Prospectus Supplement
(To Prospectus dated October 26, 2001)
$820,997,809 (APPROXIMATE)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
DEPOSITOR
PRUDENTIAL ASSET RESOURCES, INC.
MASTER SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2001-PB1
<Table>
<Caption>
---------------------------------
The Series 2001-PB1 Commercial Mortgage Pass-Through Certificates will consist of the
CONSIDER CAREFULLY THE RISK FACTORS following classes:
BEGINNING ON PAGE S-19 IN THIS
PROSPECTUS SUPPLEMENT AND PAGE 10 IN - senior certificates consisting of the Class A-1, Class A-2, Class A-2F, Class XC and
THE ACCOMPANYING PROSPECTUS. Class XP Certificates;
Neither the certificates nor the - junior certificates consisting of the Class B, Class C, Class D, Class E, Class F,
underlying mortgage loans are insured Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O, Class P and
or guaranteed by any governmental Class Q Certificates; and
agency.
- the residual certificates consisting of the Class R-I and Class R-II Certificates.
The certificates will represent
interests only in the trust and will Only the Class A-1, Class A-2, Class A-2F, Class B, Class C, Class D, Class E and
not represent interests in or Class F Certificates are offered hereby.
obligations of Banc of America
Commercial Mortgage Inc. or any of The trust's assets will consist primarily of 134 mortgage loans and other property
its affiliates, including Bank of described in this prospectus supplement and the accompanying prospectus. The mortgage
America Corporation. 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.
---------------------------------
</Table>
Certain characteristics of the offered certificates include:
<Table>
<Caption>
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
ASSUMED FINAL RATED FINAL
CERTIFICATE BALANCE AS PASS-THROUGH RATE DISTRIBUTION RATINGS DISTRIBUTION
CLASS OF DELIVERY DATE(1) AS OF DELIVERY DATE DATE(2) MOODY'S/S&P(3) DATE(4)
--------------------------------------------------------------------------------------------------------------------------------
Class A-1............ $131,224,107 4.9070% January 11, 2010 Aaa/AAA May 11, 2035
Class A-2............ $563,136,797 5.7870% July 11, 2011 Aaa/AAA May 11, 2035
Class A-2F........... $ 37,500,000 LIBOR + 0.45%(5) July 11, 2011 Aaa/AAA May 11, 2035
Class B.............. $ 37,531,329 6.0100% August 11, 2011 Aa2/AA May 11, 2035
Class C.............. $ 9,382,832 6.1100% August 11, 2011 Aa3/AA- May 11, 2035
Class D.............. $ 11,728,540 6.1880% August 11, 2011 A1/A+ May 11, 2035
Class E.............. $ 18,765,664 6.2280% August 11, 2011 A2/A May 11, 2035
Class F.............. $ 11,728,540 6.3260% August 11, 2011 A3/A- May 11, 2035
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
(Footnotes to table on page S-3)
With respect to the offered certificates, each of Banc of America Securities
LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as co-lead
manager and joint bookrunner. Banc of America Securities LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated are each acting as a co-lead manager, 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.
Salomon Smith Barney Inc. is acting as a co-manager for the offering. The
underwriters, Banc of America Securities LLC, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Smith Barney Inc., 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 November 7, 2001. Banc of America Commercial Mortgage Inc. expects to
receive from this offering approximately 100.42% of the initial principal amount
of the offered certificates, plus (except with regard to the Class A-2F
Certificates) accrued interest from October 1, 2001, 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.
--------------------------------------------------------------------------------
BANC OF AMERICA SECURITIES LLC MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
October 26, 2001
Banc of America Commercial Mortgage Inc.
--------------------------------------------------------------------------------
Commercial Mortgage Pass-Through Certificates, Series 2001-PB1
Geographic Overview of Mortgage Pool
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
[MAP]
<Table>
<Caption>
% OF
NUMBER OF AGGREGATE INITIAL
MORTGAGED CUT-OFF DATE POOL
PROPERTY LOCATION PROPERTIES BALANCE BALANCE
----------------- ---------- -------------- -------
CA................... 31 $ 162,689,187 17.3%
TX................... 16 86,738,228 9.2
NY................... 3 13,449,658 1.4
WA................... 8 54,974,029 5.9
GA................... 4 19,952,000 2.1
MD................... 6 30,852,453 3.3
AZ................... 2 3,110,478 0.3
FL................... 6 23,723,140 2.5
OH................... 5 45,788,970 4.9
NJ................... 8 38,029,525 4.1
SC................... 2 8,221,309 0.9
OR................... 1 1,962,441 0.2
PA................... 4 16,189,231 1.7
MI................... 2 18,922,933 2.0
MO................... 3 12,799,393 1.4
NC................... 5 73,656,497 7.9
NV................... 2 42,786,023 4.6
LA................... 6 8,276,214 0.9
IL................... 5 30,506,536 3.3
DE................... 3 16,092,219 1.7
HI................... 1 71,791,000 7.7
AL................... 2 6,964,725 0.7
UT................... 2 18,967,845 2.0
VA................... 2 8,085,903 0.9
MA................... 5 32,134,235 3.4
KS................... 1 3,989,764 0.4
AK................... 2 4,538,175 0.5
MN................... 1 9,914,221 1.1
WI................... 1 32,959,452 3.5
KY................... 1 7,493,877 0.8
CT................... 1 8,751,104 0.9
RI................... 1 12,503,141 1.3
NM................... 1 11,469,309 1.2
</Table>
MORTGAGE POOL BY PROPERTY TYPE
------------------------------
[PIE CHART] [ ] < 1.0% of Initial Pool Balance
-
Multifamily........... 33.1% [ ] 1.1% - 5.0% of Initial Pool Balance
Retail................ 23.3% [ ] 5.1% - 10.0% of Initial Pool Balance
Unanchored.......... 1.6% [ ] > 10.0% of Initial Pool Balance
Shadow Anchored..... 3.3%
Anchored............ 18.4%
Industrial............ 7.1%
Office................ 21.7%
Self Storage.......... 1.5%
Hotel................. 10.1%
Manufactured Housing.. 2.7%
Land.................. 0.7%
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:
- SEC Public Reference Section
450 Fifth Street, N.W.
Room 1204
Washington, D.C. 20549
- 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, 100
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.
NOTE REGARDING PIE CHART ON OPPOSITE PAGE: NUMBERS MAY NOT TOTAL TO 100% DUE TO
ROUNDING.
TABLE OF CONTENTS
<Table>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS........................................ S-4
EXECUTIVE SUMMARY................................... S-5
SUMMARY OF PROSPECTUS SUPPLEMENT.................... S-8
RISK FACTORS........................................ S-19
Risks Related to the Certificates................. S-19
Risks Related to Prepayments and Repurchases...... S-21
Risks Related to the Mortgage Loans............... S-28
Other Risks....................................... S-53
DESCRIPTION OF THE MORTGAGE POOL.................... S-54
General........................................... S-54
Certain Terms and Conditions of the Mortgage
Loans........................................... S-55
Due Dates....................................... S-55
Mortgage Rates; Calculations of Interest........ S-55
Hyperamortization............................... S-55
Amortization of Principal....................... S-56
Prepayment Provisions........................... S-57
Defeasance...................................... S-57
"Due-on-Sale" and "Due-on-Encumbrance"
Provisions.................................... S-58
Significant Mortgage Loans........................ S-58
Additional Mortgage Loan Information.............. S-63
General......................................... S-63
Delinquencies................................... S-63
Tenant Matters.................................. S-63
Ground Leases and Other Non-Fee Interests....... S-63
Subordinate Financing........................... S-63
Lender/Borrower Relationships................... S-63
Certain Underwriting Matters...................... S-64
Environmental Assessments....................... S-64
Generally....................................... S-64
Property Condition Assessments.................. S-65
Appraisals and Market Studies................... S-66
Zoning and Building Code Compliance............. S-66
Hazard, Liability and Other Insurance........... S-67
The Mortgage Loan Sellers......................... S-68
Bridger Support Party............................. S-68
Assignment of the Mortgage Loans; Repurchases and
Substitutions................................... S-69
Representations and Warranties; Repurchases and
Substitutions................................... S-72
Changes in Mortgage Pool Characteristics.......... S-75
SERVICING OF THE MORTGAGE LOANS..................... S-75
General........................................... S-75
The Master Servicer............................... S-79
The Special Servicer.............................. S-79
Sub-Servicers..................................... S-80
Servicing and Other Compensation and Payment of
Expenses........................................ S-80
Evidence as to Compliance......................... S-84
Modifications, Waivers, Amendments and Consents... S-84
Defaulted Mortgage Loans; Purchase Option......... S-86
REO Properties.................................... S-88
Inspections; Collection of Operating
Information..................................... S-88
Termination of the Special Servicer............... S-89
DESCRIPTION OF THE CERTIFICATES..................... S-90
General........................................... S-90
Registration and Denominations.................... S-90
</Table>
S-1
<Table>
Certificate Balances and Notional Amount.......... S-91
Pass-Through Rates................................ S-93
Distributions..................................... S-95
General......................................... S-95
The Available Distribution Amount............... S-96
Application of the Available Distribution
Amount........................................ S-96
Distributable Certificate Interest.............. S-101
Principal Distribution Amount................... S-102
The Class A-2F Certificates..................... S-103
Excess Interest................................. S-103
Distributions of Prepayment Premiums............ S-103
Treatment of REO Properties..................... S-105
Subordination; Allocation of Losses and Certain
Expenses........................................ S-105
Excess Interest Distribution Account.............. S-106
Interest Reserve Account.......................... S-107
P&I Advances...................................... S-107
Appraisal Reductions.............................. S-108
Reports to Certificateholders; Certain Available
Information..................................... S-109
Trustee Reports................................. S-109
Servicer Reports................................ S-111
Other Information............................... S-112
Voting Rights..................................... S-113
Termination....................................... S-113
THE TRUSTEE AND THE FISCAL AGENT.................... S-114
The Trustee....................................... S-114
The Fiscal Agent.................................. S-114
Indemnification................................... S-115
DESCRIPTION OF THE SWAP CONTRACT.................... S-115
General........................................... S-115
Distributions from the Floating Rate Account...... S-116
The Swap Contract................................. S-116
Termination Fees.................................. S-117
The Swap Counterparty............................. S-117
YIELD AND MATURITY CONSIDERATIONS................... S-118
Yield Considerations.............................. S-118
General......................................... S-118
Rate and Timing of Principal Payments........... S-118
Losses and Shortfalls........................... S-119
Certain Relevant Factors........................ S-120
Weighted Average Lives............................ S-120
USE OF PROCEEDS..................................... S-126
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............. S-126
General........................................... S-126
Discount and Premium; Prepayment Premiums......... S-126
Taxation of the Swap Contract..................... S-127
Characterization of Investments in Offered
Certificates.................................... S-128
Possible Taxes on Income From Foreclosure Property
and Other Taxes................................. S-128
Reporting and Other Administrative Matters........ S-128
CERTAIN ERISA CONSIDERATIONS........................ S-129
LEGAL INVESTMENT.................................... S-132
METHOD OF DISTRIBUTION.............................. S-132
LEGAL MATTERS....................................... S-133
RATINGS............................................. S-133
INDEX OF PRINCIPAL DEFINITIONS...................... S-135
ANNEX A............................................. A-1
ANNEX B............................................. B-1
ANNEX C............................................. C-1
ANNEX D............................................. D-1
</Table>
S-2
FOOTNOTES TO TABLE ON COVER OF PROSPECTUS SUPPLEMENT
(1) Subject to a variance of plus or minus 5%.
(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 (other than those mortgage loans with anticipated
repayment dates) 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 or (iii) whether and to what extent prepayment
premiums will be received. The rating of the Class A-2F Certificates only
reflects the receipt of interest at a rate not to exceed 5.7870% per annum.
(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) LIBOR for the first distribution date will be determined two banking days
before the delivery date, and will for each distribution date thereafter
will be determined as described under "Description of the
Certificates -- Pass-Through Rates" in this prospectus supplement. Under
certain circumstances described in this prospectus supplement, the interest
rate may convert to a fixed rate equal to 5.7870% for the Class A-2F
Certificates. See "Description of the Swap Contract -- The Swap Contract"
in this prospectus supplement.
S-3
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 2001-PB1 and the trust in abbreviated form:
Executive Summary, which begins on page S-5 of this prospectus
supplement and shows certain characteristics of the offered certificates in
tabular form;
Summary of Prospectus Supplement, which begins on page S-8 of this
prospectus supplement and gives a brief introduction of the key features of
Series 2001-PB1 and the mortgage loans; and
Risk Factors, which begins on page S-19 of this prospectus supplement
and describes risks that apply to Series 2001-PB1 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-136 in this prospectus
supplement. The capitalized terms used in the accompanying prospectus are
defined under the caption "Glossary" beginning on page 98 in the prospectus.
In this prospectus supplement, "we" refers to the depositor, and "you"
refers to a prospective investor in the offered certificates.
---------------------
Until February 4, 2002 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-4
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. 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.
<Table>
<Caption>
-----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE APPROXIMATE PASS-THROUGH WEIGHTED
BALANCE OR PERCENTAGE APPROXIMATE RATE AS AVERAGE
NOTIONAL OF POOL CREDIT OF DELIVERY LIFE PRINCIPAL
CLASS RATINGS(1) AMOUNT(2) BALANCE SUPPORT RATE TYPE DATE (YEARS)(3) WINDOW(3)
-----------------------------------------------------------------------------------------------------------------------------------
Offered Certificates
-----------------------------------------------------------------------------------------------------------------------------------
A-1 Aaa/AAA $131,224,107 13.99% 22.00% Fixed 4.9070% 4.61 11/11/01-1/11/10
-----------------------------------------------------------------------------------------------------------------------------------
A-2 Aaa/AAA $563,136,797 60.02% 22.00% Fixed 5.7870% 9.43 1/11/10-7/11/11
-----------------------------------------------------------------------------------------------------------------------------------
A-2F Aaa/AAA $ 37,500,000 4.00% 22.00% Floating(7) LIBOR + 0.45%(7) 9.43 1/11/10-7/11/11
-----------------------------------------------------------------------------------------------------------------------------------
B Aa2/AA $ 37,531,329 4.00% 18.00% Fixed 6.0100% 9.74 7/11/11-8/11/11
-----------------------------------------------------------------------------------------------------------------------------------
C Aa3/AA- $ 9,382,832 1.00% 17.00% Fixed 6.1100% 9.76 8/11/11-8/11/11
-----------------------------------------------------------------------------------------------------------------------------------
D A1/A+ $ 11,728,540 1.25% 15.75% Fixed 6.1880% 9.76 8/11/11-8/11/11
-----------------------------------------------------------------------------------------------------------------------------------
E A2/A $ 18,765,664 2.00% 13.75% Fixed 6.2280% 9.76 8/11/11-8/11/11
-----------------------------------------------------------------------------------------------------------------------------------
F A3/A- $ 11,728,540 1.25% 12.50% Fixed 6.3260% 9.76 8/11/11-8/11/11
-----------------------------------------------------------------------------------------------------------------------------------
Private Certificates -- Not Offered Hereby
-----------------------------------------------------------------------------------------------------------------------------------
G (Not Offered) $ 14,074,248 1.50% 11.00% Fixed 6.6690% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
H (Not Offered) $ 14,074,248 1.50% 9.50% Fixed 6.7690% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
J (Not Offered) $ 11,728,541 1.25% 8.25% Fixed(4) 7.1660%(4) (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
K (Not Offered) $ 18,765,664 2.00% 6.25% Fixed 6.1500% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
L (Not Offered) $ 14,074,248 1.50% 4.75% Fixed 6.1500% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
M (Not Offered) $ 7,037,124 0.75% 4.00% Fixed 6.1500% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
N (Not Offered) $ 11,728,540 1.25% 2.75% Fixed 6.1500% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
O (Not Offered) $ 4,691,416 0.50% 2.25% Fixed 6.1500% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
P (Not Offered) $ 4,691,416 0.50% 1.75% Fixed 6.1500% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
Q (Not Offered) $ 16,419,957 1.75% 0.00% Fixed 6.1500% (6) (6)
-----------------------------------------------------------------------------------------------------------------------------------
XC (Not Offered) $938,283,211 N/A N/A Variable Rate(5) 0.9522%(5) (5) N/A
-----------------------------------------------------------------------------------------------------------------------------------
XP (Not Offered) $501,273,702 N/A N/A Variable Rate(5) 1.7730%(5) (5) N/A
-----------------------------------------------------------------------------------------------------------------------------------
</Table>
(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. The ratings of the Class A-2F Certificates only reflect the
receipt of interest at a rate not to exceed 5.7870% per annum.
(2) As of the delivery date. Subject to a variance of plus or minus 5%.
(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
those mortgage loans with anticipated repayment dates, their anticipated
repayment dates).
(4) The pass-through rate for any Class J Certificate on any distribution date
will not exceed the weighted average of the interest rates (net of the fee
rates payable to the master servicer, the special servicer and the trustee)
borne by the mortgage loans. See "Description of the
Certificates -- Pass-Through Rates" in this prospectus supplement.
(5) The Class XC and Class XP 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 XC and Class XP 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
S-5
on the notional amount of the Class XC and Class XP Certificates, as the
case may be, as described in this prospectus supplement. The interest rates
applicable to the Class XC and Class XP 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.
(6) 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.
(7) LIBOR for the first distribution date will be determined two banking days
before the delivery date, and for each distribution date thereafter will be
determined as described under "Description of the
Certificates -- Pass-Through Rates" in this prospectus supplement. Under
certain circumstances described in this prospectus supplement, the interest
rate may convert to a fixed rate equal to 5.7870% for the Class A-2F
Certificates. See "Description of the Swap Contract -- The Swap Contract" in
this prospectus supplement.
S-6
Below is certain information regarding the mortgage loans and the mortgaged
properties as of the cut-off date. All weighted averages set forth below are
based on the respective cut-off date balances (as defined herein) of the
mortgage loans. Such information is described, and additional information
regarding the mortgage loans and the mortgaged properties is contained, under
"Description of the Mortgage Pool" in this prospectus supplement and in Annex A
to this prospectus supplement.
MORTGAGE POOL CHARACTERISTICS
<Table>
<Caption>
ENTIRE MORTGAGE POOL
CHARACTERISTICS (APPROXIMATE)
--------------- -----------------------
Initial pool balance(1)................ $938,283,211
Number of mortgage loans............... 134
Number of balloon mortgage loans(2).... 115
Number of mortgage loans with
anticipated repayment dates.......... 14
Number of fully amortizing mortgage
loans(3)............................. 5
Number of mortgaged properties......... 143
Average cut-off date balance........... $7,002,114
Range of cut-off date balances......... $878,523 to $71,791,000
Weighted average mortgage rate......... 7.519%
Weighted average remaining lock-out
period............................... 102months
Range of remaining terms to
maturity(4).......................... 56 to 237months
Weighted average remaining term to
maturity(4).......................... 116months
Weighted average underwriting debt
service coverage ratio(5)............ 1.41x
Weighted average cut-off date
loan-to-value ratio(4)............... 68.0%
</Table>
---------------
(1) Subject to a variance of plus or minus 5%.
(2) Not including mortgage loans with anticipated repayment dates.
(3) Each fully amortizing mortgage loan will have a payment due at its maturity
in excess of its scheduled monthly payment of principal and interest. See
"Description of the Mortgage Pool -- Certain Terms and Conditions of the
Mortgage Loans" in this prospectus supplement.
(4) In the case of 14 mortgage loans, the anticipated repayment dates.
(5) For purposes of determining the underwriting debt service coverage ratio for
7 mortgage loans (referred to in Annex A to this prospectus supplement as
LOC Loans), the debt service payments were recalculated based upon original
balances that were reduced by amounts available under letters of credit
securing such mortgage loans. In addition, the principal balances of such
mortgage loans were reduced by the amount of such letters of credit for
determining the cut-off date loan-to-value ratio of each such mortgage loan.
"Cut-off date loan-to-value ratio" and "underwriting debt service coverage
ratio" are calculated as described in Annex A to this prospectus supplement.
S-7
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 Bank of America Corporate Center, 100 North Tryon
Street, 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
LaSalle Bank National Association. The Trustee will also act as REMIC
administrator. See "The Trustee and the Fiscal Agent."
FISCAL AGENT
ABN AMRO Bank N.V. See "The Trustee and the Fiscal Agent."
MASTER SERVICER
Prudential Asset Resources, Inc., a Delaware corporation. See "Servicing of
the Mortgage Loans -- The Master Servicer" in this prospectus supplement.
SPECIAL SERVICER
KeyCorp Real Estate Capital Markets, Inc. d/b/a Key Commercial Mortgage, an
Ohio corporation. See "Servicing of the Mortgage Loans -- The Special Servicer"
in this prospectus supplement.
MORTGAGE LOAN SELLERS
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.
Bridger Commercial Realty Finance LLC is a limited liability company
organized under the laws of the State of Missouri. Bridger Commercial Realty
Finance LLC maintains its principal office at 100 Shoreline Highway, Suite 100,
Mill Valley, California 94941.
Prudential Mortgage Capital Funding, LLC is a limited liability company
organized under the laws of the State of Delaware. Prudential Mortgage Capital
Funding, LLC maintains its principal office at 4 Gateway Center 8th Floor, 100
Mulberry Street, Newark, New Jersey 07102. See "Description of the Mortgage
Pool -- The Mortgage Loan Sellers" in this prospectus supplement.
CUT-OFF DATE
October 1, 2001.
DELIVERY DATE
On or about November 7, 2001.
S-8
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. Notwithstanding the preceding
sentence, the first record date will be November 7, 2001.
DISTRIBUTION DATE
The 11th day of each month or, if any such 11th day is not a business day,
the next succeeding business day. The first distribution date with respect to
the offered certificates will occur in November 2001.
DETERMINATION DATE
With respect to any distribution date, the fifth business day prior to such
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 November 2001.
SWAP CONTRACT
The trust will have the benefit of an interest rate swap agreement relating
to the Class A-2F Certificates from Bank of America, N.A., which has a long-term
certificates of deposit rating of "Aa1" by Moody's Investors Service, Inc., a
long-term senior unsecured debt rating of "AA-" by Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc., a short-term
certificates of deposit rating of "P-1" by Moody's Investors Service, Inc. and a
short-term senior unsecured debt rating of "A-1+" by Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc., in an initial notional
amount equal to the initial certificate balance of the Class A-2F Certificates.
The notional amount of the swap agreement will decrease to the extent of any
decrease in the aggregate certificate balance of the Class A-2F Certificates.
The swap agreement will have a maturity date of the distribution date on May 11,
2035 (the same date as the rated final distribution date of the Class A-2F
Certificates). Under the swap agreement, the swap counterparty will generally be
obligated to pay to the trust fund on the second business day prior to each
distribution date an amount equal to the product of (i) the then notional amount
of the swap agreement, (ii) LIBOR plus 0.45% and (iii) the number of days in the
distribution period divided by 360, net of any fixed amounts owed by the trust
fund to the swap counterparty on such date. See "Description of the Swap
Contract" And "Risk Factors -- The Swap Contract" in this prospectus supplement.
MORTGAGE LOANS
THE MORTGAGE POOL
The pool of mortgage loans consists of 134 multifamily and commercial
mortgage loans. Forty-three of these mortgage loans were (a) originated by Bank
of America, N.A. or its conduit participants or (b) were acquired by Bank of
America, N.A. from various third party originators (other than Bridger
Commercial Funding LLC, the parent of Bridger Commercial Realty Finance LLC).
Twenty four mortgage loans were acquired by Bank of America, N.A. from Bridger
Commercial Funding LLC. The mortgage loans either acquired or originated by Bank
of America, N.A. represent approximately 51.6% of the initial pool balance.
Fifteen multifamily and commercial mortgage loans (which exclude the mortgage
loans that Bank of America, N.A. acquired from Bridger Commercial Funding LLC)
were acquired by Bridger Commercial Realty Finance LLC from Bridger Commercial
Funding LLC who in turn either directly originated or acquired such mortgage
loans from third party originators (generally comprised of commercial banks or
affiliates of commercial banks) and represent approximately 4.6% of the initial
pool balance. Fifty-two multifamily and commercial mortgage loans were acquired
by Prudential Mortgage Capital Funding, LLC from Prudential
S-9
Mortgage Capital Company, LLC or its subsidiary, Prudential Mortgage Capital
Company, Inc. and represent 43.9% of the initial pool balance. The mortgage
loans have an aggregate cut-off date balance of approximately $938,283,211 which
is referred to as the initial pool balance, subject to a variance of plus or
minus 5%.
All numerical information provided herein with respect to the mortgage
loans is provided on an approximate basis. All weighted average information
provided herein with respect to the mortgage loans reflects weighting by related
cut-off date balance. All percentages of the mortgage pool, or of any specified
sub-group thereof, referred to herein 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 range from $878,523 to $71,791,000, and the
average cut-off date balance is $7,002,114.
As of the cut-off date, the mortgage loans had the following additional
characteristics.
SELECTED MORTGAGE LOAN CHARACTERISTICS
<Table>
Range of mortgage rates.................. 6.900% per annum to 9.000% per annum
Weighted average mortgage rate........... 7.519% per annum
Range of remaining terms to stated
maturity(1)............................ 56 months to 237 months
Weighted average remaining term to stated
maturity(1)............................ 116 months
Range of remaining amortization terms.... 119 months to 360 months
Weighted average remaining amortization
term................................... 326 months
Range of remaining lock-out periods...... 26 months to 208 months
Range of cut-off date loan-to-value
ratios(2).............................. 36.3% to 80.6%
Weighted average cut-off date
loan-to-value ratio(2)................. 68.0%
Range of maturity date loan-to-value
ratios of balloon loans(1)............. 28.0% to 81.2%
Weighted average maturity date
loan-to-value ratio of balloon
loans(1)............................... 59.0%
Range of underwriting debt service
coverage ratios(2)..................... 1.13x to 2.12x
Weighted average underwriting debt
service coverage ratio(2).............. 1.41x
</Table>
------------------
(1) In the case of mortgage loans that have anticipated repayment dates the
maturity is based on the related anticipated repayment date.
(2) For purposes of determining the underwriting debt service coverage ratio for
the LOC Loans (as defined in Annex A to this prospectus supplement), the
debt service payments were recalculated based on original balances that were
reduced by amounts available under letters of credit securing such mortgage
loans. In addition, the cut-off date balances of such mortgage loans were
reduced by the amount of such letters of credit for determining the cut-off
date loan-to-value ratio of each such mortgage loan.
Each of "cut-off date loan-to-value ratio," "maturity date loan-to-value
ratio" and "underwriting debt service coverage ratio" are also defined in Annex
A to this prospectus supplement.
S-10
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 five states with the highest concentrations:
GEOGRAPHIC CONCENTRATION
<Table>
<Caption>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
STATE PROPERTIES BALANCE
----- ---------- -------------
California.................................................. 31 17.3%
Texas....................................................... 16 9.2
North Carolina.............................................. 5 7.9
Hawaii...................................................... 1 7.7
Washington.................................................. 8 5.9
</Table>
The remaining mortgaged properties are located throughout 28 other states,
with no more than 4.9% of the initial pool balance secured by mortgaged
properties located in any such other jurisdiction.
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
<Table>
<Caption>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
PROPERTIES BALANCE(1)
---------- -------------
Multifamily................................................. 52 33.1%
Retail...................................................... 34 23.2
Office...................................................... 24 21.7
Hotel....................................................... 4 10.1
Industrial and warehouse.................................... 13 7.1
Manufactured Housing Communities............................ 6 2.7
Self-Storage................................................ 8 1.5
Land........................................................ 2 0.7
</Table>
---------------
(1) The sum of the percentages in this column may not equal 100% due to
rounding.
(2) Mortgage loans secured by multiple properties have their cut-off date
balance allocated based on an individual property's appraised value as a
percentage of the total appraised value of the related mortgage loan.
FOR MORE DETAILED STATISTICAL INFORMATION REGARDING THE MORTGAGE POOL, SEE
ANNEX A HERETO.
On or before the delivery date, the mortgage loan sellers 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, Bank of America, N.A. will make certain
representations and warranties regarding the characteristics of only those
mortgage loans transferred by it. Bridger Commercial Realty Finance LLC will
make certain representations and warranties regarding the characteristics of
only those mortgage loans transferred by it. Prudential Mortgage Capital
Funding, LLC will make certain representations and warranties regarding the
characteristics of only those mortgage loans transferred by it. As described in
more detail later in this prospectus supplement, each of the mortgage loan
sellers will be obligated to cure any material breach of any such representation
or warranty made by it with respect to only those mortgage loans transferred 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. With respect to any mortgage loan transferred by Bridger Commercial
Realty Finance LLC that is required to be repurchased in connection with a
material breach of any such representation or warranty (provided that Bridger
Commercial Realty Finance LLC failed to cure such material breach or substitute
a qualified substitute mortgage loan), Prudential Securities Credit Corp., LLC
will be jointly and severally liable with Bridger Commercial Realty Finance
S-11
LLC for the repurchase of such mortgage loan. See "Description of the Mortgage
Pool -- Representations and Warranties; Repurchases" and "-- Assignment of the
Mortgage Loans; Repurchases" herein. See "Description of the Mortgage
Pool -- Assignment of the Mortgage Loan; Repurchases" and "-- Representations
and Warranties; Repurchases" in this prospectus supplement.
Each 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, the fiscal agent 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 8 classes of the depositor's Commercial
Mortgage Pass-Through Certificates as part of Series 2001-PB1, namely the Class
A-1, Class A-2, Class A-2F, Class B, Class C, Class D, Class E and Class F
Certificates. As of the delivery date, your certificates will have the
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 5%, 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. On the delivery date, the trust fund
will also issue the Class A-2F Regular Interest as an uncertificated regular
interest in one of the real estate mortgage investment conduits. The Class A-2F
Regular Interest is not offered hereby. We will transfer the Class A-2F Regular
Interest and the interest rate swap agreement discussed above to the trustee in
exchange for the Class A-2F Certificates. The Class A-2F Certificates will
represent all of the beneficial ownership interest in the portion of the trust
fund that consists of the Class A-2F Regular Interest and the swap agreement.
See "Description of the Certificates -- Pass-Through Rates" in this prospectus
supplement. Interest on the offered certificates (other than the Class A-2F
Certificates) and the Class A-2F Regular Interest will be calculated based on a
360-day year consisting of twelve 30-day months, or a 30/360 basis. Interest on
the Class A-2F Certificates will be calculated on the basis of a 360-day year
and the actual number of days in the relevant period of accrual, or an
Actual/360 basis, provided that if the pass-through rate converts to a fixed
rate as described in this prospectus supplement, the Class A-2F Certificates
will accrue interest on the same basis as the Class A-2F Regular Interest.
Series 2001-PB1 consists of a total of 22 classes of certificates, the
following 14 of which are not being offered through this prospectus supplement
and the accompanying prospectus: Class XC, Class XP, Class G, Class H, Class J,
Class K, Class L, Class M, Class N, Class O, Class P, Class Q, Class R-I and
Class R-II. The pass-through rates applicable to each of the Class G, Class H,
Class J, Class K, Class L, Class M, Class N, Class O, Class P and Class Q
Certificates for each distribution date are set forth on page S-5 of this
prospectus supplement. The Class R-I and Class R-II Certificates will not have a
certificate balance, a notional amount or a pass-through rate.
S-12
The private certificates will represent beneficial ownership interests in a
trust created by Banc of America Commercial Mortgage Inc. The trust's assets
will primarily be 134 mortgage loans secured by first liens on commercial and
multifamily properties.
CLASS X CERTIFICATES
The pass-through rate applicable to the Class XC Certificates for the
initial distribution date will equal approximately 0.9522% per annum. The
pass-through rate applicable to the Class XC Certificates for each distribution
date subsequent to the initial distribution date will, in general, equal the
weighted average of the Class XC Strip Rates for the Components (or, in the case
of the Class A-2 Component, the Class A-2A and Class A-2B Components thereof,
or, in the case of the Class A-2F Component, the Class A-2FA and Class A-2FB
Components thereof) for such distribution date (weighted on the basis of the
respective component balances of such Components outstanding immediately prior
to such distribution date). The "Class XC Strip Rate" in respect of any class of
Components (and, in the case of (x) the Class A-2 Component, the Class A-2A and
Class A-2B Components thereof, and (y) the Class A-2F Component, the Class A-2FA
and Class A-2FB Components thereof) for any distribution date will, in general,
equal (i) in the case of the Class A-1, Class A-2A, Class A-2FA, Class G, Class
H, Class J, Class K, Class L, Class M, Class N, Class O, Class P and Class Q
Components, (x) the weighted average net mortgage rate for such distribution
date, minus (y) the pass-through rate for such component and (ii) in the case of
the Class A-2B, Class A-2FB, Class B, Class C, Class D, Class E and Class F
Components (x) for any distribution date occurring on or before the distribution
date in June 2010, (1) the weighted average net mortgage rate for such
distribution date minus (2) the sum of the pass-through rate for such component
and the Class XP Strip Rate for such component, and (y) for any distribution
date occurring after the distribution date in June 2010, (1) the weighted
average net mortgage rate for such distribution date, minus (2) the pass-through
rate for such component (but in no event will any Class XC Strip Rate be less
than zero).
The pass-through rate applicable to the Class XP Certificates for the
initial distribution date will equal approximately 1.7730% per annum. The
pass-through rate applicable to the Class XP Certificates for each distribution
date subsequent to the initial distribution date and on or before the
distribution date in June 2010 will, in general, equal the weighted average of
the Class XP Strip Rates for the Class A-2B, Class A-2FB, Class B, Class C,
Class D, Class E and Class F Components for such distribution date (weighted on
the basis of the respective component balances of such Components outstanding
immediately prior to such distribution date). The "Class XP Strip Rate" in
respect of the Class A-2B, Class A-2FB, Class B, Class C, Class D, Class E and
Class F Components for any distribution date will, in general, equal (i) for any
distribution date occurring on or before the distribution date in June 2010, (x)
the lesser of (1) the weighted average net mortgage rate for such distribution
date and (2) the reference rate specified in Annex D to this prospectus
supplement minus (y) the pass-through rate for such component (but in no event
will any Class XP Strip Rate be less than zero), and (ii) for any distribution
date occurring after the distribution date in June 2010, 0% per annum.
Solely for the purposes of calculating the notional amounts of the Class XC
and Class XP Certificates and the pass-through rates applicable to the Class XC
and Class XP Certificates for each distribution date, the aggregate certificate
balance of each class of Certificates (other than the Class XC, Class XP, Class
R-I and Class R-II Certificates) will be deemed to consist of a single Component
(or two Components in the case of each of the Class A-2 and Class A-2F
Certificates).
Each Component will be deemed to have a Component Balance described in this
prospectus supplement and a pass-through rate equal to the pass-through rate on
the related Class of Certificates. Solely for the purposes of calculating the
Class XC and Class XP Strip Rates, the pass-through rate of each Component will
be the pass-through rate for the corresponding class of certificates (other than
the Class A-2F Certificates) and the Class A-2F Regular Interest. See
"Description of the Certificates -- Pass-Through Rates" and "-- Distributions"
in this prospectus supplement.
S-13
DISTRIBUTIONS
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-2F Regular Interest, Class XC and
Class XP: To interest on Class A-1, Class A-2, Class A-2F Regular Interest,
Class XC and Class XP, pro rata, in accordance with their interest entitlements.
Second, Class A-1, Class A-2 and Class A-2F Regular Interest: To the extent
of funds available for principal, on Class A-1 then, pro rata, to Class A-2 and
Class A-2F Regular Interest, until each class is reduced to zero.
Third, Class A-1, Class A-2 and Class A-2F Regular Interest: To reimburse
Class A-1, Class A-2 and Class A-2F Regular Interest, 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 of the fourth step.
Eighth: Class F: To Class F in a manner analogous to the Class B
allocations of 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 and Class A-2F
Regular Interest 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.
S-14
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. No principal payments or loan losses will be allocated to the Class XC
and Class XP Certificates. However, the notional amount on the Class XC and
Class XP Certificates (which is used to calculate interest due on the Class XC
and Class XP 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 XC
and Class XP Certificates. On any distribution date, distributions in reduction
of the certificate balance of the Class A-2F Certificates will be made in an
amount equal to the amount of principal distributed in respect of the Class A-2F
Regular Interest on such date.
--------------------------------------------------------------
Class A-1 Certificates, Class A-2 Certificates,
Class A-2F Regular Interest, Class XC
and Class XP Certificates*
--------------------------------------------------------------
|
|
----------------------
Class B Certificates
----------------------
|
|
----------------------
Class C Certificates
----------------------
|
|
----------------------
Class D Certificates
----------------------
|
|
----------------------
Class E Certificates
----------------------
|
|
----------------------
Class F Certificates
----------------------
|
|
-----------------------
Private Certificates
-----------------------
*The Class XC and Class XP Certificates will only be senior with respect to
payments of interest and will not be entitled to receive any payments in respect
of principal.
S-15
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:
- shortfalls resulting from additional compensation which the
master servicer or special servicer is entitled to receive;
- shortfalls resulting from interest on advances of principal
and interest or property expenses made by the master
servicer, the trustee or the fiscal agent;
- shortfalls resulting from extraordinary expenses of the trust; and
- shortfalls resulting from a reduction of a mortgage loan's
interest rate by a bankruptcy court or from other
unanticipated or default-related expenses of the trust.
See "Description of the Certificates -- Distributions" in this prospectus
supplement.
ADVANCES OF PRINCIPAL AND INTEREST
A. P&I Advances
The master servicer is required to advance delinquent monthly mortgage loan
payments if it determines that the advance will be recoverable. The master
servicer will not advance balloon payments due at maturity or interest in excess
of a loan's regular monthly payment. The master servicer also is not required to
advance prepayment or yield maintenance premiums. In addition, the master
servicer will not advance any amounts due to be paid under the swap contract. 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 and the special servicer 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, special servicer, the trustee and the fiscal agent, 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 above, 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.
OTHER ASPECTS OF THE OFFERED CERTIFICATES
A. Denominations
The Class A-1, Class A-2 and Class A-2F Certificates will be offered in
minimum denominations of $10,000 initial principal amount. The Class B, Class C,
Class D, Class E and Class F Certificates will be
S-16
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. We may elect to terminate the
book-entry system through The Depository Trust Company 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 in the accompanying prospectus.
OPTIONAL TERMINATION
At its option, any holder or holders (other than the depositor or the
mortgage loan sellers) of certificates representing a majority interest in the
controlling class may purchase, and if such holder or holders fail to purchase,
the master servicer may purchase, and if the master servicer fails to purchase,
the special servicer may purchase, all of the mortgage loans and REO properties,
and thereby effect a termination of the trust and early retirement of the
then-outstanding certificates, on any distribution date on which the remaining
aggregate stated principal balance of the mortgage pool is less than 1% of the
initial pool balance. See "Description of the Certificates -- Termination" in
this prospectus supplement and in the accompanying prospectus.
TAX STATUS
Elections will be made to treat designated portions of the trust (other
than the 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 the opinion of counsel, such
portions of the trust will qualify for this treatment.
Pertinent federal income tax consequences of an investment in the offered
certificates include:
- Each class of Offered Certificates (other than the Class
A-2F Certificates) and the Class A-2F Regular Interest will
constitute "regular interests" in one of the REMICs.
- The regular interests will be treated as newly originated
debt instruments for federal income tax purposes.
- The Class A-2F Certificates will represent an undivided
interest in a portion of the trust fund which is treated as
a grantor trust for federal income tax purposes, which
portion includes the Class A-2F Regular Interest and the
beneficial interests of such class in the interest rate
swap agreement.
- Beneficial owners will be required to report income on the
offered certificates in accordance with the accrual method
of accounting.
- Certain classes of offered certificates may be issued with
original issue discount for federal income tax purposes,
which generally requires you to report income in advance of
the related cash distributions.
- The Class Q Certificates will receive excess interest,
which portion of the Trust will be treated as a grantor
trust 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
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for purchase by persons investing assets of employee benefit plans or individual
retirement accounts. In particular, fiduciaries of plans contemplating purchase
of the Class A-2F Certificates should review the additional requirements for
purchase of Class A-2F Certificates by plans, as discussed under "Certain ERISA
Considerations" in this prospectus supplement.
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.
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.:
<Table>
<Caption>
MOODY'S S&P
------- ----
Class A-1................................................... Aaa AAA
Class A-2................................................... Aaa AAA
Class A-2F.................................................. Aaa AAA
Class B..................................................... Aa2 AA
Class C..................................................... Aa3 AA-
Class D..................................................... A1 A+
Class E..................................................... A2 A
Class F..................................................... A3 A-
</Table>
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 of the Class A-2F Certificates does
not represent any assessment as to whether the floating interest rate on the
certificates will convert to a fixed rate. With respect to the Class A-2F
Certificates, each rating agency is only rating the receipt of interest up to
the fixed per annum rate applicable to the Class A-2F Regular Interest. In
addition, the ratings on the Class A-2F Certificates do not address (i) the
likelihood of receipt by the holders of the Class A-2F Certificates of the
timely distribution of interest in connection with the change of the payment
terms to a fixed rate upon a swap default if The Depository Trust Company is not
given sufficient advance notice of such change in the payment terms or, (ii) in
the event that the swap counterparty defaults on its obligations under the swap
contract, the likelihood that the holders of the Class A-2F Certificates will
experience shortfalls resulting from expenses incurred in enforcing the swap
counterparty's obligations under the swap contract that were not recovered from
the swap counterparty. 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.
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RISK FACTORS
- YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE MAKING AN INVESTMENT
DECISION. IN PARTICULAR, DISTRIBUTION 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.
- 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.
- IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, YOUR INVESTMENT COULD BE
MATERIALLY AND ADVERSELY AFFECTED.
- 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. 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. 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.
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In addition, certain of the mortgage loans
included in the trust fund may have been
refinancings of debt previously held by an
affiliate of one of the mortgage loan sellers.
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:
- a substantial number of the mortgaged real
properties are managed by property managers
affiliated with the respective borrowers;
- these property managers also may manage
and/or franchise additional properties,
including properties that may compete with
the mortgaged real properties; and
- 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:
- the pass-through rate for such certificate;
- 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;
- 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;
- 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; and
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- the extent to which prepayment premiums are
collected and, in turn, distributed on the
class of certificates to which such
certificate belongs.
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.
RISKS RELATED TO PREPAYMENTS AND REPURCHASES
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:
- the terms of the mortgage loans;
- the length of any prepayment lockout period;
- the level of prevailing interest rates;
- the availability of mortgage credit;
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- the applicable yield maintenance charges or
prepayment premiums;
- the master servicer's or special servicer's
ability to enforce those charges or premiums;
- the occurrence of casualties or natural
disasters; and
- 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 Bank of America,
N.A. (as to only those mortgage loans
transferred by it), Bridger Commercial Realty
Finance LLC or Prudential Securities Credit
Corp., LLC (as to only those mortgage loans
transferred by Bridger Commercial Realty
Finance LLC) or Prudential Mortgage Capital
Funding, LLC (as to only those mortgage loans
transferred by it) 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. 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:
- the aggregate amount of distributions on the
offered certificates;
- their yield to maturity;
- the rate of principal payments; and
- 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
S-22
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 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.
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 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.
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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.
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, the trustee or the fiscal agent 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 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.
S-24
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-2F, Class XC or Class XP
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.
SENSITIVITY TO LIBOR CREATES
SPECIAL YIELD
CONSIDERATIONS FOR
INVESTORS IN THE CLASS A-2F
CERTIFICATES............... The yield to investors in the Class A-2F
Certificates will be highly sensitive to
changes in the level of LIBOR. Investors in the
Class A-2F Certificates should consider the
risk that lower than anticipated levels of
LIBOR could result in actual yields that are
lower than anticipated yields on the Class A-2F
Certificates.
In addition, because the pass-through rate on
the Class A-2F Certificates may convert to a
fixed rate in connection with certain events
discussed in this prospectus supplement, the
yield to investors in the Class A-2F
Certificates under such circumstances may not
be as high as that offered by other LIBOR-based
investments which are not subject to such
interest-rate restrictions.
The effect on such investor's yield to maturity
of a level of LIBOR that is higher (or lower)
than the rate anticipated by such investor
during the period immediately following the
issuance of the Class A-2F Certificates may not
to be offset by a subsequent like reduction (or
increase) in the level of LIBOR. The failure by
the swap counterparty in its
S-25
obligation to make payments under the interest
rate swap agreement and the conversion to a
fixed rate that is below the rate that would
otherwise be payable at the floating rate could
have such a negative impact. There can be no
assurance that such a failure by the swap
counterparty, if any, would not adversely
affect the amount and timing of distributions
to the holders of the Class A-2F Certificates.
See "Yield And Maturity Considerations" in this
prospectus supplement.
RISKS ASSOCIATED WITH THE
SWAP CONTRACT MAY AFFECT
CLASS A-2F INVESTORS....... The trust fund will have the benefit of an
interest rate swap agreement relating to the
Class A-2F Certificates from Bank of America,
N.A. Because the Class A-2F Regular Interest
accrues interest at a fixed rate of interest,
the ability of the holders of the Class A-2F
Certificates to obtain the payment of interest
at their pass-through rate will depend on
payment by the swap counterparty pursuant to
the swap contract. See "Description Of The Swap
Contract -- The Swap Counterparty."
If the swap counterparty's long-term and
short-term senior unsecured deposit ratings
fall below "Aa3" and "P-1," respectively, by
Moody's Investors Service, Inc., or if the swap
counterparty's long-term and short-term senior
unsecured debt ratings fall below "AA-" and
"A-1," respectively, by Standard & Poor's
Ratings Services, a division of The McGraw-Hill
Companies, Inc., the swap counterparty will be
required to: (i) give notice to the trust of
the occurrence of such event; and (ii) at the
swap counterparty's option and expense (a) post
collateral or (b) find (and transfer its rights
and obligations under the interest rate swap
agreement to) a replacement swap counterparty
that would not cause another rating agency
trigger event with respect to such replacement
swap counterparty. If the swap counterparty's
long-term senior unsecured deposit rating falls
below "A3" by Moody's Investors Service, Inc.
or if the swap counterparty's long-term senior
unsecured debt rating by Standard & Poor's
Ratings Services, a division of The McGraw-Hill
Companies, Inc., falls below "A-", the swap
counterparty will no longer have the option to
post collateral (as described above), but
rather will be required to use reasonable
efforts to transfer its rights and obligations
to an eligible swap counterparty within 20 days
of the publication date of such ratings
downgrade. In the event that the swap
counterparty fails to either post acceptable
collateral or find (and transfer its rights and
obligations under the interest rate swap
agreement to) an acceptable replacement swap
counterparty, then the trustee will be required
to take such
S-26
actions (following the expiration of any
applicable grace periods), unless otherwise
directed in writing by the holders of 25% of
the Class A-2F Certificates, to enforce the
rights of the trust fund under the swap
contract as may be permitted by the terms
thereof and by the terms of the pooling and
servicing agreement and use any termination
fees received from the swap counterparty to
enter into a replacement interest rate swap
contract on substantially identical terms. If
the costs attributable to entering into a
replacement interest rate swap contract would
exceed the net proceeds of the liquidation of
the swap contract, a replacement interest rate
swap contract will not be entered into and any
such proceeds will instead be distributed to
the holders of the Class A-2F Certificates.
There can be no assurance that the swap
counterparty will maintain its current ratings
or have sufficient assets or otherwise be able
to fulfill its obligations under the swap
contract.
During the occurrence of such a trigger event
and in the event that the swap counterparty
fails to either post acceptable collateral or a
replacement counterparty is not found (and a
replacement swap counterparty has not assumed
the rights and obligations of the interest rate
swap agreement), the Class A-2F Certificate
pass-through rate will convert to a fixed
interest rate. Any such conversion to a fixed
rate might result in a temporary delay of the
holders of the Class A-2F Certificates to
receive payment of the fixed interest
distribution if The Depository Trust Company is
not provided with sufficient notice of the
resulting change in payment terms to the Class
A-2F Certificates in sufficient time prior to
the related Distribution Date.
In addition, if the funds allocated to payment
of the fixed interest distribution of the Class
A-2F Regular Interest are insufficient to make
all required interest payments on the Class
A-2F Regular Interest, the swap counterparty
will only be required to make a proportionately
reduced payment under the swap contract and
holders of the Class A-2F Certificates may
experience an interest shortfall.
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 5 to 15 days. In
some cases, such 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)
S-27
even though the borrower is not technically
delinquent under the terms of its mortgage loan
and the mortgage loans will not be shown as
delinquent in such reports. No interest will
accrue on these advances made by the master
servicer until after the end of the related
grace period.
RECENT TERRORIST ATTACKS MAY
ADVERSELY AFFECT YOUR
INVESTMENT................. On September 11, 2001, the United States was
subjected to multiple terrorist attacks which
resulted in considerable uncertainty in the
world financial markets. 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. For
example, declines in travel or shopping may
adversely affect revenues from hotel and retail
properties, and the attacks could result in
higher costs for insurance or for security,
particularly for larger properties.
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:
- the age, design and construction quality of
the properties;
S-28
- perceptions regarding the safety,
convenience and attractiveness of the
properties;
- the proximity and attractiveness of
competing properties;
- the adequacy of the property's management
and maintenance;
- increases in operating expenses;
- an increase in the capital expenditures
needed to maintain the properties or make
improvements;
- a decline in the financial condition of a
major tenant;
- an increase in vacancy rates; and
- a decline in rental rates as leases are
renewed or entered into with new tenants.
Other factors are more general in nature, such
as:
- national, regional or local economic
conditions, including plant closings,
military base closings, industry slowdowns
and unemployment rates;
- local real estate conditions, such as an
oversupply of retail space, office space or
multifamily housing;
- demographic factors;
- consumer confidence;
- consumer tastes and preferences; and
- retroactive changes in building codes.
The volatility of net operating income will be
influenced by many of the foregoing factors, as
well as by:
- the length of tenant leases;
- the creditworthiness of tenants;
- in the case of rental properties, the rate
at which new rentals occur; and
- 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.
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
S-29
month-to-month leases, and may lead to higher
rates of delinquency or defaults.
Commercial properties and manufactured housing
communities represent security for 66.9% of the
initial pool 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 "-- Risks Particular to
Retail Properties", "-- Risks Particular to
Hotels", "-- Risks Particular to Office
Properties", "-- Risks Particular to
Self-Storage Properties" and "-- Risks
Particular to Manufactured Housing Communities"
below.
POOR PROPERTY MANAGEMENT WILL
LOWER THE PERFORMANCE OF
THE RELATED MORTGAGE
PROPERTY................... The successful operation of a real estate
project depends upon the property manager's
performance and viability. The property manager
is responsible for:
- responding to changes in the local market;
- planning and implementing the rental
structure;
- operating the property and providing
building services;
- managing operating expenses; and
- 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.
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 event that a related
management company is incapable of performing
its duties may affect one or more groups of
mortgaged properties.
S-30
BALLOON LOANS AND ANTICIPATED
REPAYMENT DATE LOANS MAY
PRESENT GREATER RISK THAN
FULLY AMORTIZING LOANS..... One hundred fifteen of the mortgage loans,
which represent 89.8% of the initial pool
balance as of the cut-off date, will have
substantial payments (that is, balloon
payments) due at their respective stated
maturities, in each case unless the mortgage
loan is previously prepaid. In addition, 14 of
the mortgage loans, which represent 9.2% of the
initial pool balance, are mortgage loans with
anticipated repayment dates which have
substantial scheduled principal balances as of
their respective anticipated repayment dates,
unless the mortgage loans are previously
prepaid. One hundred twenty- one of the
mortgage loans, representing in the aggregate
95.4% of the initial pool balance as of the
cut-off date, will have balloon payments (or,
in the case of mortgage loans with anticipated
repayment dates, substantial scheduled
principal balances) due during the period from
September 2010 through September 2011.
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 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, fully amortizing
mortgage loans which accrue interest on an
"actual/360" basis but have 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:
- the prevailing mortgage rates;
- the fair market value of the property;
- the borrower's equity in the related
property;
- the financial condition of the borrower and
operating history of the property;
- the operating history of the property and
occupancy levels of the property;
- tax laws;
- prevailing general and regional economic
conditions; and
- the availability of, and competition for,
credit for multifamily or commercial
properties, as the case may be.
S-31
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.
PARTICULAR PROPERTY TYPES
PRESENT SPECIAL RISKS
MULTIFAMILY PROPERTIES..... Multifamily properties secure 52 of the
mortgage loans, representing 33.1% of the
initial pool balance as of the cut-off date.
Several factors may adversely affect the value
and successful operation of a multifamily
property, including:
- the physical attributes of the apartment
building (e.g., its age, appearance and
construction quality);
- the location of the property (e.g., a
change in the neighborhood over time);
- the ability and willingness of management
to provide adequate maintenance and
insurance;
- the types of services or amenities the
property provides;
- the property's reputation;
- the level of mortgage interest rates (which
may encourage tenants to purchase rather
than lease housing);
- 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;
- the presence of competing properties;
- 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
- state and local regulations which may
affect the building owner's ability to
increase rent to market rent for an
equivalent apartment.
MANUFACTURED HOUSING
COMMUNITIES................ Manufactured housing communities secure 6 of
the mortgage loans representing 2.7% of the
initial pool balance as of the cut-off date.
Significant factors determining the value of
such properties are generally similar to the
factors affecting the value of multifamily
residential properties. In addition, these
S-32
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.
RETAIL PROPERTIES....... Retail properties secure 34 of the mortgage
loans, representing 23.2% of the initial pool
balance as of the cut-off date.
Several factors may adversely affect the value
and successful operation of a retail property,
including:
- 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);
- 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);
- the quality and philosophy of management;
- the safety, convenience and attractiveness
of the property to tenants and their
customers or clients;
- the public perception of the safety of
customers at shopping malls and shopping
centers;
- the need to make major repairs or
improvements to satisfy the needs of major
tenants; and
- 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
S-33
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.
OFFICE PROPERTIES....... Office properties secure 22 of the mortgage
loans, representing approximately 21.7% of the
initial pool balance.
A large number of factors may adversely affect
the value of office properties, including:
- the number and quality of an office
building's tenants;
- 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);
- the desirability of the area as a business
location; and
- the strength and nature of the local
economy (including labor costs and quality,
tax environment and quality of life for
employees).
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.
INDUSTRIAL AND
WAREHOUSE PROPERTIES....... Industrial and warehouse properties secure 11
of the mortgage loans representing 7.1% of the
initial pool balance as of the cut-off date.
Among the significant factors determining the
value of industrial and warehouse properties
are:
- the quality of tenants;
- building design and adaptability (e.g.,
clear heights, column spacing, zoning
restrictions, number of bays and bay
depths, divisibility and truck turning
radius); and
- 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
S-34
property may be difficult to release to another
tenant or may become functionally obsolete
relative to newer properties.
HOTELS.................. Properties operated as hotels secure 4 of the
mortgage loans, representing approximately
10.1% of the initial pool balance as of the
cut-off date.
Various factors may adversely affect the
economic performance of a hotel, including:
- 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);
- the construction of competing hotels or
resorts;
- continuing expenditures for modernizing,
refurbishing, and maintaining existing
facilities prior to the expiration of their
anticipated useful lives;
- a deterioration in the financial strength
or managerial capabilities of the owner and
operator of a hotel; and
- changes in travel patterns 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.
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. In addition, the franchise license
may be owned by an entity operating the hotel
and not the borrower or, if the franchise
license is owned by the borrower, the
transferability of the related franchise
license agreement may be restricted and, in the
event of a foreclosure on a hotel property, the
mortgagee may not have the right to use the
franchise license without the franchisor's
consent. Furthermore, the ability of a hotel to
attract customers, and some of such hotel's
revenues, may depend in large part on its
having a liquor license. Such a license may not
be transferable, and there can be no assurance
that a new license could be obtained promptly
or at all.
Given concerns over travel resulting from the
recent terrorist attacks, Prudential Mortgage
Capital Funding, LLC has agreed to provide a
limited indemnity with respect to the
S-35
mortgage loan secured by the Outrigger Reef
Hotel. Among other things, the indemnity
obligation is subject to a two-year time limit,
earlier termination in the event certain debt
coverage tests are met and addresses only
certain prepayment premiums, up to a maximum
amount equal to 10% of the outstanding
principal balance of such loan as of the
cut-off date. See "Description of the
Certificates -- Distributions -- Distributions
of Prepayment Premiums" in this prospectus
supplement for a more detailed description of
such indemnification obligation.
SELF-STORAGE
PROPERTIES................... Self-storage properties secure 4 of the
mortgage loans, representing approximately 1.5%
of the aggregate principal balance of the pool
of mortgage loans 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
- decreased demand;
- competition;
- age of improvements; or
- 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.
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
S-36
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 one mortgage
loan representing 1.4% of the initial pool
balance has existing mezzanine debt.
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), 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.
Moreover, the need to service additional debt
may reduce the cash flow available to the
borrower to operate and maintain the mortgaged
property.
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.
S-37
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 or had a transaction
screen performed in lieu of a Phase I 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 --
- the circumstances or conditions were
subsequently remediated in all material
respects; or
- generally one or more of the following was
the case:
1. a party not related to the related
borrower was identified as a responsible
party for such conditions or
circumstances;
S-38
2. the related borrower was required to
provide additional security and/or 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 conditions or circumstances;
4. such conditions or circumstances were
investigated further and based upon such
additional investigation, an environmental
consultant recommended no further
investigation or remediation;
5. the expenditure of funds reasonably
estimated to be necessary to effect such
remediation was not greater than two
percent of the outstanding principal
balance of the related mortgage loan;
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 and
conditions; or
9. a responsible party 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 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.
S-39
There can be no assurance that --
- the environmental testing referred to above
identified all material adverse environmental
conditions and circumstances at the subject
properties,
- the recommendation of the environmental
consultant was, in the case of all identified
problems, the appropriate action to take,
- 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
- 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" herein, the mortgage pool
includes 1 set of cross-collateralized mortgage
loans, which represent 0.4% of the initial pool
balance as of the cut-off date.
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
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:
- such borrower was insolvent when granted
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
- 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.
S-40
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:
- subordinate all or part of the pertinent
mortgage loan to existing or future
indebtedness of that borrower;
- recover payments made under that mortgage
loan; or
- 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 such group of
affiliated borrowers are obligors on mortgage
loans representing more than 5.8% of the
initial pool 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 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
S-41
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:
- 31 of the mortgaged properties, which
constitute security for 17.3% of the
initial pool balance, are located in
California.
- 16 of the mortgaged properties, which
constitute security for 9.2% of the initial
pool balance, are located in Texas.
- 5 of the mortgaged properties, which
constitute security for 7.9% of the initial
pool balance, are located in North
Carolina.
- 1 of the mortgaged properties, which
constitutes security for 7.7% of the
initial pool balance, is located in Hawaii.
- 8 of the mortgaged properties, which
constitute security for 5.9% of the initial
pool balance, are located in Washington.
No more than 4.8% of initial pool balance as of
the cut-off date is secured by mortgaged
properties located in any particular county in
California.
S-42
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:
- 38 mortgage loans have cut-off date
balances that are higher than the average
cut-off date balance.
- The largest single mortgage loan, by
cut-off date balance, represents
approximately 7.7% of the initial pool
balance, and the single group of
cross-collateralized mortgage loans
represents in the aggregate approximately
0.4% of the initial pool balance.
- The 10 largest mortgage loans have cut-off
date balances that represent in the
aggregate approximately 33.1% of the
initial pool 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 XC, Class XP, Class R-I
and Class R-II) 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.
PREPAYMENT PREMIUMS PRESENT
SPECIAL RISKS.............. Approximately 84.9% of the mortgage loans (by
initial pool balance) as of the cut-off date
generally permit defeasance only, and prohibit
any voluntary principal prepayment until 2 to 7
months prior to the maturity date of the
mortgage loan or the anticipated repayment date
with respect to the mortgage loans having
anticipated repayment dates. In addition, one
mortgage loan, representing 3.5% of the initial
pool balance, as of the cut-off date, (a) has
an initial lock-out period, (b) is then subject
after expiration of the initial lock-
S-43
out period to a period where the borrower has
an option either to (i) prepay the loan subject
to a prepayment premium or (ii) defease the
loan, and (c) becomes thereafter prepayable
without an accompanying prepayment premium
prior to its maturity. The remaining
approximately 11.6% of the mortgage loans (by
initial pool balance) permit voluntary
principal prepayments during certain periods
only upon the payment of 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". 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" herein 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", "Servicing of the
Mortgage Loans -- Sale of Defaulted Mortgage
Loans" and "Description of the
Certificates -- Termination" in this prospectus
supplement.
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.
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We also note the following with respect to
prepayment premiums:
- 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.
- The special servicer may waive a prepayment
premium in connection with obtaining a
pay-off of a defaulted mortgage loan.
- 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 Bank of
America, N.A. with respect to those
mortgage loans transferred by it, by
Bridger Commercial Realty Finance LLC or
Prudential Securities Credit Corp., LLC,
with respect to those mortgage loans
transferred by Bridger Commercial Realty
Finance LLC and/or by Prudential Mortgage
Capital Funding, LLC with respect to those
mortgage loans transferred by it.
- 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.
- 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.
- 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" herein 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", "Servicing of the
Mortgage Loans -- Sale of Defaulted Mortgage
Loans" and "Descrip-
S-45
tion of the Certificates -- Termination" 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............... Five mortgage loans, representing approximately
5.4% of the initial pool balance as of the
cut-off date are secured primarily 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.
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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:
- A review of the available credit and legal
files relating to the mortgage loans.
- Inspections of each mortgaged property with
respect to the applicable mortgage loan
undertaken by or on behalf of the
applicable mortgage loan seller.
- Generally, unaudited operating statements
for the mortgaged properties related to the
mortgage loans supplied by the borrowers.
- 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).
- Engineering reports and environmental
reports for the mortgaged properties
related to the mortgage loans that
generally were prepared in connection with
origination.
- Information supplied by entities from which
Bank of America, N.A., Bridger Commercial
Realty Finance LLC or Prudential Mortgage
Capital Funding, LLC 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 27 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
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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 re-lease
the space; and substantial capital costs may be
incurred to make the space appropriate for
replacement tenants. In this regard, see
"-- Risks Related to Retail 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:
- space in the mortgaged properties could not
be leased or re-leased;
- tenants were unable to meet their lease
obligations;
- a significant tenant were to become a debtor
in a bankruptcy case; or
- 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. 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
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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.
MORTGAGED PROPERTIES WITH
MULTIPLE TENANTS MAY
INCREASE RE-LEASING COSTS
AND REDUCE CASH FLOW....... If a mortgaged property has multiple tenants,
re-leasing 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.
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...... Four of the mortgage loans secured by hotel
properties, representing approximately 10.1% of
the initial principal balance of the pool of
mortgage loans as of the cut-off date, are
affiliated with a franchise or hotel management
company through a franchise or management
agreement. The perform-
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ance of a hotel property affiliated with a
franchise or hotel management company depends
in part on:
- the continued existence and financial
strength of the franchisor or hotel
management company;
- the public perception of the franchise or
hotel chain service mark; and
- 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 franchise license
agreements 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.
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, Oregon, Texas, 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,
S-50
floods and hurricanes) than other states. The
loans do not generally require the borrowers to
maintain earthquake or windstorm insurance.
As a result of any of the foregoing, the amount
available to make distributions on your
certificates could be reduced.
ZONING LAWS AND USE
RESTRICTION, 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
S-51
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. 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 "-- Zoning Compliance and
Use Restrictions" above.
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.
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
sellers, and the applicable 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 by a representation or warranty. In
S-52
addition, we can give no assurance that the
applicable 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.
OTHER RISKS
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-53
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The pool of mortgage loans (the "Mortgage Pool") consists of 134
multifamily and commercial mortgage loans. Forty-three of the Mortgage Loans
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"), the parent
of BCRF). The Mortgage Loans described in the immediately preceding sentence are
referred to in this prospectus supplement as the "BOA Originated Mortgage
Loans". Twenty-four mortgage loans were acquired by Bank of America from Bridger
(such mortgage loans, the "BOA-Bridger Mortgage Loans" and together with the BOA
Originated Mortgage Loans, the "Bank of America Mortgage Loans"). The Bank of
America Mortgage Loans represent approximately 51.6% of the Initial Pool
Balance. Fifty-two multifamily and commercial mortgage loans were acquired by
Prudential Mortgage Capital Funding, LLC ("PMCF") from Prudential Mortgage
Capital Company, LLC ("PMCC") or Prudential Mortgage Capital Company, Inc. and
represent 43.9% of the Initial Pool Balance (the "PMCF Mortgage Loans"). Fifteen
multifamily and commercial mortgage loans (which exclude the BOA-Bridger
Mortgage Loans) were acquired by Bridger Commercial Realty Finance LLC ("BCRF")
from Bridger, who either directly originated such Mortgage Loans or acquired
them from third party originators (generally comprised of commercial banks or
affiliates of commercial banks) and represent 4.6% of the Initial Pool Balance
(the "Bridger Mortgage Loans"; and collectively with the Bank of America
Mortgage Loans and the PMCF Mortgage Loans, the "Mortgage Loans"). The Mortgage
Loans have an aggregate Cut-off Date Balance of $938,283,211 (the "Initial Pool
Balance"), subject to a variance of plus or minus 5%. 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 October 1, 2001 (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 herein with respect to the Mortgage Loans is
provided on an approximate basis. All weighted average information provided
herein with respect to the Mortgage Loans reflects weighting by related Cut-off
Date Balance. All percentages of the Mortgage Pool, or of any specified
sub-group thereof, referred to herein without further description are
approximate percentages of the Initial Pool Balance.
Each Mortgage Loan is evidenced by a promissory note (a "Mortgage Note")
and secured by a mortgage, deed of trust or other similar security instrument (a
"Mortgage") that creates a first mortgage lien on a fee simple and/or leasehold
interest in real property (a "Mortgaged Property"). Each Mortgaged Property is
improved by (i) a manufactured housing community or complex consisting of five
or more rental living units or one or more apartment buildings (a "Multifamily
Mortgaged Property"; and any Mortgage Loan secured thereby, a "Multifamily
Loan") (58 Mortgage Loans, representing 35.7% of the Initial Pool Balance), or
(ii) a retail shopping mall or center, an office building or complex, a hotel,
land, an industrial or warehouse building or a self-storage facility (a
"Commercial Mortgaged Property"; and any Mortgage Loan secured thereby, a
"Commercial Loan") (76 Mortgage Loans, representing 64.3% of the Initial Pool
Balance).
One set of the Mortgage Loans contains Mortgage Loans (the
"Cross-Collateralized Mortgage Loans") that are, solely as among such Mortgage
Loans in such particular set, cross-defaulted and cross-collateralized with each
other. This set represents 0.4% of the Initial Pool 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, which may include a subordinate mortgage 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 -- Limitations on Enforceability
of Cross-Collateralization" 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
S-54
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 insured
or guaranteed by any person or entity, governmental or otherwise. See "Risk
Factors -- Risks Related to the Mortgage Loans -- Limited Recourse" in this
prospectus supplement.
Thirty-one of the Mortgaged Properties, which constitute security for
approximately 17.3% of the Initial Pool Balance, are located in California; 16
of the Mortgaged Properties, which constitute security for 9.2% of the Initial
Pool Balance, are located in Texas; 5 of the Mortgaged Properties, which
constitute security for 7.9% of the Initial Pool Balance, are located in North
Carolina; 1 Mortgaged Property, which constitutes security for 7.7% of the
Initial Pool Balance, is located in Hawaii; and 8 of the Mortgaged Properties,
which constitute security for 5.9% of the Initial Pool Balance, are located in
Washington. The remaining Mortgaged Properties are located throughout 28 other
states, with no more than 4.9% of the Initial Pool Balance secured by Mortgaged
Properties located in any such other jurisdiction.
On or about the Delivery Date, Bank of America will transfer the Bank of
America Mortgage Loans, BCRF will transfer the Bridger Mortgage Loans and PMCF
will transfer the PMCF Mortgage Loans, to or at the direction of the Depositor,
without recourse, to the Trustee for the benefit of the Certificateholders. See
"-- The Mortgage Loan Sellers" and "-- Assignment of the Mortgage Loans;
Repurchases" below.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. Each of the Mortgage Loans provides for scheduled payments of
principal and interest ("Monthly Payments") to be due on the first day of each
month (as to each such Mortgage Loan, the "Due Date") except that, as described
below, each ARD Loan may require that certain additional amounts be paid each
month following its applicable Anticipated Repayment Date. In addition, 16
Mortgage Loans representing 12.1% of the Initial Pool 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, each of the ARD
Loans will accrue interest at a higher rate after its respective Anticipated
Repayment Date. As used in this prospectus supplement, the term "Mortgage Rate"
does not include the incremental increase in the rate at which interest may
accrue on the ARD Loans after such date. As of the Cut-off Date, the Mortgage
Rates of the Mortgage Loans ranged from 6.900% per annum to 9.000% per annum,
and the weighted average Mortgage Rate of the Mortgage Loans was 7.519%. No
Mortgage Loan, other than an ARD Loan, permits negative amortization or the
deferral of accrued interest.
One hundred thirty four Mortgage Loans (the "Actual/360 Mortgage Loans"),
which represent 100% of the Initial Pool Balance, 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 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.
Hyperamortization. Seven of the Mortgage Loans (each a "Bank of America
ARD Loan"), which represent 3.7% of the Initial Pool Balance, provide for
changes in their payments and their accrual of interest if they are not paid in
full by a specified date (the "Anticipated Repayment Date"). Commencing on the
Anticipated Repayment Date, each Bank of America ARD Loan generally will bear
interest at a fixed per annum rate (the "Bank of America Revised Rate") equal to
its Mortgage Rate plus 1% in the first two years following the Anticipated
Repayment Date and 2.5% thereafter until final maturity. Interest received on a
S-55
Bank of America ARD Loan after its Anticipated Repayment Date will be applied as
follows: first, to the payment of all interest due but not yet paid at the
Mortgage Rate in effect immediately prior to the Anticipated Repayment Date,
second, to the payment of interest due but not yet paid at the Excess Interest
Rate, third, to the payment of Default Interest, if any, due in respect of the
amount described in priority first, and fourth, to the payment of Default
Interest, if any, due in respect of the amount described in priority second.
Amounts described in priorities second and fourth are referred to in this
prospectus supplement as "Bank of America Excess Interest". "Bank of America
Excess Interest Rate" shall mean the difference in rate of the Revised Rate over
the Mortgage Rate. 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 ("Bank of America 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 such Bank of America ARD Loan as called for in the related loan
documents. Seven of the Mortgage Loans (each a "PMCF ARD Loan"), which represent
5.5% of the Initial Pool Balance, provide for changes in their payments and
their accrual of interest if not paid in full by each such PMCF ARD Loan's
Anticipated Repayment Date. Commencing on the Anticipated Repayment Date, each
PMCF ARD Loan generally will bear interest at a fixed per annum rate (the "PMCF
Revised Rate") equal to its Mortgage Rate plus 2%, or the interest rate
applicable for certain non-callable U.S. treasury obligations of comparable
terms plus 2%, whichever is greater. The interest accrued at the excess of the
PMCF Revised Rate over the Mortgage Rate (such interest, the "PMCF Excess
Interest"; and such difference in rate, the "PMCF Excess Interest Rate") will be
deferred until the principal of such PMCF ARD Loan is paid in full and, except
where limited by applicable laws, will itself accrue interest at the Revised
Rate. Non-payment of such PMCF Excess Interest will not constitute a default
under such PMCF ARD Loan prior to the related maturity date. From and after the
Anticipated Repayment Date, in addition to paying interest (at the Mortgage
Rate) and principal (based on the amortization schedule), the borrower generally
will be required to apply all remaining monthly cash flow from the related
Mortgage Property, if any, after paying all permitted operating expenses and
capital expenditures, to pay principal on the PMCF ARD Loan until the PMCF ARD
Loan is paid in full. As used in this prospectus supplement, (i) "ARD Loan"
shall mean collectively each of the Bank of America ARD Loans and the PMCF ARD
Loans; (ii) "Revised Rate" shall mean collectively the Bank of America Revised
Rate and the PMCF Revised Rate; (iii) "Excess Interest" shall mean collectively
the Bank of America Excess Interest and the PMCF Excess Interest; and (iv)
"Excess Interest Rate" shall mean collectively the Bank of America Excess
Interest Rate and the PMCF Excess Interest Rate.
Amortization of Principal. One hundred fifteen Mortgage Loans, which
represent 89.8% of the Initial Pool 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. Five Mortgage
Loans, which represent 1.1% of the Initial Pool Balance, are fully amortizing
loans. The remaining fourteen Mortgage Loans, which represent 9.2% of the
Initial Pool Balance, are ARD loans.
The original term to stated maturity of each Mortgage Loan, or in the case
of each ARD Loan, to its Anticipated Repayment Date was between 60 and 240
months. The original amortization schedules of the Mortgage Loans (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. As of the Cut-off Date,
the remaining terms to stated maturity of the Mortgage Loans, or in the case of
each ARD Loan, to its Anticipated Repayment Date will range from 56 to 237
months, and the weighted average remaining term to stated maturity of the
Mortgage Loan, or in the case of each ARD Loan, to its Anticipated Repayment
Date will be 116 months. As of the Cut-off Date, the remaining amortization
terms of the Mortgage Loans (calculated on a 30/360 Basis for the accrual of
interest) will range from 119 to 360 months, and the weighted average remaining
amortization term (calculated on a 30/360 Basis for purposes of the accrual of
interest) of the Mortgage Loans will be 326 months. See "Risk Factors -- Risks
Related to the Mortgage Loans -- Balloon Payments and ARD Loans" in this
prospectus supplement.
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Prepayment Provisions. All of the Mortgage Loans provided as of
origination either (a) that voluntary prepayments were prohibited until a period
generally 2 to 7 months before the final payment date of such Mortgage Loan,
during which voluntary prepayments can be made without penalty, or (b) for a
sequence of three periods as follows:
(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 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 26 months to 208
months, with a weighted average remaining Lock-out Period of 102 months. As of
the Cut-off Date, the Open Period for each Mortgage Loan ranged from 2 months to
7 months prior to stated maturity or, in the case of an ARD Loan, the
Anticipated Repayment Date, with a weighted average Open Period of 4 months.
Prepayment Premiums on the Mortgage Loans are generally calculated either 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) or as a
percentage (which may decline over time) 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 herein, 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"
herein. 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. One hundred two Mortgage Loans, representing 84.9% of the
Initial Pool 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 from the lien of the related Mortgage (a "Defeasance
Option"). One Mortgage Loan, which represents 3.5% of the Initial Pool Balance:
(a) has an initial Lock-out Period, (b) is then subject after expiration of the
initial Lock-out Period to a period where the borrower has an option either to
(i) prepay such Mortgage Loan subject to a Prepayment Premium or (ii) defease
such Mortgage Loan, and (c) is subject to an Open Period thereafter. 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 purchase U.S. government obligations (or in some instances
the applicable Mortgage Loan documents may require the borrower to deliver
the U.S. government obligations referenced in this clause (3)) providing
payments (a) on or prior to, but as close as possible to, all successive
scheduled payment dates from the Release Date to the related maturity date,
(b) in amounts at least equal to the scheduled payments due on such dates
under the Mortgage Loan or the defeased amount thereof in the case of a
partial defeasance and
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(c) any costs and expenses incurred in connection with the purchase of such
U.S. government obligations.
In addition, the borrower must deliver a security agreement granting the
Trust Fund a first priority lien on the 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 U.S. government
obligations (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.
"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 consent of the holder of the
Mortgage. See "-- Additional Mortgage Loan Information -- Subordinate Financing"
herein. Certain of the Mortgage Loans permit transfer of the related Mortgaged
Property if certain specified conditions are satisfied or if the transfer is to
a borrower reasonably acceptable to the lender. The Master Servicer or the
Special Servicer, as applicable, will determine, in a manner consistent with the
servicing standard described herein under "Servicing of the Mortgage
Loans -- General" and with the REMIC provisions, whether to exercise any right
the holder of any Mortgage 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, however,
that neither the Master Servicer nor the Special Servicer shall 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 unless: if the then Stated
Principal Balance of any Non-Specially Serviced Mortgage Loan exceeds $2,500,000
in the case of the Master Servicer, or any Specially Serviced Mortgage Loan, in
the case of the Special Servicer, the Directing Certificateholder shall have
approved such waiver and consent which approval will be deemed given if not
denied within ten (10) Business Days after the Master Servicer or the Special
Servicer, as applicable, has given 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; and provided, further, neither the Master
Servicer nor the Special Servicer may 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. 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.
SIGNIFICANT MORTGAGE LOANS
Certain of the larger Mortgage Loans or groups of 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.
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The following table and summaries describe the 5 largest Mortgage Loans in
the Mortgage Pool by Cut-off Date Balance:
<Table>
<Caption>
CUT-OFF LTV
CUT-OFF DATE RATIO AT
DATE PROPERTY LTV MATURITY UNDERWRITING MORTGAGE
LOAN NAME BALANCE TYPE RATIO OR ARD DSCR RATE
--------- ----------- -------- ------- -------- ------------ --------
Outrigger Reef Hotel................. $71,791,000 Hotel 36.3% 29.2% 2.12x 6.910%
Market Square........................ $49,800,980 Retail 43.7% 28.0% 1.80x 7.950%
Milwaukee Center Office Tower........ $32,959,452 Office 63.4% 56.1% 1.52x 7.435%
Pacific Professional Building........ $29,971,989 Office 70.2% 59.8% 1.41x 7.400%
Nokia Office Building................ $23,304,507 Office 69.8% 57.3% 1.26x 7.630%
</Table>
Outrigger Reef Hotel Loan
The Loan. The Mortgage Loan (the "Outrigger Reef Hotel Loan") is secured
by a first mortgage encumbering an 873-room full-service hotel located in
Honolulu, Hawaii. The Outrigger Reef Hotel Loan represents approximately 7.7% of
the Initial Pool Balance. Originated on March 29, 2001, the Outrigger Reef Hotel
Loan has a principal balance, as of the Cut-off Date, of $71,791,000. The loan
was made to ORF, LLC, a special purpose, bankruptcy remote entity, with an
independent director and which delivered a nonconsolidation opinion in
connection with the origination of the Mortgage Loan.
The loan has a remaining term of 114 months and matures on April 1, 2011.
The loan may not be prepaid prior to January 1, 2011. The loan is subject to
defeasance with United States government obligations beginning on the date that
is four years following May 1, 2001, but in no event earlier than 25 months
after the Delivery Date.
The Property. The improvements were originally constructed in two phases
in 1957 and 1964-65, and consist of four structures ranging from one to 17
stories in height. The buildings are situated on a 2.5-acre parcel of land
fronting Waikiki Beach, and underwent extensive renovations in the 1990s. The
basement is used for parking, the ground floor contains retail and common areas,
and the upper floors house the guest units. In addition to the guestrooms, there
are 32 commercial tenants at the facility, including four on-site restaurants
and a spa.
As of March 31, 2001, the borrower reported an occupancy level of 81.3% on
a trailing 12 month basis, with an average daily rate of $124.52.
Escrows. In lieu of funded escrows for real estate taxes and insurance,
the borrower provided unconditional, irrevocable letters of credit. The borrower
is required to make monthly deposits to a replacement reserve.
Lock Box Account. A lock box was established at closing. All rents and
profits shall be remitted to a lock box (the "First Lock Box") in the name of
the borrower and controlled by the originator. Proceeds will then be forwarded
directly to a separate account under the name and control of the borrower until
the earlier to occur of: (i) an event of default under the related mortgage loan
document or (ii) the net operating income debt service coverage ratio falls
below 1.75x. Upon the occurrence of either of these events, all funds will be
instead transferred from the First Lock Box into an account controlled by the
originator and disbursed as set forth in the mortgage note.
Property Management. The subject is managed by Outrigger Hotels Hawaii, an
affiliate of the borrowing entity and loan sponsor, Outrigger Enterprises, Inc.
Established in 1947, Outrigger Enterprises, Inc. currently operates or has under
development 35 hotels and resort condominiums throughout Hawaii and the Pacific
region, representing approximately 10,400 hotel rooms and condominium units.
Outrigger Hotels Hawaii owns the majority of the company's hotels, and manages
all of the company's directly owned and third party owned hotels in Hawaii and
the Pacific Area.
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Market Square Loan
The Loan. The Mortgage Loan (the "Market Square Loan") is secured by a
first mortgage encumbering a furniture showroom complex in High Point, North
Carolina. The Market Square Loan represents approximately 5.3% of the Initial
Pool Balance. Originated on July 11, 2001, the Market Square Loan has a
principal balance, as of the Cut-off Date of $49,800,980. The loan was made to
Market Square II, LLC, a special purpose, bankruptcy remote entity, with two
independent managers and which delivered a nonconsolidation opinion in
connection with the origination of the Mortgage Loan.
The loan has a remaining term of 118 months and matures on August 1, 2011.
The loan may not be prepaid prior to, and including, January 1, 2011. The loan
is subject to defeasance with United States government obligations beginning two
years after the Delivery Date.
The Property. Situated on 8.8 acres of land, the property comprises a
furniture showroom complex covering one-city block with a total of 891,417
square feet of net rentable area, consisting of 58% showroom space and 42% trade
show space. The structure was constructed in 1902 as a furniture factory, and
was converted to a furniture showroom in 1982. Over its history, there have been
eleven major renovations with the last being completed in 2000, which added
approximately 330,000 square feet of showroom space. The complex consists of
three sections known as the Tower Building (15 stories), the Market Building (5
stories), and the Market Suites Building (3 stories).
There are a total of 171 tenant spaces consisting of permanent and
temporary showrooms. Showrooms are leased to individual tenants for an average
lease term of approximately five years. As of the date of origination, the
permanent space was 99.66% occupied by tenants such as Century Furniture,
Tomlinson, Old Hickory, Waverly and Stark Carpet Corp., and trade show space was
100% leased under a 14-year master lease with Merchandise Mart Properties, Inc.
("MMPI"). This space is leased to exhibitors, via license agreements, and is
typically leased six months in advance for the next one or two trade shows. In
addition, Market Square houses The String & Splinter Club, a 400-member dining
and meeting facility, the Square One Restaurant and the Boiler Room Cafe.
Escrows. Tax and replacement reserve escrows are in place. Advance rent
escrow has been put in place. The insurance reserve has been waived due to the
availability of a blanket insurance policy.
Lock Box Account. A cash management account was established by the
borrower and the manager and will be maintained during the term of the proposed
loan. All rents, revenues and receipts of the eligible property are directly
deposited in to a clearing account and funds from the clearing account are
periodically swept into a deposit account controlled by the originator. Debt
service and required escrows will be funded from this deposit account.
Property Management. The complex is managed by MMPI, an affiliate of the
Vornado Realty Trust. MMPI manages approximately seven million square feet,
including five other showroom buildings and a hotel in High Point.
Milwaukee Center Office Tower Loan
The Loan. The Mortgage Loan (the "Milwaukee Center Office Tower Loan") is
secured by a first mortgage encumbering a 28-story office building in the
central business district of Milwaukee, Wisconsin. The Milwaukee Center Office
Tower Loan represents approximately 3.5% of the Initial Pool Balance. Originated
on June 1, 2001, the Milwaukee Center Office Tower Loan has a principal balance,
as of the Cut-off Date, of $32,959,452. The loan was made to GLR Milwaukee
Center, LLC, a special purpose, bankruptcy remote entity, with an independent
manager and which delivered a nonconsolidation opinion in connection with the
origination of the Mortgage Loan.
The loan has a remaining term of 116 months and matures on June 1, 2011.
The loan may not be prepaid prior to, and including, June 1, 2005. The loan also
is subject to defeasance with United States government obligations beginning on
July 1, 2005.
S-60
The Property. The property was built in 1988, contains 373,625 net
rentable square feet and is situated on a 0.61-acre site in the heart of
downtown Milwaukee. The property is part of a larger complex that includes a
hotel, restaurants and retail stores, and is served by an underground parking
facility with 858 spaces, of which the Office Tower has the right to use 370 of
the parking spaces.
As of the date of origination, the property was 98% occupied by 49 tenants,
including Bank of New York Clearing, a securities clearing house (99,163 square
feet, 26.5%); Ernst & Young LLP, (58,859 square feet, 15.8%); Legion Insurance,
a Philadelphia-based insurance company (58,642 square feet, 15.7%); Davis &
Kuelthau, a Milwaukee law firm (38,646 square feet, 10.4%); Equitable Life
(11,816 square feet, 3.2%) and Merrill Lynch (7,009 square feet, 1.9%).
Escrows. Replacement reserve escrows are in place. In lieu of funded
escrows for real estate taxes and insurance, a principal of the borrower has
recourse liability for nonpayment. In addition, the borrower will make monthly
deposits for potential tenant improvements and leasing commissions.
Lock Box Account. In the event of the failure of the borrower to make any
of the required monthly payments for debt service and escrows, all building
revenues and receipts will be swept into a cash management account controlled by
the originator.
Property Management. The building is managed by Great Lakes Real Estate
Investment Trust LP, a 20-year-old partnership managing all the properties of
Great Lakes Real Estate Investment Trust. The partnership manages 36 properties
with a total of 5.2 million square feet of space.
Pacific Professional Building Loan
The Loan. The Mortgage Loan (the "Pacific Professional Building Loan") is
secured by a first mortgage encumbering a five-story medical office building in
San Francisco, California. The Pacific Professional Building loan represents
approximately 3.2% of the Initial Pool Balance. Originated on August 31, 2001,
the Pacific Professional Building Loan has a principal balance, as of the
Cut-off Date of $29,971,989. The loan was made to Pan-Med Enterprises, a
California limited partnership, which is a special purpose, bankruptcy remote
entity and which delivered a nonconsolidation opinion in connection with the
origination of the Mortgage Loan.
The loan has a remaining term of 119 months and matures on September 1,
2011. The loan may not be prepaid prior to, and including, October 1, 2006. If
such prepayment occurs after the expiration of the period referenced in the
immediately preceding sentence, but before March 1, 2011, the borrower will be
required to pay to the originator a prepayment premium equal to the greater of
(A) 1% of the principal amount prepaid, or (B) yield maintenance in an amount
sufficient to equal the net present value of the future cash flow from the loan
had such prepayment not occurred, discounted at the treasury rate (interpolated
based on the yield on the U.S. Treasury issue having U.S. Treasury issue with a
maturity date closest to the maturity date for the loan); The mortgage note may
be prepaid at par on or after March 1, 2011.
Ownership Interest. The borrower has a leasehold interest in the property
under a ground lease that continues through December 31, 2036, and has two
10-year extension options. The fee interest is fully subordinated to the
leasehold mortgage, and annual ground rent payments are $100 through December
31, 2024. Thereafter, the fixed rent shall be the fair market rental value of
the land as determined by an appraiser.
The Property. Constructed in 1985 on a 0.74-acre parcel of land, the
improvements consist of a medical office building that contains 110,876 square
feet of net rentable space, as well as a three-level subterranean parking
garage. The building is connected to the Pacific Campus of the California
Pacific Medical Center.
As of June 30, 2001, the property was 100% leased to 63 tenants,
approximately 81% of which have an ownership interest in the borrowing entity.
Major tenants at the facility include: Pacific Eye Associates, which occupies
8,351 square feet (7.53%), Pacific Internal Medicine Associates, which occupies
two suites totaling 6,376 square feet (5.75%), and California Pacific
Cardiology, which occupies 5,010 square feet (4.52%).
S-61
Escrows. Tax, insurance and replacement reserve escrows are in place. In
addition, a reserve account for tenant improvements and leasing commissions will
be funded via a cash sweep should the debt service coverage ratio fall below a
predetermined threshold.
Lock Box Account. The loan is structured with a lockbox that becomes
effective on the earlier to occur of (i) an event of default, or (ii) the debt
service coverage ratio falling below a predetermined threshold (the "Coverage
Trigger"). If the lockbox becomes effective due to a breach of the Coverage
Trigger, 100% of the excess cash flows will be swept to the reserve for tenant
improvements and leasing commissions. Should the debt service coverage ratio
thereafter reach a higher predetermined threshold, payments to the lockbox shall
be suspended and all funds then remaining in the reserve for tenant improvements
and leasing commissions shall be returned to the borrower.
Property Management. The building is managed by Pan-Med, Ltd., the
borrowing entity's managing general partner (20%). Pan-Med, Ltd. has been
actively managing the property since its construction in 1985.
Nokia Office Building Loan
The Loan. The Mortgage Loan (the "Nokia Office Building Loan") is secured
by a first mortgage encumbering a three-story office building located in San
Diego, California. The Nokia Office Building Loan represents approximately 2.5%
of the Initial Pool Balance. Originated on May 9, 2001, the Nokia Office
Building Loan has a principal balance, as of the Cut-off Date, of $23,304,507.
The loan was made to NK San Diego LLC, a California limited liability company,
which is a special purpose, bankruptcy remote entity, with an independent
director and which delivered a nonconsolidation opinion in connection with the
origination of the Mortgage Loan.
The loan has a remaining term of 116 months and matures on June 1, 2011.
The loan may not be prepaid prior to, and including, February 1, 2011. The loan
is subject to defeasance with United States government obligations beginning the
later of two years after the Delivery Date or three years from origination.
The Property. Constructed in 2000 on 6.4 acres of land, the 135,000 square
foot building is a steel frame structure with exterior walls of precast concrete
panels and aluminum high performance glass windows. The building has a security
system, which includes keypad/security card building access and electronically
controlled main entrance doors. Situated within an 120-acre master planned
business park known as the Scripps Northridge Corporate Center, the property is
approximately nineteen miles north of the San Diego International Airport and
located along the Interstate 15 corridor in an area known as Scripps-Miramar
Ranch.
The property is 100% leased to Nokia Mobile Phones, Inc. ("Nokia") for ten
years, expiring on August 31, 2010. The lease is structured on a triple net
basis with fixed rent increases of 5% every other year, and includes three
5-year renewal options. The tenant is required to provide twelve months notice
to exercise the first renewal option. Nokia Corporation guarantees the subject
lease.
Escrows. Escrows for taxes, insurance and replacement reserves are in
place. Commencing on June 1, 2007, the property's monthly excess cash flow will
be placed in a debt service reserve account. At the originator's sole
discretion, a portion of the excess cash flow may be placed in a reserve for
tenant improvement and leasing commission expenses. In the event Nokia does not
renew its lease, there is expected to be sufficient funds in the reserve
accounts to pay the remaining mortgage payments when due and provide
approximately $2.4 million toward retenanting expenses.
Lock Box Account. A lock box for deposit of rent payments is in place, and
controlled by the borrower during the first 73 months of the loan term.
Thereafter, the originator will control the lock box and the funds will be
disbursed each month to pay the mortgage payment and reimburse scheduled
operating expenses paid by the borrower. All excess cash flow will be deposited
into an account for the debt service reserve or for tenant improvements and
leasing commission reserves, as applicable.
Property Management. The property is managed by Matsushita International
Corporation. The property management company was formed in 1990 and manages all
of the principal's investment properties.
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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, no Mortgage Loan 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 27 months prior to
the Cut-off Date.
Tenant Matters. Sixty-Five of the retail, office, industrial and warehouse
Mortgaged Properties, which represent security for 46.3% of the Initial Pool
Balance, are leased in large part to one or more Major Tenants. The three
concentrations 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 2.3% (Kmart), 1.8% (Walgreens) and 1.0% (Food Lion) of
the Initial Pool 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 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. Five Mortgage Loans, which
represent 5.4% of the Initial Pool Balance, are, in each such case, secured
primarily by a Mortgage on the applicable borrower's leasehold interest in the
related Mortgaged Property. Generally, in each case, 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. 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. The borrowers under two of the Mortgage Loans, representing 2.0%
of the Initial Pool Balance, have existing unsecured indebtedness as of the
Cut-off Date in addition to trade debt. 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 Sellers, the Bridger
Support Party, PMCC, 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 Sellers, the Bridger Support Party, PMCC,
the Depositor or such other entities.
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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. 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 one or more of the following was the case: (A) a party not
related to the related borrower was identified as a responsible party for such
condition or circumstance, (B) the related borrower was required to provide
additional security and/or 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 authorities had no current
intention of taking any action, and are not requiring any action, in respect of
such condition or circumstance, (D) such conditions or circumstances were
investigated further and based upon such additional investigation, an
environmental consultant recommended no further investigation or remediation,
(E) the expenditure of funds reasonably estimated to be necessary to effect such
remediation was not greater than two percent of the outstanding principal
balance of the related Mortgage Loan, (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 and conditions or (I) a responsible party 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. In the case of one Mortgage Loan,
representing 0.5% of the Initial Pool Balance, the environmental consultant did
not recommend any further action be taken because the Mortgaged Property has
been included in a state created and maintained remediation program. There can
be no assurances, however, that such state program will be financially able to
address the condition.
The Mortgage Loan Sellers 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.
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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.
Certain of the Mortgaged Properties 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 Sellers, the
Underwriters, the Master Servicer, the Special Servicer, the Trustee, the REMIC
Administrator, the Fiscal Agent 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 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" herein and "The Pooling and Servicing Agreements -- Realization
Upon Defaulted Mortgage Loans", "Risk Factors -- Certain Factors Affecting
Delinquency, Foreclosure and Loss of the Mortgage Loans -- Risk of Liability
Arising from Environmental Conditions" 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
of the BOA Originated Mortgage Loans having an initial principal balance of
$2,000,000 or less and each Bridger Mortgage Loan and/or BOA-Bridger Mortgage
Loan 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
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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
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 Properties, except that in connection
with certain of the BOA Originated Mortgage Loans having an initial principal
balance of $2,000,000 or less and each Bridger Mortgage Loan and/or BOA-Bridger
Mortgage Loan having an initial principal balance of $2,000,000 or less, no
independent market study was performed prior to origination of such Mortgage
Loan. 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 Sellers, the Underwriters, the
Master Servicer, the Special Servicer, the Trustee, the REMIC Administrator, the
Fiscal Agent or any of their respective affiliates has prepared or conducted its
own separate appraisal or reappraisal of any Mortgaged Property (except for
appraisals conducted with respect to some of the Mortgaged Properties at the
time of origination by appraisers then in the employ of Bank of America).
Zoning and Building Code Compliance. Bank of America, with respect to
the Bank of America Mortgage Loans, BCRF, with respect to the Bridger Mortgage
Loans, and PMCF, with respect to PMCF Mortgage Loans, have 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 Sellers 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, but
none of Bank of America, with respect to the Bank of America Mortgage Loans,
BCRF with respect to the Bridger Mortgage Loans, or PMCF with respect to PMCF
Mortgage Loans has 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, Bank of America, with respect to the
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Bank of America Mortgage Loans and BCRF with respect to the Bridger Mortgage
Loans have determined that in the event of a material casualty affecting the
Mortgaged Property that either:
(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.
PMCF with respect to PMCF Mortgage Loans where the use, operation and/or
structure of the related Mortgaged Property constitutes a permitted
nonconforming use has generally required the related borrower to obtain law or
ordinance insurance coverage unless PMCF determined in its reasonable business
judgment that (i) the extent of the nonconformity was not material, (ii) the
Mortgaged Property, if permitted to be repaired or restored in conformity with
current law should constitute adequate security for the related Mortgage Loan or
(iii) 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
was remote.
Although the lender 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 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 the improvements on any portion of a Mortgaged Property
(except for one Mortgaged Property which while located in a flood zone has a
certificate placed on its survey indicating that its improvements are at an
elevation above the Flood Zone Plane) 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 not less than the least of
(1) in the case of Bank of America Mortgage Loans: (a) the outstanding
principal balance of the related Bank of America Mortgage 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 and (d) 100% of the replacement cost of the improvements
located on the related Mortgaged Property;
(2) in the case of Bridger Mortgage Loans: (a) the outstanding
principal balance of the related Bridger Mortgage Loan and (b) the maximum
amount of insurance available under the National Flood Insurance Act of
1973, as amended; and
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(3) in the case of the PMCF Mortgage Loans: (a) the outstanding
principal balance of the related PMCF Mortgage Loan, (b) the minimum amount
required under the terms of the coverage to compensate for any damage or
loss on a replacement basis and (c) the maximum amount of insurance
available under the National Flood Insurance Act of 1973, as amended.
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.
In general, the Mortgage Loans (including those secured by Mortgaged
Properties located in California) do not require earthquake insurance.
Forty-four of the Mortgaged Properties, securing 30.0% of the Initial Pool
Balance, are located in areas that are considered a high earthquake risk. These
areas include all or parts of the states of California, Oregon, Washington, Utah
and Nevada. No Mortgaged Property has a "probable maximum loss" (PML) in excess
of 20%.
THE MORTGAGE LOAN SELLERS
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.
BCRF is a limited liability company organized under the laws of the State
of Missouri. It is a wholly owned limited purpose finance subsidiary of Bridger
Commercial Funding LLC ("Bridger"), which is also a limited liability company
organized under the laws of the State of Missouri. The principal offices of both
Bridger and BCRF are located in Mill Valley, California.
PMCF is a limited liability company organized under the laws of the State
of Delaware. PMCF maintains its principal office in Newark, New Jersey. It is a
wholly owned subsidiary of Prudential Mortgage Capital Company, LLC which is
also a limited liability company organized under the laws of the State of
Delaware.
The information set forth herein concerning Bank of America has been
provided by Bank of America. The information set forth herein concerning BCRF
and Bridger has been provided by BCRF. The information concerning PMCF has been
provided by PMCF. Neither the Depositor nor any Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information.
BRIDGER SUPPORT PARTY
PSCC, sometimes referred to in this prospectus supplement as the "Bridger
Support Party", is a limited liability company organized under the laws of the
State of Delaware. The principal place of business of PSCC is in New York, New
York.
The information set forth herein concerning PSCC has been provided by PSCC.
Neither the Depositor nor any Underwriter make any representation or warranty as
to the accuracy or completeness of such information. In addition, PSCC makes no
representation or warranty in connection with any of the information regarding
the Mortgage Loans and its obligations are limited to the repurchase of certain
Bridger Mortgage Loans under the conditions set forth herein. See "-- Assignment
of the Mortgage Loan; Repurchases" and "-- Representations and Warranties;
Repurchases".
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ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS
On or prior to the Delivery Date, by agreement with the Depositor, the
Mortgage Loan Sellers (except as described in the next paragraph) will assign
and transfer the Mortgage Loans, 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 Bank of
America Mortgage Loan, BCRF will be required to deliver the following documents
among others to the Trustee with respect to each Bridger Mortgage Loan and PMCF
will be required to deliver the following documents among others to the Trustee
with respect to each PMCF 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); and
(8) in those cases where applicable, the original or a copy of the
related ground lease.
The Trustee is required to review the documents delivered thereto by Bank
of America with respect to each Bank of America Mortgage Loan, by BCRF with
respect to each Bridger Mortgage Loan and PMCF with respect to each PMCF
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
above-described obligations made by the related Mortgage Loan Seller, 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, then Bank of
America (if, but only if, the affected Mortgage Loan is a Bank of America
Mortgage Loan), BCRF (if, but only if, the affected Mortgage Loan is a Bridger
Mortgage Loan) or PMCF (if, but only if, the affected Mortgage Loan is a PMCF
Mortgage Loan) will be obligated, except as otherwise described below, within a
period of 90 days following its receipt of notice of such omission or defect to
deliver the missing documents or cure the defect in all material respects, as
the case may be, or (1) to repurchase (or cause the repurchase of) the affected
Mortgage Loan at a price (the "Purchase Price") generally equal to the unpaid
principal balance of such Mortgage Loan, plus any accrued but unpaid interest
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thereon (other than Excess Interest) at the related Mortgage Rate to but not
including the Due Date in the Collection Period of repurchase, plus any related
unreimbursed Servicing Advances (as defined herein), any interest on any
Advances and any related unreimbursed Additional Trust Fund Expenses or (2)
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 90 day period and Bank of America, BCRF or PMCF, as the case may be,
has commenced and is diligently proceeding with cure of such defect or breach
within such 90 day period, then Bank of America, BCRF or PMCF, as the case may
be, shall have, with respect to such Mortgage Loans only, an additional 90 days
to complete such cure or, failing such cure, to repurchase (or cause the
repurchase of) or substitute for the related Mortgage Loan (such possible
additional cure 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). A "Qualified Substitute
Mortgage Loan" is a mortgage loan which must, on the date of substitution: (i)
have an outstanding Stated Principal Balance, after application of all scheduled
payments of principal and interest due during or prior to the month of
substitution, not in excess of the Stated Principal Balance of the deleted
Mortgage Loan as of the Due Date in the calendar month during which the
substitution occurs; (ii) have a Mortgage Rate not less than the Mortgage Rate
of the deleted Mortgage Loan; (iii) have the same Due Date as the deleted
Mortgage Loan; (iv) accrue interest on the same basis as the deleted Mortgage
Loan (for example, on the basis of a 360-day year consisting of twelve 30-day
months); (v) have a remaining term to stated maturity not greater than, and not
more than two years less than, the remaining term to stated maturity of the
deleted Mortgage Loan; (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
deleted Mortgage Loan as of the Closing Date; (vii) 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 and warranties set forth in the
applicable Mortgage Loan Purchase and Sale Agreement; (viii) have an
environmental report with respect to the related Mortgaged Property which will
be delivered as a part of the related Mortgage File; (ix) be determined by an
opinion of counsel to be a "qualified replacement mortgage" within the meaning
of Section 860G(a)(4) of the Code; (x) not have a maturity date after the date
three years prior to the Rated Final Distribution Date; (xi) not be substituted
for a deleted Mortgage Loan unless the Trustee has received prior confirmation
in writing by each Rating Agency that such substitution will not result in the
withdrawal, downgrade, or qualification of the rating assigned by the Rating
Agency to any Class of Certificates then rated by the Rating Agency (the cost,
if any, of obtaining such confirmation to be paid by the applicable Mortgage
Loan Seller); (xii) have been approved by the Directing Certificateholder;
provided that such approval of the Directing Certificateholder may not be
unreasonably withheld; and (xiii) not be substituted for a deleted Mortgage Loan
if it would result in the termination of the REMIC status of any of the REMICs
or the imposition of tax on any of the REMICs other than a tax on income
expressly permitted or contemplated to be received by the terms of the Pooling
Agreement. In the event that one or more mortgage loans are substituted for one
or more deleted Mortgage Loans, then the amounts described in clause (i) shall
be determined on the basis of aggregate principal balances and the rates
described in clause (ii) above (provided that no Mortgage Rate shall be less
than the lowest Pass-Through Rate of any Class of Certificates then outstanding,
plus the Master Servicing Fee and the Trustee Fee) and the remaining term to
stated maturity referred to in clause (v) above shall be determined on a
weighted average basis. When a Qualified Substitute Mortgage Loan is substituted
for a deleted Mortgage Loan, the applicable Mortgage Loan Seller shall certify
that such Mortgage Loan meets all of the requirements of the above definition
and shall send such certification to the Trustee. Additionally, solely in
connection with the repurchase of an affected Bridger Mortgage Loan required to
be repurchased due to the failure of BCRF to cure such affected Mortgage Loan or
substitute a Qualified Substitute Mortgage Loan and pay any Substitution
Shortfall Amount as described in this prospectus supplement, the Bridger Support
Party will be jointly and severally liable with BCRF to repurchase such Mortgage
Loan at the Purchase Price. The Bridger Support Party will have no other
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obligation in connection with any Mortgage Loan other than the obligation
described in the immediately preceding sentence and the obligation described
under "-- Representations and Warranties; Repurchases and Substitutions" herein.
If (x) any Mortgage Loan is required to be repurchased or substituted as
contemplated above, (y) such Mortgage Loan is a Crossed-Collateralized Mortgage
Loan 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 (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 the
related Mortgage Loan Seller which sold the loan to the Depositor 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,
both of the following conditions would be satisfied if the related Mortgage Loan
Seller were to repurchase or substitute for only the affected
Crossed-Collateralized Mortgage Loans as to which a breach had occurred without
regard to this paragraph: (i) the debt service coverage ratio for any related
Crossed-Collateralized Mortgage Loans for the four calendar quarters immediately
preceding the repurchase or substitution is not less than 1.25x and (ii) the
loan-to-value ratio for any related Crossed-Collateralized Mortgage Loans is not
greater than 75%. In the event that both of the conditions set forth in the
preceding sentence would be so satisfied, the related Mortgage Loan Seller may
elect either to repurchase or substitute for only the affected
Crossed-Collateralized Mortgage Loan as to which the defect or breach exists or
to repurchase or substitute for the aggregate Crossed-Collateralized Mortgage
Loans.
To the extent that the related Mortgage Loan Seller repurchases or
substitutes for an affected Cross-Collateralized Mortgage Loan in the manner
prescribed above while the Trustee continues to hold any related
Cross-Collateralized Mortgage Loans, the related Mortgage Loan Seller and the
Depositor have agreed in the related Mortgage Loan Purchase and Sale Agreement
to forebear 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, including, with respect to the Trustee, the Primary Collateral
securing Mortgage Loans still held by the Trustee, so long as such exercise does
not impair the ability of the other party to exercise its remedies against its
Primary Collateral. If the exercise of remedies by one party would impair the
ability of the other party to exercise its remedies with respect to the Primary
Collateral securing the Cross-Collateralized Mortgage Loans held by such party,
then both parties have agreed in the related Mortgage Loan Purchase and Sale
Agreement to forbear from exercising such remedies until the loan documents
evidencing and securing the relevant 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 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 Sellers described in this prospectus supplement will constitute the sole
remedies available to the Certificateholders for any failure on the part of Bank
of America, BCRF or PMCF, as the case may be, 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 Bank of America, BCRF (or
the Bridger Support Party) or PMCF as the case may be, 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 Bank of America, BCRF or the Bridger Support Party or PMCF 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 related
Mortgage Loan Seller continues in good faith to attempt to obtain such document
or such copy.
The Pooling Agreement requires that 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
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jurisdictions within a specified number of days following the delivery at the
expense of Bank of America (with respect to the Bank of America Mortgage Loans
only), BCRF or the Bridger Support Party (with respect to the Bridger Mortgage
Loans only) or PMCF (with respect to the PMCF Mortgage Loans only). 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 each
Mortgage Loan Seller pursuant to a separate mortgage loan purchase and sale
agreement (each a "Mortgage Loan Purchase and Sale Agreement") to be dated as of
the Delivery Date. Pursuant to the related Mortgage Loan Purchase and Sale
Agreement, Bank of America will represent and warrant solely with respect to the
Bank of America Mortgage Loans, BCRF will represent and warrant solely with
respect to the Bridger Mortgage Loans, and PMCF will represent and warrant
solely with respect to the PMCF 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
related Mortgage Loan Purchase and Sale Agreement) among other things,
substantially as follows:
(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) is true,
complete and correct in all material respects as of the Delivery Date;
(2) each Mortgage securing a Mortgage Loan is a valid first lien on
the related Mortgaged Property subject only to (a) the lien of current real
estate taxes, ground rents, 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) other matters to which like properties are commonly subject, 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 the related Mortgage Loan, (e) the rights of tenants
(as tenants only) under leases (including subleases) pertaining to the
related Mortgaged Property which the Mortgage Loan Seller did not require
to be subordinated to the lien of such Mortgage and which do not materially
interfere 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 the related Mortgage Loan, and (f) 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 (f) being herein referred to as the
"Permitted Encumbrances").
(3) the Mortgage(s) and Mortgage Note for each Mortgage Loan and all
other documents to which the related borrower is a party and which evidence
or secure such 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
as such enforcement may be limited by bankruptcy, fraudulent transfer,
insolvency, reorganization, receivership, moratorium or other laws relating
to or 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;
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(4) no Mortgage Loan was as of the Delivery Date, or during the
twelve-month period prior thereto, 30 days or more past due in respect of
any Monthly Payment, without giving effect to any applicable grace period;
(5) there is no valid offset, defense or counterclaim to any Mortgage
Loan;
(6) it has not waived any material default, breach, violation or event
of acceleration existing under any Mortgage or Mortgage Note;
(7) it has no knowledge that (a) there is any proceeding pending or
threatened for the condemnation of all or any material portion of any
Mortgaged Property, or (b) there is any damage at any Mortgaged Property
that materially and adversely affects the value of such Mortgaged Property;
(8) at origination, each Mortgage Loan complied with or was exempt
from, all applicable usury laws in effect at its date of origination;
(9) in connection with or subsequent to the origination of the related
Mortgage Loan, one or more environmental site assessments (or an update of
a previously conducted assessment) has been performed with respect to each
Mortgaged Property or had a transaction screen performed in lieu of an
environmental site assessment, and it, having made no independent inquiry
other than reviewing the resulting report(s) and/or employing an
environmental consultant to perform the assessments or updates referenced
herein, has no actual knowledge of any material and adverse environmental
condition or circumstance affecting such Mortgaged Property that was not
disclosed in the related report(s);
(10) the lien of each Mortgage is insured by a title insurance policy
that insures the originator, its successors and assigns, as to the first
priority lien of such Mortgage subject only to Permitted Encumbrances (or,
if a title insurance policy has not yet been issued in respect of any
Mortgage Loan, a policy meeting the foregoing description is evidenced by a
commitment for title insurance "marked-up" at the closing of such loan);
(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 requirement for future advances thereunder;
(12) the terms of the Mortgage Note and Mortgage(s) for each Mortgage
Loan have not been impaired, waived, altered or modified in any material
respect, except as specifically set forth in the related Mortgage File or
indicated on the Mortgage Loan Schedule;
(13) to the Mortgage Loan Seller's actual knowledge there are no
delinquent taxes, assessments or other outstanding charges affecting the
related Mortgaged Property;
(14) the related borrower's interest in each Mortgaged Property
securing a Mortgage Loan consists of a fee simple and/or leasehold estate
or interest in real property;
(15) no Mortgage Loan contains any equity participation by the lender,
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 an ARD Loan
to the extent described under "-- Certain Terms and Conditions of the
Mortgage Loans -- Hyperamortization"; and
(16) all escrow deposits (including capital improvements and
environmental remediation reserves) relating to each Mortgage Loan that
were required to be delivered to the mortgagee under the terms of the
related loan documents have been received and, to the extent of any
remaining balances of such escrow deposits, are in the possession or under
the control of the representing party or its agents (which shall include
the Master Servicer).
In the related Mortgage Loan Purchase and Sale Agreement, the applicable
Mortgage Loan Seller will represent among other things, concerning the priority
and certain terms of ground leases securing those
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Mortgage Loans transferred by it (but only by it). Bank of America will
represent and warrant as of the Delivery Date, that, immediately prior to the
transfer of the Bank of America Mortgage Loans, Bank of America had good and
marketable title to, and was the sole owner of, each Bank of America Mortgage
Loan and had full right and authority to sell, assign and transfer such Bank of
America Mortgage Loan. BCRF will also represent and warrant, as of the Delivery
Date, that immediately prior to the transfer of the Bridger Mortgage Loans, BCRF
had good and marketable title to the Bridger Mortgage Loans, and was the sole
owner of each such Bridger Mortgage Loan and had the full right and authority to
sell, assign and transfer such Bridger Mortgage Loan. PMCF will also represent
and warrant, as of the Delivery Date, that immediately prior to the transfer of
the PMCF Mortgage Loans, PMCF had good and marketable title to the PMCF Mortgage
Loans, and was the sole owner of each such PMCF Mortgage Loan and had the full
right and authority to sell, assign and transfer such PMCF Mortgage Loan. Bank
of America, as to the Bank of America Mortgage Loans only, BCRF, as to the
Bridger Mortgage Loans only, and PMCF as to the PMCF Mortgage Loans only, will
also represent that the Mortgage File relating to each Mortgage Loan contains an
appraisal of the Mortgaged Property signed by an appraiser, who, to the Mortgage
Loan Seller's knowledge, had no interest, direct or indirect, in the Mortgaged
Property or the borrower or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage Loan
and that in connection with the origination of the Mortgage Loan, each appraiser
has represented in such appraisal or in a supplemental letter or other agreement
that the appraisal satisfies the requirements of the USPAP.
If Bank of America discovers or is notified of a breach of any of the
foregoing representations and warranties with respect to any Bank of America
Mortgage Loan, BCRF discovers or is notified of a breach of any of the foregoing
representations and warranties with respect to any Bridger Mortgage Loan, or
PMCF discovers or is notified of a breach of any of the foregoing
representations and warranties with respect to any PMCF Mortgage Loan 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, then
either Bank of America (if, but only if, the affected Mortgage Loan is a Bank of
America Mortgage Loan, BCRF (if, but only if, the affected Mortgage Loan is a
Bridger Mortgage Loan) or PMCF (if, but only if the affected Mortgage Loan is a
PMCF Mortgage Loan) 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 defect or breach is capable of being cured (but not within the
90 day period) and Bank of America, BCRF or PMCF as the case may be, has
commenced and is diligently proceeding with cure of such defect or breach within
90 day period, Bank of America, BCRF, or PMCF as the case may be, shall have 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). Additionally, solely in connection with the repurchase
of an affected Bridger Mortgage Loan required to be repurchased due to the
failure of BCRF to cure such affected Mortgage Loan or substitute a Qualified
Substitute Mortgage Loan and pay any Substitution Shortfall Amount as described
in this prospectus supplement, the Bridger Support Party will be jointly and
severally liable with BCRF to purchase such Mortgage Loan at the Purchase Price.
The Bridger Support Party will have no other obligation in connection with any
Mortgage Loan other than the obligation described in the immediately preceding
sentence.
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 Bank of America, BCRF (or the Bridger Support
Party) or PMCF as applicable, defaults on its obligation to
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do so. Bank of America, BCRF and PMCF will be the sole Warranting Parties (as
defined in the accompanying prospectus) in respect of the Mortgage Loans, Bank
of America being the sole Warranting Party with respect to the Bank of America
Mortgage Loans, BCRF being the sole Warranting Party with respect to the Bridger
Mortgage Loans and PMCF being the sole Warranting Party with respect to the PMCF
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 Bank of America, BCRF or PMCF is
made as of the Delivery Date or such earlier date specifically provided in the
related representation and warranty, and Bank of America, BCRF (or the Bridger
Support Party) or PMCF as applicable 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.
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 for which it is responsible on behalf of the Trust, in the best
interests and for the benefit of the Certificateholders, in accordance with any
and all applicable laws, the terms of the Pooling Agreement, and the respective
Mortgage Loans and, to the extent consistent with the foregoing, the following
standard (the "Servicing Standard"): (a) in the same manner in which, and with
the same care, skill, prudence and diligence with which, the Master Servicer or
Special Servicer, as the case may be, generally services and administers similar
mortgage loans or assets, as applicable, for third parties, giving due
consideration to customary and usual standards of practice of prudent
institutional lenders servicing their own mortgage loans and assets which are
comparable to the Mortgage Loans serviced under the Pooling Agreement; or
generally services and administers similar mortgage loans or assets as
applicable, held in its portfolio, whichever servicing procedure is of a higher
standard; (b) with a view to the timely collection of all scheduled payments of
principal and interest under the Mortgage Loans or, if a Mortgage Loan comes
into and continues in default, the maximization of the recovery on such Mortgage
Loan to the Certificateholders (collectively) on a net present value basis; and
(c) without regard to (1) any relationship that the Master Servicer or the
Special Servicer, as the case may be, or any affiliate thereof may have with any
related borrower or any other party to the Pooling Agreement; (2) the ownership
of any Certificate by the Master Servicer or the Special Servicer, as the case
may be, or any affiliate thereof; (3) the Master Servicer's or the Special
Servicer's obligation to make Advances (as defined herein); (4) the Special
Servicer's obligation to direct the Master Servicer to make Servicing Advances
(as defined herein); (5) the right of the Master Servicer or the Special
Servicer, as the case may be, or any affiliate thereof to receive compensation
for its services or reimbursement of costs under the Pooling Agreement or with
respect
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to any particular transaction; (6) any credit that it has extended to any
mortgagor; and (7) the servicing of other mortgage loans or other mortgaged
properties by the Master Servicer or the Special Servicer, as the case may be.
In general, the Master Servicer will be responsible for the servicing and
administration of all the Mortgage Loans 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 (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 consists of any of the
following events: (1) the related borrower has failed to make when due any
Balloon Payment and such borrower has not delivered to the Master Servicer on or
before the due date of such Balloon Payment a written refinancing commitment
from an acceptable lender and reasonably satisfactory in form and substance to
the Master Servicer which provides such refinancing will occur within 60 days
after the date of such Balloon Payment (provided that if such refinancing does
not occur during such time, a Servicing Transfer Event will be deemed to have
occurred); (2) the related borrower has failed to make when due any Monthly
Payment (other than a Balloon Payment) or any other payment required under the
related Mortgage Note or the related Mortgage(s), which failure has continued
unremedied for 60 days; (3) there shall have occurred a default under the
related loan documents, other than as described in clause (1) or (2) above, that
may, in the Master Servicer's or the Special Servicer's good faith and
reasonable judgment, materially impair the value of the related Mortgaged
Property as security for the Mortgage Loan or otherwise materially and adversely
affect the interests of Certificateholders, which default has continued
unremedied for the applicable cure period under the terms of the Mortgage Loan
(or, if no cure period is specified, 60 days); (4) a decree or order of a court
or agency or supervisory authority having jurisdiction in the premises in an
involuntary case under any present or future federal or state bankruptcy,
insolvency or similar law or the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the related borrower and such decree or
order shall have remained in force undischarged or unstayed for a period of 60
days; (5) the related borrower shall have consented to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
such borrower or of or relating to all or substantially all of its property; (6)
the related borrower 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;
(7) the Master Servicer or the Special Servicer shall have received notice of
the commencement of foreclosure or similar proceedings with respect to the
related Mortgaged Property; or (8) the Master Servicer or the Special Servicer
has determined in its good faith and reasonable judgment that a default in the
making of a Monthly Payment (including a Balloon Payment) or any other payment
required under the related Mortgage Note or the related Mortgage(s) is likely to
occur and would not be cured within 60 days or in the case of a Balloon Payment
30 days. 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.
A Mortgage 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
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the Mortgage Loan to be characterized as a Specially Serviced Mortgage Loan (and
provided that no other Servicing Transfer Event then exists):
(w) with respect to the circumstances described in clauses (1) and (2)
of the preceding paragraph, the related borrower has made three consecutive
full and timely Monthly Payments under the terms of such Mortgage Loan (as
such terms may be changed or modified in connection with a bankruptcy or
similar proceeding involving the related borrower or by reason of a
modification, waiver or amendment granted or agreed to by the Special
Servicer);
(x) with respect to the circumstances described in clauses (4), (5),
(6) and (8) of the preceding paragraph, such circumstances cease to exist
in the reasonable judgment of the Special Servicer;
(y) with respect to the circumstances described in clause (3) of the
preceding paragraph, such default is cured; and
(z) with respect to the circumstances described in clause (7) of the
preceding paragraph, such proceedings are terminated.
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 30 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. The Directing Certificateholder may object in writing via
facsimile or e-mail to any 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 ten 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 and (ii) in any case, will determine whether such
disapproval is not in the best interest of all the Certificateholders pursuant
to the Servicing Standard. 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 does not disapprove an 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 Mortgage Loan
documents. If the Directing Certificateholder 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 fails to disapprove such revised Asset Status Report
as described above or until the Special Servicer, in accordance with the
Servicing Standard, makes a determination that (i) such objection is not in the
best interests of the Certificateholders or (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 ten business day period would materially and adversely affect the interests
of the Certificateholders, and it has made a reasonable effort to contact the
Directing Certificateholder.
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.
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).
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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 Q
Certificates.
Subject to the succeeding paragraph, the Directing Certificateholder is
entitled to advise the Special Servicer (and the Master Servicer with respect to
(1) any extension of a Mortgage Loan and (2) otherwise with respect to a
Mortgage Loan having a Stated Principal Balance of $2,500,000 or greater) with
respect to the following actions of the Special Servicer or the Master Servicer,
as applicable, and the Special Servicer or the Master Servicer, as applicable,
is not permitted to take any of the following actions as to which the Directing
Certificateholder, has objected in writing within ten business days of being
notified thereof (provided that if such written objection has not been received
within such time period by the Special Servicer or the Master Servicer, as
applicable, then the Directing Certificateholder's approval will be deemed to
have been given):
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing such of
the Specially Serviced Mortgaged Loans as come into and continue in default;
(ii) any modification or waiver of a term of a Mortgage Loan other than a
modification consisting of the extension of the maturity date of a Mortgage Loan
for one year or less;
(iii) any proposed 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" or pursuant to a Purchase
Option as described below under "-- Default 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 required by the underlying loan documents;
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause (subject
to certain exceptions set forth in the Pooling Agreement); and
(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).
In addition, the Directing Certificateholder may direct the Special
Servicer to take, or to refrain from taking, such other actions as the Directing
Certificateholder may deem advisable or as to which provision is otherwise made
in the Pooling Agreement; provided that no such direction and no objection
contemplated by the prior paragraph or 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.
The Directing Certificateholder will have no liability to the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Pooling Agreement, or for errors in
judgment; provided, however, that the Directing Certificateholder will not be
protected against any liability
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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. By its acceptance of a Certificate, each
Certificateholder confirms its understanding that the Directing
Certificateholder may take actions that favor the interests of one or more
Classes of the Certificates over other Classes of the Certificates, and that the
Directing Certificateholder may have special relationships and interests that
conflict with those of holders of some Classes of the Certificates; and, absent
willful misfeasance, bad faith or negligence on the part of the Directing
Certificateholder, each Certificateholder agrees to take no action against the
Directing Certificateholder or any of its officers, directors, employees,
principals or agents as a result of such a special relationship or conflict.
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
Prudential Asset Resources, Inc. ("PAR") will be the Master Servicer. PAR,
a Delaware corporation, is a wholly owned subsidiary of PMCC, which is a
subsidiary of The Prudential Insurance Company of America. PAR serves as PMCC's
mortgage loan servicing vehicle. PAR is responsible for overseeing the servicing
of approximately 6,300 commercial and multifamily loans, with a total principal
balance of approximately $32 billion. PAR has been approved as a master servicer
by S&P, Moody's and Fitch, Inc.
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
KeyCorp Real Estate Capital Markets, Inc. d/b/a Key Commercial Mortgage
("KRECM") will be the Special Servicer. KRECM is an Ohio Corporation, which is a
wholly owned subsidiary of KeyBank National Association which is a wholly owned
subsidiary of KeyCorp. As of August 31, 2001, KRECM was responsible for the
servicing of approximately 3,128 commercial and multifamily loans with an
aggregate principal balance of approximately $9.8 billion, the collateral for
which is located throughout the United States, the District of Columbia and the
Virgin Islands. Approximately 1,600 of the loans, with a principal balance of
approximately $7.7 billion, pertain to commercial and multifamily
mortgage-backed securities. The portfolio includes multifamily, office, retail,
hospitality and other types of income producing properties. KRECM also services
newly-originated loans and loans acquired in the secondary market for issuers of
commercial and multifamily mortgage-backed securities, financial institutions
and private investors.
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.
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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 may (1) assume such
party's rights and obligations under such Sub-Servicing Agreement, (2) enter
into a new Sub-Servicing Agreement with such Sub-Servicer on such terms as the
Trustee or such other successor Master Servicer or Special Servicer and such
Sub-Servicer shall mutually agree or (3) terminate such Sub-Servicer without
cause (but only upon payment to the Sub-Servicer of specified compensation to be
paid by the successor Master Servicer, successor Special Servicer or Trustee, as
applicable. Any successor Master Servicer, or if applicable, the Trustee must
assume the Master Servicer's payment obligations under its sub-servicing
agreement with PMCC). 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 and Other Compensation and Payment of
Expenses" herein.
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. 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 (including Specially
Serviced Mortgage Loans and Mortgage Loans as to which the related Mortgaged
Property has become an REO Property), will accrue at the applicable Master
Servicing Fee Rate and will be computed on the Stated Principal Balance as of
the Due Date in the immediately preceding Collection Period and for the same
number of days respecting which any related interest payment on the related
Mortgage Loan is computed under the terms of the related Mortgage Note and
applicable law, and without giving effect to any Excess Interest that may accrue
on the ARD Loans on or after its Anticipated Repayment Date. The "Master
Servicing Fee Rate" will range from approximately 0.050% to 0.140% per annum, on
a loan-by-loan basis, with a weighted average Master Servicing Fee Rate of
0.093% 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,
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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 and any Excess
Interest) 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 lesser of (i) the
aggregate amount of Prepayment Interest Shortfalls incurred in connection with
Principal Prepayments received in respect of the Mortgage Pool during the most
recently ended Collection Period, and (ii) the aggregate of (A) 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 Mortgage Loan for which such Master
Servicing Fees are being paid in such Collection Period, calculated at 0.02% per
annum, and (B) all Prepayment Interest Excesses and, to the extent earned on
Principal Prepayments, Net Investment Earnings received by the Master Servicer
during the most recently ended Collection Period. However, 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 (X) subsequent to a
default under the related Mortgage Loan documents, (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 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" will accrue with
respect to each Specially Serviced Mortgage Loan and each Mortgage Loan as to
which the related Mortgaged Property has become an REO Property, at a rate equal
to 0.25% per annum (the "Special Servicing Fee Rate"), on the Stated Principal
Balance as of the Due Date in the immediately preceding Collection Period and
for the same number of days respecting which any related interest payment due or
deemed due on such Mortgage Loan is computed under the related Mortgage Loan and
applicable law, and without giving effect to any Excess Interest that may accrue
on the ARD Loans 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 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, the Workout Fee will be
payable out of, and will be calculated by application of a "Workout Fee Rate" of
1.0% 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 holder or holders of Certificates
evidencing a majority interest in the 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) Mortgage Loans that became Corrected Mortgage
Loans during the period that it acted as Special Servicer and were still such at
the time of 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 such that the related borrower has
made at least one timely Monthly Payment as of the date of such termination or
resignation and such Mortgage Loan otherwise meets the requirement of a
Corrected Mortgage Loan (and the successor Special Servicer shall not be
entitled to any portion of such Workout Fees), in each case until the
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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. 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% to, the related payment or proceeds (other than any portion thereof that
represents accrued but unpaid Excess Interest or Default 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 Sellers, for a
breach of representation or warranty or for defective or deficient Mortgage Loan
documentation so long as such repurchase occurs within the time required under
the Pooling Agreement, (ii) the purchase of any Specially Serviced Mortgage Loan
or REO Property by the Master Servicer, the Special Servicer or any holder or
holders of Certificates evidencing a majority interest in the Controlling Class
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. If, however, Liquidation Proceeds are received with
respect to any Corrected Mortgage Loan and the Special Servicer is properly
entitled to a Workout Fee, such Workout Fee will be payable based on and out of
the portion of such Liquidation Proceeds that constitute principal and/or
interest. 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 with
respect to Mortgage Loans that are not Specially Serviced Mortgage Loans, and
the Special Servicer with respect to Specially Serviced Mortgage Loans,
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 have been applied (1) to pay the Master Servicer, the Special
Servicer, the Trustee or the Fiscal Agent, as applicable, any unpaid interest on
advances made by that party with respect to the related Mortgage Loan, (2) to
reimburse the Trust Fund for any interest on advances that were made with
respect to any Mortgage Loan, since the Delivery Date, which interest was paid
to the Master Servicer, the Special Servicer, the Trustee or the Fiscal Agent,
as applicable, from a source of funds other than Default Charges collected on
such Mortgage Loan, (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 expenses incurred with
respect to any Mortgage Loan since the Delivery Date, which expense if paid from
a source of funds other than Default Charges collected on such Mortgage Loan, is
or will be an Additional Trust Fund Expense. 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 of Default Charges in connection with a
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Mortgage Loan that is past due, and with respect to which Advances, interest on
Advances or Additional Trust Fund Expenses have been incurred and remain
unreimbursed to the Trust, the consent of the Directing Certificateholder must
be obtained as provided in the Pooling Agreement.
The Master Servicer and the Special Servicer will, in general, each be
required to pay its overhead and any general and administrative 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 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
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).
If the Master Servicer is required under the Pooling Agreement to make a
Servicing Advance, but fails to do so within 15 days after such Servicing
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 notice of
such failure and, if such failure continues for five more business days, the
Trustee will be required to make such Servicing Advance. If the Trustee fails to
make such Servicing Advance, then the Fiscal Agent will make such Servicing
Advance.
The Master Servicer (or if applicable the Special Servicer), the Trustee
and the Fiscal Agent will be obligated to make Servicing Advances only to the
extent that such Servicing Advances are, in the reasonable and good faith
judgment of the Master Servicer (or if applicable the Special Servicer), the
Trustee or the Fiscal Agent, as the case may be, ultimately recoverable from
Related Proceeds (any Servicing Advance not so recoverable, a "Nonrecoverable
Servicing Advance"). The Trustee and the Fiscal Agent 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 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 (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.
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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, 2002 (or, as to any
such year, such earlier date as is contemplated by the last sentence of this
paragraph), 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 2002, 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 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 which are not Specially Serviced
Mortgage Loans (each a "Non-Specially Serviced Mortgage Loan")) 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 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, with respect to, any
Mortgage Loan without the consent of the Directing Certificateholder) and
neither the Master Servicer nor the Special Servicer may agree to any
modification, waiver or amendment of any term of, or take any of the other
above referenced actions with respect to, any Mortgage 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 Master Servicer's or the Special Servicer's good faith and
reasonable judgment, would materially alter the security for such Mortgage
Loan or reduce the likelihood of timely payment of amounts due thereon;
provided, however, the Special Servicer may agree to any modification,
waiver or amendment of any term of, or take any of the other above
referenced
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actions with respect to, a Specially Serviced Mortgage Loan that would have
any such effect, but only if a material default on such Mortgage Loan has
occurred or, in the Special Servicer's reasonable and good faith judgment,
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
(collectively) on a present value basis than would liquidation as certified
to the Trustee in an officer's certificate;
(ii) neither the Master Servicer nor the Special Servicer may, in
connection with any particular extension, (A) extend the maturity date of a
Mortgage Loan beyond a date that is two years prior to the Rated Final
Distribution Date, or (B) extend the maturity date of a Mortgage Loan
beyond a date which is 20 years prior to the expiration date of any related
Ground Lease; provided that with respect to clause (B) in this clause (ii),
the Special Servicer may extend the Maturity Date of a Mortgage Loan beyond
a date which is 20 years prior to the expiration of a related Ground Lease
if it gives due consideration to the remaining term of such ground lease.
(iii) unless the proviso to clause (i) above applies, neither the
Master Servicer nor the Special Servicer may 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
constitute a "significant modification" of such Mortgage Loan within the
meaning of Treasury Regulations Section 1.860G-2(b) (neither the Master
Servicer nor the Special Servicer shall be liable for judgments as regards
decisions made under this subsection which were made in good faith and,
unless it would constitute bad faith or gross negligence to do so, each of
the Master Servicer and the Special Servicer may rely on opinions of
counsel in making such decisions);
(iv) except for substitutions contemplated by the terms of the
Mortgage Loans, neither the Master Servicer nor the Special Servicer may
permit any borrower to add or substitute real estate collateral for an
outstanding Mortgage Loan unless (A) the Master Servicer or the Special
Servicer shall have first determined in accordance with the Servicing
Standard, based upon a Phase I environmental assessment (and such
additional environmental testing as the Master Servicer or 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 and (B) the
Master Servicer or the Special Servicer, as the case may be, shall have
obtained written confirmation from such Rating Agency that such addition or
substitution will not result in the withdrawal, downgrade or qualification
of any rating then assigned to any Class of Certificates;
(v) 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" and specific releases
contemplated by the terms of the mortgage loans in effect on the Delivery
Date, neither the Master Servicer nor the Special Servicer shall release
real estate collateral securing an outstanding Mortgage Loan; and except to
the extent the Special Servicer determines that a modification, waiver or
amendment is required for the best interests of all Certificateholders in
accordance with the Servicing Standard, the Special Servicer shall not
agree to any modification, waiver or amendment of any term of, or take any
of the other actions referenced in the section of the Pooling Agreement (as
defined below) regarding modifications, waivers, amendments and consents
with respect to any Specially Serviced Mortgage Loan if such action would
not be generally consistent with the Asset Status Report approved or deemed
approved by the Directing Certificateholder or the Certificateholders, as
applicable, in accordance with the Pooling Agreement, unless it shall have
proposed such action to the Directing Certificateholder in the same manner
as the Asset Status Report as provided in the Pooling Agreement.
Notwithstanding clauses (i) through (vi) above, neither the Master Servicer nor
the Special Servicer will be required to oppose the confirmation of a plan in
any bankruptcy or similar proceeding involving a borrower if
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in their reasonable and good faith judgment such opposition would not ultimately
prevent the confirmation of such plan or one substantially similar.
With respect to any ARD Loan, the Master Servicer shall be permitted, in
its discretion, 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 accrued 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. Except as permitted by clauses (i)
through (v) of the preceding paragraph, the Special Servicer will have no right
to waive the payment of Excess Interest.
The Master Servicer will not be required to seek the consent of any
Certificateholder in order to approve certain minor or routine modifications,
waivers or amendments of the Mortgage Loans, 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; 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.
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 delinquent in
respect of its Balloon Payment unless the Master Servicer has, on or prior to
the due date of such Balloon Payment, received written evidence from an
institutional lender of such lender's binding commitment to refinance such
Mortgage Loan within 60 days after 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
from the Trust Fund at a price (the "Option Price") 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 Special Servicing 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 majority Certificateholder of the Controlling Class may
have an exclusive right to exercise the Purchase Option for a specified period
of time.
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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.
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, the Trustee and the Fiscal Agent not less than five days' prior
written notice of its intention to sell any such REO Property, and shall auction
the REO Property to the highest bidder (which may be the Special Servicer) in
accordance with the servicing standard described in the Pooling Agreement;
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 bid 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 bid 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
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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 Fiscal Agent, 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, the
Special Servicer, the Fiscal Agent 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, the Fiscal
Agent 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 REMIC I, such as a hotel
or skilled nursing care business, 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 REMIC I 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 2002, the Master Servicer or, in the case of any inspection
required to be performed 60 days after delinquency, the Special 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 $2,000,000, at
least once every year) and 60 days after delinquency, provided that at least 50%
of the Mortgaged Properties (by both number and aggregate Stated Principal
Balances of the related Mortgage Loans) will be inspected each year by the
Master Servicer at its sole expense (or an entity employed by the Master
Servicer for such purpose) or, as described in the following sentence, the
Special Servicer who will be entitled to receive reimbursement for such expense
as a Servicing Advance payable, first from Default Charges and then from general
collections. In addition, the Special Servicer, subject to statutory limitations
or limitations set forth in the related loan documents, is required to
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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 is a Specially Serviced Mortgage Loan. 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 that requires the borrower to deliver
quarterly, annual or other periodic operating statements with respect 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. If the designated
replacement is acceptable to the Trustee, which approval may not be unreasonably
withheld, 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.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Depositor will issue its Commercial Mortgage Pass-Through Certificates,
Series 2001-PB1, on November 7, 2001 (the "Delivery Date") pursuant to a Pooling
and Servicing Agreement, dated as of October 1, 2001, among the Depositor, the
Master Servicer, the Special Servicer, the Trustee, the REMIC Administrator and
the Fiscal Agent (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 and all payments thereunder and proceeds thereof
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) certain rights under the Swap Contract; and (iv) such funds or
assets as from time to time are deposited in the Certificate Account, the
Interest Reserve Account, and the Excess Interest Distribution Account (see "The
Pooling and Servicing Agreements -- Certificate Account" in the accompanying
prospectus).
The Certificates will consist of 22 classes to be designated as: (i) the
Class A-1 Certificates, the Class A-2 and the Class A-2F Certificates
(collectively, the "Class A Certificates" and together with the Class XC and the
Class XP 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, the Class P Certificates and the Class Q Certificates
(collectively with the Class A Certificates, the "Sequential Pay Certificates");
(iii) the Class XC Certificates and the Class XP Certificates (collectively, the
"Class X Certificates", and collectively with the Sequential Pay Certificates,
the "REMIC Regular Certificates"); and (iv) 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-2F, Class B, Class C, Class D, Class E and Class F Certificates
(collectively, the "Offered Certificates") are offered hereby. Each Class of
Certificates (and the Class A-2F Regular Interest) is sometimes referred to in
this prospectus supplement as a "Class".
The Class XC, Class XP, Class G, Class H, Class J, Class K, Class L, Class
M, Class N, Class O, Class P and Class Q Certificates 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.
On the Delivery Date, the "Class A-2F Regular Interest" will also be issued
by the Trust Fund as an uncertificated regular interest in REMIC II. The Class
A-2F Regular Interest is not offered hereby. The Depositor will cause the
transfer of the Class A-2F Regular Interest and will direct the Trustee to enter
into the Swap Contract in exchange for the Class A-2F Certificates. The Class
A-2F Certificates will represent all of the beneficial ownership interest in the
portion of the Trust Fund that consists of the Class A-2F Regular Interest and
the Swap Contract. The Class A-1 Certificates, the Class A-2 Certificates, the
Class A-2F Regular Interest and the Class X Certificates are referred to in this
Prospectus Supplement as the "Senior Interests". The REMIC Regular Certificates
(other than the Class A-2F Certificates) and the Class A-2F Regular Interest are
referred to herein as the "REMIC II Regular Interests".
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format in
denominations of: (i) in the case of the Class A 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.
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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
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. The Offered Certificates will be issued in fully
registered physical form.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
On the Delivery Date, the respective classes of Certificates will have the
following Certificate Balances or Notional Amounts (in each case, subject to a
variance of plus or minus 5%):
<Table>
<Caption>
APPROXIMATE
CERTIFICATE PERCENTAGE OF APPROXIMATE
BALANCE OR POOL CREDIT
CLASS NOTIONAL AMOUNT BALANCE SUPPORT
----- --------------- ------------- -----------
A-1...................................... $131,224,107 13.99% 22.00%
A-2...................................... $563,136,797 60.02% 22.00%
A-2F..................................... $ 37,500,000 4.00% 22.00%
B........................................ $ 37,531,329 4.00% 18.00%
C........................................ $ 9,382,832 1.00% 17.00%
D........................................ $ 11,728,540 1.25% 15.75%
E........................................ $ 18,765,664 2.00% 13.75%
F........................................ $ 11,728,540 1.25% 12.50%
G........................................ $ 14,074,248 1.50% 11.00%
H........................................ $ 14,074,248 1.50% 9.50%
J........................................ $ 11,728,541 1.25% 8.25%
K........................................ $ 18,765,664 2.00% 6.25%
L........................................ $ 14,074,248 1.50% 4.75%
M........................................ $ 7,037,124 0.75% 4.00%
N........................................ $ 11,728,540 1.25% 2.75%
O........................................ $ 4,691,416 0.50% 2.25%
P........................................ $ 4,691,416 0.50% 1.75%
Q........................................ $ 16,419,957 1.75% 0.00%
XC....................................... $938,283,211(1) N/A N/A
XP....................................... $501,273,702(1) N/A N/A
</Table>
---------------
(1) Notional Amount.
The "Certificate Balance" of any Class of Sequential Pay Certificates and
the Class A-2F Regular Interest outstanding at any time will be the then
aggregate stated principal amount thereof. On each
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Distribution Date, the Certificate Balance of each Class of Sequential Pay
Certificates and the Class A-2F Regular Interest 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 Losses and Additional Trust
Fund Expenses allocated to such Class on such Distribution Date. Realized Losses
and Additional Trust Fund Expenses allocated in reduction of the Class A-2F
Regular Interest Certificate Balance will result in corresponding reduction of
the Certificate Balance of the Class A-2F Certificates. See "-- Distributions"
and "-- Subordination; Allocation of Losses and Certain Expenses" below.
The Class X Certificates do not have Certificate Balances, but represent
the right to receive distributions of interest in an amount equal to the
aggregate interest accrued on the applicable notional amount (each, a "Notional
Amount") of the related Class of Class X Certificates. The Notional Amount of
the Class XC Certificates will generally be equal to the aggregate of the
Component Balances of the Components outstanding from time to time. The Notional
Amount of the Class XP Certificates will generally be equal to the aggregate of
the Component Balances of the Class A-2B, Class A-2FB, Class B, Class C, Class
D, Class E and Class F Components outstanding from time to time. The initial
Notional Amount for (i) the Class XC Certificates will be $938,283,211 and (ii)
the Class XP Certificates will be $501,273,702.
Solely for the purposes of calculating the Notional Amounts of the Class XC
and Class XP Certificates and the Pass-Through Rates applicable to the Class XC
and XP Certificates for each Distribution Date, the aggregate Certificate
Balance of each Class of Sequential Pay Certificates will be deemed to consist
of a single (or two, in the case of the Class A-2 and Class A-2F Certificates)
component (each a "Component"). Each Component will have a balance (a "Component
Balance") that will be reduced by any distributions of principal (except as
described below with respect to the Class A-2 and Class A-2F Components) made on
the related Class of Certificates (other than the Class A-2F Certificates) or
Class A-2 Regular Interest or any allocations of Realized Losses or Additional
Trust Fund Expenses to such Class.
The Notional Amount of the Class XC Certificates will be reduced on each
Distribution Date by any distributions of principal actually made on, and any
Realized Losses and Additional Trust Fund Expenses actually allocated to, that
portion of the aggregate Certificate Balances of the Sequential Pay Certificates
(other than the Class A-2F Certificates) or Class A-2F Regular Interest that
corresponds to the Components. The Notional Amount of the Class XP Certificates
will be reduced on each Distribution Date by any distributions of principal
actually made on, and any Realized Losses and Additional Trust Fund Expenses
actually allocated to, that portion of the aggregate Certificate Balances of the
Class A-2, Class A-2F Regular Interest, Class B, Class C, Class D, Class E and
Class F Certificates that correspond to the Class A-2B, Class A-2FB, Class B,
Class C, Class D, Class E and Class F Components, respectively.
The initial Component Balance of the Components will be as follows: Class
A-1 ($131,224,107), Class A-2 ($563,136,797), Class A-2F ($37,500,000), Class B
($37,531,329), Class C ($9,382,832), Class D ($11,728,540), Class E
($18,765,664), Class F ($11,728,540), Class G ($14,074,248), Class H
($14,074,248), Class J ($11,728,541), Class K ($18,765,664),Class L
($14,074,248), Class M ($7,037,124), Class N ($11,728,540), Class O
($4,691,416), Class P ($4,691,416), and Class Q ($16,419,957).
In addition, the Class A-2 Component will be deemed to consist of two
Components. The "Class A-2A Component" will have a Component Balance initially
equal to $176,731,240.52, which amount will be deemed to be reduced by the
amount of all reductions of principal, Realized Losses and Additional Trust Fund
Expenses allocated to the Class A-2 Certificates until such Component Balance is
reduced to zero. The other Class A-2 Component, the "Class A-2B Component", will
have a Component Balance initially equal to $386,405,556.48 which, following the
reduction of the Component Balance of the Class A-2A Component to zero, will be
deemed reduced by the amount of all reductions of principal, Realized Losses and
Additional Trust Fund Expenses in reduction of the aggregate Certificate Balance
of the Class A-2 Certificates until the Component Balance of the Class A-2B
Component (and the aggregate Component Balance of the Class A-2 Component) has
been reduced to zero.
In addition, the Class A-2F Component will be deemed to consist of two
Components. The "Class A-2FA Component" will have a Component Balance initially
equal to $11,768,759.48, which amount will be deemed to be reduced by the amount
of all reductions of principal, Realized Losses and Additional
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Trust Fund Expenses allocated to the Class A-2F Regular Interest until such
Component Balance is reduced to zero. The other Class A-2F Component, the "Class
A-2FB Component", will have a Component Balance initially equal to
$25,731,240.52, which, following the reduction of the Component Balance of the
Class A-2FA Component to zero, will be deemed reduced by the amount of all
reductions of principal, Realized Losses and Additional Trust Fund Expenses in
reduction of the aggregate Certificate Balance of the Class A-2F Regular
Interest until the Component Balance of the Class A-2FB Component (and the
aggregate Component Balance of the Class A-2F Component) has been reduced to
zero.
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.
PASS-THROUGH RATES
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class B,
Class C, Class D, Class E and Class F 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 Class A-2F Certificates with
respect to any Distribution Date will be a per annum rate equal to LIBOR +
0.45%. The Pass-Through Rate of the Class A-2F Regular Interest will be a fixed
rate equal to 5.7870% per annum.
The term "LIBOR" means, with respect to the Class A-2F Certificates and
each interest accrual period, the per annum rate for deposits in U.S. dollars
for a period of one month, which appears on the Telerate Page 3750 as the
"London Interbank Offering Rate" as of 11:00 a.m., London time, on the day that
is two Banking Days prior to that Interest Reset Date. If such rate does not
appear on said Telerate Page 3750, LIBOR shall be the arithmetic mean of the
offered quotations obtained by the Swap Counterparty from the principal London
office of four major banks in the London interbank market selected by the Swap
Counterparty in its sole discretion (each, a "Reference Bank") for rates at
which deposits in U.S. dollars are offered to prime banks in the London
interbank market for a period of one month in an amount that is representative
for a single transaction in the relevant market at the relevant time as of
approximately 11:00 a.m., London time, on the day that is two Banking Days prior
to that Interest Reset Date. If fewer than two Reference Banks provide the Swap
Counterparty with such quotations, LIBOR shall be the rate per annum which the
Swap Counterparty determines to be the arithmetic mean of the rates quoted by
major banks in New York City, New York selected by the Swap Counterparty at
approximately 11:00 a.m. New York City time on that Interest Reset Date for
loans in U.S. dollars to leading European banks for a period of one month in an
amount that is representative for a single transaction in the relevant market at
the relevant time.
The "Interest Reset Date" is the first day of each interest accrual period
for the Class A-2F Certificates and, with respect to the first interest accrual
period, the Delivery Date. A "Banking Day" is any day on which commercial banks
are open for business (including dealings in foreign exchange and foreign
currency) in London, England, Chicago, Illinois and New York City, New York.
The Pass-Through Rate applicable to the Class XC Certificates for the
initial Distribution Date will equal approximately 0.9522% per annum. The
Pass-Through Rate applicable to the Class XC Certificates for each Distribution
Date subsequent to the initial Distribution Date will, in general, equal the
weighted average of the Class XC Strip Rates for the Components (or, in the case
of the Class A-2 Component, the Class A-2A and Class A-2B Components thereof,
or, in the case of the Class A-2F Component, the Class A-2FA and Class A-2FB
Components thereof) for such Distribution Date (weighted on the basis of the
respective Component Balances of such Components outstanding immediately prior
to such distribution date). The "Class XC Strip Rate" in respect of any class of
Components (and, in the case of (x) the Class A-2 Component, the Class A-2A and
Class A-2B Components thereof, and (y) the Class A-2F Component, the Class A-2FA
and Class A-2FB Components thereof) for any distribution date will, in general,
equal (i) in the case of the Class A-1, Class A-2A, Class A-2FA, Class G, Class
H, Class J, Class K, Class L, Class M, Class N, Class O, Class P and Class Q
Components, (x) the weighted average net mortgage rate for such
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Distribution Date, minus (y) the Pass-Through Rate for such Component and (ii)
in the case of the Class A-2B, Class A-2FB, Class B, Class C, Class D, Class E
and Class F Components (x) for any Distribution Date occurring on or before the
Distribution Date in June 2010, (1) the Weighted Average Net Mortgage Rate for
such Distribution Date minus (2) the sum of the Pass-Through Rate for such
Component for such Distribution Date and the Class XP Strip Rate for such
Component for such Distribution Date, and (y) for any Distribution Date
occurring after the Distribution Date in June 2010, (1) the Weighted Average Net
Mortgage Rate for such Distribution Date, minus (2) the Pass-Through Rate for
such Component for such Distribution Date (but in no event will any Class XC
Strip Rate be less than zero).
The Pass-Through Rate applicable to the Class XP Certificates for the
initial Distribution Date will equal approximately 1.7730% per annum. The
Pass-Through Rate applicable to the Class XP Certificates for each Distribution
Date subsequent to the initial Distribution Date and on or before the
Distribution Date in June 2010 will, in general, equal the weighted average of
the Class XP Strip Rates for the Class A-2B, Class A-2FB, Class B, Class C,
Class D, Class E and Class F Components for such Distribution Date (weighted on
the basis of the respective Component Balances of such Components outstanding
immediately prior to such Distribution Date). The "Class XP Strip Rate" in
respect of the Class A-2B, Class A-2FB, Class B, Class C, Class D, Class E and
Class F Components for any Distribution Date will, in general, equal (i) for any
Distribution Date occurring on or before the Distribution Date in June 2010, (x)
the lesser of (1) the Weighted Average Net Mortgage Rate for such Distribution
Date and (2) the reference rate specified in Annex D to this prospectus
supplement for such Distribution Date minus (y) the Pass-Through Rate for such
Component for such Distribution Date (but in no event will any Class XP Strip
Rate be less than zero), and (ii) for any Distribution Date occurring after the
Distribution Date in June 2010, 0% per annum.
For purpose of calculating the Class XC and Class XP Strip Rates, the
Pass-Through Rate of each Component (other than the Class A-2F Component) will
be the Pass-Through Rate of the corresponding Class of Certificates. In the case
of the Class A-2F Component, the Pass-Through Rate for the Class A-2F Component
will be the Pass-Through Rate of the Class A-2F Regular Interest.
The Pass-Through Rate applicable to the Class G Certificates will be
6.6690% per annum. The Pass-Through Rate applicable to the Class H Certificates
will equal 6.7690%. The Pass-Through Rate of the Class J Certificates will equal
7.1660%. However, the Pass-Through Rate of the Class J Certificates will not
exceed the Weighted Average Net Mortgage Rate on any Distribution Date. The
Pass-Through Rate applicable to the Class K, Class L, Class M, Class N, Class O,
Class P and Class Q Certificates will, for any Distribution Date, each be equal
to 6.1500% per annum.
The Class Q Certificates will also 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 (weighted
on the basis of their respective Stated Principal Balances (as defined herein)
immediately following the preceding Distribution Date).
The "Net Mortgage Rate" with respect to any Mortgage Loan is, in general, a
per annum rate equal to the related Mortgage Rate in effect from time to time,
minus the sum of the applicable Master Servicing Fee Rate and the per annum rate
at which the monthly Trustee Fee is calculated (such sum, the "Administrative
Fee Rate"); provided, however, that for purposes of calculating the Pass-Through
Rate for each Class of REMIC Regular 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
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 Regular Certificates (other than the Class A-2F Certificates) and the
Class A-2F Regular Interest, then the Net Mortgage Rate of such Mortgage Loan
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
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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, 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 6.7578% per annum to 8.8578% per annum, with a
weighted average Net Mortgage Rate of 7.424% per annum. See "Servicing of the
Mortgage Loans -- Servicing and Other Compensation and Payment of Expenses" in
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 November 2001. The "Determination Date" for each
Distribution Date will be the 5th business day prior to such Distribution Date.
DISTRIBUTIONS
General. Distributions on or with respect to the Certificates will be made
by the Trustee, to the extent of available funds, on the 11th day of each month
or, if any such 11th 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 November 2001. 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, if such
Certificateholder will have provided the Trustee with written wiring
instructions no less than five business days prior to the related Record Date,
or otherwise by check mailed to such Certificateholder. 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. Notwithstanding the
preceding sentence with respect to the Initial Distribution Date, the Record
Date will be November 7, 2001.
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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 to the Class Q
Certificates as hereinafter described);
(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; and
(vii) 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.
(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."
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) to pay interest to the holders of the Class A-1 Certificates,
Class A-2 Certificates, Class A-2F Regular Interest, Class XC Certificates
and Class XP Certificates up to an amount equal to, and pro rata as among
such Classes in accordance with, all Distributable Certificate Interest in
respect of each such Class for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(2) to pay principal sequentially first to the holders of the Class
A-1 Certificates and second pro rata to the Class A-2 Certificates and
Class A-2F Regular Interest up to an amount equal to the lesser of (a) the
then-outstanding Certificate Balance of such Class and (b) the remaining
portion of the Principal Distribution Amounts (as defined below) for such
Distribution Date;
(3) to reimburse the holders of the Class A-1 Certificates, Class A-2
Certificates and Class A-2F Regular Interest 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;
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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" 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 and Class A-2F Regular Interest 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 or
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 and Class A-2F Regular Interest 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-2F Regular Interest 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;
(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-2F Regular Interest, 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;
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(11) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-2F Regular Interest, 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-2F Regular Interest, 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-2F Regular Interest, Class B Certificates, Class
C Certificates, Class D Certificates, Class E Certificates and Class F
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-2F Regular Interest, 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;
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(23) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-2F Regular Interest, 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-2F Regular Interest, 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;
(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-2F Regular Interest, 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-2F Regular Interest, 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;
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(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-2F Regular Interest, 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-2F Regular Interest, 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 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-2F Regular Interest, 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;
(43) to pay interest to the holders of the Class Q 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;
(44) if the Certificate Balances of the Class A-1 Certificates, Class
A-2 Certificates, Class A-2F Regular Interest, 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, Class O Certificates and Class P
Certificates have been reduced to zero, to pay principal to the holders of
the Class Q Certificates, up to
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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;
(45) to reimburse the holders of the Class Q 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
(46) to pay to the holders of the REMIC Residual Certificates, the
balance, if any, of the Available Distribution Amount 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), (41) and (44) above with respect to any Class of Sequential Pay
Certificates or Class A-2F Regular Interest 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.
The amount allocated to the Class A-2F Regular Interest on the Master
Servicer Remittance Date as defined herein shall be deposited into the Floating
Rate Account on such date and the portion of such interest, if any, which is
equal to the net swap payment due to the Swap Counterparty (the "Net Swap
Payment") will be applied to make payments under the Swap Contract as provided
under "Description of the Swap Contract" in this prospectus supplement. The
amounts remaining in the Floating Rate Account, including any net payment
received under the Swap Contract from the Swap Counterparty, will be distributed
to the Holders of the Class A-2F Certificates on the related Distribution Date.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates and the Class
A-2F Regular Interest for each Distribution Date is equal to the Accrued
Certificate Interest in respect of such Class of Certificates or the Class A-2F
Regular Interest 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. On each Distribution Date, Holders of the
Class A-2F Certificates will be entitled to receive distributions of interest
equal to the Class A-2F Interest Distribution Amount. See "-- The Class A-2F
Certificates" below and "Description of the Swap Contract -- Distributions from
the Floating Rate Account" in this prospectus supplement.
The "Accrued Certificate Interest" in respect of each Class of REMIC
Regular Certificates (other than the Class A-2F Certificates) and the Class A-2F
Regular Interest for each Distribution Date is equal to one calendar month's
interest at the Pass-Through Rate applicable to such Class of Certificates or
Class A-2F Regular Interest 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 (other than the Class A-2F Certificates)
and the Class A-2F Regular Interest. The Accrued Certificate Interest in
connection with the Class A-2F Certificates will be calculated on the basis of a
360-day year and the actual number of days in the relevant period of accrual;
provided that if the Pass-Through Rate converts to a fixed rate as described in
this prospectus supplement, the Class A-2F Certificates will accrue interest on
the same basis as the Class A-2F Regular Interest. Accrued Certificate Interest
in respect of the Class A-2F Certificates for each Distribution Date will be
equal to the amount of interest accrued from and including the Distribution Date
in the immediately preceding month prior to the month of the relevant
Distribution Date (or the Delivery Date in the case of the initial period) to
but excluding the relevant Distribution Date.
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
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Distribution Date will be allocated on such Distribution Date to the respective
Classes of REMIC Regular Certificates (other than the Class A-2F Certificates)
and the Class A-2F Regular Interest (in each case, to reduce the amount of
interest otherwise payable thereon on such Distribution Date) as follows: first,
to the respective Classes of REMIC Regular Certificates (other than the Class
A-1, Class A-2, Class A-2F, Class XC and Class XP Certificates and other than
the Class A-2F Regular Interest) sequentially in reverse alphabetical order of
Class designation, in each case up to an amount equal to the lesser of any
remaining unallocated portion of such Net Aggregate Prepayment Interest
Shortfall and any Accrued Certificate Interest in respect of such Class of
Certificates for such Distribution Date; and, thereafter, if and to the extent
that any portion of such Net Aggregate Prepayment Interest Shortfall remains
unallocated, among the Class A-1 Certificates, Class A-2 Certificates, Class
A-2F Regular Interest and the Class XC and Class XP Certificates, up to, and pro
rata in accordance with, the respective amounts of Accrued Certificate Interest
for each such Class for such Distribution Date. Any allocation of Net Aggregate
Prepayment Interest Shortfall to the Class A-2F Regular Interest could result in
a shortfall in interest paid by the Swap Counterparty to the Class A-2F
Certificateholders.
Principal Distribution Amount. The "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 Balloon
Payments) and any Assumed Monthly Payments due or deemed due, as the case
may be, in respect of the Mortgage Loans for their respective Due Dates
occurring during the related Collection Period;
(b) all voluntary principal prepayments received on the Mortgage Loans
during the related Collection Period;
(c) with respect to any Balloon Loan 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 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; and
(e) the excess, if any, of (i) the Principal Distribution Amount for
the immediately preceding Distribution Date, over (ii) the aggregate
distributions of principal made on the Sequential Pay Certificates (other
than the Class A-2F Certificates) and the Class A-2F Regular Interest in
respect of such Principal Distribution Amount on such immediately preceding
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.
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
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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.
The Class A-2F Certificates. On each Distribution Date, the Trustee will
distribute the applicable Class A-2F Available Funds for such Distribution Date
to the holders of record of the Class A-2F Certificates in the following
amounts: (i) the Class A-2F Interest Distribution Amount; and (ii) Class A-2F
Principal Distribution Amount.
The Class A-2F Certificates will accrue interest on their Floating Rate
Certificate Notional Amount at a rate equal to LIBOR plus 0.45%; provided, that
such amount will not be paid if the Swap Counterparty defaults on its obligation
to pay interest under the Swap Contract or if there are insufficient funds in
the Certificate Account to pay the Swap Counterparty the full amount due under
the Swap Contract.
In the case of a default of the Swap Counterparty, and until such default
is cured or the Swap Contract is replaced, the Class A-2F Certificates will
accrue interest at the Pass-Through Rate of the Class A-2F Regular Interest,
which is 5.7870% per annum, to the extent of the Class A-2F Available Funds. In
the case that there are insufficient funds in the Certificate Account to pay the
Swap Counterparty, the amount of interest payable on the Class A-2F Certificates
will be reduced in proportion to the amount of interest shortfall on the related
Class A-2F Regular Interest.
For a further discussion, see "Description of the Swap Contract" in this
prospectus supplement.
Excess Interest. On each Distribution Date, Excess Interest received in
the related Collection Period will be distributed solely to the Class Q
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 any Distribution Date, Prepayment
Premiums collected during the related Collection Period are required to be
distributed to the holders of the Classes of Offered Certificates (other than
the Class A-2F Certificates), the Class A-2F Regular Interest, the Class G
Certificates, the Class H Certificates and the Class J Certificates as described
below.
On each Distribution Date, Prepayment Premiums collected on the Mortgage
Loans during the related Prepayment Period will be distributed by the Trustee to
the following Classes: to the Class A-1, Class A-2, Class B, Class C, Class D,
Class E, Class F, Class G, Class H and Class J Certificates and the Class A-2F
Regular Interest, 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 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, Class P and Class Q Certificates and the Class A-2F Regular Interest on
such Distribution Date, (b) the Base Interest Fraction for the related principal
payment on such Class of Certificates, and (c) the aggregate amount of
Prepayment Premiums collected on such principal prepayments during the related
Prepayment Period. In connection with the Class A-2F Regular Interest, so long
as the Swap Contract is in effect, any Prepayment Premium distributable in
respect of the Class A-2F Regular Interest will be payable to the Swap
Counterparty pursuant to the terms of the Swap Contract. If the Swap Contract is
no longer in effect, any Prepayment Premium paid to the Class A-2F Regular
Interest will be paid to the holders of the Class A-2F Certificates. Any
Prepayment Premiums collected during the related Prepayment Period remaining
after such distributions will be distributed to the holders of the Class XC
Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any class of Offered Certificates (other
than the Class A-2F Certificates) and the Class A-2F Regular Interest is a
fraction (a) whose numerator is the amount, if any, by which (i) the
Pass-Through Rate
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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 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 K,
Class L, Class M, Class N, Class O, Class P Certificates or Class Q
Certificates. Instead, after the Certificate Balances of the Class A-1, Class
A-2, Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class J
Certificates and the Class A-2F Regular Interest 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 XC 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.
PMCF has agreed to provide a limited indemnity with respect to the
Outrigger Reef Hotel Loan. If, during the period commencing on the Delivery Date
and ending on November 6, 2003 (such period, the "Outrigger Reef Hotel Indemnity
Trigger Period"), the related borrower fails to make any monthly debt service
payment or other payment due under the Outrigger Reef Hotel Loan and such
payment default is not cured by the related borrower, and, as a result of such
default, a liquidation of the Outrigger Reef Hotel Loan or of the related REO
Property occurs (the "Outrigger Reef Hotel Liquidation Event"), PMCF will
indemnify the Trust (the "Outrigger Reef Hotel Indemnification") for the benefit
of the holders of the Certificates for the prepayment premium which is due and
payable in connection with the Outrigger Reef Hotel Liquidation Event to the
extent not covered by the proceeds thereof. However, in no event will the amount
payable by PMCF pursuant to such Outrigger Reef Hotel Indemnification exceed
$7,179,100 (an amount equal to 10% of the outstanding principal balance of the
Outrigger Reef Hotel Loan as of the Cut-off Date). The prepayment premium
referenced in the preceding sentence shall mean a yield maintenance premium
calculated generally in accordance with the method defined as Interest Diff
(MEY) as set forth on page A-3 of this prospectus supplement. In addition, such
prepayment premium (if any) will be allocated to the Certificateholders in the
amounts and in the priorities referenced above.
The Outrigger Reef Hotel Indemnification will apply whether or not the
Outrigger Reef Hotel Liquidation Event occurs during the Outrigger Reef Hotel
Indemnity Trigger Period so long as the default giving rise to such Outrigger
Reef Hotel Liquidation Event occurred during the Outrigger Reef Hotel Indemnity
Trigger Period. Notwithstanding the foregoing, if at any time on or after the
date 15 months after the Delivery Date (the "Outrigger Reef Hotel Coverage Test
Commencement Date"), the debt service coverage ratio based on a rolling historic
annualized three month period is 1.65x or greater, then the Outrigger Reef Hotel
Indemnification will be deemed to have terminated, and will be null and void,
and PMCF will have no further obligations under the Outrigger Reef Hotel
Indemnification. From and after the Outrigger Reef Hotel Coverage Test
Commencement Date, the Master Servicer will calculate the debt service coverage
ratio for the Outrigger Reef Hotel Loan on a monthly basis by dividing (i) the
net operating income of the related Mortgaged Property, which means the gross
income realized from operations of the related Mortgaged Property less all
necessary and ordinary operating expenses (including, without limitation,
utilities, landscaping, janitorial and cleaning services, management fees,
repairs, reserves, real estate taxes and other assessments, ground rent payment
and insurance, but excluding any deduction for federal, state and other income
taxes, debt service expense, depreciation, or amortization of capital
expenditures, and other similar non-cash items) by (ii) the principal and
interest payments due and payable under the Outrigger Reef Hotel Loan, as
reasonably calculated by the Master Servicer using figures obtained or derived
from certified financial statements provided by the related borrower.
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
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"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 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 and Class A-2F Regular Interest 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 is
less than the then aggregate Certificate Balance of the Sequential Pay
Certificates, the Certificate Balances of the Class Q, 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). 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 and Class A-2F Regular
Interest 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. Any Realized
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Losses or Additional Trust Fund Expenses allocated in reduction of the
Certificate Balance of the Class A-2F Regular Interest will result in a
corresponding reduction in the Certificate Balance of the Class A-2F
Certificates.
"Realized Losses" are losses on or in respect of the Mortgage Loans 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 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 (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 (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 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,
the Trustee and/or the Fiscal Agent 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
or the Fiscal Agent as described under "The Trustee and the Fiscal
Agent -- 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 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 Q 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
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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 Trustee will be required to establish and maintain an "Interest Reserve
Account" (which may be a sub-account of the Distribution 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 which 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 Trustee 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. Amounts on deposit in the Interest Reserve
Account may be invested only in Permitted Investments. The Trustee will have no
obligation to invest the funds on deposit in the Interest Reserve 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 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 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. See
"-- Appraisal Reductions" below. Subject to the recoverability determination
described below, if the Master Servicer fails to make a required P&I Advance,
the Trustee or the Fiscal Agent will be required to make such P&I Advance. See
"-- The Trustee" below.
The Master Servicer, the Trustee and the Fiscal Agent will each be entitled
to recover any P&I Advance made out of its own funds from any Related Proceeds.
Notwithstanding the foregoing, neither the Master Servicer nor the Trustee nor
the Fiscal Agent will be obligated to make any P&I Advance that it 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
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Advances"). The Trustee will be entitled to rely on any non-recoverability
determination made by the Master Servicer. Neither the Master Servicer nor the
Trustee nor the Fiscal Agent will make a P&I Advance for Excess Interest. The
Master Servicer, Trustee and the Fiscal Agent, 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. 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. Such interest
on any Advance will be payable to the Master Servicer, the Special Servicer, the
Trustee or the Fiscal Agent, 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
Either (a) within 60 days (or within such longer period as the Special
Servicer is diligently and reasonably proceeding to obtain such appraisal) after
the earliest of (i) the date on which any Mortgage Loan becomes a Modified
Mortgage Loan (as defined below), (ii) the date on which a receiver is appointed
and continues in such capacity in respect of the Mortgaged Property securing any
Mortgage Loan, (iii) the date on which the borrower under any Mortgage Loan
becomes the subject of bankruptcy or insolvency proceedings and (iv) the date on
which a Mortgaged Property securing any Mortgage Loan becomes an REO Property or
(b) on the 120th day following the occurrence of any uncured delinquency in
Monthly Payments with respect to any Mortgage Loan (each such Mortgage Loan, a
"Required Appraisal Loan"; and each such date under clause (a) or (b) above, a
"Required Appraisal Date"), the Special Servicer will be required to obtain an
appraisal of the related Mortgaged Property from an independent MAI-designated
appraiser, unless such an appraisal had previously been obtained within the
prior twelve months and the Special Servicer has no knowledge of any changed
circumstances that in the Special Servicer's reasonable judgment may materially
affect the value of the Mortgaged Property; provided, however, an appraisal may,
in the case of any Mortgage Loan with an outstanding principal balance of
$2,000,000 or less, consist solely of an internal valuation performed by the
Special Servicer. The cost of such appraisal will be advanced by the Master
Servicer, subject to its right to be reimbursed therefor 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 (determined by the Special Servicer as of the Determination Date
immediately succeeding the later of the date on which the relevant appraisal is
obtained and the earliest relevant Required Appraisal Date and as of each
Determination Date following each anniversary of such loan becoming a Required
Appraisal Loan thereafter) equal to the excess, if any, of (a) the sum of (i)
the Stated Principal Balance of such Required Appraisal Loan, (ii) to the extent
not previously advanced by or on behalf of the Master Servicer or the Trustee,
all accrued and unpaid interest (other than PMCF Excess Interest) on the
Required Appraisal Loan, through the most recent Due Date prior to such
Determination Date at a per annum rate equal to the sum of the related Net
Mortgage Rate and the per annum rate at which the Trustee Fee is calculated,
(iii) all accrued but unpaid Master Servicing Fees and Special Servicing Fees in
respect of such Required Appraisal Loan, (iv) 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 plus interest accrued thereon at
the Reimbursement Rate and (v) all currently due and unpaid real estate taxes
and assessments, insurance premiums and, if applicable, ground rents in respect
of the related Mortgaged Property (net of any escrow reserves or other
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reserves held by the Master Servicer or Special Servicer to cover any such item
and net of any reserves for debt service coverage, capital expenditures and
replacement reserves, including in each case reserves posted with letters of
credit), over (b) 90% of an amount equal to (i) the appraised value of the
related Mortgaged Property or REO Property as determined by such appraisal, net
of (ii) the amount of any liens on such property (not otherwise arising out of
the items described in clause (a)(v) above) that are prior to the lien of the
Required Appraisal Loan; provided that, if an appraisal is required to be
obtained as contemplated by the first sentence of this paragraph but has not
been received within the time period contemplated by such sentence without
regard to the parenthetical, then until (but just until) such appraisal is
obtained the Appraisal Reduction Amount for the subject Required Appraisal Loan
will be deemed to equal 25% of the Stated Principal Balance of such Required
Appraisal Loan (after receipt of such appraisal, the Appraisal Reduction Amount,
if any, will be calculated without regard to this proviso).
With respect to each Required Appraisal Loan (unless such Mortgage Loan has
become a Corrected Mortgage Loan and no other Servicing Transfer Event has
occurred with respect thereto during the preceding three months, in which case
it will cease to be a Required Appraisal Loan), the Special Servicer is
required, within 30 days of each anniversary of such Mortgage Loan having become
a Required Appraisal Loan, to order an update of the prior appraisal (the cost
of which will be advanced by the Master Servicer at the direction of the Special
Servicer and will be reimbursable as a Servicing Advance). Based upon such
appraisal, the Special Servicer is to redetermine and report to the Trustee and
the Master Servicer and the Directing Certificateholder the Appraisal Reduction
Amount, if any, with respect to such Mortgage Loan. Notwithstanding anything to
the contrary above, the Special Servicer is required pursuant to the Pooling
Agreement to submit its calculation in writing of an Appraisal Reduction Amount
to the Directing Certificateholder for its approval and review to confirm that
the calculation of the Appraisal Reduction Amount is correct in accordance with
the Pooling Agreement prior to its submission of this report to the Trustee.
However, if the Directing Certificateholder does not respond in writing within
ten business days of such submission to it, the Directing Certificateholder's
approval will have been deemed to have been given.
A "Modified Mortgage Loan" is any Mortgage 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 good faith and
reasonable judgment of the Special Servicer, 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 each month to each Certificateholder and Certificate Owner (so
long as such Certificate Owner provides the Trustee with a certification 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 Regular 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 Regular 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 and aggregate P&I
Advances made as of the Master Servicer Remittance Date ("Payment After
Determination Date Report"); (v) the aggregate Stated Principal Balance of
the
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Mortgage Pool 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 Regular Certificates for such Distribution Date; (x)
the aggregate amount of Distributable Certificate Interest payable in
respect of each Class of REMIC Regular 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
Regular Certificates after giving effect to the distributions made on such
Distribution Date; (xii) the Pass-Through Rate for each Class of REMIC
Regular Certificates for such Distribution Date and, with respect to the
Class A-2F Certificates, to the extent applicable, notification that the
amount of interest distributed thereon is the respective Fixed Interest
Distribution which is being paid as a result of a Swap Default; (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,
aggregated by type, 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 Regular 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) Appraisal Subordinated
Entitlement Reduction (as defined by the CMSA) for the period and
cumulative; (xix) LIBOR as calculated for the related Distribution Date;
(xx) the amounts received and paid in respect of the Swap Contract; (xxi)
identification of any Rating Agency Trigger Event or Swap Default as of the
close of business on the last day of the immediately preceding calendar
month with respect to the Swap Contract; (xxii) the amount of any (A)
payment by the Swap Counterparty as a termination payment, (B) payment to
any successor interest rate swap counterparty to acquire a replacement
interest rate swap agreement, and (C) collateral posted in connection with
any Rating Agency Trigger Event; and (xxiii) the amount of and
identification of any payments on the Class A-2F Certificates in addition
to the amount of principal and interest due thereon, such as any
termination payment received in connection with the Swap Contract. 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. All
amounts reported above in respect of the Class A-2F Regular Interest and
the Swap Documents shall be reported on the Distribution Date Statement.
(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
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reported on an ongoing basis will be actual expenses, 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 third Business Day prior to each Distribution Date (beginning in
November 2001), 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, on each Distribution Date, a "CMSA Loan Periodic Update File",
a "CMSA Property 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, respectively
and a CMSA Financial File and the 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; provided that the Rating Agencies,
the Underwriters and parties to the Pooling Agreement will not be required to
provide a certification substantially in the form of and containing the
information called for in the electronic form for such report as is available on
the CMSA Website, or such other form for the presentation of such information
(and containing such information) as may from time to time be recommended by the
CMSA for commercial mortgage securities transactions, generally, and as
reasonably acceptable to the Master Servicer or Special Servicer, as applicable.
In addition, on the second Business Day prior to each Distribution Date
(beginning in November 2001), the Master Servicer will deliver to the Trustee,
the Special Servicer, Directing Certificateholder and the Rating Agencies a list
of all Mortgage Loans the Master Servicer has determined are in jeopardy of
becoming Specially Serviced Mortgage Loans based on criteria described in the
Pooling Agreement.
None of the Distribution Date Statement or the servicer reports will
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.
Following the end of each calendar quarter, commencing with the calendar
quarter ending December 31, 2001, within 105 days (or 180 days, in the case of
annual year end operating information, commencing with the year end 2001) of
receipt by the Master Servicer, as to Non-Specially Serviced Mortgage Loans, or
within 30 days after receipt by the Special Servicer, as to Specially Serviced
Mortgage Loans, of any annual, quarterly or other periodic operating statements
or rent rolls with respect to any Mortgaged Property or REO Property, the Master
Servicer or the Special Servicer, as applicable, will deliver to the Trustee,
and the Directing Certificateholder electronic copies (to the extent available)
of such operating statements and rent rolls. Based upon such operating
statements or rent rolls, the Master Servicer (based upon operating statements,
rent rolls, written reports and data fields collected or prepared by the Special
Servicer and furnished to the Master Servicer by the Special Servicer in the
case of Specially Serviced Mortgage Loans) shall prepare (or, if previously
prepared, update, inclusive of trailing 12-month or year-to-date data) the
written analysis of the operations of the Mortgaged Property or REO Property by
completing a report (the "Operating Statement Analysis Report") and worksheets
showing computations made to normalize annual net operating income and debt
service coverage numbers ("NOI Adjustment Worksheets"). All Operating Statement
Analysis Reports and NOI Adjustment Worksheets will be prepared substantially in
the form as may be recommended from time to time by the CMSA and will be
maintained by the Master Servicer with
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respect to each Mortgaged Property and REO Property, and the Master Servicer
will forward electronic copies (to the extent available) to the Directing
Certificateholder and, upon request, to the Trustee and, upon request, to each
Rating Agency and, upon written request, to any Certificateholder, or to the
extent the Trustee or 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 Operating Statement Analysis Report and NOI
Adjustment Worksheet will be prepared using normalized year-to-date CMSA
methodology as in effect 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 Sellers 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.
The Trustee will make available each month, to any interested party, the
Distribution Date Statement (and any additional files containing the same
information in an alternative format) via the Trustee's Website. In addition,
the Trustee will make available to any interested party each month the servicer
reports on the Trustee's Website. The Trustee's Website will initially be
located at "www.etrustee.net". In addition, the Trustee will also make Mortgage
Loan information as presented in the CMSA loan setup file, CMSA Loan Periodic
Update File and all other CMSA reports available each month to any
Certificateholder, any Certificate Owner, the Rating Agencies, the parties
hereto or any other interested party via the Trustee's Website. In addition,
pursuant to the Pooling Agreement, the Trustee will make available, as a
convenience for interested parties (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 (714) 282-3980. 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: (a) all officer's certificates delivered to the Trustee since the
Delivery Date as described under "Servicing of the Mortgage Loans -- Evidence as
to Compliance" herein, (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" herein, 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
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along with the Distribution Date Statement referred to under "-- Reports to
Certificateholders; Certain Available Information -- Trustee Reports" above;
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 and, 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, 95% 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 5% of the Voting Rights
shall be allocated to the holders of the Class X Certificates (allocated, pro
rata, between the Classes of Class X Certificates based on Notional Amount) in
proportion to their Notional Amounts. No Voting Rights will be assigned to the
REMIC Residual Certificates. Voting Rights allocated to a Class of
Certificateholders shall be allocated among such Certificateholders in
proportion to the percentage interests in such Class evidenced by their
respective Certificates. See "Description of the Certificates -- Voting Rights"
in the accompanying prospectus.
TERMINATION
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, and (ii) the purchase or exchange of all of the Mortgage Loans 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 Mortgage Loan
Sellers) of Certificates representing a majority interest in the Controlling
Class. 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 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
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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 aggregate outstanding principal balance of the
Mortgage Loans 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 TRUSTEE AND THE FISCAL AGENT
THE TRUSTEE
LaSalle Bank National Association, a national banking association with its
principal offices located in Chicago, Illinois, will act as Trustee on behalf of
the certificateholders. 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 that an advance, if made, would be a
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
corporate trust office of the Trustee is located at 135 South LaSalle Street,
Suite 1625 Chicago, Illinois 60603, Attention: Asset-Backed Securities Trust
Services Group -- Banc of America Commercial Mortgage Inc. 2001-PB1.
The Trustee will make no representation as to the validity or sufficiency
of the Pooling Agreement, the certificates, the 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.
LaSalle Bank National Association is rated "Aa3" by Moody's and "AA-" by
S&P.
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.
THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, will act as Fiscal Agent pursuant to the Pooling Agreement. The
Fiscal Agent's office is located at 135 South LaSalle Street, Chicago, Illinois
60603.
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In the event that the Master Servicer and the Trustee fail to make a
required advance, the Fiscal Agent will be required to make such advance;
provided, that the Fiscal Agent will not be obligated to make any advance that
it determines to be nonrecoverable. The Fiscal Agent will be entitled to rely
conclusively on any determination by the Master Servicer or the Trustee, as
applicable, that an advance, if made, would be nonrecoverable. The Fiscal Agent
will be entitled to reimbursement for each advance made by it in the same manner
and to the same extent as, but prior to, the Trustee and the Master Servicer.
The Fiscal Agent 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. The duties
and obligations of the Fiscal Agent will consist only of making advances as
described in "Servicing of the Loans -- Advances" in this prospectus supplement.
The Fiscal Agent will not be liable except for the performance of such duties
and obligations.
ABN AMRO Bank N.V. is rated "Aa2" by Moody's and "AA" by S&P.
INDEMNIFICATION
Each of the Trustee and the Fiscal Agent 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 or the Fiscal Agent. Any such
indemnification payments will be Additional Trust Fund Expenses that will 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.
DESCRIPTION OF THE SWAP CONTRACT
GENERAL
On the Delivery Date, the Depositor will transfer the Class A-2F Regular
Interest to the Trust Fund in exchange for the Class A-2F Certificates, which
will represent all of the beneficial interest in the portion of the Trust Fund
consisting of the Class A-2F Regular Interest and the Swap Contract.
The Trustee, on behalf of the Trust, will enter into a swap agreement (the
"Swap Contract"), related to the Class A-2F Regular Interest, with Bank of
America, N.A. (the "Swap Counterparty"), who will also be a Mortgage Loan Seller
and is an affiliate of one of the underwriters, Banc of America Securities LLC.
The Swap Contract will have a maturity date of the Distribution Date on May 11,
2035 (the same date as the Rated Final Distribution Date of the Class A-2F
Certificates). Promptly upon the determination of LIBOR by the Swap
Counterparty, the Swap Counterparty will provide a report to the Trustee
including LIBOR as applicable to the next interest accrual period for the Class
A-2F Certificates and the amount payable by the Swap Counterparty with respect
to the next succeeding Distribution Date. The Trustee shall be entitled to
conclusively rely on such report.
With respect to the Class A-2F Certificates, the Trustee will cause to be
established and maintained in the name of the Trustee, in trust for Holders of
the Class A-2F Certificates, an account (the "Floating Rate Account"), which may
be a subaccount of the Certificate Account. Promptly upon receipt of any payment
or other receipt in respect of the Class A-2F Regular Interest or the Swap
Contract, the Trustee will deposit the same into the Floating Rate Account.
The Trustee may make withdrawals from the Floating Rate Account only for
the following purposes: (i) to distribute to the Holders of the Class A-2F
Certificates the Class A-2F Available Funds for any Distribution Date; (ii) to
withdraw any amount deposited into the Floating Rate Account that was not
required to be deposited therein; (iii) to pay any funds required to be paid to
the Swap Counterparty under the Swap Contract; and (vi) to clear and terminate
the account pursuant to the terms of the Pooling Agreement.
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DISTRIBUTIONS FROM THE FLOATING RATE ACCOUNT
On each Distribution Date the Trustee will distribute the Class A-2F
Available Funds for such Distribution Date to the Holders of record of the Class
A-2F Certificates as of the related Record Date (or the Settlement Date in the
case of the initial Distribution Date) in the following amounts: (i) the Class
A-2F Interest Distribution Amount on such Distribution Date; and (ii) the Class
A-2F Principal Distribution Amount on such Distribution Date.
For purposes hereof, "Class A-2F Available Funds" means, for each
Distribution Date, (i) the sum of all previously undistributed payments or other
receipts on account of principal and interest (net of any amounts payable to the
Swap Counterparty under the Swap Contract) on or in respect of the Class A-2F
Regular Interest received by or on behalf of the Trustee after the Cut-off Date
and on or prior to such Distribution Date and (ii) the sum of all amounts
received from the Swap Counterparty pursuant to the Swap Contract, but excluding
all amounts required to be paid to the Swap Counterparty pursuant to the Swap
Contract.
The "Class A-2F Interest Distribution Amount" means, with respect to any
Distribution Date, the sum of (i) the aggregate amount of interest received by
the Trustee from the Swap Counterparty pursuant to the terms of the Swap
Contract and (ii) amounts in respect of interest received on the Class A-2F
Regular Interest not required to be paid to the Swap Counterparty. If the Swap
Counterparty defaults on its obligation to pay such interest to the Trustee, or
if a Swap Default occurs, the Class A-2F Interest Distribution Amount will equal
the Fixed Interest Distribution.
The "Class A-2F Principal Distribution Amount" means, with respect to any
Distribution Date, an amount equal the aggregate amount of the principal
payments received on the Class A-2F Regular Interest on such payment date.
THE SWAP CONTRACT
The Swap Contract will provide that, on the Master Servicer Remittance
Date, commencing in November 2001, the Trustee will pay or cause to be paid
interest to the Swap Counterparty at a fixed interest rate equal to the
Pass-Through Rate of the Class A-2F Regular Interest (the "Fixed Interest
Distribution"), on a notional amount equal to the Certificate Balance of the
Class A-2F Regular Interest (the "Floating Rate Certificate Notional Amount"),
and on the second Business Day preceding each Distribution Date, the Swap
Counterparty will pay interest on such Floating Rate Certificate Notional Amount
to the Trustee, for the benefit of the Holders of the Class A-2F Certificates,
at a rate equal to the applicable Pass-Through Rate. The Pass-Through Rate for
the Class A-2F Certificates is LIBOR plus 0.45%. Required payments under the
Swap Contract with respect to each Distribution Date will be made by the Swap
Counterparty or the Trustee on a net basis.
The Certificate Balance of the Class A-2F Regular Interest will be (i)
prior to the first Distribution Date, an amount equal to the initial Certificate
Balance of the Class A-2F Certificates as shown on the front cover of this
Prospectus Supplement, and (ii) as of any date of determination after the first
Distribution Date, the Certificate Balance of the Class A-2F Regular Interest on
the Distribution Date immediately prior to such date of determination after
giving effect to any principal distributions and allocations of Realized Losses
and Additional Trust Fund Expenses made on such Distribution Date.
If the Swap Counterparty's long-term and short-term senior unsecured
deposit ratings fall below "Aa3" and "P-1", respectively, by Moody's, or if the
Swap Counterparty's long-term and short-term senior unsecured debt ratings fall
below "AA-" and "A-1", respectively, by S&P (each, a "Rating Agency Trigger
Event"), the Swap Counterparty will be required to: (i) give notice to the trust
of the occurrence of such event; and (ii) at the Swap Counterparty's option and
expense (a) post collateral or (b) find (and transfer its rights and obligations
under the Swap Contract to) a replacement swap counterparty that would not cause
another Rating Agency Trigger Event with respect to such replacement swap
counterparty. If the Swap Counterparty's long-term senior unsecured deposit
rating falls below "A3" by Moody's or if the Swap Counterparty's long-term
senior unsecured debt rating falls below "A-" by S&P, the Swap Counterparty will
no longer have the option to post collateral (as described above) but rather
will be required to use reasonable
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efforts to transfer its rights and obligations to an eligible swap counterparty
within 20 days of the publication date of such ratings downgrade. In the event
that the Swap Counterparty fails to either post acceptable collateral or find
(and transfer its rights and obligations under the Swap Contract to) an
acceptable replacement swap counterparty (a "Swap Default"), then the Trustee
will be required to take such actions (following the expiration of any
applicable grace periods), unless otherwise directed in writing by the holders
of 25% of the Class A-2F Certificates, to enforce the rights of the Trust Fund
under the Swap Contract as may be permitted by the terms thereof and by the
terms of the Pooling Agreement and use any termination fees received from the
Swap Counterparty (as described herein) to enter into a replacement interest
rate swap contract on substantially identical terms. A Swap Default may, under
appropriate circumstances, also occur pursuant to the terms of the Swap
Documents upon the occurrence of certain events of bankruptcy with respect to
the Trust or the Swap Counterparty, the failure on the part of the Trust or the
Swap Counterparty to make any payment within the applicable grace periods, a
change in law making it illegal with respect to, or imposing indemnifiable taxes
upon, the Trust or the Swap Counterparty, a material breach of agreement or
misrepresentation on the part of the Swap Counterparty or as a result of
additional termination events specified in the Swap Documents. If the costs
attributable to entering into a replacement interest rate swap contract would
exceed the net proceeds of the liquidation of the Swap Contract, a replacement
interest rate swap contract will not be entered into and any such proceeds, if
any, will instead be distributed to the holders of the Class A-2F Certificates.
Following the termination of the Swap Contract (and during the period when the
Trustee is pursuing remedies under the Swap Contract) the Class A-2F Interest
Distribution Amount for the Class A-2F Certificates will be equal to the Fixed
Interest Distribution for the Class A-2F Regular Interest and such Class A-2F
Certificates will accrue interest on the same basis and in the same manner as
the Class A-2F Regular Interest. Any such conversion of the Class A-2F
Certificates to a fixed interest rate will become permanent following the
determination by the Trustee not to enter into a replacement interest rate swap
contract and distribution of any termination payments, if any, to the holders of
the Class A-2F Certificates. Any such Swap Default and the consequent change to
a Fixed Interest Distribution will not constitute a default under the Pooling
Agreement. Any such conversion to a fixed rate might result in a temporary delay
of the Holders of the Class A-2F Certificates to receive payment of the Fixed
Interest Distribution if DTC is not given sufficient notice of the resulting
change in payment terms to the Class A-2F Certificates in sufficient time prior
to the related Distribution Date.
In addition, if the funds allocated to payment of the Fixed Interest
Distribution of the Class A-2F Regular Interest are insufficient to make any
required payments to the Swap Counterparty and to make full distributions of the
Class A-2F Interest Distribution Amount to the Class A-2F Certificates, the Swap
Counterparty may be required to remit only a reduced payment under the Swap
Contract, and holders of the Class A-2F Certificates will experience a
shortfall.
The Trustee will have no obligation on behalf of the Trust Fund to pay or
cause to be paid to the Swap Counterparty any portion of the Fixed Interest
Distribution unless and until the related interest payment on the Class A-2F
Regular Interest is actually received by the Trustee; provided, however, that
the Trustee may receive funds from the Swap Counterparty representing the net
amount payable to the Trustee pursuant to the Swap Contract.
TERMINATION FEES
In the event of the termination of the Swap Contract, the Swap Counterparty
may be obligated to pay a termination fee to the Trust Fund generally designed
to compensate the Trust Fund for the cost, if any, of entering into a
substantially similar interest rate swap contract with another counterparty. Any
termination payments due to the Swap Counterparty under the Swap Contract shall
be payable solely from a portion, if any, of the Fixed Interest Distribution
remaining after all other amounts have been paid under the Class A-2F Regular
Interest (including all principal amounts outstanding).
THE SWAP COUNTERPARTY
Bank of America, N.A. ("Bank of America") is the Swap Counterparty under
the Swap Contract. Bank of America is also a Mortgage Loan Seller and an
affiliate of one of the Underwriters.
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Bank of America is a national banking association organized under the laws
of the United States, and its principal executive offices are located in
Charlotte, North Carolina. Bank of America is a wholly-owned indirect subsidiary
of Bank of America Corporation and is engaged in a general commercial banking
and trust business, offering a wide range of commercial, corporate,
international, financial market, retail and fiduciary banking services. As of
June 30, 2001, Bank of America had consolidated assets of $564 billion,
consolidated deposits of $384 billion and shareholder equity of $51 billion
based on regulatory accounting principles.
The long-term certificates of deposit of Bank of America are rated "Aa1" by
Moody's. The long-term senior unsecured debt rating of Bank of America by S&P is
"AA-". The short-term certificates of deposit of Bank of America are rated "P-1"
by Moody's. The short-term senior unsecured debt rating of Bank of America by
S&P is "A-1+." There can be no assurances that such ratings will be maintained.
Bank of America Corporation files reports with the Securities and Exchange
Commission that are required under the Securities Exchange Act of 1934. Such
reports include additional financial information regarding the Swap Counterparty
and may be obtained at the website maintained by the Securities and Exchange
Commission at http://www.sec.gov.
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, 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. In addition, the yield to
investors in the Class A-2F Certificates will be highly sensitive to changes in
LIBOR such that decreasing levels of LIBOR will have a negative impact on the
yield to investors in such Class of Certificates.
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 herein, the
Principal Distribution Amount for each Distribution Date will be distributable
entirely in respect of the Class A-1 Certificates, Class A-2 Certificates and
the Class A-2F Regular Interest until the related Certificate Balances thereof
are reduced to zero. Following retirement of the Class A-1 Certificates, Class
A-2 Certificates and the Class A-2F Regular Interest, 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
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of the Trust Fund). 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 Mortgage Loans and will
tend to shorten the weighted average lives of those Certificates. 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. Failure
of the borrower under each ARD Loan to repay its respective 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 Loans include 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. 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 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 to the respective Classes of Sequential Pay Certificates (other than
the Class A-2F Certificates) and the Class A-2F Regular Interest (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 and Class A-2F Regular Interest, 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 the respective Classes of REMIC Regular
Certificates (other than the Class A-2F Certificates) and the Class A-2F Regular
Interest (in each case, to reduce the amount of interest otherwise payable
thereon on such
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Distribution Date) as follows: first, to the respective Classes of REMIC Regular
Certificates (other than the Senior Certificates) sequentially in reverse
alphabetical order of Class designation, in each case up to an amount equal to
the lesser of any remaining unallocated portion of such Net Aggregate Prepayment
Interest Shortfall and any Accrued Certificate Interest in respect of such Class
of Certificates for such Distribution Date; and, thereafter, if and to the
extent that any portion of such Net Aggregate Prepayment Interest Shortfall
remains unallocated, among the Class A-1 Certificates, Class A-2 Certificates
and the Class A-2F Regular Interest up to, and pro rata in accordance with, the
respective amounts of Accrued Certificate Interest for each such Class for such
Distribution Date. Any allocation of Net Aggregate Prepayment Interest Shortfall
to the Class A-2F Regular Interest could result in a shortfall in interest paid
by the Swap Counterparty to the Class A-2F Certificateholders.
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 (or, in the
case of a ARD Loan after its Anticipated Repayment Date, the Revised 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 an ARD Loan
will be prepaid on or before its Anticipated Repayment Date or on any other date
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.
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
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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 herein, the
Principal Distribution Amount for each Distribution Date will be distributable
entirely in respect of the Class A-1 Certificates, Class A-2 Certificates and
Class A-2F Regular Interest until the Certificate Balances thereof are reduced
to zero, and will thereafter 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 Certificates, Class A-2 Certificates and Class
A-2F Regular Interest 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, Class P and Class Q 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 (other than the Class A-2F
Certificates) and the Class A-2F Regular Interest. The weighted average life of
the Class A-2F Certificates will be the same as the weighted average life of the
Class A-2F Regular Interest.
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 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-2F, Class B, Class C, Class D,
Class E and Class F 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
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condemnations affecting the Mortgaged Properties, (v) scheduled Monthly Payments
on the Mortgage Loans are timely received on the first day of each month,
commencing in November 2001, (vi) no voluntary or involuntary prepayments are
received as to any Mortgage Loan during such Mortgage Loan's Lock-out Period
("LOP"), if any, or, yield maintenance period ("YMP"), if any, and, an 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 either Mortgage Loan Seller or the Bridger Support
Party, as applicable, (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 11th day of each month, commencing in November 2001
and (xii) the Offered Certificates are settled on November 7, 2001 (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-2F, Class B, Class C, Class D, Class E and Class F
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.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-1 CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<Table>
<Caption>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 11, 2002................................. 92.42 92.42 92.42 92.42 92.42
October 11, 2003................................. 84.04 84.04 84.04 84.04 84.04
October 11, 2004................................. 74.61 74.61 74.61 74.61 74.61
October 11, 2005................................. 64.28 64.28 64.28 64.28 64.28
October 11, 2006................................. 44.25 44.25 44.25 44.25 44.25
October 11, 2007................................. 32.36 32.36 32.36 32.36 32.36
October 11, 2008................................. 17.08 17.08 17.08 17.08 17.08
October 11, 2009................................. 3.27 3.27 3.27 3.27 3.27
October 11, 2010................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 4.61 4.61 4.60 4.60 4.59
</Table>
S-122
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2 CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<Table>
<Caption>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 11, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2009................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2010................................. 88.85 88.66 88.41 88.02 85.04
October 11, 2011................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.43 9.42 9.40 9.38 9.22
</Table>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2F CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<Table>
<Caption>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 11, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2009................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2010................................. 88.85 88.66 88.41 88.02 85.04
October 11, 2011................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.43 9.42 9.40 9.38 9.22
</Table>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<Table>
<Caption>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 11, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2009................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2010................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2011................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.74 9.71 9.68 9.68 9.45
</Table>
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PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<Table>
<Caption>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 11, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2009................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2010................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2011................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.76 9.76 9.73 9.68 9.51
</Table>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<Table>
<Caption>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 11, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2009................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2010................................. 100.00 100.00 100.00 100.00 100.00
October 11, 2011................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.76 9.76 9.76 9.68 9.51
</Table>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<Table>
<Caption>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
Initial Percentage.................................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 11, 2002...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2003...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2004...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2005...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2006...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2007...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2008...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2009...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2010...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2011...................................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years)......................... 9.76 9.76 9.76 9.73 9.51
</Table>
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PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS F CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<Table>
<Caption>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
Initial Percentage.................................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 11, 2002...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2003...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2004...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2005...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2006...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2007...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2008...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2009...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2010...................................... 100.00 100.00 100.00 100.00 100.00
October 11, 2011...................................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years)......................... 9.76 9.76 9.76 9.76 9.51
</Table>
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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, two 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
"REMIC I" and "REMIC II" respectively. The assets of REMIC I will generally
include the Mortgage Loans, any REO Properties acquired on behalf of the
Certificateholders 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
Regular Certificates (other than the Class A-2F Certificates) and the Class A-2F
Regular Interest evidence the "regular interests" in, and generally will be
treated as debt obligations of, REMIC II and (ii) the REMIC Residual
Certificates represent the sole class of "residual interests" in the related
REMICs. Upon issuance of the Offered Certificates, Cadwalader, Wickersham &
Taft, 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, each of REMIC I and REMIC II will
qualify as a REMIC under the Code. In addition, in the opinion of Cadwalader,
Wickersham & Taft, 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 Q Certificates, in addition to
evidencing a regular interest in REMIC II, will evidence beneficial ownership of
such Excess Interest and Excess Interest Distribution Account. See "Certain
Federal Income Tax Consequences -- REMICs" in the accompanying prospectus. The
grantor trust will also hold the Class A-2F Regular Interest, the Swap Contract
and the Floating Rate Account, and the Class A-2F Certificates will represent
undivided beneficial interests in those assets. See "Certain Federal Income Tax
Consequences -- REMICs" in the accompanying prospectus.
DISCOUNT AND PREMIUM; PREPAYMENT PREMIUMS
The Offered Certificates (other than the Class A-2F Certificates) and the
Class A-2F Regular Interest generally will be treated as newly originated debt
instruments originated on the related Startup Day for federal income tax
purposes. The "Startup Day" of 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.
One or more of the Classes of Offered Certificates may be issued with original
issue discount for 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, 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 an ARD Loan
will be assumed to be repaid in full on its Anticipated Repayment Date). For
purposes of this discussion and the discussion in the Prospectus, holders of the
Class A-2F Certificates will be required to allocate their purchase prices and
disposition proceeds between their interest in the Class A-2F Regular Interest
and the Swap Contract for purposes of accruing discount or premium or computing
gain or loss upon disposition of the Class A-2F Certificates, and references in
such discussion to the REMIC Regular Certificates are to the Class A-2F Regular
Interest and amounts allocable thereto. 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.
S-126
Any prepayment premium paid to the Swap Counterparty with respect to the
Class A-2F Regular Interest will be treated as a periodic payment by the holders
of the Class A-2F Certificates under the Swap Contract. See "Taxation of the
Swap Contract" below.
TAXATION OF THE SWAP CONTRACT
Each holder of a Class A-2F Certificate will be treated for federal income
tax purposes as having entered into its proportionate share of the rights of
such Class under the Swap Contract. Holders of the Class A-2F Certificates must
allocate the price they pay for their Certificates between their interests in
the Class A-2F Regular Interest and the Swap Contract based on their relative
market values. The portion, if any, allocated to the Swap Contract will be
treated as a swap premium (the "Swap Premium") paid or received by the holders
of the Class A-2F Certificates, as applicable. If the Swap Premium is paid by a
holder, it will reduce the purchase price allocable to the Class A-2F Regular
Interest. If the Swap Premium is received by holders, it will be deemed to have
increased the purchase price for the Class A-2F Regular Interest. If the Swap
Contract is on-market, no amount of the purchase price will be allocable to it.
Based on the anticipated issue prices of the Class A-2F Certificates and the
Class A-2F Regular Interest, it is anticipated that the Class A-2F Regular
Interest will be issued at a premium and that an equivalent Swap Premium will be
deemed to be paid to the holders of the Class A-2F Certificates, resulting in a
net price of par. The holder of a Class A-2F Certificate will be required to
amortize any Swap Premium under a level payment method as if the Swap Premium
represented the present value of a series of equal payments made or received
over the life of the Swap Contract (adjusted to take into account decreases in
notional principal amount), discounted at a rate equal to the rate used to
determine the amount of the Swap Premium (or some other reasonable rate).
Prospective purchasers of Class A-2F Certificates should consult their own tax
advisors regarding the appropriate method of amortizing any Swap Premium.
Treasury Regulations treat a non-periodic payment made under a swap contract as
a loan for federal income tax purposes if the payment is "significant." It is
not expected that any Swap Premium would be treated in part as a loan under
Treasury Regulations.
Under Treasury Regulations (i) all taxpayers must recognize periodic
payments with respect to a notional principal contract under the accrual method
of accounting and (ii) any periodic payments received under the Swap Contract
must be netted against payments made under the Swap Contract and deemed made or
received as a result of the Swap Premium over the recipient's taxable year,
rather than accounted for on a gross basis. Net income or deduction with respect
to net payments under a notional principal contract for a taxable year should
constitute ordinary income or ordinary deduction. The IRS could contend the
amount is capital gain or loss, but such treatment is unlikely, at least in the
absence of further regulations. Any regulations requiring capital gain or loss
treatment presumably would apply only prospectively. Individuals may be limited
in their ability to deduct any such net deduction and should consult their tax
advisors prior to investing in the Class A-2F Certificates.
Any termination payment received by the holder of a Class A-2F Certificate
upon termination of the Swap Contract or any amount of proceeds from the sale,
redemption or retirement of a Class A-2F Certificate that is considered to be
allocated to the holder's rights under the Swap Contract or that the holder is
deemed to have received from the purchaser would be considered a "termination
payment" allocable to that Class A-2F Certificate under Treasury Regulations. A
holder of a Class A-2F Certificate will have gain or loss from such a
termination equal to (A)(i) any termination payment it received or is deemed to
have received minus (ii) the unamortized portion of any Swap Premium paid (or
deemed paid) by the holder upon entering into or acquiring its interest in the
Swap Contract. Gain or loss realized upon the termination of the Swap Contract
will generally be treated as capital gain or loss. Moreover, in the case of a
holder who is a bank or thrift institution, Code Section 582(c) would likely not
apply to treat such gain or loss as ordinary.
The Class A-2F Certificates, representing a beneficial ownership in the
Class A-2F Regular Interest and in the Swap Contract, may constitute positions
in a straddle, in which case the straddle rules of Code Section 1092 would
apply. A selling holder's capital gain or loss with respect to such regular
interest would be short term because the holding period would be tolled under
the straddle rules. Similarly, capital gain or loss realized in connection with
the termination of the Swap Contract would be short term. If the holder of a
Class A-2F Certificate incurred or continued to incur indebtedness to acquire or
hold such Class A-2F
S-127
Certificate, the holder would generally be required to capitalize a portion of
the interest paid on such indebtedness until termination of the Swap Contract.
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)(4)(A) of the Code
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 to
the extent that such Certificates are treated as "real estate assets" within the
meaning of Section 856(c)(4)(A) of the Code. If 95% or more of the Mortgage
Loans are treated as assets described in Section 856(c)(4)(A) 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 to the extent that the Mortgage Loans are
secured by residential property. As of the Cut-off Date, 33.1% and 2.7%, of the
Initial Pool Balance represented Mortgage Loans secured by multifamily
properties and manufactured housing communities, respectively. The holder of a
Class A-2F Certificate will not be eligible for the foregoing treatments to the
extent of the portion of its basis allocable to its interest in the Swap
Contract. In addition, 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 (other than the Class A-2F 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 AND OTHER TAXES
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 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 REMIC Regular 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 REMIC Regular
Certificates and the IRS; holders of REMIC Regular 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
S-128
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 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 Administrator may not have, such regulations only
require that information pertaining to the appropriate proportionate method of
accruing market discount be provided. The Trustee will report annually to
holders of the Class A-2F Certificates with respect to payments made or received
under the Swap Contract.
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 Transaction Exemption ("PTE") 93-31, and to
Merrill Lynch & Co., PTE 90-29, each as amended by PTE 97-34 and PTE 2000-58
(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) Merrill Lynch & Co., (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 Merrill Lynch & Co., 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, Inc. ("Fitch"), Moody's or S&P. Third, the Trustee cannot
be an affiliate of any other member of the "Restricted Group", which (in
addition to the Trustee) consists of any Exemption-Favored Party, the Depositor,
the Master Servicer, the Special Servicer, any sub-servicer, the Mortgage Loan
Sellers, the Swap Counterparty, any borrower with respect to Mortgage Loans
constituting more than 5% of the aggregate
S-129
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 purchasing a 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 Certificate, 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 Certificate 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 Certificate.
Further, the Exemption imposes additional requirements for purchases by
Plans of classes of Certificates subject to swap contracts, such as the Class
A-2F Certificates which benefit from the Swap Contract:
(a) Each swap contract must be an "eligible swap" with an "eligible
swap counterparty" (as each term is defined in PTE 2000-58);
(b) If a swap contract ceases to be an eligible swap and the swap
contract cannot be replaced, the Trustee must notify Certificateholders
that the Exemption will cease to apply with respect to the class or classes
of Certificates subject to such swap contract; and
(c) The fiduciary of a Plan purchasing any class of Certificates
subject to a swap contract must be either:
- a "qualified professional asset manager" (as defined in PTE 84-14);
- an "in-house asset manager" (as defined in PTE 96-23); or
- a Plan fiduciary with total assets under management of at least $100
million at the time of the acquisition of the Certificates by the
Plan.
The Depositor believes that the Swap Contract will meet all of the relevant
requirements to be considered an "eligible swap" as of the Delivery Date.
However, any Plan contemplating purchase of the Class A-2F Certificates must
make its own determination that all of the additional requirements of the
Exemption are satisfied as of the date of such purchase and during the time that
the Plan holds the Class A-2F 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.
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
S-130
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
Sellers 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 an 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 "certificates" 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.
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.
S-131
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 SMMEA. No representation is made as to the proper
characterization of any class of 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. All institutions 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.
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"), Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Salomon Smith Barney Inc. ("Salomon Smith
Barney" and together with Banc of America Securities and Merrill Lynch, the
"Underwriters"), the Depositor has agreed to sell to each of Banc of America and
Merrill Lynch and each of Banc of America and Merrill Lynch has agreed to
purchase, severally but not jointly, the respective Certificate Balances as
applicable, of each Class of the Offered Certificates as set forth below subject
in each case to a variance of 5%.
<Table>
<Caption>
BANC OF AMERICA MERRILL LYNCH, PIERCE, FENNER SALOMON SMITH
CLASS SECURITIES LLC & SMITH INCORPORATED BARNEY INC.
----- --------------- ----------------------------- -------------
Class A-1.......................... $ 65,612,053 $ 65,612,054 --
Class A-2.......................... $269,068,399 $269,068,398 $25,000,000
Class A-2F......................... $ 18,750,000 $ 18,750,000 --
Class B............................ $ 18,765,665 $ 18,765,664 --
Class C............................ $ 4,691,416 $ 4,691,416 --
Class D............................ $ 5,864,270 $ 5,864,270 --
Class E............................ $ 9,382,832 $ 9,382,832 --
Class F............................ $ 5,864,270 $ 5,864,270 --
</Table>
With respect to the offered certificates, each of Banc of America
Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting
as co-lead manager and joint bookrunner. Banc of America Securities LLC and
Merrill Lynch, Pierce, Fenner & Smith, Incorporated are each acting as a co-lead
manager, 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. Salomon Smith Barney is acting as a co-manager for the offering.
Banc of America Securities LLC 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
100.42% 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
S-132
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 -- Limited Liquidity and Market Value" in this
prospectus supplement and "Risk Factors -- Limited Liquidity of Certificates" in
the accompanying prospectus.
The Depositor has agreed to indemnify the Underwriters and each person, if
any, who controls the Underwriters within the meaning of Section 15 of the
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. Each 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 such Mortgage Loan Seller.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and the
Underwriters by Cadwalader, Wickersham & Taft, 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 Service, a division of The McGraw Hill
Companies, Inc. ("S&P"; and, together with Moody's, the "Rating Agencies"):
<Table>
<Caption>
CLASS MOODY'S S&P
----- ------- ----
Class A-1................................................... Aaa AAA
Class A-2................................................... Aaa AAA
Class A-2F.................................................. Aaa AAA
Class B..................................................... Aa2 AA
Class C..................................................... Aa3 AA-
Class D..................................................... A1 A+
Class E..................................................... A2 A
Class F..................................................... A3 A-
</Table>
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
on May 11, 2035 (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, (iv) whether
S-133
and to what extent Default Interest will be received or Net Aggregate Prepayment
Interest Shortfalls will be realized or (v) payments of Excess Interest. A
security rating on the Class A-2F Certificates does not represent any assessment
of whether the floating interest rate on such Certificates will convert to a
fixed rate. With respect to the Class A-2F Certificates, the Rating Agencies are
only rating the receipt of interest up to the fixed per annum rate applicable to
the Class A-2F Regular Interest. In addition, the ratings on the Class A-2F
Certificates do not address (i) the likelihood of receipt by the holders of the
Class A-2F Certificates of the timely distribution of interest in connection
with the change of the payment terms to a fixed rate upon a Swap Default if DTC
is not given sufficient advance notice of such change in the payment terms or,
(ii) in the event that the Swap Counterparty defaults on its obligations under a
Swap Contract, the likelihood that the holders of the Class A-2F Certificates
will experience shortfalls resulting from expenses incurred in enforcing the
Swap Counterparty's obligations under the related Swap Contract that were not
recovered from the related Swap Counterparty.
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 S&P and/or
Moody's.
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-134
INDEX OF PRINCIPAL DEFINITIONS
<Table>
<Caption>
PAGE
----
30/360 Basis................. S-55
60 North Taylor Avenue
Loan....................... A-6
Accrued Certificate
Interest................... S-101
ACMs......................... S-64
Actual/360 Basis............. S-55
Actual/360 Mortgage Loans.... S-55
Additional Trust Fund
Expenses................... S-106
Administrative Fee Rate...... S-94, A-1
Administrative Fees.......... S-114
Advances..................... S-83
Annual Debt Service.......... A-1
Annualized Most Recent....... A-3
Anticipated Repayment Date... S-55
Appraisal Reduction Amount... S-108
Appraisal Value.............. A-1
ARD Loan..................... S-56
Asset Status Report.......... S-77
Assumed Monthly Payment...... S-102
Available Distribution
Amount..................... S-96
Balloon...................... A-1
Balloon Loan................. S-56
Balloon Payment.............. S-56
Banc of America.............. S-132
Bank of America.............. S-54, S-117
Bank of America ARD Loan..... S-55
Bank of America Excess Cash
Flow....................... S-56
Bank of America Excess
Interest................... S-56
Bank of America Excess
Interest Rate.............. S-56
Bank of America Mortgage
Loans...................... S-54
Bank of America Revised
Rate....................... S-55
Banking Day.................. S-93
Base Interest Fraction....... S-103
BCRF......................... S-54
BOA-Bridger Mortgage Loans... S-54
BOA Originated Mortgage
Loans...................... S-54
Bridger...................... S-54, S-68
Bridger Mortgage Loans....... S-54
Bridger Support Party........ S-68
Cash Flow.................... A-1
Certificate Balance.......... S-91
Certificate Owner............ S-91, S-112
Certificate Registrar........ S-91
Class........................ S-90
Class A-2A Component......... S-92
Class A-2B Component......... S-92
</Table>
<Table>
<Caption>
PAGE
----
Class A-2FA Component........ S-92
Class A-2FB Component........ S-93
Class A-2F Available Funds... S-116
Class A-2F Interest
Distribution Amount........ S-116
Class A-2F Principal
Distribution Amount........ S-116
Class A-2F Regular
Interest................... S-90
Class A Certificates......... S-90
Class X Certificates......... S-13, S-90
Class XC Strip Rate.......... S-93
Class XP Strip Rate.......... S-94
CMSA Loan Periodic Update
File....................... S-111
CMSA Property File........... S-111
Code......................... S-70
Collateral Substitution
Deposit.................... S-57
Collection Period............ S-9, S-95
Commercial Loan.............. S-54
Commercial Mortgaged
Property................... S-54
Compensating Interest
Payment.................... S-81
Component.................... S-92
Component Balance............ S-92
Controlling Class............ S-78
Controlling Class
Certificateholder.......... S-77
Corrected Mortgage Loan...... S-76
Coverage Trigger............. S-62
Cross-Collateralized Mortgage
Loans...................... S-54
Cut-off Date................. S-8, S-54
Cut-off Date Balance......... S-54
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-82
Default Interest............. S-82
Defaulted Mortgage Loan...... S-86
DEFEASANCE................... A-2
Defeasance Lock-Out Period... S-57
Defeasance Option............ S-57
Definitive Certificate....... S-91
Delivery Date................ S-8, S-90
Depositor.................... S-8
Determination Date........... S-9, S-95
Directing
Certificateholder.......... S-77
Discount Rate................ A-2
Distributable Certificate
Interest................... S-101
Distribution Date............ S-9, S-95
</Table>
S-135
<Table>
<Caption>
PAGE
----
Distribution Date
Statement.................. S-109
DTC.......................... S-91
Due Date..................... S-55
Edwards Ground Lease
Portfolio Loan............. A-6
Emergency Advance............ S-83
ERISA........................ S-129
Excess Interest.............. S-56
Excess Interest Distribution
Account.................... S-106
Excess Interest Rate......... S-56
Excluded Plan................ S-131
Exemption-Favored Party...... S-129
Exemption.................... S-129
Expenses..................... A-1
First Lock Box............... S-59
Fiscal Agent................. S-8
Fitch........................ S-129
Fixed Interest
Distribution............... S-116
Floating Rate Account........ S-115
Floating Rate Certificate
Notional Amount............ S-116
Form 8-K..................... S-75
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
Hyper Amortizing............. A-2
Initial Certificate
Balance.................... S-121
Initial Pool Balance......... S-54
Interest Diff (BEY).......... A-2
Interest Diff (MEY).......... A-3
Interest Reserve Account..... S-107
Interest Reset Date.......... S-93
KRECM........................ S-79
Leasable Square Footage...... A-3
LIBOR........................ S-93
Liquidation Fee.............. S-82
Liquidation Fee Rate......... S-82
LOC Loans.................... S-7, A-5
Lock-out Period.............. S-57
LOP.......................... S-122
MAI.......................... S-66
MMPI......................... S-60
Major Tenants................ S-63
Market Square Loan........... S-60
</Table>
<Table>
<Caption>
PAGE
----
Master Servicer.............. S-8
Master Servicer Remittance
Date....................... S-107
Master Servicing Fee......... S-80
Master Servicing Fee Rate.... S-80
Maturity..................... A-3
Maturity Assumptions......... S-121
Maturity Date................ A-3
Maturity Date Balance........ A-3
Maturity Date Loan-to-Value
Ratio...................... A-2
Maturity Date LTV............ A-2
Merrill Lynch................ S-132
Milwaukee Center Office Tower
Loan....................... S-60
Modified Mortgage Loan....... S-109
Monthly Payments............. S-55
Moody's...................... S-133
Mortgage..................... S-54
Mortgage Loan Purchase and
Sale Agreement............. S-72
Mortgage Loan Schedule....... S-72
Mortgage Loan Sellers........ S-8
Mortgage Loans............... S-54
Mortgage Note................ S-54
Mortgage Pool................ S-9, S-54
Mortgage Rate................ S-55
Mortgaged Property........... S-54
Most Recent Cash Flow........ A-3
Most Recent DSCR............. A-3
Most Recent End Date......... A-3
Most Recent Expenses......... A-3
Most Recent Revenues......... A-3
Most Recent Statement Type... A-3
Multifamily Loan............. S-54
Multifamily Mortgaged
Property................... S-54
Net Aggregate Prepayment
Interest Shortfall......... S-101
Net Mortgage Rate............ S-94
Net Rentable Area (SF)....... A-3
Net Swap Payment............. S-101
Nokia........................ S-62
Nokia Office Building Loan... S-62
NOI Adjustment Worksheets.... S-111
Nonrecoverable Advances...... S-108
Nonrecoverable P&I Advance... S-107
Nonrecoverable Servicing
Advance.................... S-83
Non-Specially Serviced
Mortgage Loan.............. S-84
Notional Amount.............. S-92
</Table>
S-136
<Table>
<Caption>
PAGE
----
NPV (BEY).................... A-4
Occupancy%................... A-4
Occupancy Percent............ A-4
Offered Certificates......... S-12, S-90
OPEN......................... A-4
Open Period.................. S-57
Operating Statement Analysis
Report..................... S-111
Option Price................. S-86
Outrigger Reef Hotel Coverage
Test Commencement Date..... S-104
Outrigger Reef Hotel
Indemnification............ S-104
Outrigger Reef Hotel
Indemnity Trigger Period... S-104
Outrigger Reef Hotel
Liquidation Event.......... S-104
Outrigger Reef Hotel Loan.... S-59
P&I Advance.................. S-107
Pacific Professional Building
Loan....................... S-61
Pads......................... A-4
PAR.......................... S-79
Participants................. S-91
Party in Interest............ S-131
Payment After Determination
Date Report................ S-109
Payment Differential......... A-4
Periodic Treasury Yield...... A-4
Permitted Encumbrances....... S-72
Permitted Investments........ S-80
Plan......................... S-129
Plan Assets.................. S-129
PMCC......................... S-54
PMCF......................... S-54
PMCF ARD Loan................ S-56
PMCF Excess Interest......... S-56
PMCF Excess Interest Rate.... S-56
PMCF Mortgage Loans.......... S-54
PMCF Revised Rate............ S-56
Pooling Agreement............ S-90
Prepayment Interest Excess... S-80
Prepayment Interest
Shortfall.................. S-81
Prepayment Premium........... S-57
Prepayment Premium Period.... S-57
Primary Collateral........... S-71
Principal Distribution
Amount..................... S-102
Private Certificates......... S-90
PTE.......................... S-129
</Table>
<Table>
<Caption>
PAGE
----
Purchase Option.............. S-86
Purchase Price............... S-69
Qualified Substitute Mortgage
Loan....................... S-70
Rated Final Distribution
Date....................... S-133
Rating Agencies.............. S-133
Rating Agency Trigger
Event...................... S-116
Realized Losses.............. S-106
Reimbursement Rate........... S-108
Reinvestment Yield........... A-4
Reference Bank............... S-93
Record Date.................. S-9, S-95
Related Loans................ A-4
Related Proceeds............. S-83
Release Date................. S-57
REMIC........................ S-126
REMIC Administrator.......... S-114
REMIC I...................... S-126
REMIC II..................... S-126
REMIC II Regular Interests... S-90
REMIC Regular Certificates... S-90
REMIC Residual
Certificates............... S-90
REO Extension................ S-87
REO Loan..................... S-106
REO Property................. S-76
REO Tax...................... S-128
Required Appraisal Date...... S-108
Required Appraisal Loan...... S-108
Restricted Group............. S-129
Revenues..................... A-1
Revised Rate................. S-56
Rooms........................ A-4
S&P.......................... S-133
Salomon Smith Barney......... S-132
Senior Certificates.......... S-90
Senior Interests............. S-90
Sequential Pay
Certificates............... S-90
Servicing Advances........... S-83
Servicing Standard........... S-75
Servicing Transfer Event..... S-76
Settlement Date.............. S-122
Similar Law.................. S-131
Special Servicer............. S-8
Special Servicing Fee........ S-81
Special Servicing Fee Rate... S-81
Specially Serviced Mortgage
Loan....................... S-76
Startup Day.................. S-126
Stated Principal Balance..... S-95
Subordinate Certificates..... S-96
</Table>
S-137
<Table>
<Caption>
PAGE
----
Substitution Shortfall
Amount..................... S-70
Sub-Servicer................. S-80
Sub-Servicing Agreement...... S-80
Sub-Servicing Fee Rate....... A-1
Swap Contract................ S-9, S-115
Swap Counterparty............ S-115
Swap Default................. S-117
Swap Premium................. S-127
Trailing 12.................. A-4
Trust........................ S-90
Trust Fund................... S-90
Trustee...................... S-8
Trustee Fee.................. S-114
Underwriters................. S-132
Underwriting Agreement....... S-132
Underwriting Cash Flow....... A-5
Underwriting Debt Service
Coverage Ratio............. A-5
Underwriting DSCR............ A-5
Units........................ A-4
</Table>
<Table>
<Caption>
PAGE
----
UPB.......................... A-4
USPAP........................ S-66
UST.......................... S-65
U/W Cash Flow................ A-5
U/W DSCR..................... A-5
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-113
Weighted Average Net Mortgage
Rate....................... S-94
Whitfield Towne Apartments
Loan....................... A-6
Withheld Amount.............. S-107
Workout Fee.................. S-81
Workout Fee Rate............. S-81
YM........................... A-6
YMP.......................... S-122
</Table>
S-138
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 the Underwriters,
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 Balloon Loans.
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 (other than hotel Mortgaged Properties),
base rent (less mark-to-market adjustments in some cases), percentage
rent, expense reimbursements and other revenues; and (C) for the 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 of the information
provided by each
A-1
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; provided that with respect to the LOC Loans (as
defined herein) the Cut-off Date Balance was reduced by the amounts
available under the applicable letter of credit serving as additional
collateral for such Mortgage Loan. "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.
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 Amortizing" means ARD Loan.
13. "Interest Diff (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) 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 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-2
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 herein, "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.
14. "Interest Diff (MEY)" 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 present value of a series of
payments each equal to the Payment Differential and payable on each date
that payment is required under the related Mortgage Loan documents over the
remaining original term of the related Mortgage Note and on the maturity
date of the related Mortgage Loans, discounted at the Reinvestment Yield
for the number of months remaining as of the date of such prepayment to
each such date that payment is required under the related Mortgage Loan
documents and the maturity date of the related Mortgage Loans.
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 in the case of an ARD Loan, the Anticipated Repayment
Date.
17. "Maturity Date Balance" means, with respect to any Mortgage Loan,
the balance due at maturity or in the case of an ARD Loan, the Anticipated
Repayment Date, assuming no prepayments, defaults or extensions.
18. "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.
19. "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.
20. "Most Recent 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.
21. "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 fiscal year ending December 31,
2000.
(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.
A-3
(iii) "Trailing 12" means certain financial information regarding a
Mortgaged Properties which is presented for the trailing 12 months prior
to the Most Recent End Date.
22. "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.
23. "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.
24. "OPEN" means, with respect to any Mortgage Loan that such Mortgage
Loan may be voluntarily prepaid without a Prepayment Premium.
25. "Payment Differential" shall mean an amount equal to (a) the
interest rate under the relevant Mortgage Note less the Reinvestment Yield,
divided by 12 and multiplied by (b) the principal sum outstanding under the
related Mortgage Note after application of the constant monthly payment due
under the related Mortgage Note on the date of such prepayment, provided
that the Payment Differential shall in no event be less than zero.
26. "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.
27. "Reinvestment Yield" shall mean an amount equal to the lesser of
(a) the yield on the United States Treasury issue with a maturity date
closest to the maturity date of the related Mortgage Loan or (b) the yield
on the United States Treasury issue with a term equal to the remaining
average life of the indebtedness evidenced by the related Mortgage Loan,
with each such yield being based on the bid price for such issue as
published in The Wall Street Journal on the date that is 14 days prior to
the date of such prepayment set forth in the notice of prepayment (or, if
such bid price is not published on that date, the next preceding date on
which such bid price is so published) and converted to a monthly compounded
nominal yield.
28. "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.
29. "UPB" means, with respect to any Mortgage Loan, its unpaid
principal balance.
30. "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
A-4
of a Mortgaged Property operated as a Manufactured Housing Community, the
number of pads (referred to in the schedule as "Pads").
31. "U/W DSCR", "Underwriting DSCR", "Underwritten DSCR" or
"Underwriting Debt Service Coverage Ratio" means, with respect to 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; provided
however with respect to Mortgage Loan Nos. 53417, 53423, 53424, 53430,
53432, 53433 and 53443 representing 3.7% of the Initial Pool Balance (the
"LOC Loans"), the debt service was calculated after reducing the original
principal balances of such Mortgage Loans by amounts available for payment
of debt service under certain letters with credit pledged as additional
collateral to secure such Mortgage Loans (provided that such letters of
credit may be released if certain minimum debt service coverage costs are
met).
32. "U/W Cash Flow" or "Underwriting Cash Flow" means, with respect of
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
A-5
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
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.
33. "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.
34. "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, Leasable Square Feet, Rooms or Beds, as applicable.
35. "YM" means, with respect to any Mortgage Loan, a yield maintenance
premium.
36. With respect to Mortgage Loan No. 6103916, the "Edwards Ground
Lease Portfolio Loan" the information under the captions "Year
Built/Renovated", "Total Units/Room/Pads", "SF/Unit/Room/Pads", "Net
Rentable Area (SF)", "Loan Balance Per SF/Unit/Room/Pads", "Largest
Tenant", "Largest Tenant Leased SF", "Largest Tenant % of Total SF",
"Largest Tenant Lease Expiration", "Second Largest Tenant", "Second Largest
Tenant Leased SF", "Second Largest Tenant % of Total SF", and "Second
Largest Tenant Lease Expiration" on the mortgage loan schedule in this
Annex A was derived in part from the improvements on the Mortgaged Property
which are not part of the collateral securing the lien of the Mortgage.
37. The "Whitfield Towne Apartments Loan", Mortgage Loan No. 6104135,
was originally funded in the amount of $6,000,000 on April 4, 2001. An
additional $500,000 was disbursed on July 31, 2001 as certain criteria
under the Mortgage Loan documents were met. Monthly Payments prior to the
earnout funding were $41,297.49.
38. The "60 North Taylor Avenue Loan", Mortgage Loan No. 6104041,
follows the following amortization schedule (A) payments 1-5 are in the
amount of $13,518.38 based on a 300 month amortization; (B) payments 6-77
are in the amount of $14,648.60 based on a 240 month amortization; and (C)
payments 78-120 are in the amount of $15,322.43 based on a 216 month
amortization.
A-6
PREPAYMENT LOCK-OUT/PREPAYMENT ANALYSIS
BASED ON OUTSTANDING PRINCIPAL BALANCE(1)
ALL MORTGAGE LOANS
<Table>
<Caption>
OCT.-2001 OCT.-2002 OCT.-2003 OCT.-2004 OCT.-2005 OCT.-2006 OCT.-2007
--------- --------- --------- --------- --------- --------- ---------
Locked Out..................................... 100.00% 100.00% 100.00% 94.13% 88.93% 84.56% 84.54%
Yield Maintenance.............................. 0.00% 0.00% 0.00% 5.87% 11.07% 15.44% 15.46%
No Penalty..................................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
------- ------- ------- ------- ------- ------- -------
Total.......................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= ======= ======= =======
Total Beginning Balance (in millions).......... $938.28 $928.33 $917.33 $904.96 $891.41 $865.13 $849.52
Percent of Initial Balance..................... 100.00% 98.94% 97.77% 96.45% 95.00% 92.20% 90.54%
<Caption>
OCT.-2008 OCT.-2009 OCT.-2010 OCT.-2011 OCT.-2012 OCT.-2013 OCT.-2014
--------- --------- --------- --------- --------- --------- ---------
Locked Out..................................... 84.87% 84.85% 85.54% 70.21% 72.52% 75.54% 79.66%
Yield Maintenance.............................. 15.13% 15.15% 11.19% 29.79% 27.48% 24.46% 20.34%
No Penalty..................................... 0.00% 0.00% 3.27% 0.00% 0.00% 0.00% 0.00%
------- ------- ------- ------- ------- ------- -------
Total.......................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= ======= ======= =======
Total Beginning Balance (in millions).......... $829.47 $811.35 $740.12 $ 8.16 $ 7.48 $ 6.74 $ 5.93
Percent of Initial Balance..................... 88.40% 86.47% 78.88% 0.87% 0.80% 0.72% 0.63%
<Caption>
OCT.-2015
---------
Locked Out..................................... 85.59%
Yield Maintenance.............................. 9.84%
No Penalty..................................... 4.56%
-------
Total.......................................... 100.00%
=======
Total Beginning Balance (in millions).......... $ 5.06
Percent of Initial Balance..................... 0.54%
</Table>
(1) Prepayment provisions in effect as a percentage of outstanding loan balances
as of the indicated date assuming no prepayments on the Mortgage Loans
(except that an ARD Loan will be repaid in full on its Anticipated Repayment
Date), if any.
A-7
PROPERTY TYPE(1)
<Table>
<Caption>
% OF WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE MIN/MAX AVERAGE MIN/MAX
MORTGAGED CUT-OFF DATE POOL UNDERWRITING UNDERWRITING CUT-OFF DATE CUT-OFF DATE
PROPERTY TYPE PROPERTIES BALANCE BALANCE DSCR DSCR LTV RATIO LTV RATIO
------------- ---------- ------------ ------------ ------------ ------------ ------------ ------------
Multifamily............ 52 $310,225,037 33.1% 1.29x 1.20x/1.68x 75.0% 43.9/80.0%
Retail................. 34 218,020,018 23.2% 1.46x 1.13x/2.11x 67.1% 43.7/79.9%
Anchored............. 21 172,537,301 18.4% 1.46x 1.21x/1.80x 66.3% 43.7/79.9%
Shadow Anchored...... 9 30,610,532 3.3% 1.35x 1.20x/1.51x 74.6% 58.2/79.3%
Unanchored........... 4 14,872,186 1.6% 1.61x 1.13x/2.11x 60.7% 46.2/73.1%
Office................. 24 203,964,406 21.7% 1.37x 1.16x/1.66x 68.6% 52.7/74.8%
Hotel.................. 4 94,362,247 10.1% 1.96x 1.40x/2.12x 42.9% 36.3/65.2%
Industrial............. 13 66,376,522 7.1% 1.29x 1.23x/1.52x 67.6% 49.8/74.9%
Manufactured Housing... 6 25,055,313 2.7% 1.30x 1.20x/1.44x 77.6% 69.5/80.6%
Self-Storage........... 8 13,827,783 1.5% 1.39x 1.34x/1.42x 68.5% 58.5/73.6%
Land................... 2 6,451,885 0.7% 1.29x 1.29x/1.29x 73.8% 73.8/73.8%
--- ------------ ----- ---- ----------- ---- ---------
Total/Wtd Avg.......... 143 $938,283,211 100.0% 1.41x 1.13x/2.12x 68.0% 36.3/80.6%
=== ============ ===== ==== =========== ==== =========
<Caption>
WEIGHTED
AVERAGE
MORTGAGE
PROPERTY TYPE RATE
------------- --------
Multifamily............ 7.394%
Retail................. 7.709%
Anchored............. 7.701%
Shadow Anchored...... 7.771%
Unanchored........... 7.677%
Office................. 7.540%
Hotel.................. 7.217%
Industrial............. 7.703%
Manufactured Housing... 7.463%
Self-Storage........... 7.832%
Land................... 8.500%
-----
Total/Wtd Avg.......... 7.519%
=====
</Table>
---------------
(1) For Mortgage Loans secured by multiple properties, the Cut-off Date Balance
is allocated based on the individual property's appraised value as a
percentage of the total appraised value of the related Mortgage Loan.
CUT-OFF DATE BALANCES
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
BALANCES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- ------------ ------- ------------ ------------ --------
$878,523 -- $999,999...... 2 $ 1,874,095 0.2% 1.45x 57.1% 8.056%
$1,000,000 -- $1,999,999..... 22 33,518,050 3.6% 1.35x 66.4% 7.857%
$2,000,000 -- $2,999,999..... 24 61,095,608 6.5% 1.32x 71.9% 7.590%
$3,000,000 -- $3,999,999..... 18 63,136,601 6.7% 1.29x 71.1% 7.772%
$4,000,000 -- $4,999,999..... 12 52,958,547 5.6% 1.43x 70.0% 7.556%
$5,000,000 -- $7,499,999..... 22 134,858,783 14.4% 1.33x 72.1% 7.572%
$7,500,000 -- $9,999,999..... 8 71,053,727 7.6% 1.33x 70.4% 7.698%
$10,000,000 -- $14,999,999..... 12 145,147,683 15.5% 1.29x 74.5% 7.535%
$15,000,000 -- $19,999,999..... 5 81,680,374 8.7% 1.31x 72.7% 7.511%
$20,000,000 -- $29,999,999..... 6 138,408,312 14.8% 1.30x 76.0% 7.294%
$30,000,000 -- $71,791,000..... 3 154,551,432 16.5% 1.89x 44.5% 7.357%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
A-8
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
SE- LOAN
QUENCE NUMBER PROPERTY NAME PROPERTY ADDRESS
------ ------ ------------- ----------------
A1 52958 Adiamo Apartments 1350 W. Horizon Ridge Parkway
A2 54815 RCA - Royal Sahara Apartments 1655 East Sahara Avenue
A3 53713 The Callaway House 301 George Bush Drive West
P1 6104314 Quail Cove Apartments 332 West Antelope Drive
P2 6104093 River Park Place Apartments 3217 River Park Drive
A4 53424 Lumberton Apartments 1401 Windmill Way
B1 100010286 Lakeshore Apartments One East Lakeshore Drive
A5 54758 RCA - Riverwood Apartments 7767 La Riviera Drive
P3 6104044 Las Ventanas Apartments 2200 East First Street
A6 54817 RCA - Waterford Apartments 900 East Randol Mill Road
A7 55447 The Chaparral Apartments 25025 SE Klahanie Boulevard
P4 6104339 Chestnut Ridge Apartments 3901 Campbellton Road
A8 54650 RCA - Eastchase Apartments 9001 Meadowbrook Boulevard
P5 6104336 Yorktown Apartments 7103 Yorktown Road
A9 54698 Brandywine Apartments 100 New Road at Route 9
P6 6104135 Whitfield Towne Apartments 5604 Whitfield Chapel Road
B2 800010306 Birch Park Apartments 604 SE 12st Avenue
P7 6104163 Sutton House Apartments 11840 N.E. 19th Drive
A10 54492 Willow River Apartments 1650 Lancing Drive
A11 54580 Kelton Street Apartments 220-236 Kelton Street
A12 53443 Woodcrest Arms Apartments 892 Woodcrest Road
P8 6104382 Patio Apartments 420 North Dean Road
P9 6104341 Gatewood Apartments 303-D Pebble Lane
A13 54964 Twelve Trees Apartments 1136 Summerwood Drive
B3 322010307 High Key Apartments 13012 Oak Terrace Drive
A14 53423 Longview Apartments 2349 Carpenter Road
B4 415010288 Camelot Mesa Apartments 10208 Maya Linda Road
P10 6104335 Stoney Ridge Apartments 5490 Morganton Road
A15 53417 Greentree Village Apartments 519 Green Tree Village
A16 53430 Provincial West Apartments 106 Chestnut Street
A17 53432 Strathmore Gardens Apartments 12 South Atlantic Ave.
P11 6104348 Centra Villa Apartments 1717 Centra Villa Drive
B5 800010277 Park Center Apartments 3007 Borst Avenue
B6 415010290 Beach Colony Apartments 2005 Avenida de Mexico
A18 55400 Bristol Place Apartments 1207 Bristol Lane
A19 55366 RCA Portfolio 2 - Park Plaza Apartments 10010 Westpark Drive
P12 6104334 Madison Place Apartments 144 Madison Place Circle
A20 54880 Bucks Crossing 3110 Knights Road
A21 54733 652 - 658 Oakdale Apartments 652 - 658 West Oakdale Avenue
A22 53433 Sussex House Condominium Apartments 101 North Kings Highway
B7 415000236 Corona del Sol Apartments 25711 Frampton Avenue
B8 415000235 La Corona Apartments 21910 South Western Avenue
B9 415000234 Corona del Norte Apartments 21240 South Western Avenue
Sub-Total Crossed Loans
B10 400010314 Magnolia Trace Apartments 344 20th Avenue Northeast
B11 415010297 Casa Bernardo Apartments 17251 West Bernardo Drive
P13 6104247 Ballantyne Apartments 161 Ballantyne Road
B12 400000226 Monument Place Apartments 305 W. Monument Street
B13 100000256 Shawnee Place Apartments 102 E. Main Street
A23 54058 Terrace West Apartments 1000 McDonald Way
B14 820000263 Challis Apartments 1413, 1415, & 1417 Challis Court
B15 415010295 Home Avenue Apartments 874 Home Avenue
P14 6104232 Pinehurst Apartments 3401 E. Marshall Avenue
A24 55235 Market Square 305 West High Avenue
B16 100010315 Kohls Shopping Center 6199, 6235 & 6245 Wilson Mills Road
P15 6104233 Calumet Center 500 River Oaks West
B17 303000166 Raley's Stockton Plaza 2309, 2323, 2339, 2415 W. Hammer Lane
B18 415010287 Eagle Rock Center 4903 - 4945 Eagle Rock Boulevard
P16 6104239 South Lakeview Plaza 4400-4498 Lemay Ferry Road
P17 6104193 Seaford Village Shopping Center Route 13
P18 6104329 Lakehills Plaza Shopping Center 4211 South Lamar Boulevard
B19 415010281 Valu Plus Market Place, Lynwood 10721 South Atlantic Avenue
P19 6104299 Tri-Cities Shopping Center 7301-7525 W. Canal Dr. & 7320 W.
P20 6104330 Pool City Plaza 610-690 Chauvet Drive
P21 6104195 Hallandale Place Shopping Center 1400-1485 East Hallandale Beach Boulevard
A25 54522 Florida International Plaza 10520-80 SW 8th Street & 869-955 107th Avenue
P22 6104293 Coleman Center 1284-1292 West San Marcos Blvd.
B20 800010302 Eastgate Marketplace 420 North Wilbur Street
B21 323010308 Walgreens Sunrise 7877 Sunrise Blvd.
A26 54861 Walgreens - Reisterstown Road 4025 W. Northern Parkway
P23 6104356 Rocky Face Crossing Shopping Center 2709 Chattanooga Road
COUNTY CITY
------ ----
Clark Henderson
Clark Las Vegas
Brazos College Station
Davis Layton
Tarrant Fort Worth
Burlington Mount Holly
Hamilton Reading
Sacramento Sacramento
Otero Alamogordo
Tarrant Arlington
King Issaquah
Fulton Atlanta
Tarrant Fort Worth
Jefferson Louisville
Atlantic Somers Point
Prince George's Lanham
Clark Vancouver
Miami-Dade North Miami
Salem Salem
Suffolk Brighton
Kent Dover
Lee Auburn
Aiken Aiken
Dauphin Harrisburg
Bexar San Antonio
New Castle Wilmington
San Diego San Diego
Cumberland Fayetteville
Lebanon Lebanon
Camden Cherry Hill
Monmouth Aberdeen
Fulton Atlanta
Lewis Centralia
San Diego San Diego
St. Louis
Harris Houston
Iredell Mooresville
Bucks Bensalem
Cook Chicago
Camden Cherry Hill
Los Angeles Harbor City
Los Angeles Torrance
Los Angeles Torrance
Jefferson Birmingham
San Diego San Diego
Onondaga Syracuse
Baltimore Baltimore
Clark Springfield
Kern Bakersfield
McLean Bloomington
San Deigo Carlsbad
Harrison Longview
Guilford High Point
Cuyahoga Highland Heights
Cook Calumet City
San Joaquin Stockton
Los Angeles Eagle Rock
St. Louis St. Louis
Sussex Seaford
Travis Austin
Los Angeles Lynwood
Benton Kennewick
North Fayette Township
Allegheny Hallandale
Broward Miami
Miami-Dade San Marcos
San Diego Walla Walla
Walla Walla Citrus Heights
Sacramento Baltimore
Whitfield Dalton
MATURITY OR
ANTICIPATED
CUT-OFF REPAYMENT
DATE DATE LOAN
STATE ZIP CODE PROPERTY TYPE ORIGINAL BALANCE BALANCE BALANCE TYPE
----- -------- ------------- ---------------- ------- ------- ----
NV 89012 Multifamily $21,880,000 $21,786,023 $19,161,716 Balloon
NV 89104 Multifamily 21,000,000 21,000,000 19,063,723 Balloon
TX 77840 Multifamily 20,475,000 20,387,058 17,931,269 Balloon
UT 84041 Multifamily 16,200,000 16,170,436 14,332,930 Hyper Amortizing
TX 76116 Multifamily 12,800,000 12,718,460 11,396,518 Balloon
NJ 08060 Multifamily 12,459,974 12,459,974 11,153,906 Hyper Amortizing
OH 45237 Multifamily 11,700,000 11,649,991 10,251,750 Balloon
CA 95826 Multifamily 11,536,000 11,536,000 10,441,727 Balloon
NM 88310 Multifamily 11,500,000 11,469,309 10,123,088 Balloon
TX 76011 Multifamily 11,156,650 11,156,650 10,127,966 Balloon
WA 98029 Multifamily 10,879,000 10,856,885 10,328,196 Balloon
GA 30331 Multifamily 9,500,000 9,487,377 8,372,577 Balloon
TX 76120 Multifamily 8,000,000 8,000,000 7,262,370 Balloon
KY 40214 Multifamily 7,500,000 7,493,877 6,553,175 Balloon
NJ 08244 Multifamily 6,720,000 6,707,257 5,924,635 Balloon
MD 20706 Multifamily 6,500,000 6,479,698 5,725,166 Balloon
WA 98683 Multifamily 6,470,000 6,461,765 5,726,465 Balloon
FL 33181 Multifamily 6,300,000 6,284,974 5,614,490 Balloon
VA 24153 Multifamily 5,500,000 5,486,985 4,905,075 Balloon
MA 02134 Multifamily 5,300,000 5,289,311 4,645,249 Balloon
DE 19904 Multifamily 5,174,380 5,174,380 4,631,996 Hyper Amortizing
AL 36830 Multifamily 5,133,000 5,133,000 4,588,970 Balloon
SC 29801 Multifamily 4,640,000 4,633,695 4,080,019 Balloon
PA 17111 Multifamily 4,500,000 4,496,238 3,919,528 Balloon
TX 78233 Multifamily 4,500,000 4,494,777 4,017,405 Balloon
DE 19810 Multifamily 4,444,420 4,444,420 3,978,552 Hyper Amortizing
CA 92126 Multifamily 4,350,000 4,331,990 3,824,307 Balloon
NC 28314 Multifamily 4,300,000 4,294,069 3,775,257 Balloon
PA 17042 Multifamily 3,887,537 3,887,537 3,480,041 Hyper Amortizing
NJ 08002 Multifamily 3,357,256 3,357,256 3,005,345 Hyper Amortizing
NJ 07747 Multifamily 3,117,640 3,117,640 2,790,846 Hyper Amortizing
GA 30311 Multifamily 3,100,000 3,097,053 2,631,587 Balloon
WA 98531 Multifamily 2,950,000 2,937,483 2,586,848 Balloon
CA 92173 Multifamily 2,900,000 2,892,173 2,553,668 Balloon
MO 63106 Multifamily 2,800,000 2,791,508 2,279,572 Balloon
TX 77042 Multifamily 2,640,000 2,640,000 2,343,260 Balloon
NC 28115 Multifamily 2,516,000 2,512,665 2,217,971 Balloon
PA 19020 Multifamily 2,520,000 2,511,980 2,339,473 Balloon
IL 60657 Multifamily 2,100,000 2,091,002 1,839,582 Balloon
NJ 08034 Multifamily 1,987,622 1,987,622 1,779,277 Hyper Amortizing
CA 90710 Multifamily 1,872,000 1,827,328 56,054 Fully Amortizing
CA 90501 Multifamily 1,270,000 1,239,693 38,027 Fully Amortizing
CA 90501 Multifamily 900,000 878,523 26,948 Fully Amortizing
-----------------------------------------
4,042,000 3,945,544 121,029
AL 35215 Multifamily 1,835,000 1,831,725 1,626,742 Balloon
CA 92127 Multifamily 1,650,000 1,647,053 1,462,631 Balloon
NY 13205 Multifamily 1,560,000 1,556,928 1,370,461 Balloon
MD 21203 Multifamily 1,550,000 1,535,659 1,275,554 Balloon
OH 45502 Multifamily 1,525,000 1,520,486 1,356,301 Balloon
CA 93309 Multifamily 1,270,000 1,265,060 1,123,577 Balloon
IL 61704 Multifamily 1,200,000 1,194,839 1,065,783 Balloon
CA 92008 Multifamily 1,025,000 1,023,652 904,268 Balloon
TX 75601 Multifamily 1,000,000 995,572 57,153 Fully Amortizing
NC 27260 Retail 50,000,000 49,800,980 31,871,910 Balloon
OH 44143 Retail 22,000,000 21,958,734 19,415,735 Balloon
IL 60409 Retail 15,665,000 15,637,583 13,911,121 Hyper Amortizing
CA 95201 Retail 12,400,000 12,307,318 11,162,197 Balloon
CA 90041 Retail 7,500,000 7,470,825 6,635,293 Balloon
MO 63129 Retail 7,340,000 7,330,964 6,517,310 Balloon
DE 19973 Retail 6,500,000 6,473,419 5,721,761 Balloon
TX 78704 Retail 6,080,000 6,072,821 5,419,516 Balloon
CA 90262 Retail 6,051,160 6,027,621 5,353,496 Balloon
WA 99336 Retail 5,875,000 5,862,934 4,792,468 Hyper Amortizing
PA 15275 Retail 5,300,000 5,293,476 4,705,959 Balloon
FL 33009 Retail 4,700,000 4,691,541 4,163,494 Balloon
FL 33174 Retail 4,650,000 4,627,391 4,080,601 Balloon
CA 92069 Retail 4,400,000 4,386,638 2,001,483 Balloon
WA 99362 Retail 4,050,000 4,045,142 3,604,819 Balloon
CA 95610 Retail 4,000,000 3,995,295 3,566,755 Balloon
MD 21215 Retail 3,760,000 3,750,701 3,339,513 Balloon
GA 30720 Retail 3,720,000 3,717,104 3,270,542 Balloon
ADMINI-
STRATIVE SUB NET
MORTGAGE FEE SERVICING MORTGAGE NOTE
RATE RATE(1) FEE RATE RATE DATE
---- ------- -------- ---- ----
7.100% 0.142% 0.100% 6.958% 3/8/2001
7.060% 0.072% 0.030% 6.988% 3/5/2001
7.100% 0.142% 0.100% 6.958% 3/30/2001
7.490% 0.082% 0.040% 7.408% 6/14/2001
7.760% 0.052% 0.010% 7.708% 11/30/2000
8.327% 0.142% 0.100% 8.185% 9/8/2000
7.120% 0.082% 0.040% 7.038% 3/15/2001
6.900% 0.072% 0.030% 6.828% 4/16/2001
7.360% 0.082% 0.040% 7.278% 12/28/2000
7.060% 0.072% 0.030% 6.988% 3/5/2001
7.090% 0.142% 0.100% 6.948% 6/21/2001
7.350% 0.052% 0.010% 7.298% 7/20/2001
7.060% 0.072% 0.030% 6.988% 3/5/2001
7.020% 0.102% 0.060% 6.918% 8/15/2001
7.350% 0.142% 0.100% 7.208% 6/22/2001
7.320% 0.102% 0.060% 7.218% 4/4/2001
7.520% 0.092% 0.050% 7.428% 7/19/2001
7.800% 0.052% 0.010% 7.748% 5/18/2001
7.830% 0.142% 0.100% 7.688% 5/18/2001
7.120% 0.142% 0.100% 6.978% 6/12/2001
8.327% 0.142% 0.100% 8.185% 9/8/2000
7.300% 0.102% 0.060% 7.198% 8/16/2001
7.260% 0.082% 0.040% 7.178% 7/30/2001
6.900% 0.142% 0.100% 6.758% 8/29/2001
7.875% 0.092% 0.050% 7.783% 6/26/2001
8.327% 0.142% 0.100% 8.185% 9/8/2000
7.250% 0.072% 0.030% 7.178% 3/26/2001
7.200% 0.102% 0.060% 7.098% 7/31/2001
8.327% 0.142% 0.100% 8.185% 9/8/2000
8.327% 0.142% 0.100% 8.185% 9/8/2000
8.327% 0.142% 0.100% 8.185% 9/8/2000
7.300% 0.052% 0.010% 7.248% 8/27/2001
7.150% 0.072% 0.030% 7.078% 3/15/2001
7.315% 0.092% 0.050% 7.223% 5/21/2001
7.480% 0.142% 0.100% 7.338% 6/27/2001
7.330% 0.072% 0.030% 7.258% 6/13/2001
7.360% 0.102% 0.060% 7.258% 7/13/2001
7.430% 0.142% 0.100% 7.288% 4/30/2001
7.110% 0.142% 0.100% 6.968% 3/19/2001
8.327% 0.142% 0.100% 8.185% 9/8/2000
7.700% 0.072% 0.030% 7.628% 1/22/2001
7.700% 0.072% 0.030% 7.628% 1/22/2001
7.700% 0.072% 0.030% 7.628% 1/22/2001
7.570% 0.142% 0.100% 7.428% 6/29/2001
7.567% 0.092% 0.050% 7.475% 6/5/2001
7.210% 0.052% 0.010% 7.158% 6/14/2001
7.875% 0.142% 0.100% 7.733% 12/14/2000
7.700% 0.102% 0.060% 7.598% 4/11/2001
7.500% 0.142% 0.100% 7.358% 3/29/2001
7.625% 0.072% 0.030% 7.553% 2/14/2001
7.390% 0.092% 0.050% 7.298% 7/25/2001
8.370% 0.052% 0.010% 8.318% 6/13/2001
7.950% 0.092% 0.050% 7.858% 7/11/2001
7.390% 0.072% 0.030% 7.318% 6/29/2001
7.640% 0.052% 0.010% 7.588% 6/14/2001
8.240% 0.072% 0.030% 8.168% 8/25/2000
7.500% 0.072% 0.030% 7.428% 3/23/2001
7.650% 0.052% 0.010% 7.598% 7/30/2001
7.300% 0.052% 0.010% 7.248% 3/6/2001
7.810% 0.102% 0.060% 7.708% 7/5/2001
7.500% 0.072% 0.030% 7.428% 3/23/2001
7.560% 0.052% 0.010% 7.508% 7/31/2001
7.650% 0.102% 0.060% 7.548% 8/1/2001
7.540% 0.102% 0.060% 7.438% 6/29/2001
7.150% 0.142% 0.100% 7.008% 2/2/2001
8.330% 0.102% 0.060% 8.228% 7/13/2001
7.750% 0.092% 0.050% 7.658% 7/30/2001
7.825% 0.092% 0.050% 7.733% 7/10/2001
7.660% 0.142% 0.100% 7.518% 5/21/2001
7.260% 0.102% 0.060% 7.158% 8/27/2001
ORIGINAL ORIGINAL
TERM TO AMORTIZA-
FIRST INTEREST MONTHLY/ TION INTEREST
PAYMENT ACCRUED MONTHLY ARD TERM ONLY SEASONING
DATE METHOD PAYMENT (MONTHS) (MONTHS)(II) PERIOD MONTHS
------- -------- ------- -------- ------------ -------- ---------
5/1/2001 ACT/360 $147,041 120 360 6
5/1/2001 ACT/360 140,561 120 360 24 6
5/1/2001 ACT/360 137,599 120 360 6
8/1/2001 ACT/360 113,162 120 360 3
1/1/2001 ACT/360 91,789 120 360 10
11/1/2000 ACT/360 99,385 120 295 36 12
5/1/2001 ACT/360 78,786 120 360 6
6/1/2001 ACT/360 75,976 120 360 24 5
2/1/2001 ACT/360 79,310 126 360 5 9
5/1/2001 ACT/360 74,676 120 360 24 6
8/1/2001 ACT/360 73,037 60 360 3
9/1/2001 ACT/360 65,452 120 360 2
5/1/2001 ACT/360 53,547 120 360 24 6
10/1/2001 ACT/360 49,998 120 360 1
8/1/2001 ACT/360 46,299 120 360 3
6/1/2001 ACT/360 44,671 120 360 5
9/1/2001 ACT/360 45,328 120 360 2
7/1/2001 ACT/360 45,352 120 360 4
7/1/2001 ACT/360 39,707 120 360 4
8/1/2001 ACT/360 35,689 120 360 3
11/1/2000 ACT/360 41,273 120 295 36 12
10/1/2001 ACT/360 35,905 120 336 24 1
9/1/2001 ACT/360 31,684 120 360 2
10/1/2001 ACT/360 29,637 120 360 1
9/1/2001 ACT/360 32,628 120 360 2
11/1/2000 ACT/360 35,450 120 295 36 12
5/1/2001 ACT/360 29,675 120 360 6
9/1/2001 ACT/360 29,188 120 360 2
11/1/2000 ACT/360 31,008 120 295 36 12
11/1/2000 ACT/360 26,779 120 295 36 12
11/1/2000 ACT/360 24,867 120 295 36 12
10/1/2001 ACT/360 21,805 120 330 1
5/1/2001 ACT/360 19,925 120 360 6
7/1/2001 ACT/360 19,911 120 360 4
8/1/2001 ACT/360 20,655 120 300 3
8/1/2001 ACT/360 18,328 120 348 12 3
9/1/2001 ACT/360 17,352 120 360 2
6/1/2001 ACT/360 17,500 84 360 5
5/1/2001 ACT/360 14,127 120 360 6
11/1/2000 ACT/360 15,854 120 295 36 12
3/1/2001 ACT/360 17,567 180 180 8
3/1/2001 ACT/360 11,918 180 180 8
3/1/2001 ACT/360 8,446 180 180 8
8/1/2001 ACT/360 12,919 120 360 3
8/1/2001 ACT/360 11,613 120 360 3
8/1/2001 ACT/360 10,600 120 360 3
2/1/2001 ACT/360 11,835 120 300 9
6/1/2001 ACT/360 10,873 120 360 5
5/1/2001 ACT/360 8,880 120 360 6
4/1/2001 ACT/360 8,494 120 360 7
9/1/2001 ACT/360 7,090 120 360 2
8/1/2001 ACT/360 8,596 240 240 3
9/1/2001 ACT/360 435,970 120 216 2
8/1/2001 ACT/360 152,174 120 360 3
8/1/2001 ACT/360 111,038 120 360 3
10/1/2000 ACT/360 93,070 120 360 13
5/1/2001 ACT/360 52,441 120 360 6
9/1/2001 ACT/360 52,078 120 360 2
5/1/2001 ACT/360 44,562 120 360 6
9/1/2001 ACT/360 43,810 120 360 2
5/1/2001 ACT/360 42,311 120 360 6
9/1/2001 ACT/360 43,645 120 300 2
9/1/2001 ACT/360 37,604 120 360 2
8/1/2001 ACT/360 32,992 120 360 3
4/1/2001 ACT/360 31,406 120 360 7
9/1/2001 ACT/360 37,712 180 240 2
9/1/2001 ACT/360 29,015 120 360 2
9/1/2001 ACT/360 28,864 120 360 2
7/1/2001 ACT/360 26,704 120 360 4
10/1/2001 ACT/360 25,402 120 360 1
REMAINING
TERM TO MATURITY OR
MONTHLY/ ANTICIPATED CROSS
ARD REPAYMENT COLLATERALIZED RELATED LOCKOUT
(MONTHS) DATE LOAN LOAN EXPIRATION
-------- ---- ---- ------- ----------
114 4/1/2011 No No 2/1/2011
114 4/1/2011 No Yes(BACM 01-PB1-C) 2/1/2011
114 4/1/2011 No No 2/1/2011
117 7/1/2011 No No 3/31/2011
110 12/1/2010 No No 8/31/2010
108 10/1/2010 No Yes(BACM 01-PB1-A) 8/1/2004
114 4/1/2011 No No 12/1/2010
115 5/1/2011 No Yes(BACM 01-PB1-C) 3/1/2011
117 7/1/2011 No No 3/31/2011
114 4/1/2011 No Yes(BACM 01-PB1-C) 2/1/2011
57 7/1/2006 No No 4/1/2006
118 8/1/2011 No No 4/30/2011
114 4/1/2011 No Yes(BACM 01-PB1-C) 2/1/2011
119 9/1/2011 No No 5/31/2011
117 7/1/2011 No No 5/1/2011
115 5/1/2011 No No 1/31/2011
118 8/1/2011 No No 4/1/2011
116 6/1/2011 No No 2/28/2011
116 6/1/2011 No No 4/1/2011
117 7/1/2011 No No 3/1/2011
108 10/1/2010 No Yes(BACM 01-PB1-A) 8/1/2004
119 9/1/2011 No No 5/31/2011
118 8/1/2011 No No 3/31/2011
119 9/1/2011 No No 7/1/2011
118 8/1/2011 No No 4/1/2011
108 10/1/2010 No Yes(BACM 01-PB1-A) 8/1/2004
114 4/1/2011 No No 12/1/2010
118 8/1/2011 No Yes(BACM 01-PB1-F) 4/30/2011
108 10/1/2010 No Yes(BACM 01-PB1-A) 8/1/2004
108 10/1/2010 No Yes(BACM 01-PB1-A) 8/1/2004
108 10/1/2010 No Yes(BACM 01-PB1-A) 8/1/2004
119 9/1/2011 No No 5/31/2011
114 4/1/2011 No No 12/1/2010
116 6/1/2011 No Yes(BACM 01-PB1-G) 2/1/2011
117 7/1/2011 No No 5/1/2011
117 7/1/2011 No Yes(BACM 01-PB1-C) 5/1/2011
118 8/1/2011 No Yes(BACM 01-PB1-F) 4/30/2011
79 5/1/2008 No No 5/1/2004
114 4/1/2011 No No 2/1/2011
108 10/1/2010 No Yes(BACM 01-PB1-A) 8/1/2004
172 2/1/2016 Yes(BACM 01-PB1-A) No 1/1/2004
172 2/1/2016 Yes(BACM 01-PB1-A) No 1/1/2004
172 2/1/2016 Yes(BACM 01-PB1-A) No 1/1/2004
117 7/1/2011 No No 6/1/2004
117 7/1/2011 No Yes(BACM 01-PB1-G) 3/1/2011
117 7/1/2011 No No 3/31/2011
111 1/1/2011 No No 12/1/2003
115 5/1/2011 No No 1/1/2011
114 4/1/2011 No No 2/1/2011
113 3/1/2011 No No 2/1/2004
118 8/1/2011 No Yes(BACM 01-PB1-G) 4/1/2011
237 7/1/2021 No No 8/1/2005
118 8/1/2011 No No 1/1/2011
117 7/1/2011 No No 3/1/2011
117 7/1/2011 No No 3/31/2011
107 9/1/2010 No No 5/1/2010
114 4/1/2011 No Yes(BACM 01-PB1-E) 12/1/2010
118 8/1/2011 No No 4/30/2011
114 4/1/2011 No No 12/31/2010
118 8/1/2011 No No 4/30/2011
114 4/1/2011 No Yes(BACM 01-PB1-E) 12/1/2010
118 8/1/2011 No No 4/30/2011
118 8/1/2011 No No 4/30/2011
117 7/1/2011 No No 3/31/2011
113 3/1/2011 No No 1/1/2011
178 8/1/2016 No No 4/30/2016
118 8/1/2011 No No 4/1/2011
118 8/1/2011 No No 4/1/2011
116 6/1/2011 No Yes(BACM 01-PB1-D) 4/1/2011
119 9/1/2011 No No 5/31/2011
PREPAYMENT PENALTY YIELD
DESCRIPTION (MONTHS) MAINTENANCE TYPE
-------------------- ----------------
LO(118)/OPEN(2)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(46)/GRTR1%PPMTorYM(72)/OPEN(2) Interest Diff (BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(122)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(57)/OPEN(3)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(46)/GRTR1%PPMTorYM(72)/OPEN(2) Interest Diff (BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(115)/OPEN(5)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(46)/GRTR1%PPMTorYM(72)/OPEN(2) Interest Diff (BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(46)/GRTR1%PPMTorYM(72)/OPEN(2) Interest Diff (BEY)
LO(46)/GRTR1%PPMTorYM(72)/OPEN(2) Interest Diff (BEY)
LO(46)/GRTR1%PPMTorYM(72)/OPEN(2) Interest Diff (BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(36)/GRTR1%PPMTorYM(45)/OPEN(3) Interest Diff (BEY)
LO(118)/OPEN(2)/DEFEASANCE
LO(46)/GRTR1%PPMTorYM(72)/OPEN(2) Interest Diff (BEY)
LO(35)/GRTR1%PPMTorYM(141)/OPEN(4) NPV(BEY)
LO(35)/GRTR1%PPMTorYM(141)/OPEN(4) NPV(BEY)
LO(35)/GRTR1%PPMTorYM(141)/OPEN(4) NPV(BEY)
LO(35)/GRTR1%PPMTorYM(81)/OPEN(4) NPV(BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(35)/GRTR1%PPMTorYM(81)/OPEN(4) NPV(BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(35)/GRTR1%PPMTorYM(81)/OPEN(4) NPV(BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(49)/GRTR1%PPMT or YM(184)/OPEN(7) Interest Diff (MEY)
LO(113)/OPEN(7)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(176)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
APPRAISAL
SEQUENCE LOAN NUMBER PROPERTY NAME VALUE
-------- ----------- ------------- ------
A1 52958 Adiamo Apartments $27,350,000
A2 54815 RCA - Royal Sahara Apartments 26,250,000
A3 53713 The Callaway House 25,600,000
P1 6104314 Quail Cove Apartments 20,800,000
P2 6104093 River Park Place Apartments 18,400,000
A4 53424 Lumberton Apartments 14,000,000
B1 100010286 Lakeshore Apartments 15,850,000
A5 54758 RCA - Riverwood Apartments 14,750,000
P3 6104044 Las Ventanas Apartments 15,200,000
A6 54817 RCA - Waterford Apartments 15,350,000
A7 55447 The Chaparral Apartments 13,930,000
P4 6104339 Chestnut Ridge Apartments 12,200,000
A8 54650 RCA - Eastchase Apartments 10,000,000
P5 6104336 Yorktown Apartments 9,600,000
A9 54698 Brandywine Apartments 8,400,000
P6 6104135 Whitfield Towne Apartments 9,300,000
B2 800010306 Birch Park Apartments 8,615,000
P7 6104163 Sutton House Apartments 8,200,000
A10 54492 Willow River Apartments 7,525,000
A11 54580 Kelton Street Apartments 7,600,000
A12 53443 Woodcrest Arms Apartments 6,100,000
P8 6104382 Patio Apartments 6,500,000
P9 6104341 Gatewood Apartments 5,800,000
A13 54964 Twelve Trees Apartments 6,000,000
B3 322010307 High Key Apartments 7,500,000
A14 53423 Longview Apartments 4,900,000
B4 415010288 Camelot Mesa Apartments 6,730,000
P10 6104335 Stoney Ridge Apartments 5,675,000
A15 53417 Greentree Village Apartments 5,000,000
A16 53430 Provincial West Apartments 4,200,000
A17 53432 Strathmore Gardens Apartments 5,550,000
P11 6104348 Centra Villa Apartments 4,100,000
B5 800010277 Park Center Apartments 3,875,000
B6 415010290 Beach Colony Apartments 3,900,000
A18 55400 Bristol Place Apartments 3,500,000
A19 55366 RCA Portfolio 2 - Park Plaza Apartments 3,400,000
P12 6104334 Madison Place Apartments 3,145,000
A20 54880 Bucks Crossing 3,150,000
A21 54733 652 - 658 Oakdale Apartments 3,500,000
A22 53433 Sussex House Condominium Apartments 2,700,000
B7 415000236 Corona del Sol Apartments 3,500,000
B8 415000235 La Corona Apartments 2,500,000
B9 415000234 Corona del Norte Apartments 2,000,000
----------
SUB-TOTAL CROSSED LOANS 8,000,000
B10 400010314 Magnolia Trace Apartments 2,430,000
B11 415010297 Casa Bernardo Apartments 2,385,000
P13 6104247 Ballantyne Apartments 2,410,000
B12 400000226 Monument Place Apartments 2,075,000
B13 100000256 Shawnee Place Apartments 2,000,000
A23 54058 Terrace West Apartments 1,675,000
B14 820000263 Challis Apartments 1,600,000
B15 415010295 Home Avenue Apartments 1,750,000
P14 6104232 Pinehurst Apartments 1,450,000
A24 55235 Market Square 114,000,000
B16 100010315 Kohls Shopping Center 27,600,000
P15 6104233 Calumet Center 19,580,000
B17 303000166 Raley's Stockton Plaza 16,805,000
B18 415010287 Eagle Rock Center 9,800,000
P16 6104239 South Lakeview Plaza 12,650,000
P17 6104193 Seaford Village Shopping Center 9,200,000
P18 6104329 Lakehills Plaza Shopping Center 8,500,000
B19 415010281 Valu Plus Market Place, Lynwood 7,620,000
P19 6104299 Tri-Cities Shopping Center 8,350,000
P20 6104330 Pool City Plaza 6,675,000
P21 6104195 Hallandale Place Shopping Center 6,550,000
A25 54522 Florida International Plaza 9,575,000
P22 6104293 Coleman Center 6,000,000
B20 800010302 Eastgate Marketplace 5,330,000
B21 323010308 Walgreens Sunrise 5,600,000
A26 54861 Walgreens - Reisterstown Road 4,700,000
P23 6104356 Rocky Face Crossing Shopping Center 4,650,000
LOAN
TOTAL SF/ BALANCE
CUT-OFF YEAR UNITS/ UNIT/ NET PER OCCUPANCY
APPRAISAL DATE LTV BUILT/ ROOM/ ROOM/ RENTABLE SF/UNIT/ OCCUPANCY AS OF
RATIO RATIO RENOVATED PADS PADS AREA (SF) ROOM/PADS PERCENT DATE
--------- -------- --------- ----- ------- --------- --------- ------- --------
9/19/2000 80% 1999 278 Units 314,136 $78,367 95% 5/31/2001
1/19/2001 80% 1985/1999 444 Units 392,412 47,297 95% 4/18/2001
10/3/2000 80% 1999 173 Units 145,068 117,844 94% 5/21/2001
1/22/2001 78% 1986 420 Units 354,330 38,501 91% 6/14/2001
9/20/2000 69% 1997 278 Units 263,516 45,750 98% 6/28/2001
7/13/2000 76% 1972 240 Units 213,312 51,917 97% 3/31/2001
9/5/2000 74% 1965/1990 402 Units 328,814 28,980 94% 7/18/2001
3/7/2001 78% 1974 250 Units 185,376 46,144 97% 4/3/2001
7/6/2001 75% 1998 280 Units 256,468 40,962 93% 8/26/2001
1/19/2001 73% 1968/1998 330 Units 270,980 33,808 96% 4/5/2001
5/11/2001 78% 1995 128 Units 132,283 84,819 97% 5/29/2001
6/13/2001 78% 1968/1999 364 Units 390,084 26,064 95% 7/16/2001
1/19/2001 80% 1984 272 Units 203,712 29,412 97% 4/5/2001
5/30/2001 78% 1969/1977 362 Units 297,920 20,701 100% 8/10/2001
3/9/2001 80% 1965 214 Units 162,931 31,342 100% 5/31/2001
12/12/2000 70% 1965/2000 323 Units 265,860 20,061 99% 6/1/2001
4/16/2001 75% 1986 166 Units 152,244 38,926 98% 6/18/2001
1/8/2001 77% 1963 149 Units 167,370 42,181 100% 5/12/2001
2/6/2001 73% 1973 300 Units 310,800 18,290 92% 5/17/2001
1/4/2001 70% 1928/1998 99 Units 50,175 53,427 98% 6/4/2001
7/17/2000 72% 1966 148 Units 107,680 34,962 100% 3/31/2001
7/23/2001 79% 1965/1986 240 Units 179,040 21,388 99% 8/31/2001
6/19/2001 80% 1986 134 Units 141,078 34,580 96% 7/11/2001
6/16/2001 75% 1974 136 Units 140,108 33,061 100% 7/31/2001
4/19/2001 60% 1984 228 Units 158,448 19,714 99% 5/1/2001
7/17/2000 77% 1962 90 Units 79,590 49,382 96% 3/31/2001
2/6/2001 64% 1978/1990s 64 Units 53,288 67,687 100% 4/26/2001
6/14/2001 76% 2001 108 Units 76,086 39,760 98% 7/17/2001
7/18/2000 66% 1972 124 Units 111,600 31,351 98% 3/31/2001
7/14/2000 68% 1961 89 Units 65,829 37,722 96% 3/31/2001
7/13/2000 48% 1965 98 Units 71,640 31,813 86% 3/31/2001
6/14/2001 76% 1971 132 Units 140,380 23,463 98% 7/3/2001
1/16/2001 76% 2000 72 Units 66,264 40,798 97% 3/1/2001
2/15/2001 74% 1987 49 Units 46,844 59,024 96% 7/24/2001
6/1/2001 80% 1975/2000 100 Units 102,490 27,915 97% 5/31/2001
5/11/2001 78% 1979 108 Units 66,856 24,444 96% 6/6/2001
2/26/2001 80% 2000 72 Units 31,680 34,898 99% 7/13/2001
3/7/2001 80% 1966 68 Units 37,880 36,941 97% 4/2/2001
1/22/2001 60% 1928 40 Units 25,400 52,275 100% 3/12/2001
7/14/2000 63% 1971 59 Units 42,838 33,689 100% 3/31/2001
11/17/2000 52% 1976 60 Units 36,600 30,455 98% 4/16/2001
11/17/2000 50% 1977 47 Units 83,900 26,376 98% 4/16/2001
11/17/2000 44% 1979 31 Units 21,900 28,339 97% 4/16/2001
5/3/2001 75% 1973/1998 56 Units 59,499 32,709 91% 7/25/2001
3/14/2001 69% 1986 24 Units 24,624 68,627 100% 4/1/2001
3/16/2001 65% 1964/1999 138 Units 116,190 11,282 99% 6/1/2001
10/26/2000 74% 1930/1985 59 Units 50,493 26,028 95% 12/1/2000
12/11/2000 76% 1906/1985 84 Units 57,391 18,101 95% 4/2/2001
11/1/2000 76% 1978 64 Units 33,392 19,767 98% 6/30/2001
1/16/2001 75% 1986 36 Units 40,500 33,190 94% 1/3/2001
3/22/2001 58% 1979 24 Units 10,320 42,652 96% 7/2/2001
2/23/2001 69% 1977/1998 86 Units 80,560 11,576 88% 7/30/2001
1/1/2001 44% 1902/2000 891,417 SF 891,417 56 99% 7/2/2001
5/11/2001 80% 1995 247,146 SF 247,146 89 100% 5/4/2001
2/23/2001 80% 1975/1998 197,699 SF 197,699 79 98% 6/1/2001
4/7/2000 73% 1999 101,662 SF 101,662 121 100% 3/31/2001
1/29/2001 76% 1965/1990 65,219 SF 65,219 115 100% 4/30/2001
2/20/2001 58% 1981 135,363 SF 135,363 54 89% 7/31/2001
1/25/2001 70% 1985/2001 199,317 SF 199,317 32 100% 5/31/2001
5/8/2001 71% 1980 76,022 SF 76,022 80 93% 5/8/2001
1/22/2001 79% 1996 55,822 SF 55,822 108 100% 4/30/2001
4/5/2001 70% 1976/1999 175,620 SF 175,620 33 99% 7/20/2001
5/26/2001 79% 2000 48,428 SF 48,428 109 100% 7/9/2001
1/31/2001 72% 1979/1983 89,290 SF 89,290 53 97% 5/18/2001
1/3/2001 48% 1979-1995 76,232 SF 76,232 61 98% 4/30/2001
5/1/2001 73% 1985 64,678 SF 64,678 68 96% 7/11/2001
9/1/2001 76% 1972/1997 98,347 SF 98,347 41 100% 8/6/2001
5/7/2001 71% 2001 15,120 SF 15,120 264 100% 3/31/2001
2/12/2001 80% 2000 13,905 SF 13,905 270 100% 2/20/2001
7/2/2001 80% 2000 52,028 SF 52,028 71 100% 6/1/2001
REPLACEMENT
U/W U/W UW U/W REPLACEMENT RESERVES
REVENUES EXPENSES CASE FLOW DSCR RESERVES PER UNIT
--------- -------- ---------- ----- -------- --------
$3,335,061 $1,060,069 $2,199,932 1.25 $ 75,060 $270.00
3,306,441 1,106,258 2,089,183 1.24 111,000 250.00
5,153,675 3,031,482 2,070,293 1.25 51,900 300.00
2,947,641 1,136,902 1,699,019 1.25 111,720 266.00
2,614,352 1,162,388 1,396,364 1.27 55,600 200.00
1,993,045 667,203 1,265,842 1.25 60,000 250.00
2,792,698 1,400,425 1,392,273 1.47 128,568 319.82
2,071,495 851,610 1,142,385 1.25 77,500 310.00
2,122,405 699,494 1,366,911 1.44 56,000 200.00
2,248,322 1,082,912 1,082,910 1.21 82,500 250.00
1,762,090 681,519 1,051,771 1.20 28,800 225.00
2,451,977 1,275,329 1,065,992 1.36 110,656 304.00
1,694,083 830,908 792,455 1.23 70,720 260.00
1,761,199 830,831 834,438 1.39 95,930 265.00
1,406,585 636,714 716,371 1.29 53,500 250.00
2,371,051 1,509,570 764,581 1.43 96,900 300.00
1,221,701 552,582 669,119 1.23 47,642 287.00
1,289,587 549,956 687,481 1.26 52,150 350.00
1,465,305 809,589 573,216 1.20 82,500 275.00
1,053,997 444,119 585,128 1.37 24,750 250.00
843,200 280,521 525,679 1.25 37,000 250.00
1,178,793 537,902 574,891 1.33 66,000 275.00
916,077 398,204 484,239 1.27 33,634 251.00
1,045,990 505,457 504,629 1.42 35,904 264.00
1,199,635 644,965 554,670 1.42 61,332 269.00
678,270 204,250 451,520 1.25 22,500 250.00
678,148 247,919 430,229 1.21 18,427 287.92
758,997 264,207 473,190 1.35 21,600 200.00
710,304 284,358 394,946 1.25 31,000 250.00
731,848 368,526 341,072 1.25 22,250 250.00
858,405 517,176 316,729 1.25 24,500 250.00
862,445 470,526 352,319 1.35 39,600 300.00
518,073 196,216 321,857 1.35 18,000 250.00
509,560 214,317 295,423 1.24 17,885 365.00
636,814 288,531 317,133 1.28 31,150 311.50
602,743 310,483 264,504 1.20 27,756 257.00
450,230 167,782 268,048 1.29 14,400 200.00
479,327 194,660 266,851 1.27 17,816 262.00
386,494 170,416 203,678 1.20 12,400 310.00
515,340 300,413 201,927 1.25 13,000 220.34
441,028 138,875 302,153 1.43 15,000 250.00
309,360 103,258 206,102 1.44 11,750 250.00
247,000 76,803 170,197 1.68 7,750 250.00
367,591 167,179 200,412 1.29 14,000 250.00
283,685 106,729 176,956 1.27 7,800 325.00
685,763 427,591 209,872 1.65 48,300 350.00
427,159 242,788 184,371 1.30 18,734 317.53
483,206 318,609 164,597 1.26 30,240 360.00
299,755 145,694 133,515 1.25 20,546 321.03
249,179 110,368 138,811 1.36 10,309 286.36
182,161 72,846 109,315 1.28 6,000 250.00
393,875 236,199 127,576 1.24 30,100 350.00
13,068,885 3,415,601 9,415,831 1.80 89,291 0.10
3,116,548 641,721 2,445,139 1.34 24,715 0.10
2,937,209 1,072,002 1,793,720 1.35 39,540 0.20
1,714,390 295,133 1,378,159 1.23 5,978 0.06
1,265,468 293,500 896,007 1.42 9,783 0.15
1,517,578 516,800 909,673 1.46 27,073 0.20
1,110,920 287,927 719,476 1.35 29,932 0.15
1,214,037 370,261 748,102 1.42 19,006 0.25
1,026,413 275,612 698,543 1.38 8,942 0.16
1,143,602 371,916 681,082 1.30 35,124 0.20
804,843 161,441 621,005 1.38 7,264 0.15
1,045,054 443,312 537,500 1.36 22,323 0.25
1,204,992 354,499 795,669 2.11 17,533 0.23
804,363 156,018 602,068 1.33 13,220 0.20
793,742 226,854 526,713 1.51 22,529 0.23
477,000 16,578 460,422 1.33 2,268 0.15
405,000 11,100 392,509 1.22 1,391 0.10
516,267 83,771 419,000 1.37 7,804 0.15
MOST
RECENT MOST MOST MOST MOST MOST FULL FULL
STATEMENT RECENT RECENT RECENT RECENT RECENT YEAR YEAR
TYPE END DATE REVENUES EXPENSES CASH FLOW DSCR END DATE REVENUES
---- --------- ---------- -------- --------- ---- -------- --------
Annualized Most Recent 5/31/2001 $3,537,614 $1,081,253 $2,444,534 1.39 12/31/2000 $2,353,351
Annualized Most Recent 3/31/2001 3,359,492 1,036,524 2,322,968 1.38 12/31/2000 3,359,791
Annualized Most Recent 4/30/2001 6,200,910 2,920,815 3,254,706 1.97 12/31/2000 4,098,965
Trailing 12 4/30/2001 2,960,585 1,095,264 1,766,117 1.30 12/31/2000 2,949,565
Trailing 12 4/30/2001 2,403,186 1,149,376 1,253,810 1.14 12/31/2000 2,360,510
Annualized Most Recent 3/31/2001 1,910,464 659,420 1,198,244 1.06 12/31/1999 1,894,262
Annualized Most Recent 6/30/2001 2,917,264 1,656,298 1,195,766 1.26 12/31/2000 2,718,123
Annualized Most Recent 2/28/2001 1,990,800 626,292 1,364,508 1.50 12/31/2000 1,859,421
Trailing 12 5/31/2001 1,849,706 680,258 1,169,448 1.23 12/31/2000 1,799,841
Annualized Most Recent 3/31/2001 2,342,176 1,033,256 1,308,920 1.46 12/31/2000 2,223,320
Annualized Most Recent 4/30/2001 1,771,167 511,341 1,234,578 1.41 12/31/2000 1,757,548
Trailing 12 6/30/2001 2,459,502 1,205,714 1,034,318 1.32 12/31/2000 2,416,520
Annualized Most Recent 3/31/2001 1,731,352 815,856 915,496 1.42 12/31/2000 1,693,029
Trailing 12 5/31/2001 1,806,961 556,151 1,123,640 1.87 12/31/2000 1,814,044
Annualized Most Recent 3/31/2001 1,441,876 663,244 778,632 1.40 12/31/2000 1,451,652
Trailing 12 5/25/2001 2,288,186 1,506,066 576,966 1.08 12/25/2000 2,108,352
Annualized Most Recent 4/30/2001 1,206,088 553,244 652,844 1.20 12/31/2000 1,146,217
Full Year 12/31/2000 1,290,159 440,712 849,447 1.56 12/31/1999 1,044,159
Annualized Most Recent 2/28/2001 1,513,698 655,518 779,430 1.64 12/31/2000 1,432,875
Annualized Most Recent 2/28/2001 1,107,150 410,502 696,648 1.63 12/31/2000 1,054,757
Annualized Most Recent 3/31/2001 980,120 325,264 626,736 1.33 12/31/1999 788,718
Trailing 12 6/30/2001 1,170,551 469,172 701,379 1.63 12/31/2000 1,161,286
Trailing 12 6/30/2001 917,990 393,332 382,851 1.01 12/31/2000 889,599
Annualized Most Recent 6/30/2001 1,094,618 649,480 353,942 1.00 12/31/2000 1,044,113
Annualized Most Recent 5/31/2001 1,215,143 586,037 629,106 1.61 12/31/2000 1,215,618
Annualized Most Recent 3/31/2001 699,260 190,008 486,752 1.21 12/31/1999 641,374
Annualized Most Recent 6/30/2001 723,643 207,806 501,340 1.41 12/31/2000 650,218
Annualized Most Recent 6/30/2001 255,780 173,366 82,414 0.24
Annualized Most Recent 3/31/2001 809,204 300,180 478,024 1.35
Annualized Most Recent 3/31/2001 754,692 533,420 199,020 0.65 12/31/1999 701,502
Annualized Most Recent 3/31/2001 887,328 545,096 317,728 1.12 12/31/1999 443,387
Trailing 12 6/30/2001 828,593 453,821 319,410 1.22 12/31/2000 823,687
Annualized Most Recent 6/30/2001 545,518 168,121 377,397 1.58 12/31/2000 361,195
Annualized Most Recent 6/30/2001 525,360 201,804 311,322 1.30 12/31/2000 492,864
Annualized Most Recent 5/31/2001 633,352 185,922 447,430 1.81
Annualized Most Recent 5/31/2001 610,457 299,472 310,985 1.41 12/31/2000 604,112
Annualized Most Recent 4/30/2001 548,116 236,066 312,050 1.50
Annualized Most Recent 3/31/2001 481,792 212,836 268,956 1.28 12/31/2000 454,013
12/31/2000 392,939
Annualized Most Recent 3/31/2001 539,320 298,096 228,228 1.26 12/31/1999 515,236
Annualized Most Recent 6/30/2001 439,310 190,223 241,029 1.14 12/31/2000 437,765
Annualized Most Recent 6/30/2001 316,252 148,302 146,900 1.03 12/31/2000 321,343
Annualized Most Recent 6/30/2001 249,946 106,989 130,426 1.29 12/31/2000 246,950
Annualized Most Recent 6/30/2001 329,790 149,583 133,115 0.86 12/31/2000 332,349
Annualized Most Recent 6/30/2001 302,846 153,630 149,216 1.07 12/31/2000 267,720
Trailing 12 3/31/2001 655,342 420,069 213,933 1.68 12/31/2000 620,234
Annualized Most Recent 11/30/2000 442,786 199,109 243,677 1.72 12/31/1999 442,452
Annualized Most Recent 6/30/2001 462,968 284,889 149,300 1.14 12/31/2000 479,145
Annualized Most Recent 6/30/2001 314,230 132,440 156,770 1.47 12/31/2000 300,641
Annualized Most Recent 6/30/2001 293,008 109,872 183,136 1.80 12/31/2000 289,168
Annualized Most Recent 5/31/2001 192,534 74,321 118,213 1.39 12/31/2000 188,995
Trailing 12 2/28/2001 362,847 225,708 120,558 1.17 12/31/2000 359,352
Annualized Most Recent 4/30/2001 14,578,725 3,214,521 11,248,017 2.15 12/31/2000 12,558,809
12/31/2000 2,919,389
Full Year 12/31/2000 2,990,211 1,027,744 1,962,467 1.47 12/31/1999 2,937,863
Annualized Most Recent 6/30/2001 1,793,954 232,756 1,561,198 1.40 12/31/2000 1,583,562
Annualized Most Recent 6/30/2001 1,294,391 278,307 1,016,084 1.61 12/31/2000 1,143,414
Trailing 12 6/30/2001 1,571,771 479,145 1,092,626 1.75 12/31/2000 1,517,293
Trailing 12 5/31/2001 1,130,205 283,348 836,084 1.56 12/31/2000 1,122,772
Full Year 12/31/2000 1,036,820 271,164 765,656 1.46 12/31/1999 914,385
Annualized Most Recent 6/30/2001 959,934 216,806 743,127 1.46 12/31/2000 1,016,347
Annualized Most Recent 4/30/2001 1,089,388 223,304 840,223 1.60 12/31/2000 1,080,767
Trailing 12 5/31/2001 676,109 103,820 572,289 1.27
Full Year 12/31/2000 933,949 435,661 461,023 1.16 12/31/1999 976,651
Annualized Most Recent 3/31/2001 1,298,248 410,032 888,216 2.36 12/31/2000 1,141,726
Trailing 12 3/31/2001 786,957 153,017 596,205 1.32 12/31/2000 772,746
Annualized Most Recent 6/30/2001 828,874 260,554 568,320 1.63 12/31/2000 639,720
Annualized Most Recent 6/30/2001 495,463 29,504 465,959 1.35
Annualized Most Recent 6/30/2001 493,040 81,053 408,215 1.34
FULL FULL FULL
YEAR YEAR YEAR
EXPENSES CASH FLOW DSCR LARGEST TENANT
-------- --------- ---- --------------
$695,739 $1,652,979 0.94
1,111,662 2,248,129 1.33
2,907,370 1,058,227 0.64
1,087,564 1,743,425 1.28
1,146,437 1,214,073 1.10
653,631 1,192,631 1.05
1,378,278 1,207,128 1.28
707,335 1,071,665 1.18
729,984 1,069,857 1.12
986,484 1,236,836 1.38
623,210 1,090,940 1.24
1,092,042 1,020,106 1.30
767,619 925,410 1.44
785,742 975,302 1.63
604,125 847,527 1.53
1,403,881 245,544 0.46
487,365 612,029 1.13
461,048 583,111 1.07
783,249 567,786 1.19
423,288 631,469 1.47
271,128 517,590 1.10
469,663 691,623 1.61
402,122 356,808 0.94
534,711 376,182 1.06
557,849 547,825 1.40
185,193 456,181 1.13
170,409 474,105 1.33
338,970 362,532 1.19
245,564 197,823 0.70
447,963 321,116 1.23
138,344 222,851 0.93
185,187 272,077 1.14
301,876 302,236 1.37
161,028 292,985 1.40
140,781 242,158 1.43
267,658 247,578 1.37
116,880 290,933 1.38
89,164 228,009 1.59
64,836 165,175 1.63
145,736 138,008 0.89
95,098 167,701 1.20
374,076 236,466 1.86
194,533 247,919 1.75
300,410 178,735 1.37
140,479 126,369 1.19
106,319 169,747 1.67
62,279 115,632 1.36
228,610 117,231 1.14
3,081,055 9,477,754 1.81 MMPI
625,028 2,294,361 1.26 Home Depot
1,038,610 1,899,253 1.43 Kmart Corporation
245,443 1,338,119 1.20 Raleys
253,480 889,934 1.41 Super A Foods, Inc.
451,481 1,022,603 1.64 Goedeker's
256,931 865,841 1.62 Rose's Stores
260,494 653,891 1.24 Wherehouse Music
198,925 817,422 1.61 K. V. Mart Co. (Valu Plus Market).
219,227 810,712 1.55 Kmart
Pool City
445,335 497,607 1.26 Publix
314,367 827,359 2.20 Northern Hydraulics, Inc.
149,569 521,968 1.15 Coleman College
194,229 445,491 1.28 Bi-Mart
Walgreens
Walgreen Co.
Food Lion
SECOND SECOND
LARGEST SECOND LARGEST LARGEST
LARGEST TENANT LARGEST TENANT TENANT
TENANT % OF TENANT % OF LEASE
LEASED TOTAL LARGEST LEASED TOTAL EXPIRA-
SF SF TENANT SECOND LARGEST TENANT SF SF TION
-- -- ------ --------------------- -- -- ----
370,090 42% 12/31/2009 Century Furniture Co. 55,494 6% 6/30/2004
109,800 44% 11/30/2020 Kohl's 80,371 33% 1/31/2017
130,469 66% 1/31/2024 Marshalls 30,557 15% 5/31/2003
61,797 61% 6/30/2024 Fashion Bug 8,100 8% 11/16/2005
25,183 39% 4/30/2016 Sav-On 18,150 28% 2/21/2011
41,939 31% 1/31/2006 Walgreens 16,380 12% 12/31/2059
45,495 23% 3/5/2005 Sears Roebuck & Co. 44,368 22% 11/30/2005
12,581 17% 9/30/2006 Teacher Heaven 9,650 13% 4/30/2006
40,379 72% 12/31/2016 Chief Auto Parts, Inc. (Auto Zone) 6,010 11% 1/31/2007
84,180 48% 8/31/2006 Craft Warehouse 22,400 13% 6/30/2007
19,000 39% 5/31/2015 Designer Furniture Outlet 17,928 37% 7/31/2010
53,820 60% 9/30/2005 New China Buffet 8,620 10% 11/30/2004
19,376 25% 10/8/2002 Lags Fitness 7,661 10% 2/28/2003
28,535 44% 1/31/2010 Archibald Tire & Auto 6,750 10% 2/28/2003
46,000 47% 1/31/2021 Staples, Inc. 25,600 26% 11/30/2007
15,120 100% 2/28/2061
13,905 100% 1/31/2060
37,978 73% 7/18/2020 Family Dollar 8,050 15% 12/31/2010
SE- LOAN
QUENCE NUMBER PROPERTY NAME PROPERTY ADDRESS COUNTY CITY
------ ------ ------------- ---------------- ------ ----
A27 54782 Rivermont Station Phase II 8465 Holcomb Bridge Road Fulton Alpharetta
A28 54678 Kroger Supermarket - Marion, IL 1704 W. De Young Street Williamson Marion
A29 54471 McConnells Shopping Center 851 Heckle Boulevard York Rock Hill
A30 54860 Walgreens - Liberty Heights 3801 Liberty Heights Avenue Baltimore City Baltimore
P24 6103542 6403-6405 El Cajon Boulevard 6403-6405 El Cajon Boulevard San Diego San Diego
B22 415010310 Walgreens Tacoma 3737 Pacific Avenue Pierce Tacoma
B23 415000250 Village Plaza, Palmdale 2311, 2321, 2331 & 2409 Avenue S Los Angeles Palmdale
A31 54857 Walgreens - Eastern Avenue 4020 Eastern Avenue Baltimore City Baltimore
A32 54888 Shoppes of Garland Shopping Center 2535 Northeast Parkway and 1802
Pleasant Valley Drive Dallas Garland
A33 53647 El Paseo Retail Center 22307 El Paseo Orange Rancho Santa Margarita
A34 54786 Sterling Jewelers 8113 Leesburg Pike Fairfax Vienna
P25 6104304 North Dixie Plaza 245-499 Spanish River Blvd. Palm Beach Boca Raton
A35 54683 Blowing Rock Square U. S. Highway 321 Bypass
(7533 Valley Blvd.) Watauga Blowing Rock
B24 415000259 Union Landing Retail 30970-31000 Courthouse Drive Alameda Union City
B25 810000261 Staples Building, Huber Heights 8139 Old Troy Pike Montgomery Huber Heights
B26 302000241 Napa Retail 2375 California Boulevard Napa Napa
A36 54792 Milwaukee Center Office Tower 111 East Kilbourne Ave. Milwaukee Milwaukee
P26 6104366 Pacific Professional Building 2100 Webster Street San Francisco San Francisco
B27 240010305 Nokia Office Building 12220 Scripps Summit Drive San Diego San Diego
P27 6104243 Village Plaza 23400 Michigan Avenue Wayne Dearborn
P28.1 6104137 25 Hartwell Avenue 25 Hartwell Avenue Middlesex Lexington
P28.2 6104137 40 Hartwell Avenue 40 Hartwell Avenue Middlesex Lexington
P28.3 6104137 45 Hartwell Avenue 45 Hartwell Avenue Middlesex Lexington
P28 6104137 25, 40 & 45 HARTWELL AVENUE (ROLL-UP)
A37 55181 Keystone Office Buildings 100-200 530 and 630 Davis Drive Durham Durham
A38 54756 Foundry Corporate Office Center 50 Holden Street, 275 and 291
Promenade Street Providence Providence
P29 6104101 Windsor Commerce Center 80 Lamberton Road Hartford Windsor
A39 53748 175 Memorial Highway 175 Memorial Highway Westchester New Rochelle
P30 6104251 1671 The Alameda 1671 The Alameda Santa Clara San Jose
P31 6104301 600 Grand Avenue 600-618 Grand Avenue Alameda Oakland
B28 240000216 First Security Van Kasper Building 4475 Executive Drive San Diego San Diego
B29 800010301 Lakeview Place 6725 116th Avenue Northeast King Kirkland
P32 6104208 First American Plaza 1889 Rice Avenue Ventura Oxnard
P33 6104360 Southridge Professional Plaza 3570 West 9000 South Salt Lake West Jordan
P34 6104252 Manhattan Place Office Building 17320 - 17376 West Twelve Mile Road Oakland Southfield
P35 6104274 Anchorage School District Building 4600 DeBarr Road Anchorage Anchorage
P36 6104245 Republic Security Bank Building 801 NE 167th Street Miami-Dade N. Miami Beach
P37 6104303 Industriplex Center 11777 Industriplex Boulevard East Baton Rouge
Parish Baton Rouge
P38 6104261 Sunshine Plaza 411 West 4th Avenue Anchorage Anchorage
P39 6104041 60 North Taylor Avenue 60 North Taylor Avenue Monmouth Neptune
B30 240000227 2915 Telegraph Avenue 2915 Telegraph Avenue Alameda Berkeley
P40 6104236 Outrigger Reef Hotel 2169 Kalia Road Honolulu Honolulu
P41 6104254 Minneapolis Residence Inn 45 South 8th Street Hennepin Minneapolis
P42 6104253 Hilton Garden Inn 8971 Wilcox Drive Summit Twinsburg
P43 6104257 Candlewood Suites - Overland Park 11001 Oakmont Street Johnson Overland Park
P44 6103741 Northwest Corporate Park 1000 Southwest 43rd Street King Renton
A40 55329 Anheuser-Busch Distribution Center 235 Barnum Road Worcester Devens (Ft. Devens)
P45.1 6104290 Penske Logistics I - Delphi 601 Joaquin Cavazos Memorial Drive Cameron Los Indios
P45.2 6104290 Penske Logistics II -
Panasonic Building 1001 Joaquin Cavazos Memorial Drive Cameron Los Indios
P45.3 6104290 MagneTek Building 301 Joaquin Cavazos Memorial Drive Cameron Los Indios
P45 6104290 FINSA INDUSTRIAL PORTFOLIO (ROLL-UP)
A41 54630 Hart Marx Building 1680 East Touhy Avenue Cook Des Plaines
P46 6104189 Atlantic Commerce Center II 999 A South Grand Street Atlantic Hammonton
P47 6104149 Tri-Main Center 2495 Main Street Erie Buffalo
B31 311000254 Jefferson Court 27570 - 27576 Commerce Center Drive Riverside Temecula
B32 430990096 1550 Walnut Hill Lane 1550 West Walnut Hill Lane Dallas Irving
A42 53625 26 Kennedy Boulevard 26 Kennedy Boulevard Middlesex East Brunswick
B33 290000244 Carter Industrial-Will Rogers Blvd. 6601 Will Rogers Boulevard Tarrant Fort Worth
P48 6104250 21 Mandeville Court 21 Mandeville Court Monterey Monterey
A43 52694 Boones Mobile Estates 1027, 1081 and 1085 Marlboro Road Anne Arundel Lothian
B34 400010292 Rancho Salinas MHP 150 Sherwood Drive Monterey Salinas
B35 400000269 Southgate MHP 6405 & 6601 Arden Road Randall Amarillo
B36 415010300 Halcyon MHP 38129 Weirich Drive Lynn Lebanon
B37 400000266 Boulevard Estates MHC 4220 Pasadena Boulevard Harris Pasadena
B38 400010320 Brentwood MHP 1501 East Bantam Road Pima Tucson
P49.1 6104281 Shreve City Self Storage 1333 Shreveport Barksdale Hwy. Caddo Parish Shreveport
P49.2 6104281 Line Avenue Self Storage 747 American Way Caddo Parish Shreveport
P49.3 6104281 Stowaway Self Storage 9211 Youree Drive Caddo Parish Shreveport
P49.4 6104281 University Self Storage 1780 E. Bert Kouns Industrial Loop Caddo Parish Shreveport
P49.5 6104281 Crossroads Self Storage 2900 Bert Kouns Industrial Loop Caddo Parish Shreveport
P49 6104281 SHREVEPORT SELF STORAGE (ROLL-UP)
MATURITY OR
ANTICIPATED ADMINI-
CUT-OFF REPAYMENT STRATIVE SUB- NET
ZIP PROPERTY ORIGINAL DUE DATE LOAN MORTGAGE FOR SERVICING MORTGAGE NOTE
STATE CODE TYPE BALANCE BALANCE BALANCE TYPE RATE RATE(i) FEE RATE RATE DATE
----- ----- -------- ---------- ---------- ----------- ---------------- -------- ------- --------- -------- ---------
GA 30022 Retail 3,675,000 3,650,465 2,578,639 Balloon 7.710% 0.142% 0.100% 7.568% 5/31/2001
IL 62959 Retail 3,648,000 3,636,965 3,238,095 Balloon 7.620% 0.142% 0.100% 7.478% 4/12/2001
SC 29730 Retail 3,600,000 3,587,614 3,156,187 Balloon 7.130% 0.142% 0.100% 6.988% 4/12/2001
MD 21215 Retail 3,380,000 3,371,726 3,004,938 Balloon 7.700% 0.142% 0.100% 7.558% 5/21/2001
CA 92115 Retail 3,455,000 3,361,963 1,472,577 Hyper Amortizing 7.780% 0.052% 0.010% 7.728% 8/17/1999
WA 98408 Retail 3,200,000 3,194,384 2,841,025 Balloon 7.630% 0.092% 0.050% 7.538% 6/26/2001
CA 93550 Retail 3,050,000 3,040,898 2,710,614 Balloon 7.670% 0.072% 0.030% 7.598% 4/20/2001
MD 21224 Retail 2,820,000 2,813,026 2,504,635 Balloon 7.660% 0.142% 0.100% 7.518% 5/21/2001
TX 75040 Retail 2,700,000 2,693,711 2,411,404 Balloon 7.890% 0.142% 0.100% 7.748% 5/31/2001
CA 92688 Retail 2,625,000 2,609,627 2,356,104 Balloon 8.100% 0.142% 0.100% 7.958% 11/22/2000
VA 22182 Retail 2,610,000 2,598,918 2,120,350 Balloon 7.420% 0.142% 0.100% 7.278% 5/17/2001
FL 33427 Retail 2,500,000 2,496,195 1,870,272 Balloon 7.370% 0.052% 0.010% 7.318% 8/31/2001
NC 28605 Retail 2,320,000 2,317,151 2,060,471 Balloon 7.660% 0.142% 0.100% 7.518% 7/13/2001
CA 94587 Retail 2,100,000 2,091,831 1,857,881 Balloon 7.500% 0.072% 0.030% 7.428% 3/7/2001
OH 45242 Retail 2,000,000 1,992,497 1,797,770 Balloon 8.125% 0.072% 0.030% 8.053% 2/17/2001
CA 94599 Retail 1,115,000 1,112,561 1,001,348 Balloon 8.125% 0.092% 0.050% 8.033% 5/4/2001
WI 53202 Office 33,046,000 32,959,452 29,187,566 Balloon 7.435% 0.142% 0.100% 7.293% 6/1/2001
CA 94115 Office 30,000,000 29,971,989 25,537,069 Balloon 7.400% 0.052% 0.010% 7.348% 8/31/2001
CA 92128 Office 23,400,000 23,304,507 19,128,458 Balloon 7.630% 0.092% 0.050% 7.538% 5/9/2001
MI 48124 Office 16,775,000 16,457,523 14,607,088 Balloon 7.540% 0.102% 0.060% 7.438% 5/8/2001
MA 02420 Office
MA 02420 Office
MA 02420 Office
Office 16,000,000 15,988,244 14,169,416 Balloon 7.550% 0.082% 0.040% 7.468% 8/17/2001
NC 27713 Office 14,750,000 14,731,631 13,082,337 Balloon 7.605% 0.142% 0.100% 7.463% 7/19/2001
RI 02908 Office 12,525,000 12,503,141 11,125,410 Balloon 7.650% 0.142% 0.100% 7.508% 6/12/2001
CT 06095 Office 8,800,000 8,751,104 7,796,494 Balloon 7.580% 0.092% 0.050% 7.488% 1/19/2001
NY 10801 Office 8,528,000 8,496,068 7,572,735 Balloon 7.650% 0.142% 0.100% 7.508% 3/19/2001
CA 95126 Office 5,600,000 5,593,335 5,002,621 Balloon 7.780% 0.102% 0.060% 7.678% 5/18/2001
CA 94610 Office 5,275,000 5,244,607 108,383 Fully Amortizing 7.050% 0.102% 0.060% 6.948% 8/27/2001
CA 92121 Office 4,350,000 4,323,801 3,568,566 Balloon 7.750% 0.072% 0.030% 7.678% 3/9/2001
WA 98033 Office 4,200,000 4,188,847 3,704,493 Balloon 7.380% 0.092% 0.050% 7.288% 5/10/2001
CA 93030 Office 3,800,000 3,787,251 3,235,373 Balloon 7.400% 0.052% 0.010% 7.348% 5/7/2001
UT 84088 Office 2,800,000 2,797,409 2,386,714 Balloon 7.450% 0.052% 0.010% 7.398% 8/22/2001
MI 48076 Office 2,475,000 2,465,410 2,039,112 Balloon 7.900% 0.102% 0.060% 7.798% 6/1/2001
AK 99508 Office 2,450,000 2,443,036 2,013,458 Balloon 7.800% 0.102% 0.060% 7.698% 6/29/2001
FL 33169 Office 2,440,000 2,426,716 1,841,891 Balloon 7.810% 0.102% 0.060% 7.708% 5/30/2001
LA 70809 Office 2,300,000 2,300,000 2,049,874 Hyper Amortizing 7.590% 0.052% 0.010% 7.538% 8/13/2001
AK 99501 Office 2,100,000 2,095,139 1,796,392 Balloon 7.560% 0.102% 0.060% 7.458% 6/22/2001
NJ 07753 Office 1,750,000 1,741,876 1,221,041 Hyper Amortizing 8.010% 0.102% 0.060% 7.908% 4/27/2001
CA 94706 Office 1,400,000 1,393,321 1,153,098 Balloon 7.875% 0.072% 0.030% 7.803% 4/18/2001
HI 96815 Hotel 72,300,000 71,791,000 57,833,645 Balloon 6.910% 0.052% 0.010% 6.858% 3/29/2001
MN 55402 Hotel 9,950,000 9,914,221 8,286,186 Balloon 8.280% 0.052% 0.010% 8.228% 5/23/2001
OH 44087 Hotel 8,700,000 8,667,262 7,198,529 Balloon 8.050% 0.102% 0.060% 7.948% 5/11/2001
KS 66210 Hotel 4,000,000 3,989,764 3,334,338 Balloon 8.300% 0.052% 0.010% 8.248% 6/15/2001
WA 98055 Industrial 17,500,000 17,426,588 13,091,340 Balloon 7.350% 0.102% 0.060% 7.248% 6/8/2001
MA 01432 Industrial 10,875,500 10,856,680 9,741,448 Balloon 7.680% 0.142% 0.100% 7.538% 6/7/2001
TX 78667 Industrial
TX 78667 Industrial
TX 78667 Industrial
Industrial 9,800,000 9,791,549 8,441,076 Balloon 7.840% 0.052% 0.010% 7.788% 8/3/2001
IL 60018 Industrial 8,000,000 7,946,146 5,601,664 Balloon 7.650% 0.142% 0.100% 7.508% 5/3/2001
NJ 08037 Industrial 7,250,000 7,163,712 5,068,818 Balloon 7.580% 0.102% 0.060% 7.478% 2/7/2001
NY 14214 Industrial 3,400,000 3,396,662 2,841,635 Balloon 8.420% 0.102% 0.060% 8.318% 8/8/2001
CA 92590 Industrial 2,900,000 2,889,757 2,589,204 Balloon 7.875% 0.072% 0.030% 7.803% 3/26/2001
TX 75038 Industrial 2,675,000 2,641,757 2,248,588 Balloon 8.625% 0.072% 0.030% 8.553% 7/12/2000
NJ 08816 Industrial 1,500,000 1,494,188 1,394,686 Balloon 7.900% 0.142% 0.100% 7.758% 5/25/2001
TX 76102 Industrial 1,480,000 1,472,519 1,324,489 Balloon 8.000% 0.072% 0.030% 7.928% 1/9/2001
CA 93940 Industrial 1,300,000 1,296,964 1,160,770 Balloon 7.880% 0.052% 0.010% 7.828% 5/16/2001
MD 20711 Manufactured Housing
Community 12,960,000 12,901,643 11,460,428 Balloon 7.450% 0.142% 0.100% 7.308% 2/5/2001
CA 93901 Manufactured Housing
Community 5,400,000 5,385,722 4,764,956 Balloon 7.397% 0.122% 0.080% 7.275% 4/26/2001
TX 79109 Manufactured Housing
Community 2,375,000 2,362,193 1,920,341 Balloon 7.250% 0.142% 0.100% 7.108% 4/26/2001
OR 97335 Manufactured Housing
Community 1,965,000 1,962,441 1,735,287 Balloon 7.430% 0.092% 0.050% 7.338% 7/17/2001
TX 77503 Manufactured Housing
Community 1,320,000 1,311,161 1,089,455 Balloon 7.930% 0.142% 0.100% 7.788% 2/14/2001
AZ 85706 Manufactured Housing
Community 1,134,000 1,132,152 1,060,369 Balloon 7.890% 0.142% 0.100% 7.748% 6/15/2001
LA 71105 Self-Storage
LA 71106 Self-Storage
LA 71115 Self-Storage
LA 71105 Self-Storage
LA 71118 Self-Storage
Self-Storage 6,000,000 5,976,214 4,924,087 Balloon 7.820% 0.052% 0.010% 7.768% 5/22/01
ORIGINAL REMAINING
TERM TO ORIGINAL TERM TO MATURITY OR
FIRST INTEREST MATURITY AMORTIZATION INTEREST MONTHLY/ ANTICIPATED CROSS- LOCKOUT
PAYMENT ACCRUAL MONTHLY /ARD TERM ONLY SEASONING ARD REPAYMENT COLLATERALIZED RELATED EXIPIRA-
DATE METHOD PAYMENT (MONTHS) (MONTHS)(ii) PERIOD (MONTHS) (MONTHS) DATE LOANS LOANS TION
------- -------- ------- -------- ------------ -------- --------- --------- ----------- -------------- -------------- ----------
7/1/2001 ACT/360 30,079 120 240 4 116 6/1/2011 No No 4/1/2011
6/1/2001 ACT/360 25,808 120 360 5 115 5/1/2011 No No 3/1/2011
6/1/2001 ACT/360 24,266 120 360 5 115 5/1/2011 No No 3/1/2011
7/1/2001 ACT/360 24,098 120 360 4 116 6/1/2011 No No 4/1/2011
10/1/1999 ACT/360 26,165 240 300 25 215 9/1/2019 No No 2/28/2019
8/1/2001 ACT/360 22,660 120 360 3 117 7/1/2011 No No 3/1/2011
6/1/2001 ACT/360 21,682 120 360 5 115 5/1/2011 No No 4/1/2004
7/1/2001 ACT/360 20,028 120 360 4 116 6/1/2011 No Yes
(BACM 01-PB1-D) 4/1/2011
7/1/2001 ACT/360 19,605 120 360 4 116 6/1/2011 No No 3/1/2011
1/1/2001 ACT/360 19,445 120 360 10 110 12/1/2010 No No 9/1/2010
7/1/2001 ACT/360 19,152 120 300 4 116 6/1/2011 No No 3/1/2011
10/1/2001 ACT/360 19,159 120 264 1 119 9/1/2011 No No 10/1/2005
9/1/2001 ACT/360 16,477 120 360 2 118 8/1/2011 No No 6/1/2011
5/1/2001 ACT/360 14,684 120 360 6 114 4/1/2011 No No 3/1/2005
4/1/2001 ACT/360 14,850 120 360 7 113 3/1/2011 No No 2/1/2006
7/1/2001 ACT/360 8,279 120 360 4 116 6/1/2011 No No 5/1/2006
7/1/2001 ACT/360 229,593 120 360 4 116 6/1/2011 No No 6/1/2005
10/1/2001 ACT/360 213,011 120 330 1 119 9/1/2011 No No 10/1/2006
7/1/2001 ACT/360 174,907 120 300 4 116 6/1/2011 No No 2/1/2011
7/1/2001 ACT/360 115,844 120 360 4 116 6/1/2011 No No 2/28/2011
10/1/2001 ACT/360 112,423 120 360 1 119 9/1/2011 No No 5/31/2011
9/1/2001 ACT/360 104,197 120 360 2 118 8/1/2011 No No 6/1/2011
8/1/2001 ACT/360 88,867 120 360 3 117 7/1/2011 No No 5/1/2011
3/1/2001 ACT/360 62,014 120 360 8 112 2/1/2011 No No 7/31/2010
5/1/2001 ACT/360 60,507 120 360 6 114 4/1/2011 No No 2/1/2011
7/1/2001 ACT/360 40,235 120 360 2 4 116 6/1/2011 No No 2/28/2011
10/1/2001 ACT/360 61,383 120 120 1 119 9/1/2011 No No 5/31/2011
5/1/2001 ACT/360 32,857 120 300 6 114 4/1/2011 No No 12/1/2010
7/1/2001 ACT/360 29,023 120 360 4 116 6/1/2011 No No 2/1/2011
7/1/2001 ACT/360 26,981 120 330 4 116 6/1/2011 No No 2/28/2011
10/1/2001 ACT/360 19,974 120 330 1 119 9/1/2011 No No 5/31/2011
7/1/2001 ACT/360 18,939 120 300 4 116 6/1/2011 No No 2/28/2011
8/1/2001 ACT/360 18,586 120 300 3 117 7/1/2011 No No 3/31/2011
7/1/2001 ACT/360 19,433 120 262 4 116 6/1/2011 No No 2/28/2011
10/1/2001 ACT/360 16,372 120 348 11 1 119 9/1/2011 No No 5/31/2011
8/1/2001 ACT/360 15,135 120 330 3 117 7/1/2011 No No 6/22/2005
6/1/2001 ACT/360 13,518 120 300 5 115 5/1/2011 No No 1/31/2011
6/1/2001 ACT/360 10,690 120 300 5 115 5/1/2011 No No 4/1/2004
5/1/2001 ACT/360 506,858 120 300 6 114 4/1/2011 No No 12/31/2010
7/1/2001 ACT/360 78,650 120 300 4 116 6/1/2011 No No 2/28/2011
7/1/2001 ACT/360 67,436 120 300 4 116 6/1/2011 No No 2/28/2011
8/1/2001 ACT/360 31,672 120 300 3 117 7/1/2011 No No 8/1/2005
8/1/2001 ACT/360 133,896 120 264 3 117 7/1/2011 No No 3/31/2011
8/1/2001 ACT/360 77,388 115 360 3 112 2/1/2011 No No 11/1/2010
10/1/2001 ACT/360 72,478 120 330 1 119 9/1/2011 No No 5/31/2011
7/1/2001 ACT/360 65,183 120 240 4 116 6/1/2011 No No 4/1/2011
4/1/2001 ACT/360 58,761 120 240 7 113 3/1/2011 No No 11/30/2010
10/1/2001 ACT/360 27,195 120 300 1 119 9/1/2011 No No 10/1/2006
5/1/2001 ACT/360 21,027 120 360 6 114 4/1/2011 No No 12/1/2010
9/1/2000 ACT/360 21,766 120 300 14 106 8/1/2010 No No 7/1/2005
7/1/2001 ACT/360 11,478 60 300 4 56 6/1/2006 No No 4/1/2006
3/1/2001 ACT/360 10,860 120 360 8 112 2/1/2011 No No 1/1/2004
7/1/2001 ACT/360 9,430 120 360 4 116 6/1/2011 No No 2/28/2011
4/1/2001 ACT/360 90,175 120 360 7 113 3/1/2011 No No 1/1/2011
7/1/2001 ACT/360 37,377 120 360 4 116 6/1/2011 No No 2/1/2011
6/1/2001 ACT/360 17,167 120 300 5 115 5/1/2011 No No 4/1/2006
9/1/2001 ACT/360 13,646 120 360 2 118 8/1/2011 No No 4/1/2011
4/1/2001 ACT/360 10,127 120 300 7 113 3/1/2011 No Yes
(BACM 01-PB1-B) 2/1/2005
8/1/2001 ACT/360 8,234 84 360 3 81 7/1/2008 No Yes
(BACM 01-PB1-B) 6/1/2004
7/1/2001 ACT/360 45,639 120 300 4 116 6/1/2011 No No 2/28/2011
YIELD MAINTENANCE
PREPAYMENT PENALTY DESCRIPTION (MONTHS) TYPE
--------------------------------------- -----------------
LO(118)/OPEN(2)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(233)/OPEN(7)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(35)/GRTR1%PPMTorYM(81)/OPEN(4) NPV(BEY)
LO(118)/OPEN(2)/DEFEASANCE
LO(117)/OPEN(3)/DEFEASANCE
LO(117)/OPEN(3)/DEFEASANCE
LO(117)/OPEN(3)/DEFEASANCE
LO(49)/GRTR1%PPMTorYM(64)/OPEN(7) Interest Diff (MEY)
LO(118)/OPEN(2)/DEFEASANCE
LO(47)/GRTR1%PPMTorYM(69)/OPEN(4) NPV(BEY)
LO(59)/GRTR1%PPMTorYM(57)/OPEN(4) NPV(BEY)
LO(59)/GRTR1%PPMTorYM(57)/OPEN(4) NPV(BEY)
LO(48)/GRTR1%PPMTorYM(68)/OPEN(4)/DEFEASANCE Interest Diff (BEY)
LO(61)/GRTR1%PPMT or YM(52)/OPEN(7) Interest Diff (MEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(113)/OPEN(7)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(47)/GRTR1%PPMT or YM(66)/OPEN(7) Interest Diff (MEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(35)/GRTR1%PPMTorYM(81)/OPEN(4) NPV(BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(49)/GRTR1%PPMT or YM(64)/OPEN(7) Interest Diff (MEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(112)/OPEN(3)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(61)/GRTR1%PPMT or YM(55)/OPEN(4) Interest Diff (MEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(59)/GRTR1%PPMTorYM(57)/OPEN(4) NPV(BEY)
LO(58)/OPEN(2)/DEFEASANCE
LO(35)/GRTR1%PPMTorYM(81)/OPEN(4) NPV(BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(118)/OPEN(2)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(59)/GRTR1%PPMTorYM(57)/OPEN(4) NPV(BEY)
LO(116)/OPEN(4)/DEFEASANCE
LO(47)/GRTR1%PPMTorYM(69)/OPEN(4) NPV(BEY)
LO(35)/GRTR1%PPMTorYM(45)/OPEN(4) NPV(BEY)
LO(116)/OPEN(4)/DEFEASANCE
SE- LOAN APPRAISAL
QUENCE NUMBER PROPERTY NAME VALUE
------ ------ ------------- ---------
A27 54782 Rivermont Station Phase II 4,900,000
A28 54678 Kroger Supermarket - Marion, IL 4,560,000
A29 54471 McConnells Shopping Center 4,500,000
A30 54860 Walgreens - Liberty Heights 4,225,000
P24 6103542 6403-6405 El Cajon Boulevard 4,650,000
B22 415010310 Walgreens Tacoma 4,200,000
B23 415000250 Village Plaza, Palmdale 4,000,000
A31 54857 Walgreens - Eastern Avenue 3,525,000
A32 54888 Shoppes of Garland Shopping Center 3,700,000
A33 53647 El Paseo Retail Center 3,350,000
A34 54786 Sterling Jewelers 3,700,000
P25 6104304 North Dixie Plaza 5,400,000
A35 54683 Blowing Rock Square 2,900,000
B24 415000259 Union Landing Retail 2,800,000
B25 810000261 Staples Building, Huber Heights 2,860,000
B26 302000241 Napa Retail 1,910,000
A36 54792 Milwaukee Center Office Tower 52,000,000
P26 6104366 Pacific Professional Building 42,670,000
B27 240010305 Nokia Office Building 33,400,000
P27 6104243 Village Plaza 23,500,000
P28.1 6104137 25 Hartwell Avenue 6,500,000
P28.2 6104137 40 Hartwell Avenue 7,700,000
P28.3 6104137 45 Hartwell Avenue 8,950,000
P28 6104137 25, 40 & 45 HARTWELL AVENUE (ROLL-UP) 23,150,000
A37 55181 Keystone Office Buildings 100-200 20,030,000
A38 54756 Foundry Corporate Office Center 18,000,000
P29 6104101 Windsor Commerce Center 12,400,000
A39 53748 175 Memorial Highway 11,400,000
P30 6104251 1671 The Alameda 8,800,000
P31 6104301 600 Grand Avenue 9,950,000
B28 240000216 First Security Van Kasper Building 6,600,000
B29 800010301 Lakeview Place 5,600,000
P32 6104208 First American Plaza 5,300,000
P33 6104360 Southridge Professional Plaza 4,450,000
P34 6104252 Manhattan Place Office Building 3,300,000
P35 6104274 Anchorage School District Building 3,560,000
P36 6104245 Republic Security Bank Building 3,550,000
P37 6104303 Industriplex Center 3,150,000
P38 6104261 Sunshine Plaza 3,200,000
P39 6104041 60 North Taylor Avenue 2,500,000
B30 240000227 2915 Telegraph Avenue 2,100,000
P40 6104236 Outrigger Reef Hotel 197,750,000
P41 6104254 Minneapolis Residence Inn 15,750,000
P42 6104253 Hilton Garden Inn 13,300,000
P43 6104257 Candlewood Suites - Overland Park 6,300,000
P44 6103741 Northwest Corporate Park 25,800,000
A40 55329 Anheuser-Busch Distribution Center 14,500,000
P45.1 6104290 Penske Logistics I - Delphi 6,900,000
P45.2 6104290 Penske Logistics II - Panasonic Building 3,150,000
P45.3 6104290 MagneTek Building 3,700,000
P45 6104290 FINSA INDUSTRIAL PORTFOLIO (ROLL-UP) 13,750,000
A41 54630 Hart Marx Building 13,000,000
P46 6104189 Atlantic Commerce Center II 10,700,000
P47 6104149 Tri-Main Center 6,700,000
B31 311000254 Jefferson Court 4,120,000
B32 430990096 1550 Walnut Hill Lane 3,600,000
A42 53625 26 Kennedy Boulevard 3,000,000
B33 290000244 Carter Industrial-Will Rogers Blvd. 2,150,000
P48 6104250 21 Mandeville Court 1,800,000
A43 52694 Boones Mobile Estates 16,000,000
B34 400010292 Rancho Salinas MHP 6,840,000
B35 400000269 Southgate MHP 3,400,000
B36 415010300 Halcyon MHP 2,820,000
B37 400000266 Boulevard Estates MHC 1,750,000
B38 400010320 Brentwood MHP 1,575,000
P49.1 6104281 Shreve City Self Storage 1,625,000
P49.2 6104281 Line Avenue Self Storage 650,000
P49.3 6104281 Stowaway Self Storage 2,170,000
P49.4 6104281 University Self Storage 2,275,000
P49.5 6104281 Crossroads Self Storage 1,400,000
P49 6104281 SHREVEPORT SELF STORAGE (ROLL-UP) 8,120,000
TOTAL SF/ LOAN
CUT-OFF UNITS/ UNIT/ NET BALANCE PER OCCUPANCY
APPRAISAL DATE LTV YEAR BUILT/ ROOM/ ROOM/ RENTABLE SF/UNIT/ OCCUPANCY AS OF
DATE RATIO RENOVATED PADS PADS AREA (SF) ROOM/PADS PERCENT DATE
--------- -------- ----------- ------ ----- --------- ----------- --------- ---------
6/1/2001 74% 2000 33,905 SF 33,905 108 96% 4/9/2001
1/24/2001 80% 1994 61,765 SF 61,765 59 100% 3/31/2001
1/12/2001 80% 1999 49,835 SF 49,835 72 96% 3/2/2001
2/12/2001 80% 2000 13,905 SF 13,905 242 100% 4/23/2001
4/23/1999 72% 1950/1999 16,320 SF 16,320 206 100% 7/27/2001
5/15/2001 76% 2000 13,905 SF 13,905 230 100% 6/26/2001
12/1/2000 76% 1990 33,055 SF 33,055 92 100% 6/11/2001
2/12/2001 80% 2000 13,905 SF 13,905 202 100% 4/16/2001
4/1/2001 73% 1999 23,375 SF 23,375 115 100% 3/31/2001
9/8/2000 78% 2000 10,007 SF 10,007 261 100% 7/2/2001
3/7/2001 70% 2000 5,638 SF 5,638 461 100% 5/8/2001
4/19/2001 46% 1978 70,355 SF 70,355 35 100% 8/17/2001
2/1/2001 80% 1991 42,559 SF 42,559 54 96% 7/11/2001
1/4/2001 75% 2000 10,727 SF 10,727 195 100% 6/30/2001
12/15/2000 70% 2000 23,942 SF 23,942 83 100% 2/14/2001
11/21/2000 58% 1999 6,380 SF 6,380 174 100% 5/4/2001
3/1/2001 63% 1988 373,625 SF 373,625 88 98% 5/31/2001
5/31/2001 70% 1985 110,876 SF 110,876 270 100% 6/30/2001
4/3/2001 70% 2000 135,000 SF 135,000 173 100% 4/3/2001
3/21/2001 70% 1968/1999 272,480 SF 272,480 60 88% 6/28/2001
1/8/2001 1966/1997 33,339 SF 33,339 100% 7/1/2001
1/8/2001 1969/1996 30,400 SF 30,400 100% 7/1/2001
1/8/2001 1961/2000 49,420 SF 49,420 100% 7/1/2001
69% 113,159 SF 113,159 141
5/3/2001 74% 1999 135,226 SF 135,226 109 100% 6/12/2001
2/23/2001 69% 1891/1999 132,801 SF 132,801 94 99% 5/30/2001
10/19/2000 71% 1985/1998 162,052 SF 162,052 54 97% 4/1/2001
9/18/2000 75% 1932/1986 54,903 SF 54,903 155 100% 3/16/2001
3/5/2001 64% 1961 35,269 SF 35,269 159 96% 7/31/2001
4/11/2001 53% 1926/1999 60,060 SF 60,060 87 97% 8/25/2001
9/19/2000 66% 2000 26,914 SF 26,914 161 100% 4/1/2001
3/23/2001 75% 2000 21,561 SF 21,561 194 100% 3/23/2001
2/9/2001 71% 1999 39,001 SF 39,001 97 100% 3/12/2001
6/29/2001 63% 1994 34,974 SF 34,974 80 100% 6/1/2001
3/8/2001 75% 1970/2001 53,212 SF 53,212 46 100% 5/1/2001
4/11/2001 69% 1974 42,230 SF 42,230 58 100% 5/31/2001
3/2/2001 68% 1974/2001 34,801 SF 34,801 70 93% 5/25/2001
6/1/2001 73% 1984/2001 30,800 SF 30,800 75 100% 8/4/2001
3/13/2001 65% 1977/2000 38,529 SF 38,529 54 99% 6/22/2001
9/15/2000 70% 1970/1992 17,853 SF 17,853 98 100% 4/2/2001
12/22/2000 66% 1955/1975 11,960 SF 11,960 116 94% 4/14/2001
2/1/2001 36% 1957/1990 873 Rooms 612,255 82,235 81% 3/31/2001
2/27/2001 63% 1998 124 Rooms 110,512 79,953 81% 3/31/2001
3/6/2001 65% 1999 142 Rooms 93,365 61,037 63% 4/30/2001
4/20/2001 63% 1997 122 Rooms 61,245 32,703 74% 3/31/2001
5/1/2001 68% 1979/2001 419,000 SF 419,000 42 100% 6/6/2001
4/15/2001 75% 2000 183,900 SF 183,900 59 100% 6/6/2001
4/11/2001 2001 208,000 SF 208,000 100% 7/26/2001
5/1/2001 2001 100,000 SF 100,000 100% 7/26/2001
4/9/2001 1999 105,650 SF 105,650 100% 7/26/2001
71% 413,650 SF 413,650 24
1/1/2001 61% 1963/1993 390,000 SF 390,000 20 100% 5/1/2001
11/20/2000 67% 1958/2001 355,000 SF 355,000 20 100% 5/1/2001
1/5/2001 51% 1915/1995 576,126 SF 576,126 6 97% 8/1/2001
12/14/2000 70% 1989 90,007 SF 90,007 32 90% 5/7/2001
8/25/1999 73% 1983/1999 31,951 SF 31,951 83 100% 7/14/2000
8/23/2000 50% 1970 71,615 SF 71,615 21 87% 7/1/2001
12/6/2000 68% 1999 65,000 SF 65,000 23 100% 1/9/2001
3/13/2001 72% 1997 14,680 SF 14,680 88 100% 7/16/2001
10/4/2000 81% 1977 456 Pads 28,293 100% 6/1/2001
1/24/2001 79% 1964 137 Pads 39,312 99% 4/30/2001
2/2/2001 69% 1974 244 Pads 9,681 96% 4/16/2001
3/19/2001 70% 1976 88 Pads 22,300 98% 7/6/2001
12/1/2000 75% 1969/1999 114 Pads 11,501 98% 4/10/2001
5/16/2001 72% 1973 74 Pads 15,299 97% 5/1/2001
3/13/2001 1997/2000 441 Units 46,350 94% 2/28/2001
3/13/2001 1984/2000 251 Units 28,400 98% 2/28/2001
3/13/2001 1974/1998 583 Units 80,650 97% 2/28/2001
3/13/2001 1985/1994 377 Units 68,060 98% 2/28/2001
3/13/2001 1985 408 Units 57,000 99% 2/28/2001
74% 2,060 Units 280,460 2,901
U/W
U/W REPLACEMENT
APPRAISAL U/W U/W U/W U/W REPLACEMENT RESERVES
DATE REVENUES EXPENSES CASH FLOW DSCR RESERVES PER UNIT
--------- -------- -------- --------- ---- ----------- -----------
6/1/2001 620,351 152,975 434,045 1.20 5,425 0.16
1/24/2001 409,313 13,378 388,729 1.26 7,206 0.12
1/12/2001 493,519 125,131 355,126 1.22 7,475 0.15
2/12/2001 365,000 10,300 353,309 1.22 1,391 0.10
4/23/1999 440,163 71,970 353,930 1.13 2,448 0.15
5/15/2001 352,287 12,655 339,632 1.25 2,086 0.15
12/1/2000 590,565 239,214 330,865 1.27 7,603 0.23
2/12/2001 305,000 9,100 294,509 1.23 1,391 0.10
4/1/2001 489,998 175,558 294,120 1.25 3,506 0.15
9/8/2000 403,342 90,877 296,550 1.27 1,501 0.15
3/7/2001 320,100 6,684 312,570 1.36 846 0.15
4/19/2001 755,729 272,218 417,584 1.82 21,107 0.30
2/1/2001 312,476 62,520 238,565 1.21 8,512 0.20
1/4/2001 254,977 10,278 231,862 1.32 1,609 0.15
12/15/2000 263,362 11,792 240,844 1.35 3,591 0.15
11/21/2000 186,522 35,920 139,275 1.40 957 0.15
3/1/2001 9,067,402 4,130,140 4,177,683 1.52 74,687 0.20
5/31/2001 6,551,076 2,695,032 3,595,224 1.41 27,719 0.25
4/3/2001 2,946,181 115,385 2,634,125 1.26 20,250 0.15
3/21/2001 4,687,312 2,403,656 1,865,162 1.34 82,278 0.30
1/8/2001
1/8/2001
1/8/2001
2,848,859 689,193 1,908,788 1.41 22,596 0.20
5/3/2001 2,483,519 779,841 1,575,252 1.26 13,523 0.10
2/23/2001 2,295,870 725,737 1,386,387 1.30 26,528 0.20
10/19/2000 2,143,709 999,748 949,762 1.28 40,763 0.25
9/18/2000 1,326,556 278,372 975,269 1.34 12,902 0.23
3/5/2001 1,020,723 276,457 664,309 1.38 12,337 0.35
4/11/2001 1,379,035 452,814 855,569 1.16 15,089 0.25
9/19/2000 882,515 187,974 653,658 1.66 4,037 0.15
3/23/2001 637,201 176,683 437,064 1.25 3,234 0.15
2/9/2001 732,561 265,106 416,650 1.29 9,750 0.25
6/29/2001 685,496 296,014 335,033 1.40 8,750 0.25
3/8/2001 642,474 269,955 306,085 1.35 15,555 0.29
4/11/2001 524,409 183,773 295,182 1.32 14,780 0.35
3/2/2001 529,255 200,266 280,696 1.20 8,700 0.25
6/1/2001 397,675 93,294 286,990 1.46 6,160 0.20
3/13/2001 576,619 280,431 248,526 1.37 9,577 0.25
9/15/2000 420,802 166,365 247,296 1.52 7,141 0.40
12/22/2000 303,167 108,394 175,561 1.37 2,751 0.23
2/1/2001 34,006,617 19,442,016 12,864,271 2.12 1,700,331 1,947.69
2/27/2001 3,795,001 2,301,749 1,322,476 1.40 170,775 1,377.22
3/6/2001 4,532,449 3,104,646 1,201,181 1.48 226,622 1,595.93
4/20/2001 1,703,256 1,087,194 539,416 1.42 76,647 628.25
5/1/2001 3,042,096 914,871 1,978,929 1.23 62,850 0.15
4/15/2001 1,636,501 413,008 1,164,185 1.25 27,585 0.15
4/11/2001 798,100 202,192 545,724 31,200 0.15
5/1/2001 344,355 97,810 214,605 15,000 0.15
4/9/2001 416,145 71,249 318,750 15,848 0.15
1,558,600 371,251 1,079,079 1.24 62,048 0.15
1/1/2001 1,787,065 655,361 1,041,544 1.33 39,000 0.10
11/20/2000 1,446,561 387,492 924,850 1.31 71,000 0.20
1/5/2001 2,147,055 1,320,075 494,582 1.52 116,851 0.20
12/14/2000 640,942 244,888 337,741 1.34 20,931 0.23
8/25/1999 419,485 61,777 325,609 1.25 3,195 0.10
8/23/2000 404,996 149,404 209,042 1.52 14,323 0.20
12/6/2000 270,359 90,319 167,005 1.28 6,500 0.10
3/13/2001 262,424 105,163 147,883 1.31 2,473 0.17
10/4/2000 2,346,232 887,365 1,424,667 1.32 34,200 75.00
1/24/2001 880,061 343,345 536,716 1.20 6,850 50.00
2/2/2001 520,144 223,322 296,822 1.44 12,200 50.00
3/19/2001 308,144 95,278 212,866 1.30 4,400 50.00
12/1/2000 276,364 118,007 158,357 1.30 7,980 70.00
5/16/2001 241,050 111,375 129,676 1.31 3,700 50.00
3/13/2001 281,192 125,008 149,231 6,953 15.77
3/13/2001 134,532 80,052 50,220 4,260 16.97
3/13/2001 397,951 168,453 217,400 12,098 20.75
3/13/2001 447,275 214,302 222,764 10,209 27.08
3/13/2001 259,538 119,967 131,021 8,550 20.96
1,520,488 707,782 770,636 1.41 42,070 20.42
MOST
RECENT MOST MOST MOST MOST MOST FULL FULL
STATEMENT RECENT RECENT RECENT RECENT RECENT YEAR YEAR
TYPE END DATE REVENUES EXPENSES CASH FLOW DSCR END DATE REVENUES
--------- -------- -------- -------- --------- ------ -------- --------
Annualized Most Recent 3/31/2001 580,724 120,164 460,560 1.28 12/31/2000 241,227
Annualized Most Recent 3/31/2001 409,312 6,740 402,572 1.30 12/31/2000 409,313
Annualized Most Recent 2/28/2001 452,346 68,592 383,754 1.32 12/31/2000 432,141
Full Year 12/31/2000 392,860 1,598 391,262 1.25 12/31/1999 295,736
Annualized Most Recent 5/31/2001 352,286 4,526 347,760 1.28
Annualized Most Recent 6/30/2001 414,477 142,181 260,912 1.00 12/31/2000 612,030
Annualized Most Recent 3/31/2001 576,008 152,208 423,800 1.80 12/31/2000 539,385
Annualized Most Recent 6/30/2001 451,654 74,458 377,196 1.62
Full Year 12/31/2000 709,042 271,003 383,439 1.67 12/31/1999 585,703
Annualized Most Recent 5/31/2001 338,424 63,350 275,074 1.39 12/31/2000 324,691
Annualized Most Recent 6/30/2001 248,011 18,343 229,668 1.30
Annualized Most Recent 6/30/2001 263,362 9,476 253,886 1.42
Annualized Most Recent 6/30/2001 203,428 104,130 91,744 0.92 12/31/2000 175,669
Annualized Most Recent 4/30/2001 9,719,046 4,001,637 5,717,409 2.08 12/31/2000 9,324,860
Trailing 12 6/30/2001 6,675,262 2,605,033 4,070,229 1.59 12/31/2000 6,604,463
Annualized Most Recent 4/30/2001 3,020,073 199,710 2,820,363 1.34
Trailing 12 5/31/2001 4,293,167 2,348,124 1,526,549 1.10 12/31/2000 4,389,324
Full Year 12/31/2000 2,572,146 495,231 2,076,915 1.54 12/31/1999 2,104,632
Annualized Most Recent 3/31/2001 1,516,684 543,932 916,556 0.73 12/31/2000 968,488
Annualized Most Recent 4/30/2001 2,540,529 760,296 1,780,233 1.67 12/31/2000 2,282,761
Trailing 12 5/31/2001 2,396,961 955,373 1,375,435 1.85 12/31/2000 2,419,130
Annualized Most Recent 9/30/2000 1,402,795 219,029 1,183,765 1.63 12/31/1999 1,362,066
Trailing 12 5/31/2001 646,197 203,049 399,657 0.83 12/31/2000 585,866
Annualized Most Recent 2/28/2001 1,925,000 528,603 1,396,397 1.90
Annualized Most Recent 6/30/2001 833,846 137,014 696,832 1.77
Annualized Most Recent 3/31/2001 611,320 89,098 522,222 1.50 12/31/2000 435,198
Annualized Most Recent 5/31/2001 714,257 250,454 463,803 1.93 12/31/2000 721,221
Full Year 12/31/2000 690,453 230,465 425,532 1.87 12/31/1999 638,268
Trailing 12 2/28/2001 553,870 212,333 341,537 1.53 12/31/2000 548,579
Annualized Most Recent 2/28/2001 419,694 181,570 238,124 1.02
Full Year 12/31/2000 596,668 277,350 289,814 1.60 12/31/1999 322,658
Annualized Most Recent 5/31/2001 431,783 136,996 294,787 1.82 12/31/2000 400,183
Annualized Most Recent 6/30/2001 341,986 127,667 184,259 1.44 12/31/2000 302,189
Trailing 12 3/31/2001 36,695,404 20,208,935 14,651,699 2.41 12/31/2000 36,219,816
Trailing 12 3/31/2001 4,369,019 2,446,935 1,922,084 2.04 12/31/2000 4,168,653
Trailing 12 6/30/2001 4,639,687 3,092,802 1,361,298 1.68 12/31/2000 4,731,901
Trailing 12 3/31/2001 1,769,562 975,784 793,778 2.09 12/31/2000 1,816,688
Trailing 12 5/31/2001 2,337,000 417,000 1,920,000 1.19 12/31/2000 1,330,240
Annualized Most Recent 5/31/2001 1,281,784 1,281,784 1.38
Annualized Most Recent 3/31/2001 663,936 16,660 647,276
Annualized Most Recent 3/31/2001 377,972 11,340 366,632 12/31/2000 327,600
Annualized Most Recent 5/31/2001 1,272,000 1,272,000 1.63 12/31/2000 1,858,000
Full Year 12/31/2000 1,991,914 1,175,419 816,495 2.50 12/31/1999 1,799,345
Annualized Most Recent 6/30/2001 649,114 177,423 465,691 1.85 12/31/2000 624,770
Annualized Most Recent 6/30/2001 441,571 17,458 424,114 1.62
Annualized Most Recent 3/31/2001 415,160 198,120 162,956 1.18 12/31/2000 397,649
Annualized Most Recent 6/30/2001 294,552 93,628 200,924 1.54 12/31/2000 198,806
Annualized Most Recent 6/30/2001 2,457,382 815,784 1,641,598 1.52 12/31/2000 2,521,792
12/31/2000 847,415
12/31/2000 525,327
Annualized Most Recent 6/30/2001 305,186 46,376 258,810 1.58 12/31/2000 294,242
Annualized Most Recent 3/31/2001 280,125 126,413 153,712 1.26 12/31/2000 249,163
Annualized Most Recent 4/28/2001 235,547 95,508 137,939 1.40 12/31/2000 254,470
Trailing 12 2/28/2001 238,674 106,088 132,586 12/31/2000 221,879
Trailing 12 2/28/2001 138,330 71,047 67,283 12/31/2000 132,779
Trailing 12 2/28/2001 375,230 158,036 217,194 12/31/2000 362,967
Trailing 12 2/28/2001 467,530 249,814 217,716 12/31/2000 458,703
Trailing 12 2/28/2001 263,161 108,956 154,205 12/31/2000 258,761
Trailing 12 2/28/2001 1,482,925 693,941 788,984 1.44 12/31/2000 1,435,089
MOST
RECENT FULL FULL FULL
STATEMENT YEAR YEAR YEAR
TYPE EXPENSES CASH FLOW DSCR LARGEST TENANT
--------- -------- --------- ---- --------------
Annualized Most Recent 86,001 155,226 0.43 Mandarin Cafe
Annualized Most Recent 2,001 407,312 1.32 The Kroger Co.
Annualized Most Recent 56,455 375,686 1.29 Food Lion
Walgreen Co.
Full Year 294 294,535 0.94 Rite Aid Pharmacy
Annualized Most Recent Walgreens
Annualized Most Recent 245,939 351,444 1.35 Golden China
Walgreen Co.
Annualized Most Recent 137,971 401,414 1.71 Hollywood Video
Annualized Most Recent Al Phillips the Cleaners
Sterling Jewelers, Inc.
Full Year 263,404 266,181 1.16 Grades Enterprises, Inc. (Gold's Gym)
Annualized Most Recent 63,730 260,961 1.32 Food Lion
Annualized Most Recent Mancini's Sleepworld, Inc.
Annualized Most Recent Staples, Inc.
Annualized Most Recent 55,394 120,275 1.21 Blockbuster
Annualized Most Recent 3,864,290 5,110,570 1.85 BNY Clearing Services LLC
Trailing 12 2,569,208 4,035,255 1.58 Pacific Eye Associates
Annualized Most Recent Nokia Mobile Phones, Inc.
Trailing 12 2,226,759 2,162,565 1.56 Oakwood Hospital
eMed Technologies, Inc.
Nextel Communications
MediSpectra
Full Year 464,712 1,639,920 1.22 eMed Technologies, Inc.
Annualized Most Recent 338,406 630,082 0.50 Mylan Laboratories
Annualized Most Recent 596,651 1,686,110 1.58 CBSI
Trailing 12 952,764 1,388,918 1.87 SS&C Technologies
Annualized Most Recent 219,412 1,142,654 1.57 New Rochelle Radiology
Trailing 12 201,578 347,962 0.72 San Jose Police Department
Annualized Most Recent Gold's Gym
Annualized Most Recent First Security Van Kasper, Inc.
Annualized Most Recent 103,433 331,766 0.95 Personnel Management Systems, Inc.
First American Title Company
Annualized Most Recent 278,789 442,432 1.85 Jordan Valley Family Health
Full Year 245,796 380,938 1.68 G. J. Coyne & Associates, Inc.
Trailing 12 196,708 351,871 1.58 Anchorage School District
Annualized Most Recent Republic Security Bank
Hibernia National Bank
Full Year 265,208 26,450 0.15 State of Alaska - Joint Pipeline
Annualized Most Recent 135,154 265,029 1.63 State of New Jersey, Dept. of Labor
Annualized Most Recent 79,323 222,866 1.74 OB-GYN Fertility Specialists Medical Group, Inc.
Trailing 12 19,946,795 14,462,030 2.38
Trailing 12 2,409,414 1,759,239 1.86
Trailing 12 3,143,255 1,399,370 1.73
Trailing 12 942,711 873,977 2.30
Trailing 12 1,330,240 0.83 Seattle Packaging Corporation
Annualized Most Recent Anheuser-Busch, Incorporated
Annualized Most Recent Penske Logistics, Inc. (Delphi)
Penski Logistics, Inc. (Panasonic)
Annualized Most Recent 12,681 314,919 Universal Lighting Technologies (MagneTek)
Penske Logistics, Inc. (Delphi)
Annualized Most Recent 586,000 1,272,000 1.63 Hart, Schaffner & Marx
MW Manufacturers
Full Year 1,105,390 693,955 2.13 Iron Mountain Records Management Inc.
Annualized Most Recent 210,168 402,883 1.60 People's Church
Annualized Most Recent One Safe Place
Annualized Most Recent 99,731 297,918 2.16 Insurance Restoration Specialists
Annualized Most Recent 79,664 119,142 0.91 Sav-on Ltd.
Stocker and Allaire, Inc.
Annualized Most Recent 785,381 1,730,504 1.60
270,294 577,121 1.29
261,312 247,713 1.20
Annualized Most Recent 60,825 228,675 1.40
Annualized Most Recent 119,901 127,262 1.05
Annualized Most Recent 91,611 162,859 1.65
Trailing 12 100,549 121,330
Trailing 12 69,823 61,199
Trailing 12 139,595 222,366
Trailing 12 197,893 227,807
Trailing 12 100,361 156,733
Trailing 12 608,221 789,435 1.44
SECOND SECOND
LARGEST SECOND LARGEST LARGEST
LARGEST TENANT LARGEST TENANT TENANT
TENANT % OF TENANT % OF LEASE
LEASED TOTAL LARGEST LEASED TOTAL EXPIRA-
SF SF TENANT SECOND LARGEST TENANT SF SF TION
------- ------- ------- --------------------- ------- ------- --------
4,200 12% 4/30/2005 Accentrice Design 3,900 12% 8/31/2005
61,765 100% 11/30/2019
33,000 66% 12/31/2019 Family Dollar 7,200 14% 12/31/2006
13,905 100% 4/30/2060
16,320 100% 1/31/2019
13,905 100% 9/30/2060
3,745 11% 2/15/2004 $1 World 3,200 10% 7/31/2001
13,905 100% 12/31/2059
5,000 21% 7/31/2009 Leslie's Pool Mart 3,500 15% 10/31/2004
2,502 25% 9/30/2005 Happy Nail 1,993 20% 10/18/2005
5,638 100% 2/28/2021
25,600 36% 12/3/2008 Booksmart 9,520 14% 3/14/2005
29,000 68% 4/19/2016 Eckerd's #2947 8,640 20% 5/7/2011
6,926 65% 11/30/2010 Sprint Spectrum, L.P. 3,801 35% 12/31/2005
23,942 100% 8/31/2015
3,920 61% 3/31/2006 F.H. Berry (Little Caesars Pizza) 1,381 22% 7/31/2006
99,163 27% 8/31/2003 Ernst and Young 58,859 16% 11/30/2003
8,351 8% 12/31/2001 P.I.M.A. 6,376 6% 12/31/2001
135,000 100% 8/31/2010
110,710 41% 10/31/2003 Corinthian College 17,546 6% 1/31/2008
33,339 100% 11/30/2002
30,400 100% 3/31/2006
25,000 51% 9/30/2004 Shionogi BioResearch 24,420 49% 11/30/2006
33,339 100% 11/30/2002 Nextel Communications 30,400 100% 3/31/2006
72,082 53% 3/31/2008 Extreme Networks Inc. 12,834 9% 12/31/2004
28,920 22% 10/26/2006 Neighborhood Health Plan 28,386 21% 11/30/2007
76,457 47% 1/14/2008 Pratt & Whitney United Technologies 37,339 23% 5/31/2005
4,154 8% 12/31/2003 New Rochelle Oncology 3,500 6% 12/31/2003
12,600 36% 4/30/2005 State of California Department 4,615 13% 2/28/2007
16,700 28% 12/31/2011 California Labor Federations Administration 11,460 19% 7/12/2011
26,914 100% 6/30/2010
9,726 45% 5/30/2006 MEMEC 8,260 38% 1/31/2005
20,752 53% 6/30/2009 State of California 14,901 38% 11/30/2007
9,115 26% 7/31/2005 South Valley Women's Health 7,906 23% 2/12/2007
3,419 6% 4/30/2002 Presto Mortgage, Inc. 3,419 6% 7/31/2003
42,230 100% 6/30/2005
13,000 37% 6/30/2010 MHW Investments, LLC 8,500 24% 11/30/2010
30,800 100% 2/28/2013
20,726 54% 1/31/2005 Alaska General Alarm 8,838 23% 12/31/2005
17,853 100% 10/31/2012
4,300 36% 12/31/2003 Bayside Medical Group, Inc. 2,750 23% 5/31/2007
419,000 100% 5/31/2016
183,900 100% 2/28/2011
208,000 100% 12/31/2007
100,000 100% 3/31/2006
105,650 100% 12/31/2008
208,000 100% 12/31/2007 Universal Lighting Technologies (MagneTek) 105,650 100% 12/31/2008
390,000 100% 5/3/2016
355,000 100% 1/31/2013
71,030 12% 12/31/2001 American Executive Furniture, Inc. 59,350 10% 12/31/2002
6,831 8% 3/14/2005 Brand X Customz 3,406 4% 11/30/2003
31,951 100% 12/31/2014
31,400 44% 11/30/2005 Jack Gabey 31,204 44% 10/31/2002
40,625 63% 6/30/2007 Pfizer, Inc. 24,375 38% 5/31/2006
6,965 47% 12/31/2011 Lansmont Corporation 4,804 33% 3/31/2006
SE- LOAN
QUENCE NUMBER PROPERTY NAME PROPERTY ADDRESS COUNTY CITY
------ ------ ------------- ---------------- ------ ----
P50 6104343 ASAP Storage - Sarasota 619 Cattlemen Road Sarasota Sarasota
P51 6104347 ASAP Storage - Kansas City 9600 Marion Ridge Drive Jackson Kansas City
B39 400000180 Central Self-Storage 4029 Golden Acres Drive Cochise Sierra Vista
P52.1 6103916 210 and 300 Newport Center Drive 210 and 300 Newport Center Drive Orange Newport Beach
P52.2 6103916 1303 Avocado Avenue 1303 Avocado Avenue Orange Newport Beach
P52 6103916 EDWARD'S GROUND LEASE PORTFOLIO (ROLL-UP)
----------------------------------------------------------------------------------------------------------------------------
TOTALS/WEIGHTED AVERAGE 134 LOANS
============================================================================================================================
(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.
MATURITY OR
ANTICIPATED ADMINI-
CUT-OFF REPAYMENT STRATIVE SUB- NET
ZIP PROPERTY ORIGINAL DATE DATE LOAN MORTGAGE FEE SERVICING MORTGAGE NOTE
STATE CODE TYPE BALANCE BALANCE BALANCE TYPE RATE RATE(I) FEE RATE RATE DATE
----- ---- -------- -------- ------- ------------ ---- -------- -------- --------- -------- ----
FL 34232 Self-Storage 3,200,000 3,196,323 2,601,390 Balloon 7.450% 0.102% 0.060% 7.348% 8/21/2001
MO 64137 Self-Storage 2,680,000 2,676,920 2,178,664 Balloon 7.450% 0.102% 0.060% 7.348% 8/24/2001
AZ 85650 Self-Storage 2,000,000 1,978,326 1,697,622 Balloon 9.000% 0.142% 0.100% 8.858% 8/3/2000
CA 92660 Land
CA 92660 Land
Hyper
Land 6,500,000 6,451,885 5,886,874 Amortizing 8.500% 0.102% 0.060% 8.398% 7/6/2000
------------------------------------------------------------------------------------------------------------------------------------
$941,669,139 $938,283,211 $790,388,756 7.519% 7.424%
====================================================================================================================================
ORIGINAL
ORIGINAL AMORTI- REMAINING
TERM TO ZATION TERM TO MATURITY OR CROSS-
FIRST INTEREST MATURITY/ TERM INTEREST MATURITY/ ANTICIPATED COLLATE-
PAYMENT ACCRUAL MONTHLY ARD (MONTHS) ONLY SEASONING ARD REPAYMENT RALIZED LOCKOUT
DATE METHOD PAYMENT (MONTHS) (II) PERIOD (MONTHS) (MONTHS) DATE LOANS RELATED LOANS EXPIRATION
------- -------- ------- --------- -------- -------- --------- --------- ----------- -------- ------------- ----------
10/1/2001 ACT/360 23,544 120 300 1 119 9/1/2011 No Yes(BACM 01-PB1-H) 5/31/2011
10/1/2001 ACT/360 19,718 120 300 1 119 9/1/2011 No Yes(BACM 01-PB1-H) 5/31/2011
10/1/2000 ACT/360 16,784 120 300 13 107 9/1/2010 No No 8/1/2004
9/1/2000 ACT/360 49,979 120 360 14 106 8/1/2010 No No 4/30/2010
------------------------------------------------------------------------------------------------------------------------------------
$6,837,935 120 330 5 116
====================================================================================================================================
YIELD
MAINTENANCE
PREPAYMENT PENALTY DESCRIPTION (MONTHS) TYPE
--------------------------------------- -----------
LO(116)/OPEN(4)/DEFEASANCE
LO(116)/OPEN(4)/DEFEASANCE
LO(47)/GRTR1%PPMTorYM(69)/OPEN(4) NPV(BEY)
LO(116)/OPEN(4)/DEFEASANCE
LOAN APPRAISAL
SEQUENCE NUMBER PROPERTY NAME VALUE
-------- ------ ------------- ---------
P50 6104343 ASAP Storage - Sarasota 4,800,000
P51 6104347 ASAP Storage - Kansas City 4,000,000
B39 400000180 Central Self-Storage 3,380,000
P52.1 6103916 210 and 300 Newport Center Drive 8,100,000
P52.2 6103916 1303 Avocado Avenue 645,000
P52 6103916 EDWARD'S GROUND LEASE PORTFOLIO (ROLL-UP) 8,745,000
-----------------------------------------------------------------------------------------
Totals/Weighted Average
=========================================================================================
TOTAL SF/ LOAN
CUT-OFF UNITS/ UNIT/ BALANCE PER OCCUPANCY
APPRAISAL DATE LTV YEAR BUILT/ ROOM/ ROOM/ NET RENTABLE SF/UNIT/ OCCUPANCY AS OF
DATE RATIO RENOVATED PADS PADS AREA (SF) ROOM/PADS PERCENT DATE
--------- -------- --------- ---- ---- --------- --------- ------- ----
6/21/2001 67% 1985/1998 660 Units 73,391 4,843 86% 7/31/2001
6/25/2001 67% 1997 460 Units 69,975 5,819 82% 7/31/2001
6/13/2000 59% 1984/1999 558 Units 70,770 3,545 84% 7/15/2001
4/27/2000 1996 181,471 SF 181,471 100% 7/6/2000
4/27/2000 1973 16,553 SF 16,553 100% 7/6/2000
74% 198,237 SF 198,237 33
------------------------------------------------------------------------------------------------------------------------
68%
========================================================================================================================
U/W
U/W REPLACEMENT
U/W U/W U/W U/W REPLACEMENT RESERVES
REVENUES EXPENSES CASH FLOW DSCR RESERVES PER UNIT
-------- -------- --------- ----- ----------- -----------
619,119 205,638 402,535 1.42 10,946 16.58
494,938 160,409 324,033 1.37 10,496 22.82
443,637 174,664 268,973 1.34 10,602 19.00
900,180 163,862 736,318
51,932 14,116 37,816
952,112 177,978 774,134 1.29
-----------------------------------------------------------------------------------
===================================================================================
MOST
RECENT MOST MOST MOST MOST MOST FULL FULL FULL
STATEMENT RECENT RECENT RECENT RECENT RECENT YEAR YEAR YEAR
TYPE END DATE REVENUES EXPENSES CASH FLOW DSCR END DATE REVENUES EXPENSES
--------- ---------- -------- -------- --------- ---- -------- -------- --------
Trailing 12 7/31/2001 619,078 209,978 409,100 1.45 12/31/2000 540,327 196,060
Trailing 12 7/31/2001 494,968 154,565 340,403 1.44 12/31/2000 468,431 134,721
Annualized Most Recent 6/30/2001 426,014 123,509 302,504 1.50 12/31/2000 352,168 96,990
----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
FULL FULL
YEAR YEAR
CASH FLOW DSCR LARGEST TENANT
--------- ------ --------------
344,267 1.22
333,710 1.41
255,178 1.27
Edwards Theatres Circuit, Inc.
The Olen Company
Edwards Theatres Circuit, Inc.
--------------------------------------------------------------------
====================================================================
SECOND SECOND
LARGEST SECOND LARGEST LARGEST
LARGEST TENANT LARGEST TENANT TENANT
TENANT % OF TENANT % OF LEASE
LEASED TOTAL LARGEST LEASED TOTAL EXPIRA-
SF SF TENANT SECOND LARGEST TENANT SF SF TION
-- -- ------ --------------------- ------ ------- -------
181,471 100% 6/26/2034
16,553 100% 8/31/2024
181,471 100% 6/26/2034 The Olen Company 16,553 100% 8/31/2024
--------------------------------------------------------------------------------------------------------
========================================================================================================
GEOGRAPHIC DISTRIBUTION(1)
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
PROPERTY LOCATION PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
----------------- ---------- ------------ ------------ ------------ ------------ --------
CA................................ 31 $162,689,187 17.3% 1.32x 70.8% 7.610%
San Diego County................ 8 45,271,776 4.8% 1.29x 69.4% 7.656%
San Francisco County............ 1 29,971,989 3.2% 1.41x 70.2% 7.400%
Los Angeles County.............. 6 20,484,888 2.2% 1.40x 71.9% 7.564%
Sacramento County............... 2 15,531,295 1.7% 1.27x 76.4% 7.138%
San Joaquin County.............. 1 12,307,318 1.3% 1.23x 73.2% 8.240%
Orange County................... 3 9,061,512 1.0% 1.28x 75.0% 8.385%
Alameda County.................. 3 8,729,759 0.9% 1.23x 60.2% 7.290%
Monterey County................. 2 6,682,685 0.7% 1.22x 77.4% 7.491%
Santa Clara County.............. 1 5,593,335 0.6% 1.38x 63.6% 7.780%
Ventura County.................. 1 3,787,251 0.4% 1.29x 71.5% 7.400%
Other Counties.................. 3 5,267,377 0.6% 1.33x 68.9% 7.838%
TX................................ 16 86,738,228 9.2% 1.27x 73.6% 7.486%
NC................................ 5 73,656,497 7.9% 1.63x 53.9% 7.808%
HI................................ 1 71,791,000 7.7% 2.12x 36.3% 6.910%
WA................................ 8 54,974,029 5.9% 1.26x 72.9% 7.378%
OH................................ 5 45,788,970 4.9% 1.40x 74.7% 7.489%
NV................................ 2 42,786,023 4.6% 1.24x 79.8% 7.080%
NJ................................ 8 38,029,525 4.1% 1.29x 69.8% 7.983%
WI................................ 1 32,959,452 3.5% 1.52x 63.4% 7.435%
MA................................ 5 32,134,235 3.4% 1.35x 71.1% 7.523%
MD................................ 6 30,852,453 3.3% 1.31x 77.7% 7.516%
IL................................ 5 30,506,536 3.3% 1.32x 73.4% 7.603%
FL................................ 6 23,723,140 2.5% 1.52x 64.7% 7.530%
GA................................ 4 19,952,000 2.1% 1.33x 77.2% 7.391%
UT................................ 2 18,967,845 2.0% 1.27x 75.5% 7.484%
MI................................ 2 18,922,933 2.0% 1.34x 70.6% 7.587%
PA................................ 4 16,189,231 1.7% 1.34x 75.0% 7.570%
DE................................ 3 16,092,219 1.7% 1.29x 72.8% 7.914%
NY................................ 3 13,449,658 1.4% 1.42x 67.4% 7.794%
MO................................ 3 12,799,393 1.4% 1.40x 64.6% 7.571%
RI................................ 1 12,503,141 1.3% 1.30x 69.5% 7.650%
NM................................ 1 11,469,309 1.2% 1.44x 75.5% 7.360%
MN................................ 1 9,914,221 1.1% 1.40x 62.9% 8.280%
CT................................ 1 8,751,104 0.9% 1.28x 70.6% 7.580%
LA................................ 6 8,276,214 0.9% 1.42x 73.4% 7.756%
SC................................ 2 8,221,309 0.9% 1.25x 79.8% 7.203%
VA................................ 2 8,085,903 0.9% 1.25x 72.1% 7.698%
KY................................ 1 7,493,877 0.8% 1.39x 78.1% 7.020%
AL................................ 2 6,964,725 0.7% 1.32x 78.0% 7.371%
AK................................ 2 4,538,175 0.5% 1.34x 67.2% 7.689%
KS................................ 1 3,989,764 0.4% 1.42x 63.3% 8.300%
AZ................................ 2 3,110,478 0.3% 1.33x 63.4% 8.596%
OR................................ 1 1,962,441 0.2% 1.30x 69.6% 7.430%
--- ------------ ----- ---- ---- -----
Total/Weighted Average............ 143 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
---------------
(1) States or counties in which the respective Mortgaged Properties are located.
For Mortgage Loans secured by multiple properties, the Cut-off Date Balance
is allocated based on the property's appraised value as a percentage of the
total appraised value of the related Mortgage Loan.
The Mortgage Properties are located throughout 33 states.
A-9
UNDERWRITING DEBT SERVICE COVERAGE RATIO
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
RANGE OF MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
UNDERWRITING DSCRS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------------ --------- ------------ ------- ------------ ------------ --------
1.13x -- 1.19x................. 2 $ 8,606,570 0.9% 1.15x 60.4% 7.335%
1.20x -- 1.24x................. 22 142,741,600 15.2% 1.22x 74.6% 7.425%
1.25x -- 1.29x................. 37 241,118,625 25.7% 1.26x 74.7% 7.616%
1.30x -- 1.34x................. 20 123,446,161 13.2% 1.33x 72.9% 7.609%
1.35x -- 1.39x................. 20 94,450,293 10.1% 1.36x 74.8% 7.450%
1.40x -- 1.49x................. 21 148,807,825 15.9% 1.43x 68.8% 7.573%
1.50x -- 1.59x................. 5 43,637,320 4.7% 1.52x 63.3% 7.580%
1.60x -- 1.69x................. 3 6,759,252 0.7% 1.66x 62.5% 7.619%
1.80x -- 1.89x................. 2 52,297,175 5.6% 1.80x 43.8% 7.922%
2.00x -- 2.12x................. 2 76,418,391 8.1% 2.12x 37.0% 6.925%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
CUT-OFF DATE LOAN-TO-VALUE RATIO
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
LTV RATIO LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- ------------ ------- ------------ ------------ --------
36.3% -- 49.9%................. 8 $135,445,610 14.4% 1.96x 40.2% 7.365%
50.0% -- 59.9%................. 9 28,499,878 3.0% 1.37x 56.3% 7.733%
60.0% -- 64.9%................. 9 71,076,868 7.6% 1.44x 63.1% 7.662%
65.0% -- 69.9%................. 25 147,515,124 15.7% 1.33x 68.4% 7.640%
70.0% -- 74.9%................. 38 235,271,709 25.1% 1.32x 72.3% 7.639%
75.0% -- 79.9%................. 42 278,572,378 29.7% 1.30x 78.2% 7.421%
80.0% -- 80.6%................. 3 41,901,643 4.5% 1.26x 80.2% 7.180%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
MATURITY DATE LOAN-TO-VALUE RATIO(1)
<Table>
<Caption>
WEIGHTED
% OF WEIGHTED AVERAGE WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE MATURITY AVERAGE
MATURITY DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------- --------- ------------ ------- ------------ ------------ --------
1.1% -- 24.9%................. 5 $ 10,185,723 1.1% 1.30x 1.5% 7.431%
25.0% -- 49.9%................. 11 158,206,750 16.9% 1.87x 31.7% 7.431%
50.0% -- 59.9%................. 29 194,692,134 20.7% 1.38x 55.4% 7.614%
60.0% -- 64.9%................. 26 152,937,832 16.3% 1.34x 62.2% 7.596%
65.0% -- 69.9%................. 35 194,137,206 20.7% 1.30x 67.0% 7.574%
70.0% -- 74.9%................. 25 206,044,792 22.0% 1.28x 71.1% 7.305%
75.0% -- 81.2%................. 3 22,078,774 2.4% 1.25x 79.1% 8.327%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 58.3% 7.519%
=== ============ ===== ==== ==== =====
</Table>
---------------
(1) With respect to the ARD Loans, the Maturity Date Loan-to-Value Ratio was
calculated as of the related Anticipated Repayment Date.
A-10
MORTGAGE RATES
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
RATES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------- --------- ------------ ------- ------------ ------------ --------
6.900% -- 6.999%............... 3 $ 87,823,238 9.4% 1.97x 43.8% 6.908%
7.000% -- 7.249%............... 16 141,958,890 15.1% 1.30x 75.4% 7.092%
7.250% -- 7.499%............... 32 238,742,941 25.4% 1.36x 72.6% 7.387%
7.500% -- 7.749%............... 37 228,642,456 24.4% 1.32x 72.0% 7.607%
7.750% -- 7.999%............... 24 143,028,372 15.2% 1.49x 61.0% 7.863%
8.000% -- 8.499%............... 19 87,015,346 9.3% 1.32x 68.4% 8.259%
8.500% -- 8.999%............... 2 9,093,642 1.0% 1.28x 73.7% 8.536%
9.000% -- 9.000%............... 1 1,978,326 0.2% 1.34x 58.5% 9.000%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
ORIGINAL TERM TO MATURITY (1)
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
ORIGINAL TERM MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
TO MATURITY LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------- --------- ------------ ------- ------------ ------------ --------
60 -- 83..................... 2 $ 12,351,074 1.3% 1.24x 74.5% 7.188%
84 -- 99..................... 2 3,644,133 0.4% 1.28x 77.3% 7.573%
100 -- 119..................... 1 10,856,680 1.2% 1.25x 74.9% 7.680%
120............................ 122 887,272,300 94.6% 1.42x 67.7% 7.517%
121 -- 179..................... 1 11,469,309 1.2% 1.44x 75.5% 7.360%
180............................ 4 8,332,182 0.9% 1.41x 61.9% 8.032%
240............................ 2 4,357,535 0.5% 1.16x 71.5% 7.915%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
---------------
(1)With respect to the ARD Loans, the Original Term to Maturity was calculated
as of the Anticipated Repayment Date.
ORIGINAL AMORTIZATION TERM (1)
<Table>
<Caption>
ORIGINAL % OF WEIGHTED WEIGHTED WEIGHTED
AMORTIZATION NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TERM MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- ------------ ------- ------------ ------------ --------
120............................ 1 $ 5,244,607 0.6% 1.16x 52.7% 7.050%
180............................ 3 3,945,544 0.4% 1.49x 49.5% 7.700%
181 -- 239..................... 1 49,800,980 5.3% 1.80x 43.7% 7.950%
240............................ 5 24,142,534 2.6% 1.30x 67.4% 7.792%
241 -- 299..................... 10 56,778,328 6.1% 1.27x 68.2% 7.963%
300............................ 24 171,218,923 18.2% 1.68x 54.6% 7.462%
301 -- 359..................... 9 61,613,390 6.6% 1.36x 71.4% 7.468%
360............................ 81 565,538,905 60.3% 1.33x 74.1% 7.451%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
---------------
(1) For Mortgage Loans which 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-11
REMAINING TERM TO MATURITY(1)
<Table>
<Caption>
RANGE OF
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
TERMS TO NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
--------- --------- ------------ ------- ------------ ------------ --------
56 -- 59..................... 2 $ 12,351,074 1.3% 1.24x 74.5% 7.188%
60 -- 79..................... 1 2,511,980 0.3% 1.27x 79.7% 7.430%
80 -- 99..................... 1 1,132,152 0.1% 1.31x 71.9% 7.890%
100 -- 109..................... 11 57,808,115 6.2% 1.25x 71.0% 8.364%
110 -- 119..................... 113 851,790,174 90.8% 1.43x 67.7% 7.459%
160 -- 237..................... 6 12,689,716 1.4% 1.32x 65.2% 7.992%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
---------------
(1) With respect to the ARD Loans, the Remaining Term to Maturity was calculated
as of the related Anticipated Repayment Date.
REMAINING STATED AMORTIZATION TERMS
<Table>
<Caption>
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
STATED NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
AMORTIZATION MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
TERMS (MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------------- --------- ------------ ------- ------------ ------------ --------
119 -- 149..................... 1 $ 5,244,607 0.6% 1.16x 52.7% 7.050%
150 -- 174..................... 3 3,945,544 0.4% 1.49x 49.5% 7.700%
200 -- 224..................... 1 49,800,980 5.3% 1.80x 43.7% 7.950%
225 -- 249..................... 5 24,142,534 2.6% 1.30x 67.4% 7.792%
250 -- 274..................... 3 22,349,499 2.4% 1.29x 65.3% 7.402%
275 -- 299..................... 31 205,647,752 21.9% 1.61x 57.2% 7.607%
325 -- 349..................... 11 80,372,593 8.6% 1.33x 71.9% 7.669%
350 -- 360..................... 79 546,779,702 58.3% 1.33x 74.1% 7.421%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
SEASONING
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
SEASONING MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
--------- --------- ------------ ------- ------------ ------------ --------
1 -- 12....................... 129 $911,541,963 97.1% 1.42x 67.9% 7.495%
13 -- 24....................... 4 23,379,286 2.5% 1.26x 72.2% 8.420%
25 -- 25....................... 1 3,361,963 0.4% 1.13x 72.3% 7.780%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
YEAR OF MORTGAGE ORIGINATION
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF-DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
ORIGINATION LOANS BALANCE BALANCE DSCR LTV RATIO RATE
----------- --------- ------------ ------- ------------ ------------ --------
1999........................... 1 $ 3,361,963 0.4% 1.13x 72.3% 7.780%
2000........................... 15 86,141,170 9.2% 1.28x 71.6% 8.125%
2001........................... 118 848,780,078 90.5% 1.43x 67.6% 7.457%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
A-12
YEAR OF MORTGAGE MATURITY(1)
<Table>
<Caption>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
MATURITY LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------- --------- ------------ ------- ------------ ------------ --------
2006......................... 2 $ 12,351,074 1.3% 1.24x 74.5% 7.188%
2008......................... 2 3,644,133 0.4% 1.28x 77.3% 7.573%
2010......................... 13 73,136,202 7.8% 1.26x 70.9% 8.250%
2011......................... 111 836,462,086 89.1% 1.43x 67.6% 7.453%
2016......................... 4 8,332,182 0.9% 1.41x 61.9% 8.032%
2019......................... 1 3,361,963 0.4% 1.13x 72.3% 7.780%
2021......................... 1 995,572 0.1% 1.24x 68.7% 8.370%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg................ 134 $938,283,211 100.0% 1.41x 68.0% 7.519%
=== ============ ===== ==== ==== =====
</Table>
---------------
(1) With respect to the ARD Loans, the Year of Mortgage Maturity was calculated
as of the year of the Anticipated Repayment Date.
A-13
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS
INITIAL DEPOSIT
TO CAPITAL
IMPROVEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES
------------------------------------------------------------------------------------------------------------------------------------
A1 52958 Adiamo Apartments Multifamily
A2 54815 RCA - Royal Sahara Apartments Multifamily 18,125
A3 53713 The Callaway House Multifamily
P1 6104314 Quail Cove Apartments Multifamily 32,163
P2 6104093 River Park Place Apartments Multifamily
A4 53424 Lumberton Apartments Multifamily 11,625
B1 100010286 Lakeshore Apartments Multifamily 13,700
A5 54758 RCA - Riverwood Apartments Multifamily 140,188
P3 6104044 Las Ventanas Apartments Multifamily
A6 54817 RCA - Waterford Apartments Multifamily 48,250
A7 55447 The Chaparral Apartments Multifamily 5,750
P4 6104339 Chestnut Ridge Apartments Multifamily 71,664
A8 54650 RCA - Eastchase Apartments Multifamily 164,500
P5 6104336 Yorktown Apartments Multifamily
A9 54698 Brandywine Apartments Multifamily 54,516
P6 6104135 Whitfield Towne Apartments Multifamily 6,250
B2 800010306 Birch Park Apartments Multifamily 31,250
P7 6104163 Sutton House Apartments Multifamily 77,063
A10 54492 Willow River Apartments Multifamily 103,966
A11 54580 Kelton Street Apartments Multifamily 29,875
A12 53443 Woodcrest Arms Apartments Multifamily 6,000
P8 6104382 Patio Apartments Multifamily 117,038
P9 6104341 Gatewood Apartments Multifamily 43,810
A13 54964 Twelve Trees Apartments Multifamily 108,500
B3 322010307 High Key Apartments Multifamily 6,875
A14 53423 Longview Apartments Multifamily 11,250
B4 415010288 Camelot Mesa Apartments Multifamily
P10 6104335 Stoney Ridge Apartments Multifamily
A15 53417 Greentree Village Apartments Multifamily 172,250
A16 53430 Provincial West Apartments Multifamily 2,781
A17 53432 Strathmore Gardens Apartments Multifamily 30,200
P11 6104348 Centra Villa Apartments Multifamily 1,375
B5 800010277 Park Center Apartments Multifamily
B6 415010290 Beach Colony Apartments Multifamily 33,108
A18 55400 Bristol Place Apartments Multifamily
A19 55366 RCA Portfolio 2 - Park Plaza Apartments Multifamily 99,875
P12 6104334 Madison Place Apartments Multifamily
A20 54880 Bucks Crossing Multifamily
CURRENT BALANCE INITIAL ANNUAL
IN CAPITAL DEPOSIT TO DEPOSIT TO
IMPROVEMENT REFERENCES REPLACEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES
----------------------------------------------------------------------------------------------------------------------------------
A1 52958 Adiamo Apartments Multifamily 75,060
A2 54815 RCA - Royal Sahara Apartments Multifamily 18,232 102,120
A3 53713 The Callaway House Multifamily 8,650 51,900
P1 6104314 Quail Cove Apartments Multifamily 32,163 111,552
P2 6104093 River Park Place Apartments Multifamily 34,752
A4 53424 Lumberton Apartments Multifamily 76,363 52,800
B1 100010286 Lakeshore Apartments Multifamily 192,960
A5 54758 RCA - Riverwood Apartments Multifamily 140,869 87,504
P3 6104044 Las Ventanas Apartments Multifamily 56,004
A6 54817 RCA - Waterford Apartments Multifamily 48,536 82,500
A7 55447 The Chaparral Apartments Multifamily 5,775 28,800
P4 6104339 Chestnut Ridge Apartments Multifamily 71,664 110,652
A8 54650 RCA - Eastchase Apartments Multifamily 165,474 68,000
P5 6104336 Yorktown Apartments Multifamily 100,000 27,000
A9 54698 Brandywine Apartments Multifamily 52,430
P6 6104135 Whitfield Towne Apartments Multifamily 6,250 96,900
B2 800010306 Birch Park Apartments Multifamily 31,250 8,574 47,476
P7 6104163 Sutton House Apartments Multifamily 77,063 52,152
A10 54492 Willow River Apartments Multifamily 82,500
A11 54580 Kelton Street Apartments Multifamily 24,750
A12 53443 Woodcrest Arms Apartments Multifamily 31,712 28,120
P8 6104382 Patio Apartments Multifamily 294,038 66,000
P9 6104341 Gatewood Apartments Multifamily 43,810 71,800 33,636
A13 54964 Twelve Trees Apartments Multifamily 35,904
B3 322010307 High Key Apartments Multifamily 6,875 61,332
A14 53423 Longview Apartments Multifamily 22,500
B4 415010288 Camelot Mesa Apartments Multifamily 18,427
P10 6104335 Stoney Ridge Apartments Multifamily 21,600
A15 53417 Greentree Village Apartments Multifamily 31,000
A16 53430 Provincial West Apartments Multifamily 22,250
A17 53432 Strathmore Gardens Apartments Multifamily 24,504
P11 6104348 Centra Villa Apartments Multifamily 1,375 39,600
B5 800010277 Park Center Apartments Multifamily 18,000
B6 415010290 Beach Colony Apartments Multifamily 33,108 18,700 16,272
A18 55400 Bristol Place Apartments Multifamily 29,300
A19 55366 RCA Portfolio 2 - Park Plaza Apartments Multifamily 100,248 27,756
P12 6104334 Madison Place Apartments Multifamily 14,400
A20 54880 Bucks Crossing Multifamily 17,791
CURRENT
BALANCE IN TAX AND
REPLACEMENT INSURANCE
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES ESCROW
------------------------------------------------------------------------------------------------------------------------
A1 52958 Adiamo Apartments Multifamily 31,458 Yes
A2 54815 RCA - Royal Sahara Apartments Multifamily 8,527 Yes
A3 53713 The Callaway House Multifamily 21,768 Yes
P1 6104314 Quail Cove Apartments Multifamily 18,592 Yes
P2 6104093 River Park Place Apartments Multifamily 26,064 Tax Only
A4 53424 Lumberton Apartments Multifamily 44,774 Tax Only
B1 100010286 Lakeshore Apartments Multifamily 196,684 Yes
A5 54758 RCA - Riverwood Apartments Multifamily 29,226 Yes
P3 6104044 Las Ventanas Apartments Multifamily 37,468 Yes
A6 54817 RCA - Waterford Apartments Multifamily 6,889 Yes
A7 55447 The Chaparral Apartments Multifamily 4,803 Yes
P4 6104339 Chestnut Ridge Apartments Multifamily 9,221 Yes
A8 54650 RCA - Eastchase Apartments Multifamily 5,678 Yes
P5 6104336 Yorktown Apartments Multifamily 100,000 Yes
A9 54698 Brandywine Apartments Multifamily 8,748 Yes
P6 6104135 Whitfield Towne Apartments Multifamily 32,300 Yes
B2 800010306 Birch Park Apartments Multifamily 12,530 Yes
P7 6104163 Sutton House Apartments Multifamily 13,038 Yes
A10 54492 Willow River Apartments Multifamily 13,793 Yes
A11 54580 Kelton Street Apartments Multifamily 4,132 Yes
A12 53443 Woodcrest Arms Apartments Multifamily 9,867 Tax Only
P8 6104382 Patio Apartments Multifamily Yes
P9 6104341 Gatewood Apartments Multifamily 74,603 Yes
A13 54964 Twelve Trees Apartments Multifamily Yes
B3 322010307 High Key Apartments Multifamily 5,111 Yes
A14 53423 Longview Apartments Multifamily 27,238 Tax Only
B4 415010288 Camelot Mesa Apartments Multifamily 7,678 Yes
P10 6104335 Stoney Ridge Apartments Multifamily 1,800 Yes
A15 53417 Greentree Village Apartments Multifamily 3,195 Tax Only
A16 53430 Provincial West Apartments Multifamily 20,576 Tax Only
A17 53432 Strathmore Gardens Apartments Multifamily 19,107 Tax Only
P11 6104348 Centra Villa Apartments Multifamily Yes
B5 800010277 Park Center Apartments Multifamily 7,500 Yes
B6 415010290 Beach Colony Apartments Multifamily 22,768 Yes
A18 55400 Bristol Place Apartments Multifamily 4,889 Yes
A19 55366 RCA Portfolio 2 - Park Plaza Apartments Multifamily 4,629 Yes
P12 6104334 Madison Place Apartments Multifamily 1,200 Yes
A20 54880 Bucks Crossing Multifamily 4,469 Yes
ANNUAL DEPOSIT CURRENT
INITIAL DEPOSIT TO TI/LC BALANCE IN
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE TI/LC ESCROW ESCROW TI/LC ESCROW REPORT DATE
------------------------------------------------------------------------------------------------------------------------------------
A1 52958 Adiamo Apartments Multifamily 09/12/01
A2 54815 RCA - Royal Sahara Apartments Multifamily 09/10/01
A3 53713 The Callaway House Multifamily 09/12/01
P1 6104314 Quail Cove Apartments Multifamily 09/01/01
P2 6104093 River Park Place Apartments Multifamily 09/01/01
A4 53424 Lumberton Apartments Multifamily 09/12/01
B1 100010286 Lakeshore Apartments Multifamily 10/01/01
A5 54758 RCA - Riverwood Apartments Multifamily 09/10/01
P3 6104044 Las Ventanas Apartments Multifamily 09/01/01
A6 54817 RCA - Waterford Apartments Multifamily 09/10/01
A7 55447 The Chaparral Apartments Multifamily 09/10/01
P4 6104339 Chestnut Ridge Apartments Multifamily 09/01/01
A8 54650 RCA - Eastchase Apartments Multifamily 09/10/01
P5 6104336 Yorktown Apartments Multifamily 09/01/01
A9 54698 Brandywine Apartments Multifamily 09/12/01
P6 6104135 Whitfield Towne Apartments Multifamily 09/01/01
B2 800010306 Birch Park Apartments Multifamily 10/01/01
P7 6104163 Sutton House Apartments Multifamily 09/01/01
A10 54492 Willow River Apartments Multifamily 09/12/01
A11 54580 Kelton Street Apartments Multifamily 09/12/01
A12 53443 Woodcrest Arms Apartments Multifamily 09/12/01
P8 6104382 Patio Apartments Multifamily 09/01/01
P9 6104341 Gatewood Apartments Multifamily 09/01/01
A13 54964 Twelve Trees Apartments Multifamily 09/12/01
B3 322010307 High Key Apartments Multifamily 10/01/01
A14 53423 Longview Apartments Multifamily 09/12/01
B4 415010288 Camelot Mesa Apartments Multifamily 10/01/01
P10 6104335 Stoney Ridge Apartments Multifamily 09/01/01
A15 53417 Greentree Village Apartments Multifamily 09/12/01
A16 53430 Provincial West Apartments Multifamily 09/12/01
A17 53432 Strathmore Gardens Apartments Multifamily 09/12/01
P11 6104348 Centra Villa Apartments Multifamily 09/01/01
B5 800010277 Park Center Apartments Multifamily 10/01/01
B6 415010290 Beach Colony Apartments Multifamily 10/01/01
A18 55400 Bristol Place Apartments Multifamily 09/12/01
A19 55366 RCA Portfolio 2 - Park Plaza Apartments Multifamily 09/10/01
P12 6104334 Madison Place Apartments Multifamily 09/01/01
A20 54880 Bucks Crossing Multifamily 09/12/01
B-1
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS
INITIAL DEPOSIT
TO CAPITAL
IMPROVEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES
------------------------------------------------------------------------------------------------------------------------------------
A21 54733 652 - 658 Oakdale Apartments Multifamily
A22 53433 Sussex House Condominium Apartments Multifamily 9,413
B7 415000236 Corona del Sol Apartments Multifamily
B8 415000235 La Corona Apartments Multifamily
B9 415000234 Corona del Norte Apartments Multifamily
B10 400010314 Magnolia Trace Apartments Multifamily
B11 415010297 Casa Bernardo Apartments Multifamily
P13 6104247 Ballantyne Apartments Multifamily 27,500
B12 400000226 Monument Place Apartments Multifamily 2,500
B13 100000256 Shawnee Place Apartments Multifamily
A23 54058 Terrace West Apartments Multifamily
B14 820000263 Challis Apartments Multifamily
B15 415010295 Home Avenue Apartments Multifamily
P14 6104232 Pinehurst Apartments Multifamily 43,188
A24 55235 Market Square Retail
B16 100010315 Kohls Shopping Center Retail
P15 6104233 Calumet Center Retail 5,844
B17 303000166 Raley's Stockton Plaza Retail
B18 415010287 Eagle Rock Center Retail
P16 6104239 South Lakeview Plaza Retail 3,450
*P17 6104193 Seaford Village Shopping Center Retail 1,000
P18 6104329 Lakehills Plaza Shopping Center Retail
B19 415010281 Valu Plus Market Place, Lynwood Retail
P19 6104299 Tri-Cities Shopping Center Retail 473,813
P20 6104330 Pool City Plaza Retail
P21 6104195 Hallandale Place Shopping Center Retail
A25 54522 Florida International Plaza Retail
P22 6104293 Coleman Center Retail 2,563
B20 800010302 Eastgate Marketplace Retail 7,500
B21 323010308 Walgreens Sunrise Retail
A26 54861 Walgreens - Reisterstown Road Retail
P23 6104356 Rocky Face Crossing Shopping Center Retail
A27 54782 Rivermont Station Phase II Retail 1,000
A28 54678 Kroger Supermarket - Marion, IL Retail
A29 54471 McConnells Shopping Center Retail
A30 54860 Walgreens - Liberty Heights Retail
P24 6103542 6403-6405 El Cajon Boulevard Retail
B22 415010310 Walgreens Tacoma Retail
CURRENT BALANCE INITIAL
IN CAPITAL DEPOSIT IN
IMPROVEMENT REPLACEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES
-----------------------------------------------------------------------------------------------------------------------------------
A21 54733 652 - 658 Oakdale Apartments Multifamily
A22 53433 Sussex House Condominium Apartments Multifamily
B7 415000236 Corona del Sol Apartments Multifamily
B8 415000235 La Corona Apartments Multifamily
B9 415000234 Corona del Norte Apartments Multifamily
B10 400010314 Magnolia Trace Apartments Multifamily 1,167
B11 415010297 Casa Bernardo Apartments Multifamily
P13 6104247 Ballantyne Apartments Multifamily
B12 400000226 Monument Place Apartments Multifamily 2,526
B13 100000256 Shawnee Place Apartments Multifamily
A23 54058 Terrace West Apartments Multifamily
B14 820000263 Challis Apartments Multifamily
B15 415010295 Home Avenue Apartments Multifamily 4,110
P14 6104232 Pinehurst Apartments Multifamily 43,228
A24 55235 Market Square Retail
B16 100010315 Kohls Shopping Center Retail
P15 6104233 Calumet Center Retail 5,844
B17 303000166 Raley's Stockton Plaza Retail
B18 415010287 Eagle Rock Center Retail
P16 6104239 South Lakeview Plaza Retail 6,450
*P17 6104193 Seaford Village Shopping Center Retail 1,000
P18 6104329 Lakehills Plaza Shopping Center Retail
B19 415010281 Valu Plus Market Place, Lynwood Retail
P19 6104299 Tri-Cities Shopping Center Retail 473,813
P20 6104330 Pool City Plaza Retail
P21 6104195 Hallandale Place Shopping Center Retail
A25 54522 Florida International Plaza Retail
P22 6104293 Coleman Center Retail 2,563
B20 800010302 Eastgate Marketplace Retail 7,500 176,000
B21 323010308 Walgreens Sunrise Retail
A26 54861 Walgreens - Reisterstown Road Retail
P23 6104356 Rocky Face Crossing Shopping Center Retail
A27 54782 Rivermont Station Phase II Retail
A28 54678 Kroger Supermarket - Marion, IL Retail
A29 54471 McConnells Shopping Center Retail
A30 54860 Walgreens - Liberty Heights Retail
P24 6103542 6403-6405 El Cajon Boulevard Retail
B22 415010310 Walgreens Tacoma Retail
ANNUAL
DEPOSIT TO
REPLACEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES
-----------------------------------------------------------------------------------------------------------------
A21 54733 652 - 658 Oakdale Apartments Multifamily 12,400
A22 53433 Sussex House Condominium Apartments Multifamily 12,996
B7 415000236 Corona del Sol Apartments Multifamily
B8 415000235 La Corona Apartments Multifamily
B9 415000234 Corona del Norte Apartments Multifamily
B10 400010314 Magnolia Trace Apartments Multifamily 14,000
B11 415010297 Casa Bernardo Apartments Multifamily 7,780
P13 6104247 Ballantyne Apartments Multifamily 48,300
B12 400000226 Monument Place Apartments Multifamily 18,744
B13 100000256 Shawnee Place Apartments Multifamily 25,032
A23 54058 Terrace West Apartments Multifamily 20,546
B14 820000263 Challis Apartments Multifamily 10,309
B15 415010295 Home Avenue Apartments Multifamily 6,000
P14 6104232 Pinehurst Apartments Multifamily 30,096
A24 55235 Market Square Retail 80,364
B16 100010315 Kohls Shopping Center Retail 24,711
P15 6104233 Calumet Center Retail 22,500
B17 303000166 Raley's Stockton Plaza Retail
B18 415010287 Eagle Rock Center Retail 5,688
P16 6104239 South Lakeview Plaza Retail 9,060
*P17 6104193 Seaford Village Shopping Center Retail 23,076
P18 6104329 Lakehills Plaza Shopping Center Retail 15,240
B19 415010281 Valu Plus Market Place, Lynwood Retail 8,942
P19 6104299 Tri-Cities Shopping Center Retail 33,804
P20 6104330 Pool City Plaza Retail 3,636
P21 6104195 Hallandale Place Shopping Center Retail 17,400
A25 54522 Florida International Plaza Retail 19,058
P22 6104293 Coleman Center Retail 13,200
B20 800010302 Eastgate Marketplace Retail 9,000
B21 323010308 Walgreens Sunrise Retail 2,268
A26 54861 Walgreens - Reisterstown Road Retail 1,112
P23 6104356 Rocky Face Crossing Shopping Center Retail 8,004
A27 54782 Rivermont Station Phase II Retail 5,425
A28 54678 Kroger Supermarket - Marion, IL Retail
A29 54471 McConnells Shopping Center Retail 4,983
A30 54860 Walgreens - Liberty Heights Retail 834
P24 6103542 6403-6405 El Cajon Boulevard Retail 1,968
B22 415010310 Walgreens Tacoma Retail 2,086
CURRENT
BALANCE IN TAX AND
REPLACEMENT INSURANCE
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES ESCROW
----------------------------------------------------------------------------------------------------------------------------------
A21 54733 652 - 658 Oakdale Apartments Multifamily 5,197 Yes
A22 53433 Sussex House Condominium Apartments Multifamily 11,020 Tax Only
B7 415000236 Corona del Sol Apartments Multifamily Yes
B8 415000235 La Corona Apartments Multifamily Yes
B9 415000234 Corona del Norte Apartments Multifamily Yes
B10 400010314 Magnolia Trace Apartments Multifamily 3,500 Yes
B11 415010297 Casa Bernardo Apartments Multifamily 1,297 Yes
P13 6104247 Ballantyne Apartments Multifamily 8,050 Yes
B12 400000226 Monument Place Apartments Multifamily 12,535 Yes
B13 100000256 Shawnee Place Apartments Multifamily 8,344 Yes
A23 54058 Terrace West Apartments Multifamily 8,608 Yes
B14 820000263 Challis Apartments Multifamily 5,154 Yes
B15 415010295 Home Avenue Apartments Multifamily 4,610 Yes
P14 6104232 Pinehurst Apartments Multifamily 5,017 Yes
A24 55235 Market Square Retail 6,697 Tax Only
B16 100010315 Kohls Shopping Center Retail 4,119 Yes
P15 6104233 Calumet Center Retail 1,875 Tax Only
B17 303000166 Raley's Stockton Plaza Retail Yes
B18 415010287 Eagle Rock Center Retail 2,370 Yes
P16 6104239 South Lakeview Plaza Retail 755 Yes
*P17 6104193 Seaford Village Shopping Center Retail 9,613 Yes
P18 6104329 Lakehills Plaza Shopping Center Retail 1,270 Yes
B19 415010281 Valu Plus Market Place, Lynwood Retail 3,726 Yes
P19 6104299 Tri-Cities Shopping Center Retail 2,817 Yes
P20 6104330 Pool City Plaza Retail 303 Yes
P21 6104195 Hallandale Place Shopping Center Retail 2,900 Yes
A25 54522 Florida International Plaza Retail 9,597 Yes
P22 6104293 Coleman Center Retail 1,100 Yes
B20 800010302 Eastgate Marketplace Retail 176,750 Yes
B21 323010308 Walgreens Sunrise Retail 189 No
A26 54861 Walgreens - Reisterstown Road Retail 279 No
P23 6104356 Rocky Face Crossing Shopping Center Retail Yes
A27 54782 Rivermont Station Phase II Retail 1,360 Yes
A28 54678 Kroger Supermarket - Marion, IL Retail No
A29 54471 McConnells Shopping Center Retail 1,252 Yes
A30 54860 Walgreens - Liberty Heights Retail 209 No
P24 6103542 6403-6405 El Cajon Boulevard Retail 3,976 No
B22 415010310 Walgreens Tacoma Retail 348 No
ANNUAL DEPOSIT
INITIAL DEPOSIT TO TO T/LC
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE TI/LC ESCROW ESCROW
----------------------------------------------------------------------------------------------------------------------------------
A21 54733 652 - 658 Oakdale Apartments Multifamily
A22 53433 Sussex House Condominium Apartments Multifamily
B7 415000236 Corona del Sol Apartments Multifamily
B8 415000235 La Corona Apartments Multifamily
B9 415000234 Corona del Norte Apartments Multifamily
B10 400010314 Magnolia Trace Apartments Multifamily
B11 415010297 Casa Bernardo Apartments Multifamily
P13 6104247 Ballantyne Apartments Multifamily
B12 400000226 Monument Place Apartments Multifamily
B13 100000256 Shawnee Place Apartments Multifamily 10,496
A23 54058 Terrace West Apartments Multifamily
B14 820000263 Challis Apartments Multifamily
B15 415010295 Home Avenue Apartments Multifamily
P14 6104232 Pinehurst Apartments Multifamily
A24 55235 Market Square Retail
B16 100010315 Kohls Shopping Center Retail
P15 6104233 Calumet Center Retail
B17 303000166 Raley's Stockton Plaza Retail 20,004
B18 415010287 Eagle Rock Center Retail 30,000
P16 6104239 South Lakeview Plaza Retail 72,000
*P17 6104193 Seaford Village Shopping Center Retail 55,200
P18 6104329 Lakehills Plaza Shopping Center Retail 80,700
B19 415010281 Valu Plus Market Place, Lynwood Retail 18,648
P19 6104299 Tri-Cities Shopping Center Retail 50,000 56,400
P20 6104330 Pool City Plaza Retail 23,256
P21 6104195 Hallandale Place Shopping Center Retail 30,000
A25 54522 Florida International Plaza Retail
P22 6104293 Coleman Center Retail 42,000
B20 800010302 Eastgate Marketplace Retail 50,000 40,176
B21 323010308 Walgreens Sunrise Retail
A26 54861 Walgreens - Reisterstown Road Retail
P23 6104356 Rocky Face Crossing Shopping Center Retail
A27 54782 Rivermont Station Phase II Retail
A28 54678 Kroger Supermarket - Marion, IL Retail
A29 54471 McConnells Shopping Center Retail
A30 54860 Walgreens - Liberty Heights Retail
P24 6103542 6403-6405 El Cajon Boulevard Retail
B22 415010310 Walgreens Tacoma Retail
CURRENT
BALANCE IN
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE TI/LC ESCROW REPORT DATE
----------------------------------------------------------------------------------------------------------------------------------
A21 54733 652 - 658 Oakdale Apartments Multifamily 09/12/01
A22 53433 Sussex House Condominium Apartments Multifamily 09/12/01
B7 415000236 Corona del Sol Apartments Multifamily 10/01/01
B8 415000235 La Corona Apartments Multifamily 10/01/01
B9 415000234 Corona del Norte Apartments Multifamily 10/01/01
B10 400010314 Magnolia Trace Apartments Multifamily 10/01/01
B11 415010297 Casa Bernardo Apartments Multifamily 10/01/01
P13 6104247 Ballantyne Apartments Multifamily 09/01/01
B12 400000226 Monument Place Apartments Multifamily 10/01/01
B13 100000256 Shawnee Place Apartments Multifamily 10,496 10/01/01
A23 54058 Terrace West Apartments Multifamily 09/12/01
B14 820000263 Challis Apartments Multifamily 10/01/01
B15 415010295 Home Avenue Apartments Multifamily 10/01/01
P14 6104232 Pinehurst Apartments Multifamily 09/01/01
A24 55235 Market Square Retail 09/12/01
B16 100010315 Kohls Shopping Center Retail 10/01/01
P15 6104233 Calumet Center Retail 09/01/01
B17 303000166 Raley's Stockton Plaza Retail 20,004 10/01/01
B18 415010287 Eagle Rock Center Retail 12,500 10/01/01
P16 6104239 South Lakeview Plaza Retail 6,000 09/01/01
*P17 6104193 Seaford Village Shopping Center Retail 23,038 09/01/01
P18 6104329 Lakehills Plaza Shopping Center Retail 6,725 09/01/01
B19 415010281 Valu Plus Market Place, Lynwood Retail 7,770 10/01/01
P19 6104299 Tri-Cities Shopping Center Retail 54,700 09/01/01
P20 6104330 Pool City Plaza Retail 1,938 09/01/01
P21 6104195 Hallandale Place Shopping Center Retail 5,000 09/01/01
A25 54522 Florida International Plaza Retail 09/12/01
P22 6104293 Coleman Center Retail 3,500 09/01/01
B20 800010302 Eastgate Marketplace Retail 53,348 10/01/01
B21 323010308 Walgreens Sunrise Retail 10/01/01
A26 54861 Walgreens - Reisterstown Road Retail 09/12/01
P23 6104356 Rocky Face Crossing Shopping Center Retail 09/01/01
A27 54782 Rivermont Station Phase II Retail 09/12/01
A28 54678 Kroger Supermarket - Marion, IL Retail 10/01/01
A29 54471 McConnells Shopping Center Retail 09/12/01
A30 54860 Walgreens - Liberty Heights Retail 09/12/01
P24 6103542 6403-6405 El Cajon Boulevard Retail 09/01/01
B22 415010310 Walgreens Tacoma Retail 10/01/01
B-2
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS
INITIAL DEPOSIT
TO CAPITAL
IMPROVEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES
--------------------------------------------------------------------------------------------------------------------------
B23 415000250 Village Plaza, Palmdale Retail
A31 54857 Walgreens - Eastern Avenue Retail
A32 54888 Shoppes of Garland Shopping Center Retail
A33 53647 El Paseo Retail Center Retail
A34 54786 Sterling Jewelers Retail
P25 6104304 North Dixie Plaza Retail
A35 54683 Blowing Rock Square Retail 9,000
B24 415000259 Union Landing Retail Retail
B25 810000261 Staples Building, Huber Heights Retail
B26 302000241 Napa Retail Retail
A36 54792 Milwaukee Center Office Tower Office
P26 6104366 Pacific Professional Building Office
B27 240010305 Nokia Office Building Office
P27 6104243 Village Plaza Office
P28 6104137 25, 40 & 45 Hartwell Avenue Office
A37 55181 Keystone Office Buildings 100-200 Office
A38 54756 Foundry Corporate Office Center Office
P29 6104101 Windsor Commerce Center Office
A39 53748 175 Memorial Highway Office
P30 6104251 1671 The Alameda Office 2,688
P31 6104301 600 Grand Avenue Office 4,400
B28 240000216 First Security Van Kasper Building Office
B29 800010301 Lakeview Place Office
P32 6104208 First American Plaza Office
P33 6104360 Southridge Professional Plaza Office
P34 6104252 Manhattan Place Office Building Office 19,500
P35 6104274 Anchorage School District Building Office
P36 6104245 Republic Security Bank Building Office
P37 6104303 Industriplex Center Office 24,813
P38 6104261 Sunshine Plaza Office
P39 6104041 60 North Taylor Avenue Office 78,000
B30 240000227 2915 Telegraph Avenue Office
P40 6104236 Outrigger Reef Hotel Hotel
P41 6104254 Minneapolis Residence Inn Hotel
P42 6104253 Hilton Garden Inn Hotel
P43 6104257 Candlewood Suites - Overland Park Hotel
P44 6103741 Northwest Corporate Park Industrial
A40 55329 Anheuser-Busch Distribution Center Industrial
CURRENT BALANCE ANNUAL
IN CAPITAL INITIAL DEPOSIT DEPOSIT TO
IMPROVEMENT TO REPLACEMENT REPLACEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES
---------------------------------------------------------------------------------------------------------------------------------
B23 415000250 Village Plaza, Palmdale Retail 7,657
A31 54857 Walgreens - Eastern Avenue Retail 1,112
A32 54888 Shoppes of Garland Shopping Center Retail 2,571
A33 53647 El Paseo Retail Center Retail 1,501
A34 54786 Sterling Jewelers Retail
P25 6104304 North Dixie Plaza Retail
A35 54683 Blowing Rock Square Retail 8,512
B24 415000259 Union Landing Retail Retail 1,609
B25 810000261 Staples Building, Huber Heights Retail 3,600
B26 302000241 Napa Retail Retail 960
A36 54792 Milwaukee Center Office Tower Office 37,368
P26 6104366 Pacific Professional Building Office 13,860
B27 240010305 Nokia Office Building Office 20,250
P27 6104243 Village Plaza Office 47,940
P28 6104137 25, 40 & 45 Hartwell Avenue Office 16,944
A37 55181 Keystone Office Buildings 100-200 Office 13,523
A38 54756 Foundry Corporate Office Center Office 21,223
P29 6104101 Windsor Commerce Center Office 24,516
A39 53748 175 Memorial Highway Office 17,000 14,275
P30 6104251 1671 The Alameda Office 2,688 6,696
P31 6104301 600 Grand Avenue Office 4,400 8,448
B28 240000216 First Security Van Kasper Building Office
B29 800010301 Lakeview Place Office 3,234
P32 6104208 First American Plaza Office
P33 6104360 Southridge Professional Plaza Office 4,380
P34 6104252 Manhattan Place Office Building Office 19,500 14,700
P35 6104274 Anchorage School District Building Office 5,412
P36 6104245 Republic Security Bank Building Office 8,700
P37 6104303 Industriplex Center Office 24,813 4,308
P38 6104261 Sunshine Plaza Office 5,304
P39 6104041 60 North Taylor Avenue Office 78,000 4,572
B30 240000227 2915 Telegraph Avenue Office 2,751
P40 6104236 Outrigger Reef Hotel Hotel 1,355,004
P41 6104254 Minneapolis Residence Inn Hotel 169,860
P42 6104253 Hilton Garden Inn Hotel 226,620
P43 6104257 Candlewood Suites - Overland Park Hotel 76,644
P44 6103741 Northwest Corporate Park Industrial 569,477 31,500
A40 55329 Anheuser-Busch Distribution Center Industrial
</Table>
CURRENT
BALANCE IN TAX AND
REPLACEMENT INSURANCE
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES ESCROW
-----------------------------------------------------------------------------------------------------------------
B23 415000250 Village Plaza, Palmdale Retail 2,552 Yes
A31 54857 Walgreens - Eastern Avenue Retail 279 No
A32 54888 Shoppes of Garland Shopping Center Retail 644 Yes
A33 53647 El Paseo Retail Center Retail 1,140 Yes
A34 54786 Sterling Jewelers Retail No
P25 6104304 North Dixie Plaza Retail Yes
A35 54683 Blowing Rock Square Retail Yes
B24 415000259 Union Landing Retail Retail 670 Yes
B25 810000261 Staples Building, Huber Heights Retail 1,800 Yes
B26 302000241 Napa Retail Retail 240 Yes
A36 54792 Milwaukee Center Office Tower Office 9,368 No
P26 6104366 Pacific Professional Building Office Yes
B27 240010305 Nokia Office Building Office 5,063 Yes
P27 6104243 Village Plaza Office 11,997 Yes
P28 6104137 25, 40 & 45 Hartwell Avenue Office Yes
A37 55181 Keystone Office Buildings 100-200 Office 1,127 Yes
A38 54756 Foundry Corporate Office Center Office 3,541 Yes
P29 6104101 Windsor Commerce Center Office 14,343 Tax Only
A39 53748 175 Memorial Highway Office 22,074 Yes
P30 6104251 1671 The Alameda Office 1,674 Yes
P31 6104301 600 Grand Avenue Office Tax Only
B28 240000216 First Security Van Kasper Building Office Yes
B29 800010301 Lakeview Place Office 809 Yes
P32 6104208 First American Plaza Office Yes
P33 6104360 Southridge Professional Plaza Office Yes
P34 6104252 Manhattan Place Office Building Office 3,675 Yes
P35 6104274 Anchorage School District Building Office 883 Yes
P36 6104245 Republic Security Bank Building Office 2,175 Tax Only
P37 6104303 Industriplex Center Office Yes
P38 6104261 Sunshine Plaza Office 885 Tax Only
P39 6104041 60 North Taylor Avenue Office 1,524 Yes
B30 240000227 2915 Telegraph Avenue Office 917 Yes
P40 6104236 Outrigger Reef Hotel Hotel 564,585 No
P41 6104254 Minneapolis Residence Inn Hotel 42,496 Yes
P42 6104253 Hilton Garden Inn Hotel 56,655 Yes
P43 6104257 Candlewood Suites - Overland Park Hotel 12,774 Yes
P44 6103741 Northwest Corporate Park Industrial 5,250 Yes
A40 55329 Anheuser-Busch Distribution Center Industrial No
ANNUAL DEPOSIT CURRENT
INITIAL DEPOSIT TO TO TI/LC BALANCE IN
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE TI/LC ESCROW ESCROW TI/LC ESCROW REPORT DATE
------------------------------------------------------------------------------------------------------------------------------------
B23 415000250 Village Plaza, Palmdale Retail 5,000 20,532 11,844 10/01/01
A31 54857 Walgreens - Eastern Avenue Retail 09/12/01
A32 54888 Shoppes of Garland Shopping Center Retail 09/12/01
A33 53647 El Paseo Retail Center Retail 09/12/01
A34 54786 Sterling Jewelers Retail 10/01/01
P25 6104304 North Dixie Plaza Retail 09/01/01
A35 54683 Blowing Rock Square Retail 20,000 20,019 09/12/01
B24 415000259 Union Landing Retail Retail 21,600 9,000 10/01/01
B25 810000261 Staples Building, Huber Heights Retail 10,560 5,280 10/01/01
B26 302000241 Napa Retail Retail 11,220 2,805 10/01/01
A36 54792 Milwaukee Center Office Tower Office 40,000 480,000 160,649 09/12/01
P26 6104366 Pacific Professional Building Office 09/01/01
B27 240010305 Nokia Office Building Office 10/01/01
P27 6104243 Village Plaza Office 400,000 333,000 484,554 09/01/01
P28 6104137 25, 40 & 45 Hartwell Avenue Office 120,000 09/01/01
A37 55181 Keystone Office Buildings 100-200 Office 1,900 22,800 1,902 09/12/01
A38 54756 Foundry Corporate Office Center Office 100,000 100,759 09/12/01
P29 6104101 Windsor Commerce Center Office 120,000 40,180 09/01/01
A39 53748 175 Memorial Highway Office 09/12/01
P30 6104251 1671 The Alameda Office 291,200 180,000 336,571 09/01/01
P31 6104301 600 Grand Avenue Office 14,400 09/01/01
B28 240000216 First Security Van Kasper Building Office 10/01/01
B29 800010301 Lakeview Place Office 26,951 6,738 10/01/01
P32 6104208 First American Plaza Office 09/01/01
P33 6104360 Southridge Professional Plaza Office 24,252 09/01/01
P34 6104252 Manhattan Place Office Building Office 100,000 50,004 112,501 09/01/01
P35 6104274 Anchorage School District Building Office 30,000 5,000 09/01/01
P36 6104245 Republic Security Bank Building Office 24,000 6,000 09/01/01
P37 6104303 Industriplex Center Office 09/01/01
P38 6104261 Sunshine Plaza Office 30,000 5,000 09/01/01
P39 6104041 60 North Taylor Avenue Office 09/01/01
B30 240000227 2915 Telegraph Avenue Office 19,213 6,404 10/01/01
P40 6104236 Outrigger Reef Hotel Hotel 09/01/01
P41 6104254 Minneapolis Residence Inn Hotel 09/01/01
P42 6104253 Hilton Garden Inn Hotel 09/01/01
P43 6104257 Candlewood Suites - Overland Park Hotel 09/01/01
P44 6103741 Northwest Corporate Park Industrial 09/01/01
A40 55329 Anheuser-Busch Distribution Center Industrial 09/12/01
B-3
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS
INITIAL DEPOSIT CURRENT BALANCE
TO CAPITAL IN CAPITAL
IMPROVEMENT IMPROVEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES
-----------------------------------------------------------------------------------------------------------------------------------
P45 6104290 FINSA Industrial Portfolio Industrial
A41 54630 Hart Marx Building Industrial
P46 6104189 Atlantic Commerce Center II Industrial
P47 6104149 Tri-Main Center Industrial 3,125 3,125
B31 311000254 Jefferson Court Industrial
B32 430990096 1550 Walnut Hill Lane Industrial
A42 53625 26 Kennedy Boulevard Industrial 25,313
B33 290000244 Carter Industrial-Will Rogers Blvd. Industrial
P48 6104250 21 Mandeville Court Industrial
A43 52694 Boones Mobile Estates Manufactured Housing Community 73,475
B34 400010292 Rancho Salinas MHP Manufactured Housing Community
B35 400000269 Southgate MHP Manufactured Housing Community
B36 415010300 Halcyon MHP Manufactured Housing Community
B37 400000266 Boulevard Estates MHC Manufactured Housing Community 11,563 11,641
B38 400010320 Brentwood MHP Manufactured Housing Community 3,750
P49 6104281 Shreveport Self Storage Self-Storage 11,813 11,813
P50 6104343 ASAP Storage - Sarasota Self-Storage
P51 6104347 ASAP Storage - Kansas City Self-Storage 13,750 13,750
B39 400000180 Central Self-Storage Self-Storage
P52 6103916 Edward's Ground Lease Portfolio Land
------------------------------------------------------------------------------------------------------------------------------
TOTALS $ 2,300,907 $ 2,466,934
INITIAL ANNUAL
DEPOSIT TO DEPOSIT TO
REPLACEMENT REPLACEMENT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES
-------------------------------------------------------------------------------------------------------------------------------
P45 6104290 FINSA Industrial Portfolio Industrial 31,032
A41 54630 Hart Marx Building Industrial 39,000
P46 6104189 Atlantic Commerce Center II Industrial 71,004
P47 6104149 Tri-Main Center Industrial 58,428
B31 311000254 Jefferson Court Industrial 20,928
B32 430990096 1550 Walnut Hill Lane Industrial 3,192
A42 53625 26 Kennedy Boulevard Industrial 9,286
B33 290000244 Carter Industrial-Will Rogers Blvd. Industrial 6,500
P48 6104250 21 Mandeville Court Industrial 1,200
A43 52694 Boones Mobile Estates Manufactured Housing Community 34,200
B34 400010292 Rancho Salinas MHP Manufactured Housing Community 1,000 6,840
B35 400000269 Southgate MHP Manufactured Housing Community
B36 415010300 Halcyon MHP Manufactured Housing Community 4,400
B37 400000266 Boulevard Estates MHC Manufactured Housing Community 1,000 5,700
B38 400010320 Brentwood MHP Manufactured Housing Community 1,000 3,648
P49 6104281 Shreveport Self Storage Self-Storage 40,020
P50 6104343 ASAP Storage - Sarasota Self-Storage 10,980
P51 6104347 ASAP Storage - Kansas City Self-Storage 10,500
B39 400000180 Central Self-Storage Self-Storage 10,620
P52 6103916 Edward's Ground Lease Portfolio Land
------------------------------------------------------------------------------------------------------------------------------
$ 601,961 $ 4,824,838
CURRENT
BALANCE IN TAX AND
REPLACEMENT INSURANCE
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE RESERVES ESCROW
-----------------------------------------------------------------------------------------------------------------------------
P45 6104290 FINSA Industrial Portfolio Industrial Yes
A41 54630 Hart Marx Building Industrial 9,778 Yes
P46 6104189 Atlantic Commerce Center II Industrial 35,502 Yes
P47 6104149 Tri-Main Center Industrial Yes
B31 311000254 Jefferson Court Industrial 8,720 Yes
B32 430990096 1550 Walnut Hill Lane Industrial 3,458 Yes
A42 53625 26 Kennedy Boulevard Industrial 2,326 Yes
B33 290000244 Carter Industrial-Will Rogers Blvd. Industrial 3,792 Yes
P48 6104250 21 Mandeville Court Industrial 200 Yes
A43 52694 Boones Mobile Estates Manufactured Housing Community 17,218 Yes
B34 400010292 Rancho Salinas MHP Manufactured Housing Community 2,710 Yes
B35 400000269 Southgate MHP Manufactured Housing Community Yes
B36 415010300 Halcyon MHP Manufactured Housing Community 367 Yes
B37 400000266 Boulevard Estates MHC Manufactured Housing Community 3,862 Yes
B38 400010320 Brentwood MHP Manufactured Housing Community 1,608 Yes
P49 6104281 Shreveport Self Storage Self-Storage 10,005 Yes
P50 6104343 ASAP Storage - Sarasota Self-Storage Yes
P51 6104347 ASAP Storage - Kansas City Self-Storage Yes
B39 400000180 Central Self-Storage Self-Storage 10,691 Yes
P52 6103916 Edward's Ground Lease Portfolio Land No
-----------------------------------------------------------------------------------------------------------------------------
$ 2,024,539
INITIAL
DEPOSIT ANNUAL DEPOSIT
TO TI/LC TO TI/LC
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE ESCROW ESCROW
-----------------------------------------------------------------------------------------------------------------------------
P45 6104290 FINSA Industrial Portfolio Industrial 46,920
A41 54630 Hart Marx Building Industrial
P46 6104189 Atlantic Commerce Center II Industrial 150,000 50,004
P47 6104149 Tri-Main Center Industrial 200,000 240,000
B31 311000254 Jefferson Court Industrial 25,000 63,996
B32 430990096 1550 Walnut Hill Lane Industrial 30,000
A42 53625 26 Kennedy Boulevard Industrial
B33 290000244 Carter Industrial-Will Rogers Blvd. Industrial 13,044
P48 6104250 21 Mandeville Court Industrial 15,000
A43 52694 Boones Mobile Estates Manufactured Housing Community
B34 400010292 Rancho Salinas MHP Manufactured Housing Community
B35 400000269 Southgate MHP Manufactured Housing Community
B36 415010300 Halcyon MHP Manufactured Housing Community
B37 400000266 Boulevard Estates MHC Manufactured Housing Community
B38 400010320 Brentwood MHP Manufactured Housing Community
P49 6104281 Shreveport Self Storage Self-Storage
P50 6104343 ASAP Storage - Sarasota Self-Storage
P51 6104347 ASAP Storage - Kansas City Self-Storage
B39 400000180 Central Self-Storage Self-Storage
P52 6103916 Edward's Ground Lease Portfolio Land
-----------------------------------------------------------------------------------------------------------------------------
$ 1,443,596 $2,465,880
CURRENT
BALANCE
IN TI/LC REPORT
SEQUENCE LOAN NUMBER PROPERTY NAME PROPERTY TYPE ESCROW DATE
-----------------------------------------------------------------------------------------------------------------------------
P45 6104290 FINSA Industrial Portfolio Industrial 09/01/01
A41 54630 Hart Marx Building Industrial 09/12/01
P46 6104189 Atlantic Commerce Center II Industrial 176,326 09/01/01
P47 6104149 Tri-Main Center Industrial 200,000 09/01/01
B31 311000254 Jefferson Court Industrial 51,665 10/01/01
B32 430990096 1550 Walnut Hill Lane Industrial 28,500 10/01/01
A42 53625 26 Kennedy Boulevard Industrial 09/12/01
B33 290000244 Carter Industrial-Will Rogers Blvd. Industrial 7,609 10/01/01
P48 6104250 21 Mandeville Court Industrial 2,500 09/01/01
A43 52694 Boones Mobile Estates Manufactured Housing Community 09/12/01
B34 400010292 Rancho Salinas MHP Manufactured Housing Community 10/01/01
B35 400000269 Southgate MHP Manufactured Housing Community 10/01/01
B36 415010300 Halcyon MHP Manufactured Housing Community 10/01/01
B37 400000266 Boulevard Estates MHC Manufactured Housing Community 10/01/01
B38 400010320 Brentwood MHP Manufactured Housing Community 10/01/01
P49 6104281 Shreveport Self Storage Self-Storage 09/01/01
P50 6104343 ASAP Storage - Sarasota Self-Storage 09/01/01
P51 6104347 ASAP Storage - Kansas City Self-Storage 09/01/01
B39 400000180 Central Self-Storage Self-Storage 10/01/01
P52 6103916 Edward's Ground Lease Portfolio Land 09/01/01
-----------------------------------------------------------------------------------------------------------------------------
$ 1,986,826
* The Seaford Village Shopping Center loan requires monthly payments of $9,478
to the Rose's Leasing Reserve for the first 24 months of the term of the loan
B-4
ANNEX B
MULTIFAMILY SCHEDULE
Sequence Loan Number Property Name Cut-Off Balance Utilities Tenant Pays/Payment of Util.
-------------------------------------------------------------------------------------------------------------------------
A1 52958 Adiamo Apartments $ 21,786,023 Electric, Gas, Water
A2 54815 RCA - Royal Sahara Apartments 21,000,000 Electric
A3 53713 The Callaway House 20,387,058 None
P1 6104314 Quail Cove Apartments 16,170,436 Electric, Gas, Water, Sewer, Trash
P2 6104093 River Park Place Apartments 12,718,460 Electric
A4 53424 Lumberton Apartments 12,459,974 Electric, Gas
B1 100010286 Lakeshore Apartments 11,649,991 None
A5 54758 RCA - Riverwood Apartments 11,536,000 Electric, Heat
P3 6104044 Las Ventanas Apartments 11,469,309 Electric
A6 54817 RCA - Waterford Apartments 11,156,650 Electric
A7 55447 The Chaparral Apartments 10,856,885 Electric
P4 6104339 Chestnut Ridge Apartments 9,487,377 Electric, Water, Sewer
A8 54650 RCA - Eastchase Apartments 8,000,000 Electric
P5 6104336 Yorktown Apartments 7,493,877 Electric, Gas
A9 54698 Brandywine Apartments 6,707,257 Electric
P6 6104135 Whitfield Towne Apartments 6,479,698 None
B2 800010306 Birch Park Apartments 6,461,765 Electric, Gas
P7 6104163 Sutton House Apartments 6,284,974 Electric
A10 54492 Willow River Apartments 5,486,985 Electric
A11 54580 Kelton Street Apartments 5,289,311 Electric
A12 53443 Woodcrest Arms Apartments 5,174,380 Electric
P8 6104382 Patio Apartments 5,133,000 Electric, Gas
P9 6104341 Gatewood Apartments 4,633,695 Electric, Gas, Water, Sewer
A13 54964 Twelve Trees Apartments 4,496,238 Electric, Gas
B3 322010307 High Key Apartments 4,494,777 None
A14 53423 Longview Apartments 4,444,420 Electric
B4 415010288 Camelot Mesa Apartments 4,331,990 Electric, Gas
P10 6104335 Stoney Ridge Apartments 4,294,069 Electric
A15 53417 Greentree Village Apartments 3,887,537 Electric, Gas
A16 53430 Provincial West Apartments 3,357,256 None
A17 53432 Strathmore Gardens Apartments 3,117,640 Electric, Gas
P11 6104348 Centra Villa Apartments 3,097,053 Electric
B5 800010277 Park Center Apartments 2,937,483 Electric, Gas
B6 415010290 Beach Colony Apartments 2,892,173 Electric, Gas
A18 55400 Bristol Place Apartments 2,791,508 Electric, Gas
A19 55366 RCA Portfolio 2 - Park Plaza Apartments 2,640,000 Electric
P12 6104334 Madison Place Apartments 2,512,665 Electric
A20 54880 Bucks Crossing 2,511,980 Electric
A21 54733 652 - 658 Oakdale Apartments 2,091,002 Electric
A22 53433 Sussex House Condominium Apartments 1,987,622 Electric
B7 415000236 Corona del Sol Apartments 1,827,328 Electric, Gas
B8 415000235 La Corona Apartments 1,239,693 Electric, Gas
B9 415000234 Corona del Norte Apartments 878,523 Electric, Gas
SUB-TOTAL CROSSED LOANS 3,945,544
B10 400010314 Magnolia Trace Apartments 1,831,725 All Utilities
B11 415010297 Casa Bernardo Apartments 1,647,053 Electric, Gas, Water, Sewer, Trash
Studio 1 Bedroom 2 Bedroom 3 Bedroom
---------------------------------------------------------------
# of Avg # of Avg # of Avg # of
Sequence Loan Number Property Name Units Rent Units Rent Units Rent Units Avg Rent
-------------------------------------------------------------------------------------------------------------------------------
A1 52958 Adiamo Apartments 72 $ 803 138 $1,081 68 $1,210
A2 54815 RCA - Royal Sahara Apartments 216 590 126 665 102 700
A3 53713 The Callaway House 4 1,120 20 1,319 89 981 4 992
P1 6104314 Quail Cove Apartments 102 522 234 608 84 $ 687
P2 6104093 River Park Place Apartments 118 791 152 1,037 8 $1,258
A4 53424 Lumberton Apartments 168 620 72 818
B1 100010286 Lakeshore Apartments 8 465 184 561 210 695
A5 54758 RCA - Riverwood Apartments 128 676 100 776 22 1,075
P3 6104044 Las Ventanas Apartments 112 507 116 733 52 882
A6 54817 RCA - Waterford Apartments 187 503 121 655 22 $ 807
A7 55447 The Chaparral Apartments 15 952 60 1,085 53 1,275
P4 6104339 Chestnut Ridge Apartments 64 515 264 607 36 725
A8 54650 RCA - Eastchase Apartments 176 492 96 623
P5 6104336 Yorktown Apartments 8 350 354 416
A9 54698 Brandywine Apartments 152 553 62 660
P6 6104135 Whitfield Towne Apartments 1 $ 150 205 561 93 698 24 $ 766
B2 800010306 Birch Park Apartments 18 555 124 614 24 $ 785
P7 6104163 Sutton House Apartments 95 640 54 823
A10 54492 Willow River Apartments 150 475 150 525
A11 54580 Kelton Street Apartments 33 900 61 1,100 5 1,450
A12 53443 Woodcrest Arms Apartments 28 420 36 490 84 555
P8 6104382 Patio Apartments 76 369 152 458 12 599
P9 6104341 Gatewood Apartments 104 546 30 641
A13 54964 Twelve Trees Apartments 60 615 50 714 26 801
B3 322010307 High Key Apartments 24 335 84 405 120 522
A14 53423 Longview Apartments 30 650 60 725
B4 415010288 Camelot Mesa Apartments 12 745 52 945
P10 6104335 Stoney Ridge Apartments 54 547 54 667
A15 53417 Greentree Village Apartments 124 509
A16 53430 Provincial West Apartments 25 605 35 735 29 865
A17 53432 Strathmore Gardens Apartments 9 595 40 735 49 850
P11 6104348 Centra Villa Apartments 12 500 80 600 40 700
B5 800010277 Park Center Apartments 24 579 48 647
B6 415010290 Beach Colony Apartments 49 926
A18 55400 Bristol Place Apartments 70 535 30 650
A19 55366 RCA Portfolio 2 - Park Plaza Apartments 32 405 64 498 12 595
P12 6104334 Madison Place Apartments 72 549
A20 54880 Bucks Crossing 20 526 33 594 15 701
A21 54733 652 - 658 Oakdale Apartments 15 685 21 901 4 1,163
A22 53433 Sussex House Condominium Apartments 33 713 19 875
B7 415000236 Corona del Sol Apartments 59 653 1 900
B8 415000235 La Corona Apartments 18 525 27 625 2 900
B9 415000234 Corona del Norte Apartments 2 525 20 650 9 928
SUB-TOTAL CROSSED LOANS
B10 400010314 Magnolia Trace Apartments 46 557 10 660
B11 415010297 Casa Bernardo Apartments 24 1,200
4 Bedroom
----------------------
# of Avg
Sequence Loan Number Property Name Units Rent Elevators
--------------------------------------------------------------------------------------
A1 52958 Adiamo Apartments No
A2 54815 RCA - Royal Sahara Apartments No
A3 53713 The Callaway House 56 $908 Yes
P1 6104314 Quail Cove Apartments No
P2 6104093 River Park Place Apartments No
A4 53424 Lumberton Apartments No
B1 100010286 Lakeshore Apartments No
A5 54758 RCA - Riverwood Apartments No
P3 6104044 Las Ventanas Apartments No
A6 54817 RCA - Waterford Apartments No
A7 55447 The Chaparral Apartments No
P4 6104339 Chestnut Ridge Apartments No
A8 54650 RCA - Eastchase Apartments No
P5 6104336 Yorktown Apartments No
A9 54698 Brandywine Apartments No
P6 6104135 Whitfield Towne Apartments No
B2 800010306 Birch Park Apartments No
P7 6104163 Sutton House Apartments Yes
A10 54492 Willow River Apartments No
A11 54580 Kelton Street Apartments No
A12 53443 Woodcrest Arms Apartments No
P8 6104382 Patio Apartments No
P9 6104341 Gatewood Apartments No
A13 54964 Twelve Trees Apartments No
B3 322010307 High Key Apartments No
A14 53423 Longview Apartments No
B4 415010288 Camelot Mesa Apartments No
P10 6104335 Stoney Ridge Apartments No
A15 53417 Greentree Village Apartments No
A16 53430 Provincial West Apartments Yes
A17 53432 Strathmore Gardens Apartments No
P11 6104348 Centra Villa Apartments No
B5 800010277 Park Center Apartments No
B6 415010290 Beach Colony Apartments No
A18 55400 Bristol Place Apartments No
A19 55366 RCA Portfolio 2 - Park Plaza Apartments No
P12 6104334 Madison Place Apartments No
A20 54880 Bucks Crossing No
A21 54733 652 - 658 Oakdale Apartments No
A22 53433 Sussex House Condominium Apartments Yes
B7 415000236 Corona del Sol Apartments No
B8 415000235 La Corona Apartments No
B9 415000234 Corona del Norte Apartments No
SUB-TOTAL CROSSED LOANS
B10 400010314 Magnolia Trace Apartments No
B11 415010297 Casa Bernardo Apartments NO
B-5
ANNEX B
MULTIFAMILY SCHEDULE
STUDIO
------------
# OF AVG
SEQUENCE LOAN NUMBER PROPERTY NAME CUT-OFF BALANCE UTILITIES TENANT PAYS/PAYMENT OF UTIL. UNITS RENT
------------------------------------------------------------------------------------------------------------------------------
P13 6104247 Ballantyne Apartments 1,556,928 None
B12 400000226 Monument Place Apartments 1,535,659 Electric, Gas, Water 2 470
B13 100000256 Shawnee Place Apartments 1,520,486 Electric
A23 54058 Terrace West Apartments 1,265,060 Electric, Gas 24 361
B14 820000263 Challis Apartments 1,194,839 Electric
B15 415010295 Home Avenue Apartments 1,023,652 Electric, Gas 24 675
P14 6104232 Pinehurst Apartments 995,572 Electric
------------------------------------------------------------------------------------------------------------------------------
TOTAL MULTIFAMILY LOANS $310,225,037
1 BEDROOM 2 BEDROOM 3 BEDROOM 4 BEDROOM
----------------------------------------------------------
# OF AVG # OF AVG # OF AVG # OF AVG
SEQUENCE LOAN NUMBER PROPERTY NAME UNITS RENT UNITS RENT UNITS RENT UNITS RENT ELEVATORS
--------------------------------------------------------------------------------------------------------------------------------
P13 6104247 Ballantyne Apartments 60 372 72 515 6 $625 No
B12 400000226 Monument Place Apartments 37 590 20 772 Yes
B13 100000256 Shawnee Place Apartments 79 415 5 425 Yes
A23 54058 Terrace West Apartments 28 442 12 525 No
B14 820000263 Challis Apartments 36 772 No
B15 415010295 Home Avenue Apartments No
P14 6104232 Pinehurst Apartments 26 352 52 426 8 575 No
--------------------------------------------------------------------------------------------------------------------------------
TOTAL MULTIFAMILY LOANS
B-6
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
135 S. LaSalle Street Suite 1625 SERIES 2001-PB1 Prior Payment:
Chicago, IL 60603 Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
Administrator: Analyst:
REPORTING PACKAGE TABLE OF CONTENTS
Page(s)
------
Issue Id: REMIC Certificate Report Closing Date:
Bond Interest Reconciliation First Payment Date:
Monthly Data File Name: Cash Reconciliation Summary Assumed Final Payment Date:
15 Month Historical Loan Status Summary
15 Month Historical Payoff/Loss Summary
Historical Collateral Level Prepayment Report
Delinquent Loan Detail
Mortgage Loan Characteristics
Loan Level Detail
Specially Serviced Report
Modified Loan Detail
Realized Loss Detail
Appraisal Reduction Detail
CONTACT INFORMATION
ISSUER:
DEPOSITOR:
UNDERWRITER:
MASTER SERVICER:
SPECIAL SERVICER:
RATING AGENCY:
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
LaSalle Web Site www.etrustee.net
C-1
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT ADJUSTMENT RATE (2)
CUSIP Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Per 1,000 Next Rate (3)
---------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
==================================================================================================================================
TOTAL P&I PAYMENT 0.00
==============================
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest
equals Accrual
(3) Estimated
C-2
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
Lasalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO Acct: XX-XXXX-XX-X
BOND INTEREST RECONCILIATION
Deductions Additions
--------------------------------------------- -----------------------------------
Accrual Accrued Add. Deferred & Prior Prepay- Other Distributable
----------- Certificate Allocable Trust Accretion Interest Int. Short- ment Interest Certificate
Class Method Days Interest PPIS Expense(1) Interest Losses falls Due Penalties Proceeds(2) Interest
------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
=================================================================================================================================
Remaining
Interest Outstanding Credit Support
Payment Interest --------------------
Amount Shortfalls Original Current(3)
--------- ----------- ------------------------
0.00 0.00
=================================================================================================================================
(1) Additional Trust Expenses are fees allocated directly to the bond
resulting in a deduction to accrued interest and not carried as an
outstanding shortfall.
(2) Other Interest Proceeds include default interest, PPIE and Recoveries
of Interest.
(3) Determined as follows: (A) the ending balance of all the classes less
(B) the sum of (i) the ending balance of the class and (ii) the ending
balance of all classes which are not subordinate to the class divided
by (A).
C-3
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
Lasalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
CASH RECONCILIATION SUMMARY
INTEREST SUMMARY SERVICING FEE SUMMARY PRINCIPAL SUMMARY
Current Scheduled Interest Current Servicing Fees SCHEDULED PRINCIPAL:
Less Deferred Interest Plus Fees Advanced for PPIS Current Scheduled Principal
Plus Advance Interest Less Reduction for PPIS Advanced Scheduled Principal
Plus Unscheduled Interest Plus Unscheduled Servicing Fees Scheduled Principal Distribution
PPIS Reducing Scheduled Interest Total Servicing Fees Paid UNSCHEDULED PRINCIPAL:
Less Total Fees Paid To Servicer Curtailments
Plus Fees Advanced for PPIS PPIS SUMMARY Prepayments in Full
Less Fee Strips Paid by Servicer Liquidation Proceeds
Less Misc. Fees & Expenses Gross PPIS Repurchase Proceeds
Less Non Recoverable Advances Reduced by PPIE Other Principal Proceeds
Interest Due Trust Reduced by Shortfalls in Fees Unscheduled Principal Distribution
Less Trustee Fee Reduced by Other Amounts Remittance Principal
Less Fee Strips Paid by Trust PPIS Reducing Scheduled Interest
Less Misc. Fees Paid by Trust PPIS Reducing Servicing Fee Servicer Wire Amount
Remittance Interest PPIS Due Certificate
POOL BALANCE SUMMARY
BALANCE COUNT
Beginning Pool
Scheduled Principal Distribution
Unscheduled Principal Distribution
Deferred Interest
Liquidations
Repurchases
Ending Pool
ADVANCES
PRIOR OUTSTANDING CURRENT PERIOD RECOVERED ENDING OUTSTANDING
PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST
-----------------------------------------------------------------------------------------------------------------
C-4
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
ASSET BACKED FACTS ~ 15 MONTH HISTORICAL LOAN STATUS SUMMARY
Delinquency Aging Categories
--------------------------------------------------------------------------------------------------------
Distribution Delinq 1 Month Delinq 2 Months Delinq 3+ Months Foreclosure REO
Date ------------------------------------------------------------------------------------------
# Balance # Balance # Balance # Balance # Balance
========================================================================================================
Special Event Categories(1)
----------------------------------------------------
Modifications Specially Serviced Bankruptcy
------------- ------------------ ----------
# Balance # Balance # Balance
=======================================================
===================================================================================================================================
(1) Note: Modification, Specially Serviced & Bankruptcy Totals are Included in
the Appropriate Delinquency Aging Category
C-5
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
ASSET BACKED FACTS ~15 MONTH HISTORICAL PAYOFF/LOSS SUMMARY
<Caption>
Distribution Ending Pool (1) Payoffs (2) Penalties Appraisal Reduct. (2) Liquidations (2) Realized Losses (2)
Date
----------------------------------------------------------------------------------------------------------------------------------
# Balance # Balance # Amount # Balance # Balance # Amount
==================================================================================================================================
==================================================================================================================================
Remaining Term Curr Weighted Avg.
-----------------------------------------
Life Amort. Coupon Remit
==========================================
==========================================
(1) Percentage based on pool as of cutoff.
(2) Percentage based on pool as of beginning of period.
C-6
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
HISTORICAL COLLATERAL LEVEL PREPAYMENT REPORT
<Caption>
Disclosure Distribution Initial Payoff Penalty Prepayment Maturity Property Remaining Term Note
Control # Date Balance Code Amount Amount Date Date Type State DSCR Life Amort. Rate
====================================================================================================================================
==================================================================================================================================
CUMULATIVE 0 0
================
C-7
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
DELINQUENT LOAN DETAIL
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances(**) Advances Description (1) Transfer Date Date Date Date
===================================================================================================================================
===================================================================================================================================
A. P&I Advance - Loan in Grace Period 2. P&I Advance - Loan delinquent 2 months
B. P&I Advance - Late Payment but < one month delinq 3. P&I Advance - Loan delinquent 3 months or More
1. P&I Advance - Loan delinquent 1 month 4. Matured Balloon/Assumed Scheduled Payment
===================================================================================================================================
(**) Outstanding P&I Advances include the current period P&I Advance
C-8
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF PRINCIPAL BALANCES
Weighted Average
Current Scheduled # of Scheduled % of -------------------------
Balances Loans Balance Balance Term Coupon DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
Average Scheduled Balance
Maximum Scheduled Balance
Minimum Scheduled Balance
DISTRIBUTION OF REMAINING TERM (FULLY AMORTIZING)
Weighted Average
Fully Amortizing # of Scheduled % of -------------------------
Mortgage Loans Loans Balance Balance Term Coupon DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
Minimum Remaining Term
Maximum Remaining Term
DISTRIBUTION OF MORTGAGE INTEREST RATES
Weighted Average
Current Mortgage # of Scheduled % of -------------------------
Interest Rate Loans Balance Balance Term Coupon DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
Minimum Mortgage Interest Rate 10.0000%
Maximum Mortgage Interest Rate 10.0000%
DISTRIBUTION OF REMAINING TERM (BALLOON)
Weighted Average
Balloon # of Scheduled % of -------------------------
Mortgage Loans Loans Balance Balance Term Coupon DSCR
--------------------------------------------------------------------------------------------------
0 to 60
61 to 120
121 to 180
181 to 240
241 to 360
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
Minimum Remaining Term 0
Maximum Remaining Term 0
C-9
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF DSCR (CURRENT)
Debt Service # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
Maximum DSCR
Minimum DSCR
DISTRIBUTION OF DSCR (CUTOFF)
Debt Service # of Scheduled % of
Coverage Ratio Loans Balance Balance WAMM WAC DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
Maximum DSCR 0.00
Minimum DSCR 0.00
GEOGRAPHIC DISTRIBUTION
# of Scheduled % of
State Loans Balance Balance WAMM WAC DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0 0.00%
--------------------------------------------------------------------------------------------------
C-10
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MORTGAGE LOAN CHARACTERISTICS
DISTRIBUTION OF PROPERTY TYPES
# of Scheduled % of
Property Types Loans Balance Balance WAMM WAC DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
DISTRIBUTION OF AMORTIZATION TYPE
Current Scheduled # of Scheduled % of
Balances Loans Balance Balance WAMM WAC DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
DISTRIBUTION OF LOAN SEASONING
# of Scheduled % of
Number of Years Loans Balance Balance WAMM WAC DSCR
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
DISTRIBUTION OF YEAR LOANS MATURING
# of Scheduled % of
Year Loans Balance Balance WAMM WAC DSCR
--------------------------------------------------------------------------------------------------
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009 & Longer
--------------------------------------------------------------------------------------------------
0 0 0.00%
--------------------------------------------------------------------------------------------------
C-11
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
LOAN LEVEL DETAIL
----------------------------------------------------------------------------------------------------------------------------
Operating Ending
Disclosure Property Statement Maturity Principal Note Scheduled
Control # Grp Type State DSCR NOI Date Date Balance Rate P&I
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
W/Avg 0.00 0 0 0
----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Spec. Loan Prepayment
Disclosure Mod. Serv ASER Status --------------------------------
Control # Flag Flag Flag Code(1) Amount Penalty Date
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
0 0
--------------------------------------------------------------------------------------------------------------------------------
(*) NOI and DSCR, if available and reportable under the terms of the
Pooling and Servicing Agreement, are based on information obtained from
the related borrower, and no other party to the agreement shall be held
liable for the accuracy or methodology used to determine such figures.
(1) Legend: A. P&I Adv - in Grace Period 1. P&I Adv - delinquent 1 month 3. P&I Adv - delinquent 3+ months
B. P&I Adv - < one month delinq 2. P&I Adv - delinquent 2 months 4. Mat. Balloon/Assumed P&I
(1) Legend: A. P&I Adv - in Grace Period 5. Prepaid in Full 7. Foreclosure 9. REO 11. Modification
B. P&I Adv - < one month delinq 6. Specially Serviced 8. Bankruptcy 10. DPO
C-12
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
SPECIALLY SERVICED (PART I) ~ LOAN DETAIL
--------------------------------------------------------------------------------------------------------------------------------
Balance Remaining Term
Disclosure Transfer --------------------- Note Maturity ----------------- Property NOI
Control # Date Scheduled Actual Rate Date Life Amort. Type State NOI DSCR Date
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
C-13
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
SPECIALLY SERVICED LOAN DETAIL (PART II) ~ SERVICER COMMENTS
--------------------------------------------------------------------------------------------------------------------------------
Disclosure Resolution
Control # Strategy Comments
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
C-14
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
MODIFIED LOAN DETAIL
--------------------------------------------------------------------------------------------------------------------------------
Disclosure Modification Modification Modification
Control # Date Code Description
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
C-15
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
REALIZED LOSS DETAIL
----------------------------------------------------------------------------------------------------
Beginning Gross Proceeds Aggregate
Distribution Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation
Period Control # Date Value Balance Proceeds Sched Principal Expenses(*)
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------
----------------------------------------------------
Net Net Proceeds
Distribution Liquidation as a % of Realized
Period Proceeds Sched. Balance Loss
----------------------------------------------------
----------------------------------------------------
CURRENT TOTAL 0.00 0.00
CUMULATIVE 0.00 0.00
----------------------------------------------------
(*) Aggregate liquidation expenses also include outstanding P&I advances
and unpaid servicing fees, unpaid trustee fees, etc.
C-16
ABN AMRO BANC OF AMERICA COMMERCIAL MORTGAGE INC. Statement Date:
LaSalle Bank N.A. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Payment Date:
SERIES 2001-PB1 Prior Payment:
Next Payment:
Record Date:
ABN AMRO ACCT: XX-XXXX-XX-X
APPRAISAL REDUCTION DETAIL
----------------------------------------------------------------------------------------------------------------------------------
Remaining Term Appraisal
Disclosure Appraisal Scheduled Reduction Note Maturity ----------------- Property -------------
Control # Red. Date Balance Amount Rate Date Life Amort. Type State DSCR Value Date
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
C-17
ANNEX D
CLASS XP REFERENCE RATE SCHEDULE
<Table>
<Caption>
INTEREST INTEREST
ACCRUAL DISTRIBUTION CLASS XP ACCRUAL DISTRIBUTION CLASS XP
PERIOD DATE REFERENCE RATE PERIOD DATE REFERENCE RATE
-------- ------------ -------------- -------- ------------ --------------
1 11/11/01 7.6212% 53 3/11/06 7.3742%
2 12/11/01 7.3737% 54 4/11/06 7.6207%
3 1/11/02 7.3737% 55 5/11/06 7.3732%
4 2/11/02 7.3737% 56 6/11/06 7.6259%
5 3/11/02 7.3743% 57 7/11/06 7.3783%
6 4/11/02 7.6212% 58 8/11/06 7.6259%
7 5/11/02 7.3737% 59 9/11/06 7.6258%
8 6/11/02 7.6212% 60 10/11/06 7.3782%
9 7/11/02 7.3737% 61 11/11/06 7.6258%
10 8/11/02 7.6212% 62 12/11/06 7.3782%
11 9/11/02 7.6212% 63 1/11/07 7.3781%
12 10/11/02 7.3737% 64 2/11/07 7.3781%
13 11/11/02 7.6212% 65 3/11/07 7.3791%
14 12/11/02 7.3737% 66 4/11/07 7.6257%
15 1/11/03 7.3737% 67 5/11/07 7.3780%
16 2/11/03 7.3737% 68 6/11/07 7.6256%
17 3/11/03 7.3743% 69 7/11/07 7.3780%
18 4/11/03 7.6211% 70 8/11/07 7.6256%
19 5/11/03 7.3737% 71 9/11/07 7.6255%
20 6/11/03 7.6211% 72 10/11/07 7.3779%
21 7/11/03 7.3737% 73 11/11/07 7.6255%
22 8/11/03 7.6211% 74 12/11/07 7.3779%
23 9/11/03 7.6212% 75 1/11/08 7.6254%
24 10/11/03 7.3737% 76 2/11/08 7.3778%
25 11/11/03 7.6212% 77 3/11/08 7.3781%
26 12/11/03 7.3737% 78 4/11/08 7.6257%
27 1/11/04 7.6212% 79 5/11/08 7.3777%
28 2/11/04 7.3737% 80 6/11/08 7.6252%
29 3/11/04 7.3739% 81 7/11/08 7.3776%
30 4/11/04 7.6211% 82 8/11/08 7.6252%
31 5/11/04 7.3737% 83 9/11/08 7.6251%
32 6/11/04 7.6211% 84 10/11/08 7.3775%
33 7/11/04 7.3736% 85 11/11/08 7.6251%
34 8/11/04 7.6211% 86 12/11/08 7.3774%
35 9/11/04 7.6210% 87 1/11/09 7.3774%
36 10/11/04 7.3736% 88 2/11/09 7.3774%
37 11/11/04 7.6210% 89 3/11/09 7.3786%
38 12/11/04 7.3735% 90 4/11/09 7.6249%
39 1/11/05 7.3735% 91 5/11/09 7.3773%
40 2/11/05 7.3735% 92 6/11/09 7.6248%
41 3/11/05 7.3743% 93 7/11/09 7.3772%
42 4/11/05 7.6209% 94 8/11/09 7.6247%
43 5/11/05 7.3735% 95 9/11/09 7.6247%
44 6/11/05 7.6209% 96 10/11/09 7.3771%
45 7/11/05 7.3734% 97 11/11/09 7.6246%
46 8/11/05 7.6208% 98 12/11/09 7.3770%
47 9/11/05 7.6208% 99 1/11/10 7.3769%
48 10/11/05 7.3734% 100 2/11/10 7.3769%
49 11/11/05 7.6208% 101 3/11/10 7.3782%
50 12/11/05 7.3733% 102 4/11/10 7.6243%
51 1/11/06 7.3733% 103 5/11/10 7.3767%
52 2/11/06 7.3733% 104 6/11/10 7.6134%
</Table>
D-1
Prospectus
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
<Table>
<Caption>
CONSIDER CAREFULLY THE RISK FACTORS THE TRUST --
BEGINNING ON PAGE 10 IN THIS
PROSPECTUS. - may periodically issue mortgage pass-through
certificates in one or more series with one or more
Neither the certificates nor the classes; and
underlying mortgage loans are insured
by any governmental agency. - will own --
The certificates will represent - multifamily and commercial mortgage loans;
interests only in the related trust
only and will not represent interests - mortgage-backed securities; and
in or obligations of Banc of America
Commercial Mortgage Inc. or any of - other property described and in the accompanying
its affiliates, including Bank of prospectus supplement.
America Corporation.
THE CERTIFICATES --
This prospectus may be used to offer
and sell any series of certificates - will represent interests in the Trust and will be
only if accompanied by the prospectus paid only from the trust assets;
supplement for that series.
- provide for the accrual of interest based on a fixed,
variable or adjustable interest rate;
- may be offered through underwriters, which may
include Banc of America Securities LLC, an affiliate of
Banc of America Commercial Mortgage Inc.; and
- will not be listed on any securities exchange.
THE CERTIFICATEHOLDERS --
- will receive interest and principal payments based on
the rate of payment of principal and the timing of
receipt of payments on mortgage loans.
</Table>
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.
October 26, 2001
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:
- SEC Public Reference
Section
450 Fifth Street, N.W.
Room 1204
Washington, D.C. 20549
- 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, 100
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
<Table>
<Caption>
PAGE
----
SUMMARY OF PROSPECTUS........................... 5
RISK FACTORS.................................... 10
The Limited Liquidity of Your Certificates May
Have An Adverse Impact on Your Ability to
Sell Your Certificates..................... 10
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................. 10
Credit Support is Limited and May Not Be
Sufficient to Prevent Loss on Your
Certificates............................... 11
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.............................. 11
Certificates Purchased at a Premium or a
Discount Will Be Sensitive to the Rate of
Principal Payment.......................... 12
The Nature of Ratings Are Limited and Will Not
Guarantee that You Will Receive Any
Projected Return on Your Certificates...... 13
Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage
Loans...................................... 13
Inclusion of Delinquent Mortgage Loans in a
Mortgage Asset Pool........................ 16
PROSPECTUS SUPPLEMENT........................... 16
CAPITALIZED TERMS USED IN THIS PROSPECTUS....... 17
DESCRIPTION OF THE TRUST FUNDS.................. 18
General....................................... 18
Mortgage Loans................................ 18
MBS........................................... 22
Certificate Accounts.......................... 23
Credit Support................................ 23
Cash Flow Agreements.......................... 23
YIELD AND MATURITY CONSIDERATIONS............... 23
General....................................... 23
Pass-Through Rate............................. 23
Payment Delays................................ 24
Certain Shortfalls in Collections of
Interest................................... 24
Yield and Prepayment Considerations........... 24
Weighted Average Life and Maturity............ 26
Other Factors Affecting Yield, Weighted
Average
Life and Maturity.......................... 26
THE DEPOSITOR................................... 28
DESCRIPTION OF THE CERTIFICATES................. 28
General....................................... 28
Distributions................................. 29
Distributions of Interest on the
Certificates............................... 30
Distributions of Principal of the
Certificates............................... 31
Distributions on the Certificates Concerning
Prepayment Premiums or Concerning Equity
Participations............................. 31
</Table>
2
<Table>
<Caption>
PAGE
----
Allocation of Losses and Shortfalls........... 31
Advances in Respect of Delinquencies.......... 32
Reports to Certificateholders................. 32
Voting Rights................................. 34
Termination................................... 34
Book-Entry Registration and Definitive
Certificates............................... 34
THE POOLING AND SERVICING AGREEMENTS............ 36
General....................................... 36
Assignment of Mortgage Loans; Repurchases..... 36
Representations and Warranties; Repurchases... 38
Collection and Other Servicing Procedures..... 38
Sub-Servicers................................. 40
Certificate Account........................... 41
Modifications, Waivers and Amendments of
Mortgage Loans............................. 43
Realization Upon Defaulted Mortgage Loans..... 43
Hazard Insurance Policies..................... 45
Due-on-Sale and Due-on-Encumbrance
Provisions................................. 46
Servicing Compensation and Payment of
Expenses................................... 46
Evidence as to Compliance..................... 47
Certain Matters Regarding the Master Servicer,
the Special Servicer, the REMIC
Administrator and
the Depositor.............................. 47
Events of Default............................. 49
Rights Upon Event of Default.................. 49
Amendment..................................... 50
List of Certificateholders.................... 51
The Trustee................................... 51
Duties of the Trustee......................... 51
Certain Matters Regarding the Trustee......... 52
Resignation and Removal of the Trustee........ 52
DESCRIPTION OF CREDIT SUPPORT................... 52
General....................................... 52
Subordinate Certificates...................... 53
Insurance or Guarantees Concerning to Mortgage
Loans...................................... 53
Letter of Credit.............................. 53
Certificate Insurance and Surety Bonds........ 54
Reserve Funds................................. 54
Cash Collateral Account....................... 54
Credit Support with respect to MBS............ 54
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS......... 55
General....................................... 55
Types of Mortgage Instruments................. 55
Leases and Rents.............................. 55
Personalty.................................... 56
Foreclosure................................... 56
Bankruptcy Laws............................... 59
Environmental Considerations.................. 60
Due-on-Sale and Due-on-Encumbrance
Provisions................................. 62
</Table>
3
<Table>
<Caption>
PAGE
----
Junior Liens; Rights of Holders of Senior
Liens...................................... 62
Subordinate Financing......................... 64
Default Interest and Limitations on
Prepayments................................ 64
Applicability of Usury Laws................... 64
Certain Laws and Regulations.................. 65
Americans with Disabilities Act............... 65
Soldiers' and Sailors' Civil Relief Act of
1940....................................... 65
Forfeitures in Drug and RICO Proceedings...... 65
CERTAIN FEDERAL INCOME TAX CONSEQUENCES......... 66
General....................................... 66
REMICs........................................ 67
Grantor Trust Funds........................... 83
STATE AND OTHER TAX CONSEQUENCES................ 91
CERTAIN ERISA CONSIDERATIONS.................... 91
General....................................... 91
Plan Asset Regulations........................ 92
Insurance Company General Accounts............ 92
Consultation With Counsel..................... 93
Tax Exempt Investors.......................... 93
LEGAL INVESTMENT................................ 93
USE OF PROCEEDS................................. 95
METHOD OF DISTRIBUTION.......................... 95
LEGAL MATTERS................................... 96
FINANCIAL INFORMATION........................... 96
RATING.......................................... 96
AVAILABLE INFORMATION........................... 97
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE.................................. 98
GLOSSARY........................................ 98
</Table>
4
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 Bank
of America Corporate Center, 100 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 --
- 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
- 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.
5
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 --
- 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;
- 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;
- be fully amortizing or may be partially amortizing or nonamortizing, with a
balloon payment due on its stated maturity date;
- 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
- provide for payments of principal, interest or both, on due dates that occur
monthly, quarterly, semi-annually or at such 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 --
- are senior or subordinate to one or more other classes of certificates in
entitlement to certain distributions on the certificates;
- are "stripped principal certificates" entitled to distributions of principal,
with disproportionate, nominal or no distributions of interest;
6
- are "stripped interest certificates" entitled to distributions of interest,
with disproportionate, nominal or no distributions of principal;
- 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;
- 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;
- provide for distributions of principal to be made, subject to available funds,
based on a specified principal payment schedule or other methodology; or
- 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 such
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 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 such
date, whether or not received. As described in the prospectus supplement,
distributions
7
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 such series
then entitled 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) 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;
- 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;
- may be made, subject to certain limitations, based on a specified principal
payment schedule; or
- 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 such 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) of such series, 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 --
- 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
- 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 such
advances may be entitled to receive interest for a specified period during which
certain or all of such 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 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 such assets to retire such class or
classes.
8
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The certificates of each series will constitute or evidence ownership of
either --
- "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
- 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
The certificates will constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984, as amended, only if
specified in the prospectus supplement. Investors whose investment authority is
subject to legal restrictions should consult their legal advisors to determine
whether and to what extent the certificates constitute legal investments for
them.
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.
9
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
such 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 --
- perceived liquidity;
- the anticipated cash flow (which may vary widely depending upon the
prepayment and default assumptions concerning the underlying mortgage
loans); and
- 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 such 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
such 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 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.
10
Certain amounts on deposit from time to time in certain funds or accounts
constituting part of the trust, including the certificate account and any
accounts maintained as credit support, may be withdrawn under certain
conditions, for purposes other than the payment of principal of or interest on
the related series of certificates. On any distribution occurring after losses
or shortfalls in collections on the mortgage assets have been incurred, all or a
portion of the amount of losses or shortfalls in collections on the mortgage
assets 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. Such 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 such 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 such series has 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 such credit
support, it is possible that the holders of certificates of one (or more) such
series such credit support will disproportionately benefit, to the detriment of
the holders of certificates of one (or more) other such 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 such
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 such mortgage loans are likely
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 such 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 such rate of prepayment will
conform to any model in any prospectus supplement. As a result, depending on
11
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 such 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 such 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 such 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 such series) or subject to certain
contingencies (e.g., prepayment and default rates with respect to such 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 such 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 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.
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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 --
- principal prepayments on the related mortgage loans will be made;
- the degree to which the rate of such prepayments might differ from that
originally anticipated; or
- 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 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
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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.
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 --
- such borrower was insolvent at the time the cross-collateralized mortgage
loans were made; and
- 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.
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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 --
- the value of the related property;
- the level of available mortgage rates at the time of sale or refinancing;
- the borrower's equity in the related property;
- the financial condition and operating history of the borrower and the
related property;
- tax laws;
- rent control laws (pertaining to certain residential properties);
- Medicaid and Medicare reimbursement rates (pertaining to hospitals and
nursing homes);
- prevailing general economic conditions; and
- 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 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
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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.
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 --
- 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);
- information with respect to any other classes of certificates of the same
series;
- the respective dates on which distributions are to be made;
- information as to the assets, including the mortgage assets, constituting
the related trust fund;
16
- the circumstances, if any, under which the related trust fund may be
subject to early termination;
- additional information with respect to the method of distribution of such
offered certificates;
- 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;
- the initial percentage ownership interest in the related trust fund to be
evidenced by each class of certificates of such series;
- information concerning the trustee of the related trust fund;
- 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;
- information as to the nature and extent of subordination of any class of
certificates of such series, including a class of offered certificates;
and
- 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.
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DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust fund will consist of mortgage assets which
will include --
- various types of multifamily or commercial mortgage loans;
- 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
- 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 --
- 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
- 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
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
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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 --
- the risk of delay in distributions while a deficiency judgment against
the borrower is obtained; and
- 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
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
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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 --
- 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);
- the income capitalization method (a projection of value based upon the
property's projected net cash flow),
- 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 such
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 --
- 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;
- 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;
- may be fully amortizing or may be partially amortizing or nonamortizing,
with a balloon payment due on its stated maturity date;
- 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.
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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:
- the aggregate outstanding principal balance and the largest, smallest and
average outstanding principal balance of the mortgage loans;
- the type or types of property that provide security for repayment of the
mortgage loans;
- the earliest and latest origination date and maturity date of the
mortgage loans;
- 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;
- 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;
- 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;
- 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;
- information regarding the payment characteristics of the mortgage loans,
including, without limitation, balloon payment and other amortization
provisions, Lock-out Periods and Prepayment Premiums,
- 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
- 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.
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
21
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.
The prospectus supplement for a series of certificates that evidence
interests in MBS will specify, to the extent available --
- the aggregate approximate initial and outstanding principal amount(s) and
type of the MBS to be included in the trust fund;
- the original and remaining term(s) to stated maturity of the MBS, if
applicable;
- the pass-through or bond rate(s) of the MBS or the formula for
determining such rate(s);
- the payment characteristics of the MBS;
- the issuer of the MBS, Servicer of the MBS and trustee of the MBS, as
applicable, of each of the MBS;
- a description of the related credit support, if any;
- the circumstances under which the related underlying mortgage loans, or
the MBS themselves, may be purchased prior to their maturity;
- the terms on which mortgage loans may be substituted for those originally
underlying the MBS;
22
- 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
- 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.
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.
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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 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
24
consequent adverse effects on such investor's yield would not be fully offset by
a subsequent like increase (or decrease) in the rate of principal payments.
In general, the notional amount of a class of Stripped Interest
Certificates will either --
- be based on the principal balances of some or all of the mortgage assets
in the related trust fund; or
- 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 --
- the availability of mortgage credit, the relative economic vitality of
the area in which the mortgaged properties are located;
- the quality of management of the mortgaged properties;
- the servicing of the mortgage loans;
- 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 therewith,
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
25
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 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
26
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 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 --
- limits the amount by which its scheduled payment may adjust in response
to a change in its Mortgage Rate;
- provides that its scheduled payment will adjust less frequently than its
Mortgage Rate; or
- 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.
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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 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 --
- amounts attributable to interest accrued but not currently distributable
on one or more classes of Accrual Certificates;
- Excess Funds; or
- 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 Bank of America Corporate Center,
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:
- provide for the accrual of interest on the Certificate Balance or
Notional Amount at a fixed, variable or adjustable rate;
28
- constitute Senior Certificates or Subordinate Certificates;
- constitute Stripped Interest Certificates or Stripped Principal
Certificates;
- 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;
- 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;
- provide for distributions of principal to be made, subject to available
funds, based on a specified principal payment schedule or other
methodology; or
- 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 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 therewith. 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. In general, the Distribution Date for a
series of certificates will be the 15th day of each month (or, if any such 15th
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
thereby unless otherwise specified in the related prospectus supplement.
Payments will be made either
29
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 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".
30
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 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".
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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 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 statement 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:
- the amount of such distribution to holders of such class of offered
certificates that was applied to reduce the Certificate Balance of such
class;
- the amount of such distribution to holders of such class of offered
certificates that was applied to pay Accrued Certificate Interest;
32
- 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;
- the amount, if any, by which such distribution is less than the amounts
to which holders of such class of offered certificates are entitled;
- if the related trust fund includes mortgage loans, the aggregate amount
of advances included in such distribution;
- 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;
- information regarding the aggregate principal balance of the related
mortgage assets on or about such Distribution Date;
- if the related trust fund includes mortgage loans, information regarding
the number and aggregate principal balance of such mortgage loans that
are delinquent;
- 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);
- 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;
- 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;
- 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;
- 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
- 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.
33
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
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.
34
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, at its option, elects to
terminate the book-entry system through DTC with respect to such certificates.
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
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.
35
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 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
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(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.
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
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.
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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 --
- 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;
- the enforceability of the related mortgage note and mortgage and the
existence of title insurance insuring the lien priority of the related
mortgage;
- the Warranting Party's title to the mortgage loan and the authority of
the Warranting Party to sell the mortgage loan; and
- 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
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.
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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 --
- mortgage loans that are delinquent in respect of a specified number of
scheduled payments;
- 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 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
- 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
39
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.
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 thereby, 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 serviced thereby 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.
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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 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 --
- all payments on account of principal, including principal prepayments, on
the mortgage loans;
- 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;
- 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;
- any amounts paid under any instrument or drawn from any fund that
constitutes credit support for the related series of certificates;
- any advances made with respect to delinquent scheduled payments of
principal and interest on the mortgage loans;
- any amounts paid under any cash flow agreement;
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- 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";
- 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;
- 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";
- 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
- 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 --
- to make distributions to the certificateholders on each Distribution
Date;
- to pay the master servicer or the special servicer any servicing fees not
previously retained thereby, 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;
- 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 mortgage loans in the
trust fund and properties acquired in respect of the trust fund, such
reimbursement to be made out of amounts that represent late payments
collected on the particular mortgage loans, Liquidation Proceeds and
Insurance and Condemnation Proceeds collected on the particular mortgage
loans and properties, and net income collected on the particular
properties, with respect to which such advances were made or such
expenses were incurred or out of amounts drawn under any form of credit
support with respect to such mortgage loans and properties, or if in the
judgment of the master servicer, the special servicer or such other
person, as applicable, such advances and/or expenses will not be
recoverable from such amounts, such reimbursement to 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;
- 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;
- 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";
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- 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";
- 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;
- if and to the extent described in the related prospectus supplement, to
reimburse prior draws on any form of credit support;
- 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;
- to pay any servicing expenses not otherwise required to be advanced by
the master servicer, the special servicer or any other specified person;
- 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";
- to pay for the cost of various opinions of counsel obtained pursuant to
the related Pooling and Servicing Agreement for the benefit of
certificateholders;
- to make any other withdrawals permitted by the related Pooling and
Servicing Agreement and described in the related prospectus supplement;
and
- 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 --
- not affect the amount or timing of any scheduled payments of principal or
interest on the mortgage loan;
- 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
- 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, --
- a material default on the mortgage loan has occurred or a payment default
is reasonably foreseeable or imminent;
- 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
- 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
43
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 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-collaterized
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 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
44
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 thereby) 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 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
45
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 --
- a specified portion of the interest payments on each mortgage loan in the
related trust fund, whether or not serviced by it;
- an additional specified portion of the interest payments on each mortgage
loan then currently serviced by it; and
- 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.
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
46
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 thereby 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.
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
47
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.
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.
48
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 --
- 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;
- 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;
- 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;
- 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;
- 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
- 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.
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 depositor or 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
49
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 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
50
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
thereby evidencing, in each case, not less than 66 2/3% (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' 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.
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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 33 1/3% (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.
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.
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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 --
- the nature and amount of coverage under such credit support;
- any conditions to payment under the credit support not otherwise
described in this prospectus;
- 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
- 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.
INSURANCE OR GUARANTEES CONCERNING TO 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.
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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 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.
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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 thereby, 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.
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
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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.
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
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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 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
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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 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.
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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 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.
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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. 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
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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 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,
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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 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
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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 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.
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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 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.
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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 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.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
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), may not be charged interest (including fees and charges) above
an annual rate of 6% during the period of such borrower's active duty status,
unless a court 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 assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act 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 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, the Relief Act 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.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the RICO statute can be seized
by the government if the property was used in, or purchased with the proceeds
of, such crimes. Under procedures contained in the comprehensive Crime Control
Act of 1984, the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property", including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (1) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (2) the lender was,
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at the time of execution of the mortgage, "reasonably without cause to believe"
that the property was used in, or purchased with the proceeds of, illegal drug
or RICO activities.
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, 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.
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.
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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, 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
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)(4)(A) 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)(4)(A) 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
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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)(4)(A) 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.
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
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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 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
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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 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
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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 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
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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
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.
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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 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.
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
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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 therein, 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
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
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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 therein 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. 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.
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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.
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 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
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satisfy the accrued taxes. 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 each party to a transfer to provide
an affidavit that no purpose of such transfer is to impede the assessment or
collection of tax, including certain representations as to the financial
condition of the prospective transferee, as to which the transferor is also
required to make a reasonable investigation to determine such transferee's
historic payment of its debts and ability to continue to pay its debts as they
come due in the future.
In addition to the transferor's investigation of the transferee's financial
condition and the transferee's affidavit, a third requirement has been added
that must be satisfied in one of two alternative ways for the transferor to have
a "safe harbor" against ignoring the transfer. First, proposed Treasury
Regulations, would require that 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
(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%). Further, present
values generally are computed using a discount rate equal to the applicable
Federal rate set forth in Section 1274(d) of the Code, compounded semiannually.
However, a lower rate may be used if the transferee can demonstrate that it
regularly borrows, in the course of its trade or business, substantial funds at
such lower rate from unrelated third parties.
The second alternative appears in Revenue Procedure 2001-12, issued by the
IRS. The revenue procedure restates the minimum transfer price alternative
described in the proposed Treasury regulations discussed above and adds an
"eligible transferee" test as the second alternative test for meeting the safe
harbor. To meet the second alternative, (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 residual interest
only to a subsequent transferee that is an eligible corporation and meets the
requirements for a safe harbor transfer under the Revenue Procedure; 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 residual interest will not be paid by the transferee. The eligible
transferee test, as well as the minimum transfer price test, are effective
retroactive to February 4, 2000 and apply unless and until changed by final
regulations.
Prior to purchasing a REMIC Residual Certificate, prospective purchasers
should consider the applicability and effect of the proposed regulations and
revenue procedure mentioned above and should consider the possibility that a
purported transfer of such REMIC Residual Certificate by such a purchaser to
another purchaser at some future date may be disregarded in accordance with the
above-described rules which would result in the retention of tax liability by
such purchaser.
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.
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Mark-to-Market Rules. On January 4, 1995, the IRS issued final
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, any REMIC Residual
Certificate acquired on or after January 4, 1995 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. 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.
78
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 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
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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.
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.
For taxable years beginning on or after January 1, 1998, 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
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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.
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
81
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.
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 30.5% (which rate will be reduced periodically to 28%
beginning in 2006) 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. The New Regulations,
as described below, will change certain of the rules relating to certain
presumptions currently available relating to information reporting and backup
withholding. Non-U.S. Persons 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.
The Treasury Department has issued regulations which provide new methods of
satisfying the beneficial ownership certification requirement described above,
including a new series of forms. These regulations became effective January 1,
2001. 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.
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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 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)(4)(A) 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)(4)(A) 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.
83
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 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
84
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 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
85
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). 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
86
the mortgage loans held in the related trust fund, approximately in proportion
to the ratio such excess bears to such 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.
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
87
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 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.
88
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.
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
89
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.
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
90
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.
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.
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,
however, 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.
91
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 therein. 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 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, 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
92
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.
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 therewith.
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, the offered
certificates will constitute "mortgage related securities" for purposes of
SMMEA. The appropriate characterization of those offered certificates not
qualifying as "mortgage related securities" under various legal investment
restrictions, and thus the ability of investors subject to these restrictions to
purchase those types of offered certificates, may be subject to significant
interpretive uncertainties. Accordingly, investors whose investment authority is
subject to legal investment laws and regulations, regulatory capital
requirements, or review by regulatory authorities should consult their own legal
advisors to determine whether and to what extent the classes of offered
certificates not constituting mortgage related securities constitute legal
investments for them.
Generally, only classes of offered certificates that (1) are rated in one
of the two highest rating categories by any 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, will be "mortgage related
securities" for purposes of SMMEA. 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 and pension
funds, created pursuant to or existing under the laws of the United States or of
any state,
93
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 thereof 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.
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.
sec. 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. sec. 1.5 concerning "safety and soundness" and retention of credit
information), certain "Type IV securities," defined in 12 C.F.R. sec. 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 class of 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" under certain limited circumstances, other than
stripped mortgage related securities, residual interests in mortgage related
securities, and commercial mortgage related securities, unless the credit union
has obtained written approval from the NCUA to participate in the "investment
pilot program" described in 12 C.F.R. sec. 703.140. The OTS has issued Thrift
Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment
Securities, and Derivatives Activities," 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.
Institutions 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
94
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.
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
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 such 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
95
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 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 and the underwriter or underwriters by Cadwalader, Wickersham &
Taft. Certain federal income tax matters and other matters will be passed upon
for the depositor by Cadwalader, Wickersham & Taft.
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.
96
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 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; and Northeast Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048. 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
97
the staff of the Securities and Exchange Commission that the 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 therein. 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 the Bank of America Corporate Center, Charlotte, North
Carolina 28255, or by telephone at (704) 386-2400.
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
98
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.
"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 --
- the Net Operating Income derived from the related mortgaged property for
a twelve-month period to
- 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).
99
"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 --
- 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
- 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.
"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.
"Lock-out Period" means the period in which prepayments are prohibited
under a mortgage loan.
"Loan-to-Value Ratio" means for a mortgage loan the ratio (expressed as a
percentage) of --
- the then outstanding principal balance of the mortgage loan and any other
loans senior that are secured by the related mortgaged property to
100
- 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.
"MBS" means mortgage participations, pass-through certificates or other
mortgage-backed securities that may comprise the assets of the trust fund.
"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 --
- noncash items such as depreciation and amortization;
- capital expenditures; and
- 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 --
- based on the principal balances of some or all of the mortgage assets in
the related trust fund; or
- 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 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 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" mean Section 2510.3-101 of the regulations issued
by the DOL.
101
"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.
"Record Date" means last business day of the month preceding the month in
which the applicable Distribution Date occurs.
"Relief Act" means the Soldiers' and Sailors' Relief Act of 1940, as
amended.
"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;
102
"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 --
- a citizen or resident of the United States;
- 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;
- an estate whose income is subject to United States federal income tax
purposes regardless of the source of its income; or
- 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
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.
103
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 "BACM2001_PB1.xls" The
file "BACM2001_PB1.xls" is a Microsoft Excel(1), Version 5.0 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.
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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
FEBRUARY 4, 2002.
------------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
Table of Contents............................ S-1
Important Notice About Information Presented
in this Prospectus Supplement and the
Accompanying Prospectus.................... S-4
Executive Summary............................ S-5
Summary of Prospectus Supplement............. S-8
Risk Factors................................. S-19
Description of the Mortgage Pool............. S-54
Servicing of the Mortgage Loans.............. S-75
Description of the Certificates.............. S-90
The Trustee and the Fiscal Agent............. S-114
Description of the Swap Contract............. S-115
Yield and Maturity Considerations............ S-118
Use of Proceeds.............................. S-126
Certain Federal Income Tax Consequences...... S-126
Certain ERISA Considerations................. S-129
Legal Investment............................. S-132
Method of Distribution....................... S-132
Legal Matters................................ S-133
Ratings...................................... S-133
Index of Principal Definitions............... S-135
Annex A...................................... A-1
Annex B...................................... B-1
Annex C...................................... C-1
Annex D...................................... D-1
PROSPECTUS
Summary of Prospectus........................ 5
Risk Factors................................. 10
Prospectus Supplement........................ 16
Capitalized Terms Used in This Prospectus
Supplement................................. 17
Description of the Trust Funds............... 18
Yield and Maturity Considerations............ 23
The Depositor................................ 28
Description of the Certificates.............. 28
The Pooling and Servicing Agreements......... 36
Description of Credit Support................ 52
Certain Legal Aspects of Mortgage Loans...... 55
Certain Federal Income Tax Consequences...... 66
State and Other Tax Consequences............. 91
Certain ERISA Considerations................. 91
Legal Investment............................. 93
Use of Proceeds.............................. 95
Method of Distribution....................... 95
Legal Matters................................ 96
Financial Information........................ 96
Rating....................................... 96
Available Information........................ 97
Incorporation of Certain Information by
Reference.................................. 98
Glossary..................................... 98
</Table>
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$820,997,809
(APPROXIMATE)
BANC OF AMERICA
COMMERCIAL MORTGAGE INC.
DEPOSITOR
CLASS A-1, CLASS A-2, CLASS A-2F,
CLASS B, CLASS C, CLASS D,
CLASS E AND CLASS F
BANC OF AMERICA
COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 2001-PB1
-----------------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------------
BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
October 26, 2001
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