Exhibit 99.1
FORM OF
PROSPECTUS SUPPLEMENT
$___________ (APPROXIMATE)
DEUTSCHE FINANCIAL CAPITAL SECURITIZATION LLC, SELLER
MANUFACTURED HOUSING CONTRACT
SENIOR/SUBORDINATED PASS-THROUGH CERTIFICATES, SERIES 19__-X
(OAKWOOD ACCEPTANCE CORPORATION, SERVICER)
--------------------------
The Senior/Subordinated Pass-Through Certificates, Series 19__-X (the
"Certificates") will represent interests in a pool (the "Contract Pool" or the
"Asset Pool") of fixed-rate manufactured housing installment sales contracts
(the "Contracts") and certain related property (the "Trust Estate"). The
Contracts were originated or purchased by Deutsche Financial Capital Limited
Liability Company ("DFC") in the ordinary course of DFC's business and will be
conveyed by DFC to Deutsche Financial Capital Securitization LLC (the
"Company"). The Company will convey the Trust Estate to DFCS Trust 19__-X (the
"Trust") pursuant to the Pooling and Servicing Agreement referred to herein.
Oakwood Acceptance Corporation will serve as servicer of the Contracts (together
with any successor servicer, herein referred to as the "Servicer").
The Certificates will consist of the Class A-1 and Class A-2
Certificates (collectively, the "Senior Certificates") and the Class A-3, Class
B-1, Class B-2 and Class R Certificates (collectively, the "Subordinated
Certificates"). Only the Senior Certificates and the Class A-3 Certificates
(collectively, the "Class A Certificates"), and the Class B-1 Certificates are
being offered hereby (collectively, the "Offered Certificates").
Distributions of principal of and interest on the Certificates will be
distributed to Certificateholders on the 15th day of each month (or if the 15th
day is not a business day, the next business day) (each, a "Distribution Date"),
beginning in ____________, ____. Unlike standard corporate bonds, the timing and
amount of principal distributions on the Certificates are not fixed and will be
determined by the timing and amount of principal payments on the Contracts.
Contract prepayment rates are likely to fluctuate significantly from time to
time.
Elections will be made to treat certain assets of the Trust as two
separate real estate mortgage investment conduits (each, a "REMIC") under the
Internal Revenue Code of 1986, as amended (the "Code"). The Class A-1, Class A-2
and Class A-3 Certificates (collectively, the "Class A Certificates"), the Class
B-1 and Class B-2 Certificates (collectively, the "Class B Certificates") will
represent "regular interests" in one of such REMICs. The Class R Certificates
will represent beneficial ownership of the "residual interest" in each of such
REMICs. See "Certain Federal Income Tax Consequences - REMIC Certificates" in
the Prospectus.
FOR A DISCUSSION OF CERTAIN SIGNIFICANT MATTERS AFFECTING INVESTMENTS
IN THE OFFERED CERTIFICATES, SEE "RISK FACTORS" HEREIN AT PAGE S-___ AND IN THE
PROSPECTUS AT PAGE ____.
(COVER CONTINUED ON NEXT PAGE)
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
========================================================================================================================
Initial Price To Underwriting Proceeds to
Principal Amount Public (1) Discount Company (1)(2)
- -------------------------------------------------------------------------------------------------------------------------
Class A-1... $ % % %
- -------------------------------------------------------------------------------------------------------------------------
Class A-2... $ % % %
- -------------------------------------------------------------------------------------------------------------------------
Class A-3... $ % % %
- -------------------------------------------------------------------------------------------------------------------------
Class B-1... $ % % %
=========================================================================================================================
(1) Per Certificate, plus accrued interest, if any, at the applicable
Pass-Through Rate from the Closing Date, with respect to the Class A-1
Certificates, and from ___________ 1, 19___, with respect to all other
Classes of Offered Certificates.
(2) Before deducting expenses payable by the Company, estimated to be
$___,___.
----------------------------
The Offered Certificates will be offered by the Underwriter specified
below (the "Underwriter"), subject to prior sale, when, as and if delivered to
and accepted by the Underwriter and subject to their right to reject orders in
whole or in part. [It is expected that delivery of the Offered Certificates will
be made in book-entry form only through the Same Day Funds Settlement system of
The Depository Trust Company on or about ________, ____.] [It is expected that
the Offered Certificates will be delivered in certificated, fully-registered
form at the offices of the Underwriter, New York, New York, on or about
__________, 19__.]
----------------------------
[Insert Name of Underwriter of the Offered Certificates]
----------------------------
The date of this Prospectus Supplement is ____________, ____.
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As further described herein, the Subordinated Certificates are
subordinated to the Senior Certificates; the Class B-1, Class B-2 and Class R
Certificates are subordinated to the Class A Certificates; the Class B-2 and
Class R Certificates are subordinated to the Class B-1 Certificates; and the
Class R Certificates are subordinated to the Class B-2 Certificates. This
subordination will be accomplished by the preferential application of the
Available Distribution to the more senior Classes of Certificates as against the
Classes that are subordinated to such senior Classes and by the allocation of
Writedown Amounts to the more subordinated Classes of Certificates. See
"Description of the Offered Certificates - Distributions - Priority of
Distributions" and "Description of the Offered Certificates - Allocation of
Writedown Amounts" herein.
[The Class B-2 Certificateholders will have the benefit of a limited
guarantee (the "Limited Guarantee") provided by Oakwood Homes Corporation
("Oakwood Homes"), an affiliate of the Company, of certain distributions of the
Class B-2 Certificates. The Limited Guarantee will not be available to support
other Classes of Certificates.
See "Description of the Offered Certificates - The Limited Guarantee" herein.]
The Underwriter intends to make a secondary market in the Offered
Certificates but has no obligation to do so. There can be no assurance that a
secondary market for the Offered Certificates will develop, or if it does
develop, that it will continue to exist or provide sufficient liquidity.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
OFFERED CERTIFICATES. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING"
HEREIN.
NEITHER THE CERTIFICATES NOR THE ASSETS WILL BE INSURED OR GUARANTEED
BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY, BY THE COMPANY, BY THE
UNDERWRITER OR ANY OF ITS AFFILIATES OR BY THE SERVICER OR ANY OF ITS
AFFILIATES[, EXCEPT AS PROVIDED HEREIN]. THE CERTIFICATES DO NOT REPRESENT AN
OBLIGATION OF OR INTEREST IN THE COMPANY, OAKWOOD ACCEPTANCE CORPORATION OR ANY
PERSON OTHER THAN THE TRUST. DISTRIBUTIONS ON THE CERTIFICATES WILL BE PAYABLE
SOLELY FROM THE ASSETS TRANSFERRED TO THE TRUST FOR THE BENEFIT OF THE
CERTIFICATEHOLDERS [INCLUDING, WITH RESPECT TO THE CLASS B-2 CERTIFICATES, THE
LIMITED GUARANTEE].
Until the expiration of ninety days after the date of this Prospectus
Supplement, all dealers effecting transactions in the Offered Certificates,
whether or not participating in this distribution, may be required to deliver a
Prospectus Supplement and the Prospectus. This is in addition to the obligation
of dealers to deliver a Prospectus Supplement and Prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
----------------------------
The Certificates offered by this Prospectus Supplement will be part of
a separate Series of Pass-Through Certificates being offered by the Company from
time to time pursuant to its Prospectus dated __________, 19__, of which this
Prospectus Supplement is a part and which accompanies this Prospectus
Supplement. The Prospectus contains important information about the offering of
the Offered Certificates that is not contained herein, and prospective investors
are urged to read both this Prospectus Supplement and the Prospectus in full.
Sales of the Offered Certificates may not be consummated unless the purchaser
has received both this Prospectus Supplement and the Prospectus.
The Company may sell from time to time under this Prospectus Supplement
and the Prospectus and other related prospectus supplements up to $500,000,000
in aggregate principal amount of Pass-Through Certificates, issuable in Series.
As of the date of this Prospectus Supplement, the Seller has publicly sold or
committed to sell $___________ in aggregate principal amount of Pass-Through
Certificates, including the Offered Certificates.
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----------------------
[The Company has filed with the Commission certain materials relating
to the Assets and the Certificates on Form 8-K. Such materials have been
prepared by the Underwriter for certain prospective investors, and the
information included in such materials is subject to, and superseded by, the
information set forth in this Prospectus Supplement.]
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SUMMARY OF TERMS
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN THE
ATTACHED PROSPECTUS, DATED _________, ____ (THE "PROSPECTUS"). WHENEVER
REFERENCE IS MADE HEREIN TO A PERCENTAGE OF THE ASSETS OR A WEIGHTED AVERAGE
STATISTIC RELATING TO THE ASSETS, THE PERCENTAGE OR WEIGHTED AVERAGE STATISTIC
IS CALCULATED BASED ON THE SCHEDULED PRINCIPAL BALANCES OF THE ASSETS AS OF THE
CUT-OFF DATE (AS DEFINED BELOW). CAPITALIZED TERMS USED AND NOT OTHERWISE
DEFINED HEREIN HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN THE GLOSSARY IN
THE PROSPECTUS OR ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT.
TITLE OF SERIES...................................... Senior/Subordinated Pass-Through Certificates, Series
19__-X (the "Certificates"). The Certificates will evidence
in the aggregate the entire beneficial ownership interest in
a trust (the "Trust") established by the Company. The
Trust will consist primarily of manufactured housing
installment sales contracts (the "Contracts") and residential
mortgage loans (the "Mortgage Loans" and, together with
the Contracts, the "Assets") with an aggregate principal
balance of approximately $__________ as of the Cut-off
Date, subject to a permitted variance of plus or minus 5%.
CLASS DESIGNATIONS
SENIOR CERTIFICATES............................. Class A-1 and Class A-2 Certificates.
CLASS A CERTIFICATES............................ Class A-1, Class A-2 and Class A-3 Certificates.
CLASS B CERTIFICATES............................ Class B-1 and Class B-2 Certificates.
SUBORDINATED CERTIFICATES....................... Class A-3, Class B-1, Class B-2 and Class R Certificates.
OFFERED CERTIFICATES............................ Class A-1, Class A-2, Class A-3 and Class B-1 Certificates.
OFFERED CERTIFICATES................................. TITLE OF APPROXIMATE INITIAL
CLASS PRINCIPAL AMOUNT
A-1 $__________
A-2 $__________
A-3 $__________
B-1 $__________
OTHER CERTIFICATES................................... TITLE OF APPROXIMATE INITIAL
CLASS PRINCIPAL AMOUNT
B-2 $__________
R (1)
.................................................... ---------------------
.................................................... (1) The Class R Certificates will have no Certificate Principal Balance.
..................................................... The Class B-2 and Class R Certificates are not being
offered hereby. The Class B-2 and Class R Certificates are
expected to be sold initially to an affiliate of [the
Underwriter] [the Company], which may offer such
Certificates in the future in one or more privately negotiated
transactions. The Pass-Through Rate for the Class B-2
Certificates on any Distribution Date will be equal to the
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lesser of (1) ___% per
annum or (2) the
Weighted Average Net
Contract Rate for such
Distribution Date. The
Class R Certificates
will have no
Pass-Through Rate.
CERTIFICATE STRUCTURE CONSIDERATIONS................. The primary credit support for the Senior Certificates is the
subordination of the Subordinated Certificates, effected by
the allocation of Realized Losses as described herein and by
the preferential application of the Available Distribution to
the Senior Certificates relative to the Subordinated
Certificates. Additionally, the primary credit support for
the Class A-3 Certificates is the subordination of the Class
B-1 and Class B-2 Certificates effected as described above,
and the primary credit support for the Class B-1 Certificates
is the subordination of the Class B-2 Certificates effected as
described above. See "Description of the Offered
Certificates - Allocation of Losses and Shortfalls;
Subordination" herein.
Due to the preferential allocation of the Available
Distribution to more senior classes of Certificates as
compared to the allocation thereof to more subordinated
Classes, the weighted average lives of more senior Classes
of Certificates are expected to be shorter than the weighted
average lives of more subordinated Classes. The weighted
average lives of the Certificates will be affected primarily
by the timing and amount of prepayments on the Contracts.
Unlike standard corporate bonds, the timing and amount of
principal payments on the Certificates are not fixed and will
be determined by the timing and amount of principal
payments (including prepayments, repurchases, liquidations
and payments received due to a full or partial redemption
of the Certificates) on the Contracts. The timing of
principal payments on manufactured housing installment
sales contracts is affected by a variety of economic,
geographic, legal, tax and social factors. The Contracts
may be prepaid by the related obligors at any time without
penalty. Prepayment rates on manufactured housing
installment sales contracts are affected by transfers of the
underlying homes, contract default rates and refinancings
(although obligors on manufactured housing installment
sales contracts may not be as likely to refinance their
contracts than mortgagors on residential mortgage loans).
See "Maturity and Prepayment Considerations" herein.
In addition to affecting the weighted average lives of the
Certificates, prepayment rates will affect the yields on any
such Certificates purchased at a premium over or discount
from par. Contract prepayment rates that are faster than
investors' expectations will adversely affect the yields on
Certificates purchased at a premium. Contract prepayment
rates that are slower than investors' expectations will
adversely affect the yields on Certificates purchased at a
discount.
S-6
For a more complete discussion of the factors affecting
contract prepayments and the effect of prepayments and
other factors on the yield on the Offered Certificates, see
"Maturity and Prepayment Considerations" and "Yield on
the Offered Certificates" herein and "Special Considerations
- 2. Maturity and Yield Considerations" in the Prospectus.
DENOMINATIONS........................................ [The Offered Certificates will be Book-Entry Certificates.
One or more certificates representing each such Class of
Certificates will be registered in the name of the nominee
of The Depository Trust Company (together with any
successor depository selected by the Company, the
"Depository") and beneficial interests will be held by
investors through the book-entry facilities of the
Depository, as described herein, in minimum denominations
of $25,000 and integral multiples of $1 in excess thereof,
except that one Certificate of each Class may be issued in
a different denomination, and if so issued, will be held in
certificated fully-registered form.] [The Offered
Certificates will be issued in certificated, fully-registered
form in minimum denominations of $25,000 and integral
multiples of $1 in excess thereof, except that one Certificate
of each Class may be issued in a different denomination to
accommodate the remaining principal balance of such Class
after all other Certificates of such Class have been issued in
authorized denominations.] See "Description of the Offered
Certificates - General" herein.
SELLER OF OFFERED CERTIFICATES....................... Deutsche Financial Capital Securitization LLC (the
"Company"), a North Carolina limited liability company.
The Company is a limited-purpose subsidiary of Deutsche
Financial Capital I Corp. (the "Manager"), a
North Carolina corporation, and Deutsche Financial Capital
Limited Liability Company ("DFC"), a North Carolina
limited liability company. Each of the Manager and DFC
are wholly-owned (in equal shares) subsidiaries of Deutsche
Financial Services Corporation, a Nevada corporation, and
Oakwood. Deutsche Financial Services Corporation is an
indirect wholly-owned subsidiary of Deutsche Bank AG,
and OAC is a wholly-owned subsidiary of Oakwood Homes
Corporation ("Oakwood Homes"), a North Carolina
corporation. Neither the Company nor any of its affiliates
has guaranteed or is otherwise obligated with respect to the
Certificates [; provided, however, that Oakwood Homes
will guarantee certain distributions on the Class B-2
Certificates under the Limited Guarantee, to the limited
extent described herein]. See "Special Considerations"
herein and in the Prospectus.
SERVICER............................................. Oakwood will act as servicer for all the Assets (in such
capacity, the "Servicer"). For each Distribution Date, the
Servicer will be obligated to make an advance (a "P&I
Advance") in respect of any delinquent Monthly Payment
on any Asset that was due during the related Collection
Period that will, in the Servicer's judgment, be recoverable
S-7
from late payments on or
Liquidation Proceeds
from such Asset. The
Servicer will also be
obligated to make
advances ("Servicing
Advances" and, together
with "&I Advances,
"Advances") in respect
of Liquidation Expenses
and certain taxes and
insurance premiums not
paid by an Obligor on a
timely basis, to the
extent the Servicer
deems such Servicing
Advances recoverable out
of Liquidation Proceeds
from or from collections
on the related Asset.
P&I Advances and
Servicing Advances are
reimbursable to the
Servicer as described
herein under "Servicing
of the Assets -
Advances." In addition,
the Servicer is
obligated under certain
circumstances to pay
Compensating Interest
with respect to any
Asset that prepays on a
date other than on a Due
Date for such Asset. See
"Servicing of the
Assets" herein.
As Servicer, Oakwood will be entitled to (1) a monthly fee
with respect to each Asset (the "Servicing Fee") in respect
of each Collection Period equal to 1.00% per annum (the
"Servicing Fee Rate") multiplied by the Scheduled Principal
Balance of such Asset at the beginning of such Collection
Period (without taking into account any Principal
Prepayments, Net Liquidation Proceeds or Repurchase
Prices received (or Realized Losses incurred) during the
related Prepayment Period) and (2) other additional
servicing compensation described herein. See "Servicing of
the Assets - Servicing Compensation and Payment of
Expenses" herein and "Sale and Servicing of Contracts and
Mortgage Loans" in the Prospectus.
TRUSTEE.............................................. _______________________________________
MORTGAGE LOAN FILE CUSTODIAN......................... _______________________________________
CUT-OFF DATE......................................... ____________ 1, 19__.
CLOSING DATE......................................... ____________, 19__.
DISTRIBUTION DATES................................... The 15th day of each month (or if such 15th day is not a
business day, the next succeeding business day),
commencing in ___________, ____.
RECORD DATES......................................... With respect to each Distribution Date, the close of
business on the last business day of the month preceding the
month in which such Distribution Date occurs (each, a
"Record Date").
COLLECTION PERIOD.................................... With respect to each Distribution Date, the period
commencing on the second day of the month preceding the
month in which the Distribution Date occurs and ending at
the close of business on the first day of the month in which
the Distribution Date occurs (each, a "Collection Period").
S-8
INTEREST ACCRUAL PERIOD.............................. With respect to each Distribution Date (i) for the Class A-1
Certificates, the period commencing on the 15th day of the
preceding month through the 14th day of the month in which such
Distribution Date is deemed to occur (except that the first
Interest Accrual Period for the Class A-1 Certificates will
be the period from the Closing Date through ________ 14,
19__) and (ii) for the other Certificates, the calendar month
preceding the month in which the Distribution Date occurs
(each, an "Interest Accrual Period").
PREPAYMENT PERIOD.................................... With respect to each Distribution Date, the calendar month
preceding the month in
which the related
Distribution Date occurs
(each, a "Prepayment
Period").
WEIGHTED AVERAGE NET ASSET RATE...................... With respect to each Distribution Date, a rate equal to (i)
the weighted average of the Asset Rates applicable to the
scheduled Monthly Payments that were due in the related
Collection Period on outstanding Assets less (ii) the
Servicing Fee Rate.
AGREEMENT............................................ The Pooling and Servicing Agreement dated as of
____________, ____ (the "Series Agreement"), by and
among the Company, Oakwood and ___________________,
as trustee (the "Trustee"), which incorporates by reference
the Company's Standard Terms to Pooling and Servicing
Agreement (March 1997 Edition) (the "Standard Terms,"
and, together with the Series Agreement, the "Agreement").
THE CONTRACTS........................................ The Trust will consist of (1) manufactured housing
installment sales contracts (collectively, the "Contracts")
secured by security interests in manufactured homes, as
defined herein (the "Manufactured Homes"), and, with
respect to certain of the Contracts ("Land Secured
Contracts"), secured by liens on the real estate on which the
related Manufactured Homes are located and (2) mortgage
loans secured by first liens on the real estate on which the
related Manufactured Homes are deemed permanently
affixed (the "Mortgage Loans" and collectively, the
"Assets"). The Asset Pool consists of _____ Assets having
an aggregate unpaid principal balance as of the Cut-off Date
of approximately $_____________. [Each of the Contracts
was funded at origination by DFC, and either (1) was
originated in the name of DFC or (2) was originated in the
name of Oakwood, as agent of DFC, and assigned to DFC
after its origination.] Approximately ___% of the Asset
Pool is comprised of Assets that are Mortgage Loans. The
Assets, as of the Cut-off Date, were secured by
Manufactured Homes and Mortgaged Property located in __
states and the District of Columbia, and have been selected
by DFC from DFC's portfolio of manufactured housing
installment sale contracts on the basis of the criteria
specified in the Agreement. Monthly payments of principal
and interest on the Assets will be due in most cases on the
first day of each month (and in other cases on various days
throughout each Collection Period, as defined herein) (each
S-9
a "Due Date"). The annual percentage rates ("APRs" or
"Contract Rates") on the Assets range from ____% to
____%, with a weighted average of approximately ____%,
each as of the Cut-off Date. See "The Asset Pool" herein
and "Yield Considerations" in the Prospectus.
The Agreement requires the Servicer to maintain standard
hazard insurance coverage with respect to each
Manufactured Home and Mortgaged Property in an amount
at least equal to the lesser of its maximum insurable value
or the remaining principal balance on the related Asset.
The standard hazard insurance policies, at a minimum, are
required to provide fire and extended coverage on terms
and conditions customary in manufactured housing hazard
insurance policies, with customary deductible amounts. See
"The Trust - Insurance - Hazard Insurance - Standard
Hazard Insurance Policies" in the Prospectus for a more
complete description of such standard hazard insurance
policies. No other insurance policies or guarantees will be
provided with respect to any Asset or the Asset Pool [other
than the Limited Guarantee, as described herein].
ADDITIONAL INFORMATION............................... On each Distribution Date, investors may contact the
Trustee's corporate trust office by telephone to ascertain the
Certificate Principal Balance of each Class of Offered
Certificates and the then current Pass-Through Rate
applicable to each Class of the Offered Certificates. As of
the date of this Prospectus Supplement, the telephone
number maintained by the Trustee for the purpose of
reporting this information is 800-___-____.
The Company will file a Current Report on Form 8-K with
the Securities and Exchange Commission within fifteen days
following the Closing Date. The Current Report on Form
8-K will specify the initial principal amount of each Class
of the Certificates.
DISTRIBUTIONS........................................ The "Available Distribution" for a Distribution Date will
include (a)(1) Monthly Payments of principal and interest
due on the Assets during the preceding Collection Period
and received, whether paid by the Obligors or advanced by
the Servicer, and (2) other unscheduled payments received
with respect to the Assets during the related Prepayment
Period, including Principal Prepayments, proceeds of
repurchases, Net Liquidation Proceeds and Net Insurance
Proceeds, less (b)(i) if Oakwood is not the Servicer,
Servicing Fees for the related Collection Period, (2)
amounts required to reimburse the Servicer for previously
unreimbursed Advances in accordance with the Agreement,
(3) amounts required to reimburse the Company or the
Servicer for certain reimbursable expenses in accordance
with the Agreement, and (4) amounts required to reimburse
any party for an overpayment of a Repurchase Price for an
Asset in accordance with the Agreement.
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Distributions will be made on each Distribution Date to
holders of record on the preceding Record Date, except that
the final distribution in respect of the Certificates will only
be made upon presentation and surrender of the Certificates
at the office or agency appointed by the Trustee for that
purpose in _______, _______. Distributions on a Class of
Certificates will be allocated among the Certificates of such
Class in proportion to their respective Percentage Interests.
On each Distribution Date the Available Distribution will be
distributed in the following amounts in the following order
of priority:
(1) to the holders of the Class A-1 and Class A-2
Certificates, one month's interest at their
respective Pass-Through Rates on their respective
Certificate Principal Balances immediately prior to
such Distribution Date, together with any
previously undistributed shortfalls in interest due
on such respective Classes of Certificates in
respect of prior Distribution Dates; if the
Available Distribution is not sufficient to distribute
the full amount of interest due on the Class A-1
and Class A-2 Certificates for such Distribution
Date, the Available Distribution will be allocated
between such Classes of Certificates pro rata on
the basis of the respective amounts of interest due
thereon;
(2) to the holders of the Class A-3 Certificates, one
month's interest on the Certificate Principal
Balance of the Class A-3 Certificates immediately
prior to such Distribution Date, together with any
previously undistributed shortfalls in interest due
on the Class A-3 Certificates in respect of prior
Distribution Dates;
(3) to the holders of the Class B-1 Certificates, one
month's interest on the Certificate Principal
Balance of the Class B-1 Certificates immediately
prior to such Distribution Date, together with any
previously undistributed shortfalls in interest due
on the Class B-1 Certificates in respect of prior
Distribution Dates;
(4) to the holders of the Class B-2 Certificates, one
month's interest on the Certificate Principal
Balance of the Class B-2 Certificates immediately
prior to such Distribution Date, together with any
previously undistributed shortfalls in interest due
on the Class B-2 Certificates in respect of prior
Distribution Dates;
(5) to the holders of the Class A-1 Certificates, the
Principal Distribution Amount, to reduce the
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Certificate Principal Balance of the Class A-1
Certificates until it has been reduced to zero;
(6) to the holders of the Class A-2 Certificates, the
Principal Distribution Amount, to reduce the
Certificate Principal Balance of the Class A-2
Certificates until it has been reduced to zero;
(7) to the holders of the Class A-3 Certificates, the
Principal Distribution Amount, to reduce the
Certificate Principal Balance of the Class A-3
Certificates until it has been reduced to zero;
(8) to the holders of the Class B-1 Certificates, the
Principal Distribution Amount, to reduce the
Certificate Principal Balance of the Class B-1
Certificates until it has been reduced to zero;
(9) to the holders of the Class B-2 Certificates, the
Principal Distribution Amount, to reduce the
Certificate Principal Balance of the Class B-2
Certificates until it has been reduced to zero; and
(10) any remainder to the holders of the Class R
Certificates, which will initially be
_______________, an affiliate of Oakwood.
[_________ may also initially hold the Class B-2
Certificates.]
Interest shortfalls referred to in clauses (1), (2), (3) and (4)
above will, to the extent lawfully payable, bear interest at
the related Pass-Through Rate, and interest accrued on the
amount of any such interest shortfall will itself be due
pursuant to clause (1) (2), (3) or (4) above, as applicable.
The Certificate Principal Balance of each Class of
Certificates is its original principal amount reduced by all
distributions on such Class in reduction of its principal
balance and all Realized Losses allocated to such Class.
Interest will accrue on the basis of a 360-day year
consisting of twelve 30-day months.
ALLOCATION OF LOSSES AND
SHORTFALLS........................................... On each Distribution Date, Realized Losses that were
incurred on the Assets during the related Prepayment Period
will be allocated among the Classes of Certificates in the
following order of priority:
(1) first, to the Class B-2 Certificates, to be
applied in reduction of the Certificate Principal Balance of
such Class until it has been reduced to zero;
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(2) second, to the Class B-1 Certificates, to be
applied in reduction of the Certificate Principal Balance of
such Class until it has been reduced to zero;
(3) third, to the Class A-3 Certificates, to be
applied in reduction of the Certificate Principal Balance of
such Class until it has been reduced to zero; and
(4) finally, to the Senior Certificates, to be
allocated between the Classes of the Senior Certificates pro
rata based upon their respective Certificate Principal
Balances, to be applied in reduction of the Certificate
Principal Balance of each such Class until it has been
reduced to zero.
[Notwithstanding the foregoing, Special Hazard Losses in
excess of the applicable Special Hazard Loss Limit
("Excess Special Hazard Losses"), Obligor Bankruptcy
Losses in excess of the applicable Obligor Bankruptcy Loss
Limit ("Excess Bankruptcy Losses"), and Fraud Losses in
excess of the applicable Fraud Loss Limit ("Excess Fraud
Losses," and, collectively with Excess Special Hazard
Losses and Excess Bankruptcy Losses, "Excess Losses")
will be allocated concurrently among all Certificates in
proportion to their respective principal balances. The
"Special Hazard Loss Limit," "Obligor Bankruptcy Loss
Limit" and "Fraud Loss Limit" with respect to any
Distribution Date will be as described herein under
"Description of the Offered Certificates-- Allocation of
Losses and Shortfalls-- Shortfalls."
Realized Interest Shortfalls will be allocated among the
Classes of the Certificates in the same manner and order of
priority as the related Realized Losses, and any shortfalls in
interest associated with Excess Losses will be allocated
among the Classes of the Certificates in the same manner
and order of priority as the related Excess Losses. Month
End Interest Shortfall, Soldiers' and Sailors' Shortfall [and
any other shortfall in interest collected] on an Asset will be
allocated among all Classes of Certificates entitled to
receive interest in respect of such Asset, in proportion to
the amount of interest in respect of such Asset that the
holders of Certificates of each such Class would have been
entitled to receive had such Shortfall not been incurred.
P&I ADVANCES......................................... For each Distribution Date, the Servicer will be obligated
to make an advance (a "P&I Advance") in respect of any
delinquent scheduled payment on any Contract that was due
in the preceding Collection Period that will, in the
Servicer's judgment, be recoverable from related late
payments or Liquidation Proceeds. P&I Advances are
reimbursable to the Servicer as described herein under
"Servicing of the Contracts - Advances."
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[LIMITED GUARANTEE].................................. [DISCLOSE ASPECTS OF LIMITED GUARANTEE, IF
ANY]
[PRE-FUNDING ACCOUNT]................................ [DISCLOSE ASPECTS OF ANY PRE-FUNDING
ACCOUNT]
[LIQUIDITY ACCOUNTS]................................. [DISCLOSE ASPECTS OF ANY LIQUIDITY
ACCOUNT(S)]
PREPAYMENT CONSIDERATIONS
AND RISKS............................................ In general, the Assets may be prepaid at any time without
penalty and, accordingly, the rate of principal payments
thereon is likely to vary considerably from time to time.
Any of the Offered Certificates may be sold at a discount
from their principal amounts. A slower than anticipated
rate of principal payments on the Contracts is likely to
result in a lower than anticipated yield on the Offered
Certificates that are sold at a discount from their principal
amounts. See "Maturity and Prepayment Considerations"
and "Yield on the Offered Certificates" herein and "Yield
Considerations" and "Maturity and Prepayment
Considerations" in the Prospectus.
SECURITY INTERESTS AND OTHER
ASPECTS OF THE CONTRACTS............................. DFC will assign to the Company the first mortgage liens on
Mortgaged Properties securing the Mortgage Loans, and the
security interests created by the Contracts in the related
Manufactured Homes and, in the case of the Land Secured
Contracts, the liens on the Real Properties on which the
related Manufactured Homes are located, and the Company
will assign such security interests and liens to the Trustee.
DFC will not deliver any assignments in recordable form
for the mortgages or deeds of trust (each, a "Mortgage")
evidencing the liens on Real Properties that secure the Land
Secured Contracts although it will deliver an assignment in
recordable form with respect to each of the Mortgage
Loans. However, DFC will deliver to the Trustee a power
of attorney authorizing the Trustee to prepare, execute and
record assignments of Mortgages securing the Land Secured
Contracts, in the event that the recordation of such
assignments becomes necessary to foreclose upon any
related Real Property. In some states, in the absence of the
recordation of such an assignment to the Trustee of the
Mortgage securing a Land Secured Contract, it is unclear
whether the assignment of the Mortgage to the Trustee will
be effective against creditors of or purchasers from DFC,
the Company or a trustee in bankruptcy of either.
Under the laws of most states, Manufactured Homes
constitute personal property, and perfection of a security
interest in a Manufactured Home is obtained, depending on
applicable state law, by noting the security interest on the
certificate of title for the Manufactured Home, by delivery
of certain required documents and payment of a fee to the
appropriate state motor vehicle authority to re-register the
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home, by filing a financing statement under the Uniform
Commercial Code ("UCC") or, in some states, through a
combination of the aforementioned methods. Neither DFC nor
the Company will be required to cause notations to be made on
any document of title relating to any Manufactured Home or
take any other steps to re-register the Manufactured Home
in the name of the Trustee with the appropriate state
motor vehicle authority, to deliver any such document of
title to the Trustee or to execute any transfer instrument
(be it a UCC-3 assignment or other form) relating to any
Manufactured Home (other than a notation or a transfer
instrument necessary to show DFC itself as the lienholder
or legal titleholder). Consequently, as to the Contracts
secured by Manufactured Homes located in certain states,
it is unclear whether the security interests created by the
Contracts in the Manufactured Homes will be effectively
transferred to the Trustee or perfected in the Trustee,
and it is thus unclear whether the assignment of a security
interest created by a Contract in the related Manufactured
Home will be effective against creditors of the Company
or DFC or a trustee in bankruptcy of the Company or Oakwood.
See "Risk Factors - 3. Security Interests in Manufactured
Homes" in the Prospectus.
To the extent DFC's security interests in the Manufactured
Homes are effectively transferred to the Trustee and are
perfected in the Trustee, the Trustee would have a prior
claim over creditors of DFC, subsequent purchasers of the
Manufactured Homes and holders of security interests in the
Manufactured Homes perfected after perfection of the
Trustee's security interest. Even if the Trustee's security
interest in a Manufactured Home is perfected, however, if
a Manufactured Home were relocated across state lines
without reperfection of the security interest in the Trustee,
or if the Manufactured Home were to become attached to
its site and a court of competent jurisdiction were to
determine that the security interest was subject to real estate
title and recording laws, or as a result of fraud or
negligence, the Trustee could lose its prior perfected
security interest in the Manufactured Home. See "Certain
Legal Aspects of Contracts and Mortgage Loans-- Security
Interests in the Manufactured Homes" in the Prospectus.
Federal and state consumer protection laws impose
requirements upon creditors in connection with extensions
of credit and collections on installment sales contracts, and
certain of these laws make an assignee of such a contract,
such as the Trust, liable to the obligor thereon for any
violation by the lender.
DFC is obligated, subject to certain conditions described
herein under "The Asset Pool - Conveyance of Contracts,"
to repurchase or, under certain limited circumstances, to
substitute a Qualified Substitute Asset for, any Contract as
to which it has failed to perfect its security interest in the
Manufactured Home securing such Contract, or as to which
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a breach of federal or state laws exists, if such failure to
perfect or breach of law materially and adversely
affects the Trustee's interest in the Contract, unless such
failure or breach has been cured within 90 days after DFC's
discovery of or receipt of notice of such failure or breach.
See "Certain Legal Aspects of Contracts and Mortgage Loans-The
Contracts" in the Prospectus.
FINAL SCHEDULED DISTRIBUTION DATE.................... The Final Scheduled Distribution Date for each Class of the
Certificates will be the _____________ __, ____
Distribution Date. The Final Scheduled Distribution Date
has been determined by adding three months to the maturity
date of the Asset with the latest stated maturity. Because
the rate of distributions in reduction of the Certificate
Principal Balances of the Offered Certificates will depend
on the rate of payment of principal (including prepayments)
on the Assets, the actual final distribution on any Class of
Offered Certificates could occur significantly earlier than its
Final Scheduled Distribution Date. The rate of payments
on the Assets will depend on their particular characteristics,
as well as on interest rates prevailing from time to time and
other economic factors, and no assurance can be given as
to the actual payment experience of the Assets.
OPTIONAL TERMINATION................................. Either the Servicer or the holders of a majority interest
of the Class R Certificates (the "Residual Majority", at their
respective options and subject to the limitations imposed by
the Agreement, may terminate the Trust by purchasing all
Assets, Repo Properties and REO Properties remaining in
the Trust on any Distribution Date occurring on or after the
Distribution Date on which the aggregate Certificate
Principal Balance of the Certificates is less than or equal to
10% of the aggregate initial principal amount of the
Certificates. The Trust also may be terminated (and the
Certificates retired) on any Distribution Date upon the
Servicer's determination, based on an opinion of counsel,
that the REMIC status of either the Pooling REMIC or the
Issuing REMIC, each as described herein under "- Certain
Federal Income Tax Consequences." has been lost or that
a substantial risk exists that such status will be lost for the
then current taxable year.
If neither the Servicer nor the Residual Majority exercises
its optional termination right within 90 days after it first
becomes eligible to do so, the Trustee shall solicit bids for
the purchase of all Assets, REO Properties and Repo
Properties remaining in the Trust. The Trustee shall sell
such Assets, REO Properties and Repo Properties only if
the net proceeds to the Trust from such sale would at least
equal the Termination Price, and the net proceeds from
such sale will be distributed as set forth in the succeeding
paragraph. If the net proceeds from such sale would not at
least equal the Termination Price, the Trustee shall decline
to sell the Assets, REO Properties and Repo Properties, and
shall not be under any obligation to solicit any further bids
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or otherwise negotiate any further sale of the Assets, REO
Properties and Repo Properties. See "The Trust - Optional
Termination" herein.
On the date of any termination of the Trust, the
Termination Price shall be distributed (1) first to the
Servicer to reimburse it for all previously unreimbursed
Liquidation Expenses paid and Advances made by, and not
previously reimbursed to, the Servicer with respect to the
Assets and (2) second to the Certificateholders and the
Servicer in accordance with the distribution priorities set
forth under "- Distributions - Priority of Distributions"
above. The Termination Price shall be deemed to be a
Principal Prepayment in full, together with related interest,
received during the related Prepayment Period for purposes
of determining the allocation of such distributions. Upon
the termination of the Trust and payment of all amounts due
on the Certificates and all administrative expenses
associated with the Trust, any remaining assets of the
REMICs shall be sold and the proceeds distributed pro rata
to the holders of the Class R Certificates. See "The Trust
- Optional Termination" herein and "Description of the
Certificates - Optional Redemption or Termination" in the
Prospectus.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES......................................... An election will be made to treat the Assets and certain
other assets of the Trust as a REMIC for federal income tax
purposes (the "Pooling REMIC"). An election also will be
made to treat the "regular interests" in the Pooling REMIC
and certain other assets of the Trust as another REMIC for
federal income tax purposes (the "Issuing REMIC"). The
Class A Certificates and the Class B Certificates will be
designated as "regular interests" in the Issuing REMIC and
the Class R Certificates will represent the beneficial
ownership of the "residual interest" in each of the Pooling
REMIC and the Issuing REMIC.
Because the Offered Certificates will be considered REMIC
regular interests, they will be taxable debt obligations under
the code, and interest paid or accrued on such Certificates,
including any original issue discount, will be taxable to the
holders of such Certificates in accordance with the accrual
method of accounting, regardless of such Certificateholders'
usual methods of accounting. Each of the Class A-2 and
Class A-3 Certificates bears interest at a fixed rate and,
therefore, will be issued with original issue discount only if
its stated principal amount exceeds its issue price. See
"Certain Federal Income Tax Consequences - REMIC
Certificates - Original Issue Discount" in the Prospectus.
The Class A-1, Class A-6, Class B-1 and Class B-2
Certificates constitute Non-VRDI Certificates and,
therefore, will be treated as issued with original issue
discount as described in "Certain Federal Income Tax
Consequences - REMIC Certificates - Interest Weighted
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Certificates and Non-VRDI Certificates" in the Prospectus. The
prepayment assumption that should be used in determining the
rate of accrual of original issue discount, if any, with
respect to the Offered Certificates is ___% MHP. However, no
representation is made herein as to the rate at which
prepayments actually will occur. See "Maturity and Prepayment
Considerations" herein.
For federal income tax purposes, the Offered Certificates
generally will be treated as "qualifying real property loans"
for domestic building and loan associations and mutual
savings banks, "regular interests in a REMIC" for domestic
building and loan associations, and "real estate assets" for
real estate investment trust ("REITs"), subject to the
limitations described in "Certain Federal Income Tax
Consequences" in the Prospectus. Similarly, interest on the
Offered Certificates will be considered "interest on
obligations secured by mortgages on real property" for
REITs, subject to the limitations described in "Certain
Federal Income Tax Consequences" in the Prospectus.
RATINGS.............................................. It is a condition to the issuance of the Offered Certificates
that each Class of the Offered Certificates receive the
ratings specified for such Class on the cover page hereof.
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. A security
rating does not represent any assessment of the likelihood
of principal prepayments on the Contracts or of the degree
to which the rate of such prepayments might differ from
those originally anticipated. See "Maturity and Prepayment
Considerations" herein. Also, a security rating does not
represent any assessment of the yield to maturity that
investors may experience. See "Yield on the Offered
Certificates" and "Ratings" herein.
The Company has not requested a rating of the Offered
Certificates from any rating agency other than
_________________ [and __________________].
However, there can be no assurance as to whether any
other rating agency will rate the Offered Certificates, or if
one does, what rating would be assigned by such rating
agency.
LEGAL INVESTMENT..................................... The Class A-1 and Class A-2 Certificates will constitute
"mortgage related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA")
for so long as they are rated in one of the two highest
rating categories by one or more nationally recognized
statistical rating organizations. Accordingly, the Class A-1
and Class A-2 Certificates will be legal investments for
certain entities to the extent provided in SMMEA, subject
to state laws overriding SMMEA. A number of states have
enacted legislation overriding the legal investment
S-18
provisions of SMMEA. See "Legal Investment
Considerations" herein and in the Prospectus.
THE CLASS A-3 CERTIFICATES AND CLASS B-1 CERTIFICATES
WILL NOT CONSTITUTE "MORTGAGE RELATED SECURITIES" FOR PURPOSES
OF SMMEA BECAUSE SUCH CLASSES ARE NOT RATED IN ONE OF THE TWO
HIGHEST RATING CATEGORIES BY A NATIONALLY RECOGNIZED
STATISTICAL RATING ORGANIZATION.
The Company makes no representations as to the proper
characterization of any Class of the Offered Certificates for
legal investment or other purposes, or as to the legality of
investment by particular investors in any Class of the
Offered Certificates under applicable legal investment
restrictions. These uncertainties may adversely affect the
liquidity of any Class of Offered Certificates. Accordingly,
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 to what
extent the Offered Certificates are subject to investment,
capital or other restrictions. See "Legal Investment
Considerations" herein and in the Prospectus.
ERISA CONSIDERATIONS................................. Fiduciaries of employee benefit plans and certain other
retirement plans and arrangements, including individual
retirement accounts and annuities, Keogh plans, and
collective investment funds in which such plans, accounts,
annuities or arrangements are invested, that are subject to
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or corresponding provisions of the
Code (any of the foregoing, a "Plan"), who propose to
cause a Plan to acquire any of the Offered Certificates
should consult with their own counsel to determine whether
the purchase or holding of the Offered Certificates could
give rise to a transaction that is prohibited either under
ERISA or the Code. Certain prohibited transaction
exemptions may be applicable to the purchase and holding
of the Class A-1 and Class A-2 Certificates as described
herein.
BECAUSE THE CLASS A-3 CERTIFICATES AND CLASS B-1
CERTIFICATES ARE SUBORDINATED SECURITIES, THEY WILL NOT
SATISFY THE REQUIREMENTS OF CERTAIN PROHIBITED TRANSACTION
EXEMPTIONS. AS A RESULT, THE PURCHASE OR HOLDING OF ANY
OF THE CLASS A-3 CERTIFICATES OR CLASS B-1 CERTIFICATES BY
A PLAN, A PERSON ACTING ON BEHALF OF A PLAN, OR A PERSON
USING THE ASSETS OF A PLAN (ANY SUCH PERSON, A "PLAN
INVESTOR") MAY CONSTITUTE A NON-EXEMPT PROHIBITED
TRANSACTION OR RESULT IN THE IMPOSITION OF EXCISE TAXES OR
CIVIL PENALTIES. ACCORDINGLY, EACH PURCHASER OF A CLASS
A-3 CERTIFICATE OR CLASS B-1 CERTIFICATE, BY VIRTUE OF
SUCH PURCHASER'S RECEIPT OF SUCH CERTIFICATE, WILL BE
DEEMED TO HAVE REPRESENTED THAT IT IS NOT A PLAN
INVESTOR, UNLESS SUCH PURCHASER PROVIDES THE SERVICER
S-19
AND THE TRUSTEE WITH A BENEFIT PLAN OPINION (AS DEFINED IN
"ERISA CONSIDERATIONS" HEREIN). SEE "ERISA CONSIDERATIONS"
HEREIN AND IN THE PROSPECTUS.
S-20
RISK FACTORS
Prospective Certificateholders should consider, among other things, the
following factors in connection with an investment in any of the Offered
Certificates:
1. GENERAL. The geographic dispersion of the Manufactured Homes, which
is heavily concentrated in [DISCLOSE MAJOR GEOGRAPHIC CONCENTRATIONS BY STATE],
is set forth herein under "The Asset Pool." Regardless of its location,
manufactured housing generally depreciates in value. Consequently, the market
values of the Manufactured Homes could be or become lower than the principal
balances of the Assets they secure. This depreciation could exacerbate the
negative effects on Certificateholders of delinquencies on Assets because it
will result in Realized Losses on Liquidated Loans being more severe than would
have been the case had the value of the underlying Manufactured Homes not
declined. Sufficiently high defaults and realized losses on the Assets will have
the effect of reducing, and could eliminate, the protection against losses
afforded the Class A Certificates by the subordination of the Class B and Class
R Certificates. If such protection is eliminated, the Class A Certificateholders
will bear the risk of losses on the Assets. Sufficiently high delinquencies and
liquidation losses on the Assets will have the effect of reducing, and could
eliminate, the protection against loss afforded the Class B-1 Certificates by
the subordination of the Class B-2 Certificates. If such protection is
eliminated, the Class B-1 Certificateholders will bear the risk of losses on the
Assets and must rely on the value of the underlying Manufactured Homes for
recovery of the outstanding principal of and unpaid interest on any defaulted
Assets.
Certain statistical information relating to the losses experienced by
Oakwood as servicer upon its liquidation of certain manufactured housing
contracts is set forth herein under "Servicing of the Contracts - Delinquency
and Loan Loss/Repossession Experience." Such statistical information relates
only to certain manufactured housing contracts serviced by Oakwood during the
periods indicated and is included herein only for illustrative purposes. There
is no assurance that the Contracts will have characteristics similar to those of
the manufactured housing contracts to which such statistical information
relates. In addition, the losses experienced upon the liquidation of
manufactured housing contracts historically has been sharply affected by
downturns in regional or local economic conditions. These regional or local
economic conditions are often volatile, and no predictions can be made regarding
future economic losses upon liquidation. In light of the foregoing, no assurance
can be given that the losses experienced upon the liquidation of defaulted
Contracts will be similar to any statistical information provided herein under
"Servicing of the Contracts - Delinquency and Loan Loss/Repossession
Experience."
2. LIMITED OBLIGATIONS. The Certificates will not represent an interest
in or obligation of the Company or any Servicer (including Oakwood). The
Certificates will not be insured or guaranteed by any government agency or
instrumentality, by the Underwriter or any of its affiliates, by the Company or
any of its affiliates or by any Servicer or any of its affiliates, and will be
payable only from amounts collected on the Assets.
[The Limited Guarantee will be an unsecured general obligation of
Oakwood Homes and will not be supported by any letter of credit or other credit
enhancement arrangement. The Limited Guarantee will not benefit in any way, or
result in any payment to, any Class of Certificates other than the Class B-2
Certificates.]
3. LIMITED LIQUIDITY. There can be no assurance that a secondary market
will develop for the Offered Certificates or, if it does develop, that it will
provide the holders of the Offered Certificates with liquidity of investment or
that it will continue to exist for the term of the Certificates. In addition,
the Class A-3 Certificates and Class B-1 Certificates may be adversely affected
by the restrictions prohibiting such Classes from being transferred to Plan
Investors.
4. PREPAYMENT CONSIDERATIONS. The prepayment experience on the Assets
will affect the average life of the Certificates, and will affect the yield to
maturity on any Certificates purchased at a premium over or at a discount from
their principal balances. Prepayments on the Contracts may be influenced by a
variety of economic,
S-21
geographic, social and other factors, including repossessions, aging,
seasonality and interest rates. Other factors affecting prepayment rates on the
Contracts include changes in housing needs, job transfers and unemployment. See
"Maturity and Prepayment Considerations" and "Yield on the Offered Certificates"
herein and "Maturity and Prepayment Considerations" in the Prospectus.
5. VARIABILITY OF YIELD. [The yield to maturity of the Class A-1
Certificates will be affected by the performance of One-Month LIBOR (as defined
herein), which moves in a manner different from other indices. See
_____________.] The yield to maturity on the Offered Certificates, particularly
the Class B-1 Certificates, will be affected by the rate at which Assets become
Liquidated Loans and by the severity of ensuing losses on such Liquidated Loans
and the timing thereof. Prior to the time that the aggregate Certificate
Principal Balance of the Class A Certificates is reduced to zero, the holders of
the Class B-1 Certificates will not receive any distributions of principal.
Prior to the time that the Certificate Principal Balance of a Class of Class A
Certificates with a lower numerical designation is reduced to zero, the holders
of any Class of Class A Certificates with a higher numerical designation will
not receive any distributions of principal. It is not possible to predict the
timing of the occurrence of the Distribution Date, if any, on which the
aggregate Certificate Principal Balance of the Class A Certificates (or of any
Class of the Class A Certificates) will be reduced to zero, which occurrence
will be affected by the rate of voluntary principal prepayments in addition to
prepayments due to defaults on Assets and the resulting liquidations of the
underlying Manufactured Homes.
6. SECURITY INTERESTS AND CERTAIN OTHER ASPECTS OF THE ASSETS. A
variety of factors may limit the Servicer's ability to repossess or foreclose on
and liquidate the Manufactured Homes or Mortgaged Properties securing the
Contracts and Mortgage Loans or may limit the amount realized upon any such
liquidation to less than the amount due under the related Asset. See "Risk
Factors - 3. Security Interests in Manufactured Homes" and "Certain Legal
Aspects of Contracts and Mortgage Loans - The Contracts" in the Prospectus.
7. CONVEYANCE OF ASSETS; CERTAIN INSOLVENCY RISKS. DFC and the Company
intend that the transfer of the Assets to the Trust constitute a sale rather
than a pledge of the Assets to secure indebtedness of DFC. However, if DFC or
one of its affiliates were to become a debtor under the federal bankruptcy code,
it is possible that a creditor or trustee-in-bankruptcy of DFC (or such
affiliate), or DFC (or such affiliate) as a debtor-in- possession, may argue
that the sale of the Contracts by Oakwood is a pledge of the Contracts rather
than a sale. This position, if argued before or accepted by a court, could
result in a delay in or reduction of distributions to the Certificateholders. In
addition, if an affiliate of DFC were to become insolvent, a creditor, receiver,
conservator or trustee-in-bankruptcy of such affiliate may argue that DFC's
assets should be substantively consolidated into such affiliate's estate. This
position, if argued before or accepted by a court, could similarly result in a
delay in or reduction of distributions to the Certificateholders.
A case (OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir.),
CERT. DENIED 114 S.Ct. 554 (1993)) decided by the United States Court of Appeals
for the Tenth Circuit contains language to the effect that accounts sold by a
debtor under Article 9 of the UCC would remain property of the debtor's
bankruptcy estate. Although the Contracts constitute chattel paper under the UCC
rather than accounts, sales of chattel paper are similarly governed by Article 9
of the UCC. If, following a bankruptcy of DFC, a court were to follow the
reasoning of the Tenth Circuit and apply such reasoning to chattel paper, then
delays or reductions in payments of collections on or in respect of the
Contracts could occur. Counsel to DFC has advised DFC that the facts of the
Octagon case are distinguishable from those relating to the sale of the
Contracts from DFC to the Company and that the reasoning of the Octagon case is
inconsistent with precedent and the Uniform Commercial Code.
THE ASSET POOL
GENERAL
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The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust consisting primarily of the Assets. The Trust will
be established pursuant to a pooling and servicing agreement dated as of
________ 1, 19__ (together with the Standard Terms thereto (March 1997 Edition),
the "Agreement"), among the Company, the Servicer, and ___________________, as
trustee (the "Trustee"). The Company will acquire the Assets from DFC pursuant
to the Sales Agreement. DFC funded the origination of each Asset. Each Asset was
originated in DFC's name or was originated in the name of another manufactured
housing dealer and was assigned to DFC immediately after its origination, in any
case in the ordinary course of business of DFC and any other named originator.
Each Asset is either an installment sales contract secured by a unit of
(manufactured housing installment sales contracts are referred to herein as
"manufactured housing contracts" or "contracts"), or a residential mortgage loan
secured by a lien on the real estate on which the related Manufactured Home is
deemed permanently affixed (a "Mortgaged Property"). A description of DFC's
general practice with respect to the origination or purchase of manufactured
housing contracts and mortgage loans is set forth in the Prospectus under "-
Underwriting Guidelines."
Under the Agreement, the manufactured homes securing the Assets (the
"Manufactured Homes") are required to comply with the requirements of certain
federal statutes. These statutes generally require the Manufactured Homes to
have a minimum of 400 square feet of living space and a minimum width of 102
inches and to be of a kind customarily used at a fixed location. Such statutes
also require the Manufactured Homes to be transportable in one or more sections,
and to be built on a permanent chassis and designed to be used as dwellings,
with or without permanent foundations, when connected to the required utilities.
The Manufactured Homes include the plumbing, heating, air conditioning and
electrical systems contained therein. DFC's management estimates that in excess
of 90% of the Manufactured Homes are used as primary residences by the Obligors
under the Assets secured by such Manufactured Homes.
The Agreement requires the Servicer to maintain Standard Hazard
Insurance Policies with respect to each Manufactured Home in the amounts and
manner set forth in the Prospectus under "The Trusts - Insurance - Hazard
Insurance - Standard Hazard Insurance Policies." Generally, no other insurance
will be maintained with respect to the Manufactured Homes, the Mortgaged
Properties, the Assets or the Asset Pool.
[The Company will convey to the Trustee the Assets and all rights to
receive (i) payments due on the Assets after ___________, ____ (the "Cut-off
Date"), including scheduled payments due after the Cut-off Date but received
prior to such date, and (ii) prepayments and other unscheduled collections in
respect of the Assets received on or after the Cut-off Date. The right to
payments that were due on or prior to the Cut-off Date but which are received
after such date will not be conveyed to the Company by DFC, and such payments
will be the property of DFC when collected. The Servicer will retain physical
possession of the Contract Documents. See "- Conveyance of Assets" below.]
The Asset Pool will consist of _____ Assets having an aggregate
principal balance as of the Cut-off Date of approximately $______________. Each
Asset was originated on or after __________, ____.
Approximately _____% of the Assets by outstanding principal balance as
of the Cut-off Date are Land Secured Contracts. For each Land Secured Contract,
the originator financed the purchase of the related Manufactured Home and either
took as additional security a Mortgage on the property on which the Manufactured
Home is located or took a Mortgage on the property on which the Manufactured
Home is located in lieu of all or a portion of the Obligor's required down
payment.
S-23
No fewer than _____% of the Assets (by outstanding principal balance as
of the Cut-off Date) are secured by Manufactured Homes which were new at the
time the related Assets were originated. No fewer than ____%, ____% and ____% of
the Assets are secured by Manufactured Homes which were used, repossessed or
transferred to an assignee of the original Obligor, respectively, at the time
the related Assets were originated. Each Asset has a Asset Rate of at least
____% and not more than _____%. The weighted average Asset Rate of the Assets as
of the Cut-off Date is approximately _____%. The Assets have remaining
maturities as of the Cut-off Date of at least ___ months but not more than ___
months and original maturities of at least ____ months but not more than ____
months. As of the Cut-off Date, the Assets had a weighted average original term
to scheduled maturity of approximately ____ months, and a weighted average
remaining term to scheduled maturity of approximately ____ months. The remaining
term to stated maturity of an Asset is calculated as the number of monthly
payments scheduled to be made on the Asset over its term less the number of
monthly payments made or scheduled to have been made on or before the Cut-off
Date. The average outstanding principal balance of the Contracts as of the
Cutoff Date was approximately $_________.
With the exception of ____ Assets having an aggregate principal balance
as of the Cut-off Date of approximately $____________, no Asset had a
loan-to-value ratio at the time of its origination in excess of ____%. The
weighted average loan-to-value ratio at the time of origination of the Assets
was approximately _____%. "Value" in the calculation of a loan-to-value ratio is
equal to the sum of the down payment made by the Obligor for the underlying
Manufactured Home (which includes the value of any trade-in unit accepted in
lieu of or in addition to a cash down payment), the original amount financed on
the related Asset, which may include sales and other taxes, insurance premiums
and any closing fees paid to third parties, and, in the case of a Land Secured
Contract, the appraised value of the land securing the Asset if the value of
such land was considered in determining whether the related Asset met the
minimum down payment standards of DFC's underwriting policies. Manufactured
Homes, unlike site-built homes, generally depreciate in value, and it has been
DFC's experience that, upon repossession, the net amount recovered upon
disposition of a repossessed manufactured home securing a manufactured housing
contract is generally lower than the principal balance of the related
manufactured housing contract. The Assets are secured by Manufactured Homes and
real estate located in ____ states and the District of Columbia. [DISCLOSE ANY
CONCENTRATION IN ANY ONE STATE OF GREATER THAN 10% OF THE ASSET POOL.]
SELECTED DATA
Certain data with respect to the Assets to be transferred by the
Company to the Trust are set forth below. The Company believes that the
information set forth herein will be representative of the characteristics of
the actual Assets, although prior to the issuance of the Certificates, Assets
may be prepaid in full or in part or otherwise removed from the pool of Assets
to be transferred to the Trust.
Whenever reference is made herein to a percentage of the Assets (or to
a percentage of the Scheduled Principal Balance of the Assets), the percentage
is calculated based on the Scheduled Principal Balances ("SPB") of the Contracts
as of the Cut-off Date. In the following tables, asterisks (*) indicate values
between 0.0% and 0.5%.
S-24
GEOGRAPHIC DISTRIBUTION OF MANUFACTURED HOMES AS OF CUT-OFF DATE
PERCENTAGE OF
ASSET
NUMBER OF AGGREGATE POOL BY
ASSETS SPB SPB
Alabama..........................................
Arkansas.........................................
California.......................................
Colorado.........................................
Delaware.........................................
District of Columbia.............................
Florida..........................................
Georgia..........................................
Illinois.........................................
Indiana..........................................
Kentucky.........................................
Louisiana........................................
Maine............................................
Maryland.........................................
Massachusetts....................................
Michigan.........................................
Missouri.........................................
New Jersey.......................................
New Mexico.......................................
New York.........................................
North Carolina...................................
Ohio.............................................
Oklahoma.........................................
Pennsylvania.....................................
South Carolina...................................
Tennessee........................................
Texas............................................
Virginia.........................................
West Virginia....................................
Totals......................................
S-25
YEARS OF ORIGINATION OF ASSETS(1)
PERCENTAGE OF
ASSET
NUMBER OF AGGREGATE POOL BY
YEARS OF ORIGINATION ASSETS SPB SPB
- -------------------- ------ --- ---
1988.............................................
1989.............................................
1990.............................................
1991.............................................
1992.............................................
1993.............................................
1994.............................................
Total.......................................
- ----------------
(1) The weighted average seasoning of the Assets was approximately ___ months
as of the Cut-off Date.
DISTRIBUTION OF ORIGINAL ASSET AMOUNTS(1)
PERCENTAGE OF
ASSET
ORIGINAL CONTRACT NUMBER OF AGGREGATE POOL BY
AMOUNT (IN DOLLARS) ASSETS SPB SPB
- ------------------- ------ --- ---
$0.01-5,000......................................
$5,000+-10,000...................................
$10,000+-15,000..................................
$15,000+-20,000..................................
$20,000+-25,000..................................
$25,000+-30,000..................................
$30,000+-35,000..................................
$35,000+-40,000..................................
$40,000+-45,000..................................
$45,000+-50,000..................................
$50,000+-55,000..................................
$55,000+-60,000..................................
$60,000+-65,000..................................
$65,000+-70,000..................................
$70,000+-75,000..................................
Totals......................................
- ----------------
(1) The greatest original Asset amount is [$____________], which represents
[____%] of the aggregate principal balance of the Assets at
origination. The weighted average original principal amount of the
Assets was approximately $__________ as of the Cut-off Date.
S-26
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS(1)
PERCENTAGE OF
ASSET
LOAN-TO-VALUE NUMBER OF AGGREGATE POOL BY
RATIO(2) ASSETS SPB SPB
- -------- ------ --- ---
Less than or equal to 50%........................
50+% - 60%.......................................
60+% - 70%.......................................
70+% - 80%.......................................
80+% - 90%.......................................
90+% - 93%.......................................
93+% - 95%.......................................
95+% - 96%.......................................
96+% - less than 100%............................
Greater than or equal to 100%....................
Total.......................................
- ---------------
(1) The weighted average original loan-to-value ratio of the Assets was
approximately ___% as of the Cut-off Date.
(2) The definition of "Value" is set forth above. Manufactured Homes,
unlike site-built homes, generally depreciate in value, and it should
generally be expected, especially with Assets with high loan-to-value
ratios at origination, that any time after the origination of a Asset,
the net realizable value of the Manufactured Home securing such Asset
may be lower than the outstanding principal balance of such Asset.
ASSET RATES(1)
PERCENTAGE OF
ASSET
RANGES OF CONTRACT NUMBER OF AGGREGATE POOL BY
BY CONTRACT RATE ASSETS SPB SPB
- ---------------- ------ --- ---
8.25%- 8.49%....................................
8.50%- 8.99%....................................
9.00%- 9.49%....................................
9.50%- 9.99%....................................
10.00%-10.49%....................................
10.50%-10.99%....................................
11.00%-11.49%....................................
11.50%-11.99%....................................
12.00%-12.49%....................................
12.50%-12.99%....................................
13.00%-13.49%....................................
13.50%-13.99%....................................
14.00%-14.49%....................................
14.50%-14.99%....................................
15.00%-15.49%....................................
15.50%-16.25%....................................
Total.......................................
- ---------------
(1) The weighted average Asset Rate was approximately ___% as of the
Cut-off Date.
S-27
REMAINING TERMS TO MATURITY (IN MONTHS)(1)
PERCENTAGE OF
ASSET
MONTHS REMAINING NUMBER OF AGGREGATE POOL BY
AS OF CUT-OFF DATE ASSETS SPB SPB
- ------------------ ------ --- ---
1-60.............................................
61-96............................................
97-120...........................................
121-156..........................................
157-216..........................................
217-240..........................................
Total.......................................
- ---------------
(1) The weighted average remaining term to maturity of the Assets was
approximately ___ months as of the Cut-off Date.
ORIGINAL TERMS TO MATURITY (IN MONTHS)(1)
PERCENTAGE OF
ASSET
NUMBER OF AGGREGATE POOL BY
ORIGINAL TERMS (IN MONTHS) ASSET SPB SPB
- -------------------------- ----- --- ---
1-60.............................................
61-96............................................
97-120...........................................
121-156..........................................
157-216..........................................
217-240..........................................
- ---------------
(1) The weighted average original term to maturity of the Assets was
approximately ___ months as of the Cut-off Date.
UNDERWRITING GUIDELINES
[The Assets were underwritten by DFC and were underwritten and
originated substantially in accordance with the guidelines described in the
Prospectus under "Underwriting Policies - Contract Underwriting Guidelines."]
CONVEYANCE OF ASSETS
On the date of issuance of the Certificates, the Company will transfer
to the Trustee, without recourse, all of its right, title and interest in and to
the Assets, including all principal and interest received on or with respect to
the Assets (other than principal and interest due on the Assets on or before the
Cut-off Date and any other amounts collected on the Assets before the Cut-off
Date other than early collections of Monthly Payments due on or after the
Cut-off Date), and all rights under the Standard Hazard Insurance Policies
maintained with respect to the related Manufactured Homes and Real Properties.
The Assets will be listed on a schedule attached to the Agreement (the "Asset
Schedule"). The Asset Schedule will identify the Unpaid Principal Balance of
each Asset, the amount of each Monthly Payment due on each Asset, and the Asset
Rate on each Asset, in each case as of the Cut-off Date. Prior to the conveyance
of the Assets to the Trustee, Oakwood's operations department will complete a
review of all of the Contract Files, including the certificates of title to
(or other evidence of a perfected security interest in) the Manufactured Homes
and the Mortgages relating to the Real Properties securing the Land Secured
Contracts, to check the accuracy of the Asset Schedule delivered to the Trustee.
The Custodian will complete a
S-28
review of the Mortgage Loan Files to check the accuracy of the Mortgage Loan
Schedule delivered to the Trustee. DFC will be required to repurchase any Asset
that is discovered not to agree with the Asset Schedule in a manner that
materially and adversely affects the interest of the Certificateholders or,
subject to the conditions specified in the penultimate paragraph under this
heading, replace any such Asset with a Qualified Substitute Asset, except that
if the discovered discrepancy relates to the Scheduled Principal Balance of an
Asset, subject to the conditions specified in the penultimate paragraph under
this heading, DFC may deposit cash into the Certificate Account in the amount of
any deficiency.
The Company will represent and warrant only that (1) the information
set forth in the Asset Schedule was true and correct as of the date or dates on
which such information was furnished; (2) the Company is the owner of, or holder
of a first-priority security interest in, each Asset; (3) the Company acquired
its ownership of, or security interest in, each Asset in good faith without
notice of any adverse claim; (4) except for the sale of the Assets to the
Trustee, the Company has not assigned any interest or participation in any Asset
that has not been released; and (5) the Company has the full right to sell the
Trust Estate to the Trustee.
The Servicer, on behalf of the Certificateholders, will hold the
original Assets and copies of documents and instruments relating to each
Contract and the security interest in the Manufactured Home and any Real
Property relating to each Asset. In order to provide notice of the assignment of
the Assets to the Trustee, UCC-1 financing statements identifying the Trustee as
the secured party or purchaser and identifying all the Assets as collateral will
be filed in the appropriate offices in the State of North Carolina. Despite
these filings, if a subsequent purchaser were able to take physical possession
of the Assets without notice of the assignment of the Assets to the Trustee, the
Trustee's interest in the Assets could be defeated. To provide some protection
against this possibility, in addition to filing UCC-1 financing statements,
within one week after the initial delivery of the Certificates, the Assets will
be stamped or otherwise marked to reflect their assignment to the Trustee. See
"Certain Legal Aspects of Contracts and Mortgage Loans" in the Prospectus. The
Custodian, on behalf of the Certificateholders, will hold the original Mortgage
Notes and copies of documents and instruments relating to each Mortgage Loan and
the lien on the Mortgaged Property securing each Mortgage Loan.
DFC will make certain representations and warranties in respect of each
Asset in the Sales Agreement, including the following: (1) as of the Cut-off
Date, no scheduled payment is more than 30 days past due; (2) each Asset is a
legal, valid and binding obligation of the Obligor and is enforceable in
accordance with its terms (except as such enforceability may be limited by laws
affecting creditors' rights generally or by general equity principles); (3) no
Asset is subject to any right of rescission, set-off, counterclaim or defense;
(4) each Asset is covered by hazard insurance substantially as described under
"The Trusts - Insurance - Hazard Insurance - Standard Hazard Insurance Policies"
in the Prospectus; (5) each Asset complied with all requirements of applicable
law at the time of its origination; and (6) immediately following the sale of
the Assets to the Company, the Company will own such Assets, free and clear of
any prior lien, mortgage, security interest, pledge, charge or other encumbrance
(assuming assignments of mortgage from DFC to the Company were properly recorded
to reflect the transfer of any Mortgage relating to a Land Secured Contract or
Mortgage Loan), except any lien created by the Agreement. Under the terms of the
Agreement and the Sales Agreement, and subject to DFC's option to effect a
substitution as described in the next paragraph, DFC will be obligated to
repurchase any Contract for its Repurchase Price (as defined below) within 90
days after DFC's discovery, or after DFC's receipt of written notice from the
Trustee or the Servicer, of a breach of any representation or warranty made by
DFC in the Sales Agreement that materially and adversely affects the Trustee's
interest in any Asset if such breach has not been cured by such 90th day. The
"Repurchase Price" for any Asset will be the unpaid principal balance of such
Asset at the close of business on the date of such repurchase, plus accrued and
unpaid interest thereon through the end of the month of such repurchase. Prior
to being distributed to Certificateholders, this Repurchase Price will be used
to reimburse the Servicer for any previously unreimbursed Advances made by the
Servicer in respect of the repurchased Asset and, if the repurchaser is the
Servicer, the Repurchase Price may be remitted net of such reimbursement
amounts.
In lieu of repurchasing an Asset as specified in the preceding
paragraph, during the two-year period following the date of the initial issuance
of the Certificates (the "Closing Date"), DFC may, at its option, substitute
S-29
a Qualified Substitute Asset for the Asset that it would otherwise be obligated
to repurchase (referred to herein as the "Replaced Asset"). DFC will deposit
into the Certificate Account cash in the amount, if any, by which the aggregate
of the Unpaid Principal Balances of any Replaced Assets exceeds the aggregate of
the Unpaid Principal Balances of the Assets being substituted for the Replaced
Assets. Such deposit will be treated as a partial Principal Prepayment. Also, if
it is discovered that the actual Scheduled Principal Balance of an Asset is less
than the Scheduled Principal Balance identified for such Asset on the Asset
Schedule, DFC may, at its option, deposit the amount of the discrepancy into the
Certificate Account instead of repurchasing the Asset. Such deposit will be
treated a partial Principal Prepayment.
In addition, DFC is required to indemnify the Company and its assignees
(including the Trust) against losses and damages they incur as a result of
breaches of DFC's representations and warranties. DFC's obligation to repurchase
or substitute for an Asset affected by a breach of a representation or warranty
and to indemnify the Company and its assignees for losses and damages caused by
such a breach constitute the sole remedies available to the Trustee and the
Certificateholders for a breach of a representation or warranty under the
Agreement or the Sales Agreement with respect to the Assets.
MATURITY AND PREPAYMENT CONSIDERATIONS
The Assets have terms to maturity at origination ranging from ____
months to ____ months, but may be prepaid in full or in part at any time. The
prepayment experience of the Assets (including prepayments due to liquidations
of defaulted assets) will affect the weighted average life of each Class of the
Certificates. Based on the Servicer's experience with the portfolio of
conventional manufactured housing contracts it services, the Company anticipates
that a number of Assets will be prepaid in full prior to their respective
maturities. A number of factors, including homeowner mobility, general and
regional economic conditions and prevailing interest rates, may influence
prepayments. In addition, any repurchases of Assets on account of certain
breaches of representations and warranties as described above under "The Asset
Pool - Conveyance of Assets" will have the same effect as prepayments of such
Assets and therefore will affect the life of the Certificates. Most of the
Assets contain provisions that prohibit the Obligor from selling an underlying
Manufactured Home without the prior consent of the holder of the related Asset.
Such provisions may not be enforceable in certain states. See "Certain Legal
Aspects of Contracts and Mortgage Loans - The Contracts - Transfers of
Manufactured Homes; Enforceability of `Due-on-Sale Clauses'" in the Prospectus.
The Servicer's policy is to permit most sales of Manufactured Homes and
Mortgaged Properties without accelerating the related Contracts or Mortgage
Loans where the proposed buyer meets then-current underwriting standards and
either enters into an assumption agreement or executes a new contract for the
unpaid balance of the existing Contract or Mortgage Loan. The execution of a new
contract or mortgage note would have the effect of prepaying the existing
Contract or Mortgage Loan in full.
WEIGHTED AVERAGE LIVES OF THE OFFERED CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments of the Assets on the weighted average lives of the Offered
Certificates under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced with respect to the Assets.
Weighted average life refers to the average amount of time that will
elapse from the date of issuance of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average lives of the
Offered Certificates will be affected by the rate at which principal on the
Assets is paid. Principal payments on Assets may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
repayments and liquidations due to default or other dispositions of Assets).
Prepayments on contracts or mortgage loans may be measured relative to a
prepayment standard or model. The [Prepayment Model] used in this Prospectus
Supplement [(the ["_________"]) model] is based on an assumed rate of prepayment
each month of the then unpaid principal balance of a pool of new manufactured
housing installment sales contracts. A prepayment assumption of 100% [Prepayment
Model] assumes constant prepayment rates of [_____%] per annum
S-30
of the then unpaid principal balance of such contracts or mortgage loans in the
first month of the life of the contracts or mortgage loans and an additional
[_____%] per annum in each month thereafter until the [_____] month. Beginning
in the [_____] month and in each month thereafter during the life of all of the
contracts or mortgage loans, 100% [Prepayment Model]] assumes a constant
prepayment rate of [_____%] per annum each month.
As used in the following tables "0% [Prepayment Model]" assumes no
prepayments on the Assets; "100% [Prepayment Model]" assumes the Assets will
prepay at rates equal to 100% of the [Prepayment Model] assumed prepayment
rates; "150% [Prepayment Model]" assumes the Assets will prepay at rates equal
to 150% of the [Prepayment Model] assumed prepayment rates; and so on.
There is no assurance, however, that the rate of prepayments of the
Assets will conform to any level of the [____________] model, and no
representation is made that the Assets will prepay at the prepayment rates shown
or any other prepayment rate. The Company makes no representations as to the
appropriateness of the [_____________] model.
MODELING ASSUMPTIONS AND MHP TABLES
The tables set forth below (the "MHP Tables") were prepared based upon
the assumptions that there are no delinquencies on the Assets and that, on each
Distribution Date, after giving effect to the assumed losses on Liquidated
Loans, there will be a sufficient Available Distribution to distribute all
accrued interest and the Principal Distribution Amount due to the
Certificateholders.
The percentages and weighted average lives in the following tables were
determined assuming that (1) subject to clause (6) below, scheduled interest and
principal payments on the Assets are received in a timely manner and prepayments
are made at the indicated percentages of [Prepayment Model] set forth in the
tables; (2) the Servicer or the holders of a majority in interest of the Class R
Certificates exercises the right of optional termination described herein; (3)
the Assets will, as of the Cut-off Date, be grouped into [six] pools having the
additional characteristics set forth below under "Assumed Asset
Characteristics"; (4) the Class A-1 Certificates initially represent ___% of the
entire ownership interest in the Trust Estate and have a Pass-Through Rate of
____% per annum, the Class A-2 Certificates initially represent ____% of the
entire ownership interest in the Trust Estate and have a Pass-Through Rate of
____% per annum, the Class A-3 Certificates initially represent ____% of the
entire ownership interest in the Trust Estate and have a Pass-Through Rate of
____% per annum and the Class B-1 Certificates initially represent ____% of the
entire ownership interest in the Trust Estate and have a Pass-Through Rate of
____% per annum; (5) no Due Date Interest Shortfalls will arise in connection
with prepayments in full or liquidations of the Assets; (6) no losses will be
experienced on any Assets included in the Asset Pool; and (7) a servicing fee of
____% per annum on the Pool Scheduled Principal Balance will be paid to the
Servicer each month. No representation is made that the Assets will experience
delinquencies or losses at the respective rates assumed above or at any other
rates.
ASSUMED ASSET CHARACTERISTICS
REMAINING ORIGINAL
TERM TO TERM TO
CURRENT CONTRACT MATURITY MATURITY
POOL PRINCIPAL BALANCE RATE (MONTHS) (MONTHS)
---- ----------------- ---- -------- --------
1........................ $ %
2........................
3........................
4........................
5........................
6........................
S-31
Total.................. $
There will be discrepancies between the Assets actually included in the
Trust and the assumptions made as to the characteristics of such Assets in
preparing the MHP Tables. In fact, there are approximately ____ Assets which
have varying Asset Rates, and Assets bearing different interest rates may prepay
at different rates. Finally, it is unlikely that the Assets will prepay at a
constant rate or that all of the Assets will prepay at the same rate. To the
extent that the Assets actually included in the Trust have characteristics that
differ from those assumed in preparing the MHP Tables, the Offered Certificates
are likely to have weighted average lives that are shorter or longer than those
indicated.
The MHP Tables below indicate the weighted average life of each the
Class of the Offered Certificates and set forth the percentage of the initial
principal amount of each Class of Offered Certificates that would be outstanding
after each of the dates shown at various percentages of [Prepayment Model]. See
"Maturity and Prepayment Considerations" in the Prospectus. The weighted average
lives included in the following MHP Tables have been determined by (1)
multiplying the amount of each principal payment by the number of years from the
date of delivery of the Certificates to the related Distribution Date, (2)
summing the results and (3) dividing the sum by the total principal to be paid
on the Certificates.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates based on their
own assumptions as to the matters discussed herein.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE
CLASS A-1 CERTIFICATES REMAINING OUTSTANDING AT THE
RESPECTIVE PERCENTAGES OF [PREPAYMENT MODEL] SET FORTH BELOW:
PREPAYMENTS (% OF [PREPAYMENT MODEL])
DATE 0% ___% ___% ___% ___%
---- -- ---- ---- ---- ----
Initial Percentage......................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
Weighted Average Life (years)...........................
S-32
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE
CLASS A-2 CERTIFICATES REMAINING OUTSTANDING AT THE
RESPECTIVE PERCENTAGES OF [PREPAYMENT MODEL] SET FORTH
BELOW:
PREPAYMENTS (% OF [PREPAYMENT MODEL])
DATE 0% ___% ___% ___% ___%
---- -- ---- ---- ---- ----
Initial Percentage......................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
Weighted Average Life (years)...........................
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE
CLASS A-3 CERTIFICATES REMAINING OUTSTANDING AT THE
RESPECTIVE PERCENTAGES OF [PREPAYMENT MODEL] SET FORTH BELOW:
PREPAYMENTS (% OF [PREPAYMENT MODEL])
DATE 0% ___% ___% ___% ___%
---- -- ---- ---- ---- ----
Initial Percentage......................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
Weighted Average Life (years)...........................
S-33
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE
CLASS B-1 CERTIFICATES REMAINING OUTSTANDING AT THE
RESPECTIVE PERCENTAGES OF [PREPAYMENT MODEL] SET FORTH
BELOW:
PREPAYMENTS (% OF [PREPAYMENT MODEL])
DATE 0% ___% ___% ___% ___%
---- -- ---- ---- ---- ----
Initial Percentage......................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 19__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
_____ 15, 20__..........................................
Weighted Average Life (years)...........................
FACTORS AFFECTING PREPAYMENTS
The rate of principal payments on pools of manufactured housing
contracts is influenced by a variety of economic, geographic, social and other
factors, including the prevailing level of interest rates from time to time and
the rate at which owners of manufactured homes sell their manufactured homes or
default on their contracts. Other factors affecting prepayment of manufactured
housing contracts and mortgage loans include changes in obligors' housing needs,
job transfers, unemployment and obligors' net equity in the manufactured homes.
In the case of mortgage loans secured by site-built homes, in general, if
prevailing mortgage interest rates fall significantly below the interest rates
on such mortgage loans, the mortgage loans are likely to be subject to higher
prepayment rates than if prevailing mortgage interest rates remained at or above
the rates borne by such mortgage loans, because the mortgagors in many cases
could refinance and obtain alternative mortgage loans with lower interest rates
and lower monthly payments. Conversely, if prevailing mortgage interest rates
rise above the interest rates on such mortgage loans, the rate of prepayment
would be expected to decrease because alternative mortgage loans would bear
higher interest rates and require higher monthly payments. The outstanding
principal balances of manufactured housing contracts are, in general, much
smaller than mortgage loan balances and the original terms to maturity of such
contracts are generally shorter than those of mortgage loans. As a result,
changes in interest rates will not affect the monthly payments on available
alternative manufactured housing contracts to the same degree that changes in
mortgage interest rates will affect the monthly payments on available
alternative mortgage loans. Consequently, the effect of changes in prevailing
interest rates on the prepayment rates on manufactured housing contracts may not
be similar to the effects of such changes on mortgage loan prepayment rates, or
such effects may be similar to the effects of such changes on mortgage loan
prepayment rates, but to a smaller degree.
Generally, the Assets may be prepaid by the Obligors at any time
without imposition of any prepayment fee or penalty. In addition, defaults on
Assets, leading to repossession (and foreclosure in the case of Land Secured
Contracts and Mortgage Loans) and the ultimate liquidation of the related
Manufactured Homes and Mortgage Properties (and Real Properties, in the case of
Land Secured Contracts), may occur with greater frequency in their early years.
Prepayments, liquidations and repurchases of the Assets will result in
distributions of principal to Certificateholders of amounts that would otherwise
be distributed over the remaining terms of the Assets. See "Yield on the Offered
Certificates" herein and "Yield Considerations" and "Maturity and Prepayment
Considerations" in the Prospectus.
S-34
DFC, as seller under the Sales Agreement, may be required to repurchase
certain Assets if it breaches its representations and warranties contained in
the Sales Agreement, including those relating to the qualification of the Assets
for REMIC purposes. See "The Asset Pool--Conveyance of Contracts" herein. Any
repurchase of an Asset will have the same effect as a prepayment in full of such
Asset and will affect an investor's yield to maturity.
The Servicer (regardless of whether Oakwood remains the Servicer) and
the holders of a majority in interest of the Class R Certificates each has the
option to terminate the Trust, thereby causing the retirement of all outstanding
Certificates, on any Distribution Date on or after the Distribution Date on
which the Pool Scheduled Principal Balance is less than or equal to 10% of the
Pool Scheduled Principal Balance as of the Cut-off Date. See "The Trust -
Optional Termination" herein. If neither the Servicer nor the holders of a
majority in interest of the Class R Certificates exercise its optional
termination rights within 90 days after becoming eligible to do so, the Trustee
shall solicit bids for the purchase of all Assets, REO Properties and Repo
Properties remaining in the Trust. Such a purchase, if consummated, would
likewise cause the retirement of all outstanding Certificates. See "The Trust -
Optional Termination" herein.
YIELD ON THE OFFERED CERTIFICATES
Distributions of interest on the Offered Certificates (other than the
Class A-1 Certificates) on any Distribution Date will include interest accrued
thereon through the last day of the month preceding the month in which such
Distribution Date occurs. Because interest will not be distributed on such
Classes until the 15th day (or, if such day is not a business day, then on the
next succeeding business day) of the month following the month in which such
interest accrues on the Assets, the effective yield to the holders of such
Classes of Offered Certificates will be lower than the yield otherwise produced
by the Pass-Through Rate and purchase price.
The yield to maturity of, and the aggregate amount of distributions on,
each Class of the Offered Certificates will be related to the rate and timing of
principal payments on the Assets. The rate of principal payments on the Assets
will be affected by the amortization schedules of the Assets and by the rate of
principal prepayments thereon (including for this purpose payments resulting
from refinancings, liquidations of the Assets due to defaults, casualties,
condemnations and repurchases by or on behalf of the Company or DFC, as the case
may be). NO ASSURANCE CAN BE GIVEN AS TO THE RATE OF PRINCIPAL PAYMENTS OR
PREPAYMENTS ON THE ASSETS.
Delinquencies on Assets could produce payment delays and could lead to
repossession of Manufactured Homes and foreclosures in the case of Land Secured
Contracts and Mortgage Loans. Repossession of a Manufactured Home or foreclosure
on a Real Property or Mortgaged Property and the subsequent resale of the home
securing an Asset may produce resale proceeds that are less than the Unpaid
Principal Balance of the related Asset plus interest accrued thereon and the
expenses of sale. Such a shortfall upon repossession and disposition of a
Manufactured Home or foreclosure on a Real Property or Mortgaged Property would
result in a Realized Loss on such Asset. The rate of principal payments on, the
aggregate amount of distributions on, and the yield to maturity of, any Class of
the Certificates will be affected by the rate of Obligor defaults resulting in
liquidations of Assets.
If a purchaser of Certificates of a Class calculates its anticipated
yield based on an assumed rate of default and an assumed amount of losses that
are lower than the default rate and amount of losses actually incurred and such
amount of losses actually incurred is not entirely covered by the subordination
of the Certificates of Classes subordinated to such purchaser's Class as to
allocation of Realized Losses, the purchaser's actual yield to maturity will be
lower than that so calculated. The timing of losses on Liquidated Loans will
also affect an investor's actual yield to maturity, even if the rate of defaults
and severity of losses are consistent with an investor's expectations. There can
be no assurance that the delinquency or repossession experience set forth herein
under "Servicing of the Assets - Delinquency and Loan Loss/Repossession
Experience" will be representative of the results that may be
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experienced with respect to the Assets. There can be no assurance as to the
delinquency, repossession or loss experience with respect to the Assets.
The yield of each Class of Offered Certificates also will be negatively
affected to the extent any Shortfall is allocated to such Class. See
"Description of the Offered Certificates -- Allocation of Losses and Shortfall;
Subordination" herein.
The timing of changes in the rate of prepayments and defaults on the
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of principal payments experienced over time is consistent with
an investor's expectations. In general, the earlier a prepayment of principal of
an Asset, the greater will be the effect on the 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 the
period immediately following the issuance of the Certificates would not be fully
offset by a subsequent like reduction (or increase) in the rate of principal
payments.
Investors in the Class A-1 Certificates should understand that at
levels of One-Month LIBOR (as defined herein) greater than the Weighted Average
Net Asset Rate less ___% per annum, the Pass-Through Rate of such Class will
remain at its maximum rate of the Weighted Average Net Asset Rate. Investors in
such Class should also consider the risk that lower than anticipated levels of
One-Month LIBOR could result in actual yields to such investors that are lower
than anticipated yields.
Investors in the Class A-1 Certificates should understand that the
timing of changes in the level of One- Month LIBOR may affect the actual yields
to such investors even if the average level is consistent with such investor's
expectations. Each investor must make an independent decision as to the
appropriate One-Month LIBOR assumptions to be used in deciding whether to
purchase a Class A-1 Certificate.
Because the Pass-Through Rate on the Offered Subordinated Certificates
may vary on the basis of the Weighted Average Net Asset Rate, such Pass-Through
Rate and the yield on such Certificates could be affected by disproportionate
collections of principal in respect of Assets with different Asset Rates
(including Obligor prepayments and such collections resulting from liquidations
and repurchases of Assets). Accordingly, (i) the yield to maturity of the Class
A-3 Certificates will be lower than that which would otherwise result if all or
a substantial portion of the Assets with Net Rates higher than ___% prepaid
prior to those with Net Rates lower than ___% per annum, (ii) the yield to
maturity of the Class B-1 Certificates will be lower than that which would
otherwise result if all or a substantial portion of the Assets with Net Rates
higher than ___% per annum prepaid prior to those with Net Rates lower than ___%
per annum and (iii) the yield to maturity of the Class B-2 Certificates will be
lower than that which would otherwise result if all or a substantial portion of
the Assets with Net Rates higher than ___% per annum prepaid prior to those with
Net Rates lower than ___% per annum.
The aggregate amount of distributions and the yield to maturity of the
Offered Certificates, particularly the Class B Certificates, will also be
affected by early payments of principal on the assets resulting from any
purchases of Assets not conforming to certain representations and warranties of
DFC and by the exercise by the Servicer or a majority in interest in the Class R
Certificates of its option to purchase the Assets and other assets of the Trust,
thereby effecting early retirement of any outstanding Classes of Offered
Certificates as described under "The Trust - Optional Termination" herein. If
neither the Servicer nor the Residual Majority exercises its optional
termination right within 90 days after it first becomes eligible to do so, the
Trustee shall solicit bids for the purchase of all Assets, REO Properties and
Repo Properties remaining in the Trust. The Trustee shall sell such Assets, REO
Properties and Repo Properties only if the net proceeds to the Trust from such
sale would at least equal the Termination Price, and the net proceeds from such
sale will be distributed first to the Servicer to reimburse it for all
previously unreimbursed Liquidation Expenses paid and Advances made by, and not
previously reimbursed to, it with respect to the Assets and second to the
Holders of the Certificates, the Servicer and Oakwood Homes (to the extent of
any unreimbursed Limited Guarantee Payment Amounts) in accordance with the
distribution priorities set forth in "Description of the Offered Certificates -
Distributions on the Certificates - Priority of Distributions"
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herein. If the net proceeds from such sale would not at least equal the
Termination Price, the Trustee shall decline to sell the Assets, REO Properties
and Repo Properties and shall not be under any obligation to solicit any further
bids or otherwise negotiate any further sale of the Assets, REO Properties and
Repo Properties.
Because interest will not be distributed to Certificateholders until
the 15th day (or, if such day is not a business day, the next succeeding
business day) of the month following the month in which interest accrues on the
Certificates, the effective yield to the holders of the Offered Certificates
will be lower than the yield otherwise produced by the applicable Pass-Through
Rates and the respective purchase prices.
If the purchaser of a Certificate offered at a discount from its Parity
Price (as defined below) calculates its anticipated yield to maturity based on
an assumed rate of payment of principal that is faster than that actually
experienced on the Assets, the actual yield to maturity will be lower than that
so calculated. Similarly, if the purchaser of a Certificate offered at a premium
above its Parity Price calculates its anticipated yield to maturity based on an
assumed rate of payment of principal that is slower than that actually
experienced on the Assets, the actual pre-tax yield to maturity will be lower
than that so calculated. "Parity Price" is the price at which a security will
yield its coupon, after giving effect to any payment delay.
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Senior/Subordinate Contract Pass-Through Certificates, Series
19__-X, will consist of the Class A-1, Class A-2, Class A-3, Class B-1, Class
B-2 and Class R Certificates. Only the Offered Certificates are offered hereby.
The Offered Certificates will be issued in [book-entry] [certificated]
fully-registered form only, in denominations of $25,000 and integral multiples
of $1 in excess thereof. [Definitive Certificates, if issued (as defined below
under "-- Book-Entry Certificates"), will be transferable and exchangeable at
the corporate trust office of the Trustee at its Corporate Trust Administration
Department in _______, _______.] No service charge will be made for any
registration of exchange or transfer, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge incurred in
connection with such exchange or transfer.
The Company will cause the Assets to be assigned to the Trustee. The
Servicer will service the Assets pursuant to the Agreement. The Contract
Documents will be held for the benefit of the Trustee by the Servicer.
Distributions of principal and interest on the Certificates will be
made on the 15th day of each month, or, if such day is not a business day, on
the next succeeding business day (each, a "Distribution Date") beginning in
__________, 19__, to the persons in whose names the Certificates are registered
at the close of business on the last business day of the month preceding the
month in which the Distribution Date occurs (the "Record Date"). Distributions
will be made by check mailed to the address of the person entitled thereto as it
appears on the Certificate Register [which will be the Depository unless and
until Definitive Certificates (as defined below) are issued], except that a
Certificateholder who holds Certificates with original denominations aggregating
at least $5 million may request payment by wire transfer of funds pursuant to
written instructions delivered to the Trustee at least five business days prior
to the applicable Record Date. The Trustee may charge a fee for any distribution
made by wire transfer. The final distribution in retirement of the Certificates
will be made only upon presentation and surrender of the Certificates at the
office or agency of the Trustee specified in the final distribution notice to
Certificateholders.
[Each distribution with respect to a Book-Entry Certificate will be
paid to the Depository, which will credit the amount of such distribution to the
accounts of its Participants in accordance with its normal procedures. Each
Participant will be responsible for disbursing such distribution to the
Beneficial Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent.
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Each brokerage firm will be responsible for disbursing funds to the Beneficial
Owners that it represents. All such credits and disbursements with respect to
Book-Entry Certificates are to be made by the Depository and the Participants in
accordance with the Depository's rules.]
[BOOK-ENTRY CERTIFICATES
The Offered Certificates will initially be registered in the name of
Cede & Co., the nominee of the Depository Trust Corporation ("DTC"). DTC is a
limited-purpose trust company organized under the laws of the State of New York,
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 Securities Exchange
Act of 1934, as amended. DTC accepts securities for deposit from its
participating organizations ("Participants") and facilitates the clearance and
settlement of securities transactions between Participants in such securities
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("indirect participants").
Beneficial Owners of Offered Certificates who are not Participants but
desire to purchase, sell or otherwise transfer ownership of the Offered
Certificates may do so only through Participants (unless and until Definitive
Certificates, as defined below, are issued). In addition, Beneficial Owners will
receive all distributions of principal of, and interest on, the Offered
Certificates from the Trustee through DTC and Participants. Beneficial Owners
will not receive or be entitled to receive certificates representing their
respective interests in the Offered Certificates, except under the limited
circumstances described below.
Unless and until Definitive Certificates (as defined below) are issued,
it is anticipated that the only "Certificateholder"of the Offered Certificates
will be Cede & Co., as nominee of DTC. Beneficial Owners will not be
Certificateholders as that term is used in the Agreement. Beneficial Owners are
only permitted to exercise the rights of Certificateholders indirectly through
Participants and DTC.
While the Offered Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to the Offered Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Offered Certificates. Unless
and until Definitive Certificates are issued, Beneficial Owners who are not
Participants may transfer ownership of the Offered Certificates only through
Participants by instructing such Participants to transfer the Offered
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Certificates, which account is maintained with such
purchasers' respective Participants. Under the Rules and in accordance with
DTC's normal procedures, transfers of ownership of the Offered Certificates will
be executed through DTC and the accounts of the respective Participants at DTC
will be debited and credited.
The Offered Certificates will be issued in registered form to
Beneficial Owners, or their nominees, rather than to DTC (such Certificates
being referred to herein as "Definitive Certificates"), only if (1) DTC or the
Company advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as nominee and depository with respect
to the Certificates and the Company or the Trustee is unable to locate a
qualified successor; (2) the Company, with the consent of the Trustee and the
Servicer, elects to terminate the book-entry system through DTC; or (3) after
the occurrence of an Event of Default, DTC, at the direction of Beneficial
Owners owning a majority in Percentage Interests of the Class A Certificates and
Class B Certificates together, advises the Trustee in writing that the
continuation of a book-entry system through DTC (or a successor thereto) to the
exclusion of any physical certificates being issued to Beneficial Owners is no
longer in the best interests of the Beneficial Owners. Upon issuance of
Definitive Certificates to Beneficial Owners, such
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Certificates will be transferable directly (and not exclusively on a book-entry
basis) and registered holders will deal directly with the Trustee with respect
to transfers, notices and distributions.
DTC has advised the Company and the Trustee that, unless and until
Definitive Certificates are issued, DTC will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one or
more Participants to whose DTC accounts the Certificates are credited. DTC has
advised the Company that DTC will take such action with respect to any
Percentage Interests of the Offered Certificates only at the direction of and on
behalf of such Participants with respect to such Percentage Interests of the
Offered Certificates. DTC may take actions, at the direction of the related
Participants, with respect to some Offered Certificates which conflict with
actions taken with respect to other Offered Certificates.]
COLLECTION OF PAYMENTS ON CONTRACTS
The Servicer will establish and maintain the Certificate Account for
the benefit of the Trustee. The Certificate Account must be an Eligible Account.
The Certificate Account is to be held in trust for the benefit of the Trustee on
behalf of the Certificateholders, and shall be designated
"____________________________ [Name of Trustee], as Trustee under a Pooling and
Servicing Agreement dated as of _____ __, 19__." Funds in the Certificate
Account will be invested in Eligible Investments (as defined in the Agreement)
that will mature or be subject to redemption not later than the business day
preceding the applicable monthly Distribution Date. Earnings on amounts
deposited into the Certificate Account shall be credited to the account of the
Servicer as servicing compensation in addition to the Servicing Fee and may be
used to offset P&I Advances due from the Servicer in respect of the Distribution
Date next succeeding the date on which such earnings were made or, at the
Servicer's option, may be released to the Servicer on such Distribution Date.
The amount of any losses incurred in respect of any such investments shall be
deposited into the Certificate Account by the Servicer out of its own funds
promptly after any such losses are incurred.
All payments in respect of principal and interest on the Assets
received by the Servicer on or after the Cutoff Date (exclusive of collections
relating to scheduled payments due on or prior to the Cut-off Date), including
Principal Prepayments and Net Liquidation Proceeds, will be deposited into the
Certificate Account no later than the second business day following the
Servicer's receipt thereof. Amounts collected as late payment fees, extension
fees, assumption fees or similar fees will be retained by the Servicer as part
of its servicing compensation. In addition, amounts paid by DFC for Assets
repurchased as a result of breach of a representation or warranty under the
Agreement and amounts required to be deposited upon substitution of a Qualified
Substitute Asset because of a breach of a representation or warranty, as
described under "The Asset Pool - Conveyance of Assets" above, will be paid into
the Certificate Account.
Subject to the following sentence, on or prior to the business day
before each Distribution Date (the related "Remittance Date"), the Servicer will
remit the Remittance Amount and the amount of all required P&I Advances to the
Trustee for deposit into the Distribution Account. If the Certificate Account is
maintained at the Trustee, the Trustee may withdraw the Remittance Amount (and
any portion of the P&I Advance to be covered by investment earnings on the
Certificate Account) from the Certificate Account on the applicable Distribution
Date and deposit it into the Distribution Account. In such event, the Servicer
will remit the portion, if any, of the required P&I Advances that is not to be
covered by investment earnings on the Certificate Account to the Trustee on the
related Remittance Date for deposit into the Distribution Account. The
Distribution Account shall be an Eligible Account established and maintained by
the Trustee.
The Trustee or its Paying Agent will withdraw funds from the
Distribution Account (but only to the extent of the related Available
Distribution) to make distributions to Certificateholders as specified under
"--Distributions" below.
From time to time, as provided in the Agreement, the Servicer will also
withdraw funds from the Certificate Account for other purposes as permitted by
the Agreement.
S-39
DISTRIBUTIONS
The "Available Distribution" for a Distribution Date will include
(a)(1) Monthly Payments of principal and interest due on the Assets during the
preceding Collection Period and received, whether paid by the Obligors or
advanced by the Servicer, and (2) other unscheduled payments received with
respect to the Assets during the related Prepayment Period, including Principal
Prepayments, proceeds of repurchases, Net Liquidation Proceeds and Net Insurance
Proceeds, less (b) if Oakwood is not the Servicer, Servicing Fees for such
month, amounts required to reimburse the Servicer for previously unreimbursed
Advances in accordance with the Agreement, amounts required to reimburse the
Company or the Servicer for certain reimbursable expenses in accordance with the
Agreement, and amounts required to reimburse any party for an overpayment of a
Repurchase Price for an Asset.
INTEREST
[DISCUSS PARTICULAR ASPECTS OF INTEREST DISTRIBUTIONS, IF
ANY].
FLOATING RATE DETERMINATION
[DISCUSS LIBOR OR OTHER INDEX USED FOR PAYMENT ON
CERTIFICATES, IF ANY].
PRINCIPAL
[DISCUSS PARTICULAR ASPECTS OF PRINCIPAL DISTRIBUTIONS, IF
ANY].
On each Distribution Date the Available Distribution will be
distributed in the following amounts in the following order of priority:
(1) to the holders of the Class A-1 and Class A-2 Certificates,
one month's interest at their respective Pass-Through Rates on
their respective Certificate Principal Balances immediately
prior to such Distribution Date, together with any previously
undistributed shortfalls in interest due on such respective
Classes of Certificates in respect of prior Distribution
Dates; if the Available Distribution is not sufficient to
distribute the full amount of interest due on the Class A-1
and Class A-2 Certificates for such Distribution Date, the
Available Distribution will be allocated between such Classes
of Certificates pro rata on the basis of the respective
amounts of interest due thereon;
(2) to the holders of the Class A-3 Certificates, one month's
interest on the Certificate Principal Balance of the Class A-3
Certificates immediately prior to such Distribution Date,
together with any previously undistributed shortfalls in
interest due on the Class A-3 Certificates in respect of prior
Distribution Dates;
(3) to the holders of the Class B-1 Certificates, one month's
interest on the Certificate Principal Balance of the Class B-1
Certificates immediately prior to such Distribution Date,
together with any previously undistributed shortfalls in
interest due on the Class B-1 Certificates in respect of prior
Distribution Dates;
(4) to the holders of the Class B-2 Certificates, one month's
interest on the Certificate Principal Balance of the Class B-2
Certificates immediately prior to such Distribution Date,
together with any previously undistributed shortfalls in
interest due on the Class B-2 Certificates in respect of prior
Distribution Dates;
(5) to the holders of the Class A-1 Certificates, the Principal
Distribution Amount, to reduce the Certificate Principal
Balance of the Class A-1 Certificates until it has been
reduced to zero;
S-40
(6) to the holders of the Class A-2 Certificates, the Principal
Distribution Amount, to reduce the Certificate Principal
Balance of the Class A-2 Certificates until it has been
reduced to zero;
(7) to the holders of the Class A-3 Certificates, the Principal
Distribution Amount, to reduce the Certificate Principal
Balance of the Class A-3 Certificates until it has been
reduced to zero;
(8) to the holders of the Class B-1 Certificates, the Principal
Distribution Amount, to reduce the Certificate Principal
Balance of the Class B-1 Certificates until it has been
reduced to zero;
(9) to the holders of the Class B-2 Certificates, the Principal
Distribution Amount, to reduce the Certificate Principal
Balance of the Class B-2 Certificates until it has been
reduced to zero; and
(10) any remainder to the holders of the Class R Certificates,
which will initially be _________________ ("__________"), an
affiliate of [Oakwood]. [___________ may also initially hold
the Class B-2 Certificates.]
Interest shortfalls referred to in clauses (1), (2), (3) and (4) above will, to
the extent lawfully payable, bear interest at the related Pass-Through Rate, and
interest accrued on the amount of any such interest shortfall will itself be due
pursuant to clauses (1), (2), (3) or (4) above, as applicable.
The Certificate Principal Balance of each Class of Certificates is its
original principal amount reduced by all distributions on such Class in
reduction of its principal balance and all Realized Losses allocated to such
Class.
Interest will accrue on the basis of a 360-day year consisting of
twelve 30-day months.
ALLOCATION OF LOSSES AND SHORTFALLS
REALIZED LOSSES
On each Distribution Date, Realized Losses that were incurred on the
Assets during the related Prepayment Period will be allocated among the Classes
of Certificates in the following order of priority:
(1) first, to the Class B-2 Certificates, to be applied in
reduction of the Certificate Principal Balance of such Class until it
has been reduced to zero;
(2) second, to the Class B-1 Certificates, to be applied in
reduction of the Certificate Principal Balance of such Class until it
has been reduced to zero;
(3) third, to the Class A-3 Certificates, to be applied in
reduction of the Certificate Principal Balance of such Class until it
has been reduced to zero; and
(4) finally, to the Senior Certificates, to be allocated
between the Classes of the Senior Certificates pro rata based upon
their respective Certificate Principal Balances, to be applied in
reduction of the Certificate Principal Balance of each such Class until
it has been reduced to zero.
[Notwithstanding the foregoing, Special Hazard Losses in excess of the
applicable Special Hazard Loss Limit ("Excess Special Hazard Losses"), Obligor
Bankruptcy Losses in excess of the applicable Obligor Bankruptcy Loss Limit
("Excess Bankruptcy Losses") and Fraud Losses in excess of the applicable Fraud
Loss Limit ("Excess Fraud Losses," and, collectively with Excess Special Hazard
Losses and Excess Bankruptcy Losses, "Excess Losses") on the Assets will be
allocated concurrently among all Certificates in proportion to their respective
Certificate Principal Balances.]
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[Upon initial issuance of the Certificates, the "Special Hazard Loss
Limit" is expected to equal approximately $____________. As of any Distribution
Date, the Special Hazard Loss Limit will equal the initial Special Hazard Loss
Limit less any Special Hazard Losses allocated solely to the Subordinated
Certificates on previous Distribution Dates. The Special Hazard Loss Limit may
be reduced or modified upon written confirmation from the Rating Agencies that
such reduction or modification will not adversely affect the then-current
ratings assigned by such Rating Agencies to the Offered Certificates. Such a
reduction or modification may adversely affect the coverage provided by
subordination with respect to Special Hazard Losses.]
[Upon initial issuance of the Certificates, the "Obligor Bankruptcy
Loss Limit" is expected to equal approximately $____________. As of any
Distribution Date, the Obligor Bankruptcy Loss Limit will equal the initial
Obligor Bankruptcy Loss Limit less any Obligor Bankruptcy Losses allocated
solely to the Subordinated Certificates on previous Distribution Dates. The
Obligor Bankruptcy Loss Limit may be reduced or modified upon written
confirmation from the Rating Agencies that such reduction or modification will
not adversely affect the then-current ratings assigned by such Rating Agencies
to the Offered Certificates. Such a reduction or modification may adversely
affect the coverage provided by subordination with respect to Obligor Bankruptcy
Losses.]
[Upon initial issuance of the Certificates, the "Fraud Loss Limit" is
expected to equal approximately ____% of the aggregate Scheduled Principal
Balance of the Contracts as of the Cut-off Date. [INSERT DESCRIPTION OF FORMULA
FOR STEP-DOWN OF FRAUD LOSS LIMIT OVER TIME, AS SET BY THE RATING AGENCIES.]]
SHORTFALLS
Realized Interest Shortfalls will be allocated among the Classes of the
Certificates in the same manner and order of priority as the related Realized
Losses, and any shortfalls in interest associated with an Excess Loss will be
allocated among the Classes of the Certificates in the same manner and order of
priority as the related Excess Losses. Month End Interest Shortfall, Soldiers'
and Sailors' Shortfall [and any other shortfall in interest collected] on an
Asset will be allocated among all Classes of Certificates entitled to receive
interest in respect of such Asset, in proportion to the amount of interest in
respect of such Asset that the holders of Certificates of each such Class would
have been entitled to receive had such Shortfall not occurred.
LIQUIDITY ACCOUNTS
[DISCUSS LIQUIDITY ACCOUNT(S), IF ANY].
SUBORDINATION OF THE SUBORDINATED CERTIFICATES
[DISCUSS PARTICULAR SUBORDINATION FEATURES, IF ANY].
THE LIMITED GUARANTEE
[DISCUSS PARTICULAR ASPECTS OF LIMITED GUARANTEE, IF ANY].
PRE-FUNDING ACCOUNTS
[DISCUSS PARTICULAR ASPECTS OF PRE-FUNDING ACCOUNTS, IF ANY].
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THE TRUST
GENERAL
The Certificates will be issued pursuant to the Agreement. The summary
of the provisions of the Agreement contained herein does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of the Agreement. Reference is made to the Prospectus for important
information in addition to that set forth herein regarding the terms and
conditions of the Offered Certificates. See "The Pooling and Servicing
Agreements" in the Prospectus. A copy of the Standard Terms to Pooling and
Servicing Agreement (March 1997 Edition) has been filed with the Securities and
Exchange Commission (the "SEC") as an exhibit to the Company's Registration
Statement on Form S-3 of which the Prospectus is a part. A copy of the Pooling
and Servicing Agreement relating to the Certificates, in the form in which it
was executed by the Company, the Servicer and the Trustee (without exhibits),
will be filed with the SEC in a Current Report on Form 8-K within 15 days after
the Closing Date.
The Trust created pursuant to the Agreement will consist of (1) the
Assets, including all rights to receive payments due on the Assets after the
Cut-off Date; (2) such assets as from time to time are identified as deposited
in any account held for the benefit of Certificateholders (including the
Certificate Account and the Distribution Account); (3) any Manufactured Home,
Real Property or Mortgaged Property acquired on behalf of Certificateholders by
repossession, foreclosure or by deed in lieu of foreclosure; (4) the rights of
the Trustee to receive the proceeds of any Standard Hazard Insurance Policies
maintained with respect to the Manufactured Homes and Mortgaged Properties in
accordance with the Agreement; [Liquidity Account]; [Limited Guarantee]; [Pre-
funding Account]; and (5) certain rights of the Company relating to the
enforcement of representations and warranties made by DFC relating to the
Assets.
THE TRUSTEE
The Trustee is ____________________________. The Trustee has its
corporate trust office at
___________________________________________________________________________. Any
notices to the Trustee relating to the Certificates or the Agreement should be
sent to _____________________________,
- -------------------------------------------------------------------------------.
The Trustee may resign at any time, in which event the Company will be
obligated to appoint a successor Trustee. The Company may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Company will also be obligated to appoint a successor Trustee. Any resignation
or removal of the Trustee and appointment of a successor Trustee will not become
effective until acceptance of the appointment by the successor Trustee.
The Agreement requires the Trustee to maintain, at its own expense, an
office or agency in _______, _______ where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee and the Certificate Registrar in respect of the Certificates
pursuant to the Agreement may be served.
OPTIONAL TERMINATION
Either the Servicer or the holders of a majority in interest of the
Class R Certificates (the "Residual Majority"), at their respective options and
subject to the limitations imposed by the Agreement, may terminate the Trust by
purchasing all Assets, REO Properties and Repo Properties remaining in the Trust
on any Distribution Date occurring on or after the Distribution Date on which
the sum of Balance of the Certificates is less than 10% of the sum of the
original Principal Balance of the Certificates. The Trust also may be terminated
(and the Certificates
S-43
retired) on any Distribution Date upon the Servicer's determination, based on an
opinion of counsel, that the REMIC status of either the Pooling REMIC or the
Issuing REMIC described herein under "Summary of Terms - Certain Federal Income
Tax Consequences" has been lost or that a substantial risk exists that such
status will be lost for the then current taxable year. See "Description of the
Certificates - Optional Redemption or Termination" in the Prospectus.
If neither the Servicer nor the Residual Majority exercises its
optional termination right within 90 days after it first becomes eligible to do
so, the Trustee shall solicit bids for the purchase of all Assets, REO
Properties and Repo Properties remaining in the Trust. The Trustee shall sell
such Assets, REO Properties and Repo Properties only if the net proceeds to the
Trust from such sale would be at least equal to the Termination Price, and the
net proceeds from such sale will be distributed first to the Servicer to
reimburse it for all previously unreimbursed Liquidation Expenses paid and
Advances made by, and not previously reimbursed to, it with respect to the
Assets and second to the Certificateholders and the Servicer in accordance with
the distribution priorities set forth under "Description of the Offered
Certificateholders-Distributions-Priority of Distributions" herein. If the net
proceeds from such sale would not at least equal the Termination Price, the
Trustee shall decline to sell the Assets, REO Properties and Repo Properties
and shall not be under any obligation to solicit any further bids or otherwise
negotiate any further sale of the Assets, REO Properties and Repo Properties.
The "Termination Price" will equal the greater of (a) sum of (1) any
Liquidation Expenses incurred by the Servicer in respect of any Asset that has
not yet been liquidated; (2) all amounts required to be reimbursed or paid to
the Servicer in respect of previously unreimbursed Servicing Advances; and (3)
the sum of (i) the aggregate Unpaid Principal Balance of the Assets, plus
accrued and unpaid interest thereon at the Asset Rates borne by such Assets
through the end of the month preceding the month of the terminating purchase,
plus (ii) the lesser of (A) the aggregate Unpaid Principal Balance of each Asset
that had been secured by any REO Property or Repo Property remaining in the
Trust, plus accrued interest thereon at the Asset Rates borne by such Assets
through the end of the month preceding the month of the terminating purchase,
and (B) the current appraised value of any such REO Property or Repo Property
(net of Liquidation Expenses to be incurred in connection with the disposition
of such property estimated in good faith by the Servicer), such appraisal to be
conducted by an appraiser mutually agreed upon by the Servicer and the Trustee,
plus all previously unreimbursed P&I Advances made in respect of such REO
Property or Repo Property, and (b) the aggregate fair market value of the assets
of the Trust (as determined by the Servicer as described in the Agreement) plus
all previously unreimbursed P&I Advances made with respect to the Assets. The
fair market value of the assets of the Trust as determined for purposes of a
terminating purchase shall be deemed to include accrued interest at the
applicable Asset Rate on the Unpaid Principal Balance of each Asset (including
any Asset that has become a REO Property or a Repo Property, which REO Property
or Repo Property has not yet been disposed of by the Servicer) through the end
of the month preceding the month of the terminating purchase. The basis for any
such valuation shall be furnished by the Servicer to the Certificateholders upon
request. See "Description of the Certificates - Optional Redemption or
Termination" in the Prospectus.
On the date of any termination of the Trust, the Termination Price
shall be distributed (1) first to the Servicer to reimburse it for all
previously unreimbursed Liquidation Expenses paid and Advances made by and not
previously reimbursed to the Servicer with respect to the Assets and (2) second
to the Certificateholders in accordance with the distribution priorities set
forth under "-Distributions - Priority of Distributions" above. The Termination
Price shall be deemed to be a Principal Prepayment in full, together with
related interest, received during the related Prepayment Period for purposes of
determining the allocation of such distributions. Upon the termination of the
Trust and payment of all amounts due on the Certificates and all administrative
expenses associated with the Trust, any remaining assets of the REMICs shall be
sold and the proceeds distributed pro rata to the holders of the Class R
Certificates. See "Description of the Certificates - Optional Redemption or
Termination" in the Prospectus.
S-44
TERMINATION OF THE AGREEMENT
The Agreement will terminate upon the last action required to be taken
by the Trustee on the final Distribution Date following the later of (1) the
purchase by the Servicer or the Residual Majority of all Assets and all property
acquired in respect of any Asset remaining in the Trust Estate, and the election
by such purchaser to terminate the Trust, as described under "- Optional
Termination" above or (2) the final payment or other liquidation (or any advance
with respect thereto) of the last Asset remaining in the Trust Estate or the
disposition of all property acquired upon repossession of any Manufactured Home
or foreclosure on any Mortgaged Property.
Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed, to the extent of available funds, to the
Certificateholders on the final Distribution Date the amounts due them in
accordance with the Agreement. If the Agreement is then being terminated, the
amount which remains on deposit in the Certificate Account (other than amounts
retained to meet claims), after all required distributions have been made to the
Class A and Class B Certificateholders, will be paid to the Class R
Certificateholders pro rata (based upon such holders' respective Percentage
Interests).
VOTING RIGHTS
The voting rights of the Trust will be allocated 1% to the Class R
Certificates and 99% to the other Certificates in proportion to their respective
Certificate Principal Balances. For a description of the limited matters on
which the Certificateholders may vote, see "The Pooling and Servicing
Agreements" in the Prospectus.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will furnish the Certificateholders with monthly statements
prepared by the Servicer (each a "Remittance Report") containing information
with respect to principal and interest distributions on the Certificates and
Realized Losses on the Assets. Any financial information contained in such
reports will not have been examined or reported upon by an independent public
accountant. Copies of such monthly statements and any annual reports prepared by
the Servicer evidencing the status of its compliance with the provisions of an
Agreement will be furnished to related Certificateholders upon request addressed
to the Trustee.
A Remittance Report for a Distribution Date will identify the following
items:
(1) the Available Distribution for such Distribution Date;
(2) the Interest Distribution Amount and the Carryover Interest Amount,
as well as any Writedown Interest Amount and any Carryover Writedown Interest
Amount, for each Class of the Certificates for such Distribution Date, and the
amount of interest of each such category to be distributed on each such Class
based upon the Available Distribution for such Distribution Date;
(3) the amount to be distributed on such Distribution Date on each
Class of the Certificates to be applied to reduce the Certificate Principal
Balance of such Class, separately identifying any portion of such amount
attributable to prepayments, and the aggregate Principal Distribution Shortfall
Carryover Amount for each Class of the Certificates for such Distribution Date,
and the amount to be distributed to reduce the Principal Distribution Shortfall
Carryover Amount on each such Class based upon the Available Distribution for
such Distribution Date;
(4) the aggregate amount of P&I Advances required to be made by the
Servicer with respect to such Distribution Date;
(5) the amount of any Realized Losses incurred on the Assets during the
related Prepayment Period and in the aggregate since the Cut-off Date and the
amount of any Writedown Amount to be allocated to any Class of the Offered
Subordinated Certificates;
S-45
[(6)(a) the Class A-3 Liquidity Account Required Amount and the Class B-1
Liquidity Account Required Amount both immediately before and after the
Distribution Date, (b) the amount of any Class A-3 Liquidity Account Draw Amount
and Class B-1 Liquidity Account Draw Amount for such Distribution Date, (c) the
amount to be deposited into the Class A-3 Liquidity Account and the Class B-1
Liquidity Account pursuant to clause (___) under "Description of the Offered
Certificates - Distributions - Priority of distributions" herein, and (d) the
amount on deposit in the Class A-3 Liquidity Account and the Class B-1 Liquidity
Account both immediately before and immediately after the Distribution Date;]
[(7)(a) the amount of the Limited Guarantee Payment Amount, if any, for
such Distribution Date and the aggregate amount of any unpaid Limited Guarantee
Payment Amounts for any previous Distribution Dates;]
(8) the Certificate Principal Balance of each Class of the Certificates
and the Adjusted Certificate Principal Balance of each Class of the Offered
Subordinated Certificates after giving effect to the distributions to be made
(and any Writedown Amounts to be allocated) on such Distribution Date.
(9) the aggregate Interest Distribution Amount remaining unpaid, if
any, and the aggregate Carryover Interest Amount remaining unpaid, if any, for
each Class of Certificates, after giving effect to the distributions to be made
on such Distribution Date;
(10) the aggregate Writedown Interest Amount remaining unpaid, if any,
and the aggregate Carryover Writedown Interest Amount remaining unpaid, if any,
for each Class of Certificates, after giving effect to the distribution to be
made on such Distribution Date;
(11) the aggregate Principal Distribution Shortfall Carryover Amount
remaining unpaid, if any, for each Class of Certificates, after giving effect to
the distribution to be made on such Distribution Date;
(12) the amount of the aggregate Servicing Fee in respect of such
Distribution Date;
(13) the aggregate number of the aggregate of the Unpaid Principal
Balances of outstanding Assets that are (a) delinquent one month (I.E., 30 to 59
days) as of the end of the related Prepayment Period, (b) delinquent two months
(I.E., 60 to 89 days) as of the end of the related Prepayment Period, (c)
delinquent three months (I.E., 90 days or longer) as of the end of the related
Prepayment Period and (d) as to which repossession, foreclosure or other
comparable proceedings have been commenced as of the end of the related
Prepayment Period; and
(14) any other information required to be provided to
Certificateholders by the REMIC Provisions.
In the case of information furnished pursuant to clauses (1) and (3) above, the
amounts shall be expressed, with respect to any Certificate, as a dollar amount
per $1,000 denomination.
SERVICING OF THE ASSETS
THE SERVICER
Oakwood Acceptance Corporation ("Oakwood") was incorporated in 1984 in
the State of North Carolina as a wholly-owned subsidiary of Oakwood Homes
Corporation ("Oakwood Homes"). Oakwood is primarily engaged in the business of
underwriting, originating, pooling, selling and servicing installment sales
contracts for sales of manufactured housing units. Oakwood's principal offices
are located at 7800 McCloud Road, Greensboro, North Carolina 27409-9634
(telephone 910/664-2500).
S-46
Oakwood Homes is a vertically-integrated manufacturer and retailer of
manufactured homes. Homes manufactured by Oakwood Homes are sold primarily
through its approximately ___ sales centers located [principally in the
southeastern and southwestern United States]. Oakwood Homes also sells
manufactured homes purchased from other manufacturers at certain of its sales
centers.
Oakwood underwrites and funds the origination of manufactured housing
contracts on an individual basis from its principal office and [from an
additional loan origination office in Austin, Texas]. Contracts for the
financing of sales of manufactured homes at Oakwood's sales centers are
typically originated in the name of Oakwood Mobile Homes, Inc., a wholly-owned
retailing subsidiary of Oakwood Homes ("OMH"), or in the name of a third party
manufactured housing dealer, in either case using funds provided by Oakwood, and
are assigned to Oakwood following origination, although some Contracts are
originated directly in Oakwood's name. Oakwood underwrites all such contracts.
From time to time, Oakwood purchases seasoned portfolios of manufactured housing
contracts from third parties.
Since its formation, Oakwood has become the most important source of
financing for purchasers of homes manufactured by Oakwood Homes. In fiscal 1985,
Oakwood financed $12.3 million of installment sale contracts, representing 15%
of Oakwood's financed sales. In fiscal 1993, 1994, 1995 and 1996, Oakwood
financed approximately $212 million, $344 million, $487 million and $721
million of loans.
SERVICING PORTFOLIO
Oakwood services all of the manufactured housing contracts it
originates or purchases (except for certain contract portfolios which it sells
on a servicing-released basis), collecting loan payments, insurance premiums and
other payments from borrowers and remitting principal and interest payments to
the holders of the contracts. The following table shows the composition of
Oakwood's servicing portfolio of manufactured housing contracts on the dates
indicated.
CONTRACT SERVICING PORTFOLIO
AT AT
AT SEPTEMBER 30, DEC. 31, DEC. 31,
---------------------------------------------------- -------- --------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(Dollars in Thousands)
Total Number of
Oakwood-Serviced
Contracts.................
Aggregate Outstanding
Principal Balance of
Oakwood-Serviced
Contracts.................
Average Outstanding
Principal Balance per
Oakwood-Serviced
Contracts.................
Weighted Average Interest
Rate of Oakwood-Serviced
Contracts.................
S-47
DELINQUENCY AND LOAN LOSS/REPOSSESSION EXPERIENCE
The following tables set forth certain information concerning (a) the
delinquency experience and (b) the loan loss and repossession experience of the
portfolio of manufactured housing loan contracts serviced by Oakwood, in each
case for each of Oakwood's fiscal years from 1992 through 1996 and, except as
noted, the twelve months ended December 31, 1995 and 1996. Because
delinquencies, losses and repossessions are affected by a variety of economic,
geographic and other factors, there can be no assurance that the delinquency and
loss experience of the Contracts will be comparable to that set forth below.
DELINQUENCY EXPERIENCE (1)
AT AT
AT SEPTEMBER 30, DEC. 31, DEC. 31,
---------------------------------------------------- -------- --------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(Dollars in Thousands)
Total Number of Oakwood-
Serviced Contracts........
Number of Contracts
Delinquent (2):
30 to 59 days past due..
60 to 89 days past due..
90 days or more past due
Total Number of Contracts
Delinquent................
Total Delinquencies as a
Percentage of Oakwood-
Serviced Contracts (3)....
- ----------------
(1) Contracts that are already the subject of repossession or foreclosure
procedures are not included in "delinquent contracts" for purposes of
this table.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a
payment due on the first day of a month is not 30 days delinquent until
the first day of the following month.
(3) By number of contracts.
S-48
LOAN LOSS/REPOSSESSION EXPERIENCE
AT OR FOR AT OR FOR
THE TWELVE THE TWELVE
MONTHS MONTHS
ENDED ENDED
AT SEPTEMBER 30, DEC. 31, DEC. 31,
---------------------------------------------------- ---------- ----------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(Dollars in Thousands)
Number of Oakwood-
Serviced Contracts (1)
Average Number of
Oakwood-Serviced
Contracts During
Period....................
Number of Oakwood-
Serviced Contracts
Repossessed...............
Oakwood-Serviced Contracts
Repossessed as a
Percentage of Total
Oakwood-Serviced
Contracts (2).............
Oakwood-Serviced Contracts
Repossessed as a
Percentage of Average
Number of Oakwood-
Serviced Contracts........
Average Outstanding
Principal Balance
of Contracts (3)..........
Net Losses from Contract
Liquidations (4):
Total Dollars (3).........
As a Percentage of Average
Principal Balance of
Contracts(3)(5)........
- ------------------
(1) As of period end.
(2) Total Oakwood-serviced contracts repossessed during the applicable
period expressed as a percentage of the number of Oakwood- serviced
contracts at the end of the applicable period.
(3) Includes contracts originated by Oakwood and serviced by Oakwood or
others.
(4) Net losses represent the amounts charged by Oakwood against its loss
reserves for the periods indicated. Such amounts include estimates of
net losses with respect to certain defaulted contracts. Charges to the
loss reserves in respect of a defaulted contract generally are made
before the defaulted contract becomes a liquidated contract. The length
of the accrual period for the amount of accrued and unpaid interest
included in the calculation of the net loss varies depending upon the
period in which the loss was charged and whether the contract was owned
by an entity other than Oakwood.
(5) Total net losses incurred on contracts liquidated during the applicable
period expressed as a percentage of the average principal balance of
all contracts at the end of the applicable period.
(6) Annualized.
S-49
[NOTE THAT DATA PRESENTED IN THE FOREGOING TABLES IN ANY PROSPECTUS
SUPPLEMENT WILL BE AS OF A DATE NO MORE THAN 135 DAYS PRIOR TO THE DATE OF SUCH
PROSPECTUS SUPPLEMENT.]
The data presented in the foregoing tables are for illustrative
purposes only, and there is no assurance that the delinquency, loan loss and
repossession experience of Contracts in the Asset Pool will be similar to that
set forth above. The delinquency, loan loss and repossession experience of
manufactured housing contracts historically has been sharply affected by
downturns in regional or local economic conditions. For instance, such a
downturn was experienced in areas dependent on the oil and gas industry in the
1980s, causing increased levels of delinquencies, repossessions and loan losses
on manufactured housing installment sales contracts in the affected areas.
Regional and local economic conditions are often volatile, and no predictions
can be made regarding their effects on future economic losses upon
repossessions. Information regarding the geographic location, at origination, of
the Manufactured Homes and Mortgaged Properties securing the Contracts in the
Asset Pool is set forth under "The Asset Pool" herein.
In particular, the foregoing data generally represents Oakwood's
experience servicing installment sales contracts and mortgage loans
underwritten pursuant to Oakwood's underwriting standards, which may differ
from DFC's underwriting standards. Further, this data reflect Oakwood's
experience servicing installment sales contracts and mortgage loans during
certain historic economic conditions that may not reflect future conditions.
Accordingly, the performance of the Assets and Oakwood's servicing experience
with respect thereto may differ materially from Oakwood's historical servicing
data presented herein.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will administer, service and make collections on the
Assets, exercising the degree of care that the Servicer exercises with respect
to similar contracts serviced by the Servicer.
[Each Asset bears interest at a fixed annual percentage rate (the "APR"
or "Contract Rate") and provides for level payments over the term of such Asset
that fully amortize the principal balance of the Asset. All of the Assets are
actuarial obligations. The portion of each Monthly Payment for any Contract
allocable to principal is equal to the total amount of such Monthly Payment less
the portion allocable to interest. The portion of each Monthly Payment due in a
particular month that is allocable to interest is a precomputed amount equal to
one month's interest on the principal balance of the Asset, which principal
balance is determined by reducing the initial principal balance by the principal
portion of all Monthly Payments that were due in prior months (whether or not
such Monthly Payments were timely made) and all prior partial principal
prepayments. Thus, each scheduled Monthly Payment on an Asset will be applied to
interest and to principal in accordance with such precomputed allocation whether
such Monthly Payment is received in advance of or subsequent to its Due Date.]
All payments received on the Assets (other than payments allocated to items
other than principal and interest or payments sufficient to pay the outstanding
principal balance of and all accrued and unpaid interest on such Assets) will be
applied when received first to any previously unpaid scheduled Monthly Payments,
and then to the currently due Monthly Payment, in the chronological order of
occurrence of the Due Dates for such Monthly Payments. Any payments on an Asset
that exceed the amount necessary to bring the Asset current are applied to the
partial prepayment of principal of the Asset if the Servicer determines (based
on specific directions from the Obligor as to such payment or on a course of
dealing with such Obligor) that the Obligor intended such payment as a partial
principal prepayment. If the Servicer cannot determine the Obligor's intent with
respect to any such excess payment, the Servicer will apply such excess payment
as an early payment of scheduled Monthly Payments for subsequent Due Dates to
the extent such excess payment is an integral multiple of such Obligor's
scheduled Monthly Payment, and will apply the remainder of such excess payment
as a partial principal prepayment.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
S-50
For its servicing of the Assets, with respect to each Asset the
Servicer will receive, out of the related collection on such Asset, a Servicing
Fee equal to ____% per annum (the "Servicing Fee Rate") multiplied by the
related Scheduled Principal Balance of such Asset immediately prior to the
preceding Collection Period (without giving effect to any Principal Prepayments,
Net Liquidation Proceeds and Repurchase Prices received (or Realized Losses
incurred) on the day preceding the beginning of such Collection Period). The
Servicing Fee in respect of each Asset may be retained by the Servicer at the
time of the related collection on such Asset (or may be withdrawn from the
Certificate Account at a later time), in which case such amount will not be part
of the Available Distribution.
The Servicing Fee provides compensation for customary manufactured
housing contract third-party servicing activities to be performed by the
Servicer for the Trust and for additional administrative services performed by
the Servicer on behalf of the Trust. Customary servicing activities include
collecting and recording payments, communicating with Obligors, investigating
payment delinquencies, providing billing and tax records to Obligors and
maintaining internal records with respect to each Asset. Administrative services
performed by the Servicer on behalf of the Trust include calculating
distributions to Certificateholders and providing related data processing and
reporting services for Certificateholders and on behalf of the Trustee. Expenses
incurred in connection with servicing of the Assets and paid by the Servicer
from its monthly Servicing Fee include, without limitation, payment of fees and
expenses of accountants, payment of all fees and expenses incurred in connection
with the enforcement of Assets (except Liquidation Expenses as described below)
and payment of expenses incurred in connection with distributions and reports to
Certificateholders. The Servicer will be reimbursed out of the Liquidation
Proceeds of a defaulted Asset for all reasonable, out-of-pocket Liquidation
Expenses incurred by it in repossessing, foreclosing on (if applicable) and
liquidating the related Manufactured Home.
As part of its servicing fees, the Servicer will also be entitled to
retain, as compensation for the additional services provided in connection with
the Agreement, any late payment fees made by Obligors, extension fees paid by
Obligors for the extension of scheduled payments and assumption fees paid in
connection with permitted assumptions of Assets by purchasers of the related
Manufactured Homes, as well as investment earnings on funds in the Certificate
Account.
ADVANCES
On or prior to the Remittance Date for each Distribution Date, the
Servicer will either (1) deposit from its own funds the related aggregate P&I
Advance into the Certificate Account; (2) cause appropriate entries to be made
in the records of the Certificate Account that funds in the Certificate Account
that are not part of the Available Distribution for the related Distribution
Date have been used to make the aggregate P&I Advance; (3) if the Certificate
Account is maintained by the Trustee, instruct the Trustee to use investment
earnings on the Certificate Account to defray the Servicer's P&I Advance
obligation; or (4) make (or cause to be made) the aggregate P&I Advance through
any combination of the methods described in clauses (1), (2) and (3) above. Any
funds held for future distribution and used in accordance with clause (2) above
must be restored by the Servicer from its own funds or from early payments
collected on the Assets when they become part of a future Available
Distribution. The aggregate P&I Advance for a Distribution Date is the sum of
delinquent scheduled Monthly Payments due in the related Collection Period,
exclusive of all Non-recoverable Advances.
P&I Advances are intended to maintain a regular flow of scheduled
interest and principal payments to Certificateholders rather than to guarantee
or insure against losses.
The Servicer will also be obligated to make advances ("Servicing
Advances"), to the extent the Servicer deems such Advances recoverable out of
Liquidation Proceeds or from collections on the related Asset, in respect of
Liquidation Expenses and certain taxes and insurance premiums not paid by an
Obligor on a timely basis.
The Servicer will reimburse itself for P&I Advances and Servicing
Advances out of collections of the late payments in respect of which such
Advances were made. In addition, upon the determination that a Non-
S-51
recoverable Advance has been made in respect of an Asset or upon an Asset
becoming a Liquidated Loan, the Servicer will reimburse itself out of funds in
the Certificate Account for unreimbursed amounts advanced by it in respect of
such Asset.
[COMPENSATING INTEREST
If an Asset is liquidated or prepaid in full other than on a Due Date,
the Obligor generally is only required to pay interest to the date of
liquidation or prepayment. In such event, for so long as Oakwood is the Servicer
of the related Asset, the Servicer is obligated to pay interest to the next Due
Date (as further defined in the "Glossary" in the Prospectus, "Compensating
Interest"), so long as such amount does not exceed the Servicer's aggregate
servicing compensation for such month.]
SUCCESSORS TO SERVICER; DELEGATION OF DUTIES
Any entity with which the Servicer is merged or consolidated, or any
entity resulting from any merger, conversion or consolidation to which the
Servicer is a party, or any entity succeeding to the business of the Servicer,
will be the successor to the Servicer under the Agreement so long as each Rating
Agency has delivered to the Trustee a letter to the effect that such
successorship will not result in a downgrading of the rating then assigned by
such Rating Agency to any Class of the Certificates. The Servicer may delegate
certain computational, data processing, collection and foreclosure (including
repossession) duties under the Agreement without any notice to or consent from
the Company or the Trustee, provided that the Servicer will remain fully
responsible for the performance of such duties.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Certificates will be used to purchase the Assets simultaneously and to pay
other expenses connected with pooling the Assets and issuing the Certificates.
UNDERWRITING
The Company and Oakwood have entered into an underwriting agreement
dated ___________ __, 199__ (the "Underwriting Agreement") with
_________________ (the "Underwriter"). Subject to the terms and conditions set
forth in the Underwriting Agreement, the Company has agreed to sell to the
Underwriter and the Underwriter has severally agreed to purchase, the principal
amount of the Offered Certificates set forth below opposite its name.
Class A-1 Class A-2 Class A-3
[Underwriter] $__________ $__________ $___________
- ---------------
[Underwriter] $__________ $__________ $___________
- ---------------
Class B-1
[Underwriter] $__________
The underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent and that the Underwriter
will be obligated to purchase all of the Offered Certificates if any of the
Offered Certificates are purchased.
S-52
The Company has been advised that the Underwriter proposes to offer the
Offered Certificates to the public initially at the respective public offering
prices set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such prices less a concession not in excess of the amount set forth
below for each Class. The Underwriter and such dealers may allow a discount not
in excess of the amount set forth below for each Class to certain other dealers.
After the initial public offering of the Offered Certificates, the public
offering prices and concessions and discounts to dealers may be changed by the
Underwriter.
Concession Discount
(Percent of (Percent of
Principal Amount) Principal Amount)
Class A-1 _____% _____%
Class A-2 _____% _____%
Class A-3 _____% _____%
Class B-1 _____% _____%
Class B-2 _____% _____%
The Underwriter and any dealers that participate with the Underwriter
in the distribution of the Offered Certificates may be deemed to be
underwriters, and any discounts, concessions or commissions received by them,
and any profit on the resale of the Offered Certificates purchased by them, may
be deemed to be underwriting discounts and commissions under the Securities Act
of 1933, as amended (the "Act").
The Company and Oakwood have agreed to indemnify the Underwriter
against certain civil liabilities, including liabilities under the Act, to the
extent and under the circumstances set forth in the Underwriting Agreement.
[Until the distribution of the Offered Certificates is completed, rules
of the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Offered Certificates. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Offered Certificates. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Offered Certificates.
In general, purchases of a security for the purpose of stabilization
could cause the price of the security to be higher than it might be in the
absence of such purchases.
Neither the Company or any of its affiliates nor any of the
Underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Offered Certificates. In addition, neither the Company or any of
its affiliates nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.]
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Hunton &
Williams, Richmond, Virginia, and for the Underwriter by
________________________. The material federal income tax consequences of the
Offered Certificates will be passed upon for the Company by Hunton & Williams.
S-53
ERISA CONSIDERATIONS
Fiduciaries of employee benefit plans and certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans, and collective investment funds in which such plans, accounts,
annuities or arrangements are invested (collectively, "Plans"), that are subject
to ERISA or corresponding provisions of the Code should carefully review with
their legal advisors whether the purchase or holding of any Certificates could
result in unfavorable consequences for the Plan or its fiduciaries under the
Plan Asset Regulations (as defined in the Prospectus) or the prohibited
transaction rules of ERISA or the Code. Prospective investors should be aware
that, although certain exceptions from the application of the Plan Asset
Regulations and the prohibited transaction rules exist, there can be no
assurance that any such exception will apply with respect to the acquisition of
a Certificate. See "ERISA Considerations" in the Prospectus.
Sections 406 and 407 of ERISA and Section 4975 of the Code prohibit
certain transactions that involve (1) a Plan that is subject to ERISA and any
party in interest or disqualified person with respect to the Plan and (2) plan
assets. The Plan Asset Regulations define "plan assets" to include not only
securities (such as the Certificates) held by a Plan but also the underlying
assets of the issuer of any equity securities (the "Look-Through Rule"), unless
one or more exceptions specified in the regulations are satisfied. The Offered
Certificates are treated as equity securities for purposes of the Plan Asset
Regulations. Nonetheless, the Look-Through Rule will not apply to the Offered
Certificates as long as one or more of the exceptions specified in the Plan
Asset Regulations are satisfied. One exception to the Look-Through Rule will
apply if the security is registered under the Securities Exchange Act of 1934,
as amended, is freely transferable and is part of a class of securities that is
held by more than 100 unrelated investors (the "Publicly Offered Exception").
Another exception will apply if, immediately after the most recent acquisition
of an equity interest, "benefit plan investors," within the meaning of the Plan
Asset Regulations, do not own 25% or more of the value of any class of equity
interests in the related trust (the "Insignificant Participation Exception").
Based on the information available to the Underwriters at the time of the
printing of the Prospectus, there can be no assurance that either the Publicly
Offered Exception or the Insignificant Participation Exception will apply to
either the initial or subsequent purchases of the Offered Certificates.
The U.S. Department of Labor has granted an administrative exemption to
the Underwriter (Prohibited Transaction Exemption __-___; Exemption Application
No. ______, __ Fed. Reg. ______ (19__))(referred to herein as the "Exemption")
from certain of the prohibited transaction rules of ERISA and the related excise
tax provisions of Section 4975 of the Code with respect to the initial purchase,
the holding and the subsequent resale by Plans of certificates in pass-through
trusts that consist of certain receivables, loans, and other obligations and
that meet the conditions and requirements of the Exemption. The receivables
covered by the Exemption include manufactured housing installment sales
contracts such as the Contracts.
Among the general conditions that must be satisfied for the Exemption
to apply are the following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction
with an unrelated party;
(2) the rights and interests evidenced by the certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the related trust;
(3) the certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three
highest generic rating categories from either S&P, Fitch, Moody's
Investors Service, Inc. ("Moody's") or Duff & Phelps Inc. ("D&P");
(4) the trustee of the related trust must not be an affiliate
of any other member of the Restricted Group (as defined below);
S-54
(5) the sum of all payments made to and retained by the
Underwriter in connection with the distribution of the certificates
represents not more than reasonable compensation for underwriting the
certificates;
(6) the sum of all payments made to and retained by the
Company pursuant to the assignment of the loans to the trust represents
not more than the fair market value of such loans; and
(7) the sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for such
person's services under any servicing agreement and reimbursement of
the Servicer's reasonable expenses in connection therewith.
The Exemption defines the term "reasonable compensation" by reference to DOL
Regulation ss. 2550.408c-2, 29 C.F.R. ss. 2550.480c-2, which states that whether
compensation is reasonable depends upon the particular facts and circumstances
of each case. Each fiduciary of a Plan considering the purchase of an Offered
Certificate should satisfy itself that all amounts paid to or retained by the
Underwriters, the Company and the Servicer of the Contracts represent reasonable
compensation for purposes of the Exemption. In addition, it is a condition of
the Exemption that the Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and
Exchange Commission under the Securities Act of 1933, as amended. Furthermore,
in order for its certificates to qualify under the Exemption, a trust must meet
the following requirements: (a) the corpus of the trust must consist solely of
assets of the type that have been included in other investment pools; (b)
certificates in such other investment pools must have been rated in one of the
three highest rating categories of S&P, Moody's, D&P or Fitch for at least one
year prior to the Plan's acquisition of certificates; and (c) 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 certificates.
The Exemption does not apply to Plans sponsored by the Company, the
Underwriter, Oakwood, the Trustee, the Servicer and any obligor with respect to
Contracts included in the Trust constituting more than five percent of the
aggregate unamortized principal balance of the assets in the trust, or any
affiliate of such parties (the "Restricted Group"). Moreover, the Exemption
provides certain Plan fiduciaries relief from certain self-dealing/conflict of
interest prohibited transactions only if, among other requirements, (a) in the
case of an acquisition in connection with the initial issuance of certificates,
at least 50% of each class of certificates in which Plans have invested is
acquired by persons independent of the Restricted Group and at least 50% of the
aggregate interest in the trust is acquired by persons independent of the
Restricted Group; (b) such fiduciary (or its affiliate) is an obligor with
respect to five percent or less of the fair market value of the obligations
contained in the trust; (c) the Plan's investment in certificates of any class
does not exceed 25% of all of the certificates of that class outstanding at the
time of the acquisition; and (d) immediately after the acquisition, no more than
25% of the assets of the Plan with respect to which such person is a fiduciary
is invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity.
The Exemption may apply to the acquisition and holding of the Class A-1
and Class A-2 Certificates by Plans provided that all conditions of the
Exemption are met. Prospective investors should be aware, however, that even if
the conditions specified in the Exemption are met, the scope of the relief
provided by the Exemption might not cover all acts that might be construed as
prohibited transactions. In addition, one or more alternative exemptions may be
available with respect to certain prohibited transactions to which the Exemption
is not applicable, depending in part upon the Class of Certificate to be
acquired, the type of Plan fiduciary that is making the decision to acquire such
Certificate and the circumstances under which such decision is made, including,
but not limited to, (a) PTCE 91-38, regarding investments by bank collective
investment funds; (b) PTCE 90-1, regarding investments by insurance company
pooled separate accounts; or (c) PTCE 83-1, regarding acquisitions by Plans of
interests in mortgage pools. Before purchasing Class A-1 or Class A-2
Certificates, a Plan subject to the fiduciary responsibility provisions of ERISA
or described in Section 4975(e)(1) of the Code should consult with its counsel
to determine whether the conditions of the Exemption or any other exemptions
would be met. A purchaser of Class A-1 or Class A-2 Certificates should be
aware, however, that even if the conditions specified in one or more exemptions
are met,
S-55
the scope of the relief provided by an exemption might not cover all acts that
might be construed as prohibited transactions. In addition, any Plan Investor
contemplating an investment in the Senior Certificates should note that the
duties and obligations of the Trustee and the Servicer are limited to those
expressly set forth in the Agreement, and such specified duties and obligations
may not comport with or satisfy the provisions of ERISA setting forth the
fiduciary duties of Plan fiduciaries.
THE EXEMPTION, AS WELL AS CERTAIN OF THE OTHER EXEMPTIONS NOTED ABOVE,
WILL NOT APPLY TO THE PURCHASE, SALE AND HOLDING OF SUBORDINATED SECURITIES.
BECAUSE THE CLASS A-3 CERTIFICATES AND CLASS B-1 CERTIFICATES ARE SUBORDINATED
SECURITIES, THE EXEMPTION WILL NOT APPLY TO THE PURCHASE, SALE, OR HOLDING OF
SUCH CERTIFICATES. ACCORDINGLY, THE CLASS A-3 CERTIFICATES AND CLASS B-1
CERTIFICATES WILL NOT BE OFFERED FOR SALE TO A PLAN OR PLAN INVESTOR. EACH
PURCHASER OF A CLASS A-3 CERTIFICATE OR CLASS B-1 CERTIFICATE, BY VIRTUE OF ITS
RECEIPT OF SUCH CERTIFICATE, WILL BE DEEMED TO HAVE REPRESENTED THAT IT IS NOT A
PLAN OR A PLAN INVESTOR.
RATINGS
It is a condition to their issuance that each Class of Offered
Certificates obtain the ratings specified on the cover page hereof from the
Rating Agencies specified on the cover page hereof.
[INSERT LANGUAGE DESCRIBING EACH APPLICABLE RATING CATEGORY]
The ratings on asset-backed pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions on the
underlying assets to which they are entitled. Rating opinions address the
structural, legal and issuer-related aspects associated with the securities,
including the nature of the underlying assets. Ratings on pass-through
certificates do not represent any assessment of the likelihood that principal
prepayments will be made by borrowers with respect to the underlying assets or
of the degree to which the rate of such prepayments might differ from that
originally anticipated. As a result, the ratings do not address the possibility
that holders of the Offered Certificates might suffer a lower than anticipated
yield in the event of rapid prepayments of the Assets or in the event that the
Trust is terminated prior to the latest Final Scheduled Distribution Date for
the Certificates. In addition, the ratings of the Offered Certificates do not
address the possibility that, in the event of the bankruptcy of DFC or the
Company, the issuance and sale of the Offered Certificates might be
recharacterized as a financing and that, as a result of such recharacterization,
distributions on the Offered Certificates may be delayed or altered. See
"Certain Other Considerations" herein.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each security rating should be evaluated
independently of any other security rating.
The Company will request _______________ and ________________ to rate
the Offered Certificates. There can be no assurance as to whether any rating
agency not requested to rate the Offered Certificates will nonetheless issue a
rating and, if so, what such rating would be. A rating assigned to the Offered
Certificates by a rating agency that has not been requested by the Company to do
so may be lower than the rating assigned by a Rating Agency pursuant to the
Company's request.
LEGAL INVESTMENT CONSIDERATIONS
The Class A-1 and Class A-2 Certificates will constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA") for so long as they are rated in one of the two highest
rating categories by one or more nationally recognized statistical rating
organizations. As such, the Class A-1 and Class A-2 Certificates will be legal
investments for certain entities to the extent provided in SMMEA,
S-56
subject to state laws overriding SMMEA. A number of states have enacted
legislation overriding the legal investment provisions of SMMEA. See "Legal
Investment Considerations" in the Prospectus. THE CLASS A-3 AND CLASS B-1
CERTIFICATES WILL NOT CONSTITUTE "MORTGAGE RELATED SECURITIES" FOR PURPOSES OF
SMMEA BECAUSE SUCH SECURITIES WILL NOT BE RATED IN ONE OF THE TWO HIGHEST RATING
CATEGORIES BY A NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION.
The appropriate characterization of the Class A-3 and Class B-1
Certificates under various legal investment restrictions, and thus the ability
of investors subject to such restrictions to purchase such Certificates, is
subject to significant interpretative uncertainties.
Any financial institution that is subject to the jurisdiction of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision, the National Credit Union Administration, any state insurance
commission, or any other federal or state agencies with similar authority should
review any applicable rules, guidelines and regulations prior to purchasing any
Certificates. Financial institutions should review and consider the
applicability of the Federal Financial Institutions Examination Counsel
Supervisory Policy Statement on the Selection of Securities Dealers and
Unsuitable Investment Practices (to the extent adopted by their respective
federal regulators), which, among other things, sets forth guidelines for
investing in certain types of mortgage related securities and prohibits
investment in certain "high-risk" mortgage securities.
The Company makes no representations as to the proper characterization
of any Class of the Offered Certificates for legal investment or other purposes,
or as to the legality of investment by particular investors in any Class of the
Offered Certificates under applicable legal investment restrictions. The
uncertainties may adversely affect the liquidity of any Class of Offered
Certificates. Accordingly, 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 under SMMEA or are subject to
investment, capital or other restrictions.
See "Legal Investment Considerations" in the Prospectus.
S-57
No person has been authorized to give any information or to make
any representations other than those contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representations must not be relied upon. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the Offered Certificates offered hereby, nor an
offer of the Certificates in any state or jurisdiction in which, or to any
person to whom, such offer would be unlawful. The delivery of this Prospectus
Supplement or any Prospectus at any time does not imply that information herein
or therein is correct as of any time subsequent to its date; however, if any
material change occurs while this Prospectus Supplement or the Prospectus is
required by law to be delivered, this Prospectus Supplement or the Prospectus
will be amended or supplemented accordingly.
--------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
Summary of Terms....................................................... S-4
Risk Factors............................................................S-19
The Asset Pool..........................................................S-21
Maturity and Prepayment Considerations..................................S-28
Yield on the Offered Certificates.......................................S-33
Description of the Offered Certificates.................................S-34
The Trust...............................................................S-40
Servicing of the Assets.................................................S-41
Use of Proceeds.........................................................S-48
Underwriting............................................................S-48
Legal Matters...........................................................S-49
ERISA Considerations....................................................S-49
Ratings.................................................................S-51
Legal Investment Considerations.........................................S-52
PROSPECTUS
Additional Information....................................................ii
Incorporation of Certain Documents by Reference...........................ii
Summary of Terms...........................................................1
Risk Factors..............................................................12
Description of the Certificates...........................................17
Maturity and Prepayment Considerations....................................22
Yield Considerations......................................................23
The Trusts................................................................24
Underwriting Policies.....................................................40
Sale and Servicing of Contracts and Mortgage Loans........................43
The Pooling and Servicing Agreements......................................53
Certain Legal Aspects of Contracts and Mortgage Loans.....................57
Use of Proceeds...........................................................68
The Company...............................................................68
The Servicer..............................................................69
Certain Federal Income Tax Consequences...................................69
State Tax Consequences...................................................104
ERISA Considerations.....................................................104
Plan of Distribution.....................................................106
Legal Investment Considerations..........................................106
Legal Matters............................................................107
Glossary.................................................................108
DEUTSCHE FINANCIAL CAPITAL
SECURITIZATION LLC
Seller
$ (Approximate)
Senior/Subordinated
Pass-Through Certificates,
Series 19 -X
$ (Approximate)
Class A-1
$ (Approximate)
Class A-2
$ (Approximate)
Class A-3
$ (Approximate)
Class B-1
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
[NAME OF UNDERWRITER]
,