payment. However, interest accrued on any series
of certificates and distributable on any Distribution Date will generally
correspond to interest accrued on the mortgage loans to their respective Due
Dates during the related Due Period. If a prepayment on any mortgage loan is
distributable to Certificateholders on a particular Distribution Date, but such
prepayment is not accompanied by interest to the Due Date for such mortgage
loan in the related Due Period, then the interest charged to the borrower (net
of servicing and administrative fees) may be less than the corresponding amount
of interest accrued and otherwise payable on the certificates of the related
series. If and to the extent that any such shortfall is allocated to a class of
offered certificates, the yield will be adversely affected. The prospectus
supplement for each series of certificates will describe the manner in which
any such shortfalls will be allocated among the classes of such certificates.
The related prospectus supplement will also describe any amounts available to
offset such shortfalls.
YIELD AND PREPAYMENT CONSIDERATIONS
A certificate's yield to maturity will be affected by the rate of
principal payments on the mortgage loans in the related trust fund and the
allocation the principal payments to reduce the
26
principal balance (or notional amount, if applicable) of such certificate. The
rate of principal payments on the mortgage loans in any trust fund will in turn
be affected by the amortization schedules of the mortgage loans (which, in the
case of mortgage loans, may change periodically to accommodate adjustments to
the corresponding Mortgage Rates), the dates on which any balloon payments are
due, and the rate of principal prepayments (including for this purpose,
voluntary prepayments by borrowers and also prepayments resulting from
liquidations of mortgage loans due to defaults, casualties or condemnations
affecting the related mortgaged properties, or purchases of mortgage loans out
of the related trust fund). Because the rate of principal prepayments on the
mortgage loans in any trust fund will depend on future events and a variety of
factors (as described below), no assurance can be given as to such rate.
The extent to which the yield to maturity of a class of offered
certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and
to what degree, payments of principal on the mortgage loans in the related
trust fund are in turn distributed on such certificates (or, in the case of a
class of Stripped Interest Certificates, result in the reduction of the
notional amount of the Stripped Interest Certificates). An investor should
consider, in the case of any offered certificate purchased at a discount, the
risk that a slower than anticipated rate of principal payments on the mortgage
loans in the related trust fund could result in an actual yield to such
investor that is lower than the anticipated yield and, in the case of any
offered certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments on such mortgage loans could result in
an actual yield to such investor that is lower than the anticipated yield. In
addition, if an investor purchases an offered certificate at a discount (or
premium), and principal payments are made in reduction of the principal balance
or notional amount of such investor's offered certificates at a rate slower (or
faster) than the rate anticipated by the investor during any particular period,
any consequent adverse effects on such investor's yield would not be fully
offset by a subsequent increase (or decrease) in the rate of principal
payments.
In general, the notional amount of a class of Stripped Interest
Certificates will either--
o be based on the principal balances of some or all of the mortgage assets
in the related trust fund; or
o equal the Certificate Balances of one or more of the other classes of
certificates of the same series.
Accordingly, the yield on such Stripped Interest Certificates will be
inversely related to the rate at which payments and other collections of
principal are received on such mortgage assets or distributions are made in
reduction of the Certificate Balances of such classes of certificates, as the
case may be.
Consistent with the foregoing, if a class of certificates of any series
consists of Stripped Interest Certificates or Stripped Principal Certificates,
a lower than anticipated rate of principal prepayments on the mortgage loans in
the related trust fund will negatively affect the yield to investors in
Stripped Principal Certificates, and a higher than anticipated rate of
principal prepayments on such mortgage loans will negatively affect the yield
to investors in Stripped Interest Certificates. If the offered certificates of
a series include any such certificates, the related prospectus supplement will
include a table showing the effect of various constant assumed levels of
prepayment on yields on such certificates. Such tables will be intended to
illustrate the sensitivity of yields to various constant assumed prepayment
rates and will not be intended to predict, or to provide information that will
enable investors to predict, yields or prepayment rates.
The extent of prepayments of principal of the mortgage loans in any trust
fund may be affected by a number of factors, including, without limitation--
o the availability of mortgage credit, the relative economic vitality of
the area in which the mortgaged properties are located;
o the quality of management of the mortgaged properties;
27
o the servicing of the mortgage loans; and
o possible changes in tax laws and other opportunities for investment.
In general, those factors which increase the attractiveness of selling a
mortgaged property or refinancing a mortgage loan or which enhance a borrower's
ability to do so, as well as those factors which increase the likelihood of
default under a mortgage loan, would be expected to cause the rate of
prepayment in respect of any mortgage asset pool to accelerate. In contrast,
those factors having an opposite effect would be expected to cause the rate of
prepayment of any mortgage asset pool to slow.
The rate of principal payments on the mortgage loans in any trust fund may
also be affected by the existence of Lock-out Periods and requirements that
principal prepayments be accompanied by prepayment premiums, and by the extent
to which such provisions may be practicably enforced. To the extent
enforceable, such provisions could constitute either an absolute prohibition
(in the case of a Lock-out Period) or a disincentive (in the case of a
Prepayment Premium) to a borrower's voluntarily prepaying its mortgage loan,
thereby slowing the rate of prepayments.
The rate of prepayment on a pool of mortgage loans is likely to be
affected by prevailing market interest rates for mortgage loans of a comparable
type, term and risk level. When the prevailing market interest rate is below a
mortgage coupon, a borrower may have an increased incentive to refinance its
mortgage loan. Even in the case of adjustable rate mortgage loans, as
prevailing market interest rates decline, and without regard to whether the
Mortgage Rates on such adjustable rate mortgage loans decline in a manner
consistent with the prevailing market interest rates, the related borrowers may
have an increased incentive to refinance for purposes of either (1) converting
to a fixed rate loan and thereby "locking in" such rate or (2) taking advantage
of a different index, margin or rate cap or floor on another adjustable rate
mortgage loan. Therefore, as prevailing market interest rates decline,
prepayment speeds would be expected to accelerate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
mortgaged properties in order to realize their equity in the mortgaged
properties, to meet cash flow needs or to make other investments. In addition,
some borrowers may be motivated by federal and state tax laws (which are
subject to change) to sell mortgaged properties prior to the exhaustion of tax
depreciation benefits. We make no representation as to the particular factors
that will affect the prepayment of the mortgage loans in any trust fund, as to
the relative importance of such factors, as to the percentage of the principal
balance of such mortgage loans that will be paid as of any date or as to the
overall rate of prepayment on such mortgage loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the mortgage loans in
any trust fund will affect the ultimate maturity and the weighted average life
of one or more classes of the certificates of such series. Unless otherwise
specified in the related prospectus supplement, weighted average life refers to
the average amount of time that will elapse from the date of issuance of an
instrument until each dollar allocable as principal of such instrument is
repaid to the investor.
The weighted average life and maturity of a class of certificates of any
series will be influenced by the rate at which principal on the related
mortgage loans, whether in the form of scheduled amortization or prepayments
(for this purpose, the term "prepayment" includes voluntary prepayments by
borrowers and also prepayments resulting from liquidations of mortgage loans
due to default, casualties or condemnations affecting the related mortgaged
properties and purchases of mortgage loans out of the related trust fund), is
paid to such class. Prepayment rates on loans are commonly measured relative to
a prepayment standard or model, such as the CPR prepayment model or the SPA
prepayment model. CPR represents an assumed constant rate of prepayment each
month (expressed as an annual percentage) relative to the then outstanding
principal balance of a pool of mortgage loans for the life of such loans. SPA
represents an assumed variable rate of prepayment each month (expressed as an
annual percentage) relative to the then outstanding
28
principal balance of a pool of mortgage loans, with different prepayment
assumptions often expressed as percentages of SPA. For example, a prepayment
assumption of 100% of SPA assumes prepayment rates of 0.2% per annum of the
then outstanding principal balance of such loans in the first month of the life
of the loans and an additional 0.2% per annum in each month thereafter until
the thirtieth month. Beginning in the thirtieth month, and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any particular pool of mortgage loans.
Moreover, the CPR and SPA models were developed based upon historical
prepayment experience for single-family mortgage loans. Thus, it is unlikely
that the prepayment experience of the mortgage loans included in any trust fund
will conform to any particular level of CPR or SPA.
The prospectus supplement with respect to each series of certificates will
contain tables, if applicable, setting forth the projected weighted average
life of each class of offered certificates of such series with a Certificate
Balance, and the percentage of the initial Certificate Balance of each such
class that would be outstanding on specified Distribution Dates, based on the
assumptions stated in such prospectus supplement, including assumptions that
prepayments on the related mortgage loans are made at rates corresponding to
various percentages of CPR or SPA, or at such other rates specified in such
prospectus supplement. Such tables and assumptions will illustrate the
sensitivity of the weighted average lives of the certificates to various
assumed prepayment rates and will not be intended to predict, or to provide
information that will enable investors to predict, the actual weighted average
lives of the certificates.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the mortgage
loans included in a particular trust fund may require that balloon payments be
made at maturity. Because the ability of a borrower to make a balloon payment
typically will depend upon its ability either to refinance the loan or to sell
the related mortgaged property, there is a possibility that mortgage loans that
require balloon payments may default at maturity, or that the maturity of such
a mortgage loan may be extended in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the borrower or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted mortgage loans,
the master servicer or the special servicer, to the extent and under the
circumstances set forth in this prospectus and in the related prospectus
supplement, may be authorized to modify mortgage loans that are in default or
as to which a payment default is imminent. Any defaulted balloon payment or
modification that extends the maturity of a mortgage loan may delay
distributions of principal on a class of offered certificates and thereby
extend the weighted average life of such certificates and, if such certificates
were purchased at a discount, reduce the yield.
Negative Amortization. The weighted average life of a class of
certificates can be affected by mortgage loans that permit negative
amortization to occur (that is, mortgage loans that provide for the current
payment of interest calculated at a rate lower than the rate at which interest
accrues, with the unpaid portion of such interest being added to the related
principal balance). Negative amortization on one or more mortgage loans in any
trust fund may result in negative amortization on the offered certificates of
the related series. The related prospectus supplement will describe, if
applicable, the manner in which negative amortization in respect of the
mortgage loans in any trust fund is allocated among the respective classes of
certificates of the related series. The portion of any mortgage loan negative
amortization allocated to a class of certificates may result in a deferral of
some or all of the interest payable, which deferred interest may be added to
the Certificate Balance of the certificates. In addition, an adjustable rate
mortgage loan that permits negative amortization would be expected during a
period of increasing interest rates to amortize at a slower rate (and perhaps
not at all) than if interest rates were declining or were remaining constant.
Such slower rate of mortgage loan amortization would correspondingly be
reflected in a slower rate of amortization for one or more classes of
certificates of the related series. Accordingly, the weighted average lives
29
of mortgage loans that permit negative amortization (and that of the classes of
certificates to which any such negative amortization would be allocated or that
would bear the effects of a slower rate of amortization on such mortgage loans)
may increase as a result of such feature.
Negative amortization may occur in respect of an adjustable rate mortgage
loan that--
o limits the amount by which its scheduled payment may adjust in response
to a change in its Mortgage Rate;
o provides that its scheduled payment will adjust less frequently than its
Mortgage Rate; or
o provides for constant scheduled payments notwithstanding adjustments to
its Mortgage Rate.
Accordingly, during a period of declining interest rates, the scheduled
payment on such a mortgage loan may exceed the amount necessary to amortize the
loan fully over its remaining amortization schedule and pay interest at the
then applicable Mortgage Rate, thereby resulting in the accelerated
amortization of such mortgage loan. Any such acceleration in amortization of
its principal balance will shorten the weighted average life of such mortgage
loan and, correspondingly, the weighted average lives of those classes of
certificates entitled to a portion of the principal payments on such mortgage
loan.
The extent to which the yield on any offered certificate will be affected
by the inclusion in the related trust fund of mortgage loans that permit
negative amortization, will depend upon (1) whether such offered certificate
was purchased at a premium or a discount and (2) the extent to which the
payment characteristics of such mortgage loans delay or accelerate the
distributions of principal on such certificate (or, in the case of a Stripped
Interest Certificate, delay or accelerate the reduction of the notional amount
of a Stripped Interest Certificate). See "--Yield and Prepayment
Considerations" above.
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the mortgage loans that are foreclosed in relation to the
number and principal amount of mortgage loans that are repaid in accordance
with their terms will affect the weighted average lives of those mortgage loans
and, accordingly, the weighted average lives of and yields on the certificates
of the related series. Servicing decisions made with respect to the mortgage
loans, including the use of payment plans prior to a demand for acceleration
and the restructuring of mortgage loans in bankruptcy proceedings or otherwise,
may also have an effect upon the payment patterns of particular mortgage loans
and thus the weighted average lives of and yields on the certificates of the
related series.
Losses and Shortfalls on the Mortgage Assets. The yield to holders of the
offered certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or shortfalls in
collections arising out of defaults on the mortgage loans in the related trust
fund and the timing of such losses and shortfalls. In general, the earlier that
any such loss or shortfall occurs, the greater will be the negative effect on
yield for any class of certificates that is required to bear the effects of
such loss or shortfall.
The amount of any losses or shortfalls in collections on the mortgage
assets in any trust fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of credit support) will be allocated among
the respective classes of certificates of the related series in the priority
and manner, and subject to the limitations, specified in the related prospectus
supplement. As described in the related prospectus supplement, such allocations
may be effected by (1) a reduction in the entitlements to interest and/or the
Certificate Balances of one or more such classes of certificates and/or (2)
establishing a priority of payments among such classes of certificates.
The yield to maturity on a class of Subordinate Certificates may be
extremely sensitive to losses and shortfalls in collections on the mortgage
loans in the related trust fund.
Additional Certificate Amortization. In addition to entitling the holders
to a specified portion (which may during specified periods range from none to
all) of the principal payments received on
30
the mortgage assets in the related trust fund, one or more classes of
certificates of any series, including one or more classes of offered
certificates of such series, may provide for distributions of principal from--
o amounts attributable to interest accrued but not currently distributable
on one or more classes of Accrual Certificates;
o Excess Funds; or
o any other amounts described in the related prospectus supplement.
The amortization of any class of certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of such
certificates and, if such certificates were purchased at a premium, reduce the
yield. The related prospectus supplement will discuss the relevant factors to
be considered in determining whether distributions of principal of any class of
certificates out of such sources is likely to have any material effect on the
rate at which such certificates are amortized and the consequent yield with
respect thereto.
THE DEPOSITOR
We are Banc of America Commercial Mortgage Inc., a Delaware corporation
and were organized on December 13, 1995 for the limited purpose of acquiring,
owning and transferring mortgage assets and selling interests in the mortgage
assets or bonds secured by the mortgage assets. We are a subsidiary of Bank of
America, N.A. We maintain our principal office at 214 North Tryon Street,
Charlotte, North Carolina 28255. Our telephone number is (704) 386-2400.
Unless otherwise noted in the related prospectus supplement, neither we
nor any of our affiliates will insure or guarantee distributions on the
certificates of any series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of certificates will represent the entire beneficial ownership
interest in the trust fund created pursuant to the related pooling and
servicing agreement. As described in the related prospectus supplement, the
certificates of each series, including the certificates of such series being
offered for sale, may consist of one or more classes of certificates that,
among other things:
o provide for the accrual of interest on the Certificate Balance or
Notional Amount at a fixed, variable or adjustable rate;
o constitute Senior Certificates or Subordinate Certificates;
o constitute Stripped Interest Certificates or Stripped Principal
Certificates;
o provide for distributions of interest or principal that commence only
after the occurrence of certain events, such as the retirement of one or
more other classes of certificates of such series;
o provide for distributions of principal to be made, from time to time or
for designated periods, at a rate that is faster (and, in some cases,
substantially faster) or slower (and, in some cases, substantially
slower) than the rate at which payments or other collections of principal
are received on the mortgage assets in the related trust fund;
o provide for distributions of principal to be made, subject to available
funds, based on a specified principal payment schedule or other
methodology; or
o provide for distributions based on collections on the mortgage assets in
the related trust fund attributable to Prepayment Premiums and Equity
Participations.
If so specified in the related prospectus supplement, a class of
certificates may have two or more component parts, each having characteristics
that are otherwise described in this prospectus as
31
being attributable to separate and distinct classes. For example, a class of
certificates may have a Certificate Balance on which it accrues interest at a
fixed, variable or adjustable rate. Such class of certificates may also have
certain characteristics attributable to Stripped Interest Certificates insofar
as it may also entitle the holders of Stripped Interest Certificates to
distributions of interest accrued on a Notional Amount at a different fixed,
variable or adjustable rate. In addition, a class of certificates may accrue
interest on one portion of its Certificate Balance at one fixed, variable or
adjustable rate and on another portion of its Certificate Balance at a
different fixed, variable or adjustable rate.
Each class of offered certificates of a series will be issued in minimum
denominations corresponding to the principal balances or, in case of certain
classes of Stripped Interest Certificates or REMIC Residual Certificates,
notional amounts or percentage interests, specified in the related prospectus
supplement. As provided in the related prospectus supplement, one or more
classes of offered certificates of any series may be issued in fully
registered, definitive form or may be offered in book-entry format through the
facilities of DTC. The offered certificates of each series (if issued in fully
registered definitive form) may be transferred or exchanged, subject to any
restrictions on transfer described in the related prospectus supplement, at the
location specified in the related prospectus supplement, without the payment of
any service charges, other than any tax or other governmental charge payable in
connection with that transfer or exchange. Interests in a class of certificates
offered in book-entry format will be transferred on the book-entry records of
DTC and its participating organizations. If so specified in the related
prospectus supplement, arrangements may be made for clearance and settlement
through Clearstream Banking, societe anonyme, or the Euroclear System (in
Europe) if they are participants in DTC.
DISTRIBUTIONS
Distributions on the certificates of each series will be made on each
Distribution Date from the Available Distribution Amount for such series and
such Distribution Date. The particular components of the Available Distribution
Amount for any series and Distribution Date will be more specifically described
in the related prospectus supplement. Except as otherwise specified in the
related prospectus supplement, the Distribution Date for a series of
certificates will be the 11th day of each month (or, if any such 11th day is
not a business day, the next succeeding business day), commencing in the month
immediately following the month in which such series of certificates is issued.
Except as otherwise specified in the related prospectus supplement,
distributions on the certificates of each series (other than the final
distribution in retirement of any such certificate) will be made to the persons
in whose names such certificates are registered at the close of business on the
Record Date, and the amount of each distribution will be determined as of the
close of business on the date specified in the related prospectus supplement.
All distributions with respect to each class of certificates on each
Distribution Date will be allocated pro rata among the outstanding certificates
in such class in proportion to the respective percentage interests evidenced by
those certificates unless otherwise specified in the related prospectus
supplement. Payments will be made either by wire transfer in immediately
available funds to the account of a certificateholder at a bank or other entity
having appropriate facilities therefor, if such certificateholder has provided
the person required to make such payments with wiring instructions no later
than the related Record Date or such other date specified in the related
prospectus supplement (and, if so provided in the related prospectus
supplement, such certificate-holder holds certificates in the requisite amount
or denomination specified in the prospectus supplement), or by check mailed to
the address of such certificateholder as it appears on the Certificate
Register; provided, however, that the final distribution in retirement of any
class of certificates (whether issued in fully registered definitive form or in
book-entry format) will be made only upon presentation and surrender of such
certificates at the location specified in the notice to certificateholders of
such final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of certificates of each series (other than certain classes of
Stripped Principal Certificates and certain classes of REMIC Residual
Certificates that have no pass-through rate) may
32
have a different pass-through rate, which in each case may be fixed, variable
or adjustable. The related prospectus supplement will specify the pass-through
rate or, in the case of a variable or adjustable pass-through rate, the method
for determining the pass-through rate, for each class of offered certificates.
Unless otherwise specified in the related prospectus supplement, interest on
the certificates of each series will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
Distributions of interest in respect of any class of certificates (other
than a class of Accrual Certificates, which will be entitled to distributions
of accrued interest commencing only on the Distribution Date or under the
circumstances specified in the related prospectus supplement, and other than
any class of Stripped Principal Certificates or REMIC Residual Certificates
that is not entitled to any distributions of interest) will be made on each
Distribution Date based on the Accrued Certificate Interest for such class and
such Distribution Date, subject to the sufficiency of that portion, if any, of
the Available Distribution Amount allocable to such class on such Distribution
Date. Prior to the time interest is distributable on any class of Accrual
Certificates, the amount of Accrued Certificate Interest otherwise
distributable on such class will be added to the Certificate Balance of such
Accrual Certificates on each Distribution Date or otherwise deferred as
described in the related prospectus supplement. Unless otherwise provided in
the related prospectus supplement, the Accrued Certificate Interest for each
Distribution Date on a class of Stripped Interest Certificates will be
similarly calculated except that it will accrue on a Notional Amount. Reference
to a Notional Amount with respect to a class of Stripped Interest Certificates
is solely for convenience in making certain calculations and does not represent
the right to receive any distributions of principal. If so specified in the
related prospectus supplement, the amount of Accrued Certificate Interest that
is otherwise distributable on (or, in the case of Accrual Certificates, that
may otherwise be added to the Certificate Balance of) one or more classes of
the certificates of a series may be reduced to the extent that any Prepayment
Interest Shortfalls, as described under "Yield and Maturity
Considerations--Certain Shortfalls in Collections of Interest", exceed the
amount of any sums that are applied to offset the amount of such shortfalls.
The particular manner in which such shortfalls will be allocated among some or
all of the classes of certificates of that series will be specified in the
related prospectus supplement. The related prospectus supplement will also
describe the extent to which the amount of Accrued Certificate Interest that is
otherwise distributable on (or, in the case of Accrual Certificates, that may
otherwise be added to the Certificate Balance of) a class of offered
certificates may be reduced as a result of any other contingencies, including
delinquencies, losses and deferred interest on or in respect of the mortgage
assets in the related trust fund. Unless otherwise provided in the related
prospectus supplement, any reduction in the amount of Accrued Certificate
Interest otherwise distributable on a class of certificates by reason of the
allocation to such class of a portion of any deferred interest on or in respect
of the mortgage assets in the related trust fund will result in a corresponding
increase in the Certificate Balance of such class. See "Risk Factors--Effect of
Prepayments on Average Life of Certificates" and "--Effect of Prepayments on
Yield of Certificates" and "Yield and Maturity Considerations--Certain
Shortfalls in Collections of Interest".
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
Each class of certificates of each series (other than certain classes of
Stripped Interest Certificates and certain classes of REMIC Residual
Certificates) will have a Certificate Balance, which, at any time, will equal
the then maximum amount that the holders of certificates of such class will be
entitled to receive as principal out of the future cash flow on the mortgage
assets and other assets included in the related trust fund. The outstanding
Certificate Balance of a class of certificates will be reduced by distributions
of principal made from time to time and, if and to the extent so provided in
the related prospectus supplement, further by any losses incurred in respect of
the related mortgage assets allocated thereto from time to time. In turn, the
outstanding Certificate Balance of a class of certificates may be increased as
a result of any deferred interest on or in respect of the related mortgage
assets being allocated thereto from time to time, and will be increased, in the
case of a class of Accrual Certificates prior to the Distribution Date on which
distributions of interest are required to commence, by the amount of any
Accrued Certificate Interest in respect of
33
such Accrual Certificate (reduced as described above). The initial aggregate
Certificate Balance of all classes of a series of certificates will not be
greater than the aggregate outstanding principal balance of the related
mortgage assets as of a specified date, after application of scheduled payments
due on or before such date, whether or not received. The initial Certificate
Balance of each class of a series of certificates will be specified in the
related prospectus supplement. As and to the extent described in the related
prospectus supplement, distributions of principal with respect to a series of
certificates will be made on each Distribution Date to the holders of the class
or classes of certificates of such series entitled thereto until the
Certificate Balances of such certificates have been reduced to zero.
Distributions of principal with respect to one or more classes of certificates
may be made at a rate that is faster (and, in some cases, substantially faster)
than the rate at which payments or other collections of principal are received
on the mortgage assets in the related trust fund. Distributions of principal
with respect to one or more classes of certificates may not commence until the
occurrence of certain events, such as the retirement of one or more other
classes of certificates of the same series, or may be made at a rate that is
slower (and, in some cases, substantially slower) than the rate at which
payments or other collections of principal are received on the mortgage assets
in the related trust fund. Distributions of principal with respect to
Controlled Amortization Classes may be made, subject to available funds, based
on a specified principal payment schedule. Distributions of principal with
respect to Companion Classes may be contingent on the specified principal
payment schedule for a Controlled Amortization Class of the same series and the
rate at which payments and other collections of principal on the mortgage
assets in the related trust fund are received. Unless otherwise specified in
the related prospectus supplement, distributions of principal of any class of
offered certificates will be made on a pro rata basis among all of the
certificates of such class.
DISTRIBUTIONS ON THE CERTIFICATES CONCERNING PREPAYMENT PREMIUMS OR CONCERNING
EQUITY PARTICIPATIONS
If so provided in the related prospectus supplement, Prepayment Premiums
or payments in respect of Equity Participations received on or in connection
with the mortgage assets in any trust fund will be distributed on each
Distribution Date to the holders of the class of certificates of the related
series entitled thereto in accordance with the provisions described in such
prospectus supplement. Alternatively, we or any of our affiliates may retain
such items or by any other specified person and/or may be excluded as trust
assets.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the mortgage
assets in any trust fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of credit support) will be allocated among
the respective classes of certificates of the related series in the priority
and manner, and subject to the limitations, specified in the related prospectus
supplement. As described in the related prospectus supplement, such allocations
may be effected by (1) a reduction in the entitlements to interest and/or the
Certificate Balances of one or more such classes of certificates and/or (2)
establishing a priority of payments among such classes of certificates. See
"Description of Credit Support".
ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related prospectus supplement, if a
trust fund includes mortgage loans, the master servicer, the special servicer,
the trustee, any provider of credit support and/or any other specified person
may be obligated to advance, or have the option of advancing, on or before each
Distribution Date, from its or their own funds or from excess funds held in the
related Certificate Account that are not part of the Available Distribution
Amount for the related series of certificates for such Distribution Date, an
amount up to the aggregate of any payments of principal (other than the
principal portion of any balloon payments) and interest that were due on or in
respect of such mortgage loans during the related Due Period and were
delinquent on the related Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of certificates entitled
thereto, rather than to guarantee or insure
34
against losses. Accordingly, all advances made out of a specific entity's own
funds will be reimbursable out of related recoveries on the mortgage loans
(including amounts drawn under any fund or instrument constituting credit
support) respecting which such advances were made and such other specific
sources as may be identified in the related prospectus supplement, including,
in the case of a series that includes one or more classes of Subordinate
Certificates, if so identified, collections on other mortgage assets in the
related trust fund that would otherwise be distributable to the holders of one
or more classes of such Subordinate Certificates. No advance will be required
to be made by a master servicer, special servicer or trustee if, in the
judgment of the master servicer, special servicer or trustee, as the case may
be, such advance would not be recoverable from recoveries on the mortgage loans
or another specifically identified source; and, if previously made by a master
servicer, special servicer or trustee, such an advance will be reimbursable
thereto from any amounts in the related Certificate Account prior to any
distributions being made to the related series of Certificateholders.
If advances have been made by a master servicer, special servicer, trustee
or other entity from excess funds in a Certificate Account, such master
servicer, special servicer, trustee or other entity, as the case may be, will
be required to replace such funds in such Certificate Account on or prior to
any future Distribution Date to the extent that funds in such Certificate
Account on such Distribution Date are less than payments required to be made to
the related series of Certificateholders on such date. If so specified in the
related prospectus supplement, the obligation of a master servicer, special
servicer, trustee or other entity to make advances may be secured by a cash
advance reserve fund or a surety bond. If applicable, information regarding the
characteristics of, and the identity of any obligor on, any such surety bond,
will be set forth in the related prospectus supplement.
If and to the extent so provided in the related prospectus supplement, any
entity making advances will be entitled to receive interest on certain or all
of such advances for a specified period during which such advances are
outstanding at the rate specified in such prospectus supplement, and such
entity will be entitled to payment of such interest periodically from general
collections on the mortgage loans in the related trust fund prior to any
payment to the related series of Certificateholders or as otherwise provided in
the related pooling and servicing agreement and described in such prospectus
supplement.
The prospectus supplement for any series of certificates evidencing an
interest in a trust fund that includes MBS will describe any comparable
advancing obligation of a party to the related pooling and servicing agreement
or of a party to the agreement pursuant to which the MBS was issued.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders
of each class of the offered certificates of a series, a master servicer,
manager or trustee, as provided in the related prospectus supplement, will
forward to each such holder, a Distribution Date Statement that, unless
otherwise provided in the related prospectus supplement, will set forth, among
other things, in each case to the extent applicable:
o the amount of such distribution to holders of such class of offered
certificates that was applied to reduce the Certificate Balance of such
class;
o the amount of such distribution to holders of such class of offered
certificates that was applied to pay Accrued Certificate Interest;
o the amount, if any, of such distribution to holders of such class of
offered certificates that was allocable to (A) Prepayment Premiums and
(B) payments on account of Equity Participations;
o the amount, if any, by which such distribution is less than the amounts
to which holders of such class of offered certificates are entitled;
o if the related trust fund includes mortgage loans, the aggregate amount
of advances included in such distribution;
35
o if the related trust fund includes mortgage loans, the amount of
servicing compensation received by the related master servicer (and, if
payable directly out of the related trust fund, by any special servicer
and any sub-servicer) and, if the related trust fund includes MBS, the
amount of administrative compensation received by the MBS Administrator;
o information regarding the aggregate principal balance of the related
mortgage assets on or about such Distribution Date;
o if the related trust fund includes mortgage loans, information regarding
the number and aggregate principal balance of such mortgage loans that
are delinquent;
o if the related trust fund includes mortgage loans, information regarding
the aggregate amount of losses incurred and principal prepayments made
with respect to such mortgage loans during the specified period,
generally corresponding in length to the period between Distribution
Dates, during which prepayments and other unscheduled collections on the
mortgage loans in the related trust fund must be received in order to be
distributed on a particular Distribution Date);
o the Certificate Balance or Notional Amount, as the case may be, of such
class of certificates at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance or
Notional Amount due to the allocation of any losses in respect of the
related mortgage assets, any increase in such Certificate Balance or
Notional Amount due to the allocation of any negative amortization in
respect of the related mortgage assets and any increase in the
Certificate Balance of a class of Accrual Certificates, if any, in the
event that Accrued Certificate Interest has been added to such balance;
o if such class of offered certificates has a variable pass-through rate
or an adjustable pass-through rate, the pass-through rate applicable
thereto for such Distribution Date and, if determinable, for the next
succeeding Distribution Date;
o the amount deposited in or withdrawn from any reserve fund on such
Distribution Date, and the amount remaining on deposit in such reserve
fund as of the close of business on such Distribution Date;
o if the related trust fund includes one or more instruments of credit
support, such as a letter of credit, an insurance policy and/or a surety
bond, the amount of coverage under each such instrument as of the close
of business on such Distribution Date; and
o the amount of credit support being afforded by any classes of
Subordinate Certificates.
In the case of information furnished pursuant to the first 3 bulleted
items above, the amounts will be expressed as a dollar amount per specified
denomination of the relevant class of offered certificates or as a percentage.
The prospectus supplement for each series of certificates may describe
additional information to be included in reports to the holders of the offered
certificates of such series.
Within a reasonable period of time after the end of each calendar year,
the master servicer, manager or trustee for a series of certificates, as the
case may be, will be required to furnish to each person who at any time during
the calendar year was a holder of an offered certificate of such series a
statement containing the information set forth in the first 3 bulleted items
above, aggregated for such calendar year or the applicable portion during which
such person was a certificateholder. Such obligation will be deemed to have
been satisfied to the extent that substantially comparable information is
provided pursuant to any requirements of the Internal Revenue Code of 1986, as
amended, are from time to time in force. See, however, "--Book-Entry
Registration and Definitive Certificates" below.
If the trust fund for a series of certificates includes MBS, the ability
of the related master servicer, manager or trustee, as the case may be, to
include in any Distribution Date Statement information regarding the mortgage
loans underlying such MBS will depend on the reports received with respect to
such MBS. In such cases, the related prospectus supplement will describe the
36
loan-specific information to be included in the Distribution Date Statements
that will be forwarded to the holders of the offered certificates of that
series in connection with distributions made to them.
VOTING RIGHTS
The voting rights evidenced by each series of certificates will be
allocated among the respective classes of such series in the manner described
in the related prospectus supplement.
Certificateholders will generally not have a right to vote, except with
respect to required consents to certain amendments to the related pooling and
servicing agreement and as otherwise specified in the related prospectus
supplement. See "The Pooling and Servicing Agreements--
Amendment". The holders of specified amounts of certificates of a particular
series will have the right to act as a group to remove the related trustee and
also upon the occurrence of certain events which if continuing would constitute
an Event of Default on the part of the related master servicer, special
servicer or REMIC administrator. See "The Pooling and Servicing
Agreements--Events of Default", "--Rights Upon Event of Default" and
"--Resignation and Removal of the Trustee".
TERMINATION
The obligations created by the pooling and servicing agreement for each
series of certificates will terminate following (1) the final payment or other
liquidation of the last mortgage asset subject thereto or the disposition of
all property acquired upon foreclosure of any mortgage loan subject thereto and
(2) the payment (or provision for payment) to the Certificateholders of that
series of all amounts required to be paid to them pursuant to such pooling and
servicing agreement. Written notice of termination of a pooling and servicing
agreement will be given to each certificateholder of the related series, and
the final distribution will be made only upon presentation and surrender of the
certificates of such series at the location to be specified in the notice of
termination.
If so specified in the related prospectus supplement, a series of
certificates may be subject to optional early termination through the
repurchase of the mortgage assets in the related trust fund by the party or
parties specified in the prospectus supplement, under the circumstances and in
the manner set forth in the prospectus supplement. If so provided in the
related prospectus supplement upon the reduction of the Certificate Balance of
a specified class or classes of certificates by a specified percentage or
amount or upon a specified date, a party designated in the prospectus
supplement may be authorized or required to solicit bids for the purchase of
all the mortgage assets of the related trust fund, or of a sufficient portion
of such mortgage assets to retire such class or classes, under the
circumstances and in the manner set forth in the prospectus supplement.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the prospectus supplement for a series of certificates,
one or more classes of the offered certificates of such series will be offered
in book-entry format through the facilities of DTC, and each such class will be
represented by one or more global certificates registered in the name of DTC or
its nominee.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking corporation" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations and
facilitate the clearance and settlement of securities transactions between its
participating organizations through electronic computerized book-entry changes
in their accounts, thereby eliminating the need for physical movement of
securities certificates. DTC is owned by a number of its Direct Participants
and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. The rules applicable to
DTC and its participating organizations are on file with the Securities and
Exchange Commission.
37
Purchases of book-entry certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the book-entry
certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate is in turn to be recorded on the Direct and
Indirect Participants' records. Certificate Owners will not receive written
confirmation from DTC of their purchases, but Certificate Owners are expected
to receive written confirmations providing details of such transactions, as
well as periodic statements of their holdings, from the Direct or Indirect
Participant through which each Certificate Owner entered into the transaction.
Transfers of ownership interests in the book-entry certificates are to be
accomplished by entries made on the books of DTC's participating organizations
acting on behalf of Certificate Owners. Certificate Owners will not receive
certificates representing their ownership interests in the book-entry
certificates, except in the event that use of the book-entry system for the
book-entry certificates of any series is discontinued as described below.
DTC has no knowledge of the actual Certificate Owners of the book-entry
certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such certificates are credited, which may or may
not be the Certificate Owners. DTC's participating organizations will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed
by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Distributions on the book-entry certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by DTC's participating organizations to
Certificate Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility of
each such participating organization (and not of DTC, the depositor or any
trustee, master servicer, special servicer or Manager), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Accordingly, under a book-entry system, Certificate Owners may receive payments
after the related Distribution Date.
Unless otherwise provided in the related prospectus supplement, the only
Certificateholder of book-entry certificates will be the nominee of DTC, and
the Certificate Owners will not be recognized as certificateholders under the
pooling and servicing agreement. Certificate Owners will be permitted to
exercise the rights of certificateholders under the related pooling and
servicing agreement only indirectly through DTC's participating organization
who in turn will exercise their rights through DTC. We have been informed that
DTC will take action permitted to be taken by a certificateholder under a
pooling and servicing agreement only at the direction of one or more Direct
Participants to whose account with DTC interests in the book-entry certificates
are credited.
Because DTC can act only on behalf of Direct Participants, who in turn act
on behalf of Indirect Participants and certain Certificate Owners, the ability
of a Certificate Owner to pledge its interest in book-entry certificates to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of its interest in book-entry certificates, may be
limited due to the lack of a physical certificate evidencing such interest.
Unless otherwise specified in the related prospectus supplement,
certificates initially issued in book-entry form will be issued in fully
registered definitive form to Certificate Owners or their nominees, rather than
to DTC or its nominee, only if (1) the depositor advises the trustee in writing
that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to such certificates and the
depositor is unable to locate a qualified successor or (2) the depositor
notifies DTC of its intent to terminate the book-entry system through DTC and,
upon receipt of notice of such intent from DTC, the Participants holding
beneficial interests in the Certificates agree to initiate such termination.
Upon the occurrence of either of the events described in the preceding
sentence, DTC will be required to notify all Direct Participants of the
availability
38
through DTC of Certificates in fully registered form. Upon surrender by DTC of
the certificate or certificates representing a class of book-entry
certificates, together with instructions for registration, the trustee for the
related series or other designated party will be required to issue to the
Certificate Owners identified in such instructions the Certificates in fully
registered definitive form to which they are entitled, and thereafter the
holders of such Definitive Certificates will be recognized as
"certificateholders" under and within the meaning of the related pooling and
servicing agreement.
THE POOLING AND SERVICING AGREEMENTS
GENERAL
The certificates of each series will be issued pursuant to a Pooling and
Servicing Agreement. In general, the parties to a Pooling and Servicing
Agreement will include the depositor, the trustee, the master servicer, the
special servicer and, if one or more REMIC elections have been made with
respect to the trust fund, the REMIC administrator. However, a Pooling and
Servicing Agreement that relates to a trust fund that includes MBS may include
a manager as a party, but may not include a master servicer, special servicer
or other servicer as a party. All parties to each Pooling and Servicing
Agreement under which certificates of a series are issued will be identified in
the related prospectus supplement. If so specified in the related prospectus
supplement, an affiliate of the depositor, or the mortgage asset seller may
perform the functions of master servicer, special servicer, manager or REMIC
administrator. If so specified in the related prospectus supplement, the master
servicer may also perform the duties of special servicer, and the master
servicer, the special servicer or the trustee may also perform the duties of
REMIC administrator. Any party to a Pooling and Servicing Agreement or any
affiliate of any party may own certificates issued under the Pooling and
Servicing Agreement; however, unless other specified in the related prospectus
supplement, except with respect to required consents to certain amendments to a
Pooling and Servicing Agreement, certificates issued under the Pooling and
Servicing Agreement that are held by the master servicer or special servicer
for the related Series will not be allocated Voting Rights.
A form of a pooling and servicing agreement has been filed as an exhibit
to the Registration Statement of which this prospectus is a part. However, the
provisions of each Pooling and Servicing Agreement will vary depending upon the
nature of the certificates to be issued under the Pooling and Servicing
Agreement and the nature of the related trust fund. The following summaries
describe certain provisions that may appear in a Pooling and Servicing
Agreement under which certificates that evidence interests in mortgage loans
will be issued. The prospectus supplement for a series of certificates will
describe any provision of the related Pooling and Servicing Agreement that
materially differs from the description of the Pooling and Servicing Agreement
contained in this prospectus and, if the related trust fund includes MBS, will
summarize all of the material provisions of the related agreement that provided
for the issuance of the MBS. The summaries in this prospectus do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the Pooling and Servicing Agreement for
each series of certificates and the description of such provisions in the
related prospectus supplement. We will provide a copy of the Pooling and
Servicing Agreement (without exhibits) that relates to any series of
certificates without charge upon written request of a holder of a certificate
of such series addressed to it at its principal executive offices specified in
this prospectus under "The Depositor".
ASSIGNMENT OF MORTGAGE LOANS; REPURCHASES
At the time of issuance of any series of certificates, we will assign (or
cause to be assigned) to the designated trustee the mortgage loans to be
included in the related trust fund, together with, unless otherwise specified
in the related prospectus supplement, all principal and interest to be received
on or with respect to such mortgage loans after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date. The trustee will,
concurrently with such assignment, deliver the certificates to or at our
direction in exchange for the mortgage loans and the other assets to be
included in the trust fund for such series. Each mortgage loan will be
identified in a schedule appearing as an exhibit to the related Pooling and
Servicing Agreement. Such schedule generally
39
will include detailed information that pertains to each mortgage loan included
in the related trust fund, which information will typically include the address
of the related mortgaged property and type of such property; the Mortgage Rate
and, if applicable, the applicable index, gross margin, adjustment date and any
rate cap information; the original and remaining term to maturity; the
amortization term; and the original and outstanding principal balance.
In addition, unless otherwise specified in the related prospectus
supplement, we will, as to each mortgage loan to be included in a trust fund,
deliver, or cause to be delivered, to the related trustee (or to a custodian
appointed by the trustee as described below) the mortgage note endorsed,
without recourse, either in blank or to the order of such trustee (or its
nominee), the mortgage with evidence of recording indicated (except for any
mortgage not returned from the public recording office), an assignment of the
mortgage in blank or to the trustee (or its nominee) in recordable form,
together with any intervening assignments of the mortgage with evidence of
recording (except for any such assignment not returned from the public
recording office), and, if applicable, any riders or modifications to such
mortgage note and mortgage, together with certain other documents at such times
as set forth in the related Pooling and Servicing Agreement. Such assignments
may be blanket assignments covering mortgages on mortgaged properties located
in the same county, if permitted by law. Notwithstanding the foregoing, a trust
fund may include mortgage loans where the original mortgage note is not
delivered to the trustee if we deliver or cause to be delivered, to the related
trustee (or such custodian) a copy or a duplicate original of the mortgage
note, together with an affidavit certifying that the original mortgage note has
been lost or destroyed. In addition, if we cannot deliver, with respect to any
mortgage loan, the mortgage or any intervening assignment with evidence of
recording concurrently with the execution and delivery of the related Pooling
and Servicing Agreement because of a delay caused by the public recording
office, we will deliver, or cause to be delivered, to the related trustee (or
such custodian) a true and correct photocopy of such mortgage or assignment as
submitted for recording. We will deliver, or cause to be delivered, to the
related trustee (or such custodian) such mortgage or assignment with evidence
of recording indicated after receipt of such mortgage from the public recording
office. If we cannot deliver, with respect to any mortgage loan, the mortgage
or any intervening assignment with evidence of recording concurrently with the
execution and delivery of the related Pooling and Servicing Agreement because
such mortgage or assignment has been lost, we will deliver, or cause to be
delivered, to the related trustee (or such custodian) a true and correct
photocopy of such mortgage or assignment with evidence of recording. Unless
otherwise specified in the related prospectus supplement, assignments of
mortgage to the trustee (or its nominee) will be recorded in the appropriate
public recording office, except in states where, in the opinion of counsel
acceptable to the trustee, such recording is not required to protect the
trustee's interests in the mortgage loan against the claim of any subsequent
transferee or any successor to or creditor of us or the originator of such
mortgage loan. Notwithstanding the foregoing, with respect to any mortgage for
which the related assignment of mortgage, assignment of assignment of leases,
security agreements and/or UCC financing statements has been recorded in the
name of Mortgage Electronic Registration Systems, Inc. ("MERS") or its
designee, no assignment of mortgage, assignment of assignment of leases,
security agreements and/or UCC financing statements in favor of the trustee
will be required to be prepared or delivered and instead, the mortgage loan
seller shall take all actions as are necessary to cause the Trust to be shown
as, and the trustee shall take all actions necessary to confirm that it is
shown as, the owner of the related Mortgage Loan on the records of MERS for
purposes of the system or recording transfers of beneficial ownership of
mortgages maintained by MERS.
The trustee (or a custodian appointed by the trustee) for a series of
certificates will be required to review the mortgage loan documents delivered
to it within a specified period of days after receipt of the mortgage loan
documents, and the trustee (or such custodian) will hold such documents in
trust for the benefit of the certificateholders of such series. Unless
otherwise specified in the related prospectus supplement, if any such document
is found to be missing or defective, and such omission or defect, as the case
may be, materially and adversely affects the interests of the
certificateholders of the related series, the trustee (or such custodian) will
be required to notify the
40
master servicer, the special servicer and the depositor, and one of such
persons will be required to notify the relevant mortgage asset seller. In that
case, and if the mortgage asset seller cannot deliver the document or cure the
defect within a specified number of days after receipt of such notice, then,
except as otherwise specified below or in the related prospectus supplement,
the mortgage asset seller will be obligated to repurchase the related mortgage
loan from the trustee at a price generally equal to the Purchase Price, or at
such other price as will be specified in the related prospectus supplement. If
so provided in the prospectus supplement for a series of certificates, a
mortgage asset seller, in lieu of repurchasing a mortgage loan as to which
there is missing or defective loan documentation, will have the option,
exercisable upon certain conditions and/or within a specified period after
initial issuance of such series of certificates, to replace such mortgage loan
with one or more other mortgage loans, in accordance with standards that will
be described in the prospectus supplement. Unless otherwise specified in the
related prospectus supplement, this repurchase or substitution obligation will
constitute the sole remedy to holders of the certificates of any series or to
the related trustee on their behalf for missing or defective mortgage loan
documentation, and neither we nor, unless it is the mortgage asset seller, the
master servicer or the special servicer will be obligated to purchase or
replace a mortgage loan if a mortgage asset seller defaults on its obligation
to do so.
The trustee will be authorized at any time to appoint one or more
custodians pursuant to a custodial agreement to hold title to the mortgage
loans in any trust fund and to maintain possession of and, if applicable, to
review the documents relating to such mortgage loans, in any case as the agent
of the trustee. The identity of any such custodian to be appointed on the date
of initial issuance of the certificates will be set forth in the related
prospectus supplement. Any such custodian may be one of our affiliates.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the prospectus supplement for a series of
certificates, the depositor will, with respect to each mortgage loan in the
related trust fund, make or assign, or cause to be made or assigned, certain
representations and warranties covering, by way of example--
o the accuracy of the information set forth for such mortgage loan on the
schedule of mortgage loans appearing as an exhibit to the related Pooling
and Servicing Agreement;
o the enforceability of the related mortgage note and mortgage and the
existence of title insurance insuring the lien priority of the related
mortgage;
o the Warranting Party's title to the mortgage loan and the authority of
the Warranting Party to sell the mortgage loan; and
o the payment status of the mortgage loan.
It is expected that in most cases the Warranting Party will be the
mortgage asset seller; however, the Warranting Party may also be an affiliate
of the mortgage asset seller, the depositor or an affiliate of the depositor,
the master servicer, the special servicer or another person acceptable to the
depositor. The Warranting Party, if other than the mortgage asset seller, will
be identified in the related prospectus supplement.
Unless otherwise provided in the related prospectus supplement, each
Pooling and Servicing Agreement will provide that the master servicer and/or
trustee will be required to notify promptly any Warranting Party of any breach
of any representation or warranty made by it in respect of a mortgage loan that
materially and adversely affects the interests of the Certificateholders of the
related series. If such Warranting Party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the related prospectus supplement, it will
be obligated to repurchase such mortgage loan from the trustee at the
applicable Purchase Price. If so provided in the prospectus supplement for a
series of certificates, a Warranting Party, in lieu of repurchasing a mortgage
loan as to which a breach has occurred, will have the option, exercisable upon
certain conditions and/or within a specified period after initial issuance of
such series of certificates, to replace such mortgage loan with one or more
other
41
mortgage loans, in accordance with standards that will be described in the
prospectus supplement. Unless otherwise specified in the related prospectus
supplement, this repurchase or substitution obligation will constitute the sole
remedy available to holders of the certificates of any series or to the related
trustee on their behalf for a breach of representation and warranty by a
Warranting Party, and neither the depositor nor the master servicer, in either
case unless it is the Warranting Party, will be obligated to purchase or
replace a mortgage loan if a Warranting Party defaults on its obligation to do
so.
In some cases, representations and warranties will have been made in
respect of a mortgage loan as of a date prior to the date upon which the
related series of certificates is issued, and thus may not address events that
may occur following the date as of which they were made. However, the depositor
will not include any mortgage loan in the trust fund for any series of
certificates if anything has come to the depositor's attention that would cause
it to believe that the representations and warranties made in respect of such
mortgage loan will not be accurate in all material respects as of the date of
issuance. The date as of which the representations and warranties regarding the
mortgage loans in any trust fund were made will be specified in the related
prospectus supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
Unless otherwise specified in the related prospectus supplement, the
master servicer and the special servicer for any mortgage pool, directly or
through sub-servicers, will each be obligated under the related Pooling and
Servicing Agreement to service and administer the mortgage loans in such
mortgage pool for the benefit of the related certificateholders, in accordance
with applicable law and further in accordance with the terms of such Pooling
and Servicing Agreement, such mortgage loans and any instrument of credit
support included in the related trust fund. Subject to the foregoing, the
master servicer and the special servicer will each have full power and
authority to do any and all things in connection with such servicing and
administration that it may deem necessary and desirable.
As part of its servicing duties, each of the master servicer and the
special servicer will be required to make reasonable efforts to collect all
payments called for under the terms and provisions of the mortgage loans that
it services and will be obligated to follow such collection procedures as it
would follow with respect to mortgage loans that are comparable to such
mortgage loans and held for its own account, provided (1) such procedures are
consistent with the terms of the related Pooling and Servicing Agreement and
(2) do not impair recovery under any instrument of credit support included in
the related trust fund. Consistent with the foregoing, the master servicer and
the special servicer will each be permitted, in its discretion, unless
otherwise specified in the related prospectus supplement, to waive any
Prepayment Premium, late payment charge or other charge in connection with any
mortgage loan.
The master servicer and the special servicer for any trust fund, either
separately or jointly, directly or through sub-servicers, will also be required
to perform as to the mortgage loans in such trust fund various other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts, if required under the related Pooling and Servicing
Agreement, for payment of taxes, insurance premiums, ground rents and similar
items, or otherwise monitoring the timely payment of those items; attempting to
collect delinquent payments; supervising foreclosures; negotiating
modifications; conducting property inspections on a periodic or other basis;
managing (or overseeing the management of) mortgaged properties acquired on
behalf of such trust fund through foreclosure, deed-in-lieu of foreclosure or
otherwise; and maintaining servicing records relating to such mortgage loans.
The related prospectus supplement will specify when and the extent to which
servicing of a mortgage loan is to be transferred from the master servicer to
the special servicer. In general, and subject to the discussion in the related
prospectus supplement, a special servicer will be responsible for the servicing
and administration of--
o mortgage loans that are delinquent in respect of a specified number of
scheduled payments;
o mortgage loans as to which the related borrower has entered into or
consented to bankruptcy, appointment of a receiver or conservator or
similar insolvency proceeding, or
42
the related borrower has become the subject of a decree or order for such
a proceeding which shall have remained in force undischarged or unstayed
for a specified number of days; and
o REO Properties.
If so specified in the related prospectus supplement, a Pooling and
Servicing Agreement also may provide that if a default on a mortgage loan has
occurred or, in the judgment of the related master servicer, a payment default
is reasonably foreseeable, the related master servicer may elect to transfer
the servicing of the mortgage loan, in whole or in part, to the related special
servicer. Unless otherwise provided in the related prospectus supplement, when
the circumstances no longer warrant a special servicer's continuing to service
a particular mortgage loan (e.g., the related borrower is paying in accordance
with the forbearance arrangement entered into between the special servicer and
such borrower), the master servicer will resume the servicing duties with
respect thereto. If and to the extent provided in the related Pooling and
Servicing Agreement and described in the related prospectus supplement, a
special servicer may perform certain limited duties in respect of mortgage
loans for which the master servicer is primarily responsible (including, if so
specified, performing property inspections and evaluating financial
statements); and a master servicer may perform certain limited duties in
respect of any mortgage loan for which the special servicer is primarily
responsible (including, if so specified, continuing to receive payments on such
mortgage loan (including amounts collected by the special servicer)), making
certain calculations with respect to such mortgage loan and making remittances
and preparing certain reports to the trustee and/or certificateholders with
respect to such mortgage loan. Unless otherwise specified in the related
prospectus supplement, the master servicer will be responsible for filing and
settling claims in respect of particular mortgage loans under any applicable
instrument of credit support. See "Description of Credit Support".
A mortgagor's failure to make required mortgage loan payments may mean
that operating income is insufficient to service the mortgage debt, or may
reflect the diversion of that income from the servicing of the mortgage debt.
In addition, a mortgagor that is unable to make mortgage loan payments may also
be unable to make timely payment of taxes and otherwise to maintain and insure
the related mortgaged property. In general, the related special servicer will
be required to monitor any mortgage loan that is in default, evaluate whether
the causes of the default can be corrected over a reasonable period without
significant impairment of the value of the related mortgaged property, initiate
corrective action in cooperation with the Mortgagor if cure is likely, inspect
the related mortgaged property and take such other actions as it deems
necessary and appropriate. A significant period of time may elapse before the
special servicer is able to assess the success of any such corrective action or
the need for additional initiatives. The time within which the special servicer
can make the initial determination of appropriate action, evaluate the success
of corrective action, develop additional initiatives, institute foreclosure
proceedings and actually foreclose (or accept a deed to a mortgaged property in
lieu of foreclosure) on behalf of the certificateholders of the related series
may vary considerably depending on the particular mortgage loan, the mortgaged
property, the mortgagor, the presence of an acceptable party to assume the
mortgage loan and the laws of the jurisdiction in which the mortgaged property
is located. If a mortgagor files a bankruptcy petition, the special servicer
may not be permitted to accelerate the maturity of the mortgage loan or to
foreclose on the related mortgaged property for a considerable period of time.
See "Certain Legal Aspects of Mortgage Loans--Bankruptcy Laws."
Mortgagors may, from time to time, request partial releases of the
mortgaged properties, easements, consents to alteration or demolition and other
similar matters. In general, the master servicer may approve such a request if
it has determined, exercising its business judgment in accordance with the
applicable servicing standard, that such approval will not adversely affect the
security for, or the timely and full collectibility of, the related mortgage
loan. Any fee collected by the master servicer for processing such request will
be retained by the master servicer as additional servicing compensation.
43
In the case of mortgage loans secured by junior liens on the related
mortgaged properties, unless otherwise provided in the related prospectus
supplement, the master servicer will be required to file (or cause to be filed)
of record a request for notice of any action by a superior lienholder under a
senior lien for the protection of the related trustee's interest, where
permitted by local law and whenever applicable state law does not require that
a junior lienholder be named as a party defendant in foreclosure proceedings in
order to foreclose such junior lienholder's equity of redemption. Unless
otherwise specified in the related prospectus supplement, the master servicer
also will be required to notify any superior lienholder in writing of the
existence of the mortgage loan and request notification of any action (as
described below) to be taken against the mortgagor or the mortgaged property by
the superior lienholder. If the master servicer is notified that any superior
lienholder has accelerated or intends to accelerate the obligations secured by
the related senior lien, or has declared or intends to declare a default under
the mortgage or the promissory note secured by that senior lien, or has filed
or intends to file an election to have the related mortgaged property sold or
foreclosed, then, unless otherwise specified in the related prospectus
supplement, the master servicer and the special servicer will each be required
to take, on behalf of the related trust fund, whatever actions are necessary to
protect the interests of the related certificateholders and/or to preserve the
security of the related mortgage loan, subject to the application of the REMIC
Provisions. Unless otherwise specified in the related prospectus supplement,
the master servicer or special servicer, as applicable, will be required to
advance the necessary funds to cure the default or reinstate the senior lien,
if such advance is in the best interests of the related certificateholders and
the master servicer or special servicer, as applicable, determines such
advances are recoverable out of payments on or proceeds of the related mortgage
loan.
SUB-SERVICERS
A master servicer or special servicer may delegate its servicing
obligations in respect of the mortgage loans to one or more third-party
sub-servicers; provided that, unless otherwise specified in the related
prospectus supplement, such master servicer or special servicer will remain
obligated under the related Pooling and Servicing Agreement. A sub-servicer for
any series of certificates may be an affiliate of the depositor. Unless
otherwise provided in the related prospectus supplement, each subservicing
agreement between a master servicer and a sub-servicer must provide for
servicing of the applicable mortgage loans consistent with the related Pooling
and Servicing Agreement. Unless otherwise provided in the related prospectus
supplement, the master servicer and special servicer in respect of any mortgage
asset pool will each be required to monitor the performance of sub-servicers
retained by it and will have the right to remove a sub-servicer retained by it
at any time it considers such removal to be in the best interests of
certificateholders.
Unless otherwise provided in the related prospectus supplement, a master
servicer or special servicer will be solely liable for all fees owed by it to
any sub-servicer, irrespective of whether the master servicer's or special
servicer's compensation pursuant to the related Pooling and Servicing Agreement
is sufficient to pay such fees. Each Sub-Servicer will be reimbursed by the
master servicer or special servicer, as the case may be, that retained it for
certain expenditures which it makes, generally to the same extent such master
servicer or special servicer would be reimbursed under a Pooling and Servicing
Agreement. See "--Certificate Account" and "--Servicing Compensation and
Payment of Expenses".
CERTIFICATE ACCOUNT
General. The master servicer, the trustee and/or the special servicer
will, as to each trust fund that includes mortgage loans, establish and
maintain or cause to be established and maintained the corresponding
Certificate Account, which will be established so as to comply with the
standards of each rating agency that has rated any one or more classes of
certificates of the related series. A Certificate Account may be maintained as
an interest-bearing or a noninterest-bearing account and the funds held in the
Certificate Account may be invested pending each succeeding Distribution Date
in United States government securities and other obligations that are
acceptable to each rating
44
agency that has rated any one or more classes of certificates of the related
series. Unless otherwise provided in the related prospectus supplement, any
interest or other income earned on funds in a Certificate Account will be paid
to the related master servicer, trustee or special servicer as additional
compensation. A Certificate Account may be maintained with the related master
servicer, special servicer, trustee or mortgage asset seller or with a
depository institution that is an affiliate of any of the foregoing or of the
depositor, provided that it complies with applicable rating agency standards.
If permitted by the applicable rating agency, a Certificate Account may contain
funds relating to more than one series of mortgage pass-through certificates
and may contain other funds representing payments on mortgage loans owned by
the related master servicer or special servicer or serviced by either on behalf
of others.
Deposits. Unless otherwise provided in the related Pooling and Servicing
Agreement and described in the related prospectus supplement, the following
payments and collections received or made by the master servicer, the trustee
or the special servicer subsequent to the Cut-off Date (other than payments due
on or before the Cut-off Date) are to be deposited in the Certificate Account
for each trust fund that includes mortgage loans, within a certain period
following receipt (in the case of collections on or in respect of the mortgage
loans) or otherwise as provided in the related Pooling and Servicing
Agreement--
o all payments on account of principal, including principal prepayments,
on the mortgage loans;
o all payments on account of interest on the mortgage loans, including any
default interest collected, in each case net of any portion of such
default interest retained by the master servicer or the special servicer
as its servicing compensation or as compensation to the trustee;
o all proceeds received under any hazard, title or other insurance policy
that provides coverage with respect to a mortgaged property or the
related mortgage loan or in connection with the full or partial
condemnation of a mortgaged property (other than proceeds applied to the
restoration of the property or released to the related borrower) and all
other amounts received and retained in connection with the liquidation of
defaulted mortgage loans or property acquired in respect of such
defaulted mortgage loans, by foreclosure or otherwise, together with the
net operating income (less reasonable reserves for future expenses)
derived from the operation of any mortgaged properties acquired by the
trust fund through foreclosure or otherwise;
o any amounts paid under any instrument or drawn from any fund that
constitutes credit support for the related series of certificates;
o any advances made with respect to delinquent scheduled payments of
principal and interest on the mortgage loans;
o any amounts paid under any cash flow agreement;
o all proceeds of the purchase of any mortgage loan, or property acquired
in respect of a mortgage loan, by the depositor, any mortgage asset
seller or any other specified person as described under "--Assignment of
Mortgage Loans; Repurchases" and "--Representations and Warranties;
Repurchases", all proceeds of the purchase of any defaulted mortgage loan
as described under "--Realization Upon Defaulted Mortgage Loans", and all
proceeds of any mortgage asset purchased as described under "Description
of the Certificates--
Termination";
o to the extent that any such item does not constitute additional
servicing compensation to the master servicer or the special servicer and
is not otherwise retained by the depositor or another specified person,
any payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations with respect to the
mortgage loans;
45
o all payments required to be deposited in the Certificate Account with
respect to any deductible clause in any blanket insurance policy as
described under "--Hazard Insurance Policies";
o any amount required to be deposited by the master servicer, the special
servicer or the trustee in connection with losses realized on investments
for the benefit of the master servicer, the special servicer or the
trustee, as the case may be, of funds held in the Certificate Account;
and
o any other amounts required to be deposited in the Certificate Account as
provided in the related Pooling and Servicing Agreement and described in
the related prospectus supplement.
Withdrawals. Unless otherwise provided in the related Pooling and
Servicing Agreement and described in the related prospectus supplement, a
master servicer, trustee or special servicer may make withdrawals from the
Certificate Account for each trust fund that includes mortgage loans for any of
the following purposes--
o to make distributions to the certificateholders on each Distribution
Date;
o to pay the master servicer or the special servicer any servicing fees
not previously retained by the master servicer or special servicer, such
payment to be made out of payments and other collections of interest on
the particular mortgage loans as to which such fees were earned;
o to reimburse the master servicer, the special servicer or any other
specified person for unreimbursed advances of delinquent scheduled
payments of principal and interest made by it, and certain unreimbursed
servicing expenses incurred by it, with respect to particular mortgage
loans in the trust fund and particular properties acquired in respect of
the trust fund. Reimbursement for advances made or expenses incurred that
are related to particular mortgage loans or properties will normally only
be made out of amounts that represent late payments collected on those
mortgage loans, Liquidation Proceeds, Insurance and Condemnation Proceeds
collected on those mortgage loans and properties, any form of credit
support related to those mortgage loans and net income collected on those
properties. However, if in the judgment of the master servicer, the
special servicer or such other person, as applicable, the advances and/or
expenses will not be recoverable from the above amounts, the
reimbursement will be made from amounts collected on other mortgage loans
in the same trust fund or, if and to the extent so provided by the
related Pooling and Servicing Agreement and described in the related
prospectus supplement, only from that portion of amounts collected on
such other mortgage loans that is otherwise distributable on one or more
classes of Subordinate Certificates of the related series;
o if and to the extent described in the related prospectus supplement, to
pay the master servicer, the special servicer or any other specified
person interest accrued on the advances and servicing expenses described
in the bulleted clause immediately listed above incurred by it while such
remain outstanding and unreimbursed;
o to pay for costs and expenses incurred by the trust fund for
environmental site assessments performed with respect to mortgaged
properties that constitute security for defaulted mortgage loans, and for
any containment, clean-up or remediation of hazardous wastes and
materials present on such mortgaged properties, as described under
"--Realization Upon Defaulted Mortgage Loans";
o to reimburse the master servicer, the special servicer, the REMIC
administrator, the depositor, the trustee, or any of their respective
directors, officers, employees and agents, as the case may be, for
certain expenses, costs and liabilities incurred thereby, as and to the
extent described under "--Certain Matters Regarding the Master Servicer,
the Special Servicer, the REMIC Administrator and the Depositor" and
"--Certain Matters Regarding the Trustee";
46
o if and to the extent described in the related prospectus supplement, to
pay the fees of the trustee, the REMIC administrator and any provider of
credit support;
o if and to the extent described in the related prospectus supplement, to
reimburse prior draws on any form of credit support;
o to pay the master servicer, the special servicer or the trustee, as
appropriate, interest and investment income earned in respect of amounts
held in the Certificate Account as additional compensation;
o to pay any servicing expenses not otherwise required to be advanced by
the master servicer, the special servicer or any other specified person;
o if one or more elections have been made to treat the trust fund or
designated portions of the trust fund as a REMIC, to pay any federal,
state or local taxes imposed on the trust fund or its assets or
transactions, as and to the extent described under "Certain Federal
Income Tax Consequences--REMICs--Prohibited Transactions Tax and Other
Taxes";
o to pay for the cost of various opinions of counsel obtained pursuant to
the related Pooling and Servicing Agreement for the benefit of
certificateholders;
o to make any other withdrawals permitted by the related Pooling and
Servicing Agreement and described in the related prospectus supplement;
and
o to clear and terminate the Certificate Account upon the termination of
the trust fund.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
The master servicer and the special servicer may each agree to modify,
waive or amend any term of any mortgage loan serviced by it in a manner
consistent with the applicable "Servicing Standard" as defined in the related
prospectus supplement; provided that, unless otherwise set forth in the related
prospectus supplement, the modification, waiver or amendment will--
o not affect the amount or timing of any scheduled payments of principal
or interest on the mortgage loan;
o will not, in the judgment of the master servicer or the special
servicer, as the case may be, materially impair the security for the
mortgage loan or reduce the likelihood of timely payment of amounts due;
and
o will not adversely affect the coverage under any applicable instrument
of credit support.
Unless otherwise provided in the related prospectus supplement, the
special servicer also may agree to any other modification, waiver or amendment
if, in its judgment,--
o a material default on the mortgage loan has occurred or a payment
default is reasonably foreseeable or imminent;
o such modification, waiver or amendment is reasonably likely to produce a
greater recovery with respect to the mortgage loan, taking into account
the time value of money, than would liquidation; and
o unless inconsistent with the applicable "servicing standard", such
modification, waiver or amendment will not materially adversely affect
the coverage under any applicable instrument of credit support.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
If a default on a mortgage loan has occurred, the special servicer, on
behalf of the trustee, may at any time institute foreclosure proceedings,
exercise any power of sale contained in the related mortgage, obtain a deed in
lieu of foreclosure, or otherwise comparably convert ownership of, or acquire
title to the related mortgaged property, by operation of law or otherwise. In
connection with
47
such foreclosure or other conversion of ownership, the special servicer shall
follow the servicing standard. A Pooling and Servicing Agreement may grant the
special servicer the right to direct the master servicer to advance costs and
expenses to be incurred in any such proceedings, and such advances may be
subject to reimbursement requirements. A Pooling and Servicing Agreement may
require the special servicer to consult with independent counsel regarding the
order and manner should foreclose upon or comparably proceed against such
properties if a mortgage loan or group of cross-collateralized mortgage loans
are secured by real properties in multiple states including certain states with
a statute, rule or regulation comparable to California's "one action" rule.
Unless otherwise provided in the related prospectus supplement, when applicable
state law permits the special servicer to select between judicial and
non-judicial foreclosure in respect of any mortgaged property, a special
servicer may make such selection so long as the selection is made in a manner
consistent with the servicing standard. Unless otherwise specified in the
related prospectus supplement, the special servicer may not, however, acquire
title to any mortgaged property, have a receiver of rents appointed with
respect to any mortgaged property or take any other action with respect to any
mortgaged property that would cause the trustee, for the benefit of the related
series of Certificateholders, or any other specified person to be considered to
hold title to, to be a "mortgagee-in-possession" of, or to be an "owner" or an
"operator" of such mortgaged property within the meaning of certain federal
environmental laws, unless the special servicer has previously received a
report prepared by a person who regularly conducts environmental audits (which
report will be an expense of the trust fund) and either:
(1) such report indicates that (a) the mortgaged property is in
compliance with applicable environmental laws and regulations and (b)
there are no circumstances or conditions present at the mortgaged property
that have resulted in any contamination for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under
any applicable environmental laws and regulations; or
(2) the special servicer, based solely (as to environmental matters and
related costs) on the information set forth in such report, determines
that taking such actions as are necessary to bring the mortgaged property
into compliance with applicable environmental laws and regulations and/or
taking the actions contemplated by clause (1)(b) above, is reasonably
likely to produce a greater recovery, taking into account the time value
of money, than not taking such actions. See "Certain Legal Aspects of
Mortgage Loans--Environmental Considerations".
A Pooling and Servicing Agreement may grant to the master servicer, the
special servicer, a provider of credit support and/or the holder or holders of
certain classes of the related series of certificates a right of first refusal
to purchase from the trust fund, at a predetermined price (which, if less than
the Purchase Price, will be specified in the related prospectus supplement),
any mortgage loan as to which a specified number of scheduled payments are
delinquent. In addition, unless otherwise specified in the related prospectus
supplement, the special servicer may offer to sell any defaulted mortgage loan
if and when the special servicer determines, consistent with its normal
servicing procedures, that such a sale would produce a greater recovery, taking
into account the time value of money, than would liquidation of the related
mortgaged property. In the absence of any such sale, the special servicer will
generally be required to proceed against the related mortgaged property,
subject to the discussion above.
Unless otherwise provided in the related prospectus supplement, if title
to any mortgaged property is acquired by a trust fund as to which a REMIC
election has been made, the special servicer, on behalf of the trust fund, will
be required to sell the mortgaged property before the close of the third
calendar year following the year of acquisition, unless (1) the IRS grants an
extension of time to sell such property or (2) the trustee receives an opinion
of independent counsel to the effect that the holding of the property by the
trust fund for longer than such period will not result in the imposition of a
tax on the trust fund or cause the trust fund (or any designated portion of the
trust fund) to fail to qualify as a REMIC under the Code at any time that any
certificate is outstanding. Subject to the foregoing and any other tax-related
limitations, the special servicer will generally be required to attempt to sell
any mortgaged property so acquired on the same terms and conditions it would if
it were the owner. Unless otherwise provided in the related prospectus
supplement, if title
48
to any mortgaged property is acquired by a trust fund as to which a REMIC
election has been made, the special servicer will also be required to ensure
that the mortgaged property is administered so that it constitutes "foreclosure
property" within the meaning of Code Section 860G(a)(8) at all times, that the
sale of such property does not result in the receipt by the trust fund of any
income from nonpermitted assets as described in Code Section 860F(a)(2)(B), and
that the trust fund does not derive any "net income from foreclosure property"
within the meaning of Code Section 860G(c)(2), with respect to such property
unless the method of operation that produces such income would produce a
greater after-tax return than a different method of operation of such property.
If the trust fund acquires title to any mortgaged property, the special
servicer, on behalf of the trust fund, may be required to retain an independent
contractor to manage and operate such property. The retention of an independent
contractor, however, will not relieve the special servicer of its obligation to
manage such mortgaged property as required under the related Pooling and
Servicing Agreement.
If Liquidation Proceeds collected with respect to a defaulted mortgage
loan are less than the outstanding principal balance of the defaulted mortgage
loan plus interest accrued plus the aggregate amount of reimbursable expenses
incurred by the special servicer and/or the master servicer in connection with
such mortgage loan, then, to the extent that such shortfall is not covered by
any instrument or fund constituting credit support, the trust fund will realize
a loss in the amount of such shortfall. The special servicer and/or the master
servicer will be entitled to reimbursement out of the Liquidation Proceeds
recovered on any defaulted mortgage loan, prior to the distribution of such
Liquidation Proceeds to certificateholders, any and all amounts that represent
unpaid servicing compensation in respect of the mortgage loan, unreimbursed
servicing expenses incurred with respect to the mortgage loan and any
unreimbursed advances of delinquent payments made with respect to the mortgage
loan. In addition, if and to the extent set forth in the related prospectus
supplement, amounts otherwise distributable on the certificates may be further
reduced by interest payable to the master servicer and/or special servicer on
such servicing expenses and advances.
Except as otherwise provided in the prospectus supplement, if any
mortgaged property suffers damage such that the proceeds, if any, of the
related hazard insurance policy are insufficient to restore fully the damaged
property, neither the special servicer nor the master servicer will be required
to expend its own funds to effect such restoration.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related prospectus supplement, each
Pooling and Servicing Agreement will require the master servicer (or the
special servicer with respect to mortgage loans serviced by the special
servicer) to use reasonable efforts to cause each mortgage loan borrower to
maintain a hazard insurance policy that provides for such coverage as is
required under the related mortgage or, if the mortgage permits the holder to
dictate to the borrower the insurance coverage to be maintained on the related
mortgaged property, such coverage as is consistent with the master servicer's
(or special servicer's) normal servicing procedures. Unless otherwise specified
in the related prospectus supplement, such coverage generally will be in an
amount equal to the lesser of the principal balance owing on such mortgage loan
and the replacement cost of the related mortgaged property. The ability of a
master servicer (or special servicer) to assure that hazard insurance proceeds
are appropriately applied may be dependent upon its being named as an
additional insured under any hazard insurance policy and under any other
insurance policy referred to below, or upon the extent to which information
concerning covered losses is furnished by borrowers. All amounts collected by a
master servicer (or special servicer) under any such policy (except for amounts
to be applied to the restoration or repair of the mortgaged property or
released to the borrower in accordance with the master servicer's (or special
servicer's) normal servicing procedures and/or to the terms and conditions of
the related mortgage and mortgage note) will be deposited in the related
Certificate Account. The Pooling and Servicing Agreement may provide that the
master servicer (or special servicer) may satisfy its obligation to cause each
borrower to maintain such a hazard insurance policy by maintaining a blanket
policy insuring against hazard losses on
49
the mortgage loans in a trust fund, which may contain a deductible clause (not
in excess of a customary amount). If such blanket policy contains a deductible
clause, the master servicer (or special servicer) will be required, in the
event of a casualty covered by such blanket policy, to deposit in the related
Certificate Account all additional sums that would have been deposited in the
Certificate Account under an individual policy but were not because of such
deductible clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the mortgaged properties will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, most such policies typically do not cover any physical damage
resulting from war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mudflows), wet or dry rot, vermin and domestic animals. Accordingly, a
mortgaged property may not be insured for losses arising from any such cause
unless the related mortgage specifically requires, or permits the holder to
require, such coverage.
The hazard insurance policies covering the mortgaged properties will
typically contain co-insurance clauses that in effect require an insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of
the full replacement value of the improvements on the property in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, such clauses generally provide that the
insurer's liability in the event of partial loss does not exceed the lesser of
(1) the replacement cost of the improvements less physical depreciation and (2)
such proportion of the loss as the amount of insurance carried bears to the
specified percentage of the full replacement cost of such improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the mortgage loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the mortgage loan upon any sale or
other transfer of the related mortgaged property made without the lender's
consent. Certain of the mortgage loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the mortgage loan
upon the creation of any other lien or encumbrance upon the mortgaged property.
Unless otherwise provided in the related prospectus supplement, the master
servicer (or special servicer) will determine whether to exercise any right the
trustee may have under any such provision in a manner consistent with the
master servicer's (or special servicer's) normal servicing procedures. Unless
otherwise specified in the related prospectus supplement, the master servicer
or special servicer, as applicable, will be entitled to retain as additional
servicing compensation any fee collected in connection with the permitted
transfer of a mortgaged property. See "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance Provisions".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related prospectus supplement, a master
servicer's primary servicing compensation with respect to a series of
certificates will come from the periodic payment to it of a specified portion
of the interest payments on each mortgage loan in the related trust fund,
including mortgage loans serviced by the related special servicer. If and to
the extent described in the related prospectus supplement, a special servicer's
primary compensation with respect to a series of certificates may consist of
any or all of the following components--
o a specified portion of the interest payments on each mortgage loan in
the related trust fund, whether or not serviced by it;
o an additional specified portion of the interest payments on each
mortgage loan then currently serviced by it; and
o subject to any specified limitations, a fixed percentage of some or all
of the collections and proceeds received with respect to each mortgage
loan which was at any time serviced by it, including mortgage loans for
which servicing was returned to the master servicer.
50
Insofar as any portion of the master servicer's or special servicer's
compensation consists of a specified portion of the interest payments on a
mortgage loan, such compensation will generally be based on a percentage of the
principal balance of such mortgage loan outstanding from time to time and,
accordingly, will decrease with the amortization of the mortgage loan. As
additional compensation, a master servicer or special servicer may be entitled
to retain all or a portion of late payment charges, Prepayment Premiums,
modification fees and other fees collected from borrowers and any interest or
other income that may be earned on funds held in the related Certificate
Account. A more detailed description of each master servicer's and special
servicer's compensation will be provided in the related prospectus supplement.
Any sub-servicer will receive as its sub-servicing compensation a portion of
the servicing compensation to be paid to the master servicer or special
servicer that retained such sub-servicer.
In addition to amounts payable to any sub-servicer, a master servicer or
special servicer may be required, to the extent provided in the related
prospectus supplement, to pay from amounts that represent its servicing
compensation certain expenses incurred in connection with the administration of
the related trust fund, including, without limitation, payment of the fees and
disbursements of independent accountants, payment of fees and disbursements of
the trustee and any custodians appointed by the trustee and payment of expenses
incurred in connection with distributions and reports to certificateholders.
Certain other expenses, including certain expenses related to mortgage loan
defaults and liquidations and, to the extent so provided in the related
prospectus supplement, interest on such expenses at the rate specified in the
prospectus supplement, may be required to be borne by the trust fund.
EVIDENCE AS TO COMPLIANCE
Unless otherwise specified in the related prospectus supplement, each
Pooling and Servicing Agreement will provide that on or before a specified date
in each year, beginning the first such date that is at least a specified number
of months after the Cut-off Date, there will be furnished to the related
trustee a report of a firm of independent certified public accountants stating
that (1) it has obtained a letter of representation regarding certain matters
from the management of the master servicer which includes an assertion that the
master servicer has complied with certain minimum mortgage loan servicing
standards (to the extent applicable to commercial and multifamily mortgage
loans), identified in the Uniform Single Attestation Program for Mortgage
Bankers established by the Mortgage Bankers Association of America, with
respect to the master servicer's servicing of commercial and multifamily
mortgage loans during the most recently completed calendar year and (2) on the
basis of an examination conducted by such firm in accordance with standards
established by the American Institute of Certified Public Accountants, such
representation is fairly stated in all material respects, subject to such
exceptions and other qualifications that, in the opinion of such firm, such
standards require it to report. In rendering its report such firm may rely, as
to the matters relating to the direct servicing of commercial and multifamily
mortgage loans by sub-servicers, upon comparable reports of firms of
independent public accountants rendered on the basis of examinations conducted
in accordance with the same standards (rendered within one year of such report)
with respect to those sub-servicers. The prospectus supplement may provide that
additional reports of independent certified public accountants relating to the
servicing of mortgage loans may be required to be delivered to the trustee.
Each Pooling and Servicing Agreement will also provide that, on or before
a specified date in each year, beginning the first such date that is at least a
specified number of months after the Cut-off Date, the master servicer and
special servicer shall each deliver to the related trustee an annual statement
signed by one or more officers of the master servicer or the special servicer,
as the case may be, to the effect that, to the best knowledge of each such
officer, the master servicer or the special servicer, as the case may be, has
fulfilled in all material respects its obligations under the Pooling and
Servicing Agreement throughout the preceding year or, if there has been a
material default in the fulfillment of any such obligation, such statement
shall specify each such known default and the nature and status of such
default. Such statement may be provided as a single form making the required
statements as to more than one Pooling and Servicing Agreement.
51
Unless otherwise specified in the related prospectus supplement, copies of
the annual accountants' statement and the annual statement of officers of a
master servicer or special servicer may be obtained by certificateholders upon
written request to the trustee.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER, THE REMIC
ADMINISTRATOR AND THE DEPOSITOR
Any entity serving as master servicer, special servicer or REMIC
administrator under a Pooling and Servicing Agreement may be an affiliate of
the depositor and may have other normal business relationships with the
depositor or the depositor's affiliates. Unless otherwise specified in the
prospectus supplement for a series of certificates, the related Pooling and
Servicing Agreement will permit the master servicer, the special servicer and
any REMIC administrator to resign from its obligations under the Pooling and
Servicing Agreement only upon a determination that such obligations are no
longer permissible under applicable law or are in material conflict by reason
of applicable law with any other activities carried on by it. No such
resignation will become effective until the trustee or other successor has
assumed the obligations and duties of the resigning master servicer, special
servicer or REMIC administrator, as the case may be, under the Pooling and
Servicing Agreement. The master servicer and special servicer for each trust
fund will be required to maintain a fidelity bond and errors and omissions
policy or their equivalent that provides coverage against losses that may be
sustained as a result of an officer's or employee's misappropriation of funds
or errors and omissions, subject to certain limitations as to amount of
coverage, deductible amounts, conditions, exclusions and exceptions permitted
by the related Pooling and Servicing Agreement.
Unless otherwise specified in the related prospectus supplement, each
Pooling and Servicing Agreement will further provide that none of the master
servicer, the special servicer, the REMIC administrator, the depositor, any
extension adviser or any director, officer, employee or agent of any of them
will be under any liability to the related trust fund or Certificateholders for
any action taken, or not taken, in good faith pursuant to the Pooling and
Servicing Agreement or for errors in judgment; provided, however, that none of
the master servicer, the special servicer, the REMIC administrator, the
depositor, any extension adviser or any such person will be protected against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence in the performance of obligations or duties under
the Pooling and Servicing Agreement or by reason of reckless disregard of such
obligations and duties. Unless otherwise specified in the related prospectus
supplement, each Pooling and Servicing Agreement will further provide that the
master servicer, the special servicer, the REMIC administrator, the depositor,
any extension adviser and any director, officer, employee or agent of any of
them will be entitled to indemnification by the related trust fund against any
loss, liability or expense incurred in connection with any legal action that
relates to such Pooling and Servicing Agreement or the related series of
certificates; provided, however, that such indemnification will not extend to
any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or negligence in the performance of obligations or duties under such
Pooling and Servicing Agreement, or by reason of reckless disregard of such
obligations or duties. In addition, each Pooling and Servicing Agreement will
provide that none of the master servicer, the special servicer, the REMIC
administrator, any extension adviser or the depositor will be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its respective responsibilities under the Pooling and Servicing
Agreement and that in its opinion may involve it in any expense or liability.
However, each of the master servicer, the special servicer, the REMIC
administrator, any extension adviser and the depositor will be permitted, in
the exercise of its discretion, to undertake any such action that it may deem
necessary or desirable with respect to the enforcement and/or protection of the
rights and duties of the parties to the Pooling and Servicing Agreement and the
interests of the related series of certificateholders under the Pooling and
Servicing Agreement. In such event, the legal expenses and costs of such
action, and any liability resulting from such action, will be expenses, costs
and liabilities of the related series of certificateholders, and the master
servicer, the special servicer, the REMIC administrator, any extension adviser
or the depositor, as the case may be, will be entitled to charge the related
Certificate Account for this expense.
52
Any person into which the master servicer, the special servicer, the REMIC
administrator or the depositor may be merged or consolidated, or any person
resulting from any merger or consolidation to which the master servicer, the
special servicer, the REMIC administrator or the depositor is a party, or any
person succeeding to the business of the master servicer, the special servicer,
the REMIC administrator or the depositor, will be the successor of the master
servicer, the special servicer, the REMIC administrator or the depositor, as
the case may be, under the related Pooling and Servicing Agreement.
Unless otherwise specified in the related prospectus supplement, a REMIC
administrator will be entitled to perform any of its duties under the related
Pooling and Servicing Agreement either directly or by or through agents or
attorneys, and the REMIC administrator will not be responsible for any willful
misconduct or gross negligence on the part of any such agent or attorney
appointed by it with due care.
EVENTS OF DEFAULT
Unless otherwise provided in the prospectus supplement for a series of
certificates, Events of Default under the related Pooling and Servicing
Agreement will include, without limitation--
o any failure by the master servicer to distribute or cause to be
distributed to the certificateholders of such series, or to remit to the
trustee for distribution to such certificateholders, any amount required
to be so distributed or remitted, pursuant to, and at the time specified
by, the terms of the Pooling and Servicing Agreement;
o any failure by the special servicer to remit to the master servicer or
the trustee, as applicable, any amount required to be so remitted,
pursuant to, and at the time specified by, the terms of the Pooling and
Servicing Agreement;
o any failure by the master servicer or the special servicer duly to
observe or perform in any material respect any of its other covenants or
obligations under the related Pooling and Servicing Agreement, which
failure continues unremedied for thirty days after written notice of such
failure has been given to the master servicer or the special servicer, as
the case may be, by any other party to the related Pooling and Servicing
Agreement, or to the master servicer or the special servicer, as the case
may be, with a copy to each other party to the related Pooling and
Servicing Agreement, by certificateholders entitled to not less than 25%
(or such other percentage specified in the related prospectus supplement)
of the Voting Rights for such series;
o any failure by a REMIC administrator (if other than the trustee) duly to
observe or perform in any material respect any of its covenants or
obligations under the related Pooling and Servicing Agreement, which
failure continues unremedied for thirty days after written notice of such
notice has been given to the REMIC administrator by any other party to
the related Pooling and Servicing Agreement, or to the REMIC
administrator, with a copy to each other party to the related Pooling and
Servicing Agreement, by certificateholders entitled to not less than 25%
(or such other percentage specified in the related prospectus supplement)
of the Voting Rights for such series;
o certain events involving a determination by a rating agency that the
master servicer or the special servicer is no longer approved by such
rating agency to serve in such capacity; and
o certain events of insolvency, readjustment of debt, marshaling of assets
and liabilities, or similar proceedings in respect of or relating to the
master servicer, the special servicer or the REMIC administrator (if
other than the trustee), and certain actions by or on behalf of the
master servicer, the special servicer or the REMIC administrator (if
other than the trustee) indicating its insolvency or inability to pay its
obligations.
53
Material variations to the foregoing Events of Default (other than to add
thereto or shorten cure periods or eliminate notice requirements) will be
specified in the related prospectus supplement. Unless otherwise specified in
the related prospectus supplement, when a single entity acts as master
servicer, special servicer and REMIC administrator, or in any two of the
foregoing capacities, for any trust fund, an Event of Default in one capacity
will (except where related only to a Rating Agency's evaluation of the
acceptability of such entity to act in a particular capacity) constitute an
event of default in each capacity.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the master servicer, the
special servicer or a REMIC administrator under a Pooling and Servicing
Agreement, then, in each and every such case, so long as the Event of Default
remains unremedied, the trustee will be authorized, and at the direction of
certificateholders of the related series entitled to not less than 51% (or such
other percentage specified in the related prospectus supplement) of the Voting
Rights for such series, the trustee will be required, to terminate all of the
rights and obligations of the defaulting party as master servicer, special
servicer or REMIC administrator, as applicable, under the Pooling and Servicing
Agreement, whereupon the trustee will succeed to all of the responsibilities,
duties and liabilities of the defaulting party as master servicer, special
servicer or REMIC administrator, as applicable, under the Pooling and Servicing
Agreement (except that if the defaulting party is required to make advances
under the Pooling and Servicing Agreement regarding delinquent mortgage loans,
but the trustee is prohibited by law from obligating itself to make such
advances, or if the related prospectus supplement so specifies, the trustee
will not be obligated to make such advances) and will be entitled to similar
compensation arrangements. Unless otherwise specified in the related prospectus
supplement, if the trustee is unwilling or unable so to act, it may (or, at the
written request of Certificateholders of the related series entitled to not
less than 51% (or such other percentage specified in the related prospectus
supplement) of the Voting Rights for such series, it will be required to)
appoint, or petition a court of competent jurisdiction to appoint, a loan
servicing institution or other entity that (unless otherwise provided in the
related prospectus supplement) is acceptable to each applicable rating agency
to act as successor to the master servicer, special servicer or REMIC
administrator, as the case may be, under the Pooling and Servicing Agreement.
Pending such appointment, the trustee will be obligated to act in such
capacity.
If the same entity is acting as both trustee and REMIC administrator, it
may be removed in both such capacities as described under "--Resignation and
Removal of the Trustee" below.
No certificateholder will have any right under a Pooling and Servicing
Agreement to institute any proceeding with respect to such Pooling and
Servicing Agreement unless such holder previously has given to the trustee
written notice of default and the continuance of such default and unless the
holders of certificates of any class evidencing not less than 25% of the
aggregate Percentage Interests constituting such class have made written
request upon the trustee to institute such proceeding in its own name as
trustee under the Pooling and Servicing Agreement and have offered to the
trustee reasonable indemnity and the trustee for sixty days after receipt of
such request and indemnity has neglected or refused to institute any such
proceeding. However, the trustee will be under no obligation to exercise any of
the trusts or powers vested in it by the Pooling and Servicing Agreement or to
institute, conduct or defend any litigation under the Pooling and Servicing
Agreement or in relation thereto at the request, order or direction of any of
the holders of certificates covered by such Pooling and Servicing Agreement,
unless such certificateholders have offered to the trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
in connection with such litigation.
AMENDMENT
Except as otherwise specified in the related prospectus supplement, each
Pooling and Servicing Agreement may be amended by the parties thereto, without
the consent of any of the holders of certificates covered by such Pooling and
Servicing Agreement, (1) to cure any ambiguity, (2) to
54
correct or supplement any provision in the Pooling and Servicing Agreement
which may be inconsistent with any other provision in the Pooling and Servicing
Agreement or to correct any error, (3) to change the timing and/or nature of
deposits in the Certificate Account, provided that (A) such change would not
adversely affect in any material respect the interests of any
Certificateholder, as evidenced by an opinion of counsel, and (B) such change
would not result in the withdrawal, downgrade or qualification of any of the
then-current ratings on the certificates, as evidenced by a letter from each
applicable rating agency, (4) if a REMIC election has been made with respect to
the related trust fund, to modify, eliminate or add to any of its provisions
(A) to such extent as shall be necessary to maintain the qualification of the
trust fund (or any designated portion of the trust fund) as a REMIC or to avoid
or minimize the risk of imposition of any tax on the related trust fund,
provided that the trustee has received an opinion of counsel to the effect that
(1) such action is necessary or desirable to maintain such qualification or to
avoid or minimize such risk, and (2) such action will not adversely affect in
any material respect the interests of any holder of certificates covered by the
Pooling and Servicing Agreement, or (B) to restrict the transfer of the REMIC
Residual Certificates, provided that the depositor has determined that the
then-current ratings of the classes of the certificates that have been rated
will not be withdrawn, downgraded or qualified, as evidenced by a letter from
each applicable rating agency, and that any such amendment will not give rise
to any tax with respect to the transfer of the REMIC Residual Certificates to a
non-permitted transferee (See "Certain Federal Income Tax
Consequences--REMICs--Tax and Restrictions on Transfers of REMIC Residual
Certificates to Certain Organizations" in this prospectus supplement), (5) to
make any other provisions with respect to matters or questions arising under
such Pooling and Servicing Agreement or any other change, provided that such
action will not adversely affect in any material respect the interests of any
certificateholder, or (6) to amend specified provisions that are not material
to holders of any class of certificates offered by this prospectus.
The Pooling and Servicing Agreement may also be amended by the parties
thereto with the consent of the holders of certificates of each class affected
by an amendment evidencing, in each case, not less than 662/3% (or such other
percentage specified in the related prospectus supplement) of the aggregate
Percentage Interests constituting such class for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Pooling and Servicing Agreement or of modifying in any manner the rights
of the holders of certificates covered by such Pooling and Servicing Agreement,
except that no such amendment may (1) reduce in any manner the amount of, or
delay the timing of, payments received on mortgage loans which are required to
be distributed on a certificate of any class without the consent of the holder
of such certificate or (2) reduce the aforesaid percentage of certificates of
any class the holders of which are required to consent to any such amendment
without the consent of the holders of all certificates of such class covered by
such Pooling and Servicing Agreement then outstanding.
Notwithstanding the foregoing, if one or more REMIC elections have been
made with respect to the related trust fund, the trustee will not be required
to consent to any amendment to a Pooling and Servicing Agreement without having
first received an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the master servicer, the special servicer, the
depositor, the trustee or any other specified person in accordance with such
amendment will not result in the imposition of a tax on the related trust fund
or cause such trust fund (or any designated portion of the trust fund) to fail
to qualify as a REMIC.
LIST OF CERTIFICATEHOLDERS
Unless otherwise specified in the related prospectus supplement, upon
written request of three or more certificateholders of record made for purposes
of communicating with other holders of certificates of the same series with
respect to their rights under the related Pooling and Servicing Agreement, the
trustee or other specified person will afford such certificateholders access
during normal business hours to the most recent list of certificateholders of
that series held by such person. If such list is as of a date more than 90 days
prior to the date of receipt of such certificateholders'
55
request, then such person, if not the registrar for such series of
certificates, will be required to request from such registrar a current list
and to afford such requesting certificateholders access thereto promptly upon
receipt.
THE TRUSTEE
The trustee under each Pooling and Servicing Agreement will be named in
the related prospectus supplement. The commercial bank, national banking
association, banking corporation or trust company that serves as trustee may
have typical banking relationships with the depositor and its affiliates and
with any master servicer, special servicer or REMIC administrator and its
affiliates.
DUTIES OF THE TRUSTEE
The trustee for each series of certificates will make no representation as
to the validity or sufficiency of the related Pooling and Servicing Agreement,
such certificates or any underlying mortgage asset or related document and will
not be accountable for the use or application by or on behalf of any master
servicer or special servicer of any funds paid to the master servicer or
special servicer in respect of the certificates or the underlying mortgage
assets. If no Event of Default has occurred and is continuing, the trustee for
each series of certificates will be required to perform only those duties
specifically required under the related Pooling and Servicing Agreement.
However, upon receipt of any of the various certificates, reports or other
instruments required to be furnished to it pursuant to the related Pooling and
Servicing Agreement, a trustee will be required to examine such documents and
to determine whether they conform to the requirements of such agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
As and to the extent described in the related prospectus supplement, the
fees and normal disbursements of any trustee may be the expense of the related
master servicer or other specified person or may be required to be borne by the
related trust fund.
Unless otherwise specified in the related prospectus supplement, the
trustee for each series of certificates will be entitled to indemnification,
from amounts held in the Certificate Account for such series, for any loss,
liability or expense incurred by the trustee in connection with the trustee's
acceptance or administration of its trusts under the related Pooling and
Servicing Agreement; provided, however, that such indemnification will not
extend to any loss liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence on the part of the trustee in the
performance of its obligations and duties under the Pooling and Servicing
Agreement, or by reason of its reckless disregard of such obligations or
duties.
Unless otherwise specified in the related prospectus supplement, the
trustee for each series of certificates will be entitled to execute any of its
trusts or powers under the related Pooling and Servicing Agreement or perform
any of its duties under the Pooling and Servicing Agreement either directly or
by or through agents or attorneys, and the trustee will not be responsible for
any willful misconduct or negligence on the part of any such agent or attorney
appointed by it with due care.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The trustee may resign at any time, in which event the depositor will be
obligated to appoint a successor trustee. The depositor may also remove the
trustee if the trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the trustee becomes insolvent. Upon
becoming aware of such circumstances, the depositor will be obligated to
appoint a successor trustee. The trustee may also be removed at any time by the
holders of certificates of the applicable series evidencing not less than
331/3% (or such other percentage specified in the related prospectus
supplement) of the Voting Rights for such series. 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. Notwithstanding
anything in this prospectus to the contrary, if any entity is acting as both
trustee and REMIC administrator, then any resignation or removal of such entity
as the trustee will also constitute the resignation or removal of such entity
as REMIC administrator, and the successor trustee will serve as successor to
the REMIC administrator as well.
56
DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit support may be provided with respect to one or more classes of the
certificates of any series or with respect to the related mortgage assets.
Credit support may be in the form of a letter of credit, the subordination of
one or more classes of certificates, the use of a pool insurance policy or
guarantee insurance, the establishment of one or more reserve funds and/or cash
collateral accounts, overcollateralization, or another method of credit support
described in the related prospectus supplement, or any combination of the
foregoing. If and to the extent so provided in the related prospectus
supplement, any of the foregoing forms of credit support may provide credit
enhancement for more than one series of certificates.
Unless otherwise provided in the related prospectus supplement for a
series of certificates, the credit support will not provide protection against
all risks of loss and will not guarantee payment to certificateholders of all
amounts to which they are entitled under the related Pooling and Servicing
Agreement. If losses or shortfalls occur that exceed the amount covered by the
related credit support or that are of a type not covered by such credit
support, certificateholders will bear their allocable share of deficiencies.
Moreover, if a form of credit support covers the offered certificates of more
than one series and losses on the related mortgage assets exceed the amount of
such credit support, it is possible that the holders of offered certificates of
one (or more) such series will be disproportionately benefited by such credit
support to the detriment of the holders of offered certificates of one (or
more) other such series.
If credit support is provided with respect to one or more classes of
certificates of a series, or with respect to the related mortgage assets, the
related prospectus supplement will include a description of--
o the nature and amount of coverage under such credit support;
o any conditions to payment under the credit support not otherwise
described in this prospectus;
o the conditions (if any) under which the amount of coverage under such
credit support may be reduced and under which such credit support may be
terminated or replaced; and
o the material provisions relating to such credit support.
Additionally, the related prospectus supplement will set forth certain
information with respect to the obligor, if any, under any instrument of credit
support. See "Risk Factors--Credit Support Limitations".
SUBORDINATE CERTIFICATES
If so specified in the related prospectus supplement, one or more classes
of certificates of a series may be Subordinate Certificates. To the extent
specified in the related prospectus supplement, the rights of the holders of
Subordinate Certificates to receive distributions from the Certificate Account
on any Distribution Date will be subordinated to the corresponding rights of
the holders of Senior Certificates. If so provided in the related prospectus
supplement, the subordination of a class may apply only in the event of certain
types of losses or shortfalls. The related prospectus supplement will set forth
information concerning the method and amount of subordination provided by a
class or classes of Subordinate Certificates in a series and the circumstances
under which such subordination will be available.
If the mortgage assets in any trust fund are divided into separate groups,
each supporting a separate class or classes of certificates of the related
series, credit support may be provided by cross-support provisions requiring
that distributions be made on Senior Certificates evidencing interests in one
group of mortgage assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of mortgage assets within the trust
fund. The prospectus supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
57
INSURANCE OR GUARANTEES CONCERNING THE MORTGAGE LOANS
If so provided in the prospectus supplement for a series of certificates,
mortgage loans included in the related trust fund will be covered for certain
default risks by insurance policies or guarantees. The related prospectus
supplement will describe the nature of such default risks and the extent of
such coverage.
LETTER OF CREDIT
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on such certificates or certain
classes of certificates will be covered by one or more letters of credit,
issued by a bank or other financial institution (which may be an affiliate of
the depositor) specified in such prospectus supplement. Under a letter of
credit, the providing institution will be obligated to honor draws in an
aggregate fixed dollar amount, net of unreimbursed payments under the letter of
credit, generally equal to a percentage specified in the related prospectus
supplement of the aggregate principal balance of some or all of the related
mortgage assets on the related Cut-off Date or of the initial aggregate
Certificate Balance of one or more classes of certificates. If so specified in
the related prospectus supplement, the letter of credit may permit draws only
in the event of certain types of losses and shortfalls. The amount available
under the letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments under the letter of credit and may otherwise be reduced
as described in the related prospectus supplement. The obligations of the
providing institution under the letter of credit for each series of
certificates will expire at the earlier of the date specified in the related
prospectus supplement or the termination of the trust fund.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on such certificates or certain
classes of certificates will be covered by insurance policies or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of certificates of the related
series, timely distributions of interest or distributions of principal on the
basis of a schedule of principal distributions set forth in or determined in
the manner specified in the related prospectus supplement. The related
prospectus supplement will describe any limitations on the draws that may be
made under any such instrument.
RESERVE FUNDS
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on such certificates or certain
classes will be covered (to the extent of available funds) by one or more
reserve funds in which cash, a letter of credit, Permitted Investments, a
demand note or a combination will be deposited, in the amounts specified in
such prospectus supplement. If so specified in the related prospectus
supplement, the reserve fund for a series may also be funded over time by a
specified amount of certain collections received on the related mortgage
assets.
Amounts on deposit in any reserve fund for a series will be applied for
the purposes, in the manner, and to the extent specified in the related
prospectus supplement. If so specified in the related prospectus supplement,
reserve funds may be established to provide protection only against certain
types of losses and shortfalls. Following each Distribution Date, amounts in a
reserve fund in excess of any amount required to be maintained in such reserve
funds may be released from the reserve fund under the conditions and to the
extent specified in the related prospectus supplement.
If so specified in the related prospectus supplement, amounts deposited in
any reserve fund will be invested in Permitted Investments. Unless otherwise
specified in the related prospectus supplement, any reinvestment income or
other gain from such investments will be credited to the related reserve fund
for such series, and any loss resulting from such investments will be charged
to
58
such reserve fund. However, such income may be payable to any related master
servicer or another service provider as additional compensation for its
services. The reserve fund, if any, for a series will not be a part of the
trust fund unless otherwise specified in the related prospectus supplement.
CASH COLLATERAL ACCOUNT
If so specified in the related prospectus supplement, all or any portion
of credit enhancement for a series of certificates may be provided by the
establishment of a cash collateral account. A cash collateral account will be
similar to a reserve fund except that generally a cash collateral account is
funded initially by a loan from a cash collateral lender, the proceeds of which
are invested with the cash collateral lender or other eligible institution. The
loan from the cash collateral lender will be repaid from such amounts as are
specified in the related prospectus supplement. Amounts on deposit in the cash
collateral account will be available in generally the same manner described
above with respect to a reserve fund. As specified in the related prospectus
supplement, a cash collateral account may be deemed to be part of the assets of
the related Trust, may be deemed to be part of the assets of a separate cash
collateral trust or may be deemed to be property of the party specified in the
related prospectus supplement and pledged for the benefit of the holders of one
or more classes of certificates of a series.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the prospectus supplement for a series of certificates,
any MBS included in the related trust fund and/or the related underlying
mortgage loans may be covered by one or more of the types of credit support
described in this prospectus. The related prospectus supplement will specify,
as to each such form of credit support, the information indicated above with
respect thereto, to the extent such information is material and available.
59
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of mortgage loans secured by commercial and multifamily residential
properties. Because such legal aspects are governed by applicable state law
(which laws may differ substantially), the summaries do not purport to be
complete, to reflect the laws of any particular state, or to encompass the laws
of all states in which the security for the mortgage loans (or mortgage loans
underlying any MBS) is situated. Accordingly, the summaries are qualified in
their entirety by reference to the applicable laws of those states. See
"Description of the Trust Funds--Mortgage Loans". For purposes of the following
discussion, "mortgage loan" includes a mortgage loan underlying an MBS.
GENERAL
Each mortgage loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related mortgaged property is
located. mortgages, deeds of trust and deeds to secure debt are in this
prospectus collectively referred to as "mortgages". A mortgage creates a lien
upon, or grants a title interest in, the real property covered by that
mortgage, and represents the security for the repayment of the indebtedness
customarily evidenced by a promissory note. The priority of the lien created or
interest granted will depend on the terms of the mortgage and, in some cases,
on the terms of separate subordination agreements or intercreditor agreements
with others that hold interests in the real property, the knowledge of the
parties to the mortgage and, generally, the order of recordation of the
mortgage in the appropriate public recording office. However, the lien of a
recorded mortgage will generally be subordinate to later-arising liens for real
estate taxes and assessments and other charges imposed under governmental
police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent of a
borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property, irrevocably until the debt is paid, in trust
and generally with a power of sale, to the trustee to secure repayment of the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties, pursuant to which the borrower, or grantor, conveys title to the
real property to the grantee, or lender, generally with a power of sale, until
such time as the debt is repaid. In a case where the borrower is a land trust,
there would be an additional party because legal title to the property is held
by a land trustee under a land trust agreement for the benefit of the borrower.
At origination of a mortgage loan involving a land trust, the borrower may
execute a separate undertaking to make payments on the mortgage note. In no
event is the land trustee personally liable for the mortgage note obligation.
The mortgagee's authority under a mortgage, the trustee's authority under a
deed of trust and the grantee's authority under a deed to secure debt are
governed by the express provisions of the related instrument, the law of the
state in which the real property is located, certain federal laws and, in some
deed of trust transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases and/or may be accompanied by a separate
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease
and the income derived from such leases and rents, while (unless rents are to
be paid directly to the lender) retaining a revocable license to collect the
rents for so long as there is no default. If the borrower defaults, the license
terminates and the lender is entitled to collect the rents. Local law may
require that the lender take possession of the property and/or obtain a
court-appointed receiver before becoming entitled to collect the rents.
60
In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code; in cases where hotels or motels
constitute loan security, the rates are generally pledged by the borrower as
additional security for the loan. In general, the lender must file financing
statements in order to perfect its security interest in the room rates and must
file continuation statements, generally every five years, to maintain
perfection of such security interest. In certain cases, mortgage loans secured
by hotels or motels may be included in a trust fund even if the security
interest in the room rates was not perfected or the requisite UCC filings were
allowed to lapse. Even if the lender's security interest in room rates is
perfected under applicable nonbankruptcy law, it will generally be required to
commence a foreclosure action or otherwise take possession of the property in
order to enforce its rights to collect the room rates following a default. In
the bankruptcy setting, however, the lender will be stayed from enforcing its
rights to collect room rates, but those room rates (in light of certain
revisions to the Bankruptcy Code which are effective for all bankruptcy cases
commenced on or after October 22, 1994) constitute "cash collateral" and
therefore cannot be used by the bankruptcy debtor without lender's consent or a
hearing at which the lender's interest in the room rates is given adequate
protection (e.g., the lender receives cash payments from otherwise unencumbered
funds or a replacement lien on unencumbered property, in either case equal in
value to the amount of room rates that the debtor proposes to use, or other
similar relief). See "--Bankruptcy Laws".
In the case of office and retail properties, the bankruptcy or insolvency
of a major tenant or a number of smaller tenants may have an adverse impact on
the mortgaged properties affected and the income produced by such mortgaged
properties. Under bankruptcy law, a tenant has the option of assuming
(continuing), or rejecting (terminating) or, subject to certain conditions,
assigning to a third party any unexpired lease. If the tenant assumes its
lease, the tenant must cure all defaults under the lease and provide the
landlord with adequate assurance of its future performance under the lease. If
the tenant rejects the lease, the landlord's claim for breach of the lease
would (absent collateral securing the claim) be treated as a general unsecured
claim. The amount of the claim would be limited to the amount owed for unpaid
pre-petition lease payments unrelated to the rejection, plus the greater of one
year's lease payments or 15% of the remaining lease payments payable under the
lease (but not to exceed three years' lease payments). If the tenant assigns
its lease, the tenant must cure all defaults under the lease and the proposed
assignee must demonstrate adequate assurance of future performance under the
lease.
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the
borrower and not previously pledged) may constitute a significant portion of
the property's value as security. The creation and enforcement of liens on
personal property are governed by the UCC. Accordingly, if a borrower pledges
personal property as security for a mortgage loan, the lender generally must
file UCC financing statements in order to perfect its security interest in the
mortgage loan, and must file continuation statements, generally every five
years, to maintain that perfection. In certain cases, mortgage loans secured in
part by personal property may be included in a trust fund even if the security
interest in such personal property was not perfected or the requisite UCC
filings were allowed to lapse.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to
recover its mortgage debt by enforcing its rights and available legal remedies
under the mortgage. If the borrower defaults in payment or performance of its
obligations under the note or mortgage, the lender has the right to institute
foreclosure proceedings to sell the real property at public auction to satisfy
the indebtedness.
Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and nonjudicial foreclosure pursuant to a power of sale granted in the mortgage
instrument. Other foreclosure procedures are available in some states, but they
are either infrequently used or available only in limited circumstances.
61
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes requires several years to complete.
Judicial Foreclosure. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action is
initiated by the service of legal pleadings upon all parties having a
subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. Delays in completion of the foreclosure may
occasionally result from difficulties in locating defendants. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
Upon successful completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other
officer to conduct a public sale of the mortgaged property, the proceeds of
which are used to satisfy the judgment. Such sales are made in accordance with
procedures that vary from state to state.
Equitable and Other Limitations on Enforceability of Certain
Provisions. United States courts have traditionally imposed general equitable
principles to limit the remedies available to lenders in foreclosure actions.
These principles are generally designed to relieve borrowers from the effects
of mortgage defaults perceived as harsh or unfair. Relying on such principles,
a court may alter the specific terms of a loan to the extent it considers
necessary to prevent or remedy an injustice, undue oppression or overreaching,
or may require the lender to undertake affirmative actions to determine the
cause of the borrower's default and the likelihood that the borrower will be
able to reinstate the loan. In some cases, courts have substituted their
judgment for the lender's and have required that lenders reinstate loans or
recast payment schedules in order to accommodate borrowers who are suffering
from a temporary financial disability. In other cases, courts have limited the
right of the lender to foreclose in the case of a nonmonetary default, such as
a failure to adequately maintain the mortgaged property or an impermissible
further encumbrance of the mortgaged property. Finally, some courts have
addressed the issue of whether federal or state constitutional provisions
reflecting due process concerns for adequate notice require that a borrower
receive notice in addition to statutorily-prescribed minimum notice. For the
most part, these cases have upheld the reasonableness of the notice provisions
or have found that a public sale under a mortgage providing for a power of sale
does not involve sufficient state action to trigger constitutional protections.
In addition, some states may have statutory protection such as the right
of the borrower to reinstate mortgage loans after commencement of foreclosure
proceedings but prior to a foreclosure sale.
Nonjudicial Foreclosure/Power of Sale. In states permitting nonjudicial
foreclosure proceedings, foreclosure of a deed of trust is generally
accomplished by a nonjudicial trustee's sale pursuant to a power of sale
typically granted in the deed of trust. A power of sale may also be contained
in any other type of mortgage instrument if applicable law so permits. A power
of sale under a deed of trust allows a nonjudicial public sale to be conducted
generally following a request from the beneficiary/lender to the trustee to
sell the property upon default by the borrower and after notice of sale is
given in accordance with the terms of the mortgage and applicable state law. In
some states, prior to such sale, the trustee under the deed of trust must
record a notice of default and notice of sale and send a copy to the borrower
and to any other party who has recorded a request for a copy of a notice of
default and notice of sale. In addition, in some states the trustee must
provide notice to any other party having an interest of record in the real
property, including junior lienholders. A notice of sale must be posted in a
public place and, in most states, published for a specified period of time in
one or more newspapers. The borrower or junior lienholder may then have the
right, during a reinstatement period required in some states, to cure the
default by paying the entire actual amount in arrears (without regard to the
acceleration of the indebtedness), plus the lender's expenses incurred in
enforcing the obligation. In other states, the borrower or the junior
lienholder is not provided a period to reinstate the loan, but has only the
right to pay off the entire debt to prevent the foreclosure sale. Generally,
state law governs the procedure for public sale, the parties entitled to
notice, the method of giving notice and the applicable time periods.
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale because of the difficulty in determining the exact
status of title to the property (due to, among other
62
things, redemption rights that may exist) and because of the possibility that
physical deterioration of the property may have occurred during the foreclosure
proceedings. Therefore, it is common for the lender to purchase the mortgaged
property for an amount equal to the secured indebtedness and accrued and unpaid
interest plus the expenses of foreclosure, in which event the borrower's debt
will be extinguished, or for a lesser amount in order to preserve its right to
seek a deficiency judgment if such is available under state law and under the
terms of the mortgage loan documents. (The mortgage loans, however, may be
nonrecourse. See "Risk Factors--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--Limited Recourse Nature of the
Mortgage Loans".) Thereafter, subject to the borrower's right in some states to
remain in possession during a redemption period, the lender will become the
owner of the property and have both the benefits and burdens of ownership,
including the obligation to pay debt service on any senior mortgages, to pay
taxes, to obtain casualty insurance and to make such repairs as are necessary
to render the property suitable for sale. The costs of operating and
maintaining a commercial or multifamily residential property may be significant
and may be greater than the income derived from that property. The lender also
will commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale or lease 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. Moreover, because of the
expenses associated with acquiring, owning and selling a mortgaged property, a
lender could realize an overall loss on a mortgage loan even if the mortgaged
property is sold at foreclosure, or resold after it is acquired through
foreclosure, for an amount equal to the full outstanding principal amount of
the loan plus accrued interest.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure of
its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
Rights of Redemption. The purposes of a foreclosure action are to enable
the lender to realize upon its security and to bar the borrower, and all
persons who have interests in the property that are subordinate to that of the
foreclosing lender, from exercise of their "equity of redemption". The doctrine
of equity of redemption provides that, until the property encumbered by a
mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. Those having an equity of redemption must
generally be made parties and joined in the foreclosure proceeding in order for
their equity of redemption to be terminated.
The equity of redemption is a common-law (nonstatutory) right which should
be distinguished from post-sale statutory rights of redemption. In some states,
after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted if the former borrower pays only a portion of the sums due. The
effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property because the exercise of a right of
redemption would defeat the title of any purchaser through a foreclosure.
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. In some states, a post-sale statutory right of
redemption may exist following a judicial foreclosure, but not following a
trustee's sale under a deed of trust.
Anti-Deficiency Legislation. Some or all of the mortgage loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the mortgaged property and such other assets, if any, that were pledged to
secure the mortgage loan. However, even if a mortgage loan by its terms
provides for recourse to the borrower's other assets, a lender's ability to
realize upon those assets may be limited by state law. For example, in some
states a lender cannot obtain a deficiency
63
judgment against the borrower following foreclosure or sale under a deed of
trust. A deficiency judgment is a personal judgment against the former borrower
equal to the difference between the net amount realized upon the public sale of
the real property and the amount due to the lender. Other statutes may require
the lender to exhaust the security afforded under a mortgage 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 those states, the
lender, following judgment on such personal action, may be deemed to have
elected a remedy and thus may be precluded from foreclosing upon the security.
Consequently, lenders in those states where such an election of remedy
provision exists will usually proceed first against the security. Finally,
other statutory provisions, designed to protect borrowers from exposure to
large deficiency judgments that might result from bidding at below-market
values at the foreclosure sale, limit any deficiency judgment to the excess of
the outstanding debt over the fair market value of the property at the time of
the sale.
Leasehold Considerations. Mortgage loans may be secured by a mortgage on
the borrower's leasehold interest in a ground lease. Leasehold mortgage loans
are subject to certain risks not associated with mortgage loans secured by a
lien on the fee estate of the borrower. The most significant of these risks is
that if the borrower's leasehold were to be terminated upon a lease default,
the leasehold mortgagee could lose its security. This risk may be lessened if
the ground lease requires the lessor to give the leasehold mortgagee notices of
lessee defaults and an opportunity to cure them, requires the lessor to grant
the mortgagee a new lease if the existing lease is rejected in a bankruptcy
proceeding, permits the leasehold estate to be assigned to and by the leasehold
mortgagee or the purchaser at a foreclosure sale, and contains certain other
protective provisions typically included in a "mortgageable" ground lease.
Certain mortgage loans, however, may be secured by ground leases which do not
contain these provisions.
Cooperative Shares. Mortgage loans may be secured by a security interest
on the borrower's ownership interest in shares, and the proprietary leases
appurtenant thereto, allocable to cooperative dwelling units that may be vacant
or occupied by nonowner tenants. Such loans are subject to certain risks not
associated with mortgage loans secured by a lien on the fee estate of a
borrower in real property. Such a loan typically is subordinate to the
mortgage, if any, on the cooperative's building which, if foreclosed, could
extinguish the equity in the building and the proprietary leases of the
dwelling units derived from ownership of the shares of the cooperative.
Further, transfer of shares in a cooperative are subject to various regulations
as well as to restrictions under the governing documents of the cooperative,
and the shares may be canceled in the event that associated maintenance charges
due under the related proprietary leases are not paid. Typically, a recognition
agreement between the lender and the cooperative provides, among other things,
the lender with an opportunity to cure a default under a proprietary lease.
Under the laws applicable in many states, "foreclosure" on cooperative
shares is accomplished by a sale in accordance with the provisions of Article 9
of the UCC and the security agreement relating to the shares. Article 9 of the
UCC requires that a sale be conducted in a "commercially reasonable" manner,
which may be dependent upon, among other things, the notice given the debtor
and the method, manner, time, place and terms of the sale. Article 9 of the UCC
provides that the proceeds of the sale will be applied first to pay the costs
and expenses of the sale and then to satisfy the indebtedness secured by the
lender's security interest. A recognition agreement, however, generally
provides that the lender's right to reimbursement is subject to the right of
the cooperative to receive sums due under the proprietary leases.
BANKRUPTCY LAWS
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a lender to realize upon collateral and/or to enforce
a deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) to
collect a debt are automatically stayed upon the filing of the bankruptcy
petition and, often, no interest or principal payments are made during the
course of the bankruptcy case. The delay and the consequences caused by such
automatic stay can be significant. Also, under the
64
Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a
junior lienor may stay the senior lender from taking action to foreclose out
such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender are met, the amount and terms of a mortgage
loan secured by a lien on property of the debtor may be modified under certain
circumstances. For example, the outstanding amount of the loan may be reduced
to the then-current value of the property (with a corresponding partial
reduction of the amount of lender's security interest) pursuant to a confirmed
plan or lien avoidance proceeding, thus leaving the lender a general unsecured
creditor for the difference between such value and the outstanding balance of
the loan. Other modifications may include the reduction in the amount of each
scheduled payment, by means of a reduction in the rate of interest and/or an
alteration of the repayment schedule (with or without affecting the unpaid
principal balance of the loan), and/or by an extension (or shortening) of the
term to maturity. Some bankruptcy courts have approved plans, based on the
particular facts of the reorganization case, that effected the cure of a
mortgage loan default by paying arrearages over a number of years. Also, a
bankruptcy court may permit a debtor, through its rehabilitative plan, to
reinstate a loan mortgage payment schedule even if the lender has obtained a
final judgment of foreclosure prior to the filing of the debtor's petition.
Federal bankruptcy law may also have the effect of interfering with or
affecting the ability of a secured lender to enforce the borrower's assignment
of rents and leases related to the mortgaged property. Under the Bankruptcy
Code, a lender may be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue could be time-consuming, with
resulting delays in the lender's receipt of the rents. Recent amendments to the
Bankruptcy Code, however, may minimize the impairment of the lender's ability
to enforce the borrower's assignment of rents and leases. In addition to the
inclusion of hotel revenues within the definition of "cash collateral" as noted
previously in the Section entitled "-- Leases and Rents", the amendments
provide that a pre-petition security interest in rents or hotel revenues
extends (unless the bankruptcy court orders otherwise based on the equities of
the case) to such post-petition rents or revenues and is intended to overrule
those cases that held that a security interest in rents is unperfected under
the laws of certain states until the lender has taken some further action, such
as commencing foreclosure or obtaining a receiver prior to activation of the
assignment of rents.
If a borrower's ability to make payment on a mortgage loan is dependent on
its receipt of rent payments under a lease of the related property, that
ability may be impaired by the commencement of a bankruptcy case relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the lease that occurred prior to the filing of the
lessee's petition. In addition, the Bankruptcy Code generally provides that a
trustee or debtor-in-possession may, subject to approval of the court, (1)
assume the lease and retain it or assign it to a third party or (2) reject the
lease. If the lease is assumed, the trustee or debtor-in-possession (or
assignee, if applicable) must cure any defaults under the lease, compensate the
lessor for its losses and provide the lessor with "adequate assurance" of
future performance. Such remedies may be insufficient, and any assurances
provided to the lessor may, in fact, be inadequate. If the lease is rejected,
the lessor will be treated as an unsecured creditor with respect to its claim
for damages for termination of the lease. The Bankruptcy Code also limits a
lessor's damages for lease rejection to the rent reserved by the lease (without
regard to acceleration) for the greater of one year, or 15%, not to exceed
three years, of the remaining term of the lease.
Pursuant to the federal doctrine of "substantive consolidation" or to the
(predominantly state law) doctrine of "piercing the corporate veil", a
bankruptcy court, in the exercise of its equitable powers, also has the
authority to order that the assets and liabilities of a related entity be
consolidated with those of an entity before it. Thus, property ostensibly the
property of one entity may be determined to be the property of a different
entity in bankruptcy, the automatic stay applicable to the second entity
extended to the first and the rights of creditors of the first entity impaired
in the fashion set forth above in the discussion of ordinary bankruptcy
principles.
65
Depending on facts and circumstances not wholly in existence at the time a loan
is originated or transferred to the trust fund, the application of any of these
doctrines to one or more of the mortgagors in the context of the bankruptcy of
one or more of their affiliates could result in material impairment of the
rights of the Certificateholders.
For each mortgagor that is described as a "special purpose entity",
"single purpose entity" or "bankruptcy remote entity" in the related prospectus
supplement, the activities that may be conducted by such mortgagor and its
ability to incur debt are restricted by the applicable mortgage or the
organizational documents of such mortgagor in such manner as is intended to
make the likelihood of a bankruptcy proceeding being commenced by or against
such mortgagor remote, and such mortgagor has been organized and is designed to
operate in a manner such that its separate existence should be respected
notwithstanding a bankruptcy proceeding in respect of one or more affiliated
entities of such mortgagor. However, the depositor makes no representation as
to the likelihood of the institution of a bankruptcy proceeding by or in
respect of any mortgagor or the likelihood that the separate existence of any
mortgagor would be respected if there were to be a bankruptcy proceeding in
respect of any affiliated entity of a mortgagor.
ENVIRONMENTAL CONSIDERATIONS
General. A lender may be subject to environmental risks when taking a
security interest in real property. Of particular concern may be properties
that are or have been used for industrial, manufacturing, military or disposal
activity. Such environmental risks include the possible diminution of the value
of a contaminated property or, as discussed below, potential liability for
clean-up costs or other remedial actions that could exceed the value of the
property or the amount of the lender's loan. In certain circumstances, a lender
may decide to abandon a contaminated mortgaged property as collateral for its
loan rather than foreclose and risk liability for clean-up costs.
Superlien Laws. Under the laws of many states, contamination on a property
may give rise to a lien on the property for clean-up costs. In several states,
such a lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to
such a "superlien".
CERCLA. CERCLA, imposes strict liability on present and past "owners" and
"operators" of contaminated real property for the costs of clean-up. A secured
lender may be liable as an "owner" or "operator" of a contaminated mortgaged
property if agents or employees of the lender have become sufficiently involved
in the management of such mortgaged property or the operations of the borrower.
Such liability may exist even if the lender did not cause or contribute to the
contamination and regardless of whether or not the lender has actually taken
possession of a mortgaged property through foreclosure, deed in lieu of
foreclosure or otherwise. Moreover, such liability is not limited to the
original or unamortized principal balance of a loan or to the value of the
property securing a loan. Excluded from CERCLA's definition of "owner" or
"operator", however, is a person "who without participating in the management
of the facility, holds indicia of ownership primarily to protect his security
interest". This is the so-called "secured creditor exemption."
The Asset Conservation, Lender Liability and Deposit Insurance Act of
1996, amended, among other things, the provisions of CERCLA with respect to
lender liability and the secured creditor exemption. The Act offers substantial
protection of lenders by defining the activities in which a lender can engage
and still have the benefit of the secured creditor exemption. In order for a
lender to be deemed to have participated in the management of a mortgaged
property, the lender must actually participate in the operational affairs of
the property of the borrower. The Asset Conservation, Lender Liability and
Deposit Insurance Act of 1996 provides that "merely having the capacity to
influence, or unexercised right to control" operations does not constitute
participation in management. A lender will lose the protection of the secured
creditor exemption only if it exercises decision making control over the
borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of operational functions
of the
66
mortgaged property. The Asset Conservation, Lender Liability and Deposit
Insurance Act of 1996 also provides that a lender will continue to have the
benefit of the secured-creditor exemption even if it forecloses on a mortgaged
property, purchases it at a foreclosure sale or accepts a deed-in-lieu of
foreclosure provided that the lender seeks to sell the mortgaged property at
the earliest practicable commercially reasonable time on commercially
reasonable terms.
Certain Other Federal and State Laws. Many states have statutes similar to
CERCLA, and not all those statutes provide for a secured creditor exemption. In
addition, under federal law, there is potential liability relating to hazardous
wastes and underground storage tanks under the federal Resource Conservation
and Recovery Act.
In addition, the definition of "hazardous substances" under CERCLA
specifically excludes petroleum products. Subtitle I of the Resource
Conservation and Recovery Act governs underground petroleum storage tanks.
Under the Asset Conservation, Lender Liability and Deposit Insurance Act of
1996, the protections accorded to lenders under CERCLA are also accorded to the
holders of security interests in underground storage tanks. It should be noted,
however, that liability for cleanup of petroleum contamination may be governed
by state law, which may not provide for any specific protection of secured
creditors.
In a few states, transfers of some types of properties are conditioned
upon cleanup of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed in lieu of
foreclosure or otherwise, may be required to clean up the contamination before
selling or otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury or damage to property) related to hazardous
environmental conditions on a property. While it may be more difficult to hold
a lender liable in such cases, unanticipated or uninsured liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against the owner or operator who created
the environmental hazard, but that individual or entity may be without
substantial assets. Accordingly, it is possible that such costs could become a
liability of the trust fund and occasion a loss to the certificateholders of
the related series.
To reduce the likelihood of such a loss, unless otherwise specified in the
related prospectus supplement, the Pooling and Servicing Agreement will provide
that neither the master servicer nor the special servicer, acting on behalf of
the trustee, may acquire title to a mortgaged property or take over its
operation unless the special servicer, based solely (as to environmental
matters) on a report prepared by a person who regularly conducts environmental
audits, has made the determination that it is appropriate to do so, as
described under "The Pooling and Servicing Agreements--Realization Upon
Defaulted Mortgage Loans".
If a lender forecloses on a mortgage secured by a property, the operations
on which are subject to environmental laws and regulations, the lender will be
required to operate the property in accordance with those laws and regulations.
Such compliance may entail substantial expense, especially in the case of
industrial or manufacturing properties.
In addition, a lender may be obligated to disclose environmental
conditions on a property to government entities and/or to prospective buyers
(including prospective buyers at a foreclosure sale or following foreclosure).
Such disclosure may decrease the amount that prospective buyers are willing to
pay for the affected property, sometimes substantially, and thereby decrease
the ability of the lender to recoup its investment in a loan upon foreclosure.
Environmental Site Assessments. In most cases, an environmental site
assessment of each mortgaged property will have been performed in connection
with the origination of the related mortgage loan or at some time prior to the
issuance of the related certificates. Environmental site assessments, however,
vary considerably in their content, quality and cost. Even when adhering to
67
good professional practices, environmental consultants will sometimes not
detect significant environmental problems because to do an exhaustive
environmental assessment would be far too costly and time-consuming to be
practical.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the mortgage loans may contain "due-on-sale" and
"due-on-encumbrance" clauses that purport to permit the lender to accelerate
the maturity of the loan if the borrower transfers or encumbers the related
mortgaged property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce such clauses
in many states. However, the Garn Act generally preempts state laws that
prohibit the enforcement of due-on-sale clauses and permits lenders to enforce
these clauses in accordance with their terms, subject to certain limitations as
set forth in the Garn Act and the regulations promulgated under the Garn Act.
Accordingly, a master servicer may nevertheless have the right to accelerate
the maturity of a mortgage loan that contains a "due-on-sale" provision upon
transfer of an interest in the property, without regard to the master
servicer's ability to demonstrate that a sale threatens its legitimate security
interest.
JUNIOR LIENS; RIGHTS OF HOLDERS OF SENIOR LIENS
If so provided in the related prospectus supplement, mortgage assets for a
series of certificates may include mortgage loans secured by junior liens, and
the loans secured by the related senior liens may not be included in the
mortgage pool. In addition to the risks faced by the holder of a first lien,
holders of mortgage loans secured by junior liens also face the risk that
adequate funds will not be received in connection with a foreclosure on the
related mortgaged property to satisfy fully both the senior liens and the
mortgage loan. In the event that a holder of a senior lien forecloses on a
mortgaged property, the proceeds of the foreclosure or similar sale will be
applied first to the payment of court costs and fees in connection with the
foreclosure, second to real estate taxes, third in satisfaction of all
principal, interest, prepayment or acceleration penalties, if any, and any
other sums due and owing to the holder of the senior liens. The claims of the
holders of the senior liens will be satisfied in full out of proceeds of the
liquidation of the related mortgaged property, if such proceeds are sufficient,
before the trust fund as holder of the junior lien receives any payments in
respect of the mortgage loan. In the event that such proceeds from a
foreclosure or similar sale of the related mortgaged property are insufficient
to satisfy all senior liens and the mortgage loan in the aggregate, the trust
fund, as the holder of the junior lien, and, accordingly, holders of one or
more classes of the certificates of the related series bear (1) the risk of
delay in distributions while a deficiency judgment against the borrower is
obtained and (2) the risk of loss if the deficiency judgment is not realized
upon. Moreover, deficiency judgments may not be available in certain
jurisdictions or the mortgage loan may be nonrecourse.
The rights of the trust fund (and therefore the certificateholders), as
beneficiary under a junior deed of trust or as mortgagee under a junior
mortgage, are subordinate to those of the mortgagee or beneficiary under the
senior mortgage or deed of trust, including the prior rights of the senior
mortgagee or beneficiary to receive rents, hazard insurance and condemnation
proceeds and to cause the property securing the mortgage loan to be sold upon
default of the mortgagor or trustor, thereby extinguishing the junior
mortgagee's or junior beneficiary's lien unless the master servicer asserts its
subordinate interest in a property in foreclosure litigation or satisfies the
defaulted senior loan. As discussed more fully below, in many states a junior
mortgagee or beneficiary may satisfy a defaulted senior loan in full, adding
the amounts expended to the balance due on the junior loan. Absent a provision
in the senior mortgage, no notice of default is required to be given to the
junior mortgagee.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order
68
as the mortgage or beneficiary may determine. Thus, in the event improvements
on the property are damaged or destroyed by fire or other casualty, or in the
event the property is taken by condemnation, the mortgagee or beneficiary under
the senior mortgage or deed of trust will have the prior right to collect any
insurance proceeds payable under a hazard insurance policy and any award of
damages in connection with the condemnation and to apply the same to the
indebtedness secured by the senior mortgage or deed of trust. Proceeds in
excess of the amount of senior mortgage indebtedness will, in most cases, be
applied to the indebtedness of a junior mortgage or trust deed to the extent
the junior mortgage or deed of trust so provides. The laws of certain states
may limit the ability of mortgagees or beneficiaries to apply the proceeds of
hazard insurance and partial condemnation awards to the secured indebtedness.
In such states, the mortgagor or trustor must be allowed to use the proceeds of
hazard insurance to repair the damage unless the security of the mortgagee or
beneficiary has been impaired. Similarly, in certain states, the mortgagee or
beneficiary is entitled to the award for a partial condemnation of the real
property security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or "optional" advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinate to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
"future advance" clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a "credit limit"
amount stated in the recorded mortgage.
SUBORDINATE FINANCING
The terms of certain of the mortgage loans may not restrict the ability of
the borrower to use the mortgaged property as security for one or more
additional loans, or such restrictions may be unenforceable. Where a borrower
encumbers a mortgaged property with one or more junior liens, the senior lender
is subjected to additional risk. First, the borrower may have difficulty
servicing and repaying multiple loans. Moreover, if the subordinate financing
permits recourse to the borrower (as is frequently the case) and the senior
loan does not, a borrower may have more incentive to repay sums due on the
subordinate loan. Second, acts of the senior lender that prejudice the junior
lender or impair the junior lender's security may create a superior equity in
favor of the junior lender. For example, if the borrower and the senior lender
agree to an increase in the principal amount of or the interest rate payable on
the senior loan, the senior lender may lose its priority to the extent any
existing junior lender is harmed or the borrower is additionally burdened.
Third, if the borrower defaults on the senior loan and/or any junior loan or
loans, the existence of junior loans and actions taken by junior lenders can
impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if
payments are not timely made, and in some
69
circumstances may provide for prepayment fees or yield maintenance penalties if
the obligation is paid prior to maturity or prohibit such prepayment for a
specified period. In certain states, there are or may be specific limitations
upon the late charges which a lender may collect from a mortgagor for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a mortgagor as an additional charge if the loan is prepaid. The
enforceability under the laws of a number of states and the Bankruptcy Code of
provisions providing for prepayment fees of penalties upon, or prohibition of,
an involuntary prepayment is unclear, and no assurance can be given that, at
the time a prepayment premium is required to be made on a mortgage loan in
connection with an involuntary prepayment, the obligation to make such payment,
or the provisions of any such prohibition, will be enforceable under applicable
state law. The absence of a restraint on prepayment, particularly with respect
to mortgage loans having higher Mortgage Rates, may increase the likelihood of
refinancing or other early retirements of the mortgage loans.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 provides that state usury limitations shall not apply to certain
types of residential (including multifamily) first mortgage loans originated by
certain lenders after March 31, 1980. Title V of the Depository Institutions
Deregulation and Monetary Control Act of 1980 authorized any state to reimpose
interest rate limits by adopting, before April 1, 1983, a law or constitutional
provision that expressly rejects application of the federal law. In addition,
even where Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980 is not so rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on mortgage loans
covered by Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980. Certain states have taken action to reimpose interest rate
limits and/or to limit discount points or other charges.
No mortgage loan originated in any state in which application of Title V
of the Depository Institutions Deregulation and Monetary Control Act of 1980
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will (if originated after that rejection or adoption)
be eligible for inclusion in a trust fund unless (i) such mortgage loan
provides for such interest rate, discount points and charges as are permitted
in such state or (ii) such mortgage loan provides that the terms are to be
construed in accordance with the laws of another state under which such
interest rate, discount points and charges would not be usurious and the
borrower's counsel has rendered an opinion that such choice of law provision
would be given effect.
CERTAIN LAWS AND REGULATIONS
The mortgaged properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a mortgaged property which could, together with the
possibility of limited alternative uses for a particular mortgaged property
(i.e., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related mortgage loan.
AMERICANS WITH DISABILITIES ACT
Under the ADA, in order to protect individuals with disabilities, public
accommodations (such as hotels, restaurants, shopping centers, hospitals,
schools and social service center establishments) must remove architectural and
communication barriers which are structural in nature from existing places of
public accommodation to the extent "readily achievable." In addition, under the
ADA, alterations to a place of public accommodation or a commercial facility
are to be made so that, to the maximum extent feasible, such altered portions
are readily accessible to and usable by disabled individuals. The "readily
achievable" standard takes into account, among other factors, the financial
resources of the affected site, owner, landlord or other applicable person. In
addition to imposing a possible financial burden on the borrower in its
capacity as owner or landlord, the ADA may also impose such requirements on a
foreclosing lender who succeeds to the interest of the borrower as
70
owner or landlord. Furthermore, since the "readily achievable" standard may
vary depending on the financial condition of the owner or landlord, a
foreclosing lender who is financially more capable than the borrower of
complying with the requirements of the ADA may be subject to more stringent
requirements than those to which the borrower is subject.
SERVICEMEMBERS CIVIL RELIEF ACT
Under the terms of the Relief Act, a borrower who enters military service
after the origination of such borrower's mortgage loan (including a borrower
who was in reserve status and is called to active duty after origination of the
mortgage loan), upon notification by such borrower, shall not be charged
interest, including fees and charges, in excess of 6% per annum during the
period of such borrower's active duty status. Unless a court or administrative
agency orders otherwise upon application of the lender. The Relief Act applies
to individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service or
the National Oceanic and Atmospheric Administration assigned to duty with the
military. The California Military and Veterans Code provides protection
equivalent to that provided by the Relief Act to California national guard
members called up to active service by the Governor of California, California
national guard members called up to active service by the President and
reservists called to active duty. Because the Relief Act and the California
Military Code apply to borrowers who enter military service, no information can
be provided as to the number of mortgage loans that may be affected by the
Relief Act or the California Military and Veterans Code. Application of the
Relief Act or the California Military and Veterans Code would adversely affect,
for an indeterminate period of time, the ability of a master servicer or
special servicer to collect full amounts of interest on certain of the mortgage
loans. Any shortfalls in interest collections resulting from the application of
the Relief Act or the California Military and Veterans Code would result in a
reduction of the amounts distributable to the holders of the related series of
certificates, and would not be covered by advances or, unless otherwise
specified in the related prospectus supplement, any form of credit support
provided in connection with such certificates. In addition, application of the
Relief Act or the California Military and Veterans Code imposes limitations
that would impair the ability of the master servicer or special servicer to
foreclose on an affected mortgage loan during the borrower's period of active
duty status, and, under certain circumstances, during an additional three month
period thereafter.
FORFEITURE FOR DRUG AND MONEY LAUNDERING VIOLATIONS
Federal law provides that property purchased or improved with assets
derived from criminal activity or otherwise tainted, or used in the commission
of certain offenses, can be seized and ordered forfeited to the United States
of America. The offenses which can trigger such a seizure and forfeiture
include, among others, violations of the Racketeer Influenced and Corrupt
Organizations Act, the Bank Secrecy Act, the anti-money laundering laws and
regulations, including the USA Patriot Act of 2001 and the regulations issued
pursuant to that Act, as well as the narcotic drug laws. In many instances, the
United States may seize the property even before a conviction occurs.
In the event of a forfeiture proceeding, a lender may be able to establish
its interest in the property by proving that (1) its mortgage was executed and
recorded before the commission of the illegal conduct from which the assets
used to purchase or improve the property were derived or before the commission
of any other crime upon which the forfeiture is based, or (2) the lender, at
the time of the execution of the mortgage, "did not know or was reasonably
without cause to believe that the property was subject to forfeiture." However,
there is no assurance that such a defense will be successful.
FEDERAL DEPOSIT INSURANCE ACT; COMMERCIAL MORTGAGE LOAN SERVICING
Under the Federal Deposit Insurance Act, federal bank regulatory
authorities, including the Office of the Comptroller of the Currency (OCC),
have the power to determine if any activity or contractual obligation of a bank
constitutes an unsafe or unsound practice or violates a law, rule or
71
regulation applicable to such bank. If Bank of America, N.A. or another bank is
a servicer and/or a mortgage loan seller for a series and the OCC, which has
primary regulatory authority over Bank of America, N.A. and other banks, were
to find that any obligation of Bank of America, N.A. or such other bank under
the related pooling and servicing agreement or other agreement or any activity
of Bank of America, N.A. or such other bank constituted an unsafe or unsound
practice or violated any law, rule or regulation applicable to it, the OCC
could order Bank of America, N.A. or such other bank among other things to
rescind such contractual obligation or terminate such activity.
In March 2003, the OCC issued a temporary cease and desist order against a
national bank (as to which no conservator or receiver had been appointed)
asserting that, contrary to safe and sound banking practices, the bank was
receiving inadequate servicing compensation in connection with several credit
card securitizations sponsored by its affiliates because of the size and
subordination of the contractual servicing fee, and ordered the bank, among
other things, to immediately resign as servicer, to cease all servicing
activity within 120 days and to immediately withhold funds from collections in
an amount sufficient to compensate if for its actual costs and expenses of
servicing (notwithstanding the priority of payments in the related
securitization agreements).
While the depositor does not believe that the OCC would consider, with
respect to any series, (i) provisions relating to Bank of America, N.A. or
another bank acting as a servicer under the related pooling and servicing
agreement, (ii) the payment or amount of the servicing compensation payable to
Bank of America, N.A. or another bank or (iii) any other obligation of Bank of
America, N.A. or another bank under the related pooling and servicing agreement
or other contractual agreement under which the depositor may purchase mortgage
loans from Bank of America, N.A. or another bank, to be unsafe or unsound or
violative of any law, rule or regulation applicable to it, there can be no
assurance that the OCC in the future would not conclude otherwise. If the OCC
did reach such a conclusion, and ordered Bank of America, N.A. or another bank
to rescind or amend any such agreement, payments on certificates could be
delayed or reduced.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of offered
certificates of any series thereof, to the extent it relates to matters of law
or legal conclusions with respect thereto, represents the opinion of counsel to
the depositor with respect to that series on the material matters associated
with such consequences, subject to any qualifications set forth in this
prospectus. Counsel to the depositor for each series will be Cadwalader,
Wickersham & Taft LLP, and a copy of the legal opinion of such counsel rendered
in connection with any series of certificates will be filed by the depositor
with the Securities and Exchange Commission on a Current Report on Form 8-K
within 15 days after the Closing Date for such series of certificates. This
discussion is directed primarily to certificateholders that hold the
certificates as "capital assets" within the meaning of Section 1221 of the Code
(although portions thereof may also apply to certificateholders who do not hold
certificates as capital assets) and it does not purport to discuss all federal
income tax consequences that may be applicable to the individual circumstances
of particular investors, some of which (such as banks, insurance companies and
foreign investors) may be subject to special treatment under the Code. Further,
the authorities on which this discussion, and the opinion referred to below,
are based are subject to change or differing interpretations, which could apply
retroactively. Prospective investors should note that no rulings have been or
will be sought from the IRS with respect to any of the federal income tax
consequences discussed below, and no assurance can be given the IRS will not
take contrary positions. In addition to the federal income tax consequences
described in this prospectus, potential investors are advised to consider the
state and local tax consequences, if any, of the purchase, ownership and
disposition of offered certificates. See "State and Other Tax Consequences".
Certificateholders are advised to consult their tax advisors concerning the
federal, state, local or other tax consequences to them of the purchase,
ownership and disposition of offered certificates.
72
The following discussion addresses securities of two general types: (1)
REMIC Certificates representing interests in a trust fund, or a portion
thereof, that the REMIC administrator will elect to have treated as a REMIC
under the REMIC Provisions of the Code, and (2) Grantor Trust Certificates
representing interests in a Grantor Trust Fund as to which no such election
will be made. The prospectus supplement for each series of certificates will
indicate whether a REMIC election (or elections) will be made for the related
trust fund and, if such an election is to be made, will identify all "regular
interests" and "residual interests" in the REMIC. For purposes of this tax
discussion, references to a "Certificateholder" or a "holder" are to the
beneficial owner of a certificate.
The following discussion is limited in applicability to offered
certificates. Moreover, this discussion applies only to the extent that
mortgage assets held by a trust fund consist solely of mortgage loans. To the
extent that other mortgage assets, including REMIC certificates and mortgage
pass-through certificates, are to be held by a trust fund, the tax consequences
associated with the inclusion of such assets will be disclosed in the related
prospectus supplement. In addition, if cash flow agreements other than
guaranteed investment contracts are included in a trust fund, the anticipated
material tax consequences associated with such cash flow agreements also will
be discussed in the related prospectus supplement. See "Description of the
Trust Funds--Cash Flow Agreements".
Furthermore, the following discussion is based in part upon the rules
governing original issue discount that are set forth in Sections 1271-1273 and
1275 of the Code and in the OID Regulations, and in part upon the REMIC
Provisions and the REMIC Regulations. The OID Regulations do not adequately
address certain issues relevant to, and in some instances provide that they are
not applicable to, securities such as the certificates.
REMICS
Classification of REMICs. Upon the issuance of each series of REMIC
Certificates, counsel to the depositor will give its opinion generally to the
effect that, assuming compliance with all provisions of the related Pooling and
Servicing Agreement and any other governing documents, the related trust fund
(or each applicable portion thereof) will qualify as one or more REMICs and the
REMIC Certificates offered with respect thereto will be considered to evidence
ownership of REMIC Regular Certificates or REMIC Residual Certificates in a
REMIC within the meaning of the REMIC Provisions. The following general
discussion of the anticipated federal income tax consequences of the purchase,
ownership and disposition of REMIC Certificates, to the extent it relates to
matters of law or legal conclusions with respect thereto, represents the
opinion of counsel to the depositor for the applicable series as specified in
the related prospectus supplement, subject to any qualifications set forth in
this prospectus. In addition, counsel to the depositor have prepared or
reviewed the statements in this prospectus under the heading "Certain Federal
Income Tax Consequences -- REMICs," and are of the opinion that such statements
are correct in all material respects. Such statements are intended as an
explanatory discussion of the possible effects of the classification of any
trust fund (or applicable portion thereof) as one or more REMICs for federal
income tax purposes on investors generally and of related tax matters affecting
investors generally, but do not purport to furnish information in the level of
detail or with the attention to an investor's specific tax circumstances that
would be provided by an investor's own tax advisor. Accordingly, each investor
is advised to consult its own tax advisors with regard to the tax consequences
to it of investing in REMIC Certificates.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief
in the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the trust
73
fund's income for the period in which the requirements for such status are not
satisfied. The Pooling and Servicing Agreement with respect to each REMIC will
include provisions designed to maintain the trust fund's status as a REMIC
under the REMIC Provisions. It is not anticipated that the status of any trust
fund as a REMIC will be inadvertently terminated.
Characterization of Investments in REMIC Certificates. In general, unless
otherwise provided in the related prospectus supplement, the REMIC Certificates
will be "real estate assets" within the meaning of Section 856(c)(5)(B) of the
Code and assets described in Section 7701(a)(19)(C) of the Code in the same
proportion that the assets of the REMIC underlying such certificates would be
so treated. However, to the extent that the REMIC assets constitute mortgages
on property not used for residential or certain other prescribed purposes, the
REMIC Certificates will not be treated as assets qualifying under Section
7701(a)(19)(C). Moreover, if 95% or more of the assets of the REMIC qualify for
any of the foregoing characterizations at all times during a calendar year, the
REMIC Certificates will qualify for the corresponding status in their entirety
for that calendar year. Interest (including original issue discount) on the
REMIC Regular Certificates and income allocated to the REMIC Residual
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
the extent that such certificates are treated as "real estate assets" within
the meaning of Section 856(c)(5)(B) of the Code. In addition, except as
otherwise provided in the applicable prospectus supplement, the REMIC Regular
Certificates will be "qualified mortgages" for a REMIC within the meaning of
Section 860G(a)(3) of the Code and "permitted assets" for a financial asset
securitization investment trust within the meaning of Section 860L(c) of the
Code. The determination as to the percentage of the REMIC's assets that
constitute assets described in the foregoing sections of the Code will be made
with respect to each calendar quarter based on the average adjusted basis of
each category of the assets held by the REMIC during such calendar quarter. The
REMIC Administrator will report those determinations to Certificateholders in
the manner and at the times required by applicable Treasury regulations.
Tiered REMIC Structures. For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated portions of the related
trust fund as REMICs for federal income tax purposes. As to each such series of
REMIC Certificates, in the opinion of counsel to the depositor, assuming
compliance with all provisions of the related Pooling and Servicing Agreement,
the Tiered REMICs will each qualify as a REMIC and the REMIC Certificates
issued by the Tiered REMICs, will be considered to evidence ownership of REMIC
Regular Certificates or REMIC Residual Certificates in the related REMIC within
the meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
"real estate assets" within the meaning of Section 856(c)(5)(B) of the Code and
"loans secured by an interest in real property" under Section 7701(a)(19)(C) of
the Code, and whether the income on such certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
Taxation of Owners of REMIC Regular Certificates.
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt
instruments issued by the REMIC and not as ownership interests in the REMIC or
its assets. Moreover, holders of REMIC Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under an accrual method.
Original Issue Discount. Certain REMIC Regular Certificates may be issued
with "original issue discount" within the meaning of Section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in
income as it accrues, in accordance with the "constant yield" method described
below, in advance of the receipt of the cash attributable to such income. In
addition, Section 1272(a)(6) of the Code provides special rules applicable to
REMIC Regular Certificates and certain other debt instruments issued with
original issue discount. Regulations have not been issued under that section.
74
The Code requires that a reasonable prepayment assumption be used with
respect to mortgage loans held by a REMIC in computing the accrual of original
issue discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner
prescribed in Treasury regulations; as noted above, those regulations have not
been issued. The Committee Report indicates that the regulations will provide
that the prepayment assumption used with respect to a REMIC Regular Certificate
must be the same as that used in pricing the initial offering of such REMIC
Regular Certificate. The Prepayment Assumption used in reporting original issue
discount for each series of REMIC Regular Certificates will be consistent with
this standard and will be disclosed in the related prospectus supplement.
However, neither the depositor nor any other person will make any
representation that the mortgage loans will in fact prepay at a rate conforming
to the Prepayment Assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will
be the excess of its stated redemption price at maturity over its issue price.
The issue price of a particular class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the Closing Date, the issue price
for such class will be the fair market value of such class on the Closing Date.
Under the OID Regulations, the stated redemption price of a REMIC Regular
Certificate is equal to the total of all payments to be made on such
Certificate other than "qualified stated interest". "Qualified stated interest"
is interest that is unconditionally payable at least annually (during the
entire term of the instrument) at a single fixed rate, or, as discussed below
under "Variable Rate REMIC Regular Certificates," at a qualified variable rate.
If the accrued interest to be paid on the first Distribution Date is
computed with respect to a period that begins prior to the Closing Date, a
portion of the purchase price paid for a REMIC Regular Certificate will reflect
such accrued interest. In such cases, information returns provided to the
Certificateholders and the IRS will be based on the position that the portion
of the purchase price paid for the interest accrued with respect to periods
prior to the Closing Date is treated as part of the overall cost of such REMIC
Regular Certificate (and not as a separate asset the cost of which is recovered
entirely out of interest received on the next Distribution Date) and that
portion of the interest paid on the first Distribution Date in excess of
interest accrued for a number of days corresponding to the number of days from
the Closing Date to the first Distribution Date should be included in the
stated redemption price of such REMIC Regular Certificate. However, the OID
Regulations state that all or some portion of such accrued interest may be
treated as a separate asset the cost of which is recovered entirely out of
interest paid on the first Distribution Date. It is unclear how an election to
do so would be made under the OID Regulations and whether such an election
could be made unilaterally by a Certificateholder.
Notwithstanding the general definition of original issue discount,
original issue discount on a REMIC Regular Certificate will be considered to be
de minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average maturity. For this
purpose, the weighted average maturity of the REMIC Regular Certificate is
computed as the sum of the amounts determined, as to each payment included in
the stated redemption price of such REMIC Regular Certificate, by multiplying
(i) the number of complete years (rounding down for partial years) from the
issue date until such payment is expected to be made (presumably taking into
account the Prepayment Assumption) by (ii) a fraction, the numerator of which
is the amount of the payment, and the denominator of which is the stated
redemption price at maturity of such REMIC Regular Certificate. Under the OID
Regulations, original issue discount of only a de minimis amount (other than de
minimis original issue discount attributable to a so-called "teaser" interest
rate or an initial interest holiday) will be included in income as each payment
of stated principal is made, based on the product of the total amount of such
de minimis original issue discount and a fraction, the numerator of which is
the amount of such principal payment and the denominator of which is the
outstanding stated principal amount of the REMIC Regular Certificate. The OID
75
Regulations also would permit a Certificateholder to elect to accrue de minimis
original issue discount into income currently based on a constant yield method.
See "--Taxation of Owners of REMIC Regular Certificates--Market Discount" below
for a description of such election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of
a de minimis amount, the holder of such Certificate must include in ordinary
gross income the sum of the "daily portions" of original issue discount for
each day during its taxable year on which it held such REMIC Regular
Certificate, including the purchase date but excluding the disposition date. In
the case of an original holder of a REMIC Regular Certificate, the daily
portions of original issue discount will be determined as follows.
As to each "accrual period", that is, unless otherwise stated in the
related prospectus supplement, each period that begins on a date that
corresponds to a Distribution Date (or in the case of the first such period,
begins on the Closing Date) and ends on the day preceding the immediately
following Distribution Date, a calculation will be made of the portion of the
original issue discount that accrued during such accrual period. The portion of
original issue discount that accrues in any accrual period will equal the
excess, if any, of (1) the sum of (a) the present value, as of the end of the
accrual period, of all of the distributions remaining to be made on the REMIC
Regular Certificate, if any, in future periods and (b) the distributions made
on such REMIC Regular Certificate during the accrual period of amounts included
in the stated redemption price, over (2) the adjusted issue price of such REMIC
Regular Certificate at the beginning of the accrual period. The present value
of the remaining distributions referred to in the preceding sentence will be
calculated (1) assuming that distributions on the REMIC Regular Certificate
will be received in future periods based on the mortgage loans being prepaid at
a rate equal to the Prepayment Assumption, (2) using a discount rate equal to
the original yield to maturity of the Certificate and (3) taking into account
events (including actual prepayments) that have occurred before the close of
the accrual period. For these purposes, the original yield to maturity of the
Certificate will be calculated based on its issue price and assuming that
distributions on the Certificate will be made in all accrual periods based on
the mortgage loans being prepaid at a rate equal to the Prepayment Assumption.
The adjusted issue price of a REMIC Regular Certificate at the beginning of any
accrual period will equal the issue price of such Certificate, increased by the
aggregate amount of original issue discount that accrued with respect to such
Certificate in prior accrual periods, and reduced by the amount of any
distributions made on such REMIC Regular Certificate in prior accrual periods
of amounts included in the stated redemption price. The original issue discount
accruing during any accrual period, computed as described above, will be
allocated ratably to each day during the accrual period to determine the daily
portion of original issue discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of
any original issue discount with respect to such Certificate. However, each
such daily portion will be reduced, if such cost is in excess of its "adjusted
issue price", in proportion to the ratio such excess bears to the aggregate
original issue discount remaining to be accrued on such REMIC Regular
Certificate. The adjusted issue price of a REMIC Regular Certificate on any
given day equals the sum of (1) the adjusted issue price (or, in the case of
the first accrual period, the issue price) of such Certificate at the beginning
of the accrual period which includes such day and (2) the daily portions of
original issue discount for all days during such accrual period prior to such
day.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates may
provide for interest based on a variable rate. Under the OID Regulations,
interest is treated as payable at a variable rate if, generally, (1) the issue
price does not exceed the original principal balance by more than a specified
amount and (2) the interest compounds or is payable at least annually at
current values of (a) one or more "qualified floating rates", (b) a single
fixed rate and one or more qualified floating rates, (c) a single "objective
rate", or (d) a single fixed rate and a single objective rate that is a
"qualified inverse floating rate". A floating rate is a qualified floating rate
if variations in the rate
76
can reasonably be expected to measure contemporaneous variations in the cost of
newly borrowed funds, where the rate is subject to a fixed multiple that is
greater than 0.65, but not more than 1.35. The rate may also be increased or
decreased by a fixed spread or subject to a fixed cap or floor, or a cap or
floor that is not reasonably expected as of the issue date to affect the yield
of the instrument significantly. An objective rate (other than a qualified
floating rate) is a rate that is determined using a single fixed formula and
that is based on objective financial or economic information, provided that the
information is not (1) within the control of the issuer or a related party or
(2) unique to the circumstances of the issuer or a related party. A qualified
inverse floating rate is a rate equal to a fixed rate minus a qualified
floating rate that inversely reflects contemporaneous variations in the cost of
newly borrowed funds; an inverse floating rate that is not a qualified floating
rate may nevertheless be an objective rate. A class of REMIC Regular
Certificates may be issued under this prospectus that does not have a variable
rate under the OID Regulations, for example, a class that bears different rates
at different times during the period it is outstanding so that it is considered
significantly "front-loaded" or "back-loaded" within the meaning of the OID
Regulations. It is possible that a class of this type may be considered to bear
"contingent interest" within the meaning of the OID Regulations. The OID
Regulations, as they relate to the treatment of contingent interest, are by
their terms not applicable to REMIC Regular Certificates. However, if final
regulations dealing with contingent interest with respect to REMIC Regular
Certificates apply the same principles as the OID Regulations, those
regulations may lead to different timing of income inclusion than would be the
case under the OID Regulations. Furthermore, application of those principles
could lead to the characterization of gain on the sale of contingent interest
REMIC Regular Certificates as ordinary income. Investors should consult their
tax advisors regarding the appropriate treatment of any REMIC Regular
Certificate that does not pay interest at a fixed rate or variable rate as
described in this paragraph.
Under the REMIC Regulations, a REMIC Regular Certificate (1) bearing a
rate that qualifies as a variable rate under the OID Regulations that is tied
to current values of a variable rate (or the highest, lowest or average of two
or more variable rates), including a rate based on the average cost of funds of
one or more financial institutions, or a positive or negative multiple of a
rate (plus or minus a specified number of basis points), or that represents a
weighted average of rates on some or all of the mortgage loans, including a
rate that is subject to one or more caps or floors, or (2) bearing one or more
of these variable rates for one or more periods or one or more fixed rates for
one or more periods, and a different variable rate or fixed rate for other
periods qualifies as a regular interest in a REMIC. Accordingly, unless
otherwise indicated in the applicable prospectus supplement, REMIC Regular
Certificates that qualify as regular interests under this rule will be treated
in the same manner as obligations bearing a variable rate for original issue
discount reporting purposes.
The amount of original issue discount with respect to a REMIC Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above under "--Original Issue Discount" with the yield to maturity
and future payments on that REMIC Regular Certificate generally to be
determined by assuming that interest will be payable for the life of the REMIC
Regular Certificate based on the initial rate for the relevant class. Unless
otherwise specified in the applicable prospectus supplement, variable interest
will be treated as qualified stated interest, other than variable interest on
an interest-only class, which will be treated as non-qualified stated interest
includible in the stated redemption price at maturity. Ordinary income
reportable for any period will be adjusted based on subsequent changes in the
applicable interest rate index.
Although unclear under the OID Regulations, unless required otherwise by
applicable final regulations, REMIC Regular Certificates bearing an interest
rate that is a weighted average of the net interest rates on mortgage loans
having fixed or adjustable rates, will be treated as having qualified stated
interest, except to the extent that initial "teaser" rates cause sufficiently
"back-loaded" interest to create more than de minimis original issue discount.
The yield on those REMIC Regular Certificates for purposes of accruing original
issue discount will be a hypothetical fixed rate based on the fixed rates, in
the case of fixed rate mortgage loans, and initial "teaser rates" followed by
fully indexed rates, in the case of adjustable rate mortgage loans. In the case
of
77
adjustable rate mortgage loans, the applicable index used to compute interest
on the mortgage loans for the initial interest accrual period will be deemed to
be in effect beginning with the period in which the first weighted average
adjustment date occurring after the issue date occurs. Adjustments will be made
in each accrual period either increasing or decreasing the amount of ordinary
income reportable to reflect the actual pass-through interest rate on the REMIC
Regular Certificates.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount, that is, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its remaining stated principal amount, or in the case of a REMIC Regular
Certificate issued with original issue discount, at a purchase price less than
its adjusted issue price will recognize gain upon receipt of each distribution
representing stated redemption price. In particular, under Section 1276 of the
Code such a Certificateholder generally will be required to allocate the
portion of each such distribution representing stated redemption price first to
accrued market discount not previously included in income, and to recognize
ordinary income to that extent. A Certificateholder may elect to include market
discount in income currently as it accrues rather than including it on a
deferred basis in accordance with the foregoing. If made, such election will
apply to all market discount bonds acquired by such Certificateholder on or
after the first day of the first taxable year to which such election applies.
In addition, the OID Regulations permit a Certificateholder to elect to accrue
all interest and discount (including de minimis market or original issue
discount) in income as interest, and to amortize premium, based on a constant
yield method. If such an election were made with respect to a REMIC Regular
Certificate with market discount, the Certificateholder would be deemed to have
made an election to include currently market discount in income with respect to
all other debt instruments having market discount that such Certificateholder
acquires during the taxable year of the election or thereafter, including de
minimis market discount discussed in the following paragraph. Similarly, a
Certificateholder that made this election for a Certificate that is acquired at
a premium would be deemed to have made an election to amortize bond premium
with respect to all debt instruments having amortizable bond premium that such
Certificateholder owns or acquires. See "--Taxation of Owners of REMIC Regular
Certificates--Premium" below. Each of these elections to accrue interest,
discount and premium with respect to a Certificate on a constant yield method
or as interest would be irrevocable except with the approval of the IRS.
However, market discount with respect to a REMIC Regular Certificate will
be considered to be de minimis for purposes of Section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect
to market discount, presumably taking into account the Prepayment Assumption.
If market discount is treated as de minimis under this rule, it appears that
the actual discount would be treated in a manner similar to original issue
discount of a de minimis amount. See "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount" above. Such treatment would result in
discount being included in income at a slower rate than discount would be
required to be included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than
one installment. Until regulations are issued by the Treasury Department,
certain rules described in the Committee Report apply. The Committee Report
indicates that in each accrual period market discount on REMIC Regular
Certificates should accrue, at the Certificateholder's option: (1) on the basis
of a constant yield method, (2) in the case of a REMIC Regular Certificate
issued without original issue discount, in an amount that bears the same ratio
to the total remaining market discount as the stated interest paid in the
accrual period bears to the total amount of stated interest remaining to be
paid on the REMIC Regular Certificate as of the beginning of the accrual
period, or (3) in the case of a REMIC Regular Certificate issued with original
issue discount, in an amount that bears the same ratio to the total remaining
market
78
discount as the original issue discount accrued in the accrual period bears to
the total original issue discount remaining on the REMIC Regular Certificate at
the beginning of the accrual period. Moreover, the Prepayment Assumption used
in calculating the accrual of original issue discount is also used in
calculating the accrual of market discount. Because the regulations referred to
in this paragraph have not been issued, it is not possible to predict what
effect such regulations might have on the tax treatment of a REMIC Regular
Certificate purchased at a discount in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC
Regular Certificate generally will be required to treat a portion of any gain
on the sale or exchange of such Certificate as ordinary income to the extent of
the market discount accrued to the date of disposition under one of the
foregoing methods, less any accrued market discount previously reported as
ordinary income.
Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased
at a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield
method over the life of the Certificate. If made, such an election will apply
to all debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. The OID Regulations also permit Certificateholders to elect
to include all interest, discount and premium in income based on a constant
yield method, further treating the Certificateholder as having made the
election to amortize premium generally. See "--Taxation of Owners of REMIC
Regular Certificates-- Market Discount" above. Although final Treasury
regulations issued under Section 171 of the Code do not by their terms apply to
prepayable obligations such as REMIC Regular Certificates, the Committee Report
states that the same rules that apply to accrual of market discount (which
rules will require use of a Prepayment Assumption in accruing market discount
with respect to REMIC Regular Certificates without regard to whether such
certificates have original issue discount) will also apply in amortizing bond
premium.
Realized Losses. Under Section 166 of the Code, both corporate holders of
the REMIC Regular Certificates and noncorporate holders of the REMIC Regular
Certificates that acquire such certificates in connection with a trade or
business should be allowed to deduct, as ordinary losses, any losses sustained
during a taxable year in which their certificates become wholly or partially
worthless as the result of one or more realized losses on the mortgage loans.
However, it appears that a noncorporate holder that does not acquire a REMIC
Regular Certificate in connection with a trade or business will not be entitled
to deduct a loss under Section 166 of the Code until such holder's Certificate
becomes wholly worthless (i.e., until its Certificate Balance has been reduced
to zero) and that the loss will be characterized as a short-term capital loss.
Each holder of a REMIC Regular Certificate will be required to accrue
interest and original issue discount with respect to such Certificate, without
giving effect to any reductions in
79
distributions attributable to defaults or delinquencies on the mortgage loans
or the Underlying Certificates until it can be established that any such
reduction ultimately will not be recoverable. As a result, the amount of
taxable income reported in any period by the holder of a REMIC Regular
Certificate could exceed the amount of economic income actually realized by the
holder in such period. Although the holder of a REMIC Regular Certificate
eventually will recognize a loss or reduction in income attributable to
previously accrued and included income that, as the result of a realized loss,
ultimately will not be realized, the law is unclear with respect to the timing
and character of such loss or reduction in income.
Taxation of Owners of REMIC Residual Certificates.
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC generally is not subject to entity-level taxation, except
with regard to prohibited transactions and certain other transactions. See
"--Prohibited Transactions Tax and Other Taxes" below. Rather, the taxable
income or net loss of a REMIC is generally taken into account by the holder of
the REMIC Residual Certificates. Accordingly, the REMIC Residual Certificates
will be subject to tax rules that differ significantly from those that would
apply if the REMIC Residual Certificates were treated for federal income tax
purposes as direct ownership interests in the mortgage loans or as debt
instruments issued by the REMIC.
A REMIC Residual Certificateholder generally will be required to report
its daily portion of the taxable income or, subject to the limitations noted in
this discussion, the net loss of the REMIC for each day during a calendar
quarter that such holder owned such REMIC Residual Certificate. For this
purpose, the taxable income or net loss of the REMIC will be allocated to each
day in the calendar quarter ratably using a "30 days per month/90 days per
quarter/360 days per year" convention unless otherwise disclosed in the related
prospectus supplement. The daily amounts so allocated will then be allocated
among the REMIC Residual Certificateholders in proportion to their respective
ownership interests on such day. Any amount included in the gross income or
allowed as a loss of any REMIC Residual Certificateholder by virtue of this
paragraph will be treated as ordinary income or loss. The taxable income of the
REMIC will be determined under the rules described below in "--Taxable Income
of the REMIC" and will be taxable to the REMIC Residual Certificateholders
without regard to the timing or amount of cash distributions by the REMIC until
the REMIC's termination. Ordinary income derived from REMIC Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to limitations under Section 469 of the Code on the
deductibility of "passive losses".
A holder of a REMIC Residual Certificate that purchased such Certificate
from a prior holder of such Certificate also will be required to report on its
federal income tax return amounts representing its daily share of the taxable
income (or net loss) of the REMIC for each day that it holds such REMIC
Residual Certificate. Those daily amounts generally will equal the amounts of
taxable income or net loss determined as described above. The Committee Report
indicates that certain modifications of the general rules may be made, by
regulations, legislation or otherwise to reduce (or increase) the income of a
REMIC Residual Certificateholder that purchased such REMIC Residual Certificate
from a prior holder of such Certificate at a price greater than (or less than)
the adjusted basis (as defined below) such REMIC Residual Certificate would
have had in the hands of an original holder of such Certificate. The REMIC
Regulations, however, do not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate from the
seller of such Certificate in connection with the acquisition of such REMIC
Residual Certificate will be taken into account in determining the income of
such holder for federal income tax purposes. Although it is possible that any
such payment would be includible in income immediately upon its receipt, the
IRS might assert that such payment should be included in income over time
according to an amortization schedule or according to some other method.
Because of the uncertainty concerning the treatment of such payments, holders
of REMIC Residual Certificates should consult their tax advisors concerning the
treatment of such payments for income tax purposes.
80
The amount of income REMIC Residual Certificateholders will be required to
report (or the tax liability associated with such income) may exceed the amount
of cash distributions received from the REMIC for the corresponding period.
Consequently, REMIC Residual Certificateholders should have other sources of
funds sufficient to pay any federal income taxes due as a result of their
ownership of REMIC Residual Certificates or unrelated deductions against which
income may be offset, subject to the rules relating to "excess inclusions" and
"noneconomic" residual interests discussed below. The fact that the tax
liability associated with the income allocated to REMIC Residual
Certificateholders may exceed the cash distributions received by such REMIC
Residual Certificateholders for the corresponding period may significantly
adversely affect such REMIC Residual Certificateholders' after-tax rate of
return. Such disparity between income and distributions may not be offset by
corresponding losses or reductions of income attributable to the REMIC Residual
Certificateholder until subsequent tax years and, then, may not be completely
offset due to changes in the Code, tax rates or character of the income or
loss.
Taxable Income of the REMIC. The taxable income of the REMIC will equal
the income from the mortgage loans (including interest, market discount and, if
applicable, original issue discount and less premium) and other assets of the
REMIC plus any cancellation of indebtedness income due to the allocation of
realized losses to REMIC Regular Certificates, less the deductions allowed to
the REMIC for interest (including original issue discount and reduced by any
premium on issuance) on the REMIC Regular Certificates (and any other class of
REMIC Certificates constituting "regular interests" in the REMIC not offered
hereby), amortization of any premium on the mortgage loans, bad debt losses
with respect to the mortgage loans and, except as described below, for
servicing, administrative and other expenses.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate basis in its assets equal to the sum of the issue prices of
all REMIC Certificates (or, if a class of REMIC Certificates is not sold
initially, such Class's fair market value). Such aggregate basis will be
allocated among the mortgage loans and the other assets of the REMIC in
proportion to their respective fair market values. The issue price of any REMIC
Certificates offered hereby will be determined in the manner described above
under "--Taxation of Owners of REMIC Regular Certificates--Original Issue
Discount". The issue price of a REMIC Certificate received in exchange for an
interest in the mortgage loans or other property will equal the fair market
value of such interests in the mortgage loans or other property. Accordingly,
if one or more classes of REMIC Certificates are retained initially rather than
sold, the REMIC Administrator may be required to estimate the fair market value
of such interests in order to determine the basis of the REMIC in the mortgage
loans and other property held by the REMIC.
The method of accrual by the REMIC of original issue discount income and
market discount income with respect to mortgage loans that it holds will be
equivalent to the method for accruing original issue discount income for
holders of REMIC Regular Certificates (that is, under the constant yield method
taking into account the Prepayment Assumption), but without regard to the de
minimis rule applicable to REMIC Regular Certificates. However, a REMIC that
acquires loans at a market discount must include such market discount in income
currently, as it accrues, on a constant yield basis. See "--Taxation of Owners
of REMIC Regular Certificates" above, which describes a method for accruing
such discount income that is analogous to that required to be used by a REMIC
as to mortgage loans with market discount that it holds.
A mortgage loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis in that mortgage loan, determined
as described in the preceding paragraph, is less than (or greater than) its
stated redemption price. Any such discount will be includible in the income of
the REMIC as it accrues, in advance of receipt of the cash attributable to such
income, under a method similar to the method described above for accruing
original issue discount on the REMIC Regular Certificates. It is anticipated
that each REMIC will elect under Section 171 of the Code to amortize any
premium on the mortgage loans. Premium on any mortgage loan to which such
election applies may be amortized under a constant yield method, presumably
taking into account a Prepayment Assumption. Further, such an election would
not apply to any mortgage loan originated on or before September 27, 1985.
Instead, premium on such a
81
mortgage loan should be allocated among the principal payments thereon and be
deductible by the REMIC as those payments become due or upon the prepayment of
such mortgage loan.
A REMIC will be allowed deductions for interest (including original issue
discount) on the REMIC Regular Certificates (including any other class of REMIC
Certificates constituting "regular interests" in the REMIC not offered hereby)
equal to the deductions that would be allowed if the REMIC Regular Certificates
(including any other class of REMIC Certificates constituting "regular
interests" in the REMIC not offered hereby) were indebtedness of the REMIC.
Original issue discount will be considered to accrue for this purpose as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount", except that the de minimis rule and the
adjustments for subsequent holders of REMIC Regular Certificates (including any
other class of REMIC Certificates constituting "regular interests" in the REMIC
not offered hereby) described in that section will not apply.
If a class of REMIC Regular Certificates is issued with an Issue Premium,
the REMIC will have additional income in each taxable year in an amount equal
to the portion of the Issue Premium that is considered to be amortized or
repaid in that year. Although the matter is not entirely certain, it is likely
that Issue Premium would be amortized under a constant yield method in a manner
analogous to the method of accruing original issue discount described above
under "--Taxation of Owners of REMIC Regular Certificates--Original Issue
Discount".
As a general rule, the taxable income of a REMIC will be determined in the
same manner as if the REMIC were an individual having the calendar year as its
taxable year and using the accrual method of accounting. However, no item of
income, gain, loss or deduction allocable to a prohibited transaction will be
taken into account. See "--Prohibited Transactions Tax and Other Taxes" below.
Further, the limitation on miscellaneous itemized deductions imposed on
individuals by Section 67 of the Code (which allows such deductions only to the
extent they exceed in the aggregate two percent of the taxpayer's adjusted
gross income) will not be applied at the REMIC level so that the REMIC will be
allowed deductions for servicing, administrative and other noninterest expenses
in determining its taxable income. All such expenses will be allocated as a
separate item to the holders of REMIC Certificates, subject to the limitation
of Section 67 of the Code. See "--Possible Pass-Through of Miscellaneous
Itemized Deductions" below. If the deductions allowed to the REMIC exceed its
gross income for a calendar quarter, such excess will be the net loss for the
REMIC for that calendar quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC
Residual Certificate will be equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income of the REMIC Residual
Certificateholder and decreased (but not below zero) by distributions made, and
by net losses allocated, to such REMIC Residual Certificateholder.
A REMIC Residual Certificateholder is not allowed to take into account any
net loss for any calendar quarter to the extent such net loss exceeds such
REMIC Residual Certificateholder's adjusted basis in its REMIC Residual
Certificate as of the close of such calendar quarter (determined without regard
to such net loss). Any loss that is not currently deductible by reason of this
limitation may be carried forward indefinitely to future calendar quarters and,
subject to the same limitation, may be used only to offset income from the
REMIC Residual Certificate. The ability of REMIC Residual Certificateholders to
deduct net losses may be subject to additional limitations under the Code, as
to which REMIC Residual Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
nontaxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of
taxable income of the REMIC.
82
However, such bases increases may not occur until the end of the calendar
quarter, or perhaps the end of the calendar year, with respect to which such
REMIC taxable income is allocated to the REMIC Residual Certificateholders. To
the extent such REMIC Residual Certificateholders' initial bases are less than
the distributions to such REMIC Residual Certificateholders, and increases in
such initial bases either occur after such distributions or (together with
their initial bases) are less than the amount of such distributions, gain will
be recognized to such REMIC Residual Certificateholders on such distributions
and will be treated as gain from the sale of their REMIC Residual Certificates.
The effect of these rules is that a REMIC Residual Certificateholder may
not amortize its basis in a REMIC Residual Certificate, but may only recover
its basis through distributions, through the deduction of any net losses of the
REMIC or upon the sale of its REMIC Residual Certificate. See "--Sales of REMIC
Certificates" below. For a discussion of possible modifications of these rules
that may require adjustments to income of a holder of a REMIC Residual
Certificate other than an original holder in order to reflect any difference
between the cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder and the adjusted basis such REMIC Residual Certificate would
have in the hands of an original holder see "--Taxation of Owners of REMIC
Residual Certificates--General" above.
Regulations have been issued addressing the federal income tax treatment
of "inducement fees" received by transferees of non-economic residual
interests. These regulations require inducement fees to be included in income
over a period reasonably related to the period in which the related residual
interest is expected to generate taxable income or net loss to its holder.
Under two safe harbor methods, inducement fees are permitted to be included in
income (i) in the same amounts and over the same period that the taxpayer uses
for financial reporting purposes, provided that such period is not shorter than
the period the REMIC is expected to generate taxable income or (ii) ratably
over the remaining anticipated weighted average life of all the regular and
residual interests issued by the REMIC, determined based on actual
distributions projected as remaining to be made on such interests under the
Prepayment Assumption. If the holder of a non-economic residual interest sells
or otherwise disposes of the non-economic residual interest, any unrecognized
portion of the inducement fee is required to be taken into account at the time
of the sale of disposition. Prospective purchasers of the REMIC Residual
Certificates should consult with their tax advisors regarding the effect of
these proposed regulations.
Excess Inclusions. Any "excess inclusions" with respect to a REMIC
Residual Certificate will be subject to federal income tax in all events. In
general, the "excess inclusions" with respect to a REMIC Residual Certificate
for any calendar quarter will be the excess, if any, of (1) the daily portions
of REMIC taxable income allocable to such REMIC Residual Certificate over (2)
the sum of the "daily accruals" (as defined below) for each day during such
quarter that such REMIC Residual Certificate was held by such REMIC Residual
Certificateholder. The daily accruals of a REMIC Residual Certificateholder
will be determined by allocating to each day during a calendar quarter its
ratable portion of the product of the "adjusted issue price" of the REMIC
Residual Certificate at the beginning of the calendar quarter and 120% of the
"long-term Federal rate" in effect on the Closing Date. For this purpose, the
adjusted issue price of a REMIC Residual Certificate as of the beginning of any
calendar quarter will be equal to the issue price of the REMIC Residual
Certificate, increased by the sum of the daily accruals for all prior quarters
and decreased (but not below zero) by any distributions made with respect to
such REMIC Residual Certificate before the beginning of such quarter. The issue
price of a REMIC Residual Certificate is the initial offering price to the
public (excluding bond houses and brokers) at which a substantial amount of the
REMIC Residual Certificates were sold. The "long-term Federal rate" is an
average of current yields on Treasury securities with a remaining term of
greater than nine years, computed and published monthly by the IRS.
For REMIC Residual Certificateholders, an excess inclusion (1) will not be
permitted to be offset by deductions, losses or loss carryovers from other
activities, (2) will be treated as "unrelated business taxable income" to an
otherwise tax-exempt organization and (3) will not be eligible for any rate
reduction or exemption under any applicable tax treaty with respect to the 30%
United
83
States withholding tax imposed on distributions to REMIC Residual
Certificateholders that are foreign investors. See, however, "--Foreign
Investors in REMIC Certificates" below.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Treasury regulations yet to be issued could apply a similar rule
to regulated investment companies, common trust funds and certain cooperatives;
the REMIC Regulations currently do not address this subject.
Noneconomic REMIC Residual Certificates. Under the REMIC Regulations,
transfers of "noneconomic" REMIC Residual Certificates will be disregarded for
all federal income tax purposes if "a significant purpose of the transfer was
to enable the transferor to impede the assessment or collection of tax". If
such transfer is disregarded, the purported transferor will continue to remain
liable for any taxes due with respect to the income on such "noneconomic" REMIC
Residual Certificate. The REMIC Regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the Prepayment Assumption and on
any required or permitted clean up calls, or required liquidation provided for
in the REMIC's organizational documents, (1) the present value of the expected
future distributions (discounted using the "applicable Federal rate" for
obligations whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the REMIC Residual
Certificate, which rate is computed and published monthly by the IRS) on the
REMIC Residual Certificate equals at least the present value of the expected
tax on the anticipated excess inclusions, and (2) the transferor reasonably
expects that the transferee will receive distributions with respect to the
REMIC Residual Certificate at or after the time the taxes accrue on the
anticipated excess inclusions in an amount sufficient to satisfy the accrued
taxes. The REMIC Regulations explain that a significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. Under the REMIC Regulations, a safe harbor is provided if (1) the
transferor conducted, at the time of the transfer, a reasonable investigation
of the financial condition of the transferee and found that the transferee
historically had paid its debts as they came due and found no significant
evidence to indicate that the transferee would not continue to pay its debts as
they came due in the future, (2) the transferee represents to the transferor
that it understands that, as the holder of the noneconomic residual interest,
the transferee may incur tax liabilities in excess of cash flows generated by
the interest and that the transferee intends to pay taxes associated with
holding the residual interest as they become due and (3) the transferee
represents to the transferor that it will not cause income from the REMIC
Residual Certificate to be attributable to a foreign permanent establishment or
fixed base (within the meaning of an applicable income tax treaty) of the
transferee or any other person. Accordingly, all transfers of REMIC Residual
Certificates that may constitute noneconomic residual interests will be subject
to certain restrictions under the terms of the related Pooling and Servicing
Agreement that are intended to reduce the possibility of any such transfer
being disregarded. Such restrictions will require the transferee to provide an
affidavit to certify to the matters in the preceding sentence. The transferor
must have no actual knowledge or reason to know that those statements are
false.
In addition to the three conditions set forth above, the REMIC Regulations
contain a fourth requirement that must be satisfied in one of two alternative
ways for the transferor to have a "safe harbor" against ignoring the transfer:
(1) the present value of the anticipated tax liabilities associated with
holding the noneconomic residual interest not exceed the sum of:
(i) the present value of any consideration given to the transferee to
acquire the interest;
(ii) the present value of the expected future distributions on the
interest; and
84
(iii) the present value of the anticipated tax savings associated with
holding the interest as the REMIC generates losses.
For purposes of the computations under this "minimum transfer price"
alternative, the transferee is assumed to pay tax at the highest rate of tax
specified in Section 11(b)(1) of the Code (currently 35%) or, in certain
circumstances, the minimum tax rate specified in Section 55 of the Code.
Further, present values generally are computed using a discount rate equal to
the short-term Federal rate set forth in Section 1274(d) of the Code for the
month of the transfer and the compounding period used by the transferee; or
(2) (i) the transferee must be a domestic "C" corporation (other than a
corporation exempt from taxation of a regulated investment company or real
estate investment trust) that meets certain gross and net asset tests
(generally, $100 million of gross assets and $10 million of net assets for the
current year and the two preceding fiscal years);
(ii) the transferee must agree in writing that it will transfer the
REMIC Residual Certificate only to a subsequent transferee that is an
eligible corporation and meets the requirements for a safe harbor transfer;
and
(iii) the facts and circumstances known to the transferor on or before
the date of the transfer must not reasonably indicate that the taxes
associated with ownership of the REMIC Residual Certificate will not be
paid by the transferee.
The related prospectus supplement will disclose whether offered REMIC
Residual Certificates may be considered "noneconomic" residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered "noneconomic" will be based upon
certain assumptions, and the depositor will make no representation that a REMIC
Residual Certificate will not be considered "noneconomic" for purposes of the
above-described rules. See "--Foreign Investors in REMIC Certificates" below
for additional restrictions applicable to transfers of certain REMIC Residual
Certificates to foreign persons.
Mark-to-Market Rules. The IRS has issued regulations, relating to the
requirement that a securities dealer mark to market securities held for sale to
customers. This mark-to-market requirement applies to all securities owned by a
dealer, except to the extent that the dealer has specifically identified a
security as held for investment. The mark-to-market regulations provide that
for purposes of this requirement, a REMIC Residual Certificate will not be
treated as a security and thus generally may not be marked to market.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and
expenses of a REMIC generally will be allocated to certain types of holders of
the related REMIC Residual Certificates. The applicable Treasury regulations
indicate, however, that in the case of a REMIC that is similar to a single
class grantor trust, all or a portion of such fees and expenses should be
allocated to such types of holders of the related REMIC Regular Certificates.
Unless otherwise stated in the related prospectus supplement, such fees and
expenses will be allocated to the related REMIC Residual Certificates in their
entirety and not to the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate
or trust, or a "pass-through entity" beneficially owned by one or more
individuals, estates or trusts, (1) an amount equal to such individual's,
estate's or trust's share of such fees and expenses will be added to the gross
income of such holder and (2) such individual's, estate's or trust's share of
such fees and expenses will be treated as a miscellaneous itemized deduction
allowable subject to the limitation of Section 67 of the Code, which permits
such deductions only to the extent they exceed in the aggregate 2% of a
taxpayer's adjusted gross income. In addition, Section 68 of the Code provides
that the amount of itemized deductions otherwise allowable for an individual
whose adjusted gross income exceeds a specified amount will be reduced by the
lesser of (1) 3% of the excess of the individual's adjusted gross income over
such amount or (2) 80% of the amount of itemized deductions otherwise allowable
for the taxable year.
85
The amount of additional taxable income reportable by REMIC Certificateholders
that are subject to the limitations of either Section 67 or Section 68 of the
Code may be substantial. Furthermore, in determining the alternative minimum
taxable income of such a holder of a REMIC Certificate that is an individual,
estate or trust, or a "pass-through entity" beneficially owned by one or more
individuals, estates or trusts, no deduction will be allowed for such holder's
allocable portion of servicing fees and other miscellaneous itemized deductions
of the REMIC, even though an amount equal to the amount of such fees and other
deductions will be included in such holder's gross income. Accordingly, such
REMIC Certificates may not be appropriate investments for individuals, estates,
or trusts, or pass-through entities beneficially owned by one or more
individuals, estates or trusts. Such prospective investors should consult with
their tax advisors prior to making an investment in such certificates.
Under tax legislation enacted in 2001, the limitations on deductions under
Section 68 will be phased out beginning in 2006 and will be eliminated after
2009.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC
Certificate. The adjusted basis of a REMIC Regular Certificate generally will
equal the cost of such REMIC Regular Certificate to such Certificateholder,
increased by income reported by such Certificateholder with respect to such
REMIC Regular Certificate (including original issue discount and market
discount income) and reduced (but not below zero) by distributions on such
REMIC Regular Certificate received by such Certificateholder and by any
amortized premium. The adjusted basis of a REMIC Residual Certificate will be
determined as described above under "--Taxation of Owners of REMIC Residual
Certificates--Basis Rules, Net Losses and Distributions". Except as provided in
the following four paragraphs, any such gain or loss will be capital gain or
loss, provided such REMIC Certificate is held as a capital asset (generally,
property held for investment) within the meaning of Section 1221 of the Code.
The Code as of the date of this prospectus provides for tax rates for
individuals on ordinary income that are higher than the tax rates for long-term
capital gains of individuals for property held for more than one year. No such
rate differential exists for corporations. In addition, the distinction between
a capital gain or loss and ordinary income or loss remains relevant for other
purposes. Investors that recognize a loss on a sale or exchange of a REMIC
Regular Certificate for federal income tax purposes in excess of certain
threshold amounts should consult their tax advisors as to the need to file IRS
Form 8886 (disclosing certain potential tax shelters) on their federal income
tax returns.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
a capital gain will be treated as ordinary income to the extent such gain does
not exceed the excess, if any, of (1) the amount that would have been
includible in the seller's income with respect to such REMIC Regular
Certificate assuming that income had accrued thereon at a rate equal to 110% of
the "applicable Federal rate" (generally, a rate based on an average of current
yields on treasury securities having a maturity comparable to that of the
certificate based on the application of the Prepayment Assumption to such
certificate), determined as of the date of purchase of such REMIC Regular
Certificate, over (2) the amount of ordinary income actually includible in the
seller's income prior to such sale. In addition, gain recognized on the sale of
a REMIC Regular Certificate by a seller who purchased such REMIC Regular
Certificate at a market discount will be taxable as ordinary income in an
amount not exceeding the portion of such discount that accrued during the
period such REMIC Certificate was held by such holder, reduced by any market
discount included in income under the rules described above under "--Taxation
of Owners of REMIC Regular Certificates-- Market Discount" and "--Premium".
REMIC Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such Section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Certificate is held as part of a "conversion transaction" within the
meaning of Section 1258 of the Code. A conversion transaction
86
generally is one in which the taxpayer has taken two or more positions in the
same or similar property that reduce or eliminate market risk, if substantially
all of the taxpayer's return is attributable to the time value of the
taxpayer's net investment in such transaction. The amount of gain so realized
in a conversion transaction that is recharacterized as ordinary income
generally will not exceed the amount of interest that would have accrued on the
taxpayer's net investment at 120% of the appropriate "applicable Federal rate"
at the time the taxpayer enters into the conversion transaction, subject to
appropriate reduction for prior inclusion of interest and other ordinary income
items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for the taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Except as may be provided in Treasury Department regulations yet to be
issued, if the seller of a REMIC Residual Certificate reacquires such REMIC
Residual Certificate, or acquires any other residual interest in a REMIC or any
similar interest in a "taxable mortgage pool" (as defined in Section 7701(i) of
the Code) during the period beginning six months before, and ending six months
after, the date of such sale, such sale will be subject to the "wash sale"
rules of Section 1091 of the Code. In that event, any loss realized by the
REMIC Residual Certificateholder on the sale will not be deductible, but
instead will be added to such REMIC Residual Certificateholder's adjusted basis
in the newly-acquired asset.
Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from "prohibited transactions".
In general, subject to certain specified exceptions a prohibited transaction
means the disposition of a mortgage loan, the receipt of income from a source
other than a mortgage loan or certain other permitted investments, the receipt
of compensation for services, or gain from the disposition of an asset
purchased with the payments on the mortgage loans for temporary investment
pending distribution on the REMIC Certificates. It is not anticipated that any
REMIC will engage in any prohibited transactions in which it would recognize a
material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax
on the REMIC equal to 100% of the value of the contributed property. Each
Pooling and Servicing Agreement will include provisions designed to prevent the
acceptance of any contributions that would be subject to such tax.
REMICs also are subject to federal income tax at the highest corporate
rate on "net income from foreclosure property", determined by reference to the
rules applicable to real estate investment trusts. "Net income from foreclosure
property" generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment
trust. As provided in each Pooling and Servicing Agreement, a REMIC may
recognize "net income from foreclosure property" subject to federal income tax
to the extent that the REMIC Administrator determines that such method of
operation will result in a greater after-tax return to the trust fund than any
other method of operation.
Unless otherwise disclosed in the related prospectus supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related prospectus supplement, and to the
extent permitted by then applicable laws, any prohibited transactions tax or
contributions tax will be borne by the related REMIC administrator, master
servicer, special servicer, manager or trustee, in any case out of its own
funds, provided that such person has sufficient assets to do so, and provided
further that such tax arises out of a breach of such person's obligations under
the related Pooling and Servicing Agreement and in respect of compliance with
applicable laws and regulations. Any such tax not borne by a REMIC
administrator, a master servicer, special servicer, manager or trustee will be
charged against the related trust fund resulting in a reduction in amounts
payable to holders of the related REMIC Certificates.
87
Tax and Restrictions on Transfers of REMIC Residual Certificates to
Certain Organizations. If a REMIC Residual Certificate is transferred to a
"disqualified organization" (as defined below), a tax would be imposed in an
amount (determined under the REMIC Regulations) equal to the product of (1) the
present value (discounted using the "applicable Federal rate" for obligations
whose term ends on the close of the last quarter in which excess inclusions are
expected to accrue with respect to the REMIC Residual Certificate) of the total
anticipated excess inclusions with respect to such REMIC Residual Certificate
for periods after the transfer and (2) the highest marginal federal income tax
rate applicable to corporations. The anticipated excess inclusions must be
determined as of the date that the REMIC Residual Certificate is transferred
and must be based on events that have occurred up to the time of such transfer,
the Prepayment Assumption and any required or permitted clean up calls or
required liquidation provided for in the REMIC's organizational documents. Such
a tax generally would be imposed on the transferor of the REMIC Residual
Certificate, except that where such transfer is through an agent for a
disqualified organization, the tax would instead be imposed on such agent.
However, a transferor of a REMIC Residual Certificate would in no event be
liable for such tax with respect to a transfer if the transferee furnishes to
the transferor an affidavit that the transferee is not a disqualified
organization and, as of the time of the transfer, the transferor does not have
actual knowledge that such affidavit is false. Moreover, an entity will not
qualify as a REMIC unless there are reasonable arrangements designed to ensure
that (1) residual interests in such entity are not held by disqualified
organizations and (2) information necessary for the application of the tax
described herein will be made available. Restrictions on the transfer of REMIC
Residual Certificates and certain other provisions that are intended to meet
this requirement will be included in each Pooling and Servicing Agreement, and
will be discussed in any prospectus supplement relating to the offering of any
REMIC Residual Certificate.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (1) the
amount of excess inclusions on the REMIC Residual Certificate that are
allocable to the interest in the pass-through entity held by such disqualified
organization and (2) the highest marginal federal income tax rate imposed on
corporations. A pass-through entity will not be subject to this tax for any
period, however, if each record holder of an interest in such pass-through
entity furnishes to such pass-through entity (1) such holder's social security
number and a statement under penalties of perjury that such social security
number is that of the record holder or (2) a statement under penalties of
perjury that such record holder is not a disqualified organization.
If an "electing large partnership" holds a REMIC Residual Certificate, all
interests in the electing large partnership are treated as held by disqualified
organizations for purposes of the tax imposed upon a pass-through entity by
Section 860E(c) of the Code. An exception to this tax, otherwise available to a
pass-through entity that is furnished certain affidavits by record holders of
interests in the entity and that does not know such affidavits are false, is
not available to an electing large partnership.
For these purposes, a "disqualified organization" means (1) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the Federal Home Loan Mortgage Corporation), (2) any organization
(other than a cooperative described in Section 521 of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed by Section 511
of the Code or (3) any organization described in Section 1381(a)(2)(C) of the
Code. In addition, a "pass-through entity" means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in Section 860E(e)(6) of the Code. In addition, a person
holding an interest in a pass-through entity as a nominee for another person
will, with respect to such interest, be treated as a pass-through entity. For
these purposes, an "electing large partnership" means a partnership (other than
a service partnership or certain commodity pools) having more than 100 members
that has elected to apply certain simplified reporting provisions under the
Code.
88
Termination. A REMIC will terminate immediately after the Distribution
Date following receipt by the REMIC of the final payment in respect of the
mortgage loans or upon a sale of the REMIC's assets following the adoption by
the REMIC of a plan of complete liquidation. The last distribution on a REMIC
Regular Certificate will be treated as a payment in retirement of a debt
instrument. In the case of a REMIC Residual Certificate, if the last
distribution on such REMIC Residual Certificate is less than the REMIC Residual
Certificateholder's adjusted basis in such Certificate, such REMIC Residual
Certificateholder should (but may not) be treated as realizing a loss equal to
the amount of such difference, and such loss may be treated as a capital loss.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Code, the REMIC will be treated as a
partnership and REMIC Residual Certificateholders will be treated as partners.
Unless otherwise stated in the related prospectus supplement, the holder of the
largest percentage interest in a class of REMIC Residual Certificates will be
the "tax matters person" with respect to the related REMIC, and the REMIC
administrator will file REMIC federal income tax returns on behalf of the
related REMIC, and will be designated as and will act as agent of, and
attorney-in-fact for, the tax matters person with respect to the REMIC in all
respects.
As the tax matters person, the REMIC administrator, subject to certain
notice requirements and various restrictions and limitations, generally will
have the authority to act on behalf of the REMIC and the REMIC Residual
Certificateholders in connection with the administrative and judicial review of
items of income, deduction, gain or loss of the REMIC, as well as the REMIC's
classification. REMIC Residual Certificateholders generally will be required to
report such REMIC items consistently with their treatment on the related
REMIC's tax return and may in some circumstances be bound by a settlement
agreement between the REMIC Administrator, as tax matters person, and the IRS
concerning any such REMIC item. Adjustments made to the REMIC tax return may
require a REMIC Residual Certificateholder to make corresponding adjustments on
its return, and an audit of the REMIC's tax return, or the adjustments
resulting from such an audit, could result in an audit of a REMIC Residual
Certificateholder's return. No REMIC will be registered as a tax shelter
pursuant to Section 6111 of the Code because it is not anticipated that any
REMIC will have a net loss for any of the first five taxable years of its
existence. Any person that holds a REMIC Residual Certificate as a nominee for
another person may be required to furnish to the related REMIC, in a manner to
be provided in Treasury Department regulations, the name and address of such
person and other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury Department regulations. These information
reports generally are required to be sent to individual holders of REMIC
Regular Interests and the IRS; holders of REMIC Regular Certificates that are
corporations, trusts, securities dealers and certain other nonindividuals will
be provided interest and original issue discount income information and the
information set forth in the following paragraph upon request in accordance
with the requirements of the applicable regulations. The information must be
provided by the later of 30 days after the end of the quarter for which the
information was requested, or two weeks after the receipt of the request.
Reporting with respect to REMIC Residual Certificates, including income, excess
inclusions, investment expenses and relevant information regarding
qualification of the REMIC's assets will be made as required under the Treasury
Department regulations, generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular
Certificate at the beginning of each accrual period. In addition, the reports
will include information required by regulations with respect to computing the
accrual of any market discount. Because exact computation of the accrual of
market discount on a constant yield method would require information relating
to the holder's purchase price that the REMIC may not have, such regulations
only require that information pertaining to the appropriate proportionate
method of accruing market discount be provided. See "--Taxation of Owners of
REMIC Regular Certificates--Market Discount".
Unless otherwise specified in the related prospectus supplement, the
responsibility for complying with the foregoing reporting rules will be borne
by the REMIC administrator.
89
Backup Withholding with Respect to REMIC Certificates. Payments of
interest and principal, as well as payments of proceeds from the sale of REMIC
Certificates, may be subject to the "backup withholding tax" under Section 3406
of the Code at a rate of 28% (which rate will be increased to 31% after 2010)
if recipients of such payments fail to furnish to the payor certain
information, including their taxpayer identification numbers, or otherwise fail
to establish an exemption from such tax. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax. Furthermore, certain penalties may be imposed
by the IRS on a recipient of payments that is required to supply information
but that does not do so in the proper manner. Certificateholders are urged to
contact their own tax advisors regarding the application to them of backup
withholding and information reporting.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a U.S. Person and is not subject to federal income tax as a result
of any direct or indirect connection to the United States in addition to its
ownership of a REMIC Regular Certificate will not, unless otherwise disclosed
in the related prospectus supplement, be subject to United States federal
income or withholding tax in respect of a distribution on a REMIC Regular
Certificate, provided that the holder complies to the extent necessary with
certain identification requirements (including delivery of a statement, signed
by the Certificateholder under penalties of perjury, certifying that such
Certificateholder is not a U.S. Person and providing the name and address of
such Certificateholder). It is possible that the IRS may assert that the
foregoing tax exemption should not apply with respect to a REMIC Regular
Certificate held by a REMIC Residual Certificateholder that owns directly or
indirectly a 10% or greater interest in the REMIC Residual Certificates. If the
holder does not qualify for exemption, distributions of interest, including
distributions in respect of accrued original issue discount, to such holder may
be subject to a tax rate of 30%, subject to reduction under any applicable tax
treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a nonresident alien individual and would not be subject to
United States estate taxes. However, Certificateholders who are nonresident
alien individuals should consult their tax advisors concerning this question.
Treasury regulations provide new methods of satisfying the beneficial
ownership certification requirement described above, including a new series of
forms. These regulations require, in the case of REMIC Regular Certificates
held by a foreign partnership, that (x) the certification described above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule applies in the case of tiered
partnerships. Non-U.S. Persons should consult their own tax advisors concerning
the application of the certification requirements in the regulations.
Unless otherwise stated in the related prospectus supplement, transfers of
REMIC Residual Certificates to investors that are not United States Persons
will be prohibited under the related Pooling and Servicing Agreement.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds. With respect to each series of
Grantor Trust Certificates, in the opinion of counsel to the depositor for such
series, assuming compliance with all provisions of the related Pooling and
Servicing Agreement, the related Grantor Trust Fund will be classified as a
grantor trust under subpart E, part I of subchapter J of the Code and not as a
partnership or an association taxable as a corporation. The following general
discussion of the anticipated federal income tax consequences of the purchase,
ownership and disposition of Grantor Trust Certificates, to the extent it
relates to matters of law or legal conclusions with respect thereto, represents
the opinion of counsel to the depositor for the applicable series as specified
in the related prospectus supplement, subject to any qualifications set forth
in this prospectus. In addition, counsel to the
90
depositor has prepared or reviewed the statements in this prospectus under the
heading "Certain Federal Income Tax Consequences--Grantor Trust Funds," and is
of the opinion that such statements are correct in all material respects. Such
statements are intended as an explanatory discussion of the possible effects of
the classification of any Grantor Trust Fund as a grantor trust for federal
income tax purposes on investors generally and of related tax matters affecting
investors generally, but do not purport to furnish information in the level of
detail or with the attention to an investor's specific tax circumstances that
would be provided by an investor's own tax advisor. Accordingly, each investor
is advised to consult its own tax advisors with regard to the tax consequences
to it of investing in Grantor Trust Certificates.
Characterization of Investments in Grantor Trust Certificates.
Grantor Trust Fractional Interest Certificates. In the case of Grantor
Trust Fractional Interest Certificates, unless otherwise disclosed in the
related prospectus supplement, counsel to the depositor will deliver an opinion
that, in general, Grantor Trust Fractional Interest Certificates will represent
interests in (1) "loans . . . secured by an interest in real property" within
the meaning of Section 7701(a)(19)(C)(v) of the Code; (2) "obligation[s]
(including any participation or certificate of beneficial ownership therein)
which . . . [are] principally secured by an interest in real property" within
the meaning of Section 860G(a)(3) of the Code; and (3) "real estate assets"
within the meaning of Section 856(c)(5)(B) of the Code. In addition, counsel to
the depositor will deliver an opinion that interest on Grantor Trust Fractional
Interest Certificates will to the same extent be considered "interest on
obligations secured by mortgages on real property or on interests in real
property" within the meaning of Section 856(c)(3)(B) of the Code.
Grantor Trust Strip Certificates. Even if Grantor Trust Strip Certificates
evidence an interest in a Grantor Trust Fund consisting of mortgage loans that
are "loans . . . secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code and "real estate assets" within the
meaning of Section 856(c)(5)(B) of the Code, and the interest on which is
"interest on obligations secured by mortgages on real property" within the
meaning of Section 856(c)(3)(B) of the Code, it is unclear whether the Grantor
Trust Strip Certificates, and the income therefrom, will be so characterized.
However, the policies underlying such sections (namely, to encourage or require
investments in mortgage loans by thrift institutions and real estate investment
trusts) may suggest that such characterization is appropriate. Counsel to the
depositor will not deliver any opinion on these questions. Prospective
purchasers to which such characterization of an investment in Grantor Trust
Strip Certificates is material should consult their tax advisors regarding
whether the Grantor Trust Strip Certificates, and the income therefrom, will be
so characterized.
The Grantor Trust Strip Certificates will be "obligation[s] (including any
participation or Certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code.
Taxation of Owners of Grantor Trust Fractional Interest Certificates.
General. Holders of a particular series of Grantor Trust Fractional
Interest Certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the mortgage loans
(including amounts used to pay reasonable servicing fees and other expenses)
and will be entitled to deduct their shares of any such reasonable servicing
fees and other expenses. Because of stripped interests, market or original
issue discount, or premium, the amount includible in income on account of a
Grantor Trust Fractional Interest Certificate may differ significantly from the
amount distributable thereon representing interest on the mortgage loans. Under
Section 67 of the Code, an individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate directly or through certain pass-through
entities will be allowed a deduction for such reasonable servicing fees and
expenses only to the extent that the aggregate of such holder's miscellaneous
itemized deductions exceeds two percent of such holder's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be
91
reduced by the lesser of (1) 3% of the excess of the individual's adjusted
gross income over such amount or (2) 80% of the amount of itemized deductions
otherwise allowable for the taxable year. The amount of additional taxable
income reportable by holders of Grantor Trust Fractional Interest Certificates
who are subject to the limitations of either Section 67 or Section 68 of the
Code may be substantial. Further, Certificateholders (other than corporations)
subject to the alternative minimum tax may not deduct miscellaneous itemized
deductions in determining such holder's alternative minimum taxable income.
Under tax legislation enacted in 2001, this limitation on deductions under
Section 68 will be phased out beginning in 2006 and will be eliminated after
2009. Although it is not entirely clear, it appears that in transactions in
which multiple classes of Grantor Trust Certificates (including Grantor Trust
Strip Certificates) are issued, such fees and expenses should be allocated
among the classes of Grantor Trust Certificates using a method that recognizes
that each such class benefits from the related services. In the absence of
statutory or administrative clarification as to the method to be used, it
currently is intended to base information returns or reports to the IRS and
Certificateholders on a method that allocates such expenses among classes of
Grantor Trust Certificates with respect to each period based on the
distributions made to each such class during that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
"stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (1) a class of Grantor
Trust Strip Certificates is issued as part of the same series of certificates
or (2) the depositor or any of its affiliates retains (for its own account or
for purposes of resale) a right to receive a specified portion of the interest
payable on a mortgage asset. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon.
The related prospectus supplement will include information regarding servicing
fees paid to a master servicer, a special servicer, any sub-servicer or their
respective affiliates.
If Stripped Bond Rules Apply. If the stripped bond rules apply, each
Grantor Trust Fractional Interest Certificate will be treated as having been
issued with "original issue discount" within the meaning of Section 1273(a) of
the Code, subject, however, to the discussion below regarding the treatment of
certain stripped bonds as market discount bonds and the discussion regarding de
minimis market discount. See "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates --Market Discount" below. Under the stripped bond rules,
the holder of a Grantor Trust Fractional Interest Certificate (whether a cash
or accrual method taxpayer) will be required to report interest income from its
Grantor Trust Fractional Interest Certificate for each month in an amount equal
to the income that accrues on such Certificate in that month calculated under a
constant yield method, in accordance with the rules of the Code relating to
original issue discount.
The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's stated redemption price
over its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by such
purchaser of the Grantor Trust Fractional Interest Certificate. The stated
redemption price of a Grantor Trust Fractional Interest Certificate will be the
sum of all payments to be made on such Certificate, other than "qualified
stated interest", if any, as well as such certificate's share of reasonable
servicing fees and other expenses. See "--Taxation of Owners of Grantor Trust
Fractional Interest Certificates--If Stripped Bond Rules Do Not Apply" for a
definition of "qualified stated interest". In general, the amount of such
income that accrues in any month would equal the product of such holder's
adjusted basis in such Grantor Trust Fractional Interest Certificate at the
beginning of such month (see "--Sales of Grantor Trust Certificates" below) and
the yield of such Grantor Trust Fractional Interest Certificate to such holder.
Such yield would be computed as the rate (compounded based on the regular
interval between payment dates) that, if used to discount the holder's share of
future payments on the mortgage loans, would cause the present value of those
future payments to equal the price at which the holder purchased such
Certificate. In computing yield under the stripped bond rules, a
Certificateholder's share of future payments on the mortgage loans will not
include any payments made in respect of any ownership interest in the mortgage
loans retained by the
92
depositor, the master servicer, the special servicer, any sub-servicer or their
respective affiliates, but will include such Certificateholder's share of any
reasonable servicing fees and other expenses.
Section 1272(a)(6) of the Code requires (1) the use of a reasonable
prepayment assumption in accruing original issue discount and (2) adjustments
in the accrual of original issue discount when prepayments do not conform to
the prepayment assumption, with respect to certain categories of debt
instruments, and regulations could be adopted applying those provisions to the
Grantor Trust Fractional Interest Certificates. It is unclear whether those
provisions would be applicable to the Grantor Trust Fractional Interest
Certificates or whether use of a reasonable prepayment assumption may be
required or permitted without reliance on these rules. It is also uncertain, if
a prepayment assumption is used, whether the assumed prepayment rate would be
determined based on conditions at the time of the first sale of the Grantor
Trust Fractional Interest Certificate or, with respect to any holder, at the
time of purchase of the Grantor Trust Fractional Interest Certificate by that
holder. Certificateholders are advised to consult their tax advisors concerning
reporting original issue discount in general and, in particular, whether a
prepayment assumption should be used in reporting original issue discount with
respect to Grantor Trust Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired at
a price equal to the principal amount of the mortgage loans allocable to such
Certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest
income. In the case, however, of a Grantor Trust Fractional Interest
Certificate acquired at a discount or premium (that is, at a price less than or
greater than such principal amount, respectively), the use of a reasonable
prepayment assumption would increase or decrease such yield, and thus
accelerate or decelerate, respectively, the reporting of income.
If a prepayment assumption is not used, then when a mortgage loan prepays
in full, the holder of a Grantor Trust Fractional Interest Certificate acquired
at a discount or a premium generally will recognize ordinary income or loss
equal to the difference between the portion of the prepaid principal amount of
the mortgage loan that is allocable to such Certificate and the portion of the
adjusted basis of such Certificate that is allocable to such
Certificateholder's interest in the mortgage loan. If a prepayment assumption
is used, it appears that no separate item of income or loss should be
recognized upon a prepayment. Instead, a prepayment should be treated as a
partial payment of the stated redemption price of the Grantor Trust Fractional
Interest Certificate and accounted for under a method similar to that described
for taking account of original issue discount on REMIC Regular Certificates.
See "--REMICs--Taxation of Owners of REMIC Regular Certificates--Original Issue
Discount" above. It is unclear whether any other adjustments would be required
to reflect differences between an assumed prepayment rate and the actual rate
of prepayments.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
Certificateholders in transactions subject to the stripped bond rules on a
Prepayment Assumption that will be disclosed in the related prospectus
supplement and on a constant yield computed using a representative initial
offering price for each class of certificates. However, neither the depositor
nor any other person will make any representation that the mortgage loans will
in fact prepay at a rate conforming to such Prepayment Assumption or any other
rate and Certificateholders should bear in mind that the use of a
representative initial offering price will mean that such information returns
or reports, even if otherwise accepted as accurate by the IRS, will in any
event be accurate only as to the initial Certificateholders of each series who
bought at that price.
Under Treasury regulations Section 1.1286-1, certain stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (1) there is no
original issue discount (or only a de minimis amount of original issue
discount) or (2) the annual stated rate of interest payable on the original
bond is no more than one percentage point lower than the gross interest rate
payable on the original mortgage loan (before subtracting any servicing fee or
any stripped coupon).
93
If interest payable on a Grantor Trust Fractional Interest Certificate is more
than one percentage point lower than the gross interest rate payable on the
mortgage loans, the related prospectus supplement will disclose that fact. If
the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than
0.25% of the stated redemption price multiplied by the weighted average
maturity of the mortgage loans, then such original issue discount or market
discount will be considered to be de minimis. Original issue discount or market
discount of only a de minimis amount will be included in income in the same
manner as de minimis original issue and market discount described in
"--Taxation of Owners of Grantor Trust Fractional Interest Certificates--If
Stripped Bond Rules Do Not Apply" and "--Market Discount" below.
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, the Certificateholder will be required
to report its share of the interest income on the mortgage loans in accordance
with such Certificateholder's normal method of accounting. The original issue
discount rules will apply, even if the stripped bond rules do not apply, to a
Grantor Trust Fractional Interest Certificate to the extent it evidences an
interest in mortgage loans issued with original issue discount.
The original issue discount, if any, on the mortgage loans will equal the
difference between the stated redemption price of such mortgage loans and their
issue price. For a definition of "stated redemption price," see "--Taxation of
Owners of REMIC Regular Certificates--Original Issue Discount" above. In
general, the issue price of a mortgage loan will be the amount received by the
borrower from the lender under the terms of the mortgage loan, less any
"points" paid by the borrower, and the stated redemption price of a mortgage
loan will equal its principal amount, unless the mortgage loan provides for an
initial "teaser," or below-market interest rate. The determination as to
whether original issue discount will be considered to be de minimis will be
calculated using the same test as in the REMIC discussion. See "--Taxation of
Owners of REMIC Regular Certificates--Original Issue Discount" above.
In the case of mortgage loans bearing adjustable or variable interest
rates, the related prospectus supplement will describe the manner in which such
rules will be applied with respect to those mortgage loans by the trustee or
master servicer, as applicable, in preparing information returns to the
Certificateholders and the IRS.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a mortgage loan will be required to be
accrued and reported in income each month, based on a constant yield. The OID
Regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, Section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to Grantor Trust Fractional
Interest Certificates. Certificateholders should refer to the related
prospectus supplement with respect to each series to determine whether and in
what manner the original issue discount rules will apply to mortgage loans in
such series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less
than such certificate's allocable portion of the aggregate remaining stated
redemption price of the mortgage loans held in the related trust fund will also
be required to include in gross income such certificate's daily portions of any
original issue discount with respect to such mortgage loans. However, each such
daily portion will be reduced, if the cost of such Grantor Trust Fractional
Interest Certificate to such purchaser is in excess of such Certificate's
allocable portion of the aggregate "adjusted issue prices" of the mortgage
loans held in the related trust fund, approximately in proportion to the ratio
such excess bears to such
94
Certificate's allocable portion of the aggregate original issue discount
remaining to be accrued on such mortgage loans. The adjusted issue price of a
mortgage loan on any given day equals the sum of (1) the adjusted issue price
(or, in the case of the first accrual period, the issue price) of such mortgage
loan at the beginning of the accrual period that includes such day and (2) the
daily portions of original issue discount for all days during such accrual
period prior to such day. The adjusted issue price of a mortgage loan at the
beginning of any accrual period will equal the issue price of such mortgage
loan, increased by the aggregate amount of original issue discount with respect
to such mortgage loan that accrued in prior accrual periods, and reduced by the
amount of any payments made on such mortgage loan in prior accrual periods of
amounts included in its stated redemption price.
Unless otherwise provided in the related prospectus supplement, the
trustee or master servicer, as applicable, will provide to any holder of a
Grantor Trust Fractional Interest Certificate such information as such holder
may reasonably request from time to time with respect to original issue
discount accruing on Grantor Trust Fractional Interest Certificates. See
"--Grantor Trust Reporting" below.
Market Discount. If the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, a Certificateholder may be subject to
the market discount rules of Sections 1276 through 1278 of the Code to the
extent an interest in a mortgage loan is considered to have been purchased at a
"market discount", that is, in the case of a mortgage loan issued without
original issue discount, at a purchase price less than its remaining stated
redemption price (as defined above), or in the case of a mortgage loan issued
with original issue discount, at a purchase price less than its adjusted issue
price (as defined above). If market discount is in excess of a de minimis
amount (as described below), the holder generally will be required to include
in income in each month the amount of such discount that has accrued (under the
rules described in the next paragraph) through such month that has not
previously been included in income, but limited, in the case of the portion of
such discount that is allocable to any mortgage loan, to the payment of stated
redemption price on such mortgage loan that is received by (or, in the case of
accrual basis Certificateholders, due to) the trust fund in that month. A
Certificateholder may elect to include market discount in income currently as
it accrues (under a constant yield method based on the yield of the Certificate
to such holder) rather than including it on a deferred basis in accordance with
the foregoing under rules similar to those described in "--Taxation of Owners
of REMIC Regular Interests--Market Discount" above.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. Under those rules, in each
accrual period market discount on the mortgage loans should accrue, at the
holder's option: (1) on the basis of a constant yield method, (2) in the case
of a mortgage loan issued without original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the stated
interest paid in the accrual period bears to the total stated interest
remaining to be paid on the mortgage loan as of the beginning of the accrual
period, or (3) in the case of a mortgage loan issued with original issue
discount, in an amount that bears the same ratio to the total remaining market
discount as the original issue discount accrued in the accrual period bears to
the total original issue discount remaining at the beginning of the accrual
period. The prepayment assumption, if any, used in calculating the accrual of
original issue discount is to be used in calculating the accrual of market
discount. The effect of using a prepayment assumption could be to accelerate
the reporting of such discount income. Because the regulations referred to in
this paragraph have not been issued, it is not possible to predict what effect
such regulations might have on the tax treatment of a mortgage loan purchased
at a discount in the secondary market.
Because the mortgage loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount
would be included in income if it were original issue discount.
95
Market discount with respect to mortgage loans may be considered to be de
minimis and, if so, will be includible in income under de minimis rules similar
to those described above in "--REMICs--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount" above within the exception that it is
less likely that a prepayment assumption will be used for purposes of such
rules with respect to the mortgage loans.
Further, under the rules described above in "--REMICs--Taxation of Owners
of REMIC Regular Certificates--Market Discount", any discount that is not
original issue discount and exceeds a de minimis amount may require the
deferral of interest expense deductions attributable to accrued market discount
not yet includible in income, unless an election has been made to report market
discount currently as it accrues. This rule applies without regard to the
origination dates of the mortgage loans.
Premium. If a Certificateholder is treated as acquiring the underlying
mortgage loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such Certificateholder may elect under Section 171 of
the Code to amortize using a constant yield method the portion of such premium
allocable to mortgage loans originated after September 27, 1985. Amortizable
premium is treated as an offset to interest income on the related debt
instrument, rather than as a separate interest deduction. However, premium
allocable to mortgage loans originated before September 28, 1985 or to mortgage
loans for which an amortization election is not made, should be allocated among
the payments of stated redemption price on the mortgage loan and be allowed as
a deduction as such payments are made (or, for a Certificateholder using the
accrual method of accounting, when such payments of stated redemption price are
due).
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a mortgage loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a premium should recognize a loss equal to the difference between
the portion of the prepaid principal amount of the mortgage loan that is
allocable to the Certificate and the portion of the adjusted basis of the
Certificate that is allocable to the mortgage loan. If a prepayment assumption
is used to amortize such premium, it appears that such a loss would be
unavailable. Instead, if a prepayment assumption is used, a prepayment should
be treated as a partial payment of the stated redemption price of the Grantor
Trust Fractional Interest Certificate and accounted for under a method similar
to that described for taking account of original issue discount on REMIC
Regular Certificates. See "--REMICs--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount" above. It is unclear whether any other
adjustments would be required to reflect differences between the prepayment
assumption and the actual rate of prepayments.
Taxation of Owners of Grantor Trust Strip Certificates. The "stripped
coupon" rules of Section 1286 of the Code will apply to the Grantor Trust Strip
Certificates. Except as described above in "--Taxation of Owners of Grantor
Trust Fractional Interest Certificates--If Stripped Bond Rules Apply", no
regulations or published rulings under Section 1286 of the Code have been
issued and some uncertainty exists as to how it will be applied to securities
such as the Grantor Trust Strip Certificates. Accordingly, holders of Grantor
Trust Strip Certificates should consult their tax advisors concerning the
method to be used in reporting income or loss with respect to such
Certificates.
The OID Regulations do not apply to "stripped coupons", although they
provide general guidance as to how the original issue discount sections of the
Code will be applied. In addition, the discussion below is subject to the
discussion under "--Possible Application of Proposed Contingent Payment Rules"
below and assumes that the holder of a Grantor Trust Strip Certificate will not
own any Grantor Trust Fractional Interest Certificates.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of
Grantor Trust Strip Certificates would include as interest income in each month
an amount equal to the product of such holder's adjusted basis in such Grantor
Trust Strip Certificate at the beginning of such month and the yield of such
Grantor Trust Strip Certificate to
96
such holder. Such yield would be calculated based on the price paid for that
Grantor Trust Strip Certificate by its holder and the payments remaining to be
made thereon at the time of the purchase, plus an allocable portion of the
servicing fees and expenses to be paid with respect to the mortgage loans. See
"--Taxation of Owners of Grantor Trust Fractional Interest Certificates--If
Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
in the amount and rate of accrual of such discount when prepayments do not
conform to such prepayment assumption. Regulations could be adopted applying
those provisions to the Grantor Trust Strip Certificates. It is unclear whether
those provisions would be applicable to the Grantor Trust Strip Certificates or
whether use of a prepayment assumption may be required or permitted in the
absence of such regulations. It is also uncertain, if a prepayment assumption
is used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor Trust Strip Certificate
or, with respect to any subsequent holder, at the time of purchase of the
Grantor Trust Strip Certificate by that holder.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative clarification, it currently is intended to base information
returns or reports to the IRS and Certificateholders on the Prepayment
Assumption disclosed in the related prospectus supplement and on a constant
yield computed using a representative initial offering price for each class of
certificates. However, neither the depositor nor any other person will make any
representation that the mortgage loans will in fact prepay at a rate conforming
to the Prepayment Assumption or at any other rate and Certificateholders should
bear in mind that the use of a representative initial offering price will mean
that such information returns or reports, even if otherwise accepted as
accurate by the IRS, will in any event be accurate only as to the initial
Certificateholders of each series who bought at that price. Prospective
purchasers of the Grantor Trust Strip Certificates should consult their tax
advisors regarding the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the prepayment of a
mortgage loan will give rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is treated as a single
instrument (rather than an interest in discrete mortgage loans) and the effect
of prepayments is taken into account in computing yield with respect to such
Grantor Trust Strip Certificate, it appears that no loss may be available as a
result of any particular prepayment unless prepayments occur at a rate faster
than the Prepayment Assumption. However, if a Grantor Trust Strip Certificate
is treated as an interest in discrete mortgage loans, or if the Prepayment
Assumption is not used, then when a mortgage loan is prepaid, the holder of a
Grantor Trust Strip Certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the Grantor Trust Strip Certificate that
is allocable to such mortgage loan.
Possible Application of Contingent Payment Rules. The coupon stripping
rules' general treatment of stripped coupons is to regard them as newly issued
debt instruments in the hands of each purchaser. To the extent that payments on
the Grantor Trust Strip Certificates would cease if the mortgage loans were
prepaid in full, the Grantor Trust Strip Certificates could be considered to be
debt instruments providing for contingent payments. Under the OID Regulations,
debt instruments providing for contingent payments are not subject to the same
rules as debt instruments providing for noncontingent payments. Treasury
Department regulations have been promulgated regarding contingent payment debt
instruments, but it appears that Grantor Trust Strip Certificates, due to their
similarity to other mortgage-backed securities (such as REMIC regular interests
and debt instruments subject to Section 1272(a)(6) of the Code) that are
expressly excepted from the application of such Regulations, may also be
excepted from such regulations. Like the OID Regulations, the contingent
payment regulations do not specifically address securities, such as the Grantor
Trust Strip Certificates, that are subject to the stripped bond rules of
Section 1286 of the Code.
97
If the contingent payment rules similar to those under the OID Regulations
were to apply, the holder of a Grantor Trust Strip Certificate would be
required to apply a "noncontingent bond method." Under the "noncontingent bond
method," the issuer of a Grantor Trust Strip Certificate determines a projected
payment schedule. Holders of Grantor Trust Strip Certificates are bound by the
issuer's projected payment schedule. The projected payment schedule consists of
all noncontingent payments and a projected amount for each contingent payment
based on the comparable yield (as described below) of the Grantor Trust Strip
Certificate. The projected amount of each payment is determined so that the
projected payment schedule reflects the projected yield. The projected amount
of each payment must reasonably reflect the relative expected values of the
payments to be received by the holders of a Grantor Trust Strip Certificate.
The comparable yield referred to above is a rate that, as of the issue date,
reflects the yield at which the issuer would issue a fixed rate debt instrument
with terms and conditions similar to the contingent payment debt instrument,
including general market conditions, the credit quality of the issuer, and the
terms and conditions of the mortgage loans. The holder of a Grantor Trust Strip
Certificate would be required to include as interest income in each month the
adjusted issue price of the Grantor Trust Strip Certificate at the beginning of
the period multiplied by the comparable yield.
Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Grantor Trust Strip
Certificates.
Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis, recognized on such sale or exchange
of a Grantor Trust Certificate by an investor who holds such Grantor Trust
Certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a
Grantor Trust Certificate generally will equal its cost, increased by any
income reported by the seller (including original issue discount and market
discount income) and reduced (but not below zero) by any previously reported
losses, any amortized premium and by any distributions with respect to such
Grantor Trust Certificate. The Code as of the date of this prospectus generally
provides for tax rates of noncorporate taxpayers on ordinary income that are
higher than the rates on long-term capital gains (generally, property held for
more than one year). No such rate differential exists for corporations. In
addition, the distinction between a capital gain or loss and ordinary income or
loss remains relevant for other purposes.
Gain or loss from the sale of a Grantor Trust Certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary income,
as will gain or loss recognized by banks and other financial institutions
subject to Section 582(c) of the Code. Furthermore, a portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the Grantor Trust Certificate is held as part of a "conversion
transaction" within the meaning of Section 1258 of the Code. A conversion
transaction generally is one in which the taxpayer has taken two or more
positions in the same or similar property that reduce or eliminate market risk,
if substantially all of the taxpayer's return is attributable to the time value
of the taxpayer's net investment in such transaction. The amount of gain
realized in a conversion transaction that is recharacterized as ordinary income
generally will not exceed the amount of interest that would have accrued on the
taxpayer's net investment at 120% of the appropriate "applicable Federal rate"
(which rate is computed and published monthly by the IRS) at the time the
taxpayer enters into the conversion transaction, subject to appropriate
reduction for prior inclusion of interest and other ordinary income items from
the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for that taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
98
Investors that recognize a loss on a sale or exchange of a Grantor Trust
Certificate for federal income tax purposes in excess of certain threshold
amounts should consult their tax advisors as to the need to file IRS Form 8886
(disclosing certain potential tax shelters) on their federal income tax
returns.
Grantor Trust Reporting. Unless otherwise provided in the related
prospectus supplement, the trustee or master servicer, as applicable, will
furnish to each holder of a Grantor Trust Certificate with each distribution a
statement setting forth the amount of such distribution allocable to principal
on the underlying mortgage loans and to interest thereon at the related
pass-through rate. In addition, the trustee or master servicer, as applicable,
will furnish, within a reasonable time after the end of each calendar year, to
each holder of a Grantor Trust Certificate who was such a holder at any time
during such year, information regarding the amount of servicing compensation
received by the master servicer, the special servicer or any sub-servicer, and
such other customary factual information as the depositor or the reporting
party deems necessary or desirable to enable holders of Grantor Trust
Certificates to prepare their tax returns and will furnish comparable
information to the IRS as and when required by law to do so. Because the rules
for accruing discount and amortizing premium with respect to the Grantor Trust
Certificates are uncertain in various respects, there is no assurance the IRS
will agree with the trustee's or master servicer's, as the case may be,
information reports of such items of income and expense. Moreover, such
information reports, even if otherwise accepted as accurate by the IRS, will in
any event be accurate only as to the initial Certificateholders that bought
their certificates at the representative initial offering price used in
preparing such reports.
Backup Withholding. In general, the rules described above in
"--REMICs--Backup Withholding with Respect to REMIC Certificates" will also
apply to Grantor Trust Certificates.
Foreign Investors. In general, the discussion with respect to REMIC
Regular Certificates in "-- REMICs--Foreign Investors in REMIC Certificates"
above applies to Grantor Trust Certificates except that Grantor Trust
Certificates will, unless otherwise disclosed in the related prospectus
supplement, be eligible for exemption from U.S. withholding tax, subject to the
conditions described in such discussion, only to the extent the related
mortgage loans were originated after July 18, 1984.
To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to United States estate taxes in the estate of
a nonresident alien individual.
On June 20, 2002, the IRS published proposed regulations which will, when
effective, establish a reporting framework for interests in "widely held fixed
investment trusts" that will place the responsibility of reporting on the
person in the ownership chain who holds an interest for a beneficial owner. A
widely-held investment trust is defined as an entity classified as a "trust"
under Treasury Regulations Section 301.7701-4(c), in which any interest is held
by a middleman, which includes, but is not limited to (i) a custodian of a
person's account, (ii) a nominee and (iii) a broker holding an interest for a
customer in "street name." These regulations were proposed to be effective
beginning January 1, 2004, but such date passed and the regulations have not
been finalized. It is unclear when, or if, these regulations will become final.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences," potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of
the offered certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their tax advisors with respect
to the various tax consequences of investments in the offered certificates.
99
CERTAIN ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended, and the
Code impose certain requirements on retirement plans, and on certain other
employee benefit plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and
separate accounts (and as applicable, insurance company general accounts) in
which such plans, accounts or arrangements are invested that are subject to the
fiduciary responsibility provisions of ERISA and Section 4975 of the Code
("Plans"), and on persons who are fiduciaries with respect to such Plans, in
connection with the investment of Plan assets. Certain employee benefit plans,
such as governmental plans (as defined in ERISA Section 3(32)), and, if no
election has been made under Section 410(d) of the Code, church plans (as
defined in Section 3(33) of ERISA) are not subject to ERISA requirements.
However, such plans may be subject to the provisions of other applicable
federal and state law materially similar to ERISA or the Code. Moreover, any
such plan which is qualified and exempt from taxation under Sections 401(a) and
501(a) of the Code is subject to the prohibited transaction rules set forth in
Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and
the requirement that a Plan's investments be made in accordance with the
documents governing the Plan. In addition, Section 406 of ERISA and Section
4975 of the Code prohibit a broad range of transactions involving assets of a
Plan and persons who have certain specified relationships to the Plan, unless a
statutory or administrative exemption is available. Certain Parties in Interest
that participate in a prohibited transaction may be subject to an excise tax
imposed pursuant to Section 4975 of the Code or a penalty imposed pursuant to
Section 502(i) of ERISA, unless a statutory or administrative exemption is
available. These prohibited transactions generally are set forth in Section 406
of ERISA and Section 4975 of the Code.
PLAN ASSET REGULATIONS
A Plan's investment in offered certificates may cause the underlying
mortgage assets and other assets included in a related trust fund to be deemed
assets of such Plan. The Plan Asset Regulations provide that when a Plan
acquires an equity interest in an entity, the Plan's assets include both such
equity interest and an undivided interest in each of the underlying assets of
the entity, unless certain exceptions not applicable here apply, or unless the
equity participation in the entity by "benefit plan investors" (i.e., Plans and
certain employee benefit plans not subject to ERISA) is not "significant", both
as defined in the Plan Asset Regulations. For this purpose, in general, equity
participation by benefit plan investors will be "significant" on any date if
25% or more of the value of any class of equity interests in the entity is held
by benefit plan investors. Equity participation in a trust fund will be
significant on any date if immediately after the most recent acquisition of any
Certificate, 25% or more of any class of certificates is held by benefit plan
investors.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides
investment advice with respect to such assets for a fee, is a fiduciary of the
investing Plan. If the mortgage assets and other assets included in a trust
fund constitute Plan assets, then any party exercising management or
discretionary control regarding those assets, such as the master servicer, any
special servicer, any sub-servicer, the trustee, the obligor under any credit
enhancement mechanism, or certain affiliates thereof may be deemed to be a Plan
"fiduciary" and thus subject to the fiduciary responsibility provisions and
prohibited transaction provisions of ERISA and the Code with respect to the
investing Plan. In addition, if the mortgage assets and other assets included
in a trust fund constitute Plan assets, the purchase of certificates by a Plan,
as well as the operation of the trust fund, may constitute or involve a
prohibited transaction under ERISA or the Code.
The Plan Asset Regulations provide that where a Plan acquires a
"guaranteed governmental mortgage pool certificate", the Plan's assets include
such certificate but do not solely by reason of
100
the Plan's holdings of such certificate include any of the mortgages underlying
such certificate. The Plan Asset Regulations include in the definition of a
"guaranteed governmental mortgage pool certificate" Ginnie Mae, Freddie Mac,
Farmer Mac and Fannie Mae Certificates. Accordingly, even if such MBS included
in a trust fund were deemed to be assets of Plan investors, the mortgages
underlying such MBS would not be treated as assets of such Plans. Private label
mortgage participations, mortgage pass-through certificates or other
mortgage-backed securities are not "guaranteed governmental mortgage pool
certificates" within the meaning of the Plan Asset Regulations; potential Plan
investors should consult their counsel and review the ERISA discussion in the
related prospectus supplement before purchasing certificates if such MBS are
included in the trust fund.
The DOL has granted to certain underwriters administrative exemptions,
each an "Exemption", for certain mortgage-backed and asset-backed certificates
underwritten in whole or in part by the underwriters. An Exemption might be
applicable to the initial purchase, the holding, and the subsequent resale by a
Plan of certain certificates, such as the offered certificates, underwritten by
the underwriters, representing interests in pass-through trusts that consist of
certain receivables, loans and other obligations, provided that the conditions
and requirements of the Exemption are satisfied. The loans described in the
Exemptions include mortgage loans such as the mortgage assets. However, it
should be noted that in issuing the Exemptions, the DOL may not have considered
interests in pools of the exact nature as some of the offered certificates. If
all of the conditions of an Exemption are met, whether or not a Plan's assets
would be deemed to include an ownership interest in the mortgage assets, the
acquisition, holding and resale of the offered certificates by Plans would be
exempt from certain of the prohibited transaction provisions of ERISA and the
Code.
INSURANCE COMPANY GENERAL ACCOUNTS
Sections I and III of PTCE 95-60 exempt from the application of the
prohibited transaction provisions of Sections 406(a), 406(b) and 407(a) of
ERISA and Section 4975 of the Code transactions in connection with the
servicing, management and operation of a trust (such as the Trust) in which an
insurance company general account has an interest as a result of its
acquisition of certificates issued by the trust, provided that certain
conditions are satisfied. If these conditions are met, insurance company
general accounts would be allowed to purchase certain classes of certificates
which do not meet the requirements of any of the Exemptions solely because they
(1) are subordinated to other classes of certificates in the trust and/or (2)
have not received a rating at the time of the acquisition in one of the four
highest rating categories from a nationally recognized statistical rating
agency. All other conditions of one of the Exemptions would have to be
satisfied in order for PTCE 95-60 to be available. Before purchasing such class
of certificates, an insurance company general account seeking to rely on
Sections I and III of PTCE 95-60 should itself confirm that all applicable
conditions and other requirements have been satisfied.
The Small Business Job Protection Act of 1996 added a new Section 401(c)
to ERISA, which provides certain exemptive relief from the provisions of Part 4
of Title I of ERISA and Section 4975 of the Code, including the prohibited
transaction restrictions imposed by ERISA and the related excise taxes imposed
by the Code, for transactions involving an insurance company general account.
Pursuant to Section 401(c) of ERISA, the DOL has issued final regulations
providing guidance for the purpose of determining, in cases where insurance
policies supported by an insurer's general account are issued to or for the
benefit of a Plan on or before December 31, 1998, which general account assets
constitute Plan assets. Any assets of an insurance company general account
which support insurance policies issued to a Plan after December 31, 1998 or
issued to Plans on or before December 31, 1998 for which the insurance company
does not comply with the 401(c) Regulations may be treated as Plan assets. In
addition, because Section 401(c) does not relate to insurance company separate
accounts, separate account assets are still treated as Plan assets of any Plan
invested in such separate account. Insurance companies contemplating the
investment of general account assets in the offered certificates should consult
with their legal counsel with respect to the applicability of Section 401(c) of
ERISA.
101
CONSULTATION WITH COUNSEL
Any Plan fiduciary which proposes to purchase offered certificates on
behalf of or with assets of a Plan should consider its general fiduciary
obligations under ERISA and should consult with its counsel with respect to the
potential applicability of ERISA and the Code to such investment and the
availability of any prohibited transaction exemption in connection with any
planned purchase.
TAX EXEMPT INVESTORS
A Plan that is exempt from federal income taxation pursuant to Section 501
of the Code nonetheless will be subject to federal income taxation to the
extent that its income is "unrelated business taxable income" within the
meaning of Section 512 of the Code. All "excess inclusions" of a REMIC
allocated to a REMIC Residual Certificate held by a Plan will be considered
unrelated business taxable income and thus will be subject to federal income
tax. See "Certain Federal Income Tax Consequences--REMICs--Taxation of Owners
of REMIC Residual Certificates--Excess Inclusions".
LEGAL INVESTMENT
If so specified in the related prospectus supplement, certain classes of
the offered certificates will constitute "mortgage related securities" for
purposes of SMMEA. Generally, the only classes of the offered certificates
which will qualify as "mortgage related securities" will be those that (1) are
rated in one of two highest rating categories by at least one nationally
recognized statistical rating organization; and (2) are part of a series
evidencing interests in a trust fund consisting of loans originated by certain
types of originators specified in SMMEA and secured by first liens on real
estate. The appropriate characterization of those offered certificates not
qualifying as "mortgage related securities" for purposes of SMMEA ("Non-SMMEA
Certificates") under various legal investment restrictions, and thus the
ability of investors subject to these restrictions to purchase such offered
certificates, may be subject to significant interpretive uncertainties.
Accordingly, all investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements, or review by
regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Non-SMMEA Certificates constitute
legal investments for them.
Those Classes of offered certificates qualifying as "mortgage related
securities" will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business
entities, including depository institutions, insurance companies, trustees, and
pension funds, created pursuant to or existing under the laws of the United
States or of any state, including the District of Columbia and Puerto Rico,
whose authorized investments are subject to state regulation, to the same
extent that, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any of its agencies or
instrumentalities constitute legal investments for those entities.
Under SMMEA, a number of states enacted legislation, on or before the
October 3, 1991 cutoff for those enactments, limiting to various extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities" secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" to
include, in relevant part, offered certificates satisfying the rating and
qualified originator requirements for "mortgage related securities," but
evidencing interests in a trust fund consisting, in whole or in part, of first
liens on one or more parcels of real estate upon which are located one or more
commercial structures, states were authorized to enact legislation, on or
before September 23, 2001, specifically referring to Section 347 and
prohibiting or restricting the purchase, holding or investment by
state-regulated entities in those types of offered certificates. Accordingly,
the investors affected by any state legislation overriding the preemptive
effect of SMMEA will be authorized to invest in offered certificates qualifying
as "mortgage related securities" only to the extent provided in that
legislation.
102
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in those securities, and
national banks may purchase those securities for their own account without
regard to the limitations generally applicable to investment securities set
forth in 12 U.S.C. Section 24 (Seventh), subject in each case to those
regulations as the applicable federal regulatory authority may prescribe. In
this connection, the OCC has amended 12 C.F.R. Part 1 to authorize national
banks to purchase and sell for their own account, without limitation as to a
percentage of the bank's capital and surplus (but subject to compliance with
certain general standards in 12 C.F.R. Section 1.5 concerning "safety and
soundness" and retention of credit information), certain "Type IV securities,"
defined in 12 C.F.R. Section 1.2(m) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage related security"
within the meaning of SMMEA, provided that, in the case of a "commercial
mortgage-related security," it "represents ownership of a promissory note or
certificate of interest or participation that is directly secured by a first
lien on one or more parcels of real estate upon which one or more commercial
structures are located and that is fully secured by interests in a pool of
loans to numerous obligors." In the absence of any rule or administrative
interpretation by the OCC defining the term "numerous obligors," no
representation is made as to whether any of the offered certificates will
qualify as "commercial mortgage-related securities," and thus as "Type IV
securities," for investment by national banks. The NCUA has adopted rules,
codified at 12 C.F.R. Part 703, which permit federal credit unions to invest in
"mortgage related securities", other than stripped mortgage related securities,
residual interests in mortgage related securities, and commercial mortgage
related securities, subject to compliance with general rules governing
investment policies and practices; however, credit unions approved for the
NCUA's "investment pilot program" under 12 C.F.R. Section 703.19 may be able
to invest in those prohibited forms of securities, while "RegFlex credit
unions" may invest in commercial mortgage related securities under certain
conditions pursuant to 12 C.F.R. Section 742.4(b)(2). The OTS has issued
Thrift Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk,
Investment Securities, and Derivatives Activities," and Thrift Bulletin 73a
(December 18, 2001), "Investing in Complex Securities," which thrift
institutions subject to the jurisdiction of the OTS should consider before
investing in any of the offered certificates.
All depository institutions considering an investment in the offered
certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" of the Federal Financial
Institutions Examination Council, which has been adopted by the Board of
Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the OCC and the OTS, effective May 26, 1998, and by the NCUA,
effective October 1, 1998. That statement sets forth general guidelines which
depository institutions must follow in managing risks (including market,
credit, liquidity, operational (transaction), and legal risks) applicable to
all securities (including mortgage pass-through securities and
mortgage-derivative products) used for investment purposes.
Investors whose investment activities are subject to regulation by federal
or state authorities should review rules, policies and guidelines adopted from
time to time by those authorities before purchasing any offered certificates,
as certain series or classes may be deemed unsuitable investments, or may
otherwise be restricted, under those rules, policies or guidelines (in certain
instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions
which may restrict or prohibit investment in securities which are not
"interest-bearing" or "income-paying," and, with regard to any offered
certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
103
Except as to the status of certain classes of offered certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the offered certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase offered certificates under
applicable legal investment restrictions. The uncertainties described above
(and any unfavorable future determinations concerning legal investment or
financial institution regulatory characteristics of the offered certificates)
may adversely affect the liquidity of the offered certificates.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors
in determining whether and to what extent the offered certificates of any class
or series constitute legal investments or are subject to investment, capital,
or other restrictions and, if applicable, whether SMMEA has been overridden in
any jurisdiction relevant to that investor.
USE OF PROCEEDS
The net proceeds to be received from the sale of the certificates of any
series will be applied by the depositor to the purchase of trust assets or will
be used by the depositor to cover expenses related thereto. The depositor
expects to sell the certificates from time to time, but the timing and amount
of offerings of certificates will depend on a number of factors, including the
volume of mortgage assets acquired by the depositor, prevailing interest rates,
availability of funds and general market conditions.
METHOD OF DISTRIBUTION
The certificates offered hereby and by the related prospectus supplements
will be offered in series through one or more of the methods described below.
The prospectus supplement prepared for each series will describe the method of
offering being utilized for that series and will state the net proceeds to the
depositor from such sale.
The depositor intends that offered certificates will be offered through
the following methods from time to time and that offerings may be made
concurrently through more than one of these methods or that an offering of the
offered certificates of a particular series may be made through a combination
of two or more of these methods. Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting and public
re-offering by underwriters, which may include Banc of America
Securities LLC, an affiliate of the depositor;
2. By placements by the depositor with institutional investors through
dealers; and
3. By direct placements by the depositor with institutional investors.
In addition, if specified in the related prospectus supplement, the
offered certificates of a series may be offered in whole or in part to the
seller of the related mortgage assets that would comprise the trust fund for
such certificates.
If underwriters are used in a sale of any offered certificates (other than
in connection with an underwriting on a best efforts basis), such certificates
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of commitment therefor. Such
underwriters may be broker-dealers affiliated with the depositor whose
identities and relationships to the depositor will be as set forth in the
related prospectus supplement. The managing underwriter or underwriters with
respect to the offer and sale of offered certificates of a particular series
will be set forth on the cover of the prospectus supplement relating to such
series and the members of the underwriting syndicate, if any, will be named in
such prospectus supplement.
In connection with the sale of offered certificates, underwriters may
receive compensation from the depositor or from purchasers of the offered
certificates in the form of discounts, concessions or
104
commissions. Underwriters and dealers participating in the distribution of the
offered certificates may be deemed to be underwriters in connection with such
certificates, and any discounts or commissions received by them from the
depositor and any profit on the resale of offered certificates by them may be
deemed to be underwriting discounts and commissions under the Securities Act of
1933, as amended.
It is anticipated that the underwriting agreement pertaining to the sale
of the offered certificates of any series will provide that the obligations of
the underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such certificates if any are
purchased (other than in connection with an underwriting on a best efforts
basis) and that, in limited circumstances, the depositor will indemnify the
several underwriters and the underwriters will indemnify the depositor against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or will contribute to payments required to be made in respect
to such liabilities.
The prospectus supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of such offering
and any agreements to be entered into between the depositor and purchasers of
offered certificates of such series.
The depositor anticipates that the offered certificates will be sold
primarily to institutional investors. Purchasers of offered certificates,
including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended, in connection with reoffers and sales by them of
offered certificates. Holders of offered certificates should consult with their
legal advisors in this regard prior to any such reoffer or sale.
If and to the extent required by applicable law or regulation, this
prospectus will be used by Banc of America Securities LLC in connection with
offers and sales related to market-making transactions in offered certificates
previously offered hereunder in transactions with respect to which Banc of
America Securities LLC acts as principal. Banc of America Securities LLC may
also act as agent in such transactions. Sales may be made at negotiated prices
determined at the time of sale.
LEGAL MATTERS
Certain legal matters relating to the certificates will be passed upon for
the depositor by Cadwalader, Wickersham & Taft LLP. Certain legal matters
relating to the certificates will be passed upon for the underwriter by the
counsel described in the related prospectus supplement under "Legal Matters".
Certain federal income tax matters and other matters will be passed upon for
the depositor by Cadwalader, Wickersham & Taft LLP.
FINANCIAL INFORMATION
A new trust fund will be formed with respect to each series of
certificates, and no trust fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
certificates. Accordingly, no financial statements with respect to any trust
fund will be included in this prospectus or in the related prospectus
supplement. The depositor has determined that its financial statements will not
be material to the offering of any offered certificates.
RATING
It is a condition to the issuance of any class of offered certificates
that they shall have been rated not lower than investment grade, that is, in
one of the four highest rating categories, by at least one rating agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders of all collections on the underlying mortgage assets to
which such holders are entitled. These ratings address the structural, legal
and issuer-related aspects associated with such certificates, the nature of the
underlying mortgage assets and the credit quality of the guarantor, if any.
Ratings on mortgage
105
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by borrowers or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
Stripped Interest Certificates might, in extreme cases fail to recoup their
initial investments. Furthermore, ratings on mortgage pass-through certificates
do not address the price of such certificates or the suitability of such
certificates to the investor.
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 organization. Each security rating should be evaluated independently of
any other security rating.
AVAILABLE INFORMATION
The depositor has filed with the Securities and Exchange Commission a
Registration Statement (of which this prospectus forms a part) under the
Securities Act of 1933, as amended, with respect to the offered certificates.
This prospectus and the prospectus supplement relating to each series of
offered certificates contain summaries of the material terms of the documents
referred to in this prospectus or in such prospectus supplement, but do not
contain all of the information set forth in the Registration Statement pursuant
to the rules and regulations of the Commission. For further information,
reference is made to such Registration Statement and the exhibits thereto. Such
Registration Statement and exhibits can be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at its
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at its Midwest Regional Offices located as follows: Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an internet site that contains reports,
proxy and information statements, and other information that has been filed
electronically with the SEC. The Internet address is http://www.sec.gov.
No dealer, salesman, or other person has been authorized to give any
information, or to make any representations, other than those contained in this
prospectus or any related prospectus supplement, and, if given or made, such
information or representations must not be relied upon as having been
authorized by the depositor or any other person. Neither the delivery of this
prospectus or any related prospectus supplement nor any sale made under this
prospectus or any related prospectus supplement shall under any circumstances
create an implication that there has been no change in the information in this
prospectus since the date of this prospectus or in such prospectus supplement
since the date of the prospectus supplement. This prospectus and any related
prospectus supplement are not an offer to sell or a solicitation of an offer to
buy any security in any jurisdiction in which it is unlawful to make such offer
or solicitation.
The master servicer, the trustee or another specified person will cause to
be provided to registered holders of the offered certificates of each series
periodic unaudited reports concerning the related trust fund. If beneficial
interests in a class or series of offered certificates are being held and
transferred in book-entry format through the facilities of The DTC as described
in this prospectus, then unless otherwise provided in the related prospectus
supplement, such reports will be sent on behalf of the related trust fund to a
nominee of DTC as the registered holder of the offered certificates. Conveyance
of notices and other communications by DTC to its participating organizations,
and directly or indirectly through such participating organizations to the
beneficial owners of the applicable offered certificates, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. See "Description of the
Certificates--Reports to Certificateholders" and "--Book-Entry Registration and
Definitive Certificates".
The depositor will file or cause to be filed with the Securities and
Exchange Commission such periodic reports with respect to each trust fund as
are required under the Securities Exchange Act of 1934 and the rules and
regulations of the Securities and Exchange Commission. The depositor intends to
make a written request to the staff of the Securities and Exchange Commission
that the
106
staff either (1) issue an order pursuant to Section 12(h) of the Securities
Exchange Act of 1934, as amended, exempting the depositor from certain
reporting requirements under the Securities Exchange Act of 1934, as amended,
with respect to each trust fund or (2) state that the staff will not recommend
that the Commission take enforcement action if the depositor fulfills its
reporting obligations as described in its written request. If such request is
granted, the depositor will file or cause to be filed with the Securities and
Exchange Commission as to each trust fund the periodic unaudited reports to
holders of the offered certificates referenced in the preceding paragraph;
however, because of the nature of the trust funds, it is unlikely that any
significant additional information will be filed. In addition, because of the
limited number of certificateholders expected for each series, the depositor
anticipates that a significant portion of such reporting requirements will be
permanently suspended following the first fiscal year for the related trust
fund.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The depositor hereby incorporates by reference all documents and reports
filed or caused to be filed by the depositor with respect to a trust fund
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, prior to the termination of an offering of offered
certificates evidencing interests in that trust fund. The depositor will
provide or cause to be provided without charge to each person to whom this
prospectus is delivered in connection with the offering of one or more classes
of offered certificates, upon written or oral request of such person, a copy of
any or all documents or reports incorporated in this prospectus by reference,
in each case to the extent such documents or reports relate to one or more of
such classes of such offered certificates, other than the exhibits to such
documents (unless such exhibits are specifically incorporated by reference in
such documents). Such requests to the depositor should be directed in writing
to its principal executive offices at 214 North Tryon Street, Charlotte, North
Carolina 28255, or by telephone at (704) 386-2400.
107
GLOSSARY
The following capitalized terms will have the respective meanings assigned
to them in this "Glossary" section whenever they are used in this prospectus.
"401(c) Regulations" means those regulations issued by the DOL which
provide guidance for the purpose of determining, in cases where insurance
policies supported by an insurer's general account are issued to or for the
benefit of a Plan on or before December 31, 1998, which general account assets
constitute Plan assets.
"Accrued Certificate Interest" means for each Distribution Date an amount
equal to interest at the applicable pass-through rate accrued for a specified
period (generally the most recently ended calendar month) on the outstanding
Certificate Balance of such class of certificates immediately prior to such
Distribution Date.
"Accrual Certificates" means one or more classes of certificates that may
not be entitled to distributions of interest until the occurrence of certain
events, such as the retirement of one or more other classes of certificates.
"ADA" means the Americans with Disabilities Act of 1990, as amended.
"Available Distribution Amount" means unless otherwise provided in the
related prospectus supplement for any series of certificates and any
Distribution Date the total of all payments or other collections (or advances
in lieu of such collections and advances) on, under or in respect of the
mortgage assets and any other assets included in the related trust fund that
are available for distribution to the holders of certificates of such series on
such date.
"Bankruptcy Code" means the U.S. Bankruptcy Code.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Certificate Account" means for the trust fund one or more established and
maintained on behalf of the certificateholders into which all payments and
collections received or advanced with respect to the mortgage assets and other
assets in the trust fund will be deposited to the extent described this
prospectus and the related prospectus supplement.
"Certificate Balance" means the initial stated principal amount of each
individual class of certificates for a given series other than real estate
mortgage investment conduit residual certificates or certain classes of
stripped interest certificates.
"Certificate Owner" means the actual purchaser of a book-entry
certificate.
"Closing Date" means date of the initial issuance of the certificates of a
given series.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Property" means office buildings, retail stores and
establishments, hotels or motels, nursing homes, hospitals or other health
care-related facilities, recreational vehicle and mobile home parks, warehouse
facilities, mini-warehouse facilities, self-storage facilities, industrial
plants, parking lots, entertainment or sports arenas, restaurants, marinas,
mixed use or various other types of income-producing properties or unimproved
land comprising some or all of the mortgaged properties included in the trust
fund.
"Committee Report" means the Conference Committee Report accompanying the
Tax Reform Act of 1986.
"Companion Class" means one or more classes of certificate where
distributions of principal with respect to one or more other classes of
certificates may be contingent on the specified principal payment schedule for
a Controlled Amortization Class of the same series and the rate at which
payments and other collections of principal on the mortgage assets in the
related trust fund are received.
"Controlled Amortization Class" means one or more classes of certificates
where distributions of principal may be made, subject to available funds, based
on a specified principal payment schedule.
108
"CPR" means the constant prepayment rate model representing an assumed
constant rate of prepayment each month (expressed as an annual percentage)
relative to the then outstanding principal balance of a pool of mortgage loans
for the life of such mortgage loans.
"Cut-off Date" means the specified date initial aggregate outstanding
principal balance of the related mortgage assets as of a specified date.
"Debt Service Coverage Ratio" means at any given time for a mortgage loan
the ratio of--
o the Net Operating Income derived from the related mortgaged property
for a twelve-month period to
o the annualized scheduled payments of principal and/or interest on the
mortgage loan and any other loans senior to it that are secured by the
related mortgaged property.
"Determination Date" means the date upon which that all scheduled payments
on the mortgage loans in the trust fund are received or advanced by the master
servicer, special servicer or other specified person will be distributed to
certificateholders of the related series on the next succeeding Distribution
Date.
"Direct Participant" means the securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations that maintain accounts with DTC.
"Distribution Date" means the date as described in the prospectus
supplement upon which distributions on or with respect to the certificates will
be made.
"DOL" means the United States Department of Labor.
"DTC" means The Depository Trust Company.
"Due Date" means a specified date upon which scheduled payments of
interest, principal or both are to be made under a mortgage loan and may occur
monthly, quarterly, semi-annually or annually.
"Due Period" means a specified time period (generally corresponding in
length to the period between Distribution Dates).
"Equity Participation" means a provision under a mortgage loan that
entitles the lender to a share of appreciation of the related mortgaged
property, or profits realized from the operation or disposition of such
mortgaged property or the benefit, if any, resulting from the refinancing of
the mortgage loan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Funds" means in general that portion of the amounts distributable
in respect of the certificates of any series on any Distribution Date that
represent--
o interest received or advanced on the mortgage assets in the trust fund
that is in excess of the interest currently accrued on the
certificates of such series; or
o Prepayment Premiums, payments from Equity Participations or any other
amounts received on the mortgage assets in the trust fund that do not
constitute payments of interest or principal.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fannie Mae" means Federal National Mortgage Association.
"Freddie Mac" means Federal Home Loan Mortgage Corporation.
"Garn Act" means the Garn-St Germain Depository Institutions Act of 1982.
"Ginnie Mae" means Governmental National Mortgage Association.
"Grantor Trust Certificates" means certificates in a trust treated as a
grantor trust under applicable provisions of the Code.
109
"Grantor Trust Fractional Interest Certificate" means a Grantor Trust
Certificate representing an undivided equitable ownership interest in the
principal of the mortgage loans constituting the related Grantor Trust Fund,
together with interest at a pass-through rate.
"Grantor Trust Fund" means that portion of the trust fund as to which no
REMIC election has been made.
"Grantor Trust Strip Certificate" means a Grantor Trust Certificate
representing ownership of all or a portion of the difference between interest
paid on the mortgage loans constituting the related Grantor Trust Fund (net of
normal administration fees) and interest paid to the holders of Grantor Trust
Fractional Interest Certificates issued with respect to such Grantor Trust
Fund.
"Indirect Participant" means those banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly.
"Insurance and Condemnation Proceeds" means proceeds applied to the
restoration of a mortgaged property or released to the related borrower in
connection with the full or partial condemnation of such mortgaged property.
"IRS" means the Internal Revenue Service.
"Issue Premium" means, in the case of a class of REMIC Regular
Certificates issued at a price in excess of the stated redemption price of that
class, the amount of such excess.
"Liquidation Proceeds" means all proceeds received under any hazard, title
or other insurance policy (other than Insurance and Condemnation Proceeds) and
all other amounts received and retained in connection with the liquidation of
defaulted mortgage loans or property acquired in respect of such defaulted
mortgage loans, by foreclosure or otherwise.
"Loan-to-Value Ratio" means for a mortgage loan the ratio (expressed as a
percentage) of--
o the then outstanding principal balance of the mortgage loan and any
other loans senior that are secured by the related mortgaged property
to
o its fair market value as determined by an appraisal of such property
conducted by or on behalf of the originator in connection with the
origination of the mortgage loan.
"Lock-out Period" means the period in which prepayments are prohibited
under a mortgage loan.
"MBS" means mortgage participations, pass-through certificates or other
mortgage-backed securities that may comprise the assets of the trust fund.
"MERS" means Mortgage Electronic Registration Systems, Inc.
"Mortgage Asset Seller" means the entity from whom the depositor purchased
a mortgage asset either directly or indirectly, included in the trust fund. The
Mortgage Asset Seller may or may not be the originator of the related mortgage
loan or the issuer of the MBS and may be an affiliate of the depositor.
"Mortgage Rate" means the rate at which a mortgage loan accrues interest
which may be fixed over its term or that adjusts from time to time, converted
at the borrower's election from an adjustable to a fixed rate, or from a fixed
to an adjustable rate.
"Multifamily Properties" means residential properties consisting of five
or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or
garden apartment buildings or other residential structures comprising some or
all of the mortgaged properties included in the trust fund.
"Net Operating Income" means for any given period, the total operating
revenues derived from a mortgaged property during such period, minus the total
operating expenses incurred in respect of such mortgaged property during such
period other than--
o noncash items such as depreciation and amortization;
o capital expenditures; and
110
o debt service on the related mortgage loan or on any other loans that
are secured by such mortgaged property.
"NCUA" means the National Credit Union Administration.
"Notional Amount" means the amount upon which a Stripped Interest
Certificate is calculated to accrue interest which is either--
o based on the principal balances of some or all of the mortgage assets
in the related trust fund; or
o equal to the Certificate Balances of one or more other classes of
certificates of the same series.
"OCC" means the Office of the Comptroller of the Currency.
"OID Regulations" means the Treasury Department regulations issued under
Sections 1271-1273 and 1275 of the Code.
"OTS" means the Office of Thrift Supervision.
"Parties in Interest" means "parties in interest" as defined in ERISA and
"disqualified person" as defined in Section 4975 of the Code.
"Percentage Interest" means the undivided percentage interest represented
by an offered certificate of a particular class which will be equal to the
percentage obtained by dividing the initial principal balance or notional
amount of such certificate by the initial Certificate Balance or Notional
Amount of such class.
"Permitted Investments" means government securities and other obligations
that are acceptable to each rating agency that has rated any one or more
classes of certificates of the related series into which funds from the
Certificate Account may be invested.
"Plan" means retirement plans, and on certain other employee benefit plans
and arrangements, including individual retirement accounts, individual
retirement annuities, Keogh plans and collective investment funds and separate
accounts (and as applicable, insurance company general accounts) in which such
plans, accounts or arrangements are invested that are subject to the fiduciary
responsibility provisions of ERISA or Section 4975 of the Code.
"Plan Asset Regulations" means Section 2510.3-101 of the regulations
issued by the DOL, concerning what constitutes assets of a Plan.
"Pooling and Servicing Agreement" means pooling and servicing agreement or
other agreement specified in the related prospectus supplement pursuant to
which certificates of each series will be issued.
"Prepayment Assumption" means the prepayment assumption used in reporting
original issue discount for each series of REMIC Regular Certificates or, if
applicable, Grantor Trust Certificates, as disclosed in the related prospectus
supplement.
"Prepayment Interest Shortfall" means the result when a prepayment on any
mortgage loan is distributable to certificateholders on a particular
Distribution Date, but such prepayment is not accompanied by interest thereon
to the Due Date for such mortgage loan in the related Due Period, then the
interest charged to the borrower (net of servicing and administrative fees) may
be less than the corresponding amount of interest accrued and otherwise payable
on the certificates of the related series.
"Prepayment Premium" means the payment of any premium or yield maintenance
charge in connection with certain prepayments under a mortgage loan.
"PTCE 95-60" means Prohibited Transaction Class Exemption 95-60.
"Purchase Price" means the price as specified in the prospectus supplement
at which a Mortgage Asset Seller will be required to repurchase a mortgage loan
under the conditions set forth in the prospectus supplement.
111
"Record Date" means last business day of the month preceding the month in
which the applicable Distribution Date occurs.
"Relief Act" means the Servicemembers Relief Act.
"REMIC" means a real estate mortgage investment conduit, within the
meaning of, and formed in accordance with, the REMIC Provisions of the Code.
"REMIC Certificates" means certificates representing interests in a trust
fund, or a portion of the trust fund, that the REMIC administrator will elect
to have treated as REMIC.
"REMIC Provisions" means Sections 860A through 860G of the Code.
"REMIC Regular Certificates" means certificates evidencing or constituting
ownership of "regular interests" in the trust fund or a designated portion of
the trust under the REMIC Provisions.
"REMIC Regulations" means the Treasury Department regulations issued under
the REMIC Provisions.
"REMIC Residual Certificateholder" means the holder of a REMIC Residual
Certificate.
"REMIC Residual Certificates" means certificates evidencing or
constituting ownership of "residual interests" in the trust or a designated
portion of the trust under the REMIC Provisions.
"REO Properties" means mortgaged properties acquired on behalf of the
trust fund through foreclosure, deed-in-lieu of foreclosure or otherwise.
"RICO" means the Racketeer Influenced and Corrupt Organizations statute.
"Senior Certificates" means certificates in a given series that are senior
to one or more other classes of certificates in entitlement to certain
distributions;
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"SPA" means the standard prepayment assumption representing an assumed
variable rate of prepayment each month (expressed as an annual percentage)
relative to the then outstanding principal balance of a pool of mortgage loans.
"Stripped Interest Certificate" means those certificates entitled to
distributions of interest, with disproportionate, nominal or no distributions
of principal.
"Stripped Principal Certificate" means entitled to distributions of
principal, with disproportionate, nominal or no distributions of interest;
"Subordinate Certificates" means certificates in a given series that are
subordinate to one or more other classes of certificates in entitlement to
certain distributions;
"Tiered REMIC" means designated portions of the trust fund treated as two
or more REMICs.
"Treasury Department" means the United States Treasury Department.
"UCC" means for any jurisdiction the Uniform Commercial Code as in effect
in that jurisdiction.
"U.S. Person" means--
o a citizen or resident of the United States;
o a corporation or partnership created or organized in, or under the
laws of, the United States, any state or the District of Columbia,
including an entity treated as a corporation or partnership for
federal income tax purposes;
o an estate whose income is subject to United States federal income tax
purposes regardless of the source of its income; or
o a trust as to which--
1. a court in the United States is able to exercise primary
supervision over the administration of the trust, and
112
2. one or more United States persons have the authority to control
all substantial decisions of the trust.
In addition, to the extent provided in the Treasury Department
regulations, a trust will be a U.S. Person if it was in existence on August 20,
1996 and it elected to be treated as a U.S. Person.
"Voting Rights" means the voting rights evidenced by each series of
certificates.
"Warranting Party" means a party that makes certain representations and
warranties regarding the mortgage loans.
113
NOTES CONCERNING INFORMATION
PRESENTED IN THE ATTACHED
COMPUTER DISKETTE
This diskette contains a spreadsheet file that can be put on a user-specified
hard drive or network drive. The file is "BACM2004_3.xls" The file
"BACM2004_3.xls" is a Microsoft Excel(1) spreadsheet. The file provides, in
electronic format, certain loan level information shown in ANNEX A of the
Prospectus Supplement.
Open the file as you would normally open any spreadsheet in Microsoft Excel.
After the file is opened, a securities law legend will be displayed. READ THE
LEGEND CAREFULLY. To view the ANNEX A data, "click" on the worksheet labeled
"ANNEX A."
- ----------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
================================================================================
YOU SHOULD RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE CERTIFICATES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS AS OF ANY DATE OTHER THAN THE DATES STATED ON
THEIR RESPECTIVE COVERS.
DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
WHEN ACTING AS UNDERWRITERS OF THE CERTIFICATES AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THE
CERTIFICATES WILL DELIVER A PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS UNTIL OCTOBER 12, 2004.
--------------------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Table of Contents ...................................................... S-3
Important Notice About Information Presented in this
Prospectus Supplement and the Accompanying Prospectus ................ S-6
Executive Summary ...................................................... S-7
Summary of Prospectus Supplement ....................................... S-11
Risk Factors ........................................................... S-24
Description of the Mortgage Pool ....................................... S-70
Servicing of the Mortgage Loans ........................................ S-129
Description of the Certificates ........................................ S-151
The Trustee ............................................................ S-189
Yield and Maturity Considerations ...................................... S-190
Use of Proceeds ........................................................ S-198
Certain Federal Income Tax Consequences ................................ S-198
Certain ERISA Considerations ........................................... S-200
Legal Investment ....................................................... S-203
Method of Distribution ................................................. S-204
Legal Matters .......................................................... S-205
Ratings ................................................................ S-205
Index of Principal Definitions ......................................... S-206
ANNEX A ................................................................ A-1
ANNEX B ................................................................ B-1
ANNEX C ................................................................ C-1
ANNEX D ................................................................ D-1
PROSPECTUS
Summary of Prospectus .................................................. 6
Risk Factors ........................................................... 11
Prospectus Supplement .................................................. 18
Capitalized Terms Used in This Prospectus .............................. 18
Description of the Trust Funds ......................................... 19
Yield and Maturity Considerations ...................................... 25
The Depositor .......................................................... 30
Description of the Certificates ........................................ 30
The Pooling and Servicing Agreements ................................... 38
Description of Credit Support .......................................... 56
Certain Legal Aspects of Mortgage Loans ................................ 59
Certain Federal Income Tax Consequences ................................ 71
State and Other Tax Consequences ....................................... 98
Certain ERISA Considerations ........................................... 99
Legal Investment ....................................................... 101
Use of Proceeds ........................................................ 103
Method of Distribution ................................................. 103
Legal Matters .......................................................... 104
Financial Information .................................................. 104
Rating ................................................................. 104
Available Information .................................................. 105
Incorporation of Certain Information by Reference ...................... 106
Glossary ............................................................... 107
$782,927,364
(APPROXIMATE)
BANC OF AMERICA
COMMERCIAL MORTGAGE INC.
DEPOSITOR
CLASS A-1, CLASS A-2, CLASS A-3, CLASS A-4,
CLASS A-5, CLASS B, CLASS C, CLASS D AND CLASS E
BANC OF AMERICA
COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 2004-3
-------------------------
PROSPECTUS SUPPLEMENT
-------------------------
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
JUNE 30, 2004
================================================================================