SEC Info  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Impac Secured Assets Corp – ‘424B5’ on 9/1/04 re: Impac Secured Assets Corp Mortgage Pass-Through Certificates, Series 2004-3

On:  Wednesday, 9/1/04, at 3:00pm ET   ·   Accession #:  882377-4-1809   ·   File #s:  333-117991, -01

Previous ‘424B5’:  ‘424B5’ on 5/28/04   ·   Next:  ‘424B5’ on 1/3/05   ·   Latest:  ‘424B5’ on 6/13/05

Find Words in Filings emoji
 
  in    Show  and   Hints

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/01/04  Impac Secured Assets Corp         424B5                  1:1.1M Impac Secured Assets Corp… 2004-3 Thacher Proffitt… LLP/FA

Prospectus   —   Rule 424(b)(5)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Impac Secured Assets Corp                            311   1.59M 


Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Impac Funding Corporation
2Table of Contents
3Summary of Prospectus Supplement
4Offered Certificates
6The Mortgage Loans
"Loan Group 1
"Loan Group 2
7Pre-Funding Account
8Interest Coverage Accounts
"Interest Distributions
9The Corridor Contracts
10Federal Income Tax Consequences
"Ratings
"Legal Investment
"ERISA Considerations
11Risk Factors
14The Pass-Through Rates on the Offered Certificates are Subject to Limitation
21The Mortgage Pool
"General
41Credit Scores
60Underwriting Standards
76Yield on the Certificates
79Yield Sensitivity of the Mezzanine Certificates
111Percent of Initial Certificate Principal Balance Outstanding at the Following Percentages of the Prepayment Assumption
124The Certificate Insurer
126Description of the Certificates
127Registration of the Book-Entry Certificates
128Definitive Certificates
"Calculation of One-Month LIBOR for the Offered Certificates
129Allocation of Available Funds
"Interest Distributions on the Offered Certificates
130Principal Distributions on the Offered Certificates
132Overcollateralization Provisions
143Pooling and Servicing Agreement
144The Trustee
145The Subservicers
146Servicing and Other Compensation and Payment of Expenses
"Termination
150Method of Distribution
151Secondary Market
"Experts
"Legal Opinions
154Glossary
170Annex I
"Global Clearance, Settlement and Tax Documentation Procedures
176Introduction
177The Mortgage Pools
185Qualifications of Originators and Sellers
186Representations by Sellers
189Servicing of Mortgage Loans
"The Master Servicer
190Collection and Other Servicing Procedures; Mortgage Loan Modifications
192Subservicers
"Special Servicers
"Realization Upon or Sale of Defaulted Mortgage Loans
195Servicing and Other Compensation and Payment of Expenses; Retained Interest
196Evidence as to Compliance
197Description of the Securities
199Form of Securities
200Global Securities
203Assignment of Trust Fund Assets
206Certificate Account
210Distributions
"Distributions of Interest and Principal on the Securities
212Allocation of Losses and Shortfalls
"Advances
213Reports to Securityholders
214Description of Credit Enhancement
215Subordinate Securities
"Cross-Support
216Overcollateralization
"Financial Guaranty Insurance Policy
"Mortgage Pool Insurance Policies
218Letter of Credit
"Special Hazard Insurance Policies
219Reserve Funds
220Cash Flow Agreements
"Maintenance of Credit Enhancement
222Reduction or Substitution of Credit Enhancement
223Other Financial Obligations Related to the Securities
"Swaps and Yield Supplement Agreements
"Purchase Obligations
224Primary Mortgage Insurance, Hazard Insurance; Claims Thereunder
"Primary Mortgage Insurance Policies
225Hazard Insurance Policies
227FHA Insurance
"VA Mortgage Guaranty
228The Company
"Impac Mortgage Holdings, Inc
229The Agreements
"Certain Matters Regarding the Master Servicer and the Company
230Events of Default and Rights Upon Event Default
234Amendment
235Termination; Retirement of Securities
237Duties of the Trustee
"Some Matters Regarding the Trustee
"Resignation and Removal of the Trustee
238Yield Considerations
240Maturity and Prepayment Considerations
242Legal Aspects of Mortgage Loans
"Mortgages
243Cooperative Mortgage Loans
244Tax Aspects of Cooperative Ownership
"Leases and Rents
"Contracts
246Foreclosure on Mortgages and Some Contracts
248Foreclosure on Shares of Cooperatives
249Repossession with respect to Contracts
251Rights of Redemption
"Anti-Deficiency Legislation and Other Limitations on Lenders
253Environmental Legislation
254Consumer Protection Laws with Respect to Contracts
255Enforceability of Some Provisions
257Subordinate Financing
"Installment Contracts
258Applicability of Usury Laws
"Alternative Mortgage Instruments
259Formaldehyde Litigation with Respect to Contracts
"Servicemembers' Civil Relief Act of 1940
260Forfeitures in Drug and RICO Proceedings
"Junior Mortgages
261Negative Amortization Loans
262REMICs
"Classification of Remics
263Characterization of Investments in Remic Certificates
"Taxation of Owners of REMIC Regular Certificates
264Original Issue Discount
266Market Discount
268Premium
"Taxation of Owners of REMIC Residual Certificates
270Taxable Income of the REMIC
271Basis Rules, Net Losses and Distributions
272Excess Inclusions
274Possible Pass-Through of Miscellaneous Itemized Deductions
275Sales of REMIC Certificates
276Prohibited Transactions and Other Possible REMIC Taxes
278Reporting and Other Administrative Matters
279Backup Withholding with Respect to REMIC Certificates
"Foreign investors in REMIC Certificates
280Notes
"Grantor Trust Funds
281Characterization of Investments in Grantor Trust Certificates
"Taxation of Owners of Grantor Trust Fractional Interest Certificates
282If Stripped Bond Rules Apply
284If Stripped Bond Rules Do Not Apply
287Taxation of Owners of Grantor Trust Strip Certificates
288Possible Application of Contingent Payment Rules
289Sales of Grantor Trust Certificates
"Grantor Trust Reporting
290State and Other Tax Consequences
295Representation from Plans Investing in Notes with "Substantial Equity Features" or Non-exempt Certificates
296Tax Exempt Investors
"Consultation with Counsel
"Legal Investment Matters
298Use of Proceeds
"Methods of Distribution
299Legal Matters
"Financial Information
"Rating
300Available Information
"Incorporation of Information by Reference
311Underwriters
424B51st Page of 311TOCTopPreviousNextBottomJust 1st
 

PROSPECTUS SUPPLEMENT dated August 30, 2004 (to Prospectus dated August 30, 2004) $2,300,000,000 [insert Impac logo] IMPAC FUNDING CORPORATION MASTER SERVICER IMPAC SECURED ASSETS CORP. COMPANY MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2004-3 -------------------------------------------------------------------------------- YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-11 IN THIS PROSPECTUS SUPPLEMENT. -------------------------------------------------------------------------------- THE TRUST The trust will consist primarily of a pool of one- to four-family adjustable-rate first lien residential mortgage loans divided into two loan groups. The trust will be represented by seventeen classes of certificates, thirteen of which are offered under this prospectus supplement. CREDIT ENHANCEMENT The offered certificates will have credit enhancement in the form of excess interest and overcollateralization, cross-collateralization between the loan groups to cover realized losses, subordination and a certificate guaranty insurance policy issued by Ambac Assurance Corporation for the benefit of the Class 2-A Certificates only. In addition, the offered certificates may benefit from a series of corridor contract payments pursuant to corridor contracts which is intended partially to mitigate interest rate risk. The price to investors will vary from time to time and will be determined at the time of sale. The proceeds to the company from the offering will be approximately 99.75% of the aggregate certificate principal balance of the offered certificates, less expenses estimated to be approximately $900,000. SEE "METHOD OF DISTRIBUTION" IN THIS PROSPECTUS SUPPLEMENT. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. COUNTRYWIDE SECURITIES CORPORATION BEAR, STEARNS & CO. INC. UNDERWRITERS
424B52nd Page of 311TOC1stPreviousNextBottomJust 2nd
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. We provide information to you about the offered certificates in two separate documents that provide progressively more detail: o the accompanying prospectus, which provides general information, some of which may not apply to this series of certificates; and o this prospectus supplement, which describes the specific terms of this series of certificates. The company's principal offices are located at 1401 Dove Street, Newport Beach, CA 92660 and its phone number is (949) 475-3600. TABLE OF CONTENTS PROSPECTUS SUPPLEMENT PAGE Summary of Prospectus Supplement.............................................S-3 Risk Factors................................................................S-11 The Mortgage Pool...........................................................S-21 Yield on the Certificates...................................................S-76 The Certificate Insurer....................................................S-124 Description of the Certificates............................................S-126 Pooling and Servicing Agreement............................................S-143 Federal Income Tax Consequences............................................S-147 Method of Distribution.....................................................S-150 Secondary Market...........................................................S-151 Experts....................................................................S-151 Legal Opinions.............................................................S-151 Ratings....................................................................S-151 Legal Investment...........................................................S-152 ERISA Considerations.......................................................S-152 Glossary...................................................................S-154 Annex I -- Global Clearance, Settlement and Tax Documentation Procedures...........................................I-1 S-2
424B53rd Page of 311TOC1stPreviousNextBottomJust 3rd
SUMMARY OF PROSPECTUS SUPPLEMENT THE FOLLOWING SUMMARY IS A VERY BROAD OVERVIEW OF THE OFFERED CERTIFICATES AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERED CERTIFICATES, READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. A GLOSSARY IS INCLUDED AT THE END OF THIS PROSPECTUS SUPPLEMENT. CAPITALIZED TERMS USED BUT NOT DEFINED IN THE GLOSSARY AT THE END OF THIS PROSPECTUS SUPPLEMENT HAVE THE MEANINGS ASSIGNED TO THEM IN THE GLOSSARY AT THE END OF THE PROSPECTUS. [Enlarge/Download Table] Title of Series..................... Impac Secured Assets Corp., Mortgage Pass-Through Certificates, Series 2004-3. Cut-off Date........................ August 1, 2004. Closing Date........................ August 31, 2004. Company Impac Secured Assets Corp., an affiliate of Impac Funding Corporation. Seller.............................. Impac Funding Corporation. Master Servicer..................... Impac Funding Corporation. Subservicers........................ Countrywide Home Loans Servicing LP and Wells Fargo Bank, N.A. Trustee............................. Deutsche Bank National Trust Company. Securities Administrator............ Wells Fargo Bank, N.A. Distribution Date................... Distributions on the offered certificates will be made on the 25th day of each month or, if the 25th day is not a business day, on the next business day, beginning in September 2004. Offered Certificates................ The classes of offered certificates and their pass-through rates and certificate principal balances are set forth in the table below. S-3
424B54th Page of 311TOC1stPreviousNextBottomJust 4th
[Enlarge/Download Table] OFFERED CERTIFICATES PASS-THROUGH INITIAL CERTIFICATE INITIAL RATING CLASS RATE PRINCIPAL BALANCE (S&P/MOODY'S)(1) DESIGNATION --------------------------------------------------------------------------------------------------------------------------------- CLASS A CERTIFICATES: --------------------------------------------------------------------------------------------------------------------------------- 1-A-1 Adjustable Rate $ 475,414,000 AAA/Aaa Super Senior/Adjustable Rate 1-A-2 Adjustable Rate $ 200,000,000 AAA/Aaa Super Senior/Adjustable Rate 1-A-3 Adjustable Rate $ 145,231,000 AAA/Aaa Super Senior/Adjustable Rate 1-A-4 Adjustable Rate $ 554,152,000 AAA/Aaa Super Senior/Adjustable Rate 1-A-5 Adjustable Rate $ 152,755,000 AAA/Aaa Senior Support/Adjustable Rate 2-A-1 Adjustable Rate $ 400,124,000 AAA/Aaa Senior/Insured/Adjustable Rate 2-A-2 Adjustable Rate $ 225,124,000 AAA/Aaa Senior/Insured/Adjustable Rate Total Class A Certificates: $ 2,152,800,000 --------------------------------------------------------------------------------------------------------------------------------- [Enlarge/Download Table] MEZZANINE CERTIFICATES: --------------------------------------------------------------------------------------------------------------------------------- M-1 Adjustable Rate $ 26,450,000 AA+/Aa1 Mezzanine/Adjustable Rate M-2 Adjustable Rate $ 23,000,000 AA+/Aa2 Mezzanine/Adjustable Rate M-3 Adjustable Rate $ 23,000,000 AA+/Aa3 Mezzanine/Adjustable Rate M-4 Adjustable Rate $ 23,000,000 AA/A1 Mezzanine/Adjustable Rate M-5 Adjustable Rate $ 23,000,000 AA/A2 Mezzanine/Adjustable Rate B Adjustable Rate $ 28,750,000 A+/Baa1 Mezzanine/Adjustable Rate Total Mezzanine Certificates: $ 147,200,000 --------------------------------------------------------------------------------------------------------------------------------- Total offered certificates: $ 2,300,000,000 --------------------------------------------------------------------------------------------------------------------------------- (1) SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT. OTHER INFORMATION: CLASS A, CLASS M AND CLASS B CERTIFICATES: The pass-through rate on the Class A, Class M and Class B Certificates will be equal to the least of: (1) one-month LIBOR plus the related certificate margin set forth on the following page; (2) 11.25% per annum; and (3) (A) with respect to the Class A Certificates, a per annum rate equal to the weighted average of the net mortgage rates on the related mortgage loans as described in this prospectus supplement and (B) with respect to the Class M Certificates and Class B Certificates, a per annum rate equal to the weighted average (weighted in proportion to the results of subtracting from the aggregate principal balance of each loan group the aggregate Certificate Principal Balance of the related Class A Certificates) of (i) the weighted average of the net mortgage rates of the mortgage loans in loan group 1 and (ii) the weighted average of the net mortgage rates of the mortgage loans in loan group 2, in each case, as described in this prospectus supplement. S-4
424B55th Page of 311TOC1stPreviousNextBottomJust 5th
CERTIFICATE MARGIN CLASS (1) (2) 1-A-1................................... 0.200% 0.400% 1-A-2................................... 0.350% 0.700% 1-A-3................................... 0.530% 1.060% 1-A-4................................... 0.400% 0.800% 1-A-5................................... 0.470% 0.940% 2-A-1................................... 0.320% 0.640% 2-A-2................................... 0.320% 0.640% M-1..................................... 0.600% 0.900% M-2..................................... 0.650% 0.975% M-3..................................... 0.700% 1.050% M-4..................................... 1.150% 1.725% M-5..................................... 1.250% 1.875% B....................................... 1.850% 2.775% ______ (1) Initially. (2) On and after the step-up date as described in this prospectus supplement. S-5
424B56th Page of 311TOC1stPreviousNextBottomJust 6th
THE TRUST The company will establish a trust with respect to the Series 2004-3 Certificates, pursuant to a pooling and servicing agreement dated as of August 1, 2004 among the company, the master servicer, the securities administrator and the trustee. On the closing date, the company will deposit into the trust the mortgage loans, the original pre-funded amount described below and an amount as specified in the pooling and servicing agreement into the interest coverage accounts described below. There are seventeen classes of certificates representing the trust, thirteen of which are offered by this prospectus supplement. The trust will also include a certificate guaranty insurance policy provided by Ambac Assurance Corporation, which will guarantee certain payments on the Class 2-A Certificates. In addition, the company will assign to the trust four corridor contracts, which may cover interest shortfalls on the offered certificates. The certificates represent in the aggregate the entire beneficial ownership interest in the trust. Distributions of interest and/or principal on the offered certificates will be made only from payments received from the trust as described below. The Class C, Class P, Class R and Class R-X Certificates are the classes of certificates that are not offered by this prospectus supplement. SEE "DESCRIPTION OF THE CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT. THE MORTGAGE LOANS The mortgage loans will be divided into two mortgage loan groups, loan group 1 and loan group 2. LOAN GROUP 1 The mortgage loans in loan group 1 are one- to four-family, adjustable-rate residential mortgage loans secured by first liens on the related mortgaged property with mortgage loan balances at origination that may or may not conform to Fannie Mae or Freddie Mac loan limits. The interest rate on the mortgage loans in loan group 1 will adjust on each adjustment date to equal the sum of the related index and the related gross margin on such mortgage loan, subject to a maximum and minimum interest rate, as described in this prospectus supplement. LOAN GROUP 2 The mortgage loans in loan group 2 are one- to four-family, adjustable-rate residential mortgage loans secured by first liens on the related mortgaged property with mortgage loan balances at origination that conform to Fannie Mae or Freddie Mac loan limits. Notwithstanding these conforming balances, the Group 2 Loans have been originated according to underwriting standards that do not satisfy Fannie Mae or Freddie Mac underwriting criteria. The interest rate on the mortgage loans in loan group 2 will adjust on each adjustment date to equal the sum of the related index and the related gross margin on such mortgage loan, subject to a maximum and minimum interest rate, as described in this prospectus supplement. The mortgage loans in loan group 1 and loan group 2 will include initial mortgage loans and subsequent mortgage loans. The initial mortgage loans in loan group 1 and loan group 2 will be the mortgage loans deposited into the trust on the closing date. The subsequent mortgage loans in loan group 1 and loan group 2 will be the mortgage loans purchased with amounts on deposit in the related pre-funding account described in this prospectus supplement and S-6
424B57th Page of 311TOC1stPreviousNextBottomJust 7th
deposited in the trust no later than September 30, 2004. With respect to each loan group, the statistical information included in this prospectus supplement with respect to the mortgage loans in such loan group is based on a pool of sample mortgage loans. The characteristics of the final groups will not materially differ from the information provided with respect to the sample groups. Unless otherwise specified, all percentages described with respect to the sample mortgage loans are calculated based on the aggregate principal balance of the sample mortgage loans as of the cut-off date. It is expected that mortgage loans will be added to and certain sample mortgage loans will be deleted from the pool of sample mortgage loans to constitute the final groups of mortgage loans. The sample mortgage loans in loan group 1 have original terms to maturity of not greater than 30 years and the following characteristics as of the cut-off date: Range of mortgage rates (approximate): 2.875% to 10.000% Weighted average mortgage rate (approximate): 5.530% Weighted average remaining term to stated maturity (approximate): 359 months Range of principal balances (approximate): $9,154 to $4,000,000 Average principal balance: $268,377 Range of loan-to-value ratios s s (approximate): 12.90% to 100.00% Weighted average of loan-to- value ratios (approximate): 79.77% The sample mortgage loans in loan group 2 have original terms to maturity of not greater than 30 years and the following characteristics as of the cut-off date: Range of mortgage rates (approximate): 2.490% to 9.875% Weighted average mortgage rate (approximate): 5.566% Weighted average remaining term to stated maturity (approximate): 359 months Range of principal balances (approximate): $122,071 to $637,000 Average principal balance: $218,658 Range of loan-to-value ratios (approximate): 25.17% to 100.00% Weighted average of loan-to- value ratios (approximate): 80.94% FOR ADDITIONAL INFORMATION REGARDING THE MORTGAGE LOANS, SEE "THE MORTGAGE POOL" IN THIS PROSPECTUS SUPPLEMENT. Approximately 0.03%, 1.06%, 2.73%, 44.68% and 3.85% of the sample mortgage loans, by aggregate outstanding principal balance as of the cut-off date, are interest only for the first six months, two years, three years, five years and ten years, respectively, after origination. As a result, no principal payments will be received with respect to these mortgage loans during this period except in the case of a prepayment. PRE-FUNDING ACCOUNT On or before September 30, 2004, the company may sell and the securities administrator will be obligated to purchase, on behalf of the trust, with respect to loan group 1 and loan group 2, subsequent mortgage loans to be included in the related mortgage pool. On the closing date, the company will pay to the securities administrator on behalf of the trustee, with respect to each loan group, an amount equal to the difference between: the sum of the aggregate initial certificate principal balance of the related offered certificates and the initial overcollateralized amount and S-7
424B58th Page of 311TOC1stPreviousNextBottomJust 8th
the aggregate stated principal balance of the initial mortgage loans in the related loan group as of the cut-off date, which will be held by the securities administrator on behalf of the trustee in the related pre-funding account. The amounts on deposit in the pre- funding accounts will be reduced by the amounts thereof used to purchase the subsequent mortgage loans during the period from the closing date up to and including September 30, 2004. Any amounts remaining in the pre-funding accounts after September 30, 2004, will be distributed as principal on the next distribution date to the holders of the offered certificates. INTEREST COVERAGE ACCOUNTS On the closing date, the company will pay to the securities administrator for deposit in an interest coverage account with respect to each loan group, an amount which will be applied by the securities administrator, on behalf of the trustee, to cover shortfalls in the amount of interest generated by the mortgage loans in each loan group attributable to the pre-funding feature and loans that do not have a payment due during the first interest accrual period with respect to the certificates. FOR ADDITIONAL INFORMATION REGARDING THE INTEREST COVERAGE ACCOUNTS, SEE "DESCRIPTION OF THE CERTIFICATES--INTEREST COVERAGE ACCOUNTS" IN THIS PROSPECTUS SUPPLEMENT. THE OFFERED CERTIFICATES PRIORITY OF DISTRIBUTIONS FROM LOAN GROUP 1. In general, on any distribution date, funds available for distribution from payments and other amounts received on the mortgage loans in loan group 1 and on amounts in the related pre-funding account, after the payment of certain fees and expenses, will be distributed in the following order: INTEREST DISTRIBUTIONS first, to pay current interest and any previously unpaid interest, concurrently, on the Class 1-A Certificates; second, to pay current interest and any previously unpaid interest, concurrently, on the Class 2-A Certificates; and third, to pay current interest and any previously unpaid interest on the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates, in that order of priority. PRINCIPAL DISTRIBUTIONS Amounts available after distributions of interest on the Class 1-A Certificates and the Mezzanine Certificates will be used to pay principal (including the payment of amounts to create and maintain overcollateralization) on the Class 1-A Certificates and the Mezzanine Certificates, but only in the order of priority and in the amounts described herein. To the extent that the Class 1-A Certificates are no longer outstanding, such amounts available after distributions of interest on the Class 1-A Certificates and the Mezzanine Certificates will be used to pay principal (including the payment of amounts to create and maintain overcollateralization) on the Class 2-A Certificates. All principal payments on the mortgage loans from loan group 1 will be distributed among the offered certificates unless they are no longer outstanding. NET MONTHLY EXCESS CASHFLOW DISTRIBUTIONS Amounts available after distributions of interest and principal as described above will be the related net monthly excess cashflow and will be used for various purposes, including reimbursing the certificate insurer, maintaining the required level of overcollateralization with respect to the related and non-related loan groups and making distributions for reimbursement of losses. PRIORITY OF DISTRIBUTIONS FROM LOAN GROUP 2. In general, on any distribution date, funds available for distribution from payments and other amounts received on the mortgage loans in loan group 2 and on amounts in the related pre-funding account, after the payment of certain fees and expenses, will be distributed in the following order: S-8
424B59th Page of 311TOC1stPreviousNextBottomJust 9th
INTEREST DISTRIBUTIONS first, to pay current interest and any previously unpaid interest, concurrently, on the Class 2-A Certificates; second, to pay current interest and any previously unpaid interest, concurrently, on the Class 1-A Certificates; and third, to pay current interest and any previously unpaid interest on the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates, in that order of priority. PRINCIPAL DISTRIBUTIONS Amounts available after distributions of interest on the Class 2-A Certificates and the Mezzanine Certificates will be used to pay principal (including the payment of amounts to create and maintain overcollateralization) on the Class 2-A Certificates and the Mezzanine Certificates, but only in the order of priority and in the amounts described herein. To the extent that the Class 2-A Certificates are no longer outstanding, such amounts available after distributions of interest on the Class 2-A Certificates and the Mezzanine Certificates will be used to pay principal (including the payment of amounts to create and maintain overcollateralization) on the Class 1-A Certificates. All principal payments on the mortgage loans from loan group 2 will be distributed among the offered certificates unless they are no longer outstanding. NET MONTHLY EXCESS CASHFLOW DISTRIBUTIONS Amounts available after distributions of interest and principal as described above will be the related net monthly excess cashflow and will be used for various purposes, including reimbursing the certificate insurer, maintaining the required level of overcollateralization with respect to the related and non-related loan groups and making distributions for reimbursement of losses. SEE "DESCRIPTION OF THE CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT FOR ADDITIONAL INFORMATION. CREDIT ENHANCEMENT The credit enhancement provided for the benefit of the holders of the offered certificates consists of excess spread, overcollateralization related to each loan group, cross-collateralization between the loan groups to cover realized losses and, with respect to the Class 2-A Certificates only, a certificate guaranty insurance policy issued by Ambac Assurance Corporation for the benefit of the Class 2-A Certificates and the subordination provided to the more senior classes of certificates by the more subordinate classes of certificates as described in this prospectus supplement. SEE "THE CERTIFICATE INSURER" AND "DESCRIPTION OF THE CERTIFICATES--OVERCOLLATERALIZATION PROVISIONS," "--ALLOCATION OF REALIZED LOSSES," "--DESCRIPTION OF THE CERTIFICATE INSURANCE POLICY," "--SUBORDINATION," AND "--ALLOCATION OF LOSSES" IN THIS PROSPECTUS SUPPLEMENT. THE CORRIDOR CONTRACTS The holders of the offered certificates may benefit from a series of corridor contract payments from the corridor contract counterparty pursuant to the related corridor contract. The corridor contracts are intended to partially mitigate the interest rate risk that could result from the difference between one-month LIBOR plus the related certificate margin and the weighted average of the net mortgage rates of the mortgage loans as described in this prospectus supplement. The corridor contracts (other than the corridor contract related to the Class 2-A-1 Certificates) will terminate after the distribution date in January 2011. The corridor contract related to the Class 2-A-1 Certificates will terminate after the distribution date in August 2007. SEE "DESCRIPTION OF THE CERTIFICATES -- THE CORRIDOR CONTRACTS" IN THIS PROSPECTUS SUPPLEMENT. S-9
424B510th Page of 311TOC1stPreviousNextBottomJust 10th
OPTIONAL TERMINATION At its option, the Class C Certificateholder may purchase all of the mortgage loans, together with any properties in respect thereof acquired on behalf of the trust, and thereby effect termination and early retirement of the certificates on the distribution date after the aggregate stated principal balance of the mortgage loans, and properties acquired in respect thereof, remaining in the trust has been reduced to less than or equal to 10% of the sum of the aggregate stated principal balance of the initial mortgage loans as of the cut-off date and the aggregate amount deposited into the pre-funding accounts on the closing date. If the Class C Certificateholder fails to exercise such option, Countrywide Home Loans Servicing LP may purchase all of the mortgage loans, together with any properties in respect thereof acquired on behalf of the trust, and thereby effect termination and early retirement of the certificates on the distribution date after the aggregate stated principal balance of the mortgage loans, and properties acquired in respect thereof, remaining in the trust has been reduced to less than or equal to 5% of the sum of the aggregate stated principal balance of the initial mortgage loans as of the cut-off date and the aggregate amount deposited into the pre-funding accounts on the closing date. SEE "POOLING AND SERVICING AGREEMENT-- TERMINATION" IN THIS PROSPECTUS SUPPLEMENT. FEDERAL INCOME TAX CONSEQUENCES Elections will be made to treat the trust (excluding the corridor contracts, the pre-funding accounts, the interest coverage accounts and the reserve fund) as comprising two or more real estate mortgage investment conduits for federal income tax purposes. SEE "FEDERAL INCOME TAX CONSEQUENCES" IN THIS PROSPECTUS SUPPLEMENT. RATINGS When issued, the offered certificates will receive the ratings set forth on page S-4 of this prospectus supplement. The ratings on the offered certificates address the likelihood that holders of the offered certificates will receive all distributions on the underlying mortgage loans to which they are entitled. However, the ratings do not address the possibility that certificateholders might suffer a lower than anticipated yield. A security rating is not a recommendation to buy, sell or hold a security and is subject to change or withdrawal at any time by the assigning rating agency. The ratings also do not address the rate of principal prepayments on the mortgage loans. In particular, the rate of prepayments, if different than originally anticipated, could adversely affect the yield realized by holders of the offered certificates. SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT. LEGAL INVESTMENT The offered certificates, other than the Class B Certificates, will constitute "mortgage related securities" for purposes of SMMEA. The Class B Certificates will not constitute "mortgage related securities" for purposes of SMMEA. SEE "LEGAL INVESTMENT" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS. ERISA CONSIDERATIONS The offered certificates may be purchased by persons investing assets of employee benefit plans or individual retirement accounts, subject to important considerations. Plans should consult with their legal advisors before investing in the offered certificates. SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT. S-10
424B511th Page of 311TOC1stPreviousNextBottomJust 11th
RISK FACTORS You should carefully consider, among other things, the following factors in connection with the purchase of the offered certificates: THE OFFERED CERTIFICATES MAY HAVE LIMITED LIQUIDITY, SO YOU MAY BE UNABLE TO SELL YOUR SECURITIES OR MAY BE FORCED TO SELL THEM AT A DISCOUNT FROM THEIR FAIR MARKET VALUE There can be no assurance that a secondary market for the offered certificates will develop or, if one does develop, that it will provide holders of the offered certificates with liquidity of investment or that it will continue for the life of the offered certificates. As a result, any resale prices that may be available for any offered certificate in any market that may develop may be at a discount from the initial offering price or the fair market value thereof. The offered certificates will not be listed on any securities exchange. SOME OF THE MORTGAGE LOANS MAY HAVE BEEN AFFECTED BY HURRICANE CHARLEY, WHICH MAY RESULT IN LOSSES WITH RESPECT TO THESE MORTGAGE LOANS Hurricane Charley, which struck the state of Florida and surrounding areas on August 13 and 14, 2004, may have adversely affected mortgaged properties located in those areas. The seller will make a representation and warranty that no mortgaged property is subject to any material damage as of the closing date. It is unknown at this time how many mortgaged properties have been or may be affected by Hurricane Charley. No assurance can be given as to the effect of this event on the rate of delinquencies and losses on the mortgage loans secured by mortgaged properties that were or may be affected by Hurricane Charley. Any adverse impact as a result of this event may be borne by the holders of the offered certificates, particularly if the seller fails to repurchase any mortgage loan that breaches this representation and warranty. THE CREDIT ENHANCEMENT IS LIMITED, AND THE POTENTIAL INADEQUACY OF THE CREDIT ENHANCEMENT MAY CAUSE LOSSES OR SHORTFALLS TO BE INCURRED ON THE OFFERED CERTIFICATES The credit enhancement features described in the summary of this prospectus supplement are intended to enhance the likelihood that holders of the Class A Certificates, and to a limited extent, the holders of the Mezzanine Certificates, will receive regular payments of interest and principal. However, we cannot assure you that the applicable credit enhancement will adequately cover any shortfalls in cash available to pay your certificates as a result of delinquencies or defaults on the mortgage loans. On the Closing Date, the initial amount of overcollateralization will approximately equal the initial overcollateralization target amount of zero. However, commencing on the distribution date in February 2005, the overcollateralization target amount will increase to 0.35% of the sum of the aggregate stated principal balance of the initial mortgage loans and the original pre-funded amounts, as described herein. Cross-collateralization allows interest from a loan group to be paid to non-related Class A Certificates after payments to related Class A Certificates and net monthly excess cashflow from one loan group to cover realized losses in the other loan group to the extent provided in this prospectus supplement. However, this excess interest from a loan group is available solely to the extent the related certificates have received the interest and principal to which they are entitled, to the extent that any realized losses in the related loan group have been covered by net monthly excess cashflow and to the extent the certificate insurer has been reimbursed, and are subject to the priorities of payment in this prospectus supplement. SEE "DESCRIPTION OF THE CERTIFICATES -- OVERCOLLATERALIZATION PROVISIONS" in this prospectus supplement. If delinquencies or defaults occur on the mortgage loans, neither the master servicer nor any other entity will advance scheduled monthly payments of interest and principal on delinquent or defaulted S-11
424B512th Page of 311TOC1stPreviousNextBottomJust 12th
mortgage loans if, in the good faith judgment of the master servicer, these advances would not be ultimately recovered from the proceeds of the mortgage loan. If substantial losses occur as a result of defaults and delinquent payments on the mortgage loans, you may suffer losses. Losses on the mortgage loans in loan group 1, to the extent not covered by net monthly excess cashflow, overcollateralization or cross-collateralization, will be allocated first to the Class B, Class M-5, Class M-4, Class M-3, Class M-2 and Class M-1 Certificates, in that order, and then to the Class 1-A-5 Certificates, in each case, until the certificate principal balance of thereof has been reduced to zero. Losses on the mortgage loans in loan group 2, to the extent not covered by net monthly excess cashflow, overcollateralization or cross-collateralization, will be allocated to the Class B, Class M-5, Class M-4, Class M-3, Class M-2 and Class M-1 Certificates, in that order. Losses on the mortgage loans in loan group 1 will not be allocated to the Class 1-A-1, Class 1-A-2, Class 1-A-3 and Class 1-A-4 Certificates and losses on the mortgage loans in loan group 2 will not be allocated to the Class 2-A Certificates. The securities administrator, on behalf of the trustee will make a draw on the certificate insurance policy to the extent that payments on the mortgage loans in loan group 2 and certain payments on the mortgage loans in loan group 1 as described in this prospectus supplement are insufficient to make certain payments on the Class 2-A Certificates. The ratings of the offered certificates by the rating agencies may be lowered following the initial issuance thereof as a result of losses on the mortgage loans in excess of the levels contemplated by the rating agencies at the time of their initial rating analysis or, in the case of the Class 2-A Certificates, by a change of the financial strength rating of the certificate insurer. None of the company, the master servicer, the securities administrator, the trustee or any of their respective affiliates will have any obligation to replace or supplement any credit enhancement, or to take any other action to maintain the ratings of the offered certificates. SEE "DESCRIPTION OF CREDIT ENHANCEMENT" IN THE PROSPECTUS. INTEREST GENERATED BY THE MORTGAGE LOANS AND AMOUNTS CONTRIBUTED FROM THE INTEREST COVERAGE ACCOUNTS MAY BE INSUFFICIENT TO CREATE OR MAINTAIN OVERCOLLATERALIZATION OR TO PROVIDE CROSS- COLLATERALIZATION The amount of interest generated by the mortgage loans (net of fees and expenses) and amounts contributed from the interest coverage account related to each loan group may be higher than the amount of interest required to be paid to the offered certificates. Any such excess interest will be used to provide additional credit enhancement by making payments of interest to non-related certificates, to reimburse the certificate insurer, to maintain the current level of overcollateralization by covering realized losses on the mortgage loans, to create additional overcollateralization until the required level of overcollateralization is reached and to provide cross-collateralization by covering realized losses on the mortgage loans in the other loan group. We cannot assure you, however, that enough excess interest will be available to create or maintain the required level of overcollateralization or to provide cross-collateralization. The factors described below will affect the amount of excess interest that the mortgage loans will generate: o Every time a mortgage loan is prepaid in full, excess interest may be reduced because the mortgage loan will no longer be outstanding and generating interest or, in the case of a partial prepayment, will be generating less interest. o Every time a mortgage loan is liquidated, excess interest may be reduced because such mortgage loans will no longer be outstanding and generating interest. S-12
424B513th Page of 311TOC1stPreviousNextBottomJust 13th
o If the rates of delinquencies, defaults or losses on the mortgage loans turn out to be higher than expected, excess interest will be reduced by the amount necessary to compensate for any shortfalls in cash available on such date to make required distributions on the offered certificates. o If prepayments, defaults and liquidations occur more rapidly on the mortgage loans with relatively higher interest rates than on the mortgage loans with relatively lower interest rates, the amount of excess interest generated by the mortgage loans will be less than would otherwise be the case. In addition, during the funding period, amounts on deposit in the pre-funding accounts will earn a limited amount of interest which will be available to the certificateholders. The interest earned will be significantly less than interest generated by the mortgage loans in the trust. Further, certain of the mortgage loans will not have a first scheduled payment due until October 2004 and, therefore, interest on such mortgage loans will not be available for payments in September 2004. Any such shortfalls will be covered by the interest coverage accounts as described in "Description of the Certificates--Interest Coverage Accounts" below, but will not be covered by any third-party, including the certificate insurer. THE DIFFERENCE BETWEEN THE INTEREST RATES ON THE OFFERED CERTIFICATES AND THE RELATED MORTGAGE LOANS MAY RESULT IN NET WAC SHORTFALL WITH RESPECT TO SUCH CERTIFICATES The pass-through rates with respect to the offered certificates adjust each month and are based upon the value of an index (One-Month LIBOR) plus the related certificate margin, limited by the weighted average of the net mortgage rates on the related mortgage loans. However, the mortgage rate of substantially all of the mortgage loans in loan group 1 and loan group 2 is based upon the value of an index (Six-Month LIBOR) plus the related gross margin, and adjusts semi-annually, commencing, in many cases, after an initial fixed-rate period. One-Month LIBOR and Six-Month LIBOR may respond differently to economic and market factors, and there is not necessarily any correlation between them. Moreover, the mortgage loans are subject to periodic rate caps, maximum mortgage rates and minimum mortgage rates. Also, because the mortgage rates on the mortgage loans generally adjust semi-annually, and, in many cases, after an initial fixed-rate period, there will be a delay between the change in Six-Month LIBOR and the rate on the related mortgage loan. Thus, it is possible, for example, that One-Month LIBOR may rise during periods in which Six-Month LIBOR is stable or falling or that, even if both One-Month LIBOR and Six-Month LIBOR rise during the same period, One-Month LIBOR may rise much more rapidly than Six-Month LIBOR. To the extent that the related pass-through rate is limited to the weighted average of the net mortgage rates of the related mortgage loans, Net WAC shortfall amounts may occur. SEE "DESCRIPTION OF THE CERTIFICATES--INTEREST PAYMENTS ON THE CERTIFICATES." The corridor contracts will be assigned to, or entered into by, the trust and the net amounts payable from these contracts will provide some protection against certain interest shortfalls on the offered certificates. However, net amounts payable under the corridor contracts are based on the parameters described in this prospectus supplement, and to the extent the actual performance of the mortgage loans differs from the expectations on which these parameters were based, the corridor contracts may provide insufficient funds to cover Net WAC shortfall amounts. To the extent that net amounts payable under the corridor contracts are insufficient to cover Net WAC shortfall amounts on the related certificates, related net monthly excess cashflow may be used, subject to the priorities described in this prospectus supplement. However, there can be no assurance that available net monthly excess cashflow will be sufficient to cover these shortfalls, particularly because in a situation where the pass-through rate on a class of certificates is limited to the weighted average net mortgage rates of the related mortgage loans, there will be little or no related net monthly excess cashflow. Net WAC S-13
424B514th Page of 311TOC1stPreviousNextBottomJust 14th
shortfall amounts with respect to the Class 2-A Certificates are not covered by the certificate guaranty insurance policy and may remain unpaid on the final scheduled distribution date. THE PASS-THROUGH RATES ON THE OFFERED CERTIFICATES ARE SUBJECT TO LIMITATION The offered certificates accrue interest at an annual rate equal to the least of (i) an adjustable pass- through rate, (ii) a maximum rate cap equal to 11.25% per annum and (iii) a rate equal to the weighted average of the interest rates on the related mortgage loans, net of certain fees and expenses of the trust as described in this prospectus supplement. A variety of factors could limit the pass-through rate on one or more classes of the offered certificates and adversely affect the yield to maturity on such class or classes of certificates: o If prepayments, defaults and liquidations occur more rapidly on the mortgage loans with relatively higher interest rates than on the mortgage loans with relatively lower interest rates, the pass- through rates on these offered certificates are more likely to be limited. o The interest rates on the offered certificates will vary with One-Month LIBOR. Therefore, the yield to investors on the offered certificates will be sensitive to fluctuations of One-Month LIBOR. o The required payment by the master servicer of mortgage insurance premiums from interest collected on the mortgage loans will result in the limits on the pass-through rates on these offered certificates being lower than would be the case if the master servicer did not have such obligations. The holders of these offered certificates WILL NOT be entitled to recover interest in excess of any applicable limited rate on any distribution date from excess cash flow or from any other source. SEE "DESCRIPTION OF THE CERTIFICATES-- OVERCOLLATERALIZATION PROVISIONS" IN THIS PROSPECTUS SUPPLEMENT. The offered certificates will be entitled to the benefit of corridor contracts to cover any shortfalls as a result of the pass-through rate on these certificates being reduced to the net weighted average rate. STATUTORY AND JUDICIAL LIMITATIONS ON FORECLOSURE PROCEDURES MAY DELAY RECOVERY IN RESPECT OF THE MORTGAGED PROPERTIES AND, IN SOME INSTANCES, LIMIT THE AMOUNT THAT MAY BE RECOVERED BY THE FORECLOSING LENDER, RESULTING IN LOSSES ON THE MORTGAGE LOANS THAT MIGHT CAUSE LOSSES OR SHORTFALLS TO BE INCURRED ON THE OFFERED CERTIFICATES Foreclosure procedures vary from state to state. Two primary methods of foreclosing a mortgage instrument are judicial foreclosure, involving court proceedings, and non-judicial foreclosure pursuant to a power of sale granted in the mortgage instrument. A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are asserted. Delays may also result from difficulties in locating necessary defendants. Non-judicial foreclosures may be subject to delays resulting from state laws mandating the recording of notice of default and notice of sale and, in some states, notice to any party having an interest of record in the real property, including junior lienholders. Some states have adopted "anti-deficiency" statutes that limit the ability of a lender to collect the full amount owed on a loan if the property sells at foreclosure for less than the full amount owed. In addition, United States courts have traditionally imposed general equitable principles to limit the remedies available to lenders in foreclosure actions that are perceived by the court as harsh or unfair. The effect of these statutes and judicial principles may be to delay and/or reduce distributions in respect of the offered certificates. SEE "LEGAL ASPECTS OF MORTGAGE LOANS--FORECLOSURE ON MORTGAGES AND SOME CONTRACTS" IN THE PROSPECTUS. S-14
424B515th Page of 311TOC1stPreviousNextBottomJust 15th
THE VALUE OF THE MORTGAGE LOANS MAY BE AFFECTED BY, AMONG OTHER THINGS, A DECLINE IN REAL ESTATE VALUES AND CHANGES IN THE BORROWERS' FINANCIAL CONDITION, WHICH MAY CAUSE LOSSES OR SHORTFALLS TO BE INCURRED ON THE OFFERED CERTIFICATES No assurance can be given that values of the mortgaged properties have remained or will remain at their levels as of the dates of origination of the related mortgage loans. If the residential real estate market should experience an overall decline in property values so that the outstanding balances of the mortgage loans, and any secondary financing on the mortgaged properties, become equal to or greater than the value of the mortgaged properties, the actual rates of delinquencies, foreclosures and losses could be higher than those now generally experienced in the mortgage lending industry. A decline in property values is more likely to result in losses on mortgage loans with high loan-to-value ratios. Such losses will be allocated to the offered certificates to the extent not covered by credit enhancement. THE GROUP 1 LOANS AND GROUP 2 LOANS WERE UNDERWRITTEN TO NON-CONFORMING UNDERWRITING STANDARDS, WHICH MAY RESULT IN LOSSES OR SHORTFALLS ON THE OFFERED CERTIFICATES The group 1 loans and group 2 loans were underwritten generally in accordance with underwriting standards which are primarily intended to provide for single family "non-conforming" mortgage loans. A "non-conforming" mortgage loan means a mortgage loan which is ineligible for purchase by Fannie Mae or Freddie Mac due to either credit characteristics of the related mortgagor or documentation standards in connection with the underwriting of the related mortgage loan that do not meet the Fannie Mae or Freddie Mac underwriting guidelines for "A" credit mortgagors. These credit characteristics include mortgagors whose creditworthiness and repayment ability do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines and mortgagors who may have a record of credit write-offs, outstanding judgments, prior bankruptcies and other credit items that do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines. These documentation standards may include mortgagors who provide limited or no documentation in connection with the underwriting of the related mortgage loan. Accordingly, mortgage loans underwritten under the seller's non-conforming credit underwriting standards are likely to experience rates of delinquency, foreclosure and loss that are higher, and may be substantially higher, than mortgage loans originated in accordance with the Fannie Mae or Freddie Mac underwriting guidelines. Any resulting losses, to the extent not covered by credit enhancement, may affect the yield to maturity of the offered certificates. SOME OF THE MORTGAGE LOANS HAVE AN INITIAL INTEREST ONLY PERIOD, WHICH MAY RESULT IN INCREASED DELINQUENCIES AND LOSSES WITH RESPECT TO THESE MORTGAGE LOANS Approximately 0.03%, 1.20%, 3.68%, 45.85% and 4.60% of the sample mortgage loans in loan group 1 (by aggregate outstanding principal balance of the related sample mortgage loans as of the cut-off date) have initial interest only periods of six months, two, three, five, and ten years, respectively, and approximately 0.04%, 0.72%, 0.39%, 41.81%, and 2.03% of the sample mortgage loans in loan group 2 (by aggregate outstanding principal balance of the related sample mortgage loans as of the cut-off date) have initial interest only periods of six months and two, three, five and ten years, respectively. During this period, the payment made by the related borrower will be less than it would be if the mortgage loan amortized. In addition, the mortgage loan balance will not be reduced by the principal portion of scheduled monthly payments during this period. As a result, no principal payments will be made to the offered certificates from these mortgage loans during their interest only period except in the case of a prepayment. After the initial interest only period, the scheduled monthly payment on these mortgage loans will increase, which may result in increased delinquencies by the related borrowers, particularly if interest rates have increased and the borrower is unable to refinance. In addition, losses may be greater on these mortgage S-15
424B516th Page of 311TOC1stPreviousNextBottomJust 16th
loans as a result of the mortgage loan not amortizing during the early years of these mortgage loans. Although the amount of principal included in each scheduled monthly payment for a traditional mortgage loan is relatively small during the first few years after the origination of a mortgage loan, in the aggregate the amount can be significant. Any resulting delinquencies and losses, to the extent not covered by credit enhancement, will be allocated to the offered certificates. Mortgage loans with an initial interest only period are relatively new in the mortgage marketplace. The performance of these mortgage loans may be significantly different than mortgage loans that fully amortize. In particular, there may be a higher expectation by these borrowers of refinancing their mortgage loans with a new mortgage loan, in particular one with an initial interest only period, which may result in higher or lower prepayment speeds than would otherwise be the case. In addition, the failure to build equity in the property by the related mortgagor may affect the delinquency and prepayment of these mortgage loans. THE MORTGAGE LOANS ARE CONCENTRATED IN THE STATE OF CALIFORNIA, WHICH MAY RESULT IN LOSSES WITH RESPECT TO THESE MORTGAGE LOANS Investors should note that some geographic regions of the United States from time to time will experience weaker regional economic conditions and housing markets, and, consequently, will experience higher rates of loss and delinquency than will be experienced on mortgage loans generally. For example, a region's economic condition and housing market may be directly, or indirectly, adversely affected by natural disasters such as earthquakes, hurricanes, floods and eruptions, civil disturbances such as riots, and by other disruptions such as ongoing power outages or terrorist actions or acts of war. The economic impact of any of these types of events may also be felt in areas beyond the region immediately affected by the disaster or disturbance. Approximately 53.64% and 44.17% of the sample mortgage loans in loan group 1 and loan group 2, respectively (by aggregate outstanding principal balance of the related sample mortgage loans as of the cut-off date), are in the state of California. The concentration of the mortgage loans in the state of California may present risk considerations in addition to those generally present for similar mortgage-backed securities without this concentration. Any risks associated with mortgage loan concentration may affect the yield to maturity of the offered certificates to the extent losses caused by these risks which are not covered by credit enhancement are allocated to the offered certificates. THE RATE AND TIMING OF PREPAYMENTS WILL AFFECT YOUR YIELD Borrowers may prepay their mortgage loans in whole or in part at any time. We cannot predict the rate at which borrowers will repay their mortgage loans. A prepayment of a mortgage loan generally will result in a prepayment on the certificates. o If you purchase your certificates at a discount and principal is repaid slower than you anticipate, then your yield may be lower than you anticipate. o If you purchase your certificates at a premium and principal is repaid faster than you anticipate, then your yield may be lower than you anticipate. o The rate of prepayments on the mortgage loans will be sensitive to prevailing interest rates. Generally, if interest rates decline, mortgage loan prepayments may increase due to the availability of other mortgage loans at lower interest rates. Conversely, if prevailing interest rates rise significantly, the prepayments on mortgage loans may decrease. o Approximately 67.19% and 69.55% of all of the sample mortgage loans in loan group 1 and loan group 2, respectively (by aggregate outstanding principal balance of the related sample mortgage loans S-16
424B517th Page of 311TOC1stPreviousNextBottomJust 17th
as of the cut-off date), require the mortgagor to pay a charge in certain instances if the mortgagor prepays the mortgage loan during a stated period, which may be from six months to five years after the mortgage loan was originated. A prepayment charge may or may not discourage a mortgagor from prepaying the mortgage loan during the applicable period. o The seller may be required to purchase mortgage loans from the trust in the event certain breaches of representations and warranties occur and have not been cured. These purchases will have the same effect on the holders of the offered certificates as a prepayment of the mortgage loans. o The overcollateralization provisions, initially and whenever overcollateralization is at a level below the required level, are intended to result in an accelerated rate of principal distributions to holders of the classes of offered certificates then entitled to distributions of principal. An earlier return of principal to the holders of the offered certificates as a result of the overcollateralization provisions will influence the yield on the offered certificates in a manner similar to the manner in which principal prepayments on the mortgage loans will influence the yield on the offered certificates. o Because principal distributions are paid to certain classes of offered certificates before other such classes, holders of classes of offered certificates having a later priority of payment bear a greater risk of losses than holders of classes having earlier priorities for distribution of principal. SEE "YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF FACTORS THAT MAY INFLUENCE THE RATE AND TIMING OF PREPAYMENTS ON THE MORTGAGE LOANS AND THE WEIGHTED AVERAGE LIVES OF THE OFFERED CERTIFICATES. THE MORTGAGE LOANS MAY HAVE ENVIRONMENTAL RISKS, WHICH MAY RESULT IN INCREASED LOSSES WITH RESPECT TO THESE MORTGAGE LOANS To the extent the master servicer for a mortgage loan acquires title to any related mortgaged property contaminated with or affected by hazardous wastes or hazardous substances, these mortgage loans may incur losses. SEE "SERVICING OF MORTGAGE LOANS--REALIZATION UPON OR SALE OF DEFAULTED MORTGAGE LOANS" AND "LEGAL ASPECTS OF MORTGAGE LOANS--ENVIRONMENTAL LEGISLATION" IN THE PROSPECTUS. To the extent these environmental risks result in losses on the mortgage loans, the yield to maturity of the offered certificates, to the extent not covered by credit enhancement, may be affected. SOME ADDITIONAL RISKS ARE ASSOCIATED WITH THE CLASS 1-A-5 CERTIFICATES AND MEZZANINE CERTIFICATES The weighted average lives of, and the yields to maturity on, the Class 1-A-5, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates will be progressively more sensitive, in that order, to the rate and timing of mortgagor defaults and the severity of ensuing losses on the mortgage loans. If the actual rate and severity of losses on the mortgage loans is higher than those assumed by an investor in such certificates, the actual yield to maturity of such certificates may be lower than the yield anticipated by such holder based on such assumption. The timing of losses on the mortgage loans will also affect an investor's actual yield to maturity, even if the rate of defaults and severity of losses over the life of the mortgage pool are consistent with an investor's expectations. In general, the earlier a loss occurs, the greater the effect on an investor's yield to maturity. Realized losses on the mortgage loans, to the extent they exceed the amount of overcollateralization following distributions of principal on the related distribution date, will reduce the certificate principal balance of the class of Mezzanine Certificates then outstanding with the lowest payment priority. In addition, after the certificate principal balance of the Mezzanine Certificates has been reduced to zero, any realized losses on the mortgage loans in loan group 1 will be allocated to the Class 1-A-5 Certificates. As a result of such reductions, less interest will accrue on the Class 1-A-5 Certificates and such S-17
424B518th Page of 311TOC1stPreviousNextBottomJust 18th
class of Mezzanine Certificates than would otherwise be the case. Once a Realized Loss is allocated to a Class 1-A-5 Certificate and Mezzanine Certificate, no amounts will be distributable with respect to such written down amount. If the certificate principal balances of the Class 1-A-5 Certificates and Mezzanine Certificates have been reduced to zero, there may not be enough principal and interest generated from the mortgage loans available to for payments on the other classes of offered certificates, to the extent that realized losses on the mortgage loans reduce the amount available to be paid to such certificates. In addition, the yield on the Class 1-A-5 Certificates and Mezzanine Certificates will be sensitive to changes in the rates of prepayment of the mortgage loans. Because distributions of principal will be made to the holders of such certificates according to the priorities described in this prospectus supplement, the yield to maturity on such classes of certificates will be sensitive to the rates of prepayment on the mortgage loans experienced both before and after the commencement of principal distributions on such classes. The yield to maturity on such classes of certificates will also be extremely sensitive to losses due to defaults on the mortgage loans (and the timing thereof), to the extent such losses are not covered by excess interest, overcollateralization, or a class of Mezzanine Certificates with a lower payment priority. Furthermore, as described in this prospectus supplement, the timing of receipt of principal and interest by the Class 1-A-5 Certificates and Mezzanine Certificates may be adversely affected by losses even if such classes of certificates do not ultimately bear such loss. PREPAYMENT INTEREST SHORTFALLS AND RELIEF ACT SHORTFALLS WILL AFFECT YOUR YIELD When a principal prepayment in full is made on a mortgage loan, the mortgagor is charged interest only up to the date of the principal prepayment, instead of for a full month. When a partial principal prepayment is made on a mortgage loan, the mortgagor is not charged interest on the amount of the prepayment for the month in which the prepayment is made. In addition, the application of the Servicemembers Civil Relief Act, as amended, to any mortgage loan will adversely affect, for an indeterminate period of time, the ability of the Subservicer and Master Servicer to collect full amounts of interest on the mortgage loan. This may result in a shortfall in interest collections available for distribution to certificateholders on the next distribution date. The Subservicer is required to cover a portion of the shortfall in interest collections that are attributable to prepayments, but only up to the amount of the Subservicer's aggregate servicing fee for the related calendar month, and the Master Servicer is required to cover a portion of the shortfall in interest collections that are attributable to prepayments, but only up to the amount required to be paid by the Subservicer which is not paid by the Subservicer and the amount of the Master Servicer's aggregate servicing fee for the related calendar month. In addition, certain shortfalls in interest collections arising from the application of the Relief Act will not be covered by the Subservicer or the Master Servicer. Further, any such shortfalls on the Class 2-A Certificates will not be covered by the certificate guaranty insurance policy. On any distribution date, any shortfalls resulting from the application of the Relief Act and any Prepayment Interest Shortfalls to the extent not covered by Compensating Interest paid by the Subservicer or the Master Servicer will be allocated, first, in reduction of amounts otherwise distributable to the holders of the Class C Certificates, and thereafter, to the Monthly Interest Distributable Amounts with respect to the offered certificates on a pro rata basis based on the respective amounts of interest accrued on such certificates for such distribution date. The holders of the offered certificates will be entitled to reimbursement for any such interest shortfalls with interest thereon solely from the net monthly excess cashflow in accordance with the payment provisions in this prospectus supplement. If these shortfalls are allocated to the offered certificates and are not reimbursed on any distribution date, the amount of interest paid to those certificates will be reduced, adversely affecting the yield on your investment. S-18
424B519th Page of 311TOC1stPreviousNextBottomJust 19th
VIOLATION OF VARIOUS FEDERAL AND STATE LAWS MAY RESULT IN LOSSES ON THE MORTGAGE LOANS Applicable state laws generally regulate interest rates and other charges, require specific disclosure, and require licensing of the seller. In addition, other state laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and collection of the mortgage loans. The mortgage loans also are subject to federal laws, including: o the Federal Truth-in-Lending Act and Regulation Z promulgated thereunder, which require specific disclosures to the borrowers regarding the terms of the mortgage loans; o the Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the extension of credit; and o the Fair Credit Reporting Act, which regulates the use and reporting of information related to the borrower's credit experience. Depending on the provisions of the applicable law and the specific facts and circumstances involved, violations of these federal or state laws, policies and principles may limit the ability of the trust to collect all or part of the principal of or interest on the mortgage loans, may entitle the borrower to a refund of amounts previously paid and, in addition, could subject the trust to damages and administrative enforcement. The seller will represent that as of the closing date, to the best of seller's knowledge, each mortgage loan at the time it was originated complied in all material respects with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, truth-in-lending and disclosure laws; and each mortgage loan is being serviced in all material respects in accordance with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity and disclosure laws. In the event of a breach of this representation, it will be obligated to cure the breach or repurchase or replace the affected mortgage loan in the manner described in the prospectus. THERE MAY BE VARIATIONS IN THE MORTGAGE LOANS FROM THE SAMPLE MORTGAGE LOANS The sample mortgage loans include mortgage loans whose characteristics may vary from the specific characteristics reflected in the mortgage loans, although the extent of such variance is not expected to be material. Within 15 days of the closing date, tables will be filed on Form 8-K reflecting the mortgage loans. THERE MAY BE VARIATIONS IN THE SUBSEQUENT MORTGAGE LOANS FROM THE INITIAL MORTGAGE LOANS Each subsequent mortgage loan in loan group 1 and loan group 2 generally will satisfy the eligibility criteria described in this prospectus supplement at the time of its sale to the trust. The characteristics of the subsequent mortgage loans in loan group 1 and loan group 2, however, may vary from the specific characteristics reflected in the statistical information relating to the sample mortgage loans presented in this prospectus supplement, although the extent of such variance is not expected to be material. Within 15 days of the delivery of the last subsequent mortgage loan in loan group 1 and loan group 2 to the trust, tables will be filed on Form 8-K reflecting the final pool of mortgage loans. S-19
424B520th Page of 311TOC1stPreviousNextBottomJust 20th
MANDATORY PREPAYMENT To the extent that the amounts on deposit in the pre-funding accounts have not been fully applied to the purchase of subsequent mortgage loans in loan group 1 and loan group 2 on or before September 30, 2004, the holders of the certificates then entitled to principal distributions will receive on the distribution date immediately following September 30, 2004, any amounts remaining in the pre-funding accounts. Although no assurance can be given, the company intends that the principal amount of subsequent mortgage loans in loan group 1 and loan group 2 sold to the trustee on behalf of the trust will require the application of substantially all amounts on deposit in the pre-funding accounts and that there will be no material principal payment to the holders of the certificates on such distribution date. THE RATINGS ON THE OFFERED CERTIFICATES ARE NOT A RECOMMENDATION TO BUY, SELL OR HOLD THE OFFERED CERTIFICATES AND ARE SUBJECT TO WITHDRAWAL AT ANY TIME, WHICH MAY RESULT IN LOSSES ON THE OFFERED CERTIFICATES It is a condition to the issuance of the offered certificates that each class of offered certificates be rated no lower than the ratings described on page S-4 of this prospectus supplement. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. No person is obligated to maintain the rating on any offered certificate, and, accordingly, there can be no assurance that the ratings assigned to any offered certificate on the date on which the offered certificates are initially issued will not be lowered or withdrawn by a rating agency at any time thereafter. In the event any rating is revised or withdrawn, the liquidity or the market value of the related offered certificates may be adversely affected. SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE PROSPECTUS. THE RECORDING OF MORTGAGES IN THE NAME OF MERS MAY AFFECT THE YIELD ON THE CERTIFICATES. The mortgages or assignments of mortgage for some of the mortgage loans have been or may be recorded in the name of Mortgage Electronic Registration Systems, Inc., or MERS, solely as nominee for the seller and its successors and assigns. Subsequent assignments of those mortgages are registered electronically through the MERS(R) System. However, if MERS discontinues the MERS(R) System and it becomes necessary to record an assignment of the mortgage to the trustee, then any related expenses shall be paid by the trust and will reduce the amount available to pay principal of and interest on the mezzanine certificates. The recording of mortgages in the name of MERS is a new practice in the mortgage lending industry. Public recording officers and others may have limited, if any, experience with lenders seeking to foreclose mortgages, assignments of which are registered with MERS. Accordingly, delays and additional costs in commencing, prosecuting and completing foreclosure proceedings and conducting foreclosure sales of the mortgaged properties could result. Those delays and additional costs could in turn delay the distribution of liquidation proceeds to certificateholders and increase the amount of losses on the mortgage loans. FOR ADDITIONAL INFORMATION REGARDING MERS AND THE MERS(R) SYSTEM, SEE "DESCRIPTION OF THE MORTGAGE POOL--MORTGAGE POOL CHARACTERISTICS" AND "YIELD ON THE CERTIFICATES--YIELD SENSITIVITY OF THE MEZZANINE CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT. S-20
424B521st Page of 311TOC1stPreviousNextBottomJust 21st
THE MORTGAGE POOL GENERAL References to percentages of the mortgage loans unless otherwise noted are calculated based on the aggregate principal balance of the sample mortgage loans as of the Cut-off Date. The mortgage pool will consist of two groups of mortgage loans, referred to in this prospectus supplement as "Loan Group 1" and "Loan Group 2" (and each, a "Loan Group"), and also designated as the "Group 1 Loans" and the "Group 2 Loans", respectively. The Group 1 Loans are one- to four-family, adjustable-rate, fully-amortizing residential mortgage loans with non-conforming loan balances secured by first liens on mortgaged properties. The Group 2 Loans are one- to four-family, adjustable-rate, fully- amortizing residential mortgage loans with conforming loan balances secured by first liens on mortgaged properties. The mortgage loans will have original terms to maturity of not greater than 30 years. The Group 1 Loans will consist of mortgage loans which had principal balances at origination which may or may not be greater than Fannie Mae or Freddie Mac conforming balances and the Group 2 Loans will consist of mortgage loans which had principal balances at origination which are less than or equal to Fannie Mae or Freddie Mac conforming balances. The conforming balance for mortgage loans secured by a single family property is $333,700 for all mortgage loans other than those originated in Alaska, Hawaii, Guam and the U.S. Virgin Islands, for which it is $500,550. The conforming balance is higher for mortgage loans secured by two- to four-family properties. Notwithstanding these conforming balances, the Group 2 Loans have been originated according to underwriting standards that do not satisfy Fannie Mae or Freddie Mac underwriting criteria. The mortgage pool will include the initial mortgage loans and the subsequent mortgage loans in Loan Group 1 and Loan Group 2 (each, a "Group 1 subsequent mortgage loan" or "Group 2 subsequent mortgage loan", as applicable). The initial mortgage loans will be the mortgage loans deposited into the trust on the Closing Date. The Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans will be purchased with amounts on deposit in the related pre-funding account described in this prospectus supplement. The Seller will convey the initial mortgage loans to the company on the Closing Date pursuant to the Mortgage Loan Purchase Agreement and the company will convey the initial mortgage loans to the trust on the Closing Date pursuant to the Agreement. The company will convey the Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans to the trust during the Funding Period. The Group 1 subsequent mortgage loans will be acquired with amounts on deposit in the Group 1 Pre-Funding Account pursuant to the Group 1 Subsequent Transfer Instrument. The Group 2 subsequent mortgage loans will be acquired with amounts on deposit in the Group 2 Pre-Funding Account pursuant to the Group 2 Subsequent Transfer Instrument. The Seller will make certain representations and warranties with respect to the initial mortgage loans in the Mortgage Loan Purchase Agreement and with respect to the Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans in the Group 1 subsequent mortgage loan purchase agreement and Group 2 subsequent mortgage loan purchase agreement. These representations and warranties will be assigned by the company to the Trustee for the benefit of the Certificateholders and the Certificate Insurer. As more particularly described in the prospectus, the Seller will have certain repurchase or substitution obligations in connection with a breach of any such representation or warranty, as well as in connection with an omission or defect in respect of certain constituent documents required to be delivered with respect to the mortgage loans, if such breach, omission or defect cannot be cured and it materially and adversely affects the interests of the Certificateholders or the Certificate Insurer. In the event the Seller fails S-21
424B522nd Page of 311TOC1stPreviousNextBottomJust 22nd
to repurchase a mortgage loan, Impac Holdings will be required to do so. SEE "THE MORTGAGE POOLS--REPRESENTATIONS BY SELLERS" IN THE PROSPECTUS. The mortgage loans will have been originated or acquired by the Seller in accordance with the underwriting criteria described in this prospectus supplement. SEE "--UNDERWRITING" BELOW. Substantially all of the mortgage loans will be subserviced by Countrywide Home Loans Servicing LP or an affiliate thereof and Wells Fargo Bank, N.A., as described in this prospectus supplement under "Pooling and Servicing Agreement--The Subservicers" in this prospectus supplement. All of the mortgage loans have scheduled monthly payments due on the Due Date. Each mortgage loan will contain a customary "due-on-sale" clause. Certain of the mortgage loans will have their first scheduled monthly payments due in October 2004. As to those mortgage loans, no principal amortization payments will be distributed (unless prepayments are received thereon) until the distribution date occurring in October 2004, the month in which the first scheduled monthly payment is due. However, on the Closing Date, cash will be deposited in the Interest Coverage Account in an amount equal to one month's interest accrued from August 1, 2004 (at the related mortgage rates) on such mortgage loans, to be remitted to the securities administrator for distribution on the distribution date occurring in September 2004, the month prior to the month in which the first scheduled monthly payment is due on such mortgage loans. In addition, the Interest Coverage Account will be available to cover any interest shortfalls as a result of the pre-funding feature as provided in the Agreement. MORTGAGE RATE ADJUSTMENT The mortgage rate on the mortgage loans will generally adjust semi-annually commencing after an initial period after origination of generally one month, three months, six months, one year, two years, three years, five years, seven years or ten years, in each case on each applicable adjustment date to a rate equal to the sum, generally rounded to the nearest one-eighth of one percentage point (12.5 basis points), of (i) the related index and (ii) the gross margin. In addition, the mortgage rate on each mortgage loan is subject on its first adjustment date following its origination to an initial rate cap and on each adjustment date thereafter to a periodic rate cap. All of the mortgage loans are also subject to maximum and minimum lifetime mortgage rates. The mortgage loans were generally originated with an initial mortgage rate below the sum of the index at origination and the gross margin. Due to the application of the initial rate caps, periodic rate caps, maximum mortgage rates and minimum mortgage rates, the mortgage rate on any mortgage loan, as adjusted on any related adjustment date, may not equal the sum of the index and the gross margin. The mortgage rate on a substantial majority of the sample mortgage loans in Loan Group 1 and substantially all of the sample mortgage loans in Loan Group 2 adjusts based on an index equal to Six-Month LIBOR. In the event that the related index is no longer available, an index that is based on comparable information will be selected by the Master Servicer, to the extent that it is permissible under the terms of the related mortgage and mortgage note. Substantially all of the sample mortgage loans will not have reached their first adjustment date as of the Closing Date. The initial mortgage rate is generally lower than the rate that would have been produced if the applicable gross margin had been added to the index in effect at origination. Mortgage loans that have not reached their first adjustment date are subject to the initial rate cap on their first adjustment date, and periodic rate caps thereafter. S-22
424B523rd Page of 311TOC1stPreviousNextBottomJust 23rd
INDICES ON THE MORTGAGE LOANS The index applicable to the determination of the mortgage rate on approximately 93.02% and 98.85% (in each case, by aggregate outstanding principal balance of the related sample mortgage loans as of the Cut- off Date) of the sample Group 1 Loans and sample Group 2 Loans, respectively, is the average of the interbank offered rates for six-month United States dollar deposits in the London market as published by Fannie Mae or THE WALL STREET JOURNAL and, in most cases, as most recently available as of the first business day of the month preceding such adjustment date, or Six-Month LIBOR. The table below sets forth historical average rates of Six-Month LIBOR for the months indicated as made available from Fannie Mae. The rates are determined from information that is available as of 11:00 a.m. (London time) on the second to last business day of each month. Such average rates may fluctuate significantly from month to month as well as over longer periods and may not increase or decrease in a constant pattern from period to period. There can be no assurance that levels of Six-Month LIBOR published by Fannie Mae, or published on a different reference date would have been at the same levels as those set forth below. The following does not purport to be representative of future levels of Six-Month LIBOR (as published by Fannie Mae). No assurance can be given as to the level of Six-Month LIBOR on any adjustment date or during the life of any mortgage loan based on Six-Month LIBOR. [Download Table] SIX-MONTH LIBOR MONTH 1997 1998 1999 2000 2001 2002 2003 2004 ----- ---- ---- ---- ---- ---- ---- ---- ---- January 5.71% 5.75% 5.04% 6.23% 5.36% 1.99% 1.35% 1.21% February 5.68 5.78 5.17 6.32 4.96 2.06 1.34 1.10 March 5.96 5.80 5.08 6.53 4.71 2.33 1.26 1.09 April 6.08 5.87 5.08 6.61 4.23 2.10 1.29 1.10 May 6.01 5.81 5.19 7.06 3.91 2.09 1.22 1.11 June 5.94 5.87 5.62 7.01 3.83 1.95 1.12 1.36 July 5.83 5.82 5.65 6.88 3.70 1.86 1.15 1.99 August 5.86 5.69 5.90 6.83 3.48 1.82 1.21 September 5.85 5.36 5.96 6.76 2.53 1.75 1.18 October 5.81 5.13 6.13 6.72 2.17 1.62 1.22 November 6.04 5.28 6.04 6.68 2.10 1.47 1.25 December 6.01 5.17 6.13 6.20 1.98 1.38 1.22 The index applicable to the determination of the mortgage rate on approximately 5.85% and 0.58% (in each case, by aggregate outstanding principal balance of the related sample mortgage loans as of the Cut- off Date) of the sample mortgage loans in Loan Group 1 and the sample mortgage loans in Loan Group 2, respectively, is the average of the interbank offered rates for one-year United States dollar deposits in the London market as published by Fannie Mae or THE WALL STREET JOURNAL and, in most cases, as most recently available as of the first business day of the month preceding such adjustment date, or One-Year LIBOR. The index applicable to the determination of the mortgage rate on approximately 0.88% and 0.40% (in each case, by aggregate outstanding principal balance of the related sample mortgage loans as of the Cut- off Date) of the sample mortgage loans in Loan Group 1 and the sample mortgage loans in Loan Group 2, respectively, will be based on One-Month LIBOR. One-Month LIBOR will be a per annum rate equal to the average of interbank offered rates for one-month U.S. dollar-denominated deposits in the London market based on quotations of major banks as published in The Wall Street Journal and are most recently available as of the time specified in the related mortgage note. S-23
424B524th Page of 311TOC1stPreviousNextBottomJust 24th
The index applicable to the determination of the mortgage rate on approximately 0.25% and 0.17% (in each case, by aggregate outstanding principal balance of the related sample mortgage loans as of the Cut- off Date) of the sample mortgage loans in Loan Group 1 and the sample mortgage loans in Loan Group 2, respectively, will be based on Three-Month LIBOR. Three-Month LIBOR will be a per annum rate equal to the average of interbank offered rates for three-month U.S. dollar-denominated deposits in the London market based on quotations of major banks as published in The Wall Street Journal and are most recently available as of the time specified in the related mortgage note. PREPAYMENT CHARGES Approximately 67.19% of the sample mortgage loans in Loan Group 1 and 69.55% of the sample mortgage loans in Loan Group 2, provide for payment by the mortgagor of a prepayment charge in limited circumstances on prepayments. Generally, these mortgage loans provide for payment of a prepayment charge on partial or full prepayments made within six months, one year, five years or other period as provided in the related mortgage note from the date of origination of the mortgage loan. The amount of the prepayment charge is as provided in the related mortgage note, and the prepayment charge will generally apply if, in any twelve-month period during the first year, five years or other period as provided in the related mortgage note from the date of origination of the mortgage loan, the mortgagor prepays an aggregate amount exceeding 20% of the original principal balance of the mortgage loan. The amount of the prepayment charge will generally be equal to 6 months' advance interest calculated on the basis of the mortgage rate in effect at the time of the prepayment on the amount prepaid in excess of 20% of the original principal balance of the mortgage loan. The holders of the Class P Certificates will be entitled to all prepayment charges received on the mortgage loans, and these amounts will not be available for distribution on the other classes of certificates. The Master Servicer may waive the collection of any otherwise applicable prepayment charge or reduce the amount thereof actually collected, but only if the Master Servicer does so in compliance with the prepayment charge waiver standards set forth in the Agreement. If the Master Servicer waives any prepayment charge other than in accordance with the standards set forth in the Agreement, the Master Servicer will be required to pay the amount of the waived prepayment charge. There can be no assurance that the prepayment charges will have any effect on the prepayment performance of the mortgage loans. PRIMARY MORTGAGE INSURANCE AND THE RADIAN LENDER-PAID PMI POLICY Each mortgage loan with a loan-to-value ratio at origination in excess of 80.00% will be insured by one of the following: (1) a Primary Insurance Policy issued by a private mortgage insurer (other than a Radian Lender-Paid PMI Policy) or (2) a Radian Lender-Paid PMI Policy. Each Primary Insurance Policy will insure against default under each insured mortgage note as follows: (A) for which the outstanding principal balance at origination of such mortgage loan is greater than or equal to 80.01% and up to and including 90.00% of the lesser of the Appraised Value and the sales price, such mortgage loan is covered by a Primary Insurance Policy in an amount equal to at least 12.00% of the Allowable Claim and (B) for which the outstanding principal balance at origination of such mortgage loan exceeded 90.01% of the lesser of the Appraised Value and the sales price, such mortgage loan is covered by a Primary Insurance Policy in an amount equal to at least 30.00% of the Allowable Claim. Each Radian Lender-Paid PMI Policy will insure against default under each insured mortgage note as follows: (A) for which the outstanding principal balance at origination of such mortgage loan is greater than or equal to 80.01% and up to and including 95.00% of the lesser of the Appraised Value and the sales price, such mortgage loan is covered by a Radian Lender-Paid PMI Policy in an amount equal to at least 22.00% of the Allowable Claim and (B) for which the outstanding principal balance at origination of such mortgage loan is at least 95.01% and up to and including 97.00% of the lesser of the Appraised Value and S-24
424B525th Page of 311TOC1stPreviousNextBottomJust 25th
the sales price, such mortgage loan is covered by such Radian Lender-Paid PMI Policy in an amount equal to at least 35.00% of the Allowable Claim. With respect to the Radian Lender-Paid PMI Policies, the premium will be payable by the Master Servicer out of interest collections on the mortgage loans at a rate equal to the related Radian PMI Rate. The Radian PMI Rates for the sample mortgage loans range from 0.280% to 2.430% of the Stated Principal Balance of the related Radian PMI Insured Loan and the Radian PMI Rates for the sample mortgage loans have a weighted average of approximately 1.062%. To the extent of a default by Radian under the Radian Lender-Paid PMI Policy, the Master Servicer will use its best efforts to find a replacement policy with substantially similar terms, with the approval of the Certificate Insurer. Each mortgage loan is required to be covered by a standard hazard insurance policy. SEE "PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER--HAZARD INSURANCE POLICIES" IN THE PROSPECTUS. SAMPLE MORTGAGE LOAN CHARACTERISTICS The statistical information included in this prospectus supplement with respect to the mortgage loans is based on a pool of 9,136 sample mortgage loans, 70.96% of which are in Loan Group 1 and 29.04% of which are in Loan Group 2. References to percentages of the sample mortgage loans unless otherwise noted are calculated based on the aggregate principal balance of the sample mortgage loans as of the Cut-off Date. The original mortgages for some of the mortgage loans have been, or in the future may be, at the sole discretion of the Master Servicer, recorded in the name of Mortgage Electronic Registration Systems, Inc., or MERS, solely as nominee for the Seller and its successors and assigns, and subsequent assignments of those mortgages have been, or in the future may be, at the sole discretion of the Master Servicer, registered electronically through the MERS(R) System. In some other cases, the original mortgage was recorded in the name of the originator of the mortgage loan, record ownership was later assigned to MERS, solely as nominee for the owner of the mortgage loan, and subsequent assignments of the mortgage were, or in the future may be, at the sole discretion of the Master Servicer, registered electronically through the MERS(R) System. For each of these mortgage loans, MERS serves as mortgagee of record on the mortgage solely as a nominee in an administrative capacity on behalf of the trustee, and does not have any interest in the mortgage loan. Some of the sample Group 1 Loans and sample Group 2 Loans were recorded in the name of MERS. For additional information regarding the recording of mortgages in the name of MERS see "Yield on the Certificates--Yield Sensitivity of the Mezzanine Certificates" in this prospectus supplement. LOAN GROUP 1 The sample Group 1 Loans had an aggregate principal balance as of the Cut-off Date of approximately $1,631,999,917, after application of scheduled payments due on or before the Cut-off Date, whether or not received. All of the sample Group 1 Loans are secured by first liens on the related mortgaged property. The average principal balance of the sample Group 1 Loans at origination was approximately $268,819. No sample Group 1 Loan had a principal balance at origination of greater than approximately $4,000,000 or less than approximately $22,050. The average principal balance of the sample Group 1 Loans S-25
424B526th Page of 311TOC1stPreviousNextBottomJust 26th
as of the Cut-off Date was approximately $268,377. No sample Group 1 Loan had a principal balance as of the Cut-off Date of greater than approximately $4,000,000 or less than approximately $9,154. As of the Cut-off Date, the sample Group 1 Loans had mortgage rates ranging from approximately 2.875% per annum to approximately 10.000% per annum and the weighted average mortgage rate was approximately 5.530% per annum. The weighted average remaining term to stated maturity of the sample Group 1 Loans was approximately 359 months as of the Cut-off Date. None of the sample Group 1 Loans will have a first Due Date prior to September 1, 1999, or after October 1, 2004, or will have a remaining term to maturity of less than 300 months or greater than 360 months as of the Cut-off Date. The latest maturity date of any sample Group 1 Loan is September 1, 2034. Approximately 0.03%, 1.20%, 3.68%, 45.85% and 4.60% of the sample Group 1 Loans have initial interest only periods of six months, two, three, five and ten years, respectively. The loan-to-value ratio of a mortgage loan secured by a first lien is equal to the ratio, expressed as a percentage, of the principal amount of the loan at origination, to the lesser of the appraised value of the related mortgaged property at the time of origination and the sales price. The weighted average of the loan-to- value ratios at origination of the sample Group 1 Loans was approximately 79.77%. No loan-to-value ratio at origination of any sample Group 1 Loan was greater than approximately 100.00% or less than approximately 12.90%. None of the sample Group 1 Loans are buydown mortgage loans. None of the Group 1 Loans will be subject to the Home Ownership and Equity Protection Act of 1994 or any comparable state law. Substantially all of the sample Group 1 Loans will not have reached their first adjustment date as of the Closing Date. Approximately 67.19% of the sample Group 1 Loans provide for prepayment charges. Approximately 20.88% and 9.78% of the sample Group 1 Loans are covered by a Primary Insurance Policy and the Radian Lender-Paid PMI Policy, respectively. For the sample Group 1 Loans, the weighted average of the Radian PMI Rates for the mortgage loans covered by the Radian Lender-Paid PMI Policy is approximately 1.065% per annum. With respect to substantially all of the Group 1 Loans, the Minimum Mortgage Rate is equal to the Gross Margin. Set forth below is a description of certain additional characteristics of the sample Group 1 Loans as of the Cut-off Date, except as otherwise indicated. All percentages of the sample Group 1 Loans are approximate percentages by aggregate principal balance as of the Cut-off Date, except as otherwise indicated. Dollar amounts and percentages may not add up to totals due to rounding. S-26
424B527th Page of 311TOC1stPreviousNextBottomJust 27th
MORTGAGE LOAN PROGRAMS(1) [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL LOAN PROGRAMS CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------- --------------- ----- ----- ------- --- -------- ----- --- 30Y LIBOR 1MO............ $ 2,595,170 8 0.16% $324,396 4.906% 359.73 686 74.10% 30Y LIBOR 1MO IO......... 11,708,349 28 0.72 418,155 4.557 359.51 718 74.24 30Y LIBOR 3MO IO......... 4,100,300 10 0.25 410,030 5.087 359.73 691 78.78 30Y LIBOR 6MO............ 30,063,273 113 1.84 266,047 5.818 359.06 678 82.09 30Y LIBOR 6MO IO......... 161,957,902 503 9.92 321,984 5.230 359.42 702 78.28 30Y LIBOR 12MO........... 1,553,111 8 0.10 194,139 6.708 359.86 644 84.54 30Y LIBOR 12MO IO........ 7,833,992 26 0.48 301,307 5.224 359.71 696 77.29 2/28 LIBOR 6MO........... 404,573,218 1,818 24.79 222,538 5.551 357.86 681 84.88 2/28 LIBOR 6MO IO........ 445,424,375 1,398 27.29 318,615 5.841 359.23 687 80.41 3/27 LIBOR 6MO........... 242,656,819 1,233 14.87 196,802 5.303 357.99 678 80.43 3/27 LIBOR 6MO IO........ 126,526,329 439 7.75 288,215 5.530 359.26 701 74.72 3/1 LIBOR 12MO........... 23,108,418 41 1.42 563,620 4.377 355.82 719 71.27 3/1 LIBOR 12MO IO........ 55,824,725 88 3.42 634,372 4.670 356.39 728 72.54 5/25 LIBOR 6MO........... 21,413,296 83 1.31 257,992 5.987 359.20 703 71.73 5/25 LIBOR 6MO IO........ 72,255,649 256 4.43 282,249 5.855 359.20 707 71.02 5/1 LIBOR 12MO........... 1,307,283 5 0.08 261,457 6.488 359.66 665 85.01 5/1 LIBOR 12MO IO........ 5,865,200 7 0.36 837,886 6.263 358.07 730 74.66 7/23 LIBOR 6MO........... 1,111,252 4 0.07 277,813 5.837 356.37 703 77.35 7/23 LIBOR 6MO IO........ 7,109,371 10 0.44 710,937 5.774 349.02 725 66.01 10/20 LIBOR 6MO.......... 111,886 1 0.01 111,886 5.875 359.00 745 57.43 10/20 LIBOR 6MO IO....... 4,900,000 2 0.30 2,450,000 5.138 357.18 730 63.69 -------------- ----- ------ -------- ----- ------ --- ----- Total........... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== ____________ (1) A mortgage loan with a loan program including the term "30Y LIBOR 1MO" has a term of 30 years and the mortgage rate adjusts monthly based on the value of One-Month LIBOR. A mortgage loan with a loan program including the term "30Y LIBOR 3MO" has a term of 30 years and the mortgage rate adjusts quarterly based on the value of Three-Month LIBOR. A mortgage loan with a loan program including the term "30Y LIBOR 6MO" has a term of 30 years and the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. A mortgage loan with a loan program including the term "30Y LIBOR 12MO" has a term of 30 years and the mortgage rate adjusts annually based on the value of One-Year LIBOR. A mortgage loan with a loan program including the term "2/28 LIBOR 6MO" has a term of 30 years, the first two of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. A mortgage loan with a loan program including the term "3/27 LIBOR 6MO" has a term of 30 years, the first three of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. A mortgage loan with a loan program including the term "3/1 LIBOR 12MO" has a term of 30 years, the first three of which consist of a fixed rate period, and thereafter the mortgage rate adjusts annually based on the value of One-Year LIBOR. A mortgage loan with a loan program including the term "5/25 LIBOR 6MO" has a term of 30 years, the first five of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. A mortgage loan with a loan program including the term "5/1 LIBOR 12MO" has a term of 30 years, the first five of which consist of a fixed rate period, and thereafter the mortgage rate adjusts annually based on the value of One-Year LIBOR. A mortgage loan with a loan program including the term "7/23 LIBOR 6MO" has a term of 30 years, the first seven of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR . A mortgage loan with a loan program including the term "10/20 LIBOR 6MO" has a term of 30 years, the first ten of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. Any mortgage loan with a loan program including the term "IO" has an interest only period. S-27
424B528th Page of 311TOC1stPreviousNextBottomJust 28th
PRINCIPAL BALANCES AS OF ORIGINATION [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF MORTGAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL LOAN PRINCIPAL BALANCES CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ----------------------- --------------- ----- ----- ------- --- -------- ----- --- $0.01 - $50,000.00............. $ 2,666,655 68 0.16% $39,216 5.905% 357.29 703 85.61% $50,000.01 - $100,000.00....... 65,458,761 790 4.01 82,859 5.840 358.43 682 80.76 $100,000.01 - $150,000.00...... 138,215,104 1,148 8.47 120,396 5.781 358.54 685 81.81 $150,000.01 - $200,000.00...... 132,641,469 760 8.13 174,528 5.681 358.63 688 81.10 $200,000.01 - $250,000.00...... 131,687,972 586 8.07 224,724 5.588 358.71 690 81.64 $250,000.01 - $300,000.00...... 129,301,323 471 7.92 274,525 5.553 358.80 691 80.17 $300,000.01 - $350,000.00...... 157,791,997 481 9.67 328,050 5.518 358.66 689 80.55 $350,000.01 - $400,000.00...... 213,813,375 570 13.10 375,111 5.486 358.60 690 81.35 $400,000.01 - $450,000.00...... 141,083,233 332 8.64 424,949 5.525 358.66 697 81.05 $450,000.01 - $500,000.00...... 130,509,386 274 8.00 476,312 5.478 358.48 689 80.32 $500,000.01 - $550,000.00...... 96,959,234 185 5.94 524,104 5.453 358.63 691 79.60 $550,000.01 - $600,000.00...... 80,338,253 139 4.92 577,973 5.474 358.48 685 78.47 $600,000.01 - $650,000.00...... 79,895,312 126 4.90 634,090 5.365 358.39 685 77.13 $650,000.01 - $700,000.00...... 18,970,026 28 1.16 677,501 5.269 358.87 695 72.42 $700,000.01 - $750,000.00...... 41,899,487 57 2.57 735,079 5.406 358.71 681 73.55 $750,000.01 - $800,000.00...... 6,937,549 9 0.43 770,839 5.233 357.79 693 74.36 $800,000.01 - $850,000.00...... 4,141,286 5 0.25 828,257 4.467 357.61 685 69.93 $850,000.01 - $900,000.00...... 5,264,200 6 0.32 877,367 5.353 357.34 715 75.43 $900,000.01 - $950,000.00...... 1,854,000 2 0.11 927,000 5.868 358.49 700 75.09 $950,000.01 - $1,000,000.00.... 30,707,708 31 1.88 990,571 5.066 357.55 722 68.62 $1,000,000.01 - $1,050,000.00.. 1,032,575 1 0.06 1,032,575 3.875 357.00 729 57.36 $1,050,000.01 - $1,100,000.00.. 1,092,500 1 0.07 1,092,500 3.875 357.00 793 58.26 $1,100,000.01 - $1,150,000.00.. 1,112,950 1 0.07 1,112,950 4.500 359.00 714 69.99 $1,150,000.01 - $1,200,000.00.. 1,200,000 1 0.07 1,200,000 4.875 355.00 756 60.00 $1,250,000.01 - $1,300,000.00.. 1,260,000 1 0.08 1,260,000 5.625 359.00 715 70.00 $1,300,000.01 - $1,350,000.00.. 1,299,941 1 0.08 1,299,941 4.625 357.00 739 60.00 $1,350,000.01 - $1,400,000.00.. 1,365,000 1 0.08 1,365,000 4.000 357.00 743 66.58 $1,450,000.01 - $1,500,000.00.. 3,000,000 2 0.18 1,500,000 5.563 358.00 672 54.08 $1,750,000.01 - $1,800,000.00.. 1,760,000 1 0.11 1,760,000 5.875 357.00 750 80.00 $1,950,000.01 - $2,000,000.00.. 2,000,000 1 0.12 2,000,000 4.250 357.00 796 57.80 $2,700,000.01 - $2,750,000.00.. 2,740,621 1 0.17 2,740,621 6.250 338.00 740 61.09 $3,950,000.01 - $4,000,000.00.. 4,000,000 1 0.25 4,000,000 5.000 357.00 740 64.52 -------------- ----- ------ -------- ----- ------ --- ----- Total................. $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== As of origination, the average principal balance of the sample Group 1 Loans will be approximately $268,819. S-28
424B529th Page of 311TOC1stPreviousNextBottomJust 29th
PRINCIPAL BALANCES AS OF THE CUT-OFF DATE [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF MORTGAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL LOAN PRINCIPAL BALANCES CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ----------------------- --------------- ----- ----- ------- --- -------- ----- --- $0.01 - $50,000.00.............. $ 2,675,808 69 0.16% $38,780 5.899% 357.27 703 85.62% $50,000.01 - $100,000.00........ 65,644,276 791 4.02 82,989 5.835 358.43 682 80.73 $100,000.01 - $150,000.00....... 138,618,093 1,150 8.49 120,537 5.780 358.54 685 81.86 $150,000.01 - $200,000.00....... 132,243,263 757 8.10 174,694 5.681 358.64 687 81.06 $200,000.01 - $250,000.00....... 132,737,155 590 8.13 224,978 5.588 358.70 690 81.70 $250,000.01 - $300,000.00....... 128,052,688 466 7.85 274,791 5.555 358.81 691 80.09 $300,000.01 - $350,000.00....... 160,934,323 490 9.86 328,437 5.504 358.63 689 80.71 $350,000.01 - $400,000.00....... 211,469,006 563 12.96 375,611 5.494 358.62 689 81.24 $400,000.01 - $450,000.00....... 141,631,304 333 8.68 425,319 5.518 358.64 697 81.08 $450,000.01 - $500,000.00....... 130,163,248 273 7.98 476,788 5.492 358.51 689 80.23 $500,000.01 - $550,000.00....... 97,054,397 185 5.95 524,618 5.439 358.60 691 79.71 $550,000.01 - $600,000.00....... 79,842,637 138 4.89 578,570 5.481 358.51 685 78.46 $600,000.01 - $650,000.00....... 79,295,876 125 4.86 634,367 5.367 358.40 684 77.03 $650,000.01 - $700,000.00....... 18,970,026 28 1.16 677,501 5.269 358.87 695 72.42 $700,000.01 - $750,000.00....... 42,649,175 58 2.61 735,331 5.421 358.71 681 73.67 $750,000.01 - $800,000.00....... 6,187,861 8 0.38 773,483 5.110 357.65 693 73.68 $800,000.01 - $850,000.00....... 4,141,286 5 0.25 828,257 4.467 357.61 685 69.93 $850,000.01 - $900,000.00....... 5,264,200 6 0.32 877,367 5.353 357.34 715 75.43 $900,000.01 - $950,000.00....... 1,854,000 2 0.11 927,000 5.868 358.49 700 75.09 $950,000.01 - $1,000,000.00..... 30,707,708 31 1.88 990,571 5.066 357.55 722 68.62 $1,000,000.01 - $1,050,000.00... 1,032,575 1 0.06 1,032,575 3.875 357.00 729 57.36 $1,050,000.01 - $1,100,000.00... 1,092,500 1 0.07 1,092,500 3.875 357.00 793 58.26 $1,100,000.01 - $1,150,000.00... 1,112,950 1 0.07 1,112,950 4.500 359.00 714 69.99 $1,150,000.01 - $1,200,000.00... 1,200,000 1 0.07 1,200,000 4.875 355.00 756 60.00 $1,250,000.01 - $1,300,000.00... 2,559,941 2 0.16 1,279,971 5.117 357.98 727 64.92 $1,350,000.01 - $1,400,000.00... 1,365,000 1 0.08 1,365,000 4.000 357.00 743 66.58 $1,450,000.01 - $1,500,000.00... 3,000,000 2 0.18 1,500,000 5.563 358.00 672 54.08 $1,750,000.01 - $1,800,000.00... 1,760,000 1 0.11 1,760,000 5.875 357.00 750 80.00 $1,950,000.01 - $2,000,000.00... 2,000,000 1 0.12 2,000,000 4.250 357.00 796 57.80 $2,700,000.01 - $2,750,000.00... 2,740,621 1 0.17 2,740,621 6.250 338.00 740 61.09 $3,950,000.01 - $4,000,000.00... 4,000,000 1 0.25 4,000,000 5.000 357.00 740 64.52 -------------- ----- ------ -------- ----- ------ --- ----- Total.................. $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== As of the Cut-off Date, the average current principal balance of the sample Group 1 Loans will be approximately $268,377. S-29
424B530th Page of 311TOC1stPreviousNextBottomJust 30th
MORTGAGE RATES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL MORTGAGE RATES (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------------ --------------- ----- ----- ------- --- -------- ----- --- 2.500 - 2.999............ $ 2,511,310 4 0.15% $627,827 2.894% 359.16 730 59.53% 3.000 - 3.499............ 10,349,749 27 0.63 383,324 3.277 357.83 750 71.44 3.500 - 3.999............ 61,281,611 170 3.76 360,480 3.775 357.33 718 71.87 4.000 - 4.499............ 112,695,839 343 6.91 328,559 4.218 357.84 708 74.41 4.500 - 4.999............ 297,951,887 1,033 18.26 288,434 4.722 358.15 699 77.78 5.000 - 5.499............ 293,926,676 1,119 18.01 262,669 5.211 358.53 697 78.75 5.500 - 5.999............ 396,626,788 1,569 24.30 252,790 5.704 358.79 684 80.83 6.000 - 6.499............ 198,778,070 766 12.18 259,501 6.200 358.64 682 80.97 6.500 - 6.999............ 141,830,677 502 8.69 282,531 6.696 358.96 674 83.85 7.000 - 7.499............ 51,249,886 222 3.14 230,855 7.189 359.07 676 86.24 7.500 - 7.999............ 36,758,268 184 2.25 199,773 7.706 359.31 666 87.79 8.000 - 8.499............ 12,141,100 61 0.74 199,034 8.171 359.17 658 87.69 8.500 - 8.999............ 7,838,943 48 0.48 163,311 8.684 359.39 656 88.65 9.000 - 9.499............ 4,704,888 19 0.29 247,626 9.202 359.48 669 90.16 9.500 - 9.999............ 2,387,726 10 0.15 238,773 9.655 359.88 637 88.81 10.000 - 10.499.......... 966,500 4 0.06 241,625 10.000 359.34 638 94.55 -------------- ----- ------ -------- ----- ------ --- ----- Total........... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== ____________ As of the Cut-off Date, the weighted average mortgage rate of the sample Group 1 Loans will be approximately 5.530% per annum. S-30
424B531st Page of 311TOC1stPreviousNextBottomJust 31st
NEXT ADJUSTMENT DATE [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL NEXT ADJUSTMENT DATE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV -------------------- --------------- ----- ----- ------- --- -------- ----- --- August 1, 2004......... $ 3,321,867 7 0.20 $474,552 4.421% 355.15 718 75.61% September 1, 2004...... 1,326,600 3 0.08 442,200 4.532 358.03 692 81.34 October 1, 2004........ 5,225,010 12 0.32 435,417 4.342 358.72 695 71.14 November 1, 2004....... 11,850,059 40 0.73 296,251 5.030 359.21 707 80.33 December 1, 2004....... 16,976,889 55 1.04 308,671 4.988 357.96 689 79.97 January 1, 2005........ 71,732,245 226 4.40 317,399 5.076 359.00 700 78.47 February 1, 2005....... 89,060,084 289 5.46 308,166 5.587 360.00 701 79.10 March 1, 2005.......... 11,120,820 31 0.68 358,736 5.443 360.00 676 74.96 June 1, 2005........... 758,400 3 0.05 252,800 4.903 358.00 655 80.00 July 1, 2005........... 973,010 4 0.06 243,253 5.567 359.00 705 82.22 August 1, 2005......... 5,126,843 20 0.31 256,342 5.475 360.00 692 78.52 September 1, 2005...... 2,528,850 7 0.15 361,264 5.589 360.00 682 76.52 December 1, 2005....... 241,542 1 0.01 241,542 5.950 352.00 628 90.00 February 1, 2006....... 794,267 5 0.05 158,853 5.845 354.00 656 88.65 March 1, 2006.......... 2,486,667 11 0.15 226,061 5.882 355.26 651 78.25 April 1, 2006.......... 45,282,912 167 2.77 271,155 4.892 356.00 678 86.59 May 1, 2006............ 139,618,923 591 8.56 236,242 5.111 357.01 685 86.88 June 1, 2006........... 156,620,122 654 9.60 239,480 5.719 357.98 678 85.80 July 1, 2006........... 272,328,188 930 16.69 292,826 6.082 359.00 681 81.70 August 1, 2006......... 199,043,274 739 12.20 269,341 5.766 360.00 696 78.60 September 1, 2006...... 34,261,028 119 2.10 287,908 5.695 359.85 678 74.37 October 1, 2006........ 481,543 1 0.03 481,543 4.500 350.00 718 49.58 December 1, 2006....... 1,605,782 5 0.10 321,156 5.157 352.00 579 72.02 January 1, 2007........ 2,373,117 7 0.15 339,017 4.951 353.00 723 75.44 February 1, 2007....... 9,106,933 20 0.56 455,347 4.319 354.00 701 74.21 March 1, 2007.......... 10,545,836 19 0.65 555,044 4.369 355.00 728 67.52 April 1, 2007.......... 27,594,520 99 1.69 278,733 4.693 356.01 697 79.16 May 1, 2007............ 113,060,670 378 6.93 299,102 4.762 357.06 704 78.48 June 1, 2007........... 102,196,907 513 6.26 199,214 5.396 358.20 681 80.67 July 1, 2007........... 99,831,656 476 6.12 209,730 5.621 359.00 684 76.92 August 1, 2007......... 70,555,675 245 4.32 287,982 5.696 360.00 698 73.67 September 1, 2007...... 9,895,742 36 0.61 274,882 5.453 360.00 700 70.89 January 1, 2009........ 560,000 1 0.03 560,000 5.625 353.00 652 69.48 February 1, 2009....... 596,701 1 0.04 596,701 6.500 354.00 665 80.00 March 1, 2009.......... 525,000 1 0.03 525,000 5.625 355.00 702 75.00 April 1, 2009.......... 1,294,026 4 0.08 323,506 4.930 356.00 704 76.41 May 1, 2009............ 2,141,052 6 0.13 356,842 5.708 357.00 746 71.89 June 1, 2009........... 10,516,093 40 0.64 262,902 6.118 358.00 719 76.73 July 1, 2009........... 43,987,831 147 2.70 299,237 5.887 359.00 714 71.12 August 1, 2009......... 33,001,075 125 2.02 264,009 5.996 360.00 696 72.58 September 1, 2009...... 8,219,650 26 0.50 316,140 5.682 360.00 690 61.79 October 1, 2009........ 2,740,621 1 0.17 2,740,621 6.250 338.00 740 61.09 August 1, 2010......... 920,000 2 0.06 460,000 4.864 348.00 721 68.42 October 1, 2010........ 316,746 1 0.02 316,746 5.375 350.00 778 75.23 March 1, 2011.......... 857,000 1 0.05 857,000 5.250 355.00 691 72.94 April 1, 2011.......... 375,000 1 0.02 375,000 5.625 356.00 733 72.82 June 1, 2011........... 206,931 1 0.01 206,931 5.625 358.00 726 79.84 July 1, 2011........... 1,402,575 3 0.09 467,525 6.036 359.00 709 70.55 August 1, 2011......... 1,148,750 3 0.07 382,917 5.771 360.00 695 69.42 September 1, 2011...... 253,000 1 0.02 253,000 5.375 360.00 746 63.25 May 1, 2014............ 4,000,000 1 0.25 4,000,000 5.000 357.00 740 64.52 June 1, 2014........... 900,000 1 0.06 900,000 5.750 358.00 688 60.00 July 1, 2014........... 111,886 1 0.01 111,886 5.875 359.00 745 57.43 -------------- ----- ------ -------- ----- ------ --- ----- Total......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== _____________ As of the Cut-off Date, the weighted average remaining months to the next adjustment date of the sample Group 1 Loans will be approximately 26 months. S-31
424B532nd Page of 311TOC1stPreviousNextBottomJust 32nd
GROSS MARGIN [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF GROSS NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL MARGINS (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ----------- --------------- ----- ----- ------- --- -------- ----- --- 1.500 - 1.749.......... $ 684,066 4 0.04% $171,016 4.806% 359.42 769 55.94% 1.750 - 1.999.......... 8,519,346 38 0.52 224,193 3.718 357.37 738 73.10 2.000 - 2.249.......... 18,177,070 72 1.11 252,459 4.219 357.74 705 72.76 2.250 - 2.499.......... 165,604,290 344 10.15 481,408 4.846 356.78 719 72.66 2.500 - 2.749.......... 55,967,526 192 3.43 291,498 4.665 357.40 693 78.03 2.750 - 2.999.......... 107,361,070 390 6.58 275,285 4.930 357.69 694 81.10 3.000 - 3.249.......... 168,557,048 648 10.33 260,119 5.114 358.16 701 83.90 3.250 - 3.499.......... 258,335,813 977 15.83 264,417 5.425 358.87 724 79.24 3.500 - 3.749.......... 171,893,654 654 10.53 262,834 5.478 359.04 686 80.36 3.750 - 3.999.......... 277,955,196 1,059 17.03 262,469 5.871 359.45 671 77.55 4.000 - 4.249.......... 16,708,703 84 1.02 198,913 6.067 357.54 686 82.71 4.250 - 4.499.......... 21,976,654 94 1.35 233,794 6.112 358.86 663 78.50 4.500 - 4.749.......... 21,165,803 100 1.30 211,658 5.725 359.00 681 81.29 4.750 - 4.999.......... 17,893,557 99 1.10 180,743 5.614 358.96 670 80.96 5.000 - 5.249.......... 69,404,255 338 4.25 205,338 6.283 358.84 678 81.85 5.250 - 5.499.......... 31,506,635 176 1.93 179,015 5.863 358.83 657 81.54 5.500 - 5.749.......... 35,113,468 218 2.15 161,071 5.984 358.78 653 81.08 5.750 - 5.999.......... 73,145,282 272 4.48 268,916 6.233 358.81 668 80.87 6.000 - 6.249.......... 65,368,450 174 4.01 375,681 6.478 358.76 654 85.34 6.250 - 6.499.......... 34,505,950 103 2.11 335,009 6.638 358.72 644 91.30 6.500 - 6.749.......... 6,864,890 22 0.42 312,040 6.653 358.40 632 92.03 6.750 - 6.999.......... 1,223,640 5 0.07 244,728 6.348 358.34 637 76.06 7.000 - 7.249.......... 732,642 2 0.04 366,321 7.250 358.51 637 90.00 7.250 - 7.499.......... 815,633 3 0.05 271,878 8.118 359.40 616 86.72 7.500 - 7.749.......... 768,278 6 0.05 128,046 8.214 359.24 635 80.69 7.750 - 7.999.......... 346,892 1 0.02 346,892 9.000 359.00 653 95.00 8.000 - 8.249.......... 367,421 1 0.02 367,421 8.375 360.00 717 95.00 8.250 - 8.499.......... 208,829 1 0.01 208,829 8.625 360.00 642 95.00 8.500- 8.749........... 196,650 1 0.01 196,650 8.875 360.00 638 95.00 8.750 - 8.999.......... 147,250 1 0.01 147,250 9.125 360.00 667 95.00 9.000- 9.249........... 312,958 1 0.02 312,958 9.250 359.00 643 95.00 9.750 - 9.999.......... 171,000 1 0.01 171,000 10.000 360.00 676 95.00 -------------- ----- ------ -------- ----- ------ --- ----- Total......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== ___________ As of the Cut-off Date, the weighted average Gross Margin of the sample Group 1 Loans will be approximately 3.726% per annum. S-32
424B533rd Page of 311TOC1stPreviousNextBottomJust 33rd
MAXIMUM MORTGAGE RATE [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF MAXIMUM NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL MORTGAGE RATES (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------------ --------------- ----- ----- ------- --- -------- ----- --- 8.500 - 8.999........... $ 1,584,394 4 0.10% $396,099 3.056% 358.96 737 49.95% 9.000 - 9.499........... 9,776,749 25 0.60 391,070 3.332 357.66 748 71.61 9.500 - 9.999........... 78,530,553 217 4.81 361,892 4.033 357.77 716 72.97 10.000 - 10.499......... 114,234,338 350 7.00 326,384 4.258 357.82 708 74.53 10.500 - 10.999......... 296,686,223 1,029 18.18 288,325 4.746 358.13 699 77.77 11.000 - 11.499......... 289,241,317 1,109 17.72 260,813 5.230 358.57 697 78.68 11.500 - 11.999......... 390,510,169 1,550 23.93 251,942 5.717 358.80 684 80.82 12.000 - 12.499......... 195,398,486 754 11.97 259,149 6.192 358.65 681 81.14 12.500 - 12.999......... 140,778,323 491 8.63 286,718 6.655 358.95 674 84.18 13.000 - 13.499......... 48,905,007 215 3.00 227,465 7.160 359.02 676 86.72 13.500 - 13.999......... 34,500,448 176 2.11 196,025 7.660 359.16 670 88.39 14.000 - 14.499......... 12,802,167 63 0.78 203,209 7.982 358.35 654 88.64 14.500 - 14.999......... 9,593,039 57 0.59 168,299 8.426 359.42 642 84.89 15.000 - 15.499......... 4,770,368 20 0.29 238,518 9.032 359.42 660 87.33 15.500 - 15.999......... 2,723,943 12 0.17 226,995 9.390 359.60 627 86.79 16.000 - 16.499......... 1,670,428 7 0.10 238,633 9.621 359.46 624 85.19 16.500 - 16.999......... 293,967 2 0.02 146,984 9.750 360.00 566 78.14 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== _________________ As of the Cut-off Date, the weighted average Maximum Mortgage Rate of the sample Group 1 Loans will be approximately 11.516% per annum. INITIAL FIXED-RATE PERIOD [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL INITIAL FIXED PERIOD CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV -------------------- --------------- ----- ----- ------- --- -------- ----- --- One Month............... $ 3,607,500 7 0.22% $ 515,357 4.381% 359.22 724 74.77% Three Months............ 14,796,319 39 0.91 379,393 4.808 359.68 703 75.35 Six Months.............. 192,021,175 616 11.77 311,723 5.322 359.36 698 78.87 One Year................ 9,387,103 34 0.58 276,091 5.469 359.73 688 78.49 Two Years............... 849,997,593 3,216 52.08 264,303 5.703 358.58 684 82.54 Three Years............. 448,116,291 1,801 27.46 248,815 5.240 358.04 693 77.36 Five Years.............. 100,841,428 351 6.18 287,298 5.915 359.14 707 71.57 Seven Years............. 8,220,623 14 0.50 587,187 5.782 350.01 722 67.54 Ten Years............... 5,011,886 3 0.31 1,670,629 5.154 357.22 731 63.55 -------------- ----- ------ ---------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $ 268,377 5.530% 358.53 690 79.77% ============== ===== ====== S-33
424B534th Page of 311TOC1stPreviousNextBottomJust 34th
INITIAL RATE CAP [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL INITIAL CAP (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------- --------------- ----- ----- ------- --- -------- ----- --- 1.000................... $ 218,364,793 688 13.38% $317,391 5.260% 359.42 700 78.51% 1.500................... 2,880,427 11 0.18 261,857 6.848 358.72 593 75.48 2.000................... 85,006,524 149 5.21 570,514 4.643 356.32 721 72.98 3.000................... 889,284,309 3,478 54.49 255,688 5.878 359.20 685 78.80 5.000................... 23,677,958 71 1.45 333,492 5.923 358.29 714 73.00 6.000................... 412,785,907 1,684 25.29 245,122 5.077 357.08 689 84.32 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== PERIODIC RATE CAP [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL SUBSEQUENT CAP (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------------ --------------- ----- ----- ------- --- -------- ----- --- 1.000................... $1,495,410,822 5,811 91.63% $257,341 5.564% 358.70 688 80.45% 1.500................... 11,294,096 48 0.69 235,294 6.969 358.74 595 73.68 2.000................... 125,295,000 222 7.68 564,392 5.004 356.47 720 72.21 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== S-34
424B535th Page of 311TOC1stPreviousNextBottomJust 35th
ORIGINAL LOAN-TO-VALUE RATIOS [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF LOAN-TO- NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL VALUE RATIOS (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------- --------------- ----- ----- ------- --- -------- ----- --- 0.01 - 20.00............ $ 1,231,258 4 0.08% $307,814 5.257% 358.79 765 18.00% 20.01 - 25.00........... 134,573 2 0.01 67,287 4.742 358.57 719 22.52 25.01 - 30.00........... 892,002 7 0.05 127,429 4.779 358.51 718 28.60 30.01 - 35.00........... 2,057,649 9 0.13 228,628 4.062 359.00 718 32.12 35.01 - 40.00........... 2,683,136 15 0.16 178,876 4.595 358.25 683 38.01 40.01 - 45.00........... 8,402,454 23 0.51 365,324 4.910 358.51 687 42.64 45.01 - 50.00........... 8,858,522 29 0.54 305,466 5.324 358.38 686 47.16 50.01 - 55.00........... 17,918,967 53 1.10 338,094 4.757 358.34 700 53.16 55.01 - 60.00........... 35,235,209 98 2.16 359,543 4.923 358.25 708 58.31 60.01 - 65.00........... 49,114,577 133 3.01 369,283 5.057 357.19 698 63.44 65.01 - 70.00........... 210,974,207 696 12.93 303,124 4.955 359.17 703 69.40 70.01 - 75.00........... 72,529,684 239 4.44 303,471 5.409 358.35 689 73.91 75.01 - 80.00........... 719,056,869 2,657 44.06 270,627 5.527 358.86 692 79.75 80.01 - 85.00........... 50,185,170 178 3.08 281,939 5.775 358.19 672 83.96 85.01 - 90.00........... 275,206,589 1,185 16.86 232,242 5.899 357.98 682 89.67 90.01 - 95.00........... 175,353,977 740 10.74 236,965 6.041 357.86 677 94.72 95.01 - 100.00.......... 2,165,074 13 0.13 166,544 6.275 359.04 714 98.84 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== __________ The minimum and maximum loan-to-value ratios of the sample Group 1 Loans at origination were approximately 12.90% and 100.00%, respectively, and the weighted average of the loan-to-value ratios of the sample Group 1 Loans at origination was approximately 79.77%. OCCUPANCY TYPES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL OCCUPANCY CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------- --------------- ----- ----- ------- --- -------- ----- --- Owner Occupied.......... $1,344,057,008 4,750 82.36% $282,959 5.491% 358.52 687 80.00% Investment.............. 227,641,593 1,123 13.95 202,708 5.816 358.58 706 79.26 Second Home............. 60,301,317 208 3.69 289,910 5.332 358.37 708 76.48 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== Occupancy type is based on the representation of the borrower at the time of origination. S-35
424B536th Page of 311TOC1stPreviousNextBottomJust 36th
MORTGAGE LOAN PROGRAM AND DOCUMENTATION TYPE [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL DOCUMENT TYPE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------- --------------- ----- ----- ------- --- -------- ----- --- Progressive Series Program (Limited (Stated) Documentation).......... $ 684,998,148 2,142 41.97% $319,794 5.596% 358.95 696 77.87% Progressive Series Program (Full Documentation).... 366,553,985 1,583 22.46 231,557 5.407 358.79 681 78.03 Progressive Express(TM) Program (Non Verified Assets)................. 305,287,598 1,237 18.71 246,797 5.376 357.61 686 83.48 Progressive Express(TM) No Doc Program (No Documentation).......... 149,680,199 664 9.17 225,422 5.495 357.76 694 84.22 Progressive Express(TM) Program (Verified Assets)................. 102,617,636 375 6.29 273,647 5.969 358.68 688 80.72 Progressive Series Program (No Income/No Asset Documentation).......... 7,562,891 16 0.46 472,681 5.528 356.73 730 78.33 Progressive Express(TM) No Doc Program (Verified Assets)....... 7,451,711 32 0.46 232,866 6.200 359.48 703 81.39 Progressive Series Program (Full Income/Stated Assets Documentation).......... 5,838,173 26 0.36 224,545 5.649 358.45 667 81.82 Progressive Series Program (Alternative Documentation).......... 1,746,850 4 0.11 436,713 6.455 358.23 645 93.58 Progressive Series Program (Lite/Reduced Documentation (SE))..... 262,726 2 0.02 131,363 6.191 345.14 733 81.34 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== See "--Underwriting Standards" below for a detailed description of the Seller's loan programs and documentation requirements. S-36
424B537th Page of 311TOC1stPreviousNextBottomJust 37th
RISK CATEGORIES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL CREDIT GRADE CATEGORY CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------------- --------------- ----- ----- ------- --- -------- ----- --- A+(1)...................... $ 788,845,589 2,817 48.34% $280,030 5.224% 358.42 727 78.17% A(1)....................... 633,991,823 2,365 38.85 268,073 5.614 358.46 653 81.42 A- (1)..................... 51,122,166 224 3.13 228,224 6.205 358.75 610 79.24 B(1)....................... 1,432,170 4 0.09 358,043 5.124 354.09 571 71.22 C(1)....................... 620,809 5 0.04 124,162 9.005 358.88 566 74.17 CX(1)...................... 852,872 3 0.05 284,291 6.649 354.79 511 70.98 Progressive Express(TM) I(2).. 79,118,925 335 4.85 236,176 6.224 359.44 726 82.15 Progressive Express(TM) II(2). 64,320,214 274 3.94 234,745 6.760 359.17 651 82.46 Progressive Express(TM)III(2). 5,124,274 22 0.31 232,922 6.711 359.29 618 71.70 Progressive Express(TM) IV(2). 2,242,585 11 0.14 203,871 6.478 359.61 598 76.03 Progressive Express(TM) V(2).. 2,943,296 13 0.18 226,407 7.655 359.51 582 68.47 Progressive Express(TM) VI(2). 1,385,193 8 0.08 173,149 8.070 359.39 539 66.60 -------------- ----- ------ -------- ----- ------ --- ----- Total............. $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== _________________ (1) All of these sample Group 1 Loans were reviewed and placed into risk categories based on the credit standards of the Progressive Series Program. Credit grades of A+, A, A-, B, C and CX correspond to Progressive Series I+, I and II, III and III+, IV, V and VI respectively. (2) These sample Group 1 Loans were originated under the Seller's Progressive Express(TM) Program. The underwriting for these sample Group 1 Loans is generally based on the borrower's "Credit Score" score and therefore these sample Group 1 Loans do not correspond to the alphabetical risk categories listed above. Each mortgage loan originated pursuant to the Express Priority Refi(TM) Program has been placed in either Progressive Express(TM) Program II or III. SEE "--UNDERWRITING STANDARDS" BELOW FOR A DESCRIPTION OF THE SELLER'S RISK CATEGORIES. S-37
424B538th Page of 311TOC1stPreviousNextBottomJust 38th
PROPERTY TYPES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL PROPERTY TYPE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------- --------------- ----- ----- ------- --- -------- ----- --- Single-Family Residence....... $1,203,701,973 4,533 73.76% $265,542 5.498% 358.48 686 80.06% Condominium................... 146,760,564 663 8.99 221,358 5.495 358.52 702 80.57 Planned Unit Development...... 89,680,998 258 5.50 347,601 5.524 358.15 702 77.47 De minimis PUD................ 72,612,115 230 4.45 315,705 5.728 359.31 694 79.10 Two Family.................... 50,498,953 180 3.09 280,550 5.834 358.67 696 80.35 Four Family................... 25,262,419 72 1.55 350,867 5.799 358.84 709 76.64 Three Family.................. 21,046,444 59 1.29 356,719 5.788 358.63 707 76.31 Highrise/Condominium 16,077,771 49 0.99 328,118 5.545 359.19 724 74.21 Townhouse..................... 5,803,751 35 0.36 165,821 5.895 359.37 687 77.57 Condominium................... 408,000 1 0.03 408,000 6.625 360.00 717 89.68 Condotel...................... 146,930 1 0.01 146,930 3.875 358.00 708 69.67 -------------- ----- ------ -------- ----- ------ --- ----- Total................ $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== S-38
424B539th Page of 311TOC1stPreviousNextBottomJust 39th
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL STATE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ----- --------------- ----- ----- ------- --- -------- ----- --- Alabama................. $ 5,672,348 27 0.35% $210,087 5.142% 358.80 713 74.03% Arkansas................ 1,210,563 9 0.07 134,507 5.825 357.70 670 91.36 Arizona................. 49,015,351 274 3.00 178,888 5.616 358.35 680 81.12 California.............. 875,346,929 2,441 53.64 358,602 5.483 358.82 694 78.36 Colorado................ 41,668,248 164 2.55 254,075 5.334 356.53 699 80.89 Connecticut ........... 8,711,805 34 0.53 256,230 5.608 357.94 669 83.01 District of Columbia.... 3,533,926 12 0.22 294,494 5.290 358.37 679 81.57 Delaware................ 3,737,227 22 0.23 169,874 5.615 357.76 675 87.37 Florida................. 123,571,399 634 7.57 194,908 5.894 358.80 693 81.86 Georgia................. 21,392,593 110 1.31 194,478 5.567 358.03 692 82.56 Hawaii.................. 10,337,623 22 0.63 469,892 5.546 358.57 695 73.46 Iowa.................... 3,246,228 32 0.20 101,445 5.194 357.44 698 87.60 Idaho................... 1,666,379 17 0.10 98,022 5.686 358.38 656 81.30 Illinois................ 36,143,493 159 2.21 227,318 5.731 358.40 680 80.62 Indiana................. 6,692,066 56 0.41 119,501 5.759 358.24 684 85.48 Kansas.................. 3,715,322 26 0.23 142,897 5.593 357.56 692 86.30 Kentucky................ 3,315,379 25 0.20 132,615 5.444 358.23 665 85.43 Louisiana............... 2,880,756 19 0.18 151,619 5.995 357.89 657 81.90 Massachusetts........... 37,289,417 106 2.28 351,787 5.223 357.79 691 81.21 Maryland................ 36,142,772 127 2.21 284,589 5.665 358.38 681 81.26 Maine................... 3,349,409 17 0.21 197,024 5.258 357.78 705 77.77 Michigan................ 14,081,373 85 0.86 165,663 5.666 357.49 679 78.15 Minnesota............... 29,505,733 144 1.81 204,901 5.203 357.82 677 81.37 Missouri................ 11,343,799 84 0.70 135,045 5.671 358.03 676 85.36 Mississippi............. 2,914,221 21 0.18 138,772 5.174 358.32 659 79.84 Montana................. 1,281,369 10 0.08 128,137 6.449 358.45 655 83.22 North Carolina.......... 13,141,022 92 0.81 142,837 5.805 358.48 682 83.36 North Dakota............ 475,921 5 0.03 95,184 6.117 358.83 667 78.91 Nebraska................ 2,066,415 18 0.13 114,801 5.590 357.66 672 88.08 New Hampshire........... 1,733,135 9 0.11 192,571 5.801 358.63 682 78.80 New Jersey.............. 28,190,624 89 1.73 316,749 6.068 357.96 678 81.27 New Mexico ............. 4,241,377 22 0.26 192,790 5.001 357.73 673 80.50 Nevada.................. 56,065,728 207 3.44 270,849 5.605 358.51 697 80.46 New York................ 23,945,980 67 1.47 357,403 5.120 357.22 676 80.49 Ohio.................... 11,967,636 106 0.73 112,902 5.587 358.12 669 83.60 Oklahoma................ 1,064,099 10 0.07 106,410 5.803 357.93 679 89.21 Oregon.................. 13,161,709 79 0.81 166,604 5.331 358.87 688 80.99 Pennsylvania............ 6,773,883 43 0.42 157,532 5.786 358.65 670 82.49 Rhode Island............ 4,160,682 14 0.25 297,192 5.426 358.08 681 78.36 South Carolina.......... 7,350,991 37 0.45 198,675 5.506 358.36 682 84.59 South Dakota............ 1,314,123 8 0.08 164,265 4.958 357.68 693 83.58 Tennessee............... 7,525,247 54 0.46 139,356 5.536 357.97 675 83.09 Texas................... 19,830,884 123 1.22 161,227 5.963 358.42 695 81.51 Utah.................... 14,311,556 81 0.88 176,686 5.417 358.63 696 83.39 Virginia................ 43,490,371 170 2.66 255,826 5.421 358.35 681 81.05 Vermont................. 595,353 1 0.04 595,353 3.625 355.00 707 38.71 Washington.............. 23,518,411 111 1.44 211,878 5.321 358.31 679 79.76 Wisconsin............... 7,066,176 46 0.43 153,613 5.573 357.92 676 84.36 West Virginia........... 1,491,673 7 0.09 213,096 4.659 357.24 713 85.34 Wyoming................. 751,195 5 0.05 150,239 5.161 357.99 661 88.79 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== No more than approximately 0.43% of the sample Group 1 Loans (by aggregate outstanding principal balance as of the Cut-off Date) are secured by mortgaged properties located in any one zip code. S-39
424B540th Page of 311TOC1stPreviousNextBottomJust 40th
DEBT-TO-INCOME RATIO [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL DESCRIPTION (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------- --------------- ----- ----- ------- --- -------- ----- --- 0.01 - 5.00............. $ 2,320,600 3 0.14% $773,533 3.709% 356.73 757 67.99% 5.01 - 10.00............ 4,222,660 10 0.26 422,266 5.328 357.98 719 76.95 10.01 - 15.00........... 6,764,584 32 0.41 211,393 5.429 358.99 719 78.60 15.01 - 20.00........... 17,707,098 70 1.08 252,959 5.174 358.39 714 75.64 20.01 - 25.00........... 41,873,724 147 2.57 284,855 5.517 358.74 694 77.33 25.01 - 30.00........... 72,387,965 248 4.44 291,887 5.591 357.99 697 76.02 30.01 - 35.00........... 122,696,830 410 7.52 299,261 5.618 358.90 697 77.98 35.01 - 40.00........... 196,161,664 682 12.02 287,627 5.689 359.02 689 78.61 40.01 - 45.00........... 248,586,145 847 15.23 293,490 5.735 359.03 688 78.86 45.01 - 50.00........... 193,114,599 773 11.83 249,825 5.605 359.07 684 79.33 50.01 - 55.00........... 15,657,450 51 0.96 307,009 5.564 359.09 677 74.24 Greater than 55.00...... 2,823,283 12 0.17 235,274 6.625 359.84 660 78.49 Not Required............ 707,683,314 2,796 43.36 253,106 5.386 358.03 690 81.66 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== As of the Cut-off Date, the weighted average debt-to-income ratio of the sample Group 1 Loans will be approximately 38.65% per annum. PREPAYMENT PENALTY [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL NUMBER OF MONTHS CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------- --------------- ----- ----- ------- --- -------- ----- --- 0........................ $ 535,452,733 1,845 32.81% $290,218 5.403% 357.95 698 79.11% 6........................ 12,383,334 46 0.76 269,203 5.665 358.92 705 76.97 7........................ 1,312,800 3 0.08 437,600 3.932 360.00 769 70.25 12....................... 193,088,799 614 11.83 314,477 5.388 359.12 690 78.69 24....................... 547,713,115 2,089 33.56 262,189 5.658 358.72 683 82.27 36....................... 227,489,224 1,074 13.94 211,815 5.450 358.76 684 78.07 48....................... 281,500 2 0.02 140,750 5.357 359.46 705 75.40 60....................... 114,278,412 408 7.00 280,094 5.919 358.79 700 76.48 -------------- ----- ------ -------- ----- ------ --- ----- Total........... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== S-40
424B541st Page of 311TOC1stPreviousNextBottomJust 41st
MONTHS REMAINING TO SCHEDULED MATURITY [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL RANGE OF MONTHS CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------- --------------- ----- ----- ------- --- -------- ----- --- 241-300..................$ 188,580 1 0.01% $188,580 5.375% 300.00 657 90.00% 301-360.................. 1,631,811,337 6,080 99.99 268,390 5.530 358.53 690 79.77 -------------- ----- ------ -------- ----- ------ --- ----- Total........... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== As of the Cut-off Date, the weighted average months remaining to scheduled maturity of the sample Group 1 Loans will be approximately 359 months. CREDIT SCORES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL RANGE OF CREDIT SCORES CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------------- --------------- ----- ----- ------- --- -------- ----- --- Not Required.............. $ 1,570,183 6 0.10% $261,697 5.861% 357.87 N/A 73.75% Greater than 820.......... 548,000 1 0.03 548,000 3.375 357.00 836 80.00 801 - 820................. 7,225,020 31 0.44 233,065 5.337 358.59 807 76.94 781 - 800................. 45,363,046 162 2.78 280,019 4.983 358.65 790 73.33 761 - 780................. 99,501,437 355 6.10 280,286 5.069 358.49 770 77.67 741 - 760................. 139,160,056 474 8.53 293,587 5.282 358.55 750 77.58 721 - 740................. 160,560,637 548 9.84 292,994 5.380 358.31 730 78.65 701 - 720................. 201,550,578 761 12.35 264,850 5.360 358.63 710 79.66 681 - 700................. 226,946,286 865 13.91 262,366 5.451 358.56 690 79.48 661 - 680................. 240,247,873 885 14.72 271,467 5.580 358.55 670 81.05 641 - 660................. 241,216,292 933 14.78 258,538 5.797 358.56 650 81.34 621 - 640................. 197,417,453 748 12.10 263,927 5.792 358.42 631 82.36 601 - 620................. 55,271,851 245 3.39 225,599 6.235 358.82 612 79.98 581 - 600................. 8,794,319 38 0.54 231,429 6.283 358.56 596 75.04 561 - 580................. 3,552,463 13 0.22 273,266 6.533 357.26 572 68.78 541 - 560................. 1,345,627 9 0.08 149,514 8.219 359.22 555 67.78 521 - 540................. 875,923 4 0.05 218,981 8.119 359.50 532 72.27 501 - 520................. 852,872 3 0.05 284,291 6.649 354.79 511 70.98 -------------- ----- ------ -------- ----- ------ --- ----- Total............ $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== As of the Cut-off Date, the weighted average credit score of the sample Group 1 Loans for which credit scores are available will be approximately 690. S-41
424B542nd Page of 311TOC1stPreviousNextBottomJust 42nd
RANGE OF MONTHS TO ROLL [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL NUMBER OF MONTHS CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------- --------------- ----- ----- ------- --- -------- ----- --- 1 - 6................... $ 210,613,574 663 12.91% $317,668 5.270% 359.33 699 78.56% 7 - 12.................. 9,387,103 34 0.58 276,091 5.469 359.73 688 78.49 13 - 18................. 1,035,810 6 0.06 172,635 5.870 353.53 650 88.96 19 - 24................. 849,186,716 3,210 52.03 264,544 5.702 358.59 684 82.53 25 - 31................. 24,567,608 53 1.51 463,540 4.479 354.03 707 71.12 32 - 37................. 423,135,170 1,747 25.93 242,207 5.285 358.28 692 77.71 50 - 55................. 1,681,701 3 0.10 560,567 5.935 353.98 672 74.94 56 - 61................. 99,159,727 348 6.08 284,942 5.915 359.23 707 71.51 62 - 67................. 2,740,621 1 0.17 2,740,621 6.250 338.00 740 61.09 68 - 73................. 920,000 2 0.06 460,000 4.864 348.00 721 68.42 74 - 79................. 1,173,746 2 0.07 586,873 5.284 353.65 714 73.56 80 - 85................. 3,386,256 9 0.21 376,251 5.826 359.02 711 70.44 Greater than 85......... 5,011,886 3 0.31 1,670,629 5.154 357.22 731 63.55 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== As of the Cut-off Date, the weighted average months to roll of the sample Group 1 Loans will be approximately 26 months. LOAN PURPOSES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL LOAN PURPOSE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------ --------------- ----- ----- ------- --- -------- ----- --- Purchase................ $1,023,352,397 3,974 62.71% $257,512 5.568% 358.67 699 81.40% Refinance - Cash Out.... 442,562,004 1,488 27.12 297,421 5.517 358.48 673 77.29 Refinance - Rate/Term... 166,085,516 619 10.18 268,313 5.334 357.76 682 76.31 -------------- ----- ------ -------- ----- ------ --- ----- Total.......... $1,631,999,917 6,081 100.00% $268,377 5.530% 358.53 690 79.77% ============== ===== ====== In general, in the case of a mortgage loan made for "rate and term" refinance purposes, substantially all of the proceeds are used to pay in full the principal balance of a previous mortgage loan of the mortgagor with respect to a mortgaged property and to pay origination and closing costs associated with such refinancing. Mortgage loans made for "cash-out" refinance purposes may involve the use of the proceeds to pay in full the principal balance of a previous mortgage loan and related costs except that a portion of the proceeds are generally retained by the mortgagor for uses unrelated to the mortgaged property. The amount of these proceeds retained by the mortgagor may be substantial. LOAN GROUP 2 The sample Group 2 Loans had an aggregate principal balance as of the Cut-off Date of approximately $668,000,383, after application of scheduled payments due on or before the Cut-off Date, S-42
424B543rd Page of 311TOC1stPreviousNextBottomJust 43rd
whether or not received. All of the sample Group 2 Loans are secured by first liens on the related mortgaged property. The average principal balance of the sample Group 2 Loans at origination was approximately $219,045. No sample Group 2 Loan had a principal balance at origination of greater than approximately $637,000 or less than approximately $122,320. The average principal balance of the sample Group 2 Loans as of the Cut-off Date was approximately $218,658. No sample Group 2 Loan had a principal balance as of the Cut-off Date of greater than approximately $637,000 or less than approximately $122,071. As of the Cut-off Date, the sample Group 2 Loans had mortgage rates ranging from approximately 2.490% per annum to approximately 9.875% per annum and the weighted average mortgage rate was approximately 5.566% per annum. The weighted average remaining term to stated maturity of the sample Group 2 Loans was approximately 359 months as of the Cut-off Date. None of the sample Group 2 Loans will have a first Due Date prior to January 1, 2004, or after October 1, 2004, or will have a remaining term to maturity of less than 352 months or greater than 360 months as of the Cut-off Date. The latest maturity date of any sample Group 2 Loan is September 1, 2034. Approximately 0.04%, 0.72%, 0.39%, 41.81% and 2.03 of the sample Group 2 Loans have initial interest only periods of six months and two, three, five and ten years, respectively. The loan-to-value ratio of a mortgage loan secured by a first lien is equal to the ratio, expressed as a percentage, of the principal amount of the loan at origination, to the lesser of the appraised value of the related mortgaged property at the time of origination and the sales price. The weighted average of the loan-to- value ratios at origination of the sample Group 2 Loans was approximately 80.94%. No loan-to-value ratio at origination of any sample Group 2 Loan was greater than approximately 100.00% or less than approximately 25.17%. None of the sample Group 2 Loans are buydown mortgage loans. None of the Group 2 Loans will be subject to the Home Ownership and Equity Protection Act of 1994 or any comparable state law. Substantially all of the sample Group 2 Loans will not have reached their first adjustment date as of the Closing Date. Approximately 69.55% of the sample Group 2 Loans provide for prepayment charges. Approximately 23.61% and 8.29% of the sample Group 2 Loans are covered by a Primary Insurance Policy and the Radian Lender-Paid PMI Policy, respectively. For the sample Group 2 Loans, the weighted average of the Radian PMI Rates for the mortgage loans covered by the Radian Lender-Paid PMI Policy is approximately 1.055% per annum. With respect to substantially all of the Group 2 Loans, the Minimum Mortgage Rate is equal to the Gross Margin. Set forth below is a description of certain additional characteristics of the sample Group 2 Loans as of the Cut-off Date, except as otherwise indicated. All percentages of the sample Group 2 Loans are approximate percentages by aggregate principal balance as of the Cut-off Date, except as otherwise indicated. Dollar amounts and percentages may not add up to totals due to rounding. S-43
424B544th Page of 311TOC1stPreviousNextBottomJust 44th
MORTGAGE LOAN PROGRAMS(1) [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL LOAN PURPOSE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------ --------------- ----- ----- ------- --- -------- ----- --- 30Y LIBOR 1MO.............. $ 612,969 3 0.09% $204,323 4.800% 359.75 731 78.55% 30Y LIBOR 1MO IO........... 2,059,800 8 0.31 257,475 4.898 359.47 695 80.21 30Y LIBOR 3MO.............. 199,801 1 0.03 199,801 6.000 360.00 710 80.00 30Y LIBOR 3MO IO........... 942,948 4 0.14 235,737 5.061 360.00 688 80.89 30Y LIBOR 6MO.............. 13,363,530 59 2.00 226,501 5.883 359.41 671 80.82 30Y LIBOR 6MO IO........... 52,573,523 217 7.87 242,274 5.353 359.41 705 80.01 30Y LIBOR 12MO............. 228,822 1 0.03 228,822 8.875 359.00 634 95.00 30Y LIBOR 12MO IO.......... 1,828,616 8 0.27 228,577 5.457 359.62 681 79.24 2/28 LIBOR 6MO............. 219,052,853 1,023 32.79 214,128 5.586 358.05 681 84.63 2/28 LIBOR 6MO IO.......... 171,940,177 739 25.74 232,666 5.771 359.39 694 79.11 3/27 LIBOR 6MO............. 127,636,483 653 19.11 195,462 5.322 358.12 677 81.16 3/27 LIBOR 6MO IO.......... 52,118,942 226 7.80 230,615 5.430 359.21 711 75.96 3/1 LIBOR 12MO............. 409,551 2 0.06 204,776 5.872 359.41 641 73.45 3/1 LIBOR 12MO IO.......... 796,000 3 0.12 265,333 4.651 355.19 719 67.27 5/25 LIBOR 6MO............. 5,941,734 29 0.89 204,887 5.783 359.13 696 71.95 5/25 LIBOR 6MO IO.......... 17,129,135 75 2.56 228,388 5.878 359.31 710 72.70 5/1 LIBOR 12MO IO.......... 610,500 2 0.09 305,250 6.994 359.49 632 85.79 7/23 LIBOR 6MO IO.......... 275,000 1 0.04 275,000 4.750 358.00 739 63.22 10/20 LIBOR 6MO IO......... 280,000 1 0.04 280,000 7.250 359.00 664 80.00 ------------ ----- ------ -------- ----- ------ --- ----- Total............. $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== ____________ (1) A mortgage loan with a loan program including the term "30Y LIBOR 1MO" has a term of 30 years and the mortgage rate adjusts monthly based on the value of One-Month LIBOR. A mortgage loan with a loan program including the term "30Y LIBOR 3MO" has a term of 30 years and the mortgage rate adjusts quarterly based on the value of Three-Month LIBOR. A mortgage loan with a loan program including the term "30Y LIBOR 6MO" has a term of 30 years and the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. A mortgage loan with a loan program including the term "30Y LIBOR 12MO" has a term of 30 years and the mortgage rate adjusts annually based on the value of One-Year LIBOR. A mortgage loan with a loan program including the term "2/28 LIBOR 6MO" has a term of 30 years, the first two of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. A mortgage loan with a loan program including the term "3/27 LIBOR 6MO" has a term of 30 years, the first three of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi- annually based on the value of Six-Month LIBOR. A mortgage loan with a loan program including the term "3/1 LIBOR 12MO" has a term of 30 years, the first three of which consist of a fixed rate period, and thereafter the mortgage rate adjusts annually based on the value of One-Year LIBOR. A mortgage loan with a loan program including the term "5/25 LIBOR 6MO" has a term of 30 years, the first five of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six- Month LIBOR. A mortgage loan with a loan program including the term "5/1 LIBOR 12MO" has a term of 30 years, the first five of which consist of a fixed rate period, and thereafter the mortgage rate adjusts annually based on the value of One-Year LIBOR. A mortgage loan with a loan program including the term "7/23 LIBOR 6MO" has a term of 30 years, the first seven of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. A mortgage loan with a loan program including the term "10/20 LIBOR 6MO" has a term of 30 years, the first ten of which consist of a fixed rate period, and thereafter the mortgage rate adjusts semi-annually based on the value of Six-Month LIBOR. Any mortgage loan with a loan program including the term "IO" has an interest only period. S-44
424B545th Page of 311TOC1stPreviousNextBottomJust 45th
PRINCIPAL BALANCES AS OF ORIGINATION [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF MORTGAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL LOAN PRINCIPAL BALANCE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------------- --------------- ----- ----- ------- --- -------- ----- --- $100,000.01 - $150,000.00...... $ 72,611,792 535 10.87% $135,723 5.684% 358.48 683 81.81% $150,000.01 - $200,000.00...... 145,777,082 837 21.82 174,166 5.622 358.61 684 81.21 $200,000.01 - $250,000.00...... 160,640,541 714 24.05 224,987 5.519 358.59 686 81.61 $250,000.01 - $300,000.00...... 158,079,420 577 23.66 273,968 5.532 358.81 691 80.35 $300,000.01 - $350,000.00...... 106,728,563 335 15.98 318,593 5.518 358.93 694 80.62 $350,000.01 - $400,000.00...... 10,121,713 27 1.52 374,878 5.536 358.29 708 83.05 $400,000.01 - $450,000.00...... 5,483,924 13 0.82 421,840 6.016 358.68 707 77.82 $450,000.01 - $500,000.00...... 5,672,623 12 0.85 472,719 5.404 358.65 708 71.07 $500,000.01 - $550,000.00...... 1,613,976 3 0.24 537,992 5.390 359.00 670 71.47 $600,000.01 - $650,000.00...... 1,270,750 2 0.19 635,375 5.751 360.00 742 67.51 ------------ ----- ------ -------- ----- ------ --- ----- Total................. $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== As of origination, the average principal balance of the sample Group 2 Loans will be approximately $219,045. PRINCIPAL BALANCES AS OF THE CUT-OFF DATE [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF MORTGAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL LOAN PRINCIPAL BALANCE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------------- --------------- ----- ----- ------- --- -------- ----- --- $100,000.01 - $150,000.00....... $ 73,060,679 538 10.94% $135,801 5.682% 358.47 683 81.86% $150,000.01 - $200,000.00....... 146,326,318 839 21.91 174,406 5.619 358.60 684 81.23 $200,000.01 - $250,000.00....... 161,140,015 715 24.12 225,371 5.527 358.58 687 81.64 $250,000.01 - $300,000.00....... 156,880,541 572 23.49 274,267 5.523 358.82 691 80.24 $300,000.01 - $350,000.00....... 106,429,843 334 15.93 318,652 5.522 358.94 694 80.66 $350,000.01 - $400,000.00....... 10,121,713 27 1.52 374,878 5.536 358.29 708 83.05 $400,000.01 - $450,000.00....... 5,483,924 13 0.82 421,840 6.016 358.68 707 77.82 $450,000.01 - $500,000.00....... 5,672,623 12 0.85 472,719 5.404 358.65 708 71.07 $500,000.01 - $550,000.00....... 1,613,976 3 0.24 537,992 5.390 359.00 670 71.47 $600,000.01 - $650,000.00....... 1,270,750 2 0.19 635,375 5.751 360.00 742 67.51 ------------ ----- ------ -------- ----- ------ --- ----- Total.................. $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== As of the Cut-off Date, the average current principal balance of the sample Group 2 Loans will be approximately $218,658. S-45
424B546th Page of 311TOC1stPreviousNextBottomJust 46th
MORTGAGE RATES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL MORTGAGE RATES (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------------ --------------- ----- ----- ------- --- -------- ----- --- 2.000 - 2.449............ $ 168,000 1 0.03% $168,000 2.490% 359.00 816 65.88% 3.000 - 3.449............ 733,846 3 0.11 244,615 3.334 357.40 734 55.77 3.500 - 3.999............ 17,567,990 78 2.63 225,231 3.767 357.82 720 75.36 4.000 - 4.499............ 41,547,615 190 6.22 218,672 4.258 357.96 710 76.16 4.500 - 4.999............ 122,134,001 538 18.28 227,015 4.727 358.40 697 78.95 5.000 - 5.499............ 143,803,750 652 21.53 220,558 5.207 358.63 693 80.31 5.500 - 5.999............ 157,842,016 740 23.63 213,300 5.705 358.84 687 81.24 6.000 - 6.499............ 79,670,884 369 11.93 215,910 6.179 358.92 680 82.29 6.500 - 6.999............ 51,541,141 234 7.72 220,261 6.695 359.04 675 84.65 7.000 - 7.499............ 23,032,713 105 3.45 219,359 7.207 359.27 669 85.59 7.500 - 7.999............ 17,008,632 86 2.55 197,775 7.681 359.08 661 87.84 8.000 - 8.499............ 5,188,245 24 0.78 216,177 8.153 359.38 643 85.90 8.500 - 8.999............ 5,577,974 25 0.84 223,119 8.664 359.39 653 88.71 9.000 - 9.499............ 1,309,475 5 0.20 261,895 9.268 359.33 684 88.06 9.500 - 9.999............ 874,102 5 0.13 174,820 9.693 359.86 611 82.54 ------------ ----- ------ -------- ----- ------ --- ----- Total........... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== ____________ As of the Cut-off Date, the weighted average mortgage rate of the sample Group 2 Loans will be approximately 5.566% per annum. S-46
424B547th Page of 311TOC1stPreviousNextBottomJust 47th
NEXT ADJUSTMENT DATE [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL NEXT ADJUSTMENT DATE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV -------------------- --------------- ----- ----- ------- --- -------- ----- --- August 1, 2004......... $ 553,700 2 0.08% $276,850 4.782% 359.00 705 70.00% September 1, 2004...... 211,500 1 0.03 211,500 6.375 356.00 653 90.00 October 1, 2004........ 828,469 4 0.12 207,117 5.267 358.51 689 88.79 November 1, 2004....... 3,920,245 16 0.59 245,015 5.079 358.87 694 80.87 December 1, 2004....... 4,781,330 22 0.72 217,333 5.891 358.05 679 86.35 January 1, 2005........ 23,731,050 98 3.55 242,154 5.152 359.00 701 79.56 February 1, 2005....... 32,693,626 136 4.89 240,394 5.590 360.00 703 79.98 March 1, 2005.......... 3,032,650 13 0.45 233,281 5.800 360.00 672 75.21 July 1, 2005........... 918,022 4 0.14 229,505 6.427 359.00 655 83.74 August 1, 2005......... 992,916 4 0.15 248,229 5.269 360.00 700 78.72 September 1, 2005...... 146,500 1 0.02 146,500 5.990 360.00 649 79.19 December 1, 2005....... 275,492 1 0.04 275,492 6.250 352.00 702 90.00 January 1, 2006........ 384,969 1 0.06 384,969 6.375 353.00 668 94.88 February 1, 2006....... 134,822 1 0.02 134,822 6.750 354.00 704 95.00 March 1, 2006.......... 378,262 2 0.06 189,131 6.859 355.00 682 91.76 April 1, 2006.......... 20,682,053 98 3.10 211,041 4.767 356.00 685 85.78 May 1, 2006............ 63,385,075 294 9.49 215,595 5.028 357.01 685 87.10 June 1, 2006........... 73,740,847 344 11.04 214,363 5.745 358.04 679 86.43 July 1, 2006........... 107,261,717 469 16.06 228,703 6.062 359.00 683 80.16 August 1, 2006......... 109,386,420 482 16.38 226,943 5.717 360.00 699 78.46 September 1, 2006...... 15,363,374 70 2.30 219,477 5.969 360.00 675 76.95 December 1, 2006....... 293,000 1 0.04 293,000 5.625 352.00 723 77.93 January 1, 2007........ 330,000 1 0.05 330,000 4.500 353.00 744 70.97 February 1, 2007....... 296,893 2 0.04 148,446 4.754 354.00 729 64.60 March 1, 2007.......... 233,051 1 0.03 233,051 5.125 355.00 623 60.26 April 1, 2007.......... 7,761,470 40 1.16 194,037 4.801 356.02 688 80.48 May 1, 2007............ 34,700,841 170 5.19 204,123 4.938 357.07 689 83.87 June 1, 2007........... 54,128,967 279 8.10 194,011 5.416 358.28 678 80.97 July 1, 2007........... 51,901,487 260 7.77 199,621 5.524 359.00 680 78.31 August 1, 2007......... 27,457,227 114 4.11 240,853 5.566 360.00 715 74.92 September 1, 2007...... 3,858,040 16 0.58 241,128 5.521 360.00 679 73.45 April 1, 2009.......... 597,330 4 0.09 149,333 5.317 356.00 739 77.46 May 1, 2009............ 296,800 1 0.04 296,800 5.750 357.00 722 75.14 June 1, 2009........... 3,651,362 16 0.55 228,210 5.692 358.09 700 74.61 July 1, 2009........... 7,137,216 31 1.07 230,233 5.797 359.00 713 71.44 August 1, 2009......... 9,677,011 43 1.45 225,047 6.089 360.00 701 73.57 September 1, 2009...... 2,321,650 11 0.35 211,059 5.756 360.00 689 69.92 June 1, 2011........... 275,000 1 0.04 275,000 4.750 358.00 739 63.22 July 1, 2014........... 280,000 1 0.04 280,000 7.250 359.00 664 80.00 ------------ ----- ------ -------- ----- ------ --- ----- Total......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== _____________ As of the Cut-off Date, the weighted average remaining months to the next adjustment date of the sample Group 2 Loans will be approximately 25 months. S-47
424B548th Page of 311TOC1stPreviousNextBottomJust 48th
GROSS MARGIN [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF GROSS NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL MARGINS (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ----------- --------------- ----- ----- ------- --- -------- ----- --- 1.750 - 1.999.......... $ 5,483,826 25 0.82% $219,353 4.055% 357.54 725 76.99% 2.000 - 2.249.......... 7,493,258 37 1.12 202,520 4.327 357.50 705 73.73 2.250 - 2.499.......... 21,726,570 96 3.25 226,318 4.599 357.49 711 75.36 2.500 - 2.749.......... 16,577,626 78 2.48 212,534 4.778 357.47 701 76.66 2.750 - 2.999.......... 42,173,932 188 6.31 224,329 5.024 357.56 688 81.75 3.000 - 3.249.......... 71,725,050 325 10.74 220,692 5.106 358.01 700 85.12 3.250 - 3.499.......... 120,305,524 531 18.01 226,564 5.322 358.94 726 80.25 3.500 - 3.749.......... 72,171,409 319 10.80 226,243 5.477 358.90 692 81.73 3.750 - 3.999.......... 133,464,596 604 19.98 220,968 5.840 359.39 676 79.04 4.000 - 4.249.......... 8,146,628 39 1.22 208,888 6.540 358.35 676 88.76 4.250 - 4.499.......... 14,126,260 65 2.11 217,327 5.625 358.83 664 80.19 4.500 - 4.749.......... 10,764,244 51 1.61 211,064 5.330 358.80 674 80.63 4.750 - 4.999.......... 13,536,611 66 2.03 205,100 5.772 358.76 657 82.92 5.000 - 5.249.......... 38,358,336 173 5.74 221,724 6.272 358.82 680 81.40 5.250 - 5.499.......... 19,162,535 103 2.87 186,044 5.749 358.71 655 80.65 5.500 - 5.749.......... 18,362,069 101 2.75 181,803 5.939 358.84 655 80.16 5.750 - 5.999.......... 21,300,267 103 3.19 206,799 6.296 358.83 657 80.95 6.000 - 6.249.......... 16,301,040 73 2.44 223,302 6.642 358.86 646 83.60 6.250 - 6.499.......... 11,637,766 53 1.74 219,580 6.956 358.77 633 87.83 6.500 - 6.749.......... 1,603,142 7 0.24 229,020 7.085 358.74 620 88.49 6.750 - 6.999.......... 746,399 3 0.11 248,800 6.523 359.17 689 89.16 7.000 - 7.249.......... 542,280 2 0.08 271,140 7.250 359.48 634 62.92 7.250 - 7.499.......... 686,669 4 0.10 171,667 7.852 358.76 664 80.21 7.500 - 7.749.......... 525,443 3 0.08 175,148 7.778 358.73 669 87.76 8.250 - 8.499.......... 189,000 1 0.03 189,000 9.750 360.00 526 54.00 8.500- 8.749........... 351,050 2 0.05 175,525 8.661 359.43 659 83.08 9.250 - 9.499.......... 250,000 1 0.04 250,000 9.500 360.00 700 94.34 9.500 - 9.749.......... 288,852 2 0.04 144,426 9.875 359.56 642 94.82 ------------ ----- ------ -------- ----- ------ --- ----- Total......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== ___________ As of the Cut-off Date, the weighted average Gross Margin of the sample Group 2 Loans will be approximately 3.824% per annum. S-48
424B549th Page of 311TOC1stPreviousNextBottomJust 49th
MAXIMUM MORTGAGE RATE [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF MAXIMUM NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL MORTGAGE RATES (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------------ --------------- ----- ----- ------- --- -------- ----- --- 8.000 - 8.499........... $ 168,000 1 0.03% $168,000 2.490% 359.00 816 65.88% 8.500 - 8.999........... 149,092 1 0.02 149,092 3.750 356.00 762 49.18 9.000 - 9.499........... 733,846 3 0.11 244,615 3.334 357.40 734 55.77 9.500 - 9.999........... 20,738,915 90 3.10 230,432 3.972 358.10 717 75.92 10.000 - 10.499......... 42,550,033 195 6.37 218,205 4.303 357.86 710 76.13 10.500 - 10.999......... 121,306,620 537 18.16 225,897 4.742 358.38 698 79.02 11.000 - 11.499......... 144,539,170 654 21.64 221,008 5.209 358.65 693 80.29 11.500 - 11.999......... 154,270,817 723 23.09 213,376 5.710 358.87 686 81.28 12.000 - 12.499......... 78,024,474 363 11.68 214,943 6.180 358.93 680 82.25 12.500 - 12.999......... 50,515,254 229 7.56 220,591 6.671 359.00 676 84.96 13.000 - 13.499......... 23,396,097 107 3.50 218,655 7.172 359.22 670 85.87 13.500 - 13.999......... 16,684,519 83 2.50 201,018 7.624 359.04 664 87.83 14.000 - 14.499......... 5,096,312 24 0.76 212,346 7.944 359.37 654 86.89 14.500 - 14.999......... 6,299,125 29 0.94 217,211 8.508 359.43 644 87.71 15.000 - 15.499......... 2,268,616 9 0.34 252,068 8.800 359.39 616 80.50 15.500 - 15.999......... 724,243 4 0.11 181,061 9.426 359.57 638 88.30 16.500 - 16.999......... 535,250 3 0.08 178,417 9.239 359.63 570 67.24 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== _______________ As of the Cut-off Date, the weighted average Maximum Mortgage Rate of the sample Group 2 Loans will be approximately 11.562% per annum. S-49
424B550th Page of 311TOC1stPreviousNextBottomJust 50th
INITIAL FIXED-RATE PERIOD [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL INITIAL FIXED PERIOD CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV -------------------- --------------- ----- ----- ------- --- -------- ----- --- One Month............... $ 553,700 2 0.08% $276,850 4.782% 359.00 705 70.00% Three Months............ 3,261,817 14 0.49 232,987 5.014 359.79 699 81.81 Six Months.............. 65,937,052 276 9.87 238,902 5.460 359.41 698 80.18 One Year................ 2,057,438 9 0.31 228,604 5.837 359.55 676 80.99 Two Years............... 390,993,030 1,762 58.53 221,903 5.667 358.64 687 82.20 Three Years............. 180,960,976 884 27.09 204,707 5.351 358.42 687 79.59 Five Years.............. 23,681,369 106 3.55 223,409 5.883 359.27 705 72.85 Seven Years............. 275,000 1 0.04 275,000 4.750 358.00 739 63.22 Ten Years............... 280,000 1 0.04 280,000 7.250 359.00 664 80.00 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== INITIAL RATE CAP [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL INITIAL CAP (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------- --------------- ----- ----- ------- --- -------- ----- --- 1.000................... $ 70,313,325 293 10.53% $239,977 5.386% 359.44 701 80.22% 1.500................... 2,473,604 13 0.37 190,277 7.044 358.61 609 81.49 2.000................... 2,476,959 10 0.37 247,696 5.348 357.46 674 76.51 3.000................... 403,710,036 1,848 60.44 218,458 5.812 359.25 687 78.89 4.000................... 532,000 2 0.08 266,000 7.096 359.00 580 67.69 5.000................... 4,405,824 18 0.66 244,768 5.917 358.31 701 74.09 6.000................... 184,088,635 871 27.56 211,353 5.066 357.20 689 85.95 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== PERIODIC RATE CAP [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL INITIAL CAP (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------- --------------- ----- ----- ------- --- -------- ----- --- 1.000................... $656,964,718 3,007 98.35% $218,478 5.551% 358.69 690 81.01% 1.500................... 5,517,348 27 0.83 204,346 7.146 358.88 596 77.12 2.000................... 4,986,316 19 0.75 262,438 5.570 358.47 691 77.34 2.500................... 532,000 2 0.08 266,000 7.096 359.00 580 67.69 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== S-50
424B551st Page of 311TOC1stPreviousNextBottomJust 51st
ORIGINAL LOAN-TO-VALUE RATIOS [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE RANGE OF LOAN-TO- NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL VALUE RATIOS (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------- --------------- ----- ----- ------- --- -------- ----- --- 25.01 - 30.00........... $ 151,000 1 0.02% $151,000 4.750% 360.00 737 25.17% 30.01 - 35.00........... 745,786 5 0.11 149,157 5.881 357.51 680 32.91 35.01 - 40.00........... 1,421,149 7 0.21 203,021 5.174 358.30 683 37.39 40.01 - 45.00........... 776,664 4 0.12 194,166 4.698 358.11 652 43.02 45.01 - 50.00........... 4,894,677 22 0.73 222,485 4.956 358.33 703 48.25 50.01 - 55.00........... 2,628,163 13 0.39 202,166 5.349 359.15 674 53.32 55.01 - 60.00........... 6,195,756 24 0.93 258,157 5.045 359.03 685 58.57 60.01 - 65.00........... 12,364,314 54 1.85 228,969 5.177 358.82 680 63.34 65.01 - 70.00........... 84,123,694 357 12.59 235,641 4.968 359.36 711 69.62 70.01 - 75.00........... 27,207,880 118 4.07 230,575 5.421 358.66 681 73.76 75.01 - 80.00........... 313,122,218 1,437 46.87 217,900 5.527 359.00 689 79.80 80.01 - 85.00........... 19,070,126 89 2.85 214,271 5.638 358.07 674 84.10 85.01 - 90.00........... 107,476,783 509 16.09 211,153 6.080 358.12 684 89.77 90.01 - 95.00........... 86,831,223 410 13.00 211,783 5.810 357.72 679 94.76 95.01 - 100.00.......... 990,949 5 0.15 198,190 6.855 358.41 741 99.36 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== __________ The minimum and maximum loan-to-value ratios of the sample Group 2 Loans at origination were approximately 25.17% and 100.00%, respectively, and the weighted average of the loan-to-value ratios of the sample Group 2 Loans at origination was approximately 80.94%. OCCUPANCY TYPES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL OCCUPANCY CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------- --------------- ----- ----- ------- --- -------- ----- --- Owner Occupied.......... $536,229,301 2,456 80.27% $218,334 5.525% 358.71 685 81.19% Investment.............. 115,639,599 521 17.31 221,957 5.780 358.64 707 80.01 Second Home............. 16,131,482 78 2.41 206,814 5.385 358.28 689 79.13 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== Occupancy type is based on the representation of the borrower at the time of origination. S-51
424B552nd Page of 311TOC1stPreviousNextBottomJust 52nd
MORTGAGE LOAN PROGRAM AND DOCUMENTATION TYPE [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL DOCUMENT TYPE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------- --------------- ----- ----- ------- --- -------- ----- --- Progressive Series Program (Limited (Stated) Documentation).......... $235,032,443 1,013 35.18% $232,016 5.544% 359.24 700 78.25% Progressive Series Program (Full Documentation).... 169,899,435 815 25.43 208,466 5.443 359.05 679 78.99 Progressive Express(TM) Program (Non Verified Assets)................. 145,043,524 668 21.71 217,131 5.549 357.86 684 84.71 Progressive Express(TM) No Doc Program (No Documentation).......... 71,951,543 350 10.77 205,576 5.497 357.65 690 85.34 Progressive Express(TM) Program (Verified Assets)................. 38,933,854 174 5.83 223,758 6.293 358.72 682 83.16 Progressive Express(TM) No Doc Program (Verified Assets)....... 3,746,842 19 0.56 197,202 6.401 359.22 678 82.19 Progressive Series Program (Full Income/Stated Assets Documentation).......... 1,889,299 10 0.28 188,930 5.917 358.29 637 85.55 Progressive Series Program ( Alternative Documentation).......... 524,893 2 0.08 262,446 6.897 358.00 638 93.03 Progressive Series Program (No Income/No Asset Documentation).......... 461,349 2 0.07 230,674 7.281 359.42 655 78.66 Progressive Series Program (Lite/Reduced Documentation (SE))..... 270,000 1 0.04 270,000 4.375 359.00 691 61.37 Progressive Series Program (No Ratio) 247,200 1 0.04 247,200 5.750 360.00 688 80.00 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== See "--Underwriting Standards" below for a detailed description of the Seller's loan programs and documentation requirements. S-52
424B553rd Page of 311TOC1stPreviousNextBottomJust 53rd
RISK CATEGORIES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL CREDIT GRADE CATEGORY CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------------- --------------- ----- ----- ------- --- -------- ----- --- A+(1)...................... $312,626,344 1,400 46.80% $223,305 5.249% 358.71 725 79.96% A(1)....................... 252,152,448 1,174 37.75 214,781 5.595 358.42 654 82.12 A- (1)..................... 25,760,289 127 3.86 202,837 6.136 358.92 610 79.69 B(1)....................... 129,781 1 0.02 129,781 6.875 359.00 564 78.78 C(1)....................... 185,390 1 0.03 185,390 8.625 359.00 549 70.00 CX(1)...................... 390,492 2 0.06 195,246 8.976 359.48 517 64.84 Progressive Express(TM) I(2).. 37,439,760 164 5.60 228,291 6.199 359.47 726 81.78 Progressive Express(TM) II(2). 32,881,265 155 4.92 212,137 6.771 359.30 650 82.05 Progressive Express(TM)III(2). 3,480,644 16 0.52 217,540 7.083 359.41 617 81.47 Progressive Express(TM) IV(2). 1,014,295 5 0.15 202,859 7.090 358.92 608 85.37 Progressive Express(TM) V(2).. 446,334 2 0.07 223,167 7.097 359.31 637 72.28 Progressive Express(TM) VI(2). 1,493,339 8 0.22 186,667 8.160 359.80 527 65.40 ------------ ----- ------ -------- ----- ------ --- ----- Total............. $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== _________________ (1) All of these sample Group 2 Loans were reviewed and placed into risk categories based on the credit standards of the Progressive Series Program. Credit grades of A+, A, A-, B, C and CX correspond to Progressive Series I+, I and II, III and III+, IV, V and VI, respectively. (2) These sample Group 2 Loans were originated under the Seller's Progressive Express(TM) Program. The underwriting for these sample Group 2 Loans is generally based on the borrower's "Credit Score" score and therefore these sample Group 2 Loans do not correspond to the alphabetical risk categories listed above. Each mortgage loan originated pursuant to the Express Priority Refi(TM) Program has been placed in either Progressive Express(TM) Program II or III. SEE "--UNDERWRITING STANDARDS" BELOW FOR A DESCRIPTION OF THE SELLER'S RISK CATEGORIES. S-53
424B554th Page of 311TOC1stPreviousNextBottomJust 54th
PROPERTY TYPES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL PROPERTY TYPE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------- --------------- ----- ----- ------- --- -------- ----- --- Single-Family Residence....... $462,374,558 2,177 69.22% $212,391 5.522% 358.61 684 81.46% Condominium................... 80,314,536 370 12.02 217,066 5.406 358.79 701 80.10 Two Family.................... 32,821,196 126 4.91 260,486 5.757 358.59 697 81.56 Planned Unit Development...... 30,609,523 142 4.58 215,560 6.039 359.03 686 80.45 De minimis PUD................ 23,712,576 105 3.55 225,834 5.749 359.47 698 80.69 Four Family................... 18,905,959 58 2.83 325,965 5.600 358.70 711 75.46 Three Family.................. 12,447,207 43 1.86 289,470 5.702 358.46 708 76.59 Townhouse..................... 3,532,975 20 0.53 176,649 5.949 359.21 678 77.24 Highrise/Condominium.......... 3,146,963 13 0.47 242,074 6.802 359.40 685 79.37 Coop.......................... 134,889 1 0.02 134,889 7.000 359.00 N/A 90.00 ------------ ----- ------ -------- ----- ------ --- ----- Total................ $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== S-54
424B555th Page of 311TOC1stPreviousNextBottomJust 55th
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL STATE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ----- --------------- ----- ----- ------- --- -------- ----- --- Alabama................. $ 1,489,962 7 0.22% $212,852 5.391% 358.61 686 74.68% Arkansas................ 872,117 5 0.13 174,423 5.808 358.58 692 87.61 Arizona................. 24,092,121 129 3.61 186,761 5.720 358.35 676 83.79 California.............. 295,045,988 1,178 44.17 250,463 5.473 359.07 698 78.33 Colorado................ 20,925,836 109 3.13 191,980 5.460 358.20 679 82.34 Connecticut ........... 2,522,137 12 0.38 210,178 5.503 357.56 689 85.83 District of Columbia.... 1,532,679 6 0.23 255,446 6.559 359.12 636 77.09 Delaware................ 1,241,114 7 0.19 177,302 5.134 357.55 688 81.83 Florida................. 50,521,704 268 7.56 188,514 5.840 358.76 682 82.26 Georgia................. 10,555,695 54 1.58 195,476 5.605 357.86 675 87.27 Hawaii.................. 2,942,096 11 0.44 267,463 5.548 358.59 668 75.06 Iowa.................... 851,884 5 0.13 170,377 4.732 357.18 664 85.58 Idaho................... 898,813 6 0.13 149,802 5.945 358.39 665 89.62 Illinois................ 22,373,516 114 3.35 196,259 5.860 358.54 682 83.22 Indiana................. 1,311,073 7 0.20 187,296 5.638 358.89 698 80.79 Kansas.................. 1,561,867 9 0.23 173,541 5.490 358.16 684 85.51 Kentucky................ 764,377 5 0.11 152,875 5.101 358.21 678 77.96 Louisiana............... 1,206,605 7 0.18 172,372 4.997 357.83 738 83.48 Massachusetts........... 20,129,739 83 3.01 242,527 5.249 358.19 688 79.80 Maryland................ 14,916,908 73 2.23 204,341 5.616 358.88 679 80.05 Maine................... 1,251,164 6 0.19 208,527 5.279 357.31 691 75.82 Michigan................ 6,889,333 35 1.03 196,838 6.009 358.01 677 85.32 Minnesota............... 25,085,203 132 3.76 190,039 5.469 358.12 684 84.47 Missouri................ 3,314,218 20 0.50 165,711 5.446 357.66 673 88.24 Mississippi............. 1,061,616 6 0.16 176,936 5.571 358.38 664 81.56 Montana................. 987,742 5 0.15 197,548 5.737 358.01 668 88.75 North Carolina.......... 5,424,793 31 0.81 174,993 5.478 357.90 677 84.66 North Dakota............ 252,070 2 0.04 126,035 7.997 359.00 661 84.26 Nebraska................ 459,502 2 0.07 229,751 5.951 357.70 675 95.00 New Hampshire........... 4,183,690 18 0.63 232,427 5.296 357.80 676 83.67 New Jersey.............. 16,987,167 69 2.54 246,191 6.109 358.31 675 85.38 New Mexico.............. 1,679,697 9 0.25 186,633 5.961 357.46 667 83.88 Nevada.................. 31,758,508 149 4.75 213,144 5.803 358.62 691 82.41 New York................ 7,982,040 29 1.19 275,243 5.685 357.80 677 82.14 Ohio.................... 4,617,859 26 0.69 177,610 5.485 358.13 672 86.73 Oklahoma................ 396,015 3 0.06 132,005 6.757 358.97 647 83.11 Oregon.................. 8,456,466 48 1.27 176,176 5.306 358.37 687 82.29 Pennsylvania............ 4,580,886 25 0.69 183,235 5.560 358.02 681 86.36 Rhode Island............ 2,292,557 10 0.34 229,256 5.654 358.12 691 82.37 South Carolina.......... 3,752,829 21 0.56 178,706 5.307 357.91 688 87.12 Tennessee............... 2,702,788 16 0.40 168,924 5.441 358.55 669 84.15 Texas................... 6,961,386 39 1.04 178,497 5.644 358.51 682 83.38 Utah.................... 6,477,183 38 0.97 170,452 5.697 358.48 690 84.20 Virginia................ 23,473,207 108 3.51 217,345 5.608 358.62 682 82.50 Washington.............. 18,491,337 97 2.77 190,632 5.321 358.66 676 81.30 Wisconsin............... 2,218,165 13 0.33 170,628 5.418 357.56 672 85.87 West Virginia........... 506,732 3 0.08 168,911 4.623 357.54 665 89.26 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== No more than approximately 0.69% of the sample Group 2 Loans (by aggregate outstanding principal balance as of the Cut-off Date) are secured by mortgaged properties located in any one zip code. S-55
424B556th Page of 311TOC1stPreviousNextBottomJust 56th
DEBT-TO-INCOME RATIO [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL DESCRIPTION (%) CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------- --------------- ----- ----- ------- --- -------- ----- --- 0.01 - 5.00............... $ 454,000 2 0.07% $227,000 4.933% 359.65 661 62.26% 5.01 - 10.00.............. 1,123,799 7 0.17 160,543 6.037 358.35 670 82.89 10.01 - 15.00............. 2,221,071 11 0.33 201,916 5.933 359.07 685 80.48 15.01 - 20.00............. 5,570,618 28 0.83 198,951 5.565 359.23 699 78.35 20.01 - 25.00............. 12,352,055 55 1.85 224,583 5.555 359.13 693 76.83 25.01 - 30.00............. 22,663,490 106 3.39 213,807 5.676 359.27 694 78.04 30.01 - 35.00............. 45,416,035 211 6.80 215,242 5.665 359.15 684 78.71 35.01 - 40.00............. 66,287,468 304 9.92 218,051 5.744 359.11 687 80.33 40.01 - 45.00............. 95,458,827 419 14.29 227,825 5.674 359.16 687 78.96 45.01 - 50.00............. 99,622,516 458 14.91 217,516 5.665 359.16 683 79.52 50.01 - 55.00............. 6,321,685 27 0.95 234,136 5.665 359.43 696 77.66 Greater than 55.00........ 1,326,218 6 0.20 221,036 6.712 359.25 704 86.63 Not Required.............. 309,182,600 1,421 46.28 217,581 5.430 358.14 691 82.95 ------------ ----- ------ -------- ----- ------ --- ----- Total............ $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== As of the Cut-off Date, the weighted average debt-to-income ratio of the sample Group 2 Loans will be approximately 39.80% per annum. PREPAYMENT PENALTY [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL NUMBER OF MONTHS CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------- --------------- ----- ----- ------- --- -------- ----- --- 0........................ $203,381,658 913 30.45% $222,762 5.584% 358.34 692 82.53% 6........................ 4,352,891 20 0.65 217,645 5.950 359.37 692 82.71 7........................ 651,000 2 0.10 325,500 4.274 360.00 734 70.00 12....................... 86,037,024 368 12.88 233,796 5.439 359.05 697 78.54 24....................... 254,720,791 1,165 38.13 218,644 5.647 358.78 687 81.22 36....................... 118,857,019 587 17.79 202,482 5.446 358.80 681 79.33 ------------ ----- ------ -------- ----- ------ --- ----- Total........... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== S-56
424B557th Page of 311TOC1stPreviousNextBottomJust 57th
MONTHS REMAINING TO SCHEDULED MATURITY [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL RANGE OF MONTHS CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV --------------- --------------- ----- ----- ------- --- -------- ----- --- 301-360................... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ------------ ----- ------ -------- ----- ------ --- ----- Total............ $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== As of the Cut-off Date, the weighted average months remaining to scheduled maturity of the sample Group 2 Loans will be approximately 359 months. CREDIT SCORES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL RANGE OF CREDIT SCORES CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------------- --------------- ----- ----- ------- --- -------- ----- --- Not Required.............. $ 442,889 2 0.07% $221,445 5.870% 359.00 N/A 83.05% 801 - 820................. 2,331,683 10 0.35 233,168 4.483 358.92 807 77.03 781 - 800................. 16,947,758 75 2.54 225,970 5.184 358.76 788 76.56 761 - 780................. 37,996,913 166 5.69 228,897 5.280 358.88 770 77.55 741 - 760................. 54,816,061 236 8.21 232,271 5.320 359.04 750 79.84 721 - 740................. 64,347,663 291 9.63 221,126 5.320 358.65 730 80.52 701 - 720................. 81,197,337 365 12.16 222,458 5.416 358.76 710 81.58 681 - 700................. 99,354,594 449 14.87 221,280 5.478 358.75 691 80.49 661 - 680................. 95,199,379 438 14.25 217,350 5.599 358.56 671 81.55 641 - 660................. 103,595,852 488 15.51 212,287 5.770 358.55 650 82.66 621 - 640................. 77,883,620 369 11.66 211,067 5.809 358.42 631 82.35 601 - 620................. 28,587,092 140 4.28 204,194 6.141 358.89 612 80.21 581 - 600................. 2,768,539 13 0.41 212,965 7.038 359.45 592 81.52 561 - 580................. 129,781 1 0.02 129,781 6.875 359.00 564 78.78 541 - 560................. 482,422 3 0.07 160,807 8.120 359.62 546 60.63 521 - 540................. 1,098,649 4 0.16 274,662 7.867 359.42 530 65.74 501 - 520................. 820,151 5 0.12 164,030 8.297 359.75 514 67.88 ------------ ----- ------ -------- ----- ------ --- ----- Total............ $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== As of the Cut-off Date, the weighted average credit score of the sample Group 2 Loans for which credit scores are available will be approximately 689. S-57
424B558th Page of 311TOC1stPreviousNextBottomJust 58th
RANGE OF MONTHS TO ROLL [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL NUMBER OF MONTHS CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ---------------- --------------- ----- ----- ------- --- -------- ----- --- 1 - 6................... $ 69,752,569 292 10.44% $238,879 5.434% 359.42 698 80.17% 7 - 12.................. 2,057,438 9 0.31 228,604 5.837 359.55 676 80.99 13 - 18................. 795,283 3 0.12 265,094 6.395 352.82 686 93.21 19 - 24................. 390,197,747 1,759 58.41 221,829 5.666 358.65 687 82.18 25 - 31................. 1,152,944 5 0.17 230,589 4.978 353.41 710 68.93 32 - 37................. 179,808,032 879 26.92 204,560 5.354 358.46 687 79.65 56 - 61................. 23,681,369 106 3.55 223,409 5.883 359.27 705 72.85 80 - 85................. 275,000 1 0.04 275,000 4.750 358.00 739 63.22 Greater than 85......... 280,000 1 0.04 280,000 7.250 359.00 664 80.00 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== As of the Cut-off Date, the weighted average months to roll of the sample Group 2 Loans will be approximately 25 months. LOAN PURPOSES [Enlarge/Download Table] WEIGHTED WEIGHTED AVERAGE WEIGHTED WEIGHTED AVERAGE REMG. AVERAGE AVERAGE NO. OF % OF AVERAGE GROSS TERM CREDIT ORIGINAL LOAN PURPOSE CURRENT BALANCE LOANS TOTAL BALANCE WAC (MONTHS) SCORE LTV ------------ --------------- ----- ----- ------- --- -------- ----- --- Purchase................ $439,132,309 2,015 65.74% $217,932 5.594% 358.78 698 81.81% Refinance - Cash Out.... 168,377,751 751 25.21 224,205 5.488 358.48 670 78.99 Refinance - Rate/Term... 60,490,323 289 9.06 209,309 5.577 358.58 669 80.01 ------------ ----- ------ -------- ----- ------ --- ----- Total.......... $668,000,383 3,055 100.00% $218,658 5.566% 358.69 689 80.94% ============ ===== ====== In general, in the case of a mortgage loan made for "rate and term" refinance purposes, substantially all of the proceeds are used to pay in full the principal balance of a previous mortgage loan of the mortgagor with respect to a mortgaged property and to pay origination and closing costs associated with such refinancing. Mortgage loans made for "cash-out" refinance purposes may involve the use of the proceeds to pay in full the principal balance of a previous mortgage loan and related costs except that a portion of the proceeds are generally retained by the mortgagor for uses unrelated to the mortgaged property. The amount of these proceeds retained by the mortgagor may be substantial. CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS AND THE PRE-FUNDING ACCOUNT Under and to the extent provided in the Agreement, the Securities Administrator, on behalf of the Trust, will be obligated to purchase from the company during the Funding Period, subject to the availability thereof, Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans. The Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans will be transferred to the Securities Administrator, on behalf of the Trust, on the related Subsequent Transfer Date pursuant to the related Subsequent Transfer Instrument between the company and the Trustee. In connection with the purchase of Group 1 subsequent S-58
424B559th Page of 311TOC1stPreviousNextBottomJust 59th
mortgage loans and Group 2 subsequent mortgage loans on such Subsequent Transfer Dates, the Trustee, on behalf of the Trust, will be required to pay to the company solely from amounts on deposit in the related Pre-Funding Account, a cash purchase price of 100% of the principal balance of the Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans. The amount paid from the related Pre-Funding Account on each Subsequent Transfer Date will not include accrued interest on the related Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans. Following each Subsequent Transfer Date, the aggregate Stated Principal Balance of the mortgage loans will increase by an amount equal to the aggregate Stated Principal Balance of the related Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans so purchased and the amount in the related Pre-Funding Account will decrease accordingly. The Group 1 Pre-Funding Account will be established to provide the Securities Administrator, on behalf of the Trust, with sufficient funds to purchase the Group 1 subsequent mortgage loans. On or about September 30, 2004, and otherwise during the Funding Period, the Group 1 Original Pre-Funded Amount will be reduced by the amount used to purchase the Group 1 subsequent mortgage loans for the mortgage pool in accordance with the Agreement. Any investment income on funds in the Group 1 Pre-Funding Account will be included in Group 1 Available Funds. Any conveyance of Group 1 subsequent mortgage loans on a Subsequent Transfer Date is subject to certain conditions including, but not limited to the following: (a) each such mortgage loan must satisfy the representations and warranties specified in the related Subsequent Transfer Instrument and the Agreement; (b) the company will not select such mortgage loans in a manner that it believes to be adverse to the interests of the Certificateholders; (c) the company will deliver certain opinions of counsel with respect to the validity of the conveyance of such mortgage loans; (d) as of the related Subsequent Cut-off Date, each such mortgage loan will satisfy the following criteria: (i) such mortgage loan may not be 30 or more days delinquent as of the last day of the month preceding the Subsequent Cut-off Date; (ii) the original term to stated maturity of such mortgage loan will be 360 months; (iii) each Group 1 subsequent mortgage loan must be an adjustable-rate mortgage loan with a first lien on the related mortgaged property; (iv) no Group 1 subsequent mortgage loan will have a first distribution date occurring after November 1, 2004; (v) the latest maturity date of any Group 1 subsequent mortgage loan will be no later than October 1, 2034; (vi) none of the Group 1 subsequent mortgage loans will be a buydown loan; (vii) such mortgage loan will have a credit score of not less than 500; (viii) such mortgage loan will have a Mortgage Rate as of the applicable Subsequent Cut-off Date ranging from approximately 2.49% per annum to approximately 10.00% per annum; (ix) none of the Group 1 subsequent mortgage loans will be a New York State "high cost" loan; and (x) such mortgage loan shall have been underwritten in accordance with the criteria set forth under "The Mortgage Pool--Underwriting Standards" in this prospectus supplement; (e) as of the related Subsequent Cut-off Date, each group of such mortgage loans will satisfy the following criteria: (i) have a weighted average Mortgage Rate ranging from 5.285% to 6.375% per annum; (ii) consist of mortgage loans with prepayment charges representing no less than approximately 47.27% of the Group 1 Loans; (iii) have a weighted average credit score ranging from 680 to 705; (iv) have no more than 60% of such mortgage loans concentrated in the state of California; (v) have no less than 70% of the mortgaged properties securing Group 1 Loans be owner occupied; (vi) have no less than 55% of the mortgaged properties securing Group 1 Loans be single family detached and de minimis planned unit developments; (vii) have no more than 30% of the Group 1 Loans be cash-out refinance; (viii) all of the subsequent mortgage loans with a loan to value ratio greater than 80% will be covered by a Primary Insurance Policy or the Radian Lender-Paid PMI Policy; (ix) have no more than 0.58% of the Group 1 Loans be mortgage loans with an interest only period; and (x) together with the Group 1 Loans already included in the trust, have no more than 1.5% of such mortgage loans (by aggregate Stated Principal Balance as of the Subsequent Cut-off Date) secured by mortgaged properties located in any one zip code. The Group 2 Pre-Funding Account will be established to provide the Securities Administrator, on behalf of the Trust, with sufficient funds to purchase the Group 2 subsequent mortgage loans. On or about S-59
424B560th Page of 311TOC1stPreviousNextBottomJust 60th
September 30, 2004, and otherwise during the Funding Period, the Group 2 Original Pre-Funded Amount will be reduced by the amount used to purchase the Group 2 subsequent mortgage loans for the mortgage pool in accordance with the Agreement. Any investment income on funds in the Group 2 Pre-Funding Account will be included in Group 2 Available Funds. Any conveyance of Group 2 subsequent mortgage loans on a Subsequent Transfer Date is subject to certain conditions including, but not limited to the following: (a) each such mortgage loan must satisfy the representations and warranties specified in the related Subsequent Transfer Instrument and the Agreement; (b) the company will not select such mortgage loans in a manner that it believes to be adverse to the interests of the Certificateholders or the Certificate Insurer; (c) the company will deliver certain opinions of counsel with respect to the validity of the conveyance of such mortgage loans; (d) as of the related Subsequent Cut-off Date, each such mortgage loan will satisfy the following criteria: (i) such mortgage loan may not be 30 or more days delinquent as of the last day of the month preceding the related Subsequent Cut off Date; (ii) the original term to stated maturity of such mortgage loan will be 360 months; (iii) each Group 2 subsequent mortgage loan must be an adjustable-rate mortgage loan with a first lien on the related mortgaged property; (iv) no Group 2 subsequent mortgage loan will have a first distribution date occurring after November 1, 2004; (v) the latest maturity date of any Group 2 subsequent mortgage loan will be no later than October 1, 2034; (vi) none of the Group 2 subsequent mortgage loans will be a buydown loan; (vii) such mortgage loan will have a credit score of not less than 500; (viii) such mortgage loan will have a Mortgage Rate ranging from approximately 5.453% per annum to approximately 10.000% per annum; (ix) none of the Group 2 subsequent mortgage loans will be a New York State "high cost" loan; and (x) such mortgage loan shall have been underwritten in accordance with the criteria set forth under "The Mortgage Pool--Underwriting Standards" in this prospectus supplement; (e) as of the related Subsequent Cut-off Date, each group of such mortgage loans will satisfy the following criteria: (i) have a weighted average Mortgage Rate ranging from 4.875% to 6.375% per annum; (ii) consist of mortgage loans with prepayment charges representing no less than approximately 57.486% of the Group 2 Loans; (iii) have a weighted average credit score ranging from 684 to 705; (iv) have no more than 60% of such mortgage loans concentrated in the state of California; (v) have no less than 70% of the mortgaged properties be owner occupied; (vi) have no less than 55% of the mortgaged properties be single family detached and de minimis planned unit developments; (vii) have no more than 30% of the mortgage loans be cash-out refinance; (viii) all of the subsequent mortgage loans with a loan to value ratio greater than 80% will be covered by a Primary Insurance Policy or the Radian Lender-Paid PMI Policy; (ix) have no more than 58% of the Group 2 Loans be mortgage loans with an interest only period; and (x) together with the Group 2 Loans already included in the Trust, have no more than 1.5% of such mortgage loans (by aggregate Stated Principal Balance as of the applicable Subsequent Cut-off Date) be secured by mortgaged properties located in any one zip code. Notwithstanding the foregoing, any Group 1 subsequent mortgage loan or Group 2 subsequent mortgage loans may be rejected by any one of the Rating Agencies if the inclusion of such mortgage loan would adversely affect the ratings on any class of certificates, without, in the case of the Class 2-A Certificates, taking the Policy into account. In addition, minor variances from the characteristics stated above will be permitted with the consent of the Rating Agencies so long as there are compensating factors. The final characteristics of the mortgage loans will be reflected in a Form 8-K which will be filed within 15 days of the end of the Funding Period. UNDERWRITING STANDARDS GENERAL Approximately 36.34% and 37.93% of the sample Group 1 Loans and sample Group 2 Loans, respectively, were underwritten pursuant to, or in accordance with, the standards of the Seller's Progressive Series Program which is described below. Approximately 9.51% and 11.49% of the sample Group 1 Loans S-60
424B561st Page of 311TOC1stPreviousNextBottomJust 61st
and sample Group 2 Loans, respectively, were underwritten pursuant to, or in accordance with, the standards of the Progressive Express(TM) Program, each of which is described below. Approximately 54.16% and 50.58% of the sample Group 1 Loans and sample Group 2 Loans, respectively, were acquired in bulk purchases from underwriters, the underwriting standards of whom were reviewed for acceptability by the Master Servicer. DETAILS OF SPECIFIC PROGRAMS The following provisions apply to all of the mortgage loans originated under the Seller's Progressive Series Program and Progressive Express(TM) Program. ELIGIBILITY. The Seller generally performs a pre-funding audit on each mortgage loan. This audit includes a review for compliance with the related program parameters and accuracy of the legal documents. QUALITY CONTROL. The Seller performs a post-closing quality control review on a minimum of 25% of the mortgage loans originated or acquired under the programs described below for complete re-verification of employment, income and liquid assets used to qualify for such mortgage loan. Such review also includes procedures intended to detect evidence of fraudulent documentation and/or imprudent activity during the processing, funding, servicing or selling of the mortgage loan. Verification of occupancy and applicable information is made by regular mail. VARIATIONS. The Seller uses the following parameters as guidelines only. On a case-by-case basis, the Seller may determine that the prospective mortgagor warrants an exception outside the standard program guidelines. An exception may be allowed if the loan application reflects certain compensating factors, including instances where the prospective mortgagor: o has demonstrated an ability to save and devote a greater portion of income to basic housing needs; o may have a potential for increased earnings and advancement because of education or special job training, even if the prospective mortgagor has just entered the job market; o has demonstrated an ability to maintain a debt free position; o may have short term income that is verifiable but could not be counted as stable income because it does not meet the remaining term requirements; and o has net worth substantial enough to suggest that repayment of the loan is within the prospective mortgagor's ability. APPRAISALS. The Seller does not publish an approved appraiser list for the conduit seller. Each conduit seller maintains its own list of appraisers, provided that each appraiser must: o be a state licensed or certified appraiser; o meet the independent appraiser requirements for staff appraisers, or, if appropriate, be on a list of appraisers specified by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the FDIC and the Office of Thrift Supervision under their respective real estate appraisal regulations adopted in accordance with Title XI of the Financial Institutions Reform Recovery and Enforcement Act of 1989, regardless of whether the seller is subject to those regulations; S-61
424B562nd Page of 311TOC1stPreviousNextBottomJust 62nd
o be experienced in the appraisal of properties similar to the type being appraised; o be actively engaged in appraisal work; and o subscribe to a code of ethics that is at least as strict as the code of the American Institute of Real Estate Appraisers or the Society of Real Estate Appraisers. With respect to the Seller's Progressive Series Program or Progressive Express(TM) Program in general one full appraisal is required on each loan. In addition, an automated valuation model, or AVM, or a quantitative appraisal report (Fannie Mae Form 2055), or a Hansen Pro, or enhanced desk review is obtained either (a) when the loan-to-value ratio is 90.01% to 95% or (b) when the property has multiple units and the loan-to-value ratio is greater than 80%, or (c) the loan is a Progressive Express(TM) No Doc Program and the loan-to-value ratio is 80.01% to 90%. In addition, a quantitative appraisal report (Fannie Mae Form 2055), or a Hansen Pro, or enhanced desk review is obtained when the loan is a Progressive Express(TM) No Doc Program and the loan-to-value ratio is equal to or greater than 90.01%. An enhanced field review is also required when the loan-to-value ratio is equal to or greater than 95.01% or when the loan amount is above $500,000 or the property is located in Georgia and the loan-to-value ratio is 70.01% and above. At the underwriter's discretion, any one of the above appraisal reviews may be required when program parameters do not require an appraisal review. THE PROGRESSIVE SERIES PROGRAM GENERAL. The underwriting guidelines utilized in the Progressive Series Program, as developed by the Seller, are intended to assess the borrower's ability and willingness to repay the mortgage loan obligation and to assess the adequacy of the mortgaged property as collateral for the mortgage loan. The Progressive Series Program is designed to meet the needs of borrowers with excellent credit, as well as those whose credit has been adversely affected. The Progressive Series Program consists of seven mortgage loan programs. Each program has different credit criteria, reserve requirements, qualifying ratios and loan-to-value ratio restrictions. Series I is designed for credit history and income requirements typical of "A" credit borrowers. In the event a borrower does not fit the Series I criteria, the borrower's mortgage loan is placed into either Series II, III, III+, IV, V or VI, depending on which series' mortgage loan parameters meets the borrower's unique credit profile. Series II, III, III+, IV, V or VI allow for less restrictive standards because of certain compensating or offsetting factors such as a lower loan-to-value ratio, verified liquid assets, job stability, pride of ownership and, in the case of refinanced mortgage loans, length of time owning the mortgaged property. The philosophy of the Progressive Series Program is that no single borrower characteristic should automatically determine whether an application for a mortgage loan should be approved or disapproved. Lending decisions are based on a risk analysis assessment after the review of the entire mortgage loan file. Each mortgage loan is individually underwritten with emphasis placed on the overall quality of the mortgage loan. The Progressive Series I, II, III, III+, IV, V and VI Program borrowers are required to have debt service- to-income ratios within the range of 45% to 60% calculated on the basis of monthly income and depending on the loan-to-value ratio of the mortgage loan. Under the Progressive Series Program, the Seller underwrites one- to four-family mortgage loans with loan-to-value ratios at origination of up to 100%, depending on, among other things, a borrower's credit history, repayment ability and debt service-to-income ratio, as well as the type and use of the mortgaged property. Second lien financing of the mortgaged properties may be provided by lenders other than the Seller at origination; however, the combined loan-to-value ratio ("CLTV") generally may not exceed 100%. Generally, when the loan-to-value ratio is 97.00% to 100.00%, second liens are ineligible. Mortgage loans with a loan-to-value ratio of up to 95.00% on owner-occupied mortgage properties are allowed a CLTV of up to 100%. Generally, second home-owner-occupied and non-owner-occupied mortgage properties are allowed a maximum CLTV of up to 95%. Under the Seller's 80/20 program, which is available to Progressive S-62
424B563rd Page of 311TOC1stPreviousNextBottomJust 63rd
Series I and II borrowers only, the Seller may allow second lien financing at the same time as the origination of the first lien with CLTVs of up to 100%. The mortgage loans in the Progressive Series Program generally bear rates of interest that are greater than those which are originated in accordance with Freddie Mac and Fannie Mae standards. In general, the maximum amount for mortgage loans originated under the Progressive Series Program is $750,000; however, the Seller may approve mortgage loans in excess of such amount on a case-by-case basis where generally the maximum loan amount is up to $1 million, owner-occupied, with a minimum credit score of 681, the maximum loan-to-value is 80% on full documentation and 75% on reduced documentation, the CLTV is 100% on full documentation and 90% on reduced documentation and the property must be a single-family residence, excluding condominiums. All of the mortgage loans originated under the Progressive Series I, II and III Programs are prior approved and/or underwritten either by employees of the Seller or underwritten by contracted mortgage insurance companies or delegated conduit sellers. Generally all of the mortgage loans originated under the Series III+, IV, V and VI Programs are prior approved and/or underwritten by employees of the Seller and underwritten by designated conduit sellers. All of the Series I, Series II and Series III Program mortgage loans with loan-to-value ratios at origination in excess of 80% have mortgage insurance which may include insurance by Radian, Republic Mortgage Insurance Corporation, General Electric Mortgage Insurance, PMI or United Guaranty Insurance. The borrower may elect to have primary mortgage insurance covered by their loan payment. If the borrower makes such election, a loan-to-value ratio between 80.01% and 90.00% requires 22% coverage, a loan-to-value ratio between 90.01% and 95.00% requires 30% coverage and a loan- to-value ratio between 95.01% and 100% requires 35% coverage. Generally, when the borrower's credit score is less than 660 or the borrower does not make such an election, the related mortgage loan will be covered by a modified primary mortgage insurance policy issued by Radian to the Seller providing coverage in the amount of (i) 22% coverage for a mortgage loan with a loan-to-value ratio between 80.01% and 90.00%, (ii) 30% coverage for a mortgage loan with a loan-to-value ratio between 90.01% and 95.00% and (iii) 35% coverage for a mortgage loan with a loan-to-value ratio between 95.01% and 100%. None of the Series III+ Program mortgage loans with loan-to-value ratios at origination in excess of 80% will be insured by a Primary Insurance Policy. All Series IV, V and VI Program mortgage loans have loan-to-value ratios at origination which are less than or equal to 85% and do not require a Primary Insurance Policy. The Seller receives verbal verification from the conduit seller of employment prior to funding or acquiring each Progressive Series Program mortgage loan. FULL/ALTERNATIVE DOCUMENTATION AND REDUCED DOCUMENTATION PROGRESSIVE SERIES PROGRAMS. Each prospective borrower completes a mortgage loan application which includes information with respect to the applicant's liabilities, income, credit history, employment history and personal information. The Seller requires a credit report on each applicant from a credit reporting company. The report typically contains information relating to credit history with local and national merchants and lenders, installment debt payments and any record of defaults, bankruptcies, repossessions or judgments. The Progressive Series Program allows for approval of an application pursuant to the (a) Full/Alternative Documentation Program, or (b) the Limited Documentation Program or the "No Income, No Assets" Program or the No Ratio Program (any of the foregoing, a "Reduced Documentation Program"). The Full/Alternative Documentation Program requires the following documents: (i) Uniform Residential Loan Application (Fannie Mae Form 1003 or Freddie Mac Form 65), (ii) Statement of Assets and Liabilities (Fannie Mae Form 1003A or Freddie Mac Form 65A), (iii) In-File Tri-Merged Credit Report or Residential Mortgage Credit Report with records obtained from at least two separate repositories, (iv) Verification of Employment Form providing a complete two year employment history, (v) Verification of Deposit Form for all liquid assets, verifying minimum cash reserves based upon the loan-to-value ratio and borrower's income, and (vi) a Uniform Residential Appraisal Report (Fannie Mae Form 1004 or Freddie Mac Form 70). The S-63
424B564th Page of 311TOC1stPreviousNextBottomJust 64th
Full/Alternative Documentation Program allows for the use of certain alternative documents in lieu of the Verification of Deposit Form and Verification of Employment Form. These include W-2 Statements, tax returns and one pay check from the most recent full month for verification of income and the most recent one month personal bank statement for verification of liquid assets. In addition, self-employed borrowers must provide federal tax returns for the previous two years, including K-1's, federal business tax returns for two years, year-to-date financial statements and a signed IRS Form 4506 (Request for Copy of Tax Returns). Under the Full Income Documentation/Stated Assets Program available to borrowers in the Series I, II and III programs, the borrower provides full income and employment documentation information, which the Seller is required to verify. The borrower states assets on the Residential Loan Application (Fannie Mae Form 1003 or Freddie Mac Form 65); however, verification of assets is not required. With respect to the Full Income Documentation/Stated Assets Program, a mortgage loan is allowed to have a loan-to-value ratio at origination of up to 100%. Under each Reduced Documentation Program, which is available to borrowers in every Progressive Series Program, the Seller obtains from prospective borrowers either a verification of deposits or bank statements for the most recent one-month period preceding the mortgage loan application. Under this program the borrower provides income information on the mortgage loan application, and the debt service-to-income ratio is calculated. However, income is not verified. Permitted maximum loan-to-value ratios (including secondary financing) under the Reduced Documentation Program generally are limited. Under the "No Ratio" program available to borrowers in the Series I and II program, the borrower provides no income information, but provides employment and asset information, which the Seller is required to verify, on the mortgage loan application. With respect to the "No Ratio" program, a mortgage loan with a loan-to-value ratio at origination in excess of 80% is generally not eligible. Under the "No Income, No Assets" Program available to borrowers in the Series I Program, the borrower provides no income information, but provides employment and unverified asset information on the mortgage loan application. With respect to the "No Income, No Assets" Program, a mortgage loan with a loan-to-value ratio at origination in excess of 80% is generally not eligible. Under the Lite Income/Stated Assets Program which is available to borrowers for the Series I, II, and III Programs, the Seller obtains from prospective salaried borrowers a 30-day pay stub and from prospective self-employed borrowers bank statements for the most recent twelve-month period preceding the mortgage loan application and a year-to-date profit and loss statement. Under this program the borrower provides income information on the mortgage loan application, and the debt service-to-income ratio is provided. The maximum loan-to-value ratio under this program is 97%. Under the Lite Documentation Program, which is available to Series III+, Series IV, and Series V Program self-employed borrowers, the previous 12 months bank statements are utilized in lieu of tax returns. Under these programs the borrower provides income information on the mortgage loan applicant and the debt-to-service-to income ratio is calculated. However, income is not verified. Permitted maximum loan-to-value ratios (including secondary financing) under the Lite Documentation Program generally are limited. Under all Progressive Series Programs, the Seller or the conduit seller verbally verifies the borrower's employment prior to closing. Credit history, collateral quality and the amount of the down payment are important factors in evaluating a mortgage loan submitted under one of the Reduced Documentation Programs. In addition, in order to qualify for a Reduced Documentation Program, a mortgage loan must conform to certain criteria regarding maximum loan amount, property type and occupancy status. Mortgage loans having a loan-to-value ratio at origination in excess of 95% where the related mortgaged property is used as a second S-64
424B565th Page of 311TOC1stPreviousNextBottomJust 65th
or vacation home or is a non-owner occupied home are not eligible for the Series I, II or III Reduced Documentation Program. In general, the maximum loan amount for mortgage loans underwritten in accordance with Series I, II and III Reduced Documentation Program is $750,000 for purchase transactions, rate-term transactions and cash out refinance transactions. The maximum loan amount is $500,000 for mortgage loans underwritten in accordance with Series III+ Reduced Documentation Program, $400,000 for mortgage loans underwritten in accordance with Series IV and V Reduced Documentation Program, and $175,000 for mortgage loans underwritten in accordance with Series VI Reduced Documentation Program, however, exceptions are granted on a case-by-case basis. Secondary financing is allowed in the origination of the Reduced Documentation Program but must meet the CLTV requirements described above and certain other requirements for subordinate financing. In all cases, liquid assets must support the level of income of the borrower as stated in proportion to the type of employment of the borrower. Full Documentation is requested by the underwriter if it is the judgment of the underwriter that the compensating factors are insufficient for loan approval. CREDIT HISTORY. The Progressive Series Program defines an acceptable credit history in each of the Series I, II and III Programs. The Series I Program defines an acceptable credit history as a borrower who has "A" credit, meaning a minimum of four trade accounts, including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, with 24 months credit history, no 30-day delinquent mortgage payments in the last 12 months, and a maximum of one 30-day delinquent payments on any revolving credit account within the past 12 months and a maximum of one 30-day delinquent payment on installment credit account within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, consumer credit is disregarded. Bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs in the past 24 months, generally older items must be paid prior to or at closing. With respect to the Series II Program, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, and no 30-day delinquent mortgage payments in the past 12 months. A borrower may not have more than three 30-day delinquent payments on any revolving credit account and a maximum of three 30-day delinquent payments within the past 12 months on any installment credit account. However, if the loan-to-value ratio of the loan is 90% or less, consumer credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs in the past 24 months, generally older items must be paid prior to or at closing. With respect to the Series III Program, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, with 24-months credit history, a borrower may not have more than two 30-day delinquent mortgage payments within the past 12 months. Bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs in the past 24 months, generally older items must be paid prior to or at closing. With respect to the Series III+ Program, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, a borrower may not have more than two 30-day delinquent mortgage payments within the past 12 months. Any open judgments, suits, liens, collections and charge-offs not to exceed $500 cumulatively within the past 12 months generally are paid prior to or at closing. Bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit S-65
424B566th Page of 311TOC1stPreviousNextBottomJust 66th
history. Foreclosures are not allowed during the past 24 months. Tax liens are not allowed within the last 12 months. With respect to the Series IV Program, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, a borrower may not have more than four 30-day delinquent mortgage payments or three 30-day delinquent mortgage payments and one 60-day delinquent mortgage payment within the past 12 months. Any open judgments, suits, liens, collections and charge-offs not to exceed $1,000 cumulatively within the past 12 months generally are paid prior to or at closing. Bankruptcies must be at least 18 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 18 months. Tax liens are not allowed within the last 12 months. With respect to the Series V Program, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, a borrower may not have more than five 30-day delinquent mortgage payments or two 60-day delinquent mortgage payments or one 90-day delinquent mortgage payment within the past 12 months. Any open judgments, suits, liens, collections and charge-offs not to exceed $4,000 cumulatively within the past 12 months generally are paid prior to or at closing. Bankruptcies must be at least 12 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 12 months. Tax liens are not allowed within the last 12 months. With respect to the Series VI program, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, a borrower may not have more than one 90-day delinquent mortgage payment within the past 12 months. Any open judgments, suits, liens, collections and charge-offs generally are paid prior to or at closing. Bankruptcies must be at least 6 months old. Foreclosures are not allowed in the past 6 months. Tax liens are not allowed within the last 6 months. THE PROGRESSIVE EXPRESS(TM) PROGRAMS PROGRESSIVE EXPRESS(TM) PROGRAMS WITH DOCUMENTATION GENERAL. In July 1996, the Seller developed an additional series to the Progressive Program, the "Progressive Express(TM) Program." The concept of the Progressive Express(TM) Program is to underwrite the loan focusing on the borrower's Credit Score, ability and willingness to repay the mortgage loan obligation, and assess the adequacy of the mortgaged property as collateral for the loan. The Credit Score is an electronic evaluation of past and present credit accounts on the borrower's credit bureau report. This includes all reported accounts as well as public records and inquiries. The Progressive Express(TM) Program offers six levels of mortgage loan programs. The Progressive Express(TM) Program has a minimum Credit Score that must be met by the borrower's primary wage earner and does not allow for exceptions to the Credit Score requirement. The Credit Score requirement is as follows: Progressive Express(TM) I above 680, Progressive Express(TM) II 680-620, Progressive Express(TM) III 619-601, Progressive Express(TM) IV 600-581, Progressive Express(TM) V 580-551, and Progressive Express(TM) VI 550-500. Each Progressive Express(TM) program has different Credit Score requirements, credit criteria, reserve requirements, and loan-to-value ratio restrictions. Progressive Express(TM) I is designed for credit history and income requirements typical of "A+" credit borrowers. In the event a borrower does not fit the Progressive Express(TM) I criteria, the borrower's mortgage loan is placed into either Progressive Express(TM) II, III, IV, V, or VI, depending on which series' mortgage loan parameters meets the borrowers unique credit profile. All of the mortgage loans originated under the Progressive Express(TM) program are prior approved and/or underwritten either by employees of the Seller or underwritten by contracted mortgage insurance S-66
424B567th Page of 311TOC1stPreviousNextBottomJust 67th
companies or delegated conduit sellers. Under the Progressive Express(TM) Program, the Seller underwrites single family dwellings with loan-to-value ratios at origination of up to 100%. In general, the maximum amount for mortgage loans originated under the Progressive Express Program is $750,000; however, the Seller may approve mortgage loans on a case-by-case basis where generally the maximum loan amount is up to $1 million, owner-occupied, with a minimum credit score of 681. The borrower must disclose employment and assets which both are verified by the Seller, the loan-to-value must not be greater than 70%, the CLTV must not be greater than 80% and the property must be single-family residence, excluding condominiums. For loans that exceed a 97% loan-to-value ratio to a maximum of a 100% loan-to-value ratio, (i) such loans must be for purchase transactions only, (ii) the borrower must have a minimum credit score of 700, (iii) the mortgaged property must be an owner-occupied, primary residence, (iv) the borrower must state income and assets on the Residential Loan Application and meet a debt ratio not to exceed 50% and (v) such loan must be underwritten utilizing the Impac Direct Access System for Lending (IDASL) automated underwriting system. Condominiums are not allowed on the 100% loan-to-value ratio feature. In order for the property to be eligible for the Progressive Express(TM) Program, it may include a single-family residence (1-unit), 2-4 units, condominium and/or planned unit development (PUD). Progressive Express(TM) I & II allow owner- occupied and second home single-family residence property subject to a maximum loan-to-value ratio of 95% and a maximum 100% CLTV on owner-occupied mortgaged properties and 95% on mortgaged properties that are second homes. Express III allows owner-occupied single-family residence property subject to a maximum 90% loan-to-value ratio and a combined loan-to-value of 95%. Progressive Express(TM) I & II allow owner- occupied and non-owner occupied properties to a maximum 90% loan-to-value ratio on 1-2 units and 80% loan-to-value ratio on 3-4 units with a maximum 100% CLTV on owner-occupied and Express II non-owner occupied to 95% CLTV. Express III allow non-owner occupied subject to a maximum 80% loan-to-value ratio on 1-4 units with a maximum 95% CLTV. Express IV, V and VI allow owner-occupied and second homes only and non-owner occupied property is not allowed. Express IV owner-occupied is subject to a maximum 90% loan-to-value ratio, Express V is subject to a maximum of 80% loan-to-value ratio and Express VI is subject to a maximum of 75% loan-to-value ratio and CLTV is not allowed on Express IV, V or VI. Express IV, V or VI loans secured by a second home are subject to a maximum of 70% loan-to-value ratio on Express IV, V and VI and CLTV is not allowed. Progressive Express(TM) Programs I through IV loans with loan-to- value ratios at origination in excess of 80% are insured by MGIC, Radian or RMIC. The borrower can elect to have primary mortgage insurance covered by their loan payment. If the borrower makes such election, a loan-to-value ratio between 80.01% and 89.99% requires 22% coverage, and a loan-to-value ratio between 90.00% and 95.00% requires 30% coverage and a loan-to-value ratio between 95.01% and 100% requires 35% coverage. Generally, when the borrower's credit score is less than 660 or the borrower does not make such an election, the related mortgage loan will be covered by a modified primary mortgage insurance policy issued by Radian to the Seller providing coverage in the amount of (i) 22% for a mortgage loan with a loan-to-value ratio between 80.01% and 89.99%, (ii) 30% for a mortgage loan with a loan-to-value ratio between 90% and 95% and (iii) 35% for mortgage loan with a loan-to-value ratio between 95.01% and 100%. Each borrower completes a Residential Loan Application (Fannie Mae Form 1003 or Freddie Mac Form 65). The borrower must disclose employment and assets on the application, however, there is no verification of the information. If the borrower elects to verify assets, the Seller obtains from the borrower either verification of deposits or bank statements for the most recent one-month period preceding the mortgage loan application. The conduit seller obtains a verbal verification of employment on each borrower. The Seller uses the foregoing parameters as guidelines only. The Seller may include certain provisions in the note that the Seller may not enforce. Full documentation is requested by the underwriter if it is the judgment of the underwriter that the compensating factors are insufficient for loan approval under the Progressive Express(TM) Product Line. CREDIT HISTORY. The Progressive Express(TM) Program defines an acceptable credit history in each of the programs I through VI. Progressive Express(TM) I defines an acceptable credit history as a borrower who S-67
424B568th Page of 311TOC1stPreviousNextBottomJust 68th
has "A+" credit, meaning a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, no 30-day delinquent mortgage payments in the past 12 months, and a maximum of one 30-day delinquent payments on any revolving credit accounts within the past 12 months and one 30-day delinquent payment on any installment credit accounts within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, consumer credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs in the past 24 months, generally older items must be paid prior to or at closing. With respect to Progressive Express(TM) II, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, and no late mortgage payments for the past 12 months. In addition, a borrower must have a maximum of two 30-day delinquent payments on any revolving credit accounts within the past 12 months and one 30-day delinquent payment on any installment credit accounts within the past 12 months. However, if the loan-to- value ratio of the loan is 90% or less, revolving and installment credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs allowed within the past 24 months, generally older items must be paid prior to or at closing. With respect to Progressive Express(TM) III, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades and no more than one 30-day late mortgage payment for the past 12 months. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs allowed within the past 24 months, generally older items must be paid prior to or at closing. With respect to Progressive Express(TM) IV, a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, no more than two 30-day late mortgage payments for the past 12 months. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs allowed within the past 24 months, generally older items must be paid prior to or at closing. With respect to Progressive Express(TM) V, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, no more than two 30-day late mortgage payments in the past 12 months. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in the past 24 months. Judgments, suits, liens, collections or charge-offs, may not exceed $500 cumulatively within the past 12 months, and must be paid prior to or at closing. Tax liens are not allowed within the last 12 months. With respect to Progressive Express(TM) VI, a borrower must have a minimum of two trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy three trades, with 12 months credit history, no more than four 30-day or three 30-day and one 60-day late mortgage payments in the past 12 months. All bankruptcies must be at least 18 months old and fully discharged. Foreclosures are not allowed in the past 18 months. Judgments, suits, liens, collections or charge-offs, may S-68
424B569th Page of 311TOC1stPreviousNextBottomJust 69th
not exceed $1,000 cumulatively within the past 12 months, and must be paid prior to or at closing. Tax liens are not allowed within the last 12 months. PROGRESSIVE EXPRESS(TM) NO DOC PROGRAM In May, 1999, the Seller introduced a Progressive Express(TM) No Doc Program (the "No Doc program"). The concept of the No Doc program is to underwrite the loan focusing on the borrower's credit score, ability and willingness to repay the mortgage loan obligation, and assess the adequacy of the mortgaged property as collateral for the loan. The No Doc program has a minimum credit score and does not allow for exceptions to the credit score. The credit score requirement is as follows: 681 for Progressive Express(TM) No Doc I and 620 for Progressive Express(TM) No Doc II. Each program has a different credit score requirement and credit criteria. All of the mortgage loans originated under the Progressive Express(TM) No Doc program are prior approved and/or underwritten either by employees of the Seller or underwritten by contracted mortgage insurance companies or delegated conduit sellers. Under the Progressive Express(TM) No Doc program, the Seller employees or contracted mortgage insurance companies or delegated conduit sellers underwrite single family dwellings with loan-to-value ratios at origination up to 95% and $500,000. In order for the property to be eligible for the Progressive Express(TM) No Doc program, it must be a single family residence (single unit only), condominium and/or planned unit development (PUD) or 2-units to a maximum loan-to-value ratio of 80%. The borrower can elect to have primary mortgage insurance covered by their loan payment. If the borrower makes such election, the loan-to-value ratios at origination in excess of 80%, are insured by MGIC, Radian or RMIC. For loan-to-value ratios of 80.01% to 89.99%, mortgage insurance coverage is 22% and for loan-to-value ratios of 90% to 95%, mortgage insurance coverage is 30%. Generally, when the borrower's credit score is less than 660 or if the borrower does not make such election, the related mortgage loan will be covered by a modified primary insurance policy issued by Radian to the Seller providing coverage in the amount of 22% for a mortgage loan with a loan-to-value ratio between 80.01% and 89.99% and 30% for a mortgage loan with a loan-to-value ratio of 90% to 95%. Each borrower completes a Residential Loan Application (Fannie Mae Form 1003 or Freddie Mac Form 65). The borrower does not disclose income, employment, or assets and a Verbal Verification of Employment is not provided. Generally, borrowers provide a daytime telephone number as well as an evening telephone number. If the prospective borrower elects to state and verify assets on the Residential Loan Application, Seller obtains from prospective borrowers either a verification of deposits or bank statements for the most recent one-month period preceding the mortgage loan application. CREDIT HISTORY. The Progressive Express(TM) No Doc program defines an acceptable credit history as follows: Progressive Express(TM) No Doc I defines an acceptable credit history as a borrower who has "A+" credit, meaning a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, and no 30-day delinquent mortgage payments in the past 12 months and a maximum of one 30-day delinquent payments on any revolving credit accounts within the past 12 months and one 30-day delinquent payment on any installment credit accounts within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, revolving and installment credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed a satisfactory credit history. Foreclosures are not allowed in the past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs are allowed within the past 24 months, generally older items must be paid prior to or at closing. With respect to Progressive Express(TM) No Doc II a borrower must have a minimum of four trade accounts including a mortgage and/or rental history, along with one non-traditional trade account to satisfy five trades, and no late mortgage payments for the past 12 months and a maximum of two 30-day delinquent S-69
424B570th Page of 311TOC1stPreviousNextBottomJust 70th
payments on any revolving credit accounts and one 30-day delinquent payment on any installment credit accounts within the past 12 months. However, if the loan-to-value ratio of the loan is 90% or less, revolving and installment credit is disregarded. All bankruptcies must be at least 24 months old, fully discharged and the borrower must have re-established or re-affirmed satisfactory credit history. Foreclosures are not allowed in past 3 years. No judgments, suits, tax liens, other liens, collections or charge-offs allowed within the past 24 months, generally older items must be paid prior to or at closing. IN ADDITION, SEE "THE MORTGAGE POOLS -- UNDERWRITING STANDARDS" IN THE PROSPECTUS. DELINQUENCY AND FORECLOSURE EXPERIENCE OF THE SELLER Based solely upon information provided by the Seller, the following tables summarize, for the respective dates indicated, the delinquency, foreclosure, bankruptcy and REO property status with respect to all one- to four-family residential mortgage loans originated or acquired by the Seller which were being master serviced by the Seller at the dates indicated. The indicated periods of delinquency are based on the number of days past due on a contractual basis. The monthly payments under all of such mortgage loans are due on the first day of each calendar month. A mortgage loan is considered "30 days" delinquent if a payment due on the first of the month is not received by the second day of the following month, and so forth. S-70
424B571st Page of 311TOC1stPreviousNextBottomJust 71st
[Enlarge/Download Table] At December 31, 2000 At December 31, 2001 At December 31, 2002 NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL OF LOANS AMOUNT OF LOANS AMOUNT OF LOANS AMOUNT -------- ------ -------- ------ -------- ------ (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Total Loan Outstanding 31,971 $ 4,042,859 37,972 $5,568,740 48,520 $8,694,474 DELINQUENCY 1 Period of Delinquency: 30-59 Days..... 1,941 $ 242,081 2,064 $ 287,616 2,331 $ 383,855 60-89 Days..... 529 65,809 531 72,460 644 100,878 90- Days or More 266 25,952 705 72,544 616 71,466 ----- ----------- ----- ------- ----- ---------- Total Delinquencies 2,736 $ 333,842 3,300 432,620 3,591 $ 556,200 ===== =========== ===== ======= ===== ========== Delinquencies as a Percentage of Total Loans Outstanding... 8.56% 8.26% 8.69% 7.77% 7.40% 6.40% [Download Table] At December 31, 2003 At June 30, 2004 NUMBER PRINCIPAL NUMBER PRINCIPAL OF LOANS AMOUNT OF LOANS AMOUNT -------- ------ -------- ------ (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Total Loan Outstanding 65,256 $ 13,919,693 90,398 $20,128,690 DELINQUENCY 1 Period of Delinquency: 30-59 Days..... 2,432 $ 419,202 2,221 $ 566,141 60-89 Days..... 601 105,455 695 121,312 90- Days or More 560 87,297 513 58,061 ----- ------------ ----- ----------- Total Delinquencies 3,593 $ 611,954 3,429 $ 745,514 ===== ============ ===== =========== Delinquencies as a Percentage of Total Loans Outstanding... 5.51% 4.40% 3.79% 3.70% ---------- 1 The delinquency balances, percentages and numbers set forth under this heading exclude (a) delinquent mortgage loans that were in foreclosure at the respective dates indicated ("Foreclosure Loans"), (b) delinquent mortgage loans as to which the related mortgagor was in bankruptcy proceedings at the respective dates indicated ("Bankruptcy Loans") and (c) REO properties that have been purchased upon foreclosure of the related mortgage loans. All Foreclosure Loans, Bankruptcy Loans and REO properties have been segregated into the sections of the table entitled "Foreclosures Pending," "Bankruptcies Pending" and "REO Properties," respectively, and are not included in the "30-59 Days," "60-89 Days," "90 Days or More" and "Total Delinquencies" sections of the table. See the section of the table entitled "Total Delinquencies plus Foreclosures Pending and Bankruptcies Pending" for total delinquency balances, percentages and numbers which include Foreclosure Loans and Bankruptcy Loans, and see the section of the table entitled "REO Properties" for delinquency balances, percentages and numbers related to REO properties that have been purchased upon foreclosure of the related mortgage loans. S-71
424B572nd Page of 311TOC1stPreviousNextBottomJust 72nd
[Enlarge/Download Table] At December 31, 2000 At December 31, 2001 At December 31, 2002 NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL OF LOANS AMOUNT OF LOANS AMOUNT OF LOANS AMOUNT -------- ------ -------- ------ -------- ------ (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) FORECLOSURES PENDING 1 396 $57,133 931 $132,571 1,452 $212,309 Foreclosures Pending as a Percentage of Total Loans Outstanding.................... 1.24% 1.41% 2.45% 2.38% 2.99% 2.44% BANKRUPTCIES PENDING 2 227 $22,556 259 $22,054 328 $26,402 Bankruptcies Pending as a Percentage of Total Loans Outstanding.................... 0.71% 0.56% 0.68% 0.40% 0.68% 0.30% Total Delinquencies plus Foreclosures Pending and Bankruptcies Pending........... 3,359 $413,531 4,490 $587,245 5,371 $794,910 Total Delinquencies plus Foreclosures Pending and Bankruptcies Pending as a Percentage of Total Loans Outstanding.................... 10.51% 10.23% 11.82% 10.55% 11.07% 9.14% REO PROPERTIES 3 105 $13,944 223 $37,631 329 $53,055 REO Properties as a Percentage. 0.33% 0.34% 0.59% 0.68% 0.68% 0.61% [Download Table] At December 31, 2003 At June 30, NUMBER PRINCIPAL NUMBER PRINCIPAL OF LOANS AMOUNT OF LOANS AMOUNT -------- ------ -------- ------ (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) FORECLOSURES PENDING 1 1,049 $158,261 1,603 $229,718 Foreclosures Pending as a Percentage of Total Loans Outstanding.................... 1.61% 1.14% 1.77% 1.14% BANKRUPTCIES PENDING 2 227 $19,912 350 $ 21,893 Bankruptcies Pending as a Percentage of Total Loans Outstanding.................... 0.35% 0.14% 0.39% 0.11% Total Delinquencies plus Foreclosures Pending and Bankruptcies Pending........... 4,869 $790,127 5,382 $997,125 Total Delinquencies plus Foreclosures Pending and Bankruptcies Pending as a Percentage of Total Loans Outstanding.................... 7.46% 5.68% 5.95% 4.95% REO PROPERTIES 3 316 $50,383 340 $60,085 REO Properties as a Percentage. 0.48% 0.36% 0.38% 0.30% ---------- 1 Mortgage loans that are in foreclosure but as to which the mortgaged property has not been liquidated at the respective dates indicated. It is generally the Master Servicer's policy, with respect to mortgage loans originated by the Seller, to commence foreclosure proceedings when a mortgage loan is 60 days or more delinquent. However, the Master Servicer may delay the foreclosure process as a result of loss mitigation efforts. 2 Mortgage loans as to which the related mortgagor is in bankruptcy proceedings at the respective dates indicated. 3 REO properties that have been purchased upon foreclosure of the related mortgage loans, including mortgaged properties that were purchased by the Seller after the respective dates indicated. S-72
424B573rd Page of 311TOC1stPreviousNextBottomJust 73rd
Based solely on information provided by the Seller, the following table presents the changes in the Seller's charge-offs and recoveries for the periods indicated. [Enlarge/Download Table] TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS SIX MONTHS ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, 2000 2001 2002 2003 2004 ---- ---- ---- ---- ---- (DOLLARS IN (DOLLARS IN (DOLLARS IN (DOLLARS IN (DOLLARS IN THOUSANDS) THOUSANDS) THOUSANDS) THOUSANDS) THOUSANDS) Charge-offs: Mortgage Loan Properties... $ 12,785 6,475 2,416 3,049 315 REO Properties................. 4,779 4,584 4,043 10,687 1,964 Recoveries: Mortgage Loan Properties... 409 849 1,509 913 948 REO Properties ............ 0 0 0 0 0 Net charge-offs ............... 17,155 10,210 4,950 12,823 1,331 Ratio of net charge-offs ...... to average loans outstanding during the indicated period** ............ 0.51%* 0.21%* 0.07%* 0.12%* 0.03%* ---------- *The ratio of net charge-offs was based upon annualized charge-offs for the indicated periods. The average loans outstanding was computed using monthly balances for the indicated periods. **The information on this table does not include statistical information on mortgage loans which have recently been sold on a servicing-released basis by the Seller to third parties. The above data on charge-offs and recoveries are calculated on the basis of the total mortgage loans originated or acquired by the Seller. However, the total amount of mortgage loans on which the above data are based includes many mortgage loans which were not, as of the respective dates indicated, outstanding long enough to give rise to some of the indicated charge-offs. In the absence of such mortgage loans, the charge-off percentages indicated above would be higher and could be substantially higher. Because the mortgage pool will consist of a fixed group of mortgage loans, the actual charge-off percentages with respect to the mortgage pool may therefore be expected to be higher, and may be substantially higher, than the percentages indicated above. The information set forth in the preceding paragraphs concerning the Seller has been provided by the Seller. WELLS FARGO BANK, N.A. Approximately 17.33% and 8.13% of the Group 1 Loans and Group 2 Loans, respectively, were underwritten pursuant to, or in accordance with, the standards of Wells Fargo Bank, N.A.'s which is described below. Wells Fargo Bank, N.A. ("Wells Fargo") originates first lien residential mortgage loans (referred to as "Mortgage Loans" for purposes of this section) through a network of retail, wholesale, and correspondent offices located throughout all 50 states. S-73
424B574th Page of 311TOC1stPreviousNextBottomJust 74th
The underwriting functions of Wells Fargo are performed in its Arizona, California, Louisiana, Minnesota and North Carolina offices. Wells Fargo employs loan credit underwriters to scrutinize the applicant's credit profile and to evaluate whether an impaired credit history is a result of adverse circumstances or a continuing inability or unwillingness to meet credit obligations in a timely manner. Personal circumstances such as divorce, family illnesses or deaths and temporary job loss due to layoffs and corporate downsizing will often impair an applicant's credit record. The underwriting guidelines used by Wells Fargo are primarily intended to evaluate the prospective borrower's credit standing and ability to repay the loan, as well as the value and adequacy of the proposed mortgaged property as collateral. A prospective borrower applying for a mortgage loan is required to complete a detailed application. The loan application elicits pertinent information about the applicant including, depending on the program, the applicant's financial condition (assets, liabilities, income and expenses), the property being financed and the type of loan desired. With respect to every applicant, a credit report summarizing the applicant's credit history with merchants and lenders is obtained. Significant unfavorable credit information reported by the applicant or by a credit reporting agency is taken into account in the credit decision. Loan applications are classified according to certain characteristics, including but not limited to: condition and location of the collateral, credit history of the applicant, ability to pay, loan-to-value ratio and general stability of the applicant in terms of employment history and time in residence. Wells Fargo has established classifications with respect to the credit profile of the applicant. Terms of Mortgage Loans made by Wells Fargo, as well as maximum loan-to-value ratios and debt-to-income ratios, vary depending on the classification of the applicant. Generally, the loan-to-value ratio is the ratio, expressed as a percentage, of the principal amount of the mortgage loan at origination to the lesser of (i) the appraised value of the related mortgaged property, as established by an appraisal obtained by the originator generally no more than four months prior to origination (or, with respect to newly constructed properties, no more than 180 days prior to origination), or (ii) the sale price for such property. In some instances, the loan-to-value may be based on the value determined by an appraisal that was obtained by the originator more than 120 days prior to origination, provided that (i) an appraisal update is obtained and (ii) the original appraisal was obtained no more than 180 days prior to origination. Loan applicants with less favorable credit ratings generally are restricted to consideration for loans with higher interest rates and lower loan-to-value ratios than applicants with more favorable credit ratings. Wells Fargo uses these classifications as guidelines only. On a case-by-case basis, Wells Fargo makes exceptions to these classifications for a prospective borrower based upon the presence of acceptable compensating factors. Examples of compensating factors include, but are not limited to, loan-to-value ratio, debt-to-income ratio, long-term stability of employment and/or residence, statistical credit scores, verified cash reserves or reduction in overall monthly expenses. Except for balloon loans, the Mortgage Loans originated or acquired by Wells Fargo have loan terms of 15, 20 or 30 years and fully amortize over such terms. Wells Fargo generally does not originate or acquire any Mortgage Loans for which the combined loan-to-value ratio at origination exceeds 100% in the event of concurrent secondary financing. The loans originated or acquired by Wells Fargo are generally secured by single-family detached residences, condominium units or two-to four-family residences, and such properties may or may not be occupied by the owner. It is Wells Fargo's policy not to accept commercial properties or unimproved land as collateral for Mortgage Loans. Wells Fargo, will, however, accept mixed-use properties such as a property where more than 80% is used for residential purposes and the balance is used for commercial purposes. Wells Fargo's mortgage loan programs include various "stated income, stated asset" and "no ratio" programs. Wells Fargo may perform a telephone verification of employment for salaried employees prior to funding. In some cases, employment histories may be obtained through V.I.E., Inc., an entity jointly owned by Wells Fargo and an unaffiliated third party that obtains employment data from state unemployment insurance departments or other state agencies. S-74
424B575th Page of 311TOC1stPreviousNextBottomJust 75th
Under Wells Fargo's "stated income, stated asset" programs, the applicant's employment, income sources and/or assets must be stated on the initial signed application. The applicant's income as stated must be reasonable for the applicant's occupation as determined in the discretion of the loan underwriter; however, such income is not independently verified. Similarly the applicant's assets as stated must be reasonable for the applicant's occupation as determined in the discretion of the loan underwriter; however, such assets are not independently verified. Wells Fargo's underwriting of every mortgage loan submitted consists of not only a thorough credit review, but also a separate appraisal conducted by (i) Value Information Technology, Inc., ("Value I.T."), an entity jointly owned by Wells Fargo and an unaffiliated third party, (ii) an appraiser approved by Value I.T. or (iii) another third-party appraiser. Appraisals generally conform to current Fannie Mae and Freddie Mac secondary market requirements for residential property appraisals. All appraisals are subject to an internal appraisal review by the loan underwriter irrespective of the loan-to-value ratio, the mortgage loan amount or the identity of the appraiser. Certain loans may require a third party review in the form of either a desk review or field review. Additionally, at the discretion of Wells Fargo, any mortgage loan is subject to further review in the form of a desk review, field review or additional full appraisal. No assurance can be given that values of the Mortgaged Properties have remained or will remain at the levels that existed on the dates of appraisal (or, when applicable, on the dates of appraisal updates) of the related Mortgage Loans. In comparison to Wells Fargo's "general" underwriting standards, the underwriting standards applicable to Mortgage Loans under Wells Fargo's "alternative" mortgage loan underwriting program permit different underwriting criteria, additional types of mortgaged properties or categories of borrowers such as "foreign nationals" without a FICO Score who hold certain types of visas and have acceptable credit references, and include certain other less restrictive parameters. Generally, relative to the "general" underwriting standards, these standards include higher loan amounts, higher maximum loan-to-value ratios, higher maximum "combined" loan-to-value ratios (in each case, relative to Mortgage Loans with otherwise similar characteristics) in cases of simultaneous primary and secondary financings, less restrictive requirements for "equity take out" refinancings, the removal of limitations on the number of permissible Mortgage Loans that may be extended to one borrower and the ability to originate Mortgage Loans with loan-to-value ratios in excess of 80% without the requirement to obtain primary mortgage insurance if such loans are secured by cooperatives or investment properties. Under a program available to eligible borrowers who meet certain underwriting criteria and for which program a minimum downpayment of only 3% is required, Mortgage Loans may be originated with loan-to-value ratios between 95.01% and 97% with the application of less restrictive maximum qualifying ratios of borrower monthly housing debt or total monthly debt obligations to borrower monthly income and reduced minimum requirements for primary mortgage insurance coverage. With respect to mortgaged property types, Mortgage Loans may be secured by shares in cooperative housing corporations, manufactured homes, investment properties permitted under less stringent guidelines, condotels (features of which may include maid service, a front desk or resident manager, rental pools and up to 20% of commercial space) and the mortgaged properties may represent an unusually high percentage of land vs. structure or have other unique characteristics. In addition, borrowers who satisfy certain guidelines regarding credit history may have been approved under a "No Ratio" program (such Mortgage Loans, "No Ratio Loans") or under a "No Income/No Asset" program (such Mortgage Loans, "No Income/No Asset Loans"). In the case of No Ratio Loans, the borrower's income would not have been verified nor would there have been the calculation of any ratios, as part of the loan underwriting decision, of the borrower's expected monthly housing debt or total monthly debt obligations to the borrower's monthly income. In connection with such No Ratio program, the borrower's assets may have been verified and certain minimum "cash reserves" required. In the case of No Income/No Asset Loans, borrowers may not have been required to provide any information in their loan application S-75
424B576th Page of 311TOC1stPreviousNextBottomJust 76th
regarding their employment and in that instance employment would not have been verified. Also in the case of No Income/No Asset Loans, borrowers would not have been required to provide any information in their loan application regarding their income or assets. RECENT DEVELOPMENTS WITH RESPECT TO THE SELLER On July 23, 2004, the Seller announced that it would correct and restate certain of its previously issued financial statements for the years ended December 31, 2001, 2002 and 2003 and its unaudited financial statements for the three months ended March 31, 2003 and 2004. While the change affects net earnings in accordance with generally accepted accounting principles, it does not affect its estimated taxable income, future cash flows, past dividends or future dividends. ADDITIONAL INFORMATION The description in this prospectus supplement of the sample mortgage loans and the mortgaged properties is based upon the sample mortgage pool as of the Cut-off Date, as adjusted for the scheduled principal payments due on or before this date. The sample mortgage loans consist of mortgage loans that are intended to be included in the trust as initial mortgage loans, but not the Group 1 subsequent mortgage loans and Group 2 subsequent mortgage loans. However, many of the sample mortgage loans may not be included in the trust as initial mortgage loans as a result of incomplete documentation or otherwise if the company deems this removal necessary or desirable, and may be prepaid at any time. The characteristics of each final loan group will not materially differ from the information provided with respect to each sample loan group. Within 15 days of the Closing Date and 15 days of the end of the Funding Period, tables reflecting the composition of the initial mortgage loans in each loan group and the final pool of mortgage loans in each loan group, respectively, will be filed on Form 8-K with the Commission. However, only one set of tables will be filed if the final pool of mortgage loans in each loan group is determined within 15 days of the closing date. YIELD ON THE CERTIFICATES SHORTFALLS IN COLLECTIONS OF INTEREST When a principal prepayment in full is made on a mortgage loan, the mortgagor is charged interest only for the period from the Due Date of the preceding monthly payment up to the date of the principal prepayment, instead of for a full month. When a partial principal prepayment is made on a mortgage loan, the mortgagor is not charged interest on the amount of the prepayment for the month in which the prepayment is made. In addition, the application of the Relief Act to any mortgage loan will adversely affect, for an indeterminate period of time, the ability of the Master Servicer to collect full amounts of interest on the mortgage loan. SEE "LEGAL ASPECTS OF THE MORTGAGE LOANS--SERVICEMEMBERS CIVIL RELIEF ACT" IN THE PROSPECTUS. The Subservicer is obligated to pay from its own funds only those interest shortfalls attributable to full and partial prepayments by the mortgagors on the mortgage loans subserviced by it, but only to the extent of its aggregate Subservicing Fee for the related Due Period. The Master Servicer is obligated to pay from its own funds only those interest shortfalls attributable to full and partial prepayments by the mortgagors on the mortgage loans master serviced by it, but only to the extent required to be paid by Subservicer and not so paid, and to the extent of its aggregate Master Servicing Fee for the related Due Period. See "Pooling and Servicing Agreement--Servicing and Other Compensation and Payment of Expenses" in this prospectus supplement. Accordingly, the effect of (1) any principal prepayments on the mortgage loans, to the extent that any resulting Prepayment Interest Shortfall exceeds any Compensating Interest or (2) any shortfalls resulting from the application of the Relief Act, will be to reduce the aggregate amount of interest collected that is available for distribution to holders of the certificates. Any resulting S-76
424B577th Page of 311TOC1stPreviousNextBottomJust 77th
shortfalls will be allocated among the certificates as provided in this prospectus supplement under "Description of the Certificates--Interest Distributions." GENERAL YIELD AND PREPAYMENT CONSIDERATIONS The yield to maturity of the Offered Certificates will be sensitive to defaults on the mortgage loans. If a purchaser of an Offered Certificate calculates its anticipated yield based on an assumed rate of default and amount of losses that is lower than the default rate and amount of losses actually incurred, its actual yield to maturity will be lower than that so calculated. In general, the earlier a loss occurs, the greater is the effect on an investor's yield to maturity. There can be no assurance as to the delinquency, foreclosure or loss experience with respect to the mortgage loans. Because the mortgage loans were underwritten in accordance with standards less stringent than those generally acceptable to Fannie Mae and Freddie Mac with regard to a borrower's credit standing and repayment ability, the risk of delinquencies with respect to, and losses on, the mortgage loans will be greater than that of mortgage loans underwritten in accordance with Fannie Mae or Freddie Mac standards. The rate of principal payments, the aggregate amount of distributions and the yields to maturity of the Offered Certificates will be affected by the rate and timing of payments of principal on the mortgage loans. The rate of principal payments on the mortgage loans will in turn be affected by the amortization schedules of the mortgage loans and by the rate of principal prepayments (including for this purpose prepayments resulting from refinancing, liquidations of the mortgage loans due to defaults, casualties or condemnations and repurchases by the Seller). Certain of the mortgage loans contain prepayment charge provisions. The rate of principal payments may or may not be less than the rate of principal payments for mortgage loans that did not have prepayment charge provisions. The mortgage loans are subject to the "due- on-sale" provisions included therein. SEE "THE MORTGAGE POOL" HEREIN. Prepayments, liquidations and purchases of the mortgage loans (including any optional purchases) will result in distributions on the Offered Certificates of principal amounts which would otherwise be distributed over the remaining terms of the mortgage loans. Since the rate of payment of principal on the mortgage loans will depend on future events and a variety of other factors, no assurance can be given as to such rate or the rate of principal prepayments. The extent to which the yield to maturity of a class of Offered Certificates may vary from the anticipated yield will depend, in the case of the Offered Certificates, upon the degree to which such class of certificates is purchased at a discount or premium. Further, an investor should consider the risk that, in the case of any Offered Certificate purchased at a discount, a slower than anticipated rate of principal payments (including prepayments) on the mortgage loans could result in an actual yield to such investor that is lower than the anticipated yield and, in the case of any Offered Certificate purchased at a premium, a faster than anticipated rate of principal payments on the mortgage loans could result in an actual yield to such investor that is lower than the anticipated yield. The rate of principal payments (including prepayments) on pools of mortgage loans may vary significantly over time and may be influenced by a variety of economic, geographic, social and other factors, including changes in mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity in the mortgaged properties and servicing decisions. In general, if prevailing interest rates were to fall significantly below the mortgage rates on the mortgage loans, such mortgage loans could be subject to higher prepayment rates than if prevailing interest rates were to remain at or above the mortgage rates on such mortgage loans. Conversely, if prevailing interest rates were to rise significantly, the rate of prepayments on such mortgage loans would generally be expected to decrease. The mortgage loans may be subject to a greater rate of principal prepayments in a low interest rate environment. For example, if prevailing interest rates were to fall, mortgagors may be inclined to refinance their mortgage loans with a fixed-rate loan to "lock in" a lower interest rate or to refinance their mortgage loans with adjustable-rate mortgage loans with low introductory S-77
424B578th Page of 311TOC1stPreviousNextBottomJust 78th
interest rates. No assurances can be given as to the rate of prepayments on the mortgage loans in stable or changing interest rate environments. Because principal distributions are paid to certain classes of Offered Certificates before other such classes, holders of classes of Offered Certificates having a later priority of payment bear a greater risk of losses than holders of classes having earlier priorities for distribution of principal. To the extent the related Net WAC Rate becomes the Pass-Through Rate on the Offered Certificates, then in any such case, less interest will accrue on such certificates than would otherwise be the case. The related Net WAC Rate on the Offered Certificates will be equal to the weighted average of the net mortgage rates on the related mortgage loans, multiplied by a fraction equal to (x) 30 divided by (y) the number of days in the related Accrual Period. Corridor Contract payments may be used to cover Net WAC Shortfall Amounts as described under "Description of the Certificates--The Corridor Contracts" in this prospectus supplement. The holders of the Offered Certificates WILL NOT be entitled to recover interest in excess of any applicable limited rate on any future distribution date from Net Monthly Excess Cashflow or from any other source. For a discussion of factors that could limit the Pass-Through Rate on the certificates, see "Risk Factors--The Pass-Through Rates on the Offered Certificates are Subject to Limitation" in this prospectus supplement. Approximately 0.03%, 1.20%, 3.68%, 45.85% and 4.60% of the sample Group 1 Loans have initial interest only periods of six months, two, three, five and ten years, respectively. Approximately 0.04%, 0.72%, 0.39%, 41.81%, and 2.03% of the sample Group 2 Loans have initial interest only periods of six months, two, three, five and ten years, respectively. During this period, the payment made by the related borrower will be less than it would be if the mortgage loan amortized. In addition, the mortgage loan balance will not be reduced by the principal portion of scheduled monthly payments during this period. As a result, no principal payments will be made to the certificates from these mortgage loans during their interest only period except in the case of a prepayment. Approximately 67.19% and 69.55% of the sample Group 1 Loans and sample Group 2 Loans, respectively, provide for payment by the borrower of a prepayment charge in limited circumstances on certain prepayments. The holders of the Class P Certificates will be entitled to all prepayment charges received on the mortgage loans, and these amounts will not be available for distribution on the other classes of certificates. The Master Servicer may waive the collection of any otherwise applicable prepayment charge or reduce the amount thereof actually collected, but only if the Master Servicer does so in compliance with the prepayment charge waiver standards set forth in the Agreement. If the Master Servicer waives any prepayment charge other than in accordance with the standards set forth in the Agreement, the Master Servicer will be required to pay the amount of the waived prepayment charge. There can be no assurance that the prepayment charges will have any effect on the prepayment performance of the mortgage loans. Investors should conduct their own analysis of the effect, if any, that the prepayment premiums, and decisions by the master servicer with respect to the waiver thereof, may have on the prepayment performance of the mortgage loans. The Corridor Contracts will be assigned to, or entered into by, the trust and will provide some protection against Net WAC Shortfall Amounts on the Offered Certificates. However, the Corridor Contracts may not provide sufficient funds to cover such Net WAC Shortfall Amounts on the Offered Certificates. In addition, payments under the Corridor Contracts are limited to a specified rate in effect from time to time. To the extent that net amounts payable under the Corridor Contracts are insufficient to cover Net WAC Shortfall Amounts on the Offered Certificates, some or all of the Net Monthly Excess Cashflow may be used. However, there can be no assurance that the Net Monthly Excess Cashflow will be sufficient to cover these shortfalls, particularly because on any distribution date where the pass-through rate of the Offered Certificates is limited to the related Net WAC Rate, there will be little or no excess interest. S-78
424B579th Page of 311TOC1stPreviousNextBottomJust 79th
YIELD SENSITIVITY OF THE MEZZANINE CERTIFICATES If the overcollateralization and the certificate principal balances of the Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates have been reduced to zero, the yield to maturity on the Class M-1 Certificates will become extremely sensitive to losses on the mortgage loans (and the timing thereof) that are covered by subordination, because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-1 Certificates. If the overcollateralization and the certificate principal balance of the Class M-3, Class M-4, Class M-5 and Class B Certificates have been reduced to zero, the yield to maturity on the Class M-2 Certificates will become extremely sensitive to losses on the mortgage loans (and the timing thereof) that are covered by subordination, because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-2 Certificates. If the overcollateralization and the certificate principal balance of the Class M-4, Class M-5 and Class B Certificates have been reduced to zero, the yield to maturity on the Class M-3 Certificates will become extremely sensitive to losses on the mortgage loans (and the timing thereof) that are covered by subordination, because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-3 Certificates. If the overcollateralization and the certificate principal balance of the Class M-5 Certificates and Class B Certificates have been reduced to zero, the yield to maturity on the Class M-4 Certificates will become extremely sensitive to losses on the mortgage loans (and the timing thereof) that are covered by subordination, because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-4 Certificates. If the overcollateralization and the certificate principal balance of the Class B Certificates have been reduced to zero, the yield to maturity on the Class M-5 Certificates will become extremely sensitive to losses on the mortgage loans (and the timing thereof) that are covered by subordination, because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class M-5 Certificates. If the overcollateralization has been reduced to zero, the yield to maturity on the Class B Certificates will become extremely sensitive to losses on the mortgage loans (and the timing thereof) that are covered by subordination, because the entire amount of any Realized Losses (to the extent not covered by Net Monthly Excess Cashflow) will be allocated to the Class B Certificates. The initial undivided interests in the trust evidenced by the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates are approximately 1.15%, 1.00%, 1.00%, 1.00%, 1.00% and 1.25%, respectively, of the Cut-off Date Balance. On the Closing Date, the initial Overcollateralized Amount will approximately equal the initial Overcollateralization Target Amount of zero. However, on the distribution date in February 2005, the Overcollateralization Target Amount will increase to 0.35% of the Cut-off Date Balance, as described herein. The recording of mortgages in the name of MERS is a relatively new practice in the mortgage lending industry. While the company expects that the master servicer or applicable subservicer will be able to commence foreclosure proceedings on the mortgaged properties, when necessary and appropriate, public recording officers and others, however, may have limited, if any, experience with lenders seeking to foreclose mortgages, assignments of which are registered with MERS. Accordingly, delays and additional costs in commencing, prosecuting and completing foreclosure proceedings, defending litigation commenced by third parties and conducting foreclosure sales of the mortgaged properties could result. Those delays and additional costs could in turn delay the distribution of liquidation proceeds to the certificateholders and increase the amount of Realized Losses on the mortgage loans. In addition, if, as a result of MERS discontinuing or becoming unable to continue operations in connection with the MERS(R) System, it becomes necessary to remove any mortgage loan from registration on the MERS(R) System and to arrange for the assignment of the related mortgages to the trustee, then any related expenses shall be reimbursable by the trust to the Master Servicer, which will reduce the amount available to pay principal of and interest on the Mezzanine Certificates. For additional information regarding the recording of mortgages in the name of MERS see "The Mortgage Pool--Mortgage Loan Characteristics" in this prospectus supplement. S-79
424B580th Page of 311TOC1stPreviousNextBottomJust 80th
Investors in the Mezzanine Certificates should fully consider the risk that Realized Losses on the mortgage loans could result in the failure of such investors to fully recover their investments. In addition, once Realized Losses have been allocated to the Mezzanine Certificates, such amounts with respect to such certificates will no longer accrue interest and will not be reinstated thereafter. Unless the Certificate Principal Balances of the Class A Certificates have been reduced to zero, the Mezzanine Certificates will not be entitled to any principal distributions until the Stepdown Date or during any period in which a Trigger Event is in effect. As a result, the weighted average lives of the Mezzanine Certificates will be longer than would otherwise be the case if distributions of principal were allocated on a pro rata basis among the Class A Certificates and Mezzanine Certificates. As a result of the longer weighted average lives of the Mezzanine Certificates, the holders of such certificates have a greater risk of suffering a loss on their investments. Further, because a Trigger Event could result from either delinquencies or losses, it is possible for the Mezzanine Certificates to receive no principal distributions (unless the certificate principal balances of the Class A Certificates have been reduced to zero) on and after the Stepdown Date even if no losses have occurred on the mortgage loans. YIELD SENSITIVITY OF THE OFFERED CERTIFICATES The yield to investors on the Offered Certificates will be sensitive to fluctuations in the level of One- Month LIBOR. The Pass-Through Rate on the Offered Certificates will vary with One-Month LIBOR. Changes in the level of One-Month LIBOR may not correlate with changes in prevailing mortgage interest rates or changes in other indices. It is possible that lower prevailing mortgage interest rates, which might be expected to result in faster prepayments, could occur concurrently with an increased level of One-Month LIBOR. Investors in the Offered Certificates should also fully consider the effect on the yields on those certificates of changes in the level of One-Month LIBOR. WEIGHTED AVERAGE LIVES The timing of changes in the rate of principal prepayments on the mortgage loans may significantly affect an investor's actual yield to maturity, even if the average rate of principal prepayments is consistent with such investor's expectation. In general, the earlier a principal prepayment on the mortgage loans occurs, the greater the effect of such principal prepayment on an investor's yield to maturity. The effect on an investor's yield of principal prepayments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Offered Certificates may not be offset by a subsequent like decrease (or increase) in the rate of principal prepayments. The weighted average life of an Offered Certificate is the average amount of time that will elapse from the Closing Date, until each dollar of principal is repaid to the investors in such certificate. Because it is expected that there will be prepayments and defaults on the mortgage loans, the actual weighted average lives of these certificates are expected to vary substantially from the weighted average remaining terms to stated maturity of the mortgage loans as set forth herein under "The Mortgage Pool." Prepayments of mortgage loans are commonly measured relative to a prepayment standard or model. The model used in this Prospectus Supplement is the Prepayment Assumption. The Prepayment Assumption does not purport to be either an historical description of the prepayment experience of any pool of mortgage loans or a prediction of the anticipated rate of prepayment of any mortgage loans, including the mortgage loans to be included in the trust. The tables entitled "Percent of Initial Certificate Principal Balance Outstanding at the Following Percentages of the Prepayment Assumption" were prepared on the basis of the assumptions in the following paragraph and the table set forth below. There are certain differences between the loan characteristics S-80
424B581st Page of 311TOC1stPreviousNextBottomJust 81st
included in such assumptions and the characteristics of the actual mortgage loans. Any such discrepancy may have an effect upon the percentages of original certificate principal balances outstanding and weighted average lives of the Class A Certificates and the Mezzanine Certificates set forth in the tables. In addition, since the actual mortgage loans in the trust will have characteristics that differ from those assumed in preparing the tables set forth below, the distributions of principal of the Class A Certificates and the Mezzanine Certificates may be made earlier or later than indicated in the table. The percentages and weighted average lives in the tables entitled "Percent of Initial Certificate Principal Balance Outstanding at the Following Percentages of the Prepayment Assumption" were determined assuming that: (i) the mortgage groups consists of 637 hypothetical mortgage loans having the following characteristics: [Enlarge/Download Table] ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 1 1 503,200.00 5.345000 5.750000 2 6 358 6 Month LIBOR 2 1 6,135,539.98 5.150332 6.328447 2 24 358 6 Month LIBOR 3 1 108,000.00 6.095000 6.500000 2 24 358 6 Month LIBOR 4 1 559,074.00 6.365061 6.770061 2 24 358 6 Month LIBOR 5 1 4,869,400.00 5.645125 6.050125 2 24 358 6 Month LIBOR 6 1 5,507,070.00 5.939896 6.344896 2 24 358 6 Month LIBOR 7 1 219,100.00 6.095000 6.500000 4 24 356 6 Month LIBOR 8 1 2,113,600.00 5.601056 6.006056 3 24 357 6 Month LIBOR 9 1 54,854,325.19 4.268856 4.673856 4 36 356 1 Year LIBOR 10 1 440,499.99 4.225000 5.690000 2 36 358 6 Month LIBOR 11 1 324,499.99 5.220000 5.625000 7 36 353 6 Month LIBOR 12 1 839,200.00 5.526244 5.931244 3 36 357 6 Month LIBOR 13 1 369,000.00 7.095000 7.500000 2 36 358 6 Month LIBOR 14 1 1,221,500.00 4.751212 5.156212 3 36 357 6 Month LIBOR 15 1 1,166,400.00 4.662970 5.067970 3 36 357 1 Year LIBOR 16 1 731,250.00 4.272356 5.027735 3 36 357 6 Month LIBOR 17 1 184,500.00 4.595000 5.000000 3 36 357 6 Month LIBOR 18 1 1,093,500.00 5.444931 5.849931 0 60 360 6 Month LIBOR 19 1 476,000.00 4.845000 5.250000 1 60 359 6 Month LIBOR 20 1 943,700.00 5.944873 7.004173 1 60 359 6 Month LIBOR 21 1 30,550,325.00 4.862636 5.432114 1 60 359 6 Month LIBOR 22 1 2,750,750.00 4.819890 5.253924 1 60 359 6 Month LIBOR 23 1 510,325.00 6.220255 7.401581 1 60 359 6 Month LIBOR 24 1 1,269,600.00 5.572236 6.074905 0 60 360 6 Month LIBOR 25 1 1,643,100.00 4.556703 4.961703 1 60 359 6 Month LIBOR 26 1 370,150.00 6.018272 6.835405 0 60 360 6 Month LIBOR 27 1 356,800.00 4.995000 5.400000 2 60 358 6 Month LIBOR 28 1 113,920.00 4.845000 5.250000 1 60 359 6 Month LIBOR 29 1 114,913,393.00 5.180512 5.916965 1 60 359 6 Month LIBOR 30 1 27,855,926.00 5.245575 5.711649 0 60 360 6 Month LIBOR 31 1 415,833.00 5.595000 6.000000 1 60 359 6 Month LIBOR 32 1 2,255,982.00 6.060802 6.601362 1 60 359 6 Month LIBOR 33 1 4,060,900.00 4.934540 5.339540 0 60 360 6 Month LIBOR S-81
424B582nd Page of 311TOC1stPreviousNextBottomJust 82nd
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 34 1 157,500.00 4.230000 5.625000 2 60 358 6 Month LIBOR 35 1 269,239.00 4.950000 6.125000 1 60 359 6 Month LIBOR 36 1 6,193,750.00 5.708467 6.294902 1 60 359 6 Month LIBOR 37 1 881,250.00 5.666106 6.071106 1 60 359 6 Month LIBOR 38 1 35,499,870.00 5.348524 5.900971 1 60 359 6 Month LIBOR 39 1 358,400.00 5.095000 5.500000 2 60 358 1 Year LIBOR 40 1 1,111,450.00 5.380826 5.785826 0 60 360 6 Month LIBOR 41 1 407,840.00 4.928543 5.333543 1 60 359 6 Month LIBOR 42 1 14,097,953.00 5.005619 5.471515 1 60 359 6 Month LIBOR 43 1 1,677,900.00 6.014112 6.568866 1 60 359 6 Month LIBOR 44 1 449,500.00 4.780512 5.185512 0 60 360 6 Month LIBOR 45 1 4,077,002.00 5.129644 5.560648 1 60 359 6 Month LIBOR 46 1 3,696,800.00 4.774037 5.179037 0 60 360 6 Month LIBOR 47 1 453,992.00 4.839634 5.244634 1 60 359 6 Month LIBOR 48 1 3,468,737.82 4.549140 5.494853 2 60 358 6 Month LIBOR 49 1 1,194,650.00 5.159881 5.730434 2 60 358 6 Month LIBOR 50 1 154,760.00 4.795000 5.200000 1 60 359 6 Month LIBOR 51 1 262,710.00 5.866121 6.742378 2 60 358 6 Month LIBOR 52 1 22,926,873.00 4.933699 5.426853 1 60 359 6 Month LIBOR 53 1 10,664,500.00 5.198549 5.603549 1 60 359 6 Month LIBOR 54 1 389,150.00 4.929126 5.639471 1 60 359 6 Month LIBOR 55 1 2,808,050.00 5.463032 6.204946 0 60 360 6 Month LIBOR 56 1 10,515,757.00 5.269668 5.802523 1 60 359 6 Month LIBOR 57 1 494,750.00 4.370455 4.775455 0 60 360 1 Year LIBOR 58 1 316,000.00 5.095000 5.500000 0 60 360 1 Year LIBOR 59 1 349,600.00 5.095000 5.500000 0 60 360 1 Year LIBOR 60 1 490,000.00 4.345000 4.750000 0 60 360 1 Year LIBOR 61 1 342,400.00 6.095000 6.500000 0 60 360 1 Year LIBOR 62 1 956,200.00 3.504616 3.909616 0 60 360 1 Month LIBOR 63 1 524,000.00 3.720000 4.125000 1 60 359 1 Month LIBOR 64 1 457,500.00 4.345000 4.750000 0 60 360 1 Month LIBOR 65 1 540,000.00 3.845000 4.250000 0 60 360 1 Month LIBOR 66 1 335,700.00 4.000094 4.779491 0 60 360 1 Month LIBOR 67 1 420,000.00 3.095000 3.500000 1 60 359 1 Month LIBOR 68 1 787,500.00 2.807302 3.212302 1 60 359 1 Month LIBOR 69 1 559,200.00 5.345000 5.750000 0 60 360 3 Month LIBOR 70 1 365,500.00 4.595000 5.000000 0 60 360 3 Month LIBOR 71 1 365,000.00 2.720000 3.125000 0 60 360 3 Month LIBOR 72 1 604,000.00 4.720000 5.125000 1 60 359 3 Month LIBOR 73 1 519,200.00 4.345000 4.750000 1 60 359 3 Month LIBOR 74 1 3,477,900.00 4.418295 4.823295 1 60 359 6 Month LIBOR 75 1 1,973,850.00 4.244546 4.649546 1 60 359 6 Month LIBOR 76 1 14,613,230.00 4.447856 5.036444 1 60 359 6 Month LIBOR 77 1 2,670,650.00 4.650124 5.254765 0 60 360 6 Month LIBOR 78 1 81,000.00 5.345000 5.750000 3 60 357 6 Month LIBOR S-82
424B583rd Page of 311TOC1stPreviousNextBottomJust 83rd
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 79 1 6,774,550.00 4.711847 5.116847 1 60 359 6 Month LIBOR 80 1 5,182,741.00 4.739413 5.306322 0 60 360 6 Month LIBOR 81 1 714,000.00 4.132990 4.537990 0 60 360 6 Month LIBOR 82 1 2,623,753.00 4.487805 4.993157 0 60 360 6 Month LIBOR 83 1 7,654,305.00 4.740357 5.195323 1 60 359 6 Month LIBOR 84 1 129,500.00 4.345000 4.750000 0 60 360 6 Month LIBOR 85 1 649,500.00 5.123521 6.178406 1 60 359 6 Month LIBOR 86 1 16,780,488.00 4.888493 5.437883 1 60 359 6 Month LIBOR 87 1 959,500.00 6.086589 7.183585 0 60 360 6 Month LIBOR 88 1 624,000.00 5.970000 6.375000 1 60 359 6 Month LIBOR 89 1 28,117,426.00 4.705164 5.212993 1 60 359 6 Month LIBOR 90 1 956,000.00 6.595000 7.000000 2 60 358 1 Year LIBOR 91 1 1,000,000.00 5.720000 6.125000 2 60 358 1 Year LIBOR 92 1 2,859,200.00 5.450904 5.855904 2 60 358 1 Year LIBOR 93 1 3,790,292.00 5.341966 5.746966 0 60 360 6 Month LIBOR 94 1 130,000.00 5.595000 6.000000 2 60 358 6 Month LIBOR 95 1 3,661,233.00 5.341226 5.746226 1 60 359 6 Month LIBOR 96 1 1,174,400.00 5.360295 5.765295 1 60 359 6 Month LIBOR 97 1 650,000.00 5.720000 6.125000 2 60 358 6 Month LIBOR 98 1 3,568,840.00 5.181306 5.586306 1 60 359 6 Month LIBOR 99 1 1,422,880.00 5.183528 5.588528 3 60 357 6 Month LIBOR 100 1 1,417,097.00 5.511096 5.916096 1 60 359 6 Month LIBOR 101 1 12,232,720.00 5.492591 5.897591 1 60 359 6 Month LIBOR 102 1 6,246,650.00 5.544356 5.962085 1 60 359 6 Month LIBOR 103 1 258,750.00 6.095000 6.500000 0 60 360 6 Month LIBOR 104 1 375,000.00 5.220000 5.625000 4 60 356 6 Month LIBOR 105 1 1,042,000.00 4.734036 5.139036 4 60 356 6 Month LIBOR 106 1 21,240,190.00 4.956227 5.409573 1 60 359 6 Month LIBOR 107 1 442,500.00 6.470000 6.875000 0 60 360 6 Month LIBOR 108 1 896,050.00 5.644236 6.616751 3 60 357 6 Month LIBOR 109 1 1,052,950.00 5.416554 5.821554 1 60 359 6 Month LIBOR 110 1 796,650.00 5.885992 6.290992 1 60 359 6 Month LIBOR 111 1 284,900.00 4.095000 4.500000 1 60 359 6 Month LIBOR 112 1 93,126,564.00 5.282685 5.939050 2 60 358 6 Month LIBOR 113 1 15,984,109.00 5.052331 5.512390 1 60 359 6 Month LIBOR 114 1 194,500.00 4.952134 5.357134 0 60 360 6 Month LIBOR 115 1 118,384.00 4.920000 5.325000 2 60 358 6 Month LIBOR 116 1 188,800.00 4.970000 5.375000 2 60 358 6 Month LIBOR 117 1 3,225,750.00 4.979986 5.384986 1 60 359 6 Month LIBOR 118 1 1,636,650.00 4.874332 5.279332 0 60 360 6 Month LIBOR 119 1 5,302,480.00 5.325737 5.740378 1 60 359 6 Month LIBOR 120 1 484,800.00 5.095000 5.500000 1 60 359 6 Month LIBOR 121 1 27,907,229.00 5.420378 5.922194 1 60 359 6 Month LIBOR 122 1 5,527,115.00 5.065209 5.543728 1 60 359 6 Month LIBOR 123 1 1,311,500.00 4.809068 5.214068 1 60 359 6 Month LIBOR S-83
424B584th Page of 311TOC1stPreviousNextBottomJust 84th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 124 1 277,500.00 5.913243 6.318243 2 60 358 6 Month LIBOR 125 1 2,126,450.00 5.033236 5.438236 1 60 359 6 Month LIBOR 126 1 911,650.00 5.214303 5.619303 1 60 359 6 Month LIBOR 127 1 732,000.00 4.970000 5.375000 1 60 359 6 Month LIBOR 128 1 6,347,175.00 5.168730 5.573730 1 60 359 6 Month LIBOR 129 1 4,373,424.00 5.462543 5.894715 1 60 359 6 Month LIBOR 130 1 1,315,750.00 4.586744 4.991744 2 60 358 6 Month LIBOR 131 1 9,826,400.00 5.060950 5.465950 1 60 359 6 Month LIBOR 132 1 376,000.00 5.095000 5.500000 1 60 359 1 Year LIBOR 133 1 2,282,242.00 4.300818 4.753490 1 60 359 1 Year LIBOR 134 1 100,000.00 3.595000 4.000000 1 60 359 1 Year LIBOR 135 1 75,000.00 4.220000 4.625000 1 60 359 1 Year LIBOR 136 1 400,000.00 5.470000 5.875000 0 60 360 1 Year LIBOR 137 1 234,800.00 5.345000 5.750000 1 60 359 1 Year LIBOR 138 1 452,000.00 4.720000 5.125000 0 60 360 1 Year LIBOR 139 1 754,800.00 5.895146 6.300146 1 60 359 1 Year LIBOR 140 1 264,000.00 4.220000 4.625000 2 60 358 1 Month LIBOR 141 1 356,000.00 5.970000 6.375000 1 60 359 1 Month LIBOR 142 1 388,500.00 3.095000 3.500000 0 60 360 1 Month LIBOR 143 1 1,615,449.00 4.921343 5.786015 1 60 359 1 Month LIBOR 144 1 1,456,000.00 4.660591 5.065591 1 60 359 1 Month LIBOR 145 1 399,000.00 4.345000 4.750000 0 60 360 3 Month LIBOR 146 1 427,100.00 6.642062 7.047062 1 60 359 3 Month LIBOR 147 1 861,300.00 4.478969 4.883969 1 60 359 3 Month LIBOR 148 1 735,600.00 4.509579 4.914579 2 60 358 6 Month LIBOR 149 1 10,383,265.00 4.888964 5.527761 1 60 359 6 Month LIBOR 150 1 70,200.00 7.105000 8.750000 0 60 360 6 Month LIBOR 151 1 229,500.00 3.470000 3.875000 1 60 359 6 Month LIBOR 152 1 5,151,170.00 4.590560 5.043573 1 60 359 6 Month LIBOR 153 1 1,705,502.00 5.143815 5.548815 1 60 359 6 Month LIBOR 154 1 72,000.00 5.095000 5.500000 1 60 359 6 Month LIBOR 155 1 3,444,800.00 4.813177 5.236400 2 60 358 6 Month LIBOR 156 1 1,662,150.00 4.498226 4.940533 1 60 359 6 Month LIBOR 157 1 1,248,600.00 5.856403 6.261403 1 60 359 6 Month LIBOR 158 1 10,817,657.00 4.958884 5.395359 1 60 359 6 Month LIBOR 159 1 2,972,400.00 5.160019 5.565019 1 60 359 6 Month LIBOR 160 1 1,312,800.00 3.526939 3.931939 1 60 359 6 Month LIBOR 161 1 13,230,515.00 5.012147 5.471591 1 60 359 6 Month LIBOR 162 1 3,091,000.00 5.313052 5.718052 1 60 359 6 Month LIBOR 163 1 297,500.00 4.970000 5.375000 1 60 359 6 Month LIBOR 164 1 167,650.00 5.220000 5.625000 2 60 358 6 Month LIBOR 165 1 292,400.00 6.076703 6.481703 2 60 358 6 Month LIBOR 166 1 1,691,600.00 5.312161 5.717161 1 60 359 6 Month LIBOR 167 1 580,965.00 5.345000 5.750000 1 60 359 6 Month LIBOR 168 1 3,624,200.00 5.400243 5.805243 1 60 359 6 Month LIBOR S-84
424B585th Page of 311TOC1stPreviousNextBottomJust 85th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 169 1 968,400.00 6.374474 7.076370 2 60 358 6 Month LIBOR 170 1 152,000.00 5.470000 5.875000 2 60 358 6 Month LIBOR 171 1 1,346,000.00 5.826575 6.231575 0 60 360 6 Month LIBOR 172 1 6,124,070.00 5.349385 5.754385 1 60 359 6 Month LIBOR 173 1 6,312,456.00 5.194771 5.599771 2 60 358 6 Month LIBOR 174 1 1,003,000.00 5.063470 5.468470 1 60 359 6 Month LIBOR 175 1 4,000,000.00 4.595000 5.000000 3 120 357 6 Month LIBOR 176 1 900,000.00 5.345000 5.750000 2 120 358 6 Month LIBOR 177 1 1,716,250.00 4.919251 6.274369 2 120 358 6 Month LIBOR 178 1 819,500.00 4.659140 5.064140 1 120 359 6 Month LIBOR 179 1 4,065,412.82 4.233150 6.211327 2 120 358 6 Month LIBOR 180 1 3,435,400.00 5.139510 5.544510 1 120 359 6 Month LIBOR 181 1 572,405.47 3.805983 5.720252 2 120 358 6 Month LIBOR 182 1 157,500.00 4.845000 5.250000 1 120 359 6 Month LIBOR 183 1 1,851,016.00 5.295821 6.989614 2 120 358 6 Month LIBOR 184 1 612,000.00 3.470000 3.875000 4 120 356 1 Year LIBOR 185 1 336,000.00 5.585000 5.990000 0 120 360 6 Month LIBOR 186 1 822,000.00 5.147311 5.552311 0 120 360 6 Month LIBOR 187 1 3,287,800.00 4.854588 5.259588 1 120 359 6 Month LIBOR 188 1 1,512,950.00 4.224548 4.629548 1 120 359 1 Month LIBOR 189 1 448,000.00 3.585000 3.990000 1 120 359 1 Month LIBOR 190 1 1,156,550.00 3.751876 4.156876 1 120 359 1 Month LIBOR 191 1 490,000.00 4.095000 4.500000 1 120 359 1 Month LIBOR 192 1 88,350.00 4.095000 4.500000 1 120 359 6 Month LIBOR 193 1 3,501,900.00 4.376869 4.781869 1 120 359 6 Month LIBOR 194 1 652,000.00 5.017546 5.422546 1 120 359 6 Month LIBOR 195 1 1,108,000.00 5.537708 5.942708 1 120 359 6 Month LIBOR 196 1 1,520,200.00 4.451212 4.856212 1 120 359 6 Month LIBOR 197 1 1,004,000.00 4.246355 4.651355 1 120 359 6 Month LIBOR 198 1 2,574,200.00 4.330607 4.735607 0 120 360 6 Month LIBOR 199 1 102,000.00 6.585000 6.990000 1 120 359 6 Month LIBOR 200 1 91,000.00 6.095000 6.500000 0 120 360 6 Month LIBOR 201 1 3,636,250.00 6.296460 6.724832 1 120 359 6 Month LIBOR 202 1 1,000,000.00 5.585000 5.990000 1 120 359 6 Month LIBOR 203 1 1,500,000.00 6.345000 6.750000 1 120 359 6 Month LIBOR 204 1 770,000.00 5.845000 6.250000 1 120 359 6 Month LIBOR 205 1 3,160,621.44 5.678893 6.083893 21 120 339 6 Month LIBOR 206 1 500,000.00 4.345000 4.750000 12 120 348 6 Month LIBOR 207 1 584,800.00 4.773523 5.178523 1 120 359 6 Month LIBOR 208 1 640,800.00 5.913352 6.318352 2 120 358 6 Month LIBOR 209 1 257,114.00 6.095000 6.500000 2 120 358 6 Month LIBOR 210 1 2,025,765.00 5.114567 5.519567 2 120 358 6 Month LIBOR 211 1 1,766,746.00 4.830983 5.235983 3 120 357 6 Month LIBOR 212 1 554,800.00 5.694766 6.099766 1 120 359 6 Month LIBOR 213 1 571,550.00 4.884421 5.289421 1 120 359 6 Month LIBOR S-85
424B586th Page of 311TOC1stPreviousNextBottomJust 86th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 214 1 195,000.00 4.595000 5.000000 2 120 358 6 Month LIBOR 215 1 1,233,913.00 5.440101 5.845101 2 120 358 6 Month LIBOR 216 1 728,840.00 4.703878 5.108878 2 120 358 6 Month LIBOR 217 1 234,400.00 7.095000 7.500000 3 120 357 6 Month LIBOR 218 1 6,816,000.00 4.591295 4.996295 1 120 359 6 Month LIBOR 219 1 431,200.00 3.845000 4.250000 2 120 358 6 Month LIBOR 220 1 518,000.00 2.845000 3.250000 3 120 357 6 Month LIBOR 221 1 3,078,550.00 4.141660 4.546660 1 120 359 6 Month LIBOR 222 1 700,000.00 6.095000 6.500000 1 120 359 1 Year LIBOR 223 1 350,000.00 7.095000 7.500000 3 120 357 1 Year LIBOR 224 1 330,000.00 5.345000 5.750000 2 120 358 6 Month LIBOR 225 1 166,240.00 6.095000 6.500000 3 120 357 6 Month LIBOR 226 1 676,250.00 4.819353 5.224353 2 120 358 6 Month LIBOR 227 1 342,700.00 4.993818 5.398818 2 120 358 6 Month LIBOR 228 1 2,645,141.00 5.313952 5.718952 3 120 357 6 Month LIBOR 229 1 240,000.00 4.595000 5.000000 5 120 355 6 Month LIBOR 230 1 2,583,715.00 4.853482 5.258482 2 120 358 6 Month LIBOR 231 1 111,885.81 5.470000 5.875000 1 N/A 359 6 Month LIBOR 232 1 445,237.01 4.419657 6.120350 2 N/A 358 6 Month LIBOR 233 1 1,282,363.06 5.303005 5.708005 1 N/A 359 6 Month LIBOR 234 1 5,119,972.38 5.217424 5.715458 1 N/A 359 6 Month LIBOR 235 1 812,315.03 5.066193 5.471193 1 N/A 359 6 Month LIBOR 236 1 1,037,326.48 5.914272 6.574312 2 N/A 358 6 Month LIBOR 237 1 191,751.07 6.017010 7.277295 1 N/A 359 6 Month LIBOR 238 1 600,855.46 6.008013 6.413013 1 N/A 359 6 Month LIBOR 239 1 190,642.05 6.545000 6.950000 1 N/A 359 6 Month LIBOR 240 1 629,657.59 6.026287 6.873478 0 N/A 360 6 Month LIBOR 241 1 166,000.00 5.845000 6.250000 0 N/A 360 6 Month LIBOR 242 1 115,878.89 5.345000 5.750000 1 N/A 359 6 Month LIBOR 243 1 25,259,009.20 5.489963 6.317292 1 N/A 359 6 Month LIBOR 244 1 7,989,988.80 5.609596 6.118053 1 N/A 359 6 Month LIBOR 245 1 166,330.25 5.470000 5.875000 1 N/A 359 6 Month LIBOR 246 1 96,750.00 6.970000 7.375000 0 N/A 360 6 Month LIBOR 247 1 128,000.00 7.220000 7.625000 0 N/A 360 6 Month LIBOR 248 1 1,496,969.46 6.014917 6.806574 1 N/A 359 6 Month LIBOR 249 1 1,019,043.04 5.030342 5.640747 1 N/A 359 6 Month LIBOR 250 1 99,419.43 6.095000 6.500000 2 N/A 358 6 Month LIBOR 251 1 368,502.76 6.301075 6.706075 0 N/A 360 6 Month LIBOR 252 1 6,229,519.85 6.808354 7.251203 1 N/A 359 6 Month LIBOR 253 1 66,390.44 4.995000 6.990000 2 N/A 358 6 Month LIBOR 254 1 26,892,527.98 5.818283 6.504788 1 N/A 359 6 Month LIBOR 255 1 382,544.84 4.345000 4.750000 3 N/A 357 1 Year LIBOR 256 1 22,725,873.01 3.965693 4.370693 4 N/A 356 1 Year LIBOR 257 1 274,690.40 4.945000 5.350000 1 N/A 359 6 Month LIBOR 258 1 130,113.91 5.095000 5.500000 2 N/A 358 6 Month LIBOR S-86
424B587th Page of 311TOC1stPreviousNextBottomJust 87th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 259 1 2,182,423.82 4.986350 5.499016 1 N/A 359 6 Month LIBOR 260 1 437,279.70 4.548560 5.227705 1 N/A 359 6 Month LIBOR 261 1 1,832,796.20 4.702060 5.173224 1 N/A 359 6 Month LIBOR 262 1 236,056.34 6.595000 7.000000 1 N/A 359 6 Month LIBOR 263 1 107,200.00 5.585000 5.990000 0 N/A 360 6 Month LIBOR 264 1 100,694.76 5.345000 5.750000 1 N/A 359 6 Month LIBOR 265 1 106,177.30 5.345000 5.750000 2 N/A 358 6 Month LIBOR 266 1 77,276.60 5.845000 6.250000 1 N/A 359 6 Month LIBOR 267 1 2,256,832.52 5.039330 5.444330 0 N/A 360 6 Month LIBOR 268 1 73,710.00 6.845000 7.250000 0 N/A 360 6 Month LIBOR 269 1 3,773,591.84 5.189848 5.726528 1 N/A 359 6 Month LIBOR 270 1 1,938,013.98 5.196911 5.784683 1 N/A 359 6 Month LIBOR 271 1 1,086,833.80 4.883513 5.615717 1 N/A 359 6 Month LIBOR 272 1 404,177.80 5.586430 5.991430 2 N/A 358 6 Month LIBOR 273 1 740,678.17 6.874691 7.279691 0 N/A 360 6 Month LIBOR 274 1 387,313.44 5.246873 5.651873 1 N/A 359 6 Month LIBOR 275 1 14,090,396.97 5.459086 5.963957 1 N/A 359 6 Month LIBOR 276 1 1,636,918.99 5.058467 5.463467 1 N/A 359 6 Month LIBOR 277 1 2,072,456.65 5.909708 6.314708 1 N/A 359 6 Month LIBOR 278 1 10,773,360.57 5.438063 5.929382 2 N/A 358 6 Month LIBOR 279 1 471,500.50 5.803011 6.537224 0 N/A 360 1 Year LIBOR 280 1 189,000.00 2.845000 3.250000 0 N/A 360 1 Month LIBOR 281 1 391,500.00 4.095000 4.500000 0 N/A 360 1 Month LIBOR 282 1 103,500.00 6.875000 8.500000 0 N/A 360 1 Month LIBOR 283 1 1,196,923.70 3.653975 4.111863 1 N/A 359 1 Month LIBOR 284 1 545,873.96 4.980163 5.385163 1 N/A 359 6 Month LIBOR 285 1 118,750.00 6.595000 7.000000 0 N/A 360 6 Month LIBOR 286 1 783,788.89 3.663105 4.068105 2 N/A 358 6 Month LIBOR 287 1 2,690,928.30 4.671004 5.170365 0 N/A 360 6 Month LIBOR 288 1 1,371,695.01 5.821263 6.580661 1 N/A 359 6 Month LIBOR 289 1 382,500.00 5.470000 5.875000 0 N/A 360 6 Month LIBOR 290 1 859,404.66 5.150196 6.430865 1 N/A 359 6 Month LIBOR 291 1 324,000.00 4.720000 5.125000 0 N/A 360 6 Month LIBOR 292 1 601,616.87 4.516688 4.921688 1 N/A 359 6 Month LIBOR 293 1 539,429.05 6.527449 7.673232 1 N/A 359 6 Month LIBOR 294 1 3,838,480.32 5.551201 6.050422 1 N/A 359 6 Month LIBOR 295 1 9,436,035.64 4.719578 5.277499 2 N/A 358 6 Month LIBOR 296 1 583,796.74 6.293139 6.698139 1 N/A 359 6 Month LIBOR 297 1 419,989.72 5.470000 5.875000 2 N/A 358 6 Month LIBOR 298 1 832,621.47 5.552094 6.579014 1 N/A 359 6 Month LIBOR 299 1 217,500.00 5.720000 6.125000 0 N/A 360 6 Month LIBOR 300 1 850,633.70 5.037901 5.524540 1 N/A 359 6 Month LIBOR 301 1 789,792.95 5.878129 6.283129 0 N/A 360 6 Month LIBOR 302 1 110,720.00 5.470000 5.875000 0 N/A 360 6 Month LIBOR 303 1 1,246,029.76 6.100957 6.505957 1 N/A 359 6 Month LIBOR S-87
424B588th Page of 311TOC1stPreviousNextBottomJust 88th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 304 1 2,726,074.39 5.407725 5.812725 1 N/A 359 6 Month LIBOR 305 1 2,740,371.72 5.387600 5.792600 2 N/A 358 6 Month LIBOR 306 1 140,000.00 5.470000 5.875000 0 N/A 360 6 Month LIBOR 307 1 447,574.92 5.845000 6.250000 1 N/A 359 6 Month LIBOR 308 1 316,745.66 4.970000 5.375000 10 N/A 350 6 Month LIBOR 309 1 945,218.82 4.247942 4.652942 4 N/A 356 6 Month LIBOR 310 1 189,669.38 7.470000 7.875000 1 N/A 359 6 Month LIBOR 311 1 7,701,381.90 4.475893 4.916197 4 N/A 356 6 Month LIBOR 312 1 307,000.00 8.095000 8.500000 0 N/A 360 6 Month LIBOR 313 1 7,131,879.62 4.843399 5.310619 3 N/A 357 6 Month LIBOR 314 1 239,448.22 4.845000 5.250000 2 N/A 358 6 Month LIBOR 315 1 4,422,352.98 5.054308 5.482975 3 N/A 357 6 Month LIBOR 316 1 7,862,821.30 4.869547 5.274547 4 N/A 356 6 Month LIBOR 317 1 465,114.94 6.470000 6.875000 2 N/A 358 6 Month LIBOR 318 1 3,551,361.09 4.792182 5.197182 3 N/A 357 6 Month LIBOR 319 1 5,775,031.82 4.415492 4.820492 4 N/A 356 6 Month LIBOR 320 1 577,453.13 7.644252 8.719488 0 N/A 360 6 Month LIBOR 321 1 2,449,098.86 5.144083 5.549083 3 N/A 357 6 Month LIBOR 322 1 107,004,738.60 4.735084 5.172913 3 N/A 357 6 Month LIBOR 323 1 10,545,768.54 6.033974 6.530301 2 N/A 358 6 Month LIBOR 324 1 159,131.33 4.830817 5.235817 2 N/A 358 6 Month LIBOR 325 1 154,576.29 6.010000 7.125000 1 N/A 359 6 Month LIBOR 326 1 1,313,810.35 6.161584 6.566584 1 N/A 359 6 Month LIBOR 327 1 409,815.40 4.736000 5.141000 2 N/A 358 6 Month LIBOR 328 1 856,494.87 6.358226 7.324828 1 N/A 359 6 Month LIBOR 329 1 1,514,112.68 6.625585 7.257650 1 N/A 359 6 Month LIBOR 330 1 1,202,476.94 5.191326 5.596326 4 N/A 356 6 Month LIBOR 331 1 159,390,010.30 4.935227 5.354734 4 N/A 356 6 Month LIBOR 332 1 335,694.53 5.285645 5.690645 3 N/A 357 6 Month LIBOR 333 1 183,289.38 5.795000 6.200000 4 N/A 356 6 Month LIBOR 334 1 2,544,096.14 5.223929 5.670887 2 N/A 358 6 Month LIBOR 335 1 4,121,307.62 4.489508 4.894508 4 N/A 356 6 Month LIBOR 336 1 7,165,762.24 4.807269 5.271190 3 N/A 357 6 Month LIBOR 337 1 918,618.68 4.446268 4.851268 4 N/A 356 6 Month LIBOR 338 1 2,525,191.47 4.481612 4.886612 4 N/A 356 6 Month LIBOR 339 1 631,486.81 5.095000 5.500000 4 N/A 356 6 Month LIBOR 340 1 1,235,623.41 4.111115 4.516115 4 N/A 356 6 Month LIBOR 341 1 24,919,044.79 4.329895 4.734895 4 N/A 356 6 Month LIBOR 342 1 230,978.86 6.183749 6.588749 3 N/A 357 6 Month LIBOR 343 1 4,733,851.96 4.633816 5.098566 3 N/A 357 6 Month LIBOR 344 1 223,342.26 7.345000 7.750000 1 N/A 359 6 Month LIBOR 345 1 5,063,921.45 5.129367 5.574051 3 N/A 357 6 Month LIBOR 346 1 2,685,762.77 4.785713 5.190713 3 N/A 357 6 Month LIBOR 347 1 6,776,085.42 4.013745 4.418745 4 N/A 356 6 Month LIBOR 348 1 647,100.79 4.785238 5.275506 3 N/A 357 6 Month LIBOR S-88
424B589th Page of 311TOC1stPreviousNextBottomJust 89th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 349 1 68,866,965.59 4.780767 5.221954 3 N/A 357 6 Month LIBOR 350 1 1,290,160.42 5.956624 6.361624 1 N/A 359 6 Month LIBOR 351 1 159,672.94 5.470000 5.875000 2 N/A 358 6 Month LIBOR 352 1 1,188,659.40 4.877669 5.282669 3 N/A 357 6 Month LIBOR 353 1 61,491,208.58 4.923034 5.333481 4 N/A 356 6 Month LIBOR 354 1 551,283.90 7.220393 7.625393 1 N/A 359 1 Year LIBOR 355 1 530,326.61 5.091330 5.905968 1 N/A 359 1 Year LIBOR 356 1 714,246.10 4.896605 6.377076 0 N/A 360 1 Month LIBOR 357 1 1,097,161.39 5.712469 6.478832 2 N/A 358 6 Month LIBOR 358 1 107,445.09 4.670000 5.875000 4 N/A 356 6 Month LIBOR 359 1 526,063.45 5.564267 5.969267 2 N/A 358 6 Month LIBOR 360 1 98,129.19 4.470000 4.875000 1 N/A 359 6 Month LIBOR 361 1 527,904.13 5.811423 6.382489 1 N/A 359 6 Month LIBOR 362 1 136,620.00 4.720000 5.125000 0 N/A 360 6 Month LIBOR 363 1 2,237,444.44 6.342275 7.032086 2 N/A 358 6 Month LIBOR 364 1 3,840,002.57 5.697250 6.325202 1 N/A 359 6 Month LIBOR 365 1 1,307,282.66 6.037624 6.488113 1 N/A 359 1 Year LIBOR 366 1 1,048,873.15 5.202150 5.607150 1 N/A 359 6 Month LIBOR 367 1 505,332.95 5.677784 6.082784 1 N/A 359 6 Month LIBOR 368 1 1,866,793.30 5.594983 5.999983 1 N/A 359 6 Month LIBOR 369 1 680,153.25 5.660801 6.065801 1 N/A 359 6 Month LIBOR 370 1 136,794.39 4.720000 5.125000 3 N/A 357 6 Month LIBOR 371 1 365,515.33 6.309316 6.714316 2 N/A 358 6 Month LIBOR 372 1 2,193,555.06 5.974420 6.379420 1 N/A 359 6 Month LIBOR 373 1 115,757.20 5.345000 5.750000 2 N/A 358 6 Month LIBOR 374 1 3,982,991.01 5.316505 5.721505 2 N/A 358 6 Month LIBOR 375 1 206,931.10 5.220000 5.625000 3 N/A 357 6 Month LIBOR 376 2 288,000.00 5.845000 6.250000 4 6 356 6 Month LIBOR 377 2 895,249.99 4.779365 6.485482 2 24 358 6 Month LIBOR 378 2 205,600.00 6.470000 6.875000 2 24 358 6 Month LIBOR 379 2 1,706,900.00 5.523357 5.928357 2 24 358 6 Month LIBOR 380 2 1,666,240.00 6.445947 6.850947 2 24 358 6 Month LIBOR 381 2 320,000.00 5.470000 5.875000 2 24 358 6 Month LIBOR 382 2 476,000.00 4.095000 4.500000 7 36 353 1 Year LIBOR 383 2 614,500.00 5.779093 6.184093 2 36 358 6 Month LIBOR 384 2 238,000.00 6.170000 6.575000 2 36 358 1 Year LIBOR 385 2 451,200.00 4.702801 5.107801 2 36 358 1 Year LIBOR 386 2 717,000.00 5.155418 5.560418 2 36 358 6 Month LIBOR 387 2 126,900.00 4.465000 6.000000 2 36 358 6 Month LIBOR 388 2 416,000.00 4.984423 5.389423 0 60 360 6 Month LIBOR 389 2 196,000.00 6.095000 6.500000 0 60 360 6 Month LIBOR 390 2 352,650.00 7.010355 7.415355 0 60 360 6 Month LIBOR 391 2 11,970,872.00 4.735234 5.183300 1 60 359 6 Month LIBOR 392 2 247,200.00 5.345000 5.750000 0 60 360 6 Month LIBOR 393 2 200,000.00 6.345000 6.750000 2 60 358 6 Month LIBOR S-89
424B590th Page of 311TOC1stPreviousNextBottomJust 90th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 394 2 219,600.00 7.200000 8.375000 1 60 359 6 Month LIBOR 395 2 524,642.00 5.146402 6.068225 1 60 359 6 Month LIBOR 396 2 131,000.00 4.470000 4.875000 1 60 359 6 Month LIBOR 397 2 220,000.00 5.595000 6.000000 1 60 359 6 Month LIBOR 398 2 242,000.00 7.220000 7.625000 1 60 359 6 Month LIBOR 399 2 41,011,599.00 5.194035 5.735172 1 60 359 6 Month LIBOR 400 2 13,846,830.00 5.153684 5.618741 0 60 360 6 Month LIBOR 401 2 266,000.00 5.535000 6.750000 1 60 359 6 Month LIBOR 402 2 521,700.00 4.731101 5.503427 1 60 359 6 Month LIBOR 403 2 1,479,300.00 5.666167 6.225656 1 60 359 6 Month LIBOR 404 2 698,800.00 5.079402 5.484402 0 60 360 6 Month LIBOR 405 2 14,946,502.00 5.219071 5.782076 1 60 359 6 Month LIBOR 406 2 320,000.00 4.470000 4.875000 2 60 358 1 Year LIBOR 407 2 641,100.00 5.304387 6.205545 2 60 358 6 Month LIBOR 408 2 582,400.00 4.688613 5.093613 2 60 358 6 Month LIBOR 409 2 188,000.00 4.995000 5.400000 1 60 359 6 Month LIBOR 410 2 4,494,959.00 4.875463 5.310961 1 60 359 6 Month LIBOR 411 2 310,000.00 5.345000 5.750000 1 60 359 6 Month LIBOR 412 2 248,000.00 5.344194 5.749194 1 60 359 6 Month LIBOR 413 2 142,373.00 4.245000 4.650000 1 60 359 6 Month LIBOR 414 2 4,010,050.00 4.724652 5.172757 1 60 359 6 Month LIBOR 415 2 877,300.00 4.497114 4.902114 0 60 360 6 Month LIBOR 416 2 136,000.00 5.145000 5.550000 1 60 359 6 Month LIBOR 417 2 959,700.00 4.202951 4.856466 1 60 359 6 Month LIBOR 418 2 136,570.00 4.845000 5.250000 1 60 359 6 Month LIBOR 419 2 279,000.00 4.695000 6.100000 2 60 358 6 Month LIBOR 420 2 184,500.00 6.285000 7.750000 2 60 358 6 Month LIBOR 421 2 10,955,668.00 4.630232 5.119344 1 60 359 6 Month LIBOR 422 2 4,545,102.00 5.054821 5.477917 0 60 360 6 Month LIBOR 423 2 5,549,966.97 5.335933 5.829182 1 60 359 6 Month LIBOR 424 2 287,000.00 3.970000 4.375000 0 60 360 1 Year LIBOR 425 2 312,300.00 3.595000 4.000000 0 60 360 1 Month LIBOR 426 2 205,000.00 3.345000 3.750000 1 60 359 1 Month LIBOR 427 2 639,900.00 4.993343 5.398343 1 60 359 1 Month LIBOR 428 2 258,500.00 4.470000 4.875000 0 60 360 3 Month LIBOR 429 2 156,900.00 4.970000 5.375000 0 60 360 3 Month LIBOR 430 2 194,400.00 5.480000 6.875000 0 60 360 3 Month LIBOR 431 2 2,203,600.00 4.613779 5.018779 1 60 359 6 Month LIBOR 432 2 688,000.00 4.108953 4.513953 1 60 359 6 Month LIBOR 433 2 8,140,331.50 4.586189 5.295125 1 60 359 6 Month LIBOR 434 2 788,200.00 5.371680 6.704358 1 60 359 6 Month LIBOR 435 2 248,000.00 4.970000 5.375000 0 60 360 6 Month LIBOR 436 2 1,632,100.00 4.482660 4.887660 0 60 360 6 Month LIBOR 437 2 2,977,593.00 4.855235 5.626997 1 60 359 6 Month LIBOR 438 2 196,000.00 4.095000 4.500000 0 60 360 6 Month LIBOR S-90
424B591st Page of 311TOC1stPreviousNextBottomJust 91st
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 439 2 1,979,100.00 4.288271 4.783168 0 60 360 6 Month LIBOR 440 2 2,001,700.00 5.319110 6.042714 1 60 359 6 Month LIBOR 441 2 915,500.00 5.498273 6.143419 0 60 360 6 Month LIBOR 442 2 12,752,045.00 4.796501 5.362029 1 60 359 6 Month LIBOR 443 2 681,800.00 5.345000 5.750000 1 60 359 6 Month LIBOR 444 2 1,273,200.00 5.289206 5.694206 1 60 359 6 Month LIBOR 445 2 598,000.00 5.316237 5.721237 1 60 359 6 Month LIBOR 446 2 144,000.00 5.095000 5.500000 1 60 359 6 Month LIBOR 447 2 1,257,215.00 5.619718 6.024718 1 60 359 6 Month LIBOR 448 2 583,750.00 5.649872 6.054872 0 60 360 6 Month LIBOR 449 2 1,534,600.00 5.609971 6.014971 0 60 360 6 Month LIBOR 450 2 275,000.00 4.345000 4.750000 2 60 358 6 Month LIBOR 451 2 496,600.00 5.811935 6.216935 1 60 359 6 Month LIBOR 452 2 261,250.00 4.535000 6.630000 3 60 357 6 Month LIBOR 453 2 569,750.00 5.004267 5.750000 1 60 359 6 Month LIBOR 454 2 9,183,495.00 4.916279 5.385161 1 60 359 6 Month LIBOR 455 2 240,500.00 4.845000 5.250000 1 60 359 6 Month LIBOR 456 2 285,000.00 3.995000 5.940000 2 60 358 6 Month LIBOR 457 2 318,040.00 6.110000 6.515000 2 60 358 6 Month LIBOR 458 2 144,900.00 6.970000 7.375000 2 60 358 6 Month LIBOR 459 2 307,700.00 4.850444 5.255444 1 60 359 6 Month LIBOR 460 2 37,665,970.00 5.462113 5.931865 2 60 358 6 Month LIBOR 461 2 9,160,792.00 5.179673 5.716417 1 60 359 6 Month LIBOR 462 2 252,000.00 5.295000 5.700000 2 60 358 6 Month LIBOR 463 2 1,147,930.00 5.412862 5.817862 1 60 359 6 Month LIBOR 464 2 532,000.00 4.916429 5.321429 1 60 359 6 Month LIBOR 465 2 418,000.00 5.630885 6.035885 1 60 359 6 Month LIBOR 466 2 11,266,765.00 5.386736 5.815417 1 60 359 6 Month LIBOR 467 2 3,386,690.00 4.983262 5.388262 1 60 359 6 Month LIBOR 468 2 1,263,400.00 4.847276 5.252276 1 60 359 6 Month LIBOR 469 2 200,000.00 4.720000 5.125000 0 60 360 6 Month LIBOR 470 2 230,400.00 5.720000 6.125000 1 60 359 6 Month LIBOR 471 2 3,599,191.00 5.550960 6.026264 1 60 359 6 Month LIBOR 472 2 3,345,250.00 5.384159 5.840660 1 60 359 6 Month LIBOR 473 2 2,637,350.00 5.073691 5.478691 1 60 359 6 Month LIBOR 474 2 146,500.00 5.585000 5.990000 0 60 360 1 Year LIBOR 475 2 243,616.00 5.595000 6.000000 1 60 359 1 Year LIBOR 476 2 160,200.00 6.095000 6.500000 1 60 359 1 Year LIBOR 477 2 302,100.00 4.470000 4.875000 1 60 359 1 Year LIBOR 478 2 125,900.00 4.945000 7.000000 0 60 360 1 Month LIBOR 479 2 223,000.00 4.470000 4.875000 1 60 359 1 Month LIBOR 480 2 333,148.00 3.595000 4.000000 1 60 359 3 Month LIBOR 481 2 420,400.00 4.905823 5.310823 1 60 359 6 Month LIBOR 482 2 642,000.00 4.577866 4.982866 1 60 359 6 Month LIBOR 483 2 2,612,580.00 4.377139 4.808286 1 60 359 6 Month LIBOR S-91
424B592nd Page of 311TOC1stPreviousNextBottomJust 92nd
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 484 2 206,500.00 4.720000 5.125000 0 60 360 6 Month LIBOR 485 2 1,363,760.00 5.172010 5.815388 1 60 359 6 Month LIBOR 486 2 1,568,891.00 4.571221 5.073021 2 60 358 6 Month LIBOR 487 2 1,389,600.00 4.163836 4.643944 1 60 359 6 Month LIBOR 488 2 1,377,200.00 4.952283 5.357283 1 60 359 6 Month LIBOR 489 2 216,000.00 5.595000 6.000000 1 60 359 6 Month LIBOR 490 2 269,600.00 5.845000 6.250000 2 60 358 6 Month LIBOR 491 2 651,000.00 3.869194 4.274194 1 60 359 6 Month LIBOR 492 2 5,386,472.00 5.203236 5.726195 1 60 359 6 Month LIBOR 493 2 1,704,430.00 5.402241 5.807241 1 60 359 6 Month LIBOR 494 2 329,275.00 5.511939 5.916939 1 60 359 6 Month LIBOR 495 2 191,900.00 5.345000 5.750000 1 60 359 6 Month LIBOR 496 2 1,745,115.00 5.386048 5.791048 1 60 359 6 Month LIBOR 497 2 235,000.00 5.720000 6.125000 1 60 359 6 Month LIBOR 498 2 2,433,850.00 5.501203 5.906203 2 60 358 6 Month LIBOR 499 2 329,000.00 4.887553 5.292553 1 60 359 6 Month LIBOR 500 2 2,778,600.00 5.634372 6.039372 1 60 359 6 Month LIBOR 501 2 215,650.00 4.305000 6.400000 1 120 359 6 Month LIBOR 502 2 178,400.00 6.095000 6.500000 1 120 359 6 Month LIBOR 503 2 129,600.00 4.095000 5.990000 2 120 358 6 Month LIBOR 504 2 2,218,077.93 5.168268 6.991579 2 120 358 6 Month LIBOR 505 2 488,000.00 5.166721 5.571721 1 120 359 6 Month LIBOR 506 2 185,500.00 6.095000 6.500000 0 120 360 6 Month LIBOR 507 2 315,200.00 5.405216 7.115397 2 120 358 6 Month LIBOR 508 2 1,056,000.00 4.578428 4.983428 0 120 360 6 Month LIBOR 509 2 235,200.00 4.095000 4.500000 1 120 359 1 Month LIBOR 510 2 318,500.00 4.585000 4.990000 1 120 359 1 Month LIBOR 511 2 308,000.00 4.970000 5.375000 1 120 359 6 Month LIBOR 512 2 224,000.00 4.470000 4.875000 1 120 359 6 Month LIBOR 513 2 283,450.00 5.585000 5.990000 0 120 360 6 Month LIBOR 514 2 280,000.00 6.845000 7.250000 2 120 358 6 Month LIBOR 515 2 516,300.00 4.220000 4.625000 2 120 358 6 Month LIBOR 516 2 719,520.00 5.341206 5.746206 2 120 358 6 Month LIBOR 517 2 2,023,952.00 4.947739 5.352739 2 120 358 6 Month LIBOR 518 2 269,000.00 5.345000 5.750000 2 120 358 6 Month LIBOR 519 2 145,600.00 5.220000 5.625000 1 120 359 6 Month LIBOR 520 2 126,072.00 5.095000 5.500000 3 120 357 6 Month LIBOR 521 2 436,000.00 5.091560 5.496560 3 120 357 6 Month LIBOR 522 2 983,400.00 4.206501 4.611501 2 120 358 6 Month LIBOR 523 2 610,500.00 5.851081 6.993550 2 120 358 1 Year LIBOR 524 2 260,000.00 5.345000 5.750000 2 120 358 6 Month LIBOR 525 2 352,000.00 5.970000 6.375000 3 120 357 6 Month LIBOR 526 2 230,000.00 4.720000 5.125000 3 120 357 6 Month LIBOR 527 2 467,400.00 5.283650 5.688650 3 120 357 6 Month LIBOR 528 2 244,759.58 5.240000 6.075000 1 N/A 359 6 Month LIBOR S-92
424B593rd Page of 311TOC1stPreviousNextBottomJust 93rd
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 529 2 1,123,873.18 5.574182 5.979182 1 N/A 359 6 Month LIBOR 530 2 264,000.00 6.970000 7.375000 0 N/A 360 6 Month LIBOR 531 2 2,933,890.62 5.315918 5.887518 1 N/A 359 6 Month LIBOR 532 2 649,072.03 5.741891 6.391053 1 N/A 359 6 Month LIBOR 533 2 430,490.01 6.000077 6.405077 1 N/A 359 6 Month LIBOR 534 2 388,587.67 5.859183 6.858951 1 N/A 359 6 Month LIBOR 535 2 277,850.00 7.970000 8.375000 0 N/A 360 6 Month LIBOR 536 2 529,968.29 6.211674 6.616674 1 N/A 359 6 Month LIBOR 537 2 235,600.00 4.970000 5.375000 0 N/A 360 6 Month LIBOR 538 2 598,134.37 6.455996 7.750920 1 N/A 359 6 Month LIBOR 539 2 14,728,004.01 5.559718 6.271060 1 N/A 359 6 Month LIBOR 540 2 7,610,048.44 5.591006 6.200306 1 N/A 359 6 Month LIBOR 541 2 502,187.61 5.628045 6.513518 1 N/A 359 6 Month LIBOR 542 2 237,500.00 7.470000 7.875000 0 N/A 360 6 Month LIBOR 543 2 281,280.40 6.845000 7.250000 1 N/A 359 6 Month LIBOR 544 2 756,853.64 4.608036 5.013036 0 N/A 360 6 Month LIBOR 545 2 739,721.30 6.324628 6.729628 0 N/A 360 6 Month LIBOR 546 2 171,881.63 7.470000 7.875000 1 N/A 359 6 Month LIBOR 547 2 14,158,942.82 5.547863 6.306962 1 N/A 359 6 Month LIBOR 548 2 259,720.72 5.195000 5.600000 1 N/A 359 6 Month LIBOR 549 2 2,582,574.69 5.005289 5.561847 1 N/A 359 6 Month LIBOR 550 2 600,578.10 5.184424 5.805973 1 N/A 359 6 Month LIBOR 551 2 1,831,622.75 5.507873 5.912873 1 N/A 359 6 Month LIBOR 552 2 135,693.10 4.945000 5.350000 2 N/A 358 6 Month LIBOR 553 2 305,328.64 5.095000 5.500000 2 N/A 358 6 Month LIBOR 554 2 162,228.83 5.295000 5.700000 1 N/A 359 6 Month LIBOR 555 2 130,295.78 6.085000 7.250000 2 N/A 358 6 Month LIBOR 556 2 736,011.35 5.215385 5.620385 1 N/A 359 6 Month LIBOR 557 2 1,860,385.68 5.155752 5.560752 1 N/A 359 6 Month LIBOR 558 2 1,710,625.78 4.786906 5.312942 1 N/A 359 6 Month LIBOR 559 2 656,975.03 5.153146 5.558146 1 N/A 359 6 Month LIBOR 560 2 175,840.89 6.095000 6.500000 1 N/A 359 6 Month LIBOR 561 2 146,569.70 5.445000 5.850000 1 N/A 359 6 Month LIBOR 562 2 8,216,578.63 5.269243 5.715058 1 N/A 359 6 Month LIBOR 563 2 914,058.00 5.878053 6.487053 1 N/A 359 6 Month LIBOR 564 2 4,843,015.87 5.167585 5.663544 1 N/A 359 6 Month LIBOR 565 2 228,821.65 6.700000 8.875000 1 N/A 359 1 Year LIBOR 566 2 175,000.00 5.470000 5.875000 0 N/A 360 1 Month LIBOR 567 2 282,700.00 3.345000 3.750000 0 N/A 360 1 Month LIBOR 568 2 238,064.10 3.720000 4.125000 1 N/A 359 6 Month LIBOR 569 2 284,000.00 3.845000 4.250000 0 N/A 360 6 Month LIBOR 570 2 886,681.63 5.051208 5.628323 1 N/A 359 6 Month LIBOR 571 2 185,250.13 3.970000 4.375000 1 N/A 359 6 Month LIBOR 572 2 509,007.90 5.258897 5.663897 0 N/A 360 6 Month LIBOR 573 2 629,500.00 5.692597 6.097597 0 N/A 360 6 Month LIBOR S-93
424B594th Page of 311TOC1stPreviousNextBottomJust 94th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 574 2 149,802.47 4.095000 4.500000 1 N/A 359 6 Month LIBOR 575 2 4,752,812.94 5.471484 6.235042 1 N/A 359 6 Month LIBOR 576 2 382,834.57 5.768488 6.173488 0 N/A 360 6 Month LIBOR 577 2 124,907.23 7.095000 7.500000 1 N/A 359 6 Month LIBOR 578 2 469,267.83 5.385186 5.790186 2 N/A 358 6 Month LIBOR 579 2 297,189.39 5.345000 5.750000 1 N/A 359 6 Month LIBOR 580 2 491,304.47 5.097993 5.502993 1 N/A 359 6 Month LIBOR 581 2 635,111.81 4.888470 5.293470 1 N/A 359 6 Month LIBOR 582 2 1,186,410.07 5.296910 5.701910 1 N/A 359 6 Month LIBOR 583 2 561,540.65 4.122153 4.527153 2 N/A 358 6 Month LIBOR 584 2 135,646.12 5.545000 5.950000 2 N/A 358 6 Month LIBOR 585 2 3,935,891.28 4.363491 4.768491 4 N/A 356 6 Month LIBOR 586 2 843,878.68 5.573795 5.978795 1 N/A 359 6 Month LIBOR 587 2 4,497,821.57 5.425365 5.884426 3 N/A 357 6 Month LIBOR 588 2 407,571.04 4.936008 6.384435 4 N/A 356 6 Month LIBOR 589 2 2,720,026.71 5.091548 5.496548 3 N/A 357 6 Month LIBOR 590 2 4,620,507.39 4.637188 5.042188 4 N/A 356 6 Month LIBOR 591 2 287,477.87 6.095000 6.500000 2 N/A 358 6 Month LIBOR 592 2 1,748,236.69 4.714854 5.304634 3 N/A 357 6 Month LIBOR 593 2 4,555,533.59 5.037828 5.442828 4 N/A 356 6 Month LIBOR 594 2 367,410.00 7.147913 8.203438 0 N/A 360 6 Month LIBOR 595 2 292,329.53 4.366391 4.771391 4 N/A 356 6 Month LIBOR 596 2 57,301,397.01 4.829663 5.287188 3 N/A 357 6 Month LIBOR 597 2 4,963,993.24 5.486243 5.891243 1 N/A 359 6 Month LIBOR 598 2 291,314.74 5.395000 5.800000 2 N/A 358 6 Month LIBOR 599 2 603,782.57 5.726359 6.234832 1 N/A 359 6 Month LIBOR 600 2 216,846.17 5.465000 6.500000 2 N/A 358 6 Month LIBOR 601 2 650,944.07 5.088771 5.493771 3 N/A 357 6 Month LIBOR 602 2 83,188,058.79 5.004889 5.423713 3 N/A 357 6 Month LIBOR 603 2 409,551.27 5.467097 5.872097 2 N/A 358 1 Year LIBOR 604 2 354,839.69 5.164139 5.569139 3 N/A 357 6 Month LIBOR 605 2 3,206,950.03 5.304331 5.751975 2 N/A 358 6 Month LIBOR 606 2 1,784,432.33 4.446940 4.851940 3 N/A 357 6 Month LIBOR 607 2 2,074,721.02 4.668975 5.073975 3 N/A 357 6 Month LIBOR 608 2 552,272.28 4.941562 5.346562 4 N/A 356 6 Month LIBOR 609 2 484,524.09 4.629176 5.034176 4 N/A 356 6 Month LIBOR 610 2 343,737.17 4.591905 4.996905 3 N/A 357 6 Month LIBOR 611 2 1,324,493.55 4.006987 4.411987 4 N/A 356 6 Month LIBOR 612 2 390,663.90 3.419458 3.824458 4 N/A 356 6 Month LIBOR 613 2 11,022,120.96 4.479839 4.884839 4 N/A 356 6 Month LIBOR 614 2 2,145,868.63 4.801248 5.206248 3 N/A 357 6 Month LIBOR 615 2 3,443,364.20 5.206178 5.611178 3 N/A 357 6 Month LIBOR 616 2 1,585,302.75 5.007893 5.412893 3 N/A 357 6 Month LIBOR 617 2 241,735.12 5.095000 5.500000 1 N/A 359 6 Month LIBOR 618 2 3,567,478.06 4.285251 4.690251 3 N/A 357 6 Month LIBOR S-94
424B595th Page of 311TOC1stPreviousNextBottomJust 95th
ORIGINAL REMAINING AGE INTEREST ONLY AMORTIZATION LOAN LOAN PRINCIPAL NET MORTGAGE MORTGAGE (IN PERIOD (IN TERM TO MATURITY NUMBER GROUP BALANCE ($) RATE (%) RATE (%) MONTHS) MONTHS) (IN MONTHS) INDEX ------ ----- ----------- -------- -------- ------- ------- ----------- ----- 619 2 480,277.18 5.196729 5.601729 3 N/A 357 6 Month LIBOR 620 2 41,797,904.53 4.859261 5.273737 3 N/A 357 6 Month LIBOR 621 2 718,103.13 5.304544 5.709544 2 N/A 358 6 Month LIBOR 622 2 261,046.99 5.306077 5.711077 2 N/A 358 6 Month LIBOR 623 2 26,588,543.61 4.894359 5.323040 4 N/A 356 6 Month LIBOR 624 2 155,268.56 5.095000 5.500000 2 N/A 358 1 Month LIBOR 625 2 199,800.90 5.595000 6.000000 1 N/A 359 3 Month LIBOR 626 2 543,427.50 4.726267 5.131267 2 N/A 358 6 Month LIBOR 627 2 445,840.99 6.921641 7.754218 0 N/A 360 6 Month LIBOR 628 2 231,415.07 4.345000 4.750000 2 N/A 358 6 Month LIBOR 629 2 539,295.33 4.256600 4.661600 1 N/A 359 6 Month LIBOR 630 2 289,251.98 4.220000 4.625000 2 N/A 358 6 Month LIBOR 631 2 3,679,179.49 5.549934 6.087019 1 N/A 359 6 Month LIBOR 632 2 157,835.03 5.345000 5.750000 1 N/A 359 6 Month LIBOR 633 2 498,294.70 5.607979 6.012979 3 N/A 357 6 Month LIBOR 634 2 300,000.00 5.220000 5.625000 0 N/A 360 6 Month LIBOR 635 2 322,231.06 5.589838 5.994838 1 N/A 359 6 Month LIBOR 636 2 641,854.33 5.706884 6.111884 1 N/A 359 6 Month LIBOR 637 2 434,493.72 5.029122 5.434122 1 N/A 359 6 Month LIBOR
S-95
424B596th Page of 311TOC1stPreviousNextBottomJust 96th
[Enlarge/Download Table] MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 1 1 3.000000 4 1.000000 6 1.000000 11.750000 3.000000 1 2 1 5.619664 22 2.758886 6 1.470534 12.919538 6.328447 N/A 3 1 5.000000 22 3.000000 6 1.000000 12.500000 5.000000 1 4 1 5.000000 22 3.000000 6 1.000000 12.770061 6.770061 1 5 1 5.082675 22 2.890746 6 1.054627 12.159379 5.060989 1 6 1 5.000000 22 3.000000 6 1.000000 12.344896 6.344896 1 7 1 3.250000 20 5.000000 6 1.000000 11.500000 3.250000 1 8 1 3.879258 21 4.280848 6 1.000000 11.365632 3.879258 1 9 1 2.250000 32 2.000000 12 2.000000 10.673856 2.250000 N/A 10 1 5.990000 34 2.000000 6 1.500000 12.690000 5.690000 N/A 11 1 2.250000 29 3.000000 6 1.000000 10.625000 2.250000 N/A 12 1 4.685415 33 3.000000 6 1.000000 11.931244 4.685415 1 13 1 5.000000 34 3.000000 6 1.000000 13.500000 7.500000 1 14 1 3.500716 33 3.000000 6 1.000000 10.299478 5.156212 1 15 1 3.000000 9 2.000000 12 2.000000 11.067970 5.067970 1 16 1 2.875000 3 1.000000 6 1.000000 11.027735 5.027735 1 17 1 2.875000 3 1.000000 6 1.000000 11.000000 5.000000 1 18 1 3.594650 24 3.000000 6 1.000000 11.849931 3.594650 N/A 19 1 3.875000 23 3.000000 6 1.000000 11.250000 3.875000 N/A 20 1 5.915227 23 3.000000 6 1.000000 13.004173 7.004173 N/A 21 1 3.833870 23 3.000000 6 1.000000 11.420435 4.008224 N/A 22 1 3.611808 23 3.000000 6 1.000000 11.253924 3.611808 N/A 23 1 6.133016 23 3.000000 6 1.000000 13.401581 7.401581 N/A 24 1 4.639020 24 3.000000 6 1.000000 12.074905 5.044581 N/A 25 1 3.618222 23 3.000000 6 1.000000 10.961703 3.618222 N/A 26 1 4.083851 24 3.000000 6 1.000000 12.835405 4.083851 N/A 27 1 5.150000 22 3.000000 6 1.000000 11.400000 5.150000 N/A 28 1 3.250000 23 3.000000 6 1.000000 11.250000 3.250000 N/A 29 1 4.876341 23 3.000000 6 1.000000 11.916976 5.058987 N/A 30 1 3.652926 24 3.000000 6 1.000000 11.711649 3.652926 N/A 31 1 3.250000 23 3.000000 6 1.000000 12.000000 3.250000 N/A 32 1 3.884261 23 3.000000 6 1.000000 12.601362 3.972959 N/A 33 1 3.616837 24 3.000000 6 1.000000 11.339540 3.616837 N/A 34 1 4.500000 22 3.000000 6 1.000000 11.625000 4.500000 N/A 35 1 3.750000 23 3.000000 6 1.000000 12.125000 3.750000 N/A 36 1 3.710437 23 3.000000 6 1.000000 12.294902 3.710437 N/A 37 1 3.779695 23 3.000000 6 1.000000 12.071106 3.779695 N/A 38 1 4.053070 23 3.000000 6 1.000000 11.898362 4.212744 N/A 39 1 3.250000 34 3.000000 12 2.000000 11.500000 3.250000 N/A 40 1 3.830413 36 3.000000 6 1.000000 11.785826 3.830413 N/A 41 1 5.083543 35 3.000000 6 1.000000 11.333543 5.083543 N/A 42 1 3.585513 35 3.000000 6 1.000000 11.471441 3.585513 N/A 43 1 3.829296 35 3.000000 6 1.000000 12.568866 3.829296 N/A 44 1 3.693465 36 3.000000 6 1.000000 11.185512 3.693465 N/A 45 1 3.780444 35 3.000000 6 1.000000 11.560648 3.780444 N/A S-96
424B597th Page of 311TOC1stPreviousNextBottomJust 97th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 46 1 3.498309 36 3.000000 6 1.000000 11.179037 3.498309 N/A 47 1 4.994634 35 3.000000 6 1.000000 11.244634 4.994634 N/A 48 1 5.052927 34 3.000000 6 1.000000 11.494853 5.052927 N/A 49 1 5.469887 34 3.000000 6 1.000000 11.730434 5.469887 N/A 50 1 4.950000 35 3.000000 6 1.000000 11.200000 4.950000 N/A 51 1 3.750000 34 3.000000 6 1.000000 12.742378 3.750000 N/A 52 1 4.284201 35 3.059458 6 1.019819 11.427707 4.284201 N/A 53 1 3.456670 35 3.000000 6 1.000000 11.603549 3.456670 N/A 54 1 3.600524 35 3.000000 6 1.000000 11.639471 3.600524 N/A 55 1 3.886365 36 3.000000 6 1.000000 12.204946 3.886365 N/A 56 1 3.572959 35 3.578418 6 1.192806 11.771836 3.572959 N/A 57 1 3.336281 12 1.000000 12 1.000000 10.775455 3.336281 N/A 58 1 3.875000 12 1.000000 12 1.000000 11.500000 3.875000 N/A 59 1 3.000000 12 1.000000 12 1.000000 11.500000 3.000000 N/A 60 1 3.500000 12 1.000000 12 1.000000 10.750000 3.500000 N/A 61 1 3.875000 12 1.000000 12 1.000000 12.500000 3.875000 N/A 62 1 3.290865 3 1.000000 1 1.000000 9.708601 3.290865 N/A 63 1 2.000000 2 1.000000 1 1.000000 10.125000 2.000000 N/A 64 1 3.000000 3 1.000000 1 1.000000 9.999000 3.000000 N/A 65 1 3.250000 3 1.000000 1 1.000000 9.999000 3.250000 N/A 66 1 3.382038 3 1.000000 1 1.000000 9.999000 3.382038 N/A 67 1 1.875000 2 1.000000 1 1.000000 9.990000 1.875000 N/A 68 1 2.222222 2 1.000000 1 1.000000 9.175873 2.222222 N/A 69 1 2.250000 3 1.000000 3 1.000000 9.999000 2.250000 N/A 70 1 3.625000 3 1.000000 3 1.000000 9.999000 3.625000 N/A 71 1 3.000000 3 1.000000 3 1.000000 9.990000 3.000000 N/A 72 1 3.625000 2 1.000000 3 1.000000 9.990000 3.625000 N/A 73 1 3.500000 2 1.000000 3 1.000000 9.999000 3.500000 N/A 74 1 3.352943 5 1.000000 6 1.000000 10.823295 3.352943 N/A 75 1 3.559569 5 1.000000 6 1.000000 10.649546 3.559569 N/A 76 1 3.469344 5 1.000000 6 1.000000 11.036444 3.469344 N/A 77 1 3.147572 6 1.000000 6 1.000000 11.254765 3.147572 N/A 78 1 3.625000 3 1.000000 6 1.000000 11.750000 3.625000 N/A 79 1 3.371252 5 1.000000 6 1.000000 11.116847 3.371252 N/A 80 1 3.304319 6 1.000000 6 1.000000 11.306322 3.304319 N/A 81 1 3.625000 6 1.000000 6 1.000000 10.537990 3.625000 N/A 82 1 2.837623 6 1.000000 6 1.000000 10.993157 2.837623 N/A 83 1 3.189165 5 1.000000 6 1.000000 11.195323 3.189165 N/A 84 1 3.625000 6 1.000000 6 1.000000 10.750000 3.625000 N/A 85 1 4.205254 5 1.000000 6 1.000000 12.178406 4.205254 N/A 86 1 3.364491 5 1.000000 6 1.000000 11.383038 3.364491 N/A 87 1 3.940998 6 1.000000 6 1.000000 13.183585 3.940998 N/A 88 1 3.000000 5 1.000000 6 1.000000 12.375000 3.000000 N/A 89 1 3.275508 5 1.000000 6 1.000000 11.201620 3.275508 N/A 90 1 2.250000 58 5.000000 12 2.000000 12.000000 2.250000 N/A S-97
424B598th Page of 311TOC1stPreviousNextBottomJust 98th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 91 1 2.250000 58 5.000000 12 2.000000 11.125000 2.250000 N/A 92 1 2.250000 58 5.000000 12 2.000000 10.855904 2.250000 N/A 93 1 3.658823 60 3.000000 6 1.000000 11.746966 3.658823 N/A 94 1 3.750000 58 3.000000 6 1.000000 12.000000 3.750000 N/A 95 1 3.442481 59 3.000000 6 1.000000 11.716400 3.442481 N/A 96 1 3.337917 59 3.000000 6 1.000000 11.765295 3.337917 N/A 97 1 2.250000 58 5.000000 6 1.000000 11.125000 2.250000 N/A 98 1 3.912742 59 3.000000 6 1.000000 11.586306 3.912742 N/A 99 1 3.759864 57 3.000000 6 1.000000 11.588528 3.759864 N/A 100 1 3.415347 59 3.000000 6 1.000000 11.916096 3.415347 N/A 101 1 3.422260 59 3.363206 6 1.121069 11.899208 3.422260 N/A 102 1 3.556941 59 3.172893 6 1.057631 11.951819 3.556941 N/A 103 1 3.500000 84 3.000000 6 1.000000 12.500000 3.500000 N/A 104 1 2.250000 80 6.000000 6 2.000000 11.625000 2.250000 N/A 105 1 2.427543 80 5.467370 6 1.822457 11.139036 2.427543 N/A 106 1 3.918105 23 3.000000 6 1.000000 11.405892 4.011317 1 107 1 3.750000 24 3.000000 6 1.000000 12.875000 3.750000 1 108 1 5.994713 21 3.000000 6 1.000000 12.616751 6.616751 1 109 1 5.445973 23 3.000000 6 1.000000 11.821554 5.493475 1 110 1 3.831341 23 3.000000 6 1.000000 12.290992 3.831341 1 111 1 3.250000 23 3.000000 6 1.000000 10.500000 3.250000 1 112 1 5.046952 22 3.000000 6 1.000000 11.939064 5.177654 1 113 1 3.620843 23 3.000000 6 1.000000 11.543407 3.620843 1 114 1 3.636889 24 3.000000 6 1.000000 11.357134 3.636889 1 115 1 3.000000 22 2.000000 6 2.000000 11.325000 3.000000 1 116 1 3.500000 22 3.000000 6 1.000000 11.375000 3.500000 1 117 1 3.841703 23 2.934279 6 1.065721 11.384986 3.841703 1 118 1 3.652594 24 3.000000 6 1.000000 11.279332 3.652594 1 119 1 3.711853 23 3.000000 6 1.000000 11.740378 3.711853 1 120 1 3.500000 23 3.000000 6 1.000000 11.500000 3.500000 1 121 1 4.246236 23 3.000000 6 1.000000 11.885577 4.449951 1 122 1 3.506899 35 3.000000 6 1.000000 11.543728 3.506899 1 123 1 3.549037 35 3.000000 6 1.000000 11.214068 3.549037 1 124 1 3.836486 34 3.000000 6 1.000000 12.318243 3.836486 1 125 1 3.772085 35 3.000000 6 1.000000 11.438236 3.772085 1 126 1 3.704807 35 3.000000 6 1.000000 11.619303 3.704807 1 127 1 3.500000 35 3.000000 6 1.000000 11.375000 3.500000 1 128 1 3.678500 35 3.000000 6 1.000000 11.513357 3.678500 1 129 1 3.590359 35 3.000000 6 1.000000 11.949591 3.590359 1 130 1 3.385284 34 3.000000 6 1.000000 10.991744 3.385284 1 131 1 3.313837 35 3.222767 6 1.105125 11.436641 3.313837 1 132 1 3.875000 11 1.000000 12 1.000000 11.500000 3.875000 1 133 1 3.726309 11 1.000000 12 1.000000 10.640064 3.726309 1 134 1 3.500000 11 1.000000 12 1.000000 10.000000 3.500000 1 135 1 3.250000 11 1.000000 12 1.000000 10.625000 3.250000 1 S-98
424B599th Page of 311TOC1stPreviousNextBottomJust 99th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 136 1 3.250000 12 1.000000 12 1.000000 11.875000 3.250000 1 137 1 3.750000 11 1.000000 12 1.000000 11.750000 3.750000 1 138 1 3.750000 12 1.000000 12 1.000000 11.125000 3.750000 1 139 1 3.250000 11 1.000000 12 1.000000 12.300146 3.250000 1 140 1 3.500000 1 1.000000 1 1.000000 9.999000 3.500000 1 141 1 2.500000 2 1.000000 1 1.000000 12.375000 2.500000 1 142 1 3.000000 3 1.000000 1 1.000000 9.999000 3.000000 1 143 1 3.846173 2 1.000000 1 1.000000 9.999000 3.846173 1 144 1 3.228022 2 1.000000 1 1.000000 10.532234 3.228022 1 145 1 3.625000 3 1.000000 3 1.000000 9.999000 3.625000 1 146 1 2.113908 2 1.000000 3 1.000000 9.999000 2.113908 1 147 1 3.363549 2 1.000000 3 1.000000 9.999000 3.363549 1 148 1 3.375204 4 1.000000 6 1.000000 10.914579 3.375204 1 149 1 3.678149 5 1.000000 6 1.000000 11.569290 3.678149 1 150 1 4.500000 6 1.000000 6 1.000000 14.750000 4.500000 1 151 1 3.000000 5 1.000000 6 1.000000 9.875000 3.000000 1 152 1 3.331953 5 1.000000 6 1.000000 11.043573 3.331953 1 153 1 3.294749 5 1.000000 6 1.000000 11.548815 3.294749 1 154 1 3.625000 5 1.000000 6 1.000000 11.500000 3.625000 1 155 1 3.093347 4 1.000000 6 1.000000 11.236400 3.093347 1 156 1 3.335811 5 1.000000 6 1.000000 10.940533 3.335811 1 157 1 3.013555 5 1.000000 6 1.000000 12.261403 3.013555 1 158 1 3.234672 5 1.000000 6 1.000000 11.288831 3.234672 1 159 1 3.245593 5 1.000000 6 1.000000 11.565019 3.245593 1 160 1 3.000000 5 1.000000 6 1.000000 9.931939 3.000000 1 161 1 3.136566 5 1.000000 6 1.000000 11.458440 3.146430 1 162 1 3.536558 59 3.357166 6 1.000000 11.539469 3.536558 1 163 1 3.750000 59 3.000000 6 1.000000 11.375000 3.750000 1 164 1 3.250000 58 3.000000 6 1.000000 11.625000 3.250000 1 165 1 3.875000 58 3.000000 6 1.000000 12.481703 3.875000 1 166 1 3.817274 59 3.000000 6 1.000000 11.717161 3.817274 1 167 1 3.250000 59 3.000000 6 1.000000 11.750000 3.250000 1 168 1 3.882905 59 3.000000 6 1.000000 11.805243 3.882905 1 169 1 4.695464 58 3.000000 6 1.000000 13.076370 6.011327 1 170 1 3.250000 58 3.000000 6 1.000000 11.875000 3.250000 1 171 1 3.592218 60 3.000000 6 1.000000 12.232353 3.592218 1 172 1 3.685141 59 3.000000 6 1.000000 11.754385 3.685141 1 173 1 2.982901 58 3.731696 6 1.000000 11.233923 4.288409 1 174 1 3.436939 83 3.000000 6 1.000000 11.468470 3.436939 1 175 1 2.250000 117 6.000000 6 2.000000 11.000000 2.250000 N/A 176 1 3.250000 118 5.000000 6 1.000000 11.750000 5.750000 N/A 177 1 5.905608 22 3.000000 6 1.000000 12.274369 6.274369 N/A 178 1 3.179073 23 3.000000 6 1.000000 11.064140 3.179073 N/A 179 1 6.197208 22 3.000000 6 1.000000 12.211327 6.211327 N/A 180 1 3.102615 23 3.000000 6 1.000000 11.544510 3.102615 N/A S-99
424B5100th Page of 311TOC1stPreviousNextBottomJust 100th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 181 1 6.115126 22 3.000000 6 1.000000 11.720252 5.720252 N/A 182 1 2.875000 23 3.000000 6 1.000000 11.250000 2.875000 N/A 183 1 6.117295 22 3.000000 6 1.000000 12.989614 6.989614 N/A 184 1 2.250000 32 2.000000 12 2.000000 9.875000 2.250000 N/A 185 1 2.250000 36 6.000000 6 2.000000 11.990000 2.250000 N/A 186 1 2.250000 36 6.000000 6 2.000000 11.552311 2.250000 N/A 187 1 2.250000 35 6.000000 6 2.000000 11.259588 2.250000 N/A 188 1 2.816096 1 1.000000 1 1.000000 9.999000 2.816096 N/A 189 1 2.750000 1 1.000000 1 1.000000 9.999000 2.750000 N/A 190 1 2.750000 1 1.000000 1 1.000000 9.999000 2.750000 N/A 191 1 2.750000 1 1.000000 1 1.000000 9.999000 2.750000 N/A 192 1 2.750000 5 1.000000 6 1.000000 10.500000 2.750000 N/A 193 1 3.029420 5 1.000000 6 1.000000 10.781869 3.029420 N/A 194 1 3.000000 5 1.000000 6 1.000000 11.422546 3.000000 N/A 195 1 3.315884 5 1.000000 6 1.000000 11.942708 3.315884 N/A 196 1 2.871645 5 1.000000 6 1.000000 10.856212 2.871645 N/A 197 1 2.750000 5 1.000000 6 1.000000 10.651355 2.750000 N/A 198 1 2.338416 6 1.000000 6 1.000000 10.735607 2.338416 N/A 199 1 2.250000 59 6.000000 6 2.000000 12.990000 2.250000 N/A 200 1 2.250000 60 6.000000 6 2.000000 12.500000 2.250000 N/A 201 1 2.250000 59 5.927508 6 1.927508 12.652339 2.250000 N/A 202 1 2.250000 59 6.000000 6 2.000000 11.990000 2.250000 N/A 203 1 3.750000 59 5.000000 6 2.000000 11.750000 3.750000 N/A 204 1 2.250000 83 6.000000 6 2.000000 12.250000 2.250000 N/A 205 1 2.250000 63 6.000000 6 2.000000 12.083893 2.250000 N/A 206 1 2.250000 72 6.000000 6 2.000000 10.750000 2.250000 N/A 207 1 3.250000 23 3.000000 6 1.000000 11.178523 3.250000 1 208 1 3.000000 22 3.000000 6 1.000000 12.318352 3.000000 1 209 1 3.750000 22 3.000000 6 1.000000 12.500000 3.750000 1 210 1 3.233948 22 3.000000 6 1.000000 11.519567 3.233948 1 211 1 3.305683 21 3.000000 6 1.000000 11.023666 3.305683 1 212 1 3.000000 23 3.000000 6 1.000000 12.099766 3.000000 1 213 1 3.369871 23 3.000000 6 1.000000 11.289421 3.369871 1 214 1 3.250000 22 3.000000 6 1.000000 11.000000 3.250000 1 215 1 3.040343 22 3.000000 6 1.000000 11.772810 3.040343 1 216 1 3.050423 34 3.000000 6 1.000000 10.645238 3.050423 1 217 1 3.000000 33 3.000000 6 1.000000 12.500000 3.000000 1 218 1 2.250000 35 4.316901 6 1.794601 10.996295 2.250000 1 219 1 3.000000 4 1.000000 6 1.000000 10.250000 3.000000 1 220 1 3.000000 3 1.000000 6 1.000000 9.250000 3.000000 1 221 1 2.452003 5 1.000000 6 1.000000 10.546660 2.452003 1 222 1 3.750000 59 5.000000 12 2.000000 11.500000 3.750000 1 223 1 3.500000 57 5.000000 12 2.000000 12.500000 3.500000 1 224 1 3.875000 58 3.000000 6 1.000000 11.750000 3.875000 1 225 1 3.000000 57 5.000000 6 1.000000 11.500000 3.000000 1 S-100
424B5101st Page of 311TOC1stPreviousNextBottomJust 101st
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 226 1 3.000000 58 5.000000 6 1.000000 10.224353 3.000000 1 227 1 3.000000 58 5.000000 6 1.000000 10.398818 3.000000 1 228 1 3.000000 57 5.000000 6 1.000000 10.718952 3.000000 1 229 1 2.750000 55 5.000000 6 1.000000 10.000000 2.750000 1 230 1 2.942743 58 4.341613 6 1.111822 10.755408 2.942743 1 231 1 2.250000 119 6.000000 6 2.000000 11.875000 2.250000 N/A 232 1 5.778348 22 3.000000 6 1.000000 12.120350 6.062020 N/A 233 1 3.487090 23 3.000000 6 1.000000 11.708005 3.487090 N/A 234 1 4.104810 23 3.000000 6 1.015115 11.745687 4.171442 N/A 235 1 3.634774 23 3.000000 6 1.000000 11.471193 3.634774 N/A 236 1 5.394195 22 3.000000 6 1.048522 12.671355 5.787735 N/A 237 1 3.978443 23 3.000000 6 1.000000 13.277295 3.978443 N/A 238 1 4.921422 23 3.000000 6 1.000000 12.413013 4.921422 N/A 239 1 3.875000 23 3.000000 6 1.000000 13.000000 3.875000 N/A 240 1 3.952487 24 3.000000 6 1.000000 12.873478 3.952487 N/A 241 1 4.250000 24 3.000000 6 1.000000 12.250000 4.250000 N/A 242 1 3.750000 23 3.000000 6 1.000000 11.750000 3.750000 N/A 243 1 4.683928 23 2.982322 6 1.026041 12.385756 4.795460 N/A 244 1 3.686651 23 3.000000 6 1.000000 12.127510 3.686651 N/A 245 1 3.500000 23 3.000000 6 1.000000 11.875000 3.500000 N/A 246 1 3.875000 24 3.000000 6 1.000000 13.375000 3.875000 N/A 247 1 3.875000 24 3.000000 6 1.000000 13.625000 3.875000 N/A 248 1 4.687623 23 3.000000 6 1.000000 12.806574 4.786285 N/A 249 1 3.395747 23 3.000000 6 1.000000 11.640747 3.395747 N/A 250 1 3.500000 22 3.000000 6 1.000000 12.500000 3.500000 N/A 251 1 3.456075 24 3.000000 6 1.000000 12.706075 3.456075 N/A 252 1 3.683654 23 3.000000 6 1.008718 13.268639 3.720705 N/A 253 1 6.250000 22 3.000000 6 1.000000 12.990000 6.990000 N/A 254 1 4.198466 23 2.973980 6 1.032459 12.593258 4.347560 N/A 255 1 2.250000 33 2.000000 12 2.000000 10.750000 2.250000 N/A 256 1 2.316487 32 2.000000 12 2.000000 10.370693 2.316487 N/A 257 1 5.100000 35 3.000000 6 1.000000 11.350000 5.100000 N/A 258 1 3.750000 34 3.000000 6 1.000000 11.500000 3.750000 N/A 259 1 5.249016 35 3.000000 6 1.000000 11.499016 5.280801 N/A 260 1 4.977705 35 3.000000 6 1.000000 11.227705 5.073509 N/A 261 1 4.026274 35 3.000000 6 1.000000 11.173224 4.026274 N/A 262 1 4.250000 35 3.000000 6 1.000000 13.000000 4.250000 N/A 263 1 3.875000 36 3.000000 6 1.000000 12.000000 3.875000 N/A 264 1 2.250000 35 6.000000 6 2.000000 11.750000 2.250000 N/A 265 1 5.500000 34 3.000000 6 1.000000 11.750000 5.500000 N/A 266 1 3.875000 35 3.000000 6 1.000000 12.250000 3.875000 N/A 267 1 3.674233 36 3.000000 6 1.000000 11.444330 3.674233 N/A 268 1 3.875000 36 3.000000 6 1.000000 13.250000 3.875000 N/A 269 1 5.480649 35 3.000000 6 1.000000 11.726528 5.500973 N/A 270 1 5.540333 35 3.000000 6 1.000000 11.784683 5.540333 N/A S-101
424B5102nd Page of 311TOC1stPreviousNextBottomJust 102nd
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 271 1 5.365717 35 3.000000 6 1.000000 11.615717 5.365717 N/A 272 1 4.936514 34 3.000000 6 1.000000 11.991430 5.034796 N/A 273 1 4.849614 36 3.000000 6 1.259897 13.799485 6.019150 N/A 274 1 5.401873 35 3.000000 6 1.000000 11.651873 5.401873 N/A 275 1 5.009192 35 3.000000 6 1.030198 12.024428 5.218665 N/A 276 1 3.630995 35 3.000000 6 1.000000 11.463467 3.630995 N/A 277 1 3.522430 35 4.050631 6 1.350210 12.314708 3.522430 N/A 278 1 4.271816 34 2.994525 6 1.061276 11.923188 4.288297 N/A 279 1 3.750000 12 1.000000 12 1.000000 12.537224 3.750000 N/A 280 1 1.500000 3 1.000000 1 1.000000 9.999000 1.500000 N/A 281 1 3.500000 3 1.000000 1 1.000000 9.999000 3.500000 N/A 282 1 4.875000 3 1.000000 1 1.000000 14.500000 4.875000 N/A 283 1 3.365005 2 1.000000 1 1.000000 9.999000 3.365005 N/A 284 1 3.625000 5 1.000000 6 1.000000 11.385163 3.625000 N/A 285 1 3.625000 6 1.000000 6 1.000000 13.000000 3.625000 N/A 286 1 3.361598 4 1.000000 6 1.000000 10.068105 3.361598 N/A 287 1 3.662928 6 1.000000 6 1.000000 11.170365 3.662928 N/A 288 1 3.360959 5 1.000000 6 1.000000 12.580661 3.360959 N/A 289 1 3.250000 6 1.000000 6 1.000000 11.875000 3.250000 N/A 290 1 4.548458 5 1.000000 6 1.000000 12.430865 4.548458 N/A 291 1 3.000000 6 1.000000 6 1.000000 11.125000 3.000000 N/A 292 1 3.597662 5 1.000000 6 1.000000 10.921688 3.597662 N/A 293 1 5.652608 5 1.248279 6 1.248279 14.169789 6.583653 N/A 294 1 3.613737 5 1.043421 6 1.043421 12.184955 3.698263 N/A 295 1 3.425233 5 1.197670 6 1.022603 11.674529 3.482964 N/A 296 1 3.844510 59 3.000000 6 1.000000 12.698139 3.844510 N/A 297 1 3.250000 58 3.000000 6 1.000000 11.875000 3.250000 N/A 298 1 4.889407 59 3.000000 6 1.000000 12.579014 5.183623 N/A 299 1 3.875000 60 3.000000 6 1.000000 12.125000 3.875000 N/A 300 1 3.854605 59 3.000000 6 1.000000 11.524540 3.854605 N/A 301 1 3.402582 60 3.000000 6 1.000000 12.283129 3.402582 N/A 302 1 3.750000 60 3.000000 6 1.000000 11.875000 3.750000 N/A 303 1 3.687496 59 3.000000 6 1.000000 12.505957 3.687496 N/A 304 1 2.858095 59 4.512604 6 1.477843 11.784513 2.858095 N/A 305 1 3.392189 58 3.718681 6 1.000000 11.433259 3.392189 N/A 306 1 3.875000 84 3.000000 6 1.000000 11.875000 3.875000 N/A 307 1 2.250000 83 6.000000 6 2.000000 12.250000 2.250000 N/A 308 1 2.250000 74 6.000000 6 2.000000 11.375000 2.250000 N/A 309 1 2.408145 20 6.000000 6 1.000000 10.652942 2.408145 1 310 1 6.375000 23 3.000000 6 1.500000 14.875000 7.875000 1 311 1 3.152768 20 5.664052 6 1.000000 10.916197 3.152768 1 312 1 6.375000 24 3.000000 6 1.500000 15.500000 8.500000 1 313 1 3.415289 21 4.500734 6 1.000000 11.316957 3.481718 1 314 1 3.875000 22 3.000000 6 1.000000 11.250000 3.875000 1 315 1 2.945757 21 5.789093 6 1.000000 11.482975 2.945757 1 S-102
424B5103rd Page of 311TOC1stPreviousNextBottomJust 103rd
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 316 1 3.152587 20 5.647933 6 1.000000 11.274547 3.174871 1 317 1 5.000000 22 3.000000 6 1.000000 12.875000 6.875000 1 318 1 3.099772 21 5.534941 6 1.000000 11.197182 3.108748 1 319 1 2.902928 20 6.000000 6 1.000000 10.820492 2.902928 1 320 1 4.401575 24 3.000000 6 1.000000 14.719488 4.729987 1 321 1 3.521803 21 5.510914 6 1.000000 11.549083 3.537435 1 322 1 3.308116 21 5.211047 6 1.005286 11.184373 3.347313 1 323 1 4.314813 22 2.965697 6 1.011434 12.546824 5.109598 1 324 1 4.985817 22 3.000000 6 1.000000 11.235817 5.142534 1 325 1 3.625000 23 3.000000 6 1.000000 13.125000 3.625000 1 326 1 4.248391 23 3.000000 6 1.036101 12.638785 4.374743 1 327 1 3.418684 22 3.000000 6 1.000000 11.141000 3.418684 1 328 1 4.345771 23 3.000000 6 1.000000 13.324828 4.345771 1 329 1 4.024781 23 3.000000 6 1.023105 13.303861 4.180741 1 330 1 3.026709 20 5.573682 6 1.047369 11.691064 3.026709 1 331 1 3.199601 20 5.679721 6 1.000878 11.356994 3.201298 1 332 1 4.421727 33 4.630268 6 1.000000 11.690645 4.535872 1 333 1 5.950000 32 3.000000 6 1.000000 12.200000 6.200000 1 334 1 5.420887 34 3.000000 6 1.000000 11.670887 5.583611 1 335 1 3.297163 32 5.480665 6 1.000000 10.894508 3.330766 1 336 1 3.709360 33 4.725759 6 1.027053 11.325297 3.660933 1 337 1 2.756252 32 6.000000 6 1.000000 10.851268 2.756252 1 338 1 3.015899 32 6.000000 6 1.000000 10.886612 3.015899 1 339 1 3.125000 32 6.000000 6 1.000000 11.500000 3.125000 1 340 1 2.660555 32 6.000000 6 1.000000 10.516115 2.660555 1 341 1 2.775448 32 5.864396 6 1.000000 10.734895 2.776399 1 342 1 3.000000 33 3.000000 6 1.000000 11.588749 3.000000 1 343 1 3.886257 33 4.714634 6 1.000000 11.098566 3.962025 1 344 1 3.875000 35 3.000000 6 1.000000 13.750000 3.875000 1 345 1 4.779202 33 3.926214 6 1.000000 11.574051 4.888697 1 346 1 3.917930 33 4.542481 6 1.000000 11.190713 4.020425 1 347 1 2.763167 32 5.721663 6 1.000000 10.418745 2.770972 1 348 1 4.528277 33 3.994458 6 1.000000 11.275506 4.576702 1 349 1 4.254942 33 4.016702 6 1.000000 11.220470 4.318645 1 350 1 3.973899 35 3.000000 6 1.037961 12.437545 4.289833 1 351 1 3.000000 34 3.000000 6 1.000000 10.875000 3.000000 1 352 1 3.618497 33 4.721691 6 1.000000 11.282669 3.642761 1 353 1 3.393144 32 5.542524 6 1.000000 11.327840 3.408675 1 354 1 5.487193 11 1.530621 12 1.530621 14.261084 7.132909 1 355 1 4.256044 11 1.000000 12 1.000000 11.905968 4.256044 1 356 1 3.560770 3 1.000000 1 1.000000 9.999000 3.560770 1 357 1 3.710840 4 1.000000 6 1.000000 12.478832 3.710840 1 358 1 3.875000 2 1.000000 6 1.000000 11.875000 3.875000 1 359 1 3.797134 4 1.000000 6 1.000000 11.969267 3.797134 1 360 1 3.625000 5 1.000000 6 1.000000 9.999000 3.625000 1 S-103
424B5104th Page of 311TOC1stPreviousNextBottomJust 104th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 361 1 4.914795 5 1.293614 6 1.293614 12.969716 5.648830 1 362 1 3.000000 6 1.000000 6 1.000000 11.125000 3.000000 1 363 1 3.821538 4 1.000000 6 1.000000 13.032086 3.821538 1 364 1 3.345838 5 1.000000 6 1.000000 12.325202 3.345838 1 365 1 3.430382 59 5.000000 12 2.000000 11.488113 4.197465 1 366 1 3.500000 59 3.000000 6 1.000000 11.607150 3.500000 1 367 1 3.707751 59 3.000000 6 1.000000 12.082784 3.707751 1 368 1 3.889992 59 3.106941 6 1.000000 11.999983 4.012980 1 369 1 4.131409 59 3.000000 6 1.000000 12.065801 4.558478 1 370 1 3.000000 57 5.000000 6 1.000000 10.125000 3.000000 1 371 1 3.806033 58 3.000000 6 1.000000 12.714316 3.806033 1 372 1 3.266136 59 3.468373 6 1.000000 12.145233 3.266136 1 373 1 5.000000 58 3.000000 6 1.000000 11.750000 5.000000 1 374 1 3.280264 58 3.582791 6 1.079599 11.430110 3.489428 1 375 1 3.000000 81 5.000000 6 1.000000 10.625000 3.000000 1 376 2 5.000000 2 6.000000 6 1.000000 12.250000 5.000000 1 377 2 6.253379 22 2.653449 6 1.826724 13.485482 6.485482 N/A 378 2 5.000000 22 3.000000 6 1.000000 12.875000 5.000000 1 379 2 5.653231 22 3.311676 6 1.467514 12.551709 5.653231 1 380 2 5.000000 22 3.000000 6 1.000000 12.850947 6.850947 1 381 2 5.000000 22 3.000000 6 1.000000 11.875000 5.000000 1 382 2 2.250000 29 2.000000 12 2.000000 10.500000 2.250000 N/A 383 2 5.000000 34 3.000000 6 1.000000 12.184093 6.184093 1 384 2 3.000000 10 2.000000 12 2.000000 12.575000 6.575000 1 385 2 3.000000 10 2.000000 12 2.000000 11.107801 5.107801 1 386 2 2.787134 4 1.000000 6 1.000000 11.560418 5.560418 1 387 2 3.250000 4 1.000000 6 1.000000 12.000000 6.000000 1 388 2 3.663462 24 3.000000 6 1.000000 11.389423 3.663462 N/A 389 2 3.750000 24 3.000000 6 1.000000 12.500000 3.750000 N/A 390 2 3.875000 24 3.000000 6 1.000000 13.415355 3.875000 N/A 391 2 3.597073 23 3.000000 6 1.000000 11.187644 3.667893 N/A 392 2 3.750000 24 3.000000 6 1.000000 11.750000 3.750000 N/A 393 2 3.875000 22 3.000000 6 1.000000 12.750000 3.875000 N/A 394 2 3.750000 23 3.000000 6 1.000000 14.375000 3.750000 N/A 395 2 4.787804 23 3.000000 6 1.000000 12.068225 5.090558 N/A 396 2 3.875000 23 3.000000 6 1.000000 10.875000 3.875000 N/A 397 2 3.750000 23 3.000000 6 1.000000 12.000000 3.750000 N/A 398 2 4.625000 23 3.000000 6 1.000000 13.625000 4.625000 N/A 399 2 4.229611 23 3.000000 6 1.000000 11.735243 4.358589 N/A 400 2 3.531131 24 3.000000 6 1.000000 11.618863 3.531131 N/A 401 2 3.250000 23 3.000000 6 1.000000 12.750000 3.250000 N/A 402 2 4.938902 23 3.000000 6 1.000000 11.503427 5.158401 N/A 403 2 3.692773 23 3.000000 6 1.000000 12.225656 3.692773 N/A 404 2 3.686176 24 3.000000 6 1.000000 11.484402 3.686176 N/A 405 2 3.885114 23 3.000000 6 1.000000 11.782076 3.972134 N/A S-104
424B5105th Page of 311TOC1stPreviousNextBottomJust 105th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 406 2 2.250000 34 3.000000 12 2.000000 10.875000 2.250000 N/A 407 2 3.572181 34 3.000000 6 1.000000 12.205545 3.572181 N/A 408 2 4.843613 34 3.000000 6 1.000000 11.093613 4.843613 N/A 409 2 5.150000 35 3.000000 6 1.000000 11.400000 5.150000 N/A 410 2 3.629276 35 3.000000 6 1.000000 11.310961 3.629276 N/A 411 2 3.500000 35 3.000000 6 1.000000 11.750000 3.500000 N/A 412 2 3.560484 35 3.000000 6 1.000000 11.749194 3.560484 N/A 413 2 4.400000 35 3.000000 6 1.000000 10.650000 4.400000 N/A 414 2 3.606071 35 3.000000 6 1.000000 11.172757 3.606071 N/A 415 2 3.673629 36 3.000000 6 1.000000 10.902114 3.673629 N/A 416 2 5.300000 35 3.000000 6 1.000000 11.550000 5.300000 N/A 417 2 4.260733 35 3.000000 6 1.000000 10.856466 4.260733 N/A 418 2 3.750000 35 3.000000 6 1.000000 11.250000 3.750000 N/A 419 2 5.850000 34 3.000000 6 1.000000 12.100000 5.850000 N/A 420 2 7.500000 34 3.000000 6 1.000000 13.750000 7.500000 N/A 421 2 4.306506 35 3.000000 6 1.000000 11.119627 4.306506 N/A 422 2 3.472231 36 3.000000 6 1.000000 11.477917 3.472231 N/A 423 2 3.718504 35 3.083892 6 1.027964 11.743393 3.718504 N/A 424 2 3.750000 12 1.000000 12 1.000000 10.375000 3.750000 N/A 425 2 3.625000 3 1.000000 1 1.000000 9.999000 3.625000 N/A 426 2 3.625000 2 1.000000 1 1.000000 9.750000 3.625000 N/A 427 2 3.564834 2 1.000000 1 1.000000 9.999000 3.564834 N/A 428 2 3.000000 3 1.000000 3 1.000000 9.999000 3.000000 N/A 429 2 4.750000 3 1.000000 3 1.000000 11.375000 4.750000 N/A 430 2 5.375000 3 1.000000 3 1.000000 9.999000 5.375000 N/A 431 2 3.346172 5 1.000000 6 1.000000 11.021479 3.346172 N/A 432 2 3.305233 5 1.000000 6 1.000000 10.518256 3.305233 N/A 433 2 3.545468 5 1.000000 6 1.000000 11.295125 3.545468 N/A 434 2 4.357650 5 1.000000 6 1.000000 12.704358 4.357650 N/A 435 2 3.000000 6 1.000000 6 1.000000 11.375000 3.000000 N/A 436 2 3.358112 6 1.000000 6 1.000000 10.887660 3.358112 N/A 437 2 3.619229 5 1.000000 6 1.000000 11.626997 3.619229 N/A 438 2 2.750000 6 1.000000 6 1.000000 10.500000 2.750000 N/A 439 2 3.356889 6 1.000000 6 1.000000 10.783168 3.356889 N/A 440 2 3.600658 5 1.000000 6 1.000000 12.042714 3.600658 N/A 441 2 3.451338 6 1.000000 6 1.000000 12.143419 3.451338 N/A 442 2 3.382199 5 1.000000 6 1.000000 11.362029 3.382199 N/A 443 2 3.342146 59 3.000000 6 1.000000 11.750000 3.342146 N/A 444 2 3.401223 59 3.000000 6 1.000000 11.694206 3.401223 N/A 445 2 3.250000 59 3.000000 6 1.000000 11.721237 3.250000 N/A 446 2 3.875000 59 3.000000 6 1.000000 11.500000 3.875000 N/A 447 2 3.794316 59 3.000000 6 1.000000 12.024718 3.794316 N/A 448 2 3.564186 60 3.000000 6 1.000000 12.054872 3.564186 N/A 449 2 3.535131 60 3.000000 6 1.000000 12.014971 3.535131 N/A 450 2 2.250000 82 5.000000 6 1.000000 9.750000 2.250000 N/A S-105
424B5106th Page of 311TOC1stPreviousNextBottomJust 106th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 451 2 3.485350 23 3.000000 6 1.000000 12.220701 3.485350 1 452 2 6.250000 21 3.000000 6 1.000000 12.630000 6.630000 1 453 2 3.875000 23 3.000000 6 1.000000 11.750000 3.875000 1 454 2 3.912421 23 3.000000 6 1.000000 11.385161 4.041075 1 455 2 3.875000 23 3.000000 6 1.000000 11.250000 3.875000 1 456 2 6.250000 22 3.000000 6 1.000000 11.940000 5.940000 1 457 2 6.000000 22 3.000000 6 1.000000 12.515000 6.515000 1 458 2 5.000000 22 3.000000 6 1.000000 13.375000 5.000000 1 459 2 3.500000 23 3.000000 6 1.000000 11.255444 3.500000 1 460 2 4.480054 22 3.000000 6 1.000000 11.931865 4.610901 1 461 2 3.676488 23 3.000000 6 1.000000 11.716417 3.676488 1 462 2 3.000000 22 2.000000 6 2.000000 11.700000 3.000000 1 463 2 4.006361 23 3.000000 6 1.000000 11.612972 4.094346 1 464 2 3.250000 23 3.000000 6 1.000000 11.321429 3.250000 1 465 2 3.613038 23 3.000000 6 1.000000 12.035885 3.613038 1 466 2 3.790775 23 3.000000 6 1.000000 11.815417 3.885244 1 467 2 3.439756 35 3.000000 6 1.000000 11.388262 3.439756 1 468 2 3.376286 35 3.000000 6 1.000000 11.252276 3.376286 1 469 2 3.875000 36 3.000000 6 1.000000 11.125000 3.875000 1 470 2 3.875000 35 3.000000 6 1.000000 12.125000 3.875000 1 471 2 4.040420 35 3.000000 6 1.000000 12.026264 4.205983 1 472 2 3.538175 35 3.000000 6 1.000000 11.840660 3.538175 1 473 2 3.170706 35 2.772499 6 1.000000 11.478691 3.170706 1 474 2 3.875000 12 1.000000 12 1.000000 12.000000 3.875000 1 475 2 3.500000 11 1.000000 12 1.000000 12.000000 3.500000 1 476 2 3.750000 11 1.000000 12 1.000000 12.500000 3.750000 1 477 2 3.500000 11 1.000000 12 1.000000 10.875000 3.500000 1 478 2 4.875000 3 1.000000 1 1.000000 13.000000 4.875000 1 479 2 3.000000 2 1.000000 1 1.000000 9.999000 3.000000 1 480 2 3.250000 2 1.000000 3 1.000000 9.999000 3.250000 1 481 2 3.000000 5 1.000000 6 1.000000 11.315771 3.000000 1 482 2 3.165498 5 1.000000 6 1.000000 10.982866 3.165498 1 483 2 3.108944 5 1.000000 6 1.000000 10.808286 3.108944 1 484 2 2.500000 6 1.000000 6 1.000000 11.125000 2.500000 1 485 2 3.704559 5 1.000000 6 1.000000 11.815388 3.704559 1 486 2 3.113612 4 1.000000 6 1.000000 11.073021 3.113612 1 487 2 3.247103 5 1.000000 6 1.000000 10.643944 3.247103 1 488 2 3.289210 5 1.000000 6 1.000000 11.357283 3.289210 1 489 2 3.250000 5 1.000000 6 1.000000 12.000000 3.250000 1 490 2 3.625000 4 1.000000 6 1.000000 12.250000 3.625000 1 491 2 3.362903 5 1.000000 6 1.000000 10.274194 3.362903 1 492 2 3.193395 5 1.000000 6 1.000000 11.726500 3.193395 1 493 2 3.439763 59 3.000000 6 1.000000 11.807241 3.439763 1 494 2 3.750000 59 3.000000 6 1.000000 11.916939 3.750000 1 495 2 3.750000 59 3.000000 6 1.000000 11.750000 3.750000 1 S-106
424B5107th Page of 311TOC1stPreviousNextBottomJust 107th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 496 2 3.711617 59 3.217751 6 1.000000 11.682173 3.711617 1 497 2 3.750000 59 3.000000 6 1.000000 12.125000 3.750000 1 498 2 4.235150 58 3.504222 6 1.000000 11.655859 4.235150 1 499 2 3.622340 59 3.000000 6 1.000000 11.292553 3.622340 1 500 2 4.024248 59 3.412942 6 1.000000 11.832901 4.066895 1 501 2 6.250000 23 3.000000 6 1.000000 12.400000 6.400000 N/A 502 2 2.875000 23 3.000000 6 1.000000 12.500000 2.875000 N/A 503 2 6.000000 22 3.000000 6 1.000000 11.990000 5.990000 N/A 504 2 6.170032 22 3.000000 6 1.000000 12.991579 6.991579 N/A 505 2 3.250000 23 3.000000 6 1.000000 11.571721 3.250000 N/A 506 2 2.875000 24 3.000000 6 1.000000 12.500000 2.875000 N/A 507 2 6.250000 22 3.000000 6 1.000000 13.115397 7.115397 N/A 508 2 2.250000 36 6.000000 6 2.000000 10.983428 2.250000 N/A 509 2 2.750000 1 1.000000 1 1.000000 9.999000 2.750000 N/A 510 2 3.000000 1 1.000000 1 1.000000 9.999000 3.000000 N/A 511 2 3.625000 5 1.000000 6 1.000000 11.375000 3.625000 N/A 512 2 2.750000 5 1.000000 6 1.000000 10.875000 2.750000 N/A 513 2 2.750000 6 1.000000 6 1.000000 11.990000 2.750000 N/A 514 2 3.250000 118 5.000000 6 1.000000 13.250000 7.250000 1 515 2 3.250000 22 3.000000 6 1.000000 10.625000 3.250000 1 516 2 3.250000 22 3.000000 6 1.000000 11.746206 3.250000 1 517 2 3.238710 22 3.000000 6 1.000000 11.352739 3.238710 1 518 2 3.250000 22 3.000000 6 1.000000 11.750000 3.250000 1 519 2 3.000000 23 3.000000 6 1.000000 11.625000 3.000000 1 520 2 3.000000 33 3.000000 6 1.000000 10.500000 3.000000 1 521 2 3.000000 33 3.000000 6 1.000000 10.496560 3.000000 1 522 2 2.491001 34 3.339333 6 1.339333 10.290167 2.491001 1 523 2 3.750000 58 5.000000 12 2.000000 11.993550 3.750000 1 524 2 3.000000 58 5.000000 6 1.000000 10.750000 3.000000 1 525 2 3.000000 57 5.000000 6 1.000000 11.375000 3.000000 1 526 2 2.750000 57 5.000000 6 1.000000 10.125000 2.750000 1 527 2 3.000000 57 5.000000 6 1.000000 10.688650 3.000000 1 528 2 5.825000 23 3.000000 6 1.000000 12.075000 5.825000 N/A 529 2 5.729182 23 3.000000 6 1.000000 11.979182 5.729182 N/A 530 2 4.250000 24 3.000000 6 1.000000 13.375000 4.250000 N/A 531 2 3.814476 23 3.000000 6 1.000000 11.887518 3.814476 N/A 532 2 4.055265 23 3.000000 6 1.000000 12.391053 4.055265 N/A 533 2 4.153201 23 3.000000 6 1.000000 12.405077 4.153201 N/A 534 2 6.354224 23 3.000000 6 1.000000 12.858951 6.494169 N/A 535 2 6.375000 24 3.000000 6 1.500000 15.375000 8.375000 N/A 536 2 4.405260 23 3.000000 6 1.000000 12.644730 4.405260 N/A 537 2 3.875000 24 3.000000 6 1.000000 11.375000 3.875000 N/A 538 2 4.329009 23 3.000000 6 1.000000 13.750920 4.329009 N/A 539 2 4.572586 23 2.956366 6 1.046855 12.365118 4.764770 N/A 540 2 3.917939 23 3.000000 6 1.019698 12.239701 3.981956 N/A S-107
424B5108th Page of 311TOC1stPreviousNextBottomJust 108th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 541 2 6.263518 23 3.000000 6 1.000000 12.513518 6.263518 N/A 542 2 3.500000 24 3.000000 6 1.000000 13.875000 3.500000 N/A 543 2 7.000000 23 3.000000 6 1.000000 13.250000 7.000000 N/A 544 2 4.042493 24 3.000000 6 1.000000 11.016312 4.042493 N/A 545 2 3.567593 24 3.000000 6 1.000000 12.729628 3.567593 N/A 546 2 4.250000 23 3.000000 6 1.000000 13.000000 4.250000 N/A 547 2 4.267325 23 3.000000 6 1.005721 12.318403 4.397537 N/A 548 2 5.350000 35 3.000000 6 1.000000 11.600000 5.350000 N/A 549 2 5.311847 35 3.000000 6 1.000000 11.561847 5.350849 N/A 550 2 5.555973 35 3.000000 6 1.000000 11.805973 5.555973 N/A 551 2 3.909504 35 3.000000 6 1.000000 11.912873 3.909504 N/A 552 2 5.100000 34 3.000000 6 1.000000 11.350000 5.100000 N/A 553 2 3.750000 34 3.000000 6 1.000000 11.500000 3.750000 N/A 554 2 5.450000 35 3.000000 6 1.000000 11.700000 5.450000 N/A 555 2 3.875000 34 3.000000 6 1.000000 13.250000 3.875000 N/A 556 2 5.370385 35 3.000000 6 1.000000 11.620385 5.421959 N/A 557 2 5.310752 35 3.000000 6 1.000000 11.560752 5.310752 N/A 558 2 5.062942 35 3.000000 6 1.000000 11.312942 5.062942 N/A 559 2 5.308146 35 3.000000 6 1.000000 11.558146 5.308146 N/A 560 2 3.250000 35 3.000000 6 1.000000 12.500000 3.250000 N/A 561 2 5.600000 35 3.000000 6 1.000000 11.850000 5.600000 N/A 562 2 5.003539 35 3.000000 6 1.000000 11.716699 5.021033 N/A 563 2 3.780579 35 3.000000 6 1.000000 12.487053 3.780579 N/A 564 2 4.262804 35 3.061570 6 1.000000 11.601602 4.270478 N/A 565 2 5.625000 11 1.000000 12 1.000000 14.875000 5.625000 N/A 566 2 2.000000 3 1.000000 1 1.000000 9.999000 2.000000 N/A 567 2 3.000000 3 1.000000 1 1.000000 9.999000 3.000000 N/A 568 2 3.500000 5 1.000000 6 1.000000 10.125000 3.500000 N/A 569 2 3.000000 6 1.000000 6 1.000000 10.250000 3.000000 N/A 570 2 4.473127 5 1.147127 6 1.147127 11.922578 5.098418 N/A 571 2 3.625000 5 1.000000 6 1.000000 10.375000 3.625000 N/A 572 2 3.495846 6 1.000000 6 1.000000 11.663897 3.495846 N/A 573 2 3.000000 6 1.000000 6 1.000000 12.097597 3.000000 N/A 574 2 3.000000 5 1.000000 6 1.000000 10.500000 3.000000 N/A 575 2 4.011792 5 1.056324 6 1.056324 12.347689 4.135121 N/A 576 2 4.054093 60 3.000000 6 1.000000 12.173488 4.054093 N/A 577 2 2.250000 59 6.000000 6 2.000000 13.500000 2.250000 N/A 578 2 3.190903 58 3.000000 6 1.000000 11.790186 3.190903 N/A 579 2 3.250000 59 3.000000 6 1.000000 11.750000 3.250000 N/A 580 2 3.292389 59 3.000000 6 1.000000 11.502993 3.292389 N/A 581 2 3.250000 59 3.000000 6 1.000000 11.293470 3.250000 N/A 582 2 3.666723 59 3.364405 6 1.121468 11.701910 3.666723 N/A 583 2 3.394976 22 4.217226 6 1.000000 10.527153 3.394976 1 584 2 5.700000 22 3.000000 6 1.000000 11.950000 5.950000 1 585 2 2.900237 20 5.837659 6 1.000000 10.768491 2.900237 1 S-108
424B5109th Page of 311TOC1stPreviousNextBottomJust 109th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 586 2 3.289816 23 3.000000 6 1.000000 11.978795 3.289816 1 587 2 3.869707 21 3.620056 6 1.000000 11.884426 4.083470 1 588 2 2.667080 20 3.000000 6 1.000000 12.384435 2.667080 1 589 2 2.961760 21 5.827943 6 1.000000 11.496548 2.961760 1 590 2 3.174954 20 5.821169 6 1.000000 11.042188 3.189857 1 591 2 5.000000 22 3.000000 6 1.000000 12.500000 6.500000 1 592 2 3.941828 21 4.853701 6 1.000000 11.304634 3.984209 1 593 2 3.110801 20 5.744604 6 1.000000 11.442828 3.110801 1 594 2 5.060729 24 3.000000 6 1.000000 14.203438 5.060729 1 595 2 3.181627 20 6.000000 6 1.000000 10.771391 3.181627 1 596 2 3.483585 21 4.973613 6 1.012114 11.306041 3.526042 1 597 2 4.079095 23 3.000000 6 1.013860 11.918963 4.518075 1 598 2 5.550000 22 3.000000 6 1.000000 11.800000 5.550000 1 599 2 4.812203 23 3.000000 6 1.000000 12.234832 4.812203 1 600 2 3.875000 22 3.000000 6 1.000000 12.500000 3.875000 1 601 2 2.738099 21 6.000000 6 1.000000 11.493771 2.738099 1 602 2 3.271322 21 5.498974 6 1.000000 11.423713 3.276735 1 603 2 3.018414 34 2.414731 12 1.585269 11.872097 4.627903 1 604 2 5.319139 33 3.000000 6 1.000000 11.569139 5.319139 1 605 2 5.501975 34 3.000000 6 1.000000 11.751975 5.618234 1 606 2 3.428324 33 5.194750 6 1.000000 10.851940 3.460975 1 607 2 3.826198 33 4.320016 6 1.000000 11.073975 3.851426 1 608 2 3.203128 32 6.000000 6 1.000000 11.346562 3.203128 1 609 2 3.325178 32 6.000000 6 1.000000 11.034176 3.325178 1 610 2 2.746905 33 6.000000 6 1.000000 10.996905 2.746905 1 611 2 2.674394 32 6.000000 6 1.000000 10.411987 2.674394 1 612 2 2.132972 32 6.000000 6 1.000000 9.824458 2.132972 1 613 2 2.900590 32 5.904935 6 1.000000 10.884839 2.903976 1 614 2 3.828530 33 4.745804 6 1.000000 11.206248 3.915676 1 615 2 4.787819 33 3.562931 6 1.000000 11.611178 4.959517 1 616 2 4.175681 33 4.193071 6 1.000000 11.412893 4.261537 1 617 2 4.250000 35 3.000000 6 1.000000 11.500000 4.250000 1 618 2 2.886961 33 5.667880 6 1.000000 10.690251 2.901228 1 619 2 4.469583 33 4.264511 6 1.000000 11.601729 4.523780 1 620 2 4.443737 33 3.865177 6 1.001827 11.274165 4.515114 1 621 2 3.608104 34 3.000000 6 1.000000 11.709544 3.608104 1 622 2 5.461077 34 3.000000 6 1.000000 11.711077 5.461077 1 623 2 3.512777 32 5.533815 6 1.004804 11.332647 3.532452 1 624 2 3.625000 1 1.000000 1 1.000000 9.990000 3.625000 1 625 2 1.875000 2 1.000000 3 1.000000 9.999000 1.875000 1 626 2 3.408924 4 1.000000 6 1.000000 11.131267 3.408924 1 627 2 3.458015 6 1.000000 6 1.000000 13.754218 3.458015 1 628 2 3.650000 4 1.000000 6 1.000000 10.750000 3.650000 1 629 2 3.411600 5 1.000000 6 1.000000 10.661600 3.411600 1 630 2 2.875000 4 1.000000 6 1.000000 10.625000 2.875000 1 S-109
424B5110th Page of 311TOC1stPreviousNextBottomJust 110th
MONTHS TO MONTHS NEXT RATE INITIAL BETWEEN RATE SUBSEQUENT MAXIMUM MINIMUM LOAN LOAN GROSS ADJUSTMENT RATE ADJUSTMENT PERIODIC RATE MORTGAGE MORTGAGE PRE-FUNDING NUMBER GROUP MARGIN (%) DATE CAP (%) DATES CAP (%) RATE (%) RATE (%) TERM (MONTHS) ------ ----- ---------- ---- ------- ----- ------- -------- -------- ------------- 631 2 3.713530 5 1.048500 6 1.048500 12.184019 3.864734 1 632 2 3.750000 59 3.000000 6 1.000000 11.750000 3.750000 1 633 2 5.000000 57 4.020767 6 1.000000 11.012979 5.000000 1 634 2 3.500000 60 3.000000 6 1.000000 11.625000 3.500000 1 635 2 3.875000 59 3.000000 6 1.000000 11.994838 3.875000 1 636 2 3.947702 59 3.468053 6 1.000000 11.877858 4.358247 1 637 2 4.668580 59 3.000000 6 1.000000 11.434122 4.668580 1
(ii) with respect to the certificates, the level of One-Month LIBOR remains constant at 1.60%; (iii) the hypothetical mortgage loans with an Index indicated as "3 Month LIBOR", "6 Month LIBOR", "1 Year LIBOR", or "1 Month LIBOR" have an Index of Three-Month LIBOR, Six-Month LIBOR, One-Year LIBOR and One-Month LIBOR which remain constant at 1.71%, 1.93%, 2.25% and 1.60% per annum, respectively; (iv) payments on the certificates are received, in cash, on the 25th day of each month, commencing in September 2004; (v) there are no delinquencies or losses on the mortgage loans and principal payments on the mortgage loans are timely received together with prepayments, if any, at the respective percentages of the Prepayment Assumption set forth in the following tables; (vi) there are no repurchases of the mortgage loans; (vii) all of the hypothetical mortgage loans are fully-amortizing; (viii) there is no Prepayment Interest Shortfall, Net WAC Shortfall Amount or any other interest shortfall in any month; (ix) the scheduled monthly payment for the mortgage loan is calculated based on its principal balance, mortgage rate and remaining term to maturity such that such mortgage loan will amortize in amounts sufficient to repay the remaining principal balance of such mortgage loan by its remaining term to maturity, in some cases following an interest only period; (x) with respect to each mortgage loan, the Index remains constant at the rate set forth above and the mortgage rate on each mortgage loan is adjusted on the next adjustment date (and on subsequent adjustment dates, as necessary) to equal the Index plus the applicable gross margin, subject to the maximum mortgage rates, minimum mortgage rates and periodic rate caps listed above; (xi) none of the mortgage loans provide for negative amortization; (xii) the monthly payment on each mortgage loan is adjusted on the due date immediately following the next related adjustment date (and on subsequent adjustment dates, as necessary) to equal a fully amortizing payment as described in clause (ix) above, in some cases, after an initial interest only period; (xiii) payments on the mortgage loans earn no reinvestment return; (xiv) there are no additional ongoing expenses payable out of the trust, other than the Policy Premium Rate payable to the Certificate Insurer; (xv) the holder of the Class C Certificates exercises its optional call on the first distribution date on which it would be permitted to do so as described in "Pooling and Servicing Agreement -- Termination" in this prospectus supplement; (xvi) the certificates will be purchased on August 31, 2004; (xvii) with respect to the "Pre-Funding Term" column, hypothetical mortgage loans with a value of 1, will begin to pay interest based on the mortgage rates in September 2004 and principal in October 2004 with the characteristics set forth in the previous table, and in each case are computed prior to giving effect to prepayments received on the last day of the prior month; and (xviii) scheduled payments on the mortgage loans are received on the first day of each month commencing in the calendar month following the Closing Date and are computed prior to giving effect to prepayments received on the last day of the prior month. Nothing contained in the foregoing assumptions should be construed as a representation that the mortgage loans will not experience delinquencies or losses or will otherwise behave in accordance with any of the above structuring assumptions. Based on the foregoing assumptions, the following tables indicate the projected weighted average lives of each class of the Offered Certificates and set forth the percentages of the original Certificate Principal Balance of each such class of Offered Certificates that would be outstanding after each of the dates shown, at various constant percentages of the Prepayment Assumption. S-110
424B5111th Page of 311TOC1stPreviousNextBottomJust 111th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS 1-A-1 CERTIFICATES ------------------------------------------------------- PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage...................... 100% 100% 100% 100% 100% August 25, 2005......................... 98 56 45 19 2 August 25, 2006......................... 97 21 6 0 0 August 25, 2007......................... 96 0 0 0 0 August 25, 2008......................... 94 0 0 0 0 August 25, 2009......................... 93 0 0 0 0 August 25, 2010......................... 89 0 0 0 0 August 25, 2011......................... 86 0 0 0 0 August 25, 2012......................... 83 0 0 0 0 August 25, 2013......................... 79 0 0 0 0 August 25, 2014......................... 75 0 0 0 0 August 25, 2015......................... 70 0 0 0 0 August 25, 2016......................... 65 0 0 0 0 August 25, 2017......................... 60 0 0 0 0 August 25, 2018......................... 55 0 0 0 0 August 25, 2019......................... 50 0 0 0 0 August 25, 2020......................... 44 0 0 0 0 August 25, 2021......................... 37 0 0 0 0 August 25, 2022......................... 31 0 0 0 0 August 25, 2023......................... 24 0 0 0 0 August 25, 2024......................... 16 0 0 0 0 August 25, 2025......................... 8 0 0 0 0 August 25, 2026......................... 1 0 0 0 0 August 25, 2027......................... 0 0 0 0 0 August 25, 2028......................... 0 0 0 0 0 August 25, 2029......................... 0 0 0 0 0 August 25, 2030......................... 0 0 0 0 0 August 25, 2031......................... 0 0 0 0 0 August 25, 2032......................... 0 0 0 0 0 August 25, 2033......................... 0 0 0 0 0 August 25, 2034......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*... 14.0 1.3 1.0 0.6 0.5 Weighted Average Life in years (to Call)*....... 14.0 1.3 1.0 0.6 0.5 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-111
424B5112th Page of 311TOC1stPreviousNextBottomJust 112th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS 1-A-2 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 100 100 100 100 100 August 25, 2006.......................... 100 100 100 32 0 August 25, 2007.......................... 100 89 48 0 0 August 25, 2008.......................... 100 52 17 0 0 August 25, 2009.......................... 100 21 0 0 0 August 25, 2010.......................... 100 0 0 0 0 August 25, 2011.......................... 100 0 0 0 0 August 25, 2012.......................... 100 0 0 0 0 August 25, 2013.......................... 100 0 0 0 0 August 25, 2014.......................... 100 0 0 0 0 August 25, 2015.......................... 100 0 0 0 0 August 25, 2016.......................... 100 0 0 0 0 August 25, 2017.......................... 100 0 0 0 0 August 25, 2018.......................... 100 0 0 0 0 August 25, 2019.......................... 100 0 0 0 0 August 25, 2020.......................... 100 0 0 0 0 August 25, 2021.......................... 100 0 0 0 0 August 25, 2022.......................... 100 0 0 0 0 August 25, 2023.......................... 100 0 0 0 0 August 25, 2024.......................... 100 0 0 0 0 August 25, 2025.......................... 100 0 0 0 0 August 25, 2026.......................... 100 0 0 0 0 August 25, 2027.......................... 84 0 0 0 0 August 25, 2028.......................... 65 0 0 0 0 August 25, 2029.......................... 45 0 0 0 0 August 25, 2030.......................... 23 0 0 0 0 August 25, 2031.......................... 1 0 0 0 0 August 25, 2032.......................... 0 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 24.7 4.2 3.2 1.9 1.4 Weighted Average Life in years (to Call)*.......... 24.7 4.2 3.2 1.9 1.4 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-112
424B5113th Page of 311TOC1stPreviousNextBottomJust 113th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS 1-A-3 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 100 100 100 100 100 August 25, 2006.......................... 100 100 100 100 90 August 25, 2007.......................... 100 100 100 60 0 August 25, 2008.......................... 100 100 100 0 0 August 25, 2009.......................... 100 100 86 0 0 August 25, 2010.......................... 100 96 59 0 0 August 25, 2011.......................... 100 72 0 0 0 August 25, 2012.......................... 100 53 0 0 0 August 25, 2013.......................... 100 0 0 0 0 August 25, 2014.......................... 100 0 0 0 0 August 25, 2015.......................... 100 0 0 0 0 August 25, 2016.......................... 100 0 0 0 0 August 25, 2017.......................... 100 0 0 0 0 August 25, 2018.......................... 100 0 0 0 0 August 25, 2019.......................... 100 0 0 0 0 August 25, 2020.......................... 100 0 0 0 0 August 25, 2021.......................... 100 0 0 0 0 August 25, 2022.......................... 100 0 0 0 0 August 25, 2023.......................... 100 0 0 0 0 August 25, 2024.......................... 100 0 0 0 0 August 25, 2025.......................... 100 0 0 0 0 August 25, 2026.......................... 100 0 0 0 0 August 25, 2027.......................... 100 0 0 0 0 August 25, 2028.......................... 100 0 0 0 0 August 25, 2029.......................... 100 0 0 0 0 August 25, 2030.......................... 100 0 0 0 0 August 25, 2031.......................... 100 0 0 0 0 August 25, 2032.......................... 68 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 28.5 9.1 7.2 4.2 2.9 Weighted Average Life in years (to Call)*.......... 28.1 7.5 5.9 3.4 2.5 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-113
424B5114th Page of 311TOC1stPreviousNextBottomJust 114th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS 1-A-4 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 99 75 68 53 43 August 25, 2006.......................... 98 54 45 26 16 August 25, 2007.......................... 98 39 29 11 0 August 25, 2008.......................... 97 30 22 0 0 August 25, 2009.......................... 96 23 15 0 0 August 25, 2010.......................... 94 17 10 0 0 August 25, 2011.......................... 92 13 0 0 0 August 25, 2012.......................... 90 9 0 0 0 August 25, 2013.......................... 88 0 0 0 0 August 25, 2014.......................... 85 0 0 0 0 August 25, 2015.......................... 83 0 0 0 0 August 25, 2016.......................... 80 0 0 0 0 August 25, 2017.......................... 77 0 0 0 0 August 25, 2018.......................... 74 0 0 0 0 August 25, 2019.......................... 71 0 0 0 0 August 25, 2020.......................... 67 0 0 0 0 August 25, 2021.......................... 64 0 0 0 0 August 25, 2022.......................... 60 0 0 0 0 August 25, 2023.......................... 56 0 0 0 0 August 25, 2024.......................... 51 0 0 0 0 August 25, 2025.......................... 47 0 0 0 0 August 25, 2026.......................... 43 0 0 0 0 August 25, 2027.......................... 38 0 0 0 0 August 25, 2028.......................... 34 0 0 0 0 August 25, 2029.......................... 29 0 0 0 0 August 25, 2030.......................... 23 0 0 0 0 August 25, 2031.......................... 18 0 0 0 0 August 25, 2032.......................... 12 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 19.2 3.4 2.6 1.6 1.2 Weighted Average Life in years (to Call)*.......... 19.1 3.1 2.4 1.4 1.1 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-114
424B5115th Page of 311TOC1stPreviousNextBottomJust 115th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS 1-A-5 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 99 75 68 53 43 August 25, 2006.......................... 98 54 45 26 16 August 25, 2007.......................... 98 39 29 11 0 August 25, 2008.......................... 97 30 22 0 0 August 25, 2009.......................... 96 23 15 0 0 August 25, 2010.......................... 94 17 10 0 0 August 25, 2011.......................... 92 13 0 0 0 August 25, 2012.......................... 90 9 0 0 0 August 25, 2013.......................... 88 0 0 0 0 August 25, 2014.......................... 85 0 0 0 0 August 25, 2015.......................... 83 0 0 0 0 August 25, 2016.......................... 80 0 0 0 0 August 25, 2017.......................... 77 0 0 0 0 August 25, 2018.......................... 74 0 0 0 0 August 25, 2019.......................... 71 0 0 0 0 August 25, 2020.......................... 67 0 0 0 0 August 25, 2021.......................... 64 0 0 0 0 August 25, 2022.......................... 60 0 0 0 0 August 25, 2023.......................... 56 0 0 0 0 August 25, 2024.......................... 51 0 0 0 0 August 25, 2025.......................... 47 0 0 0 0 August 25, 2026.......................... 43 0 0 0 0 August 25, 2027.......................... 38 0 0 0 0 August 25, 2028.......................... 34 0 0 0 0 August 25, 2029.......................... 29 0 0 0 0 August 25, 2030.......................... 23 0 0 0 0 August 25, 2031.......................... 18 0 0 0 0 August 25, 2032.......................... 12 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 19.2 3.4 2.6 1.6 1.2 Weighted Average Life in years (to Call)*.......... 19.1 3.1 2.4 1.4 1.1 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-115
424B5116th Page of 311TOC1stPreviousNextBottomJust 116th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS 2-A-1 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 99 75 68 53 44 August 25, 2006.......................... 98 54 45 26 16 August 25, 2007.......................... 97 39 29 11 0 August 25, 2008.......................... 96 30 22 0 0 August 25, 2009.......................... 95 23 15 0 0 August 25, 2010.......................... 93 17 10 0 0 August 25, 2011.......................... 91 13 0 0 0 August 25, 2012.......................... 89 9 0 0 0 August 25, 2013.......................... 87 0 0 0 0 August 25, 2014.......................... 85 0 0 0 0 August 25, 2015.......................... 82 0 0 0 0 August 25, 2016.......................... 79 0 0 0 0 August 25, 2017.......................... 76 0 0 0 0 August 25, 2018.......................... 73 0 0 0 0 August 25, 2019.......................... 70 0 0 0 0 August 25, 2020.......................... 67 0 0 0 0 August 25, 2021.......................... 63 0 0 0 0 August 25, 2022.......................... 59 0 0 0 0 August 25, 2023.......................... 55 0 0 0 0 August 25, 2024.......................... 51 0 0 0 0 August 25, 2025.......................... 47 0 0 0 0 August 25, 2026.......................... 43 0 0 0 0 August 25, 2027.......................... 38 0 0 0 0 August 25, 2028.......................... 34 0 0 0 0 August 25, 2029.......................... 29 0 0 0 0 August 25, 2030.......................... 23 0 0 0 0 August 25, 2031.......................... 18 0 0 0 0 August 25, 2032.......................... 12 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 19.1 3.4 2.6 1.6 1.2 Weighted Average Life in years (to Call)*.......... 19.0 3.1 2.4 1.4 1.1 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-116
424B5117th Page of 311TOC1stPreviousNextBottomJust 117th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS 2-A-2 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 99 75 68 53 44 August 25, 2006.......................... 98 54 45 26 16 August 25, 2007.......................... 97 39 29 11 0 August 25, 2008.......................... 96 30 22 0 0 August 25, 2009.......................... 95 23 15 0 0 August 25, 2010.......................... 93 17 10 0 0 August 25, 2011.......................... 91 13 0 0 0 August 25, 2012.......................... 89 9 0 0 0 August 25, 2013.......................... 87 0 0 0 0 August 25, 2014.......................... 85 0 0 0 0 August 25, 2015.......................... 82 0 0 0 0 August 25, 2016.......................... 79 0 0 0 0 August 25, 2017.......................... 76 0 0 0 0 August 25, 2018.......................... 73 0 0 0 0 August 25, 2019.......................... 70 0 0 0 0 August 25, 2020.......................... 67 0 0 0 0 August 25, 2021.......................... 63 0 0 0 0 August 25, 2022.......................... 59 0 0 0 0 August 25, 2023.......................... 55 0 0 0 0 August 25, 2024.......................... 51 0 0 0 0 August 25, 2025.......................... 47 0 0 0 0 August 25, 2026.......................... 43 0 0 0 0 August 25, 2027.......................... 38 0 0 0 0 August 25, 2028.......................... 34 0 0 0 0 August 25, 2029.......................... 29 0 0 0 0 August 25, 2030.......................... 23 0 0 0 0 August 25, 2031.......................... 18 0 0 0 0 August 25, 2032.......................... 12 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 19.1 3.4 2.6 1.6 1.2 Weighted Average Life in years (to Call)*.......... 19.0 3.1 2.4 1.4 1.1 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-117
424B5118th Page of 311TOC1stPreviousNextBottomJust 118th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS M-1 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 100 100 100 100 100 August 25, 2006.......................... 100 100 100 100 100 August 25, 2007.......................... 100 100 100 100 0 August 25, 2008.......................... 100 66 47 0 0 August 25, 2009.......................... 100 49 33 0 0 August 25, 2010.......................... 100 37 23 0 0 August 25, 2011.......................... 100 27 0 0 0 August 25, 2012.......................... 100 20 0 0 0 August 25, 2013.......................... 100 0 0 0 0 August 25, 2014.......................... 100 0 0 0 0 August 25, 2015.......................... 100 0 0 0 0 August 25, 2016.......................... 100 0 0 0 0 August 25, 2017.......................... 100 0 0 0 0 August 25, 2018.......................... 100 0 0 0 0 August 25, 2019.......................... 100 0 0 0 0 August 25, 2020.......................... 100 0 0 0 0 August 25, 2021.......................... 100 0 0 0 0 August 25, 2022.......................... 100 0 0 0 0 August 25, 2023.......................... 100 0 0 0 0 August 25, 2024.......................... 100 0 0 0 0 August 25, 2025.......................... 100 0 0 0 0 August 25, 2026.......................... 92 0 0 0 0 August 25, 2027.......................... 83 0 0 0 0 August 25, 2028.......................... 73 0 0 0 0 August 25, 2029.......................... 62 0 0 0 0 August 25, 2030.......................... 51 0 0 0 0 August 25, 2031.......................... 39 0 0 0 0 August 25, 2032.......................... 26 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 25.9 5.8 4.8 3.9 4.1 Weighted Average Life in years (to Call)*.......... 25.8 5.4 4.4 3.6 3.0 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-118
424B5119th Page of 311TOC1stPreviousNextBottomJust 119th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS M-2 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 100 100 100 100 100 August 25, 2006.......................... 100 100 100 100 100 August 25, 2007.......................... 100 100 100 100 0 August 25, 2008.......................... 100 66 47 0 0 August 25, 2009.......................... 100 49 33 0 0 August 25, 2010.......................... 100 37 23 0 0 August 25, 2011.......................... 100 27 0 0 0 August 25, 2012.......................... 100 20 0 0 0 August 25, 2013.......................... 100 0 0 0 0 August 25, 2014.......................... 100 0 0 0 0 August 25, 2015.......................... 100 0 0 0 0 August 25, 2016.......................... 100 0 0 0 0 August 25, 2017.......................... 100 0 0 0 0 August 25, 2018.......................... 100 0 0 0 0 August 25, 2019.......................... 100 0 0 0 0 August 25, 2020.......................... 100 0 0 0 0 August 25, 2021.......................... 100 0 0 0 0 August 25, 2022.......................... 100 0 0 0 0 August 25, 2023.......................... 100 0 0 0 0 August 25, 2024.......................... 100 0 0 0 0 August 25, 2025.......................... 100 0 0 0 0 August 25, 2026.......................... 92 0 0 0 0 August 25, 2027.......................... 83 0 0 0 0 August 25, 2028.......................... 73 0 0 0 0 August 25, 2029.......................... 62 0 0 0 0 August 25, 2030.......................... 51 0 0 0 0 August 25, 2031.......................... 39 0 0 0 0 August 25, 2032.......................... 26 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 25.9 5.8 4.7 3.8 3.9 Weighted Average Life in years (to Call)*.......... 25.8 5.4 4.4 3.6 3.0 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-119
424B5120th Page of 311TOC1stPreviousNextBottomJust 120th
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS M-3 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 100 100 100 100 100 August 25, 2006.......................... 100 100 100 100 100 August 25, 2007.......................... 100 100 100 100 0 August 25, 2008.......................... 100 66 47 0 0 August 25, 2009.......................... 100 49 33 0 0 August 25, 2010.......................... 100 37 23 0 0 August 25, 2011.......................... 100 27 0 0 0 August 25, 2012.......................... 100 20 0 0 0 August 25, 2013.......................... 100 0 0 0 0 August 25, 2014.......................... 100 0 0 0 0 August 25, 2015.......................... 100 0 0 0 0 August 25, 2016.......................... 100 0 0 0 0 August 25, 2017.......................... 100 0 0 0 0 August 25, 2018.......................... 100 0 0 0 0 August 25, 2019.......................... 100 0 0 0 0 August 25, 2020.......................... 100 0 0 0 0 August 25, 2021.......................... 100 0 0 0 0 August 25, 2022.......................... 100 0 0 0 0 August 25, 2023.......................... 100 0 0 0 0 August 25, 2024.......................... 100 0 0 0 0 August 25, 2025.......................... 100 0 0 0 0 August 25, 2026.......................... 92 0 0 0 0 August 25, 2027.......................... 83 0 0 0 0 August 25, 2028.......................... 73 0 0 0 0 August 25, 2029.......................... 62 0 0 0 0 August 25, 2030.......................... 51 0 0 0 0 August 25, 2031.......................... 39 0 0 0 0 August 25, 2032.......................... 26 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 25.9 5.7 4.7 3.7 3.7 Weighted Average Life in years (to Call)*.......... 25.8 5.4 4.4 3.5 3.0 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-120
424B5121st Page of 311TOC1stPreviousNextBottomJust 121st
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS M-4 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 100 100 100 100 100 August 25, 2006.......................... 100 100 100 100 100 August 25, 2007.......................... 100 100 100 100 0 August 25, 2008.......................... 100 66 47 0 0 August 25, 2009.......................... 100 49 33 0 0 August 25, 2010.......................... 100 37 23 0 0 August 25, 2011.......................... 100 27 0 0 0 August 25, 2012.......................... 100 20 0 0 0 August 25, 2013.......................... 100 0 0 0 0 August 25, 2014.......................... 100 0 0 0 0 August 25, 2015.......................... 100 0 0 0 0 August 25, 2016.......................... 100 0 0 0 0 August 25, 2017.......................... 100 0 0 0 0 August 25, 2018.......................... 100 0 0 0 0 August 25, 2019.......................... 100 0 0 0 0 August 25, 2020.......................... 100 0 0 0 0 August 25, 2021.......................... 100 0 0 0 0 August 25, 2022.......................... 100 0 0 0 0 August 25, 2023.......................... 100 0 0 0 0 August 25, 2024.......................... 100 0 0 0 0 August 25, 2025.......................... 100 0 0 0 0 August 25, 2026.......................... 92 0 0 0 0 August 25, 2027.......................... 83 0 0 0 0 August 25, 2028.......................... 73 0 0 0 0 August 25, 2029.......................... 62 0 0 0 0 August 25, 2030.......................... 51 0 0 0 0 August 25, 2031.......................... 39 0 0 0 0 August 25, 2032.......................... 26 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 25.9 5.7 4.6 3.6 3.5 Weighted Average Life in years (to Call)*.......... 25.8 5.4 4.4 3.4 3.0 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-121
424B5122nd Page of 311TOC1stPreviousNextBottomJust 122nd
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS M-5 CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 100 100 100 100 100 August 25, 2006.......................... 100 100 100 100 100 August 25, 2007.......................... 100 100 100 100 0 August 25, 2008.......................... 100 66 47 0 0 August 25, 2009.......................... 100 49 33 0 0 August 25, 2010.......................... 100 37 23 0 0 August 25, 2011.......................... 100 27 0 0 0 August 25, 2012.......................... 100 18 0 0 0 August 25, 2013.......................... 100 0 0 0 0 August 25, 2014.......................... 100 0 0 0 0 August 25, 2015.......................... 100 0 0 0 0 August 25, 2016.......................... 100 0 0 0 0 August 25, 2017.......................... 100 0 0 0 0 August 25, 2018.......................... 100 0 0 0 0 August 25, 2019.......................... 100 0 0 0 0 August 25, 2020.......................... 100 0 0 0 0 August 25, 2021.......................... 100 0 0 0 0 August 25, 2022.......................... 100 0 0 0 0 August 25, 2023.......................... 100 0 0 0 0 August 25, 2024.......................... 100 0 0 0 0 August 25, 2025.......................... 100 0 0 0 0 August 25, 2026.......................... 92 0 0 0 0 August 25, 2027.......................... 83 0 0 0 0 August 25, 2028.......................... 73 0 0 0 0 August 25, 2029.......................... 62 0 0 0 0 August 25, 2030.......................... 51 0 0 0 0 August 25, 2031.......................... 39 0 0 0 0 August 25, 2032.......................... 26 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 25.8 5.5 4.4 3.4 3.3 Weighted Average Life in years (to Call)*.......... 25.8 5.4 4.3 3.4 3.0 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-122
424B5123rd Page of 311TOC1stPreviousNextBottomJust 123rd
[Enlarge/Download Table] PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION CLASS B CERTIFICATES ------------------------------------------------------ PREPAYMENT ASSUMPTION 0% 80% 100% 150% 180% --------------------- -- --- ---- ---- ---- DISTRIBUTION DATE ----------------- Initial Percentage....................... 100% 100% 100% 100% 100% August 25, 2005.......................... 100 100 100 100 100 August 25, 2006.......................... 100 100 100 100 100 August 25, 2007.......................... 100 100 100 100 0 August 25, 2008.......................... 100 56 33 0 0 August 25, 2009.......................... 100 35 14 0 0 August 25, 2010.......................... 100 19 1 0 0 August 25, 2011.......................... 100 7 0 0 0 August 25, 2012.......................... 100 0 0 0 0 August 25, 2013.......................... 100 0 0 0 0 August 25, 2014.......................... 100 0 0 0 0 August 25, 2015.......................... 100 0 0 0 0 August 25, 2016.......................... 100 0 0 0 0 August 25, 2017.......................... 100 0 0 0 0 August 25, 2018.......................... 100 0 0 0 0 August 25, 2019.......................... 100 0 0 0 0 August 25, 2020.......................... 100 0 0 0 0 August 25, 2021.......................... 100 0 0 0 0 August 25, 2022.......................... 100 0 0 0 0 August 25, 2023.......................... 100 0 0 0 0 August 25, 2024.......................... 100 0 0 0 0 August 25, 2025.......................... 100 0 0 0 0 August 25, 2026.......................... 90 0 0 0 0 August 25, 2027.......................... 78 0 0 0 0 August 25, 2028.......................... 65 0 0 0 0 August 25, 2029.......................... 51 0 0 0 0 August 25, 2030.......................... 37 0 0 0 0 August 25, 2031.......................... 21 0 0 0 0 August 25, 2032.......................... 5 0 0 0 0 August 25, 2033.......................... 0 0 0 0 0 August 25, 2034.......................... 0 0 0 0 0 Weighted Average Life in years (to Maturity)*...... 25.0 4.6 3.8 3.1 3.1 Weighted Average Life in years (to Call)*.......... 25.0 4.6 3.8 3.1 3.0 (*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of Certificate Principal Balance by the number of years from the date of issuance of the certificate to the related distribution date, (ii) adding the results, and (iii) dividing the sum by the aggregate of the net reductions of the Certificate Principal Balance described in (i) above. S-123
424B5124th Page of 311TOC1stPreviousNextBottomJust 124th
There is no assurance that prepayments of the mortgage loans will conform to any of the percentages of the Prepayment Assumption indicated in the tables above or to any other level, or that the actual weighted average life of any class of Offered Certificates will conform to any of the weighted average lives set forth in the tables above. Furthermore, the information contained in the tables with respect to the weighted average life of each specified class of Offered Certificates is not necessarily indicative of the weighted average life that might be calculated or projected under different or varying prepayment assumptions or other structuring assumptions. The characteristics of the mortgage loans will differ from those assumed in preparing the table above. In addition, it is unlikely that any mortgage loan will prepay at any constant percentage of the Prepayment Assumption until maturity or that all of the mortgage loans will prepay at the same rate. The timing of changes in the rate of prepayments may significantly affect the actual yield to maturity to investors, even if the average rate of principal prepayments is consistent with the expectations of investors. FINAL SCHEDULED DISTRIBUTION DATES The final scheduled distribution date with respect to the Offered Certificates will be the distribution date in November 2034, which is the distribution date following the month of the last possible scheduled monthly payment of a mortgage loan. Due to losses and prepayments on the mortgage loans, the final scheduled distribution date on each class of certificates may be substantially earlier. In addition, the actual final distribution date may be later than the final scheduled distribution date. THE CERTIFICATE INSURER The following information has been supplied by Ambac Assurance Corporation, the Certificate Insurer, for inclusion in this prospectus supplement. No representation is made by the company, the Master Servicer, the Underwriters or any of their affiliates as to the accuracy or completeness of the information. The Certificate Insurer is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Territory of Guam and the U.S. Virgin Islands. The Certificate Insurer primarily insures newly-issued municipal and structured finance obligations. The Certificate Insurer is a wholly owned subsidiary of Ambac Financial Group, Inc. (formerly, AMBAC Inc.), a 100% publicly-held company. Moody's, Standard & Poor's and Fitch Ratings have each assigned a triple-A financial strength rating to the Certificate Insurer. The consolidated financial statements of the Certificate Insurer and subsidiaries as of December 31, 2003 and December 31, 2002, and for each of the years in the three-year period ended December 31, 2003, prepared in accordance with accounting principles generally accepted in the United States of America, included in the Annual Report on Form 10-K of Ambac Financial Group, Inc. (which was filed with the Commission on March 15, 2004; Commission File Number 1-10777), the unaudited consolidated financial statements of the Certificate Insurer and subsidiaries as of March 31, 2004 and for the periods ending March 31, 2004 and March 31, 2003 included in the Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. for the period ended March 31, 2004 (which was filed with the Commission on May 10, 2004); the unaudited consolidated financial statements of the Certificate Insurer and subsidiaries as of June 30, 2004 and for the periods ended June 30, 2004 and June 30, 2003 included in the Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. for the period ended June 30, 2004 (which was filed with the Commission on August 9, 2004) and the Current Reports on Form 8-K filed with the Commission on April 22, 2004, July 22, 2004 and August 20, 2004, as each related to the Certificate Insurer, are hereby incorporated by reference into this prospectus supplement and shall be deemed to be a part of this prospectus supplement. Any statement S-124
424B5125th Page of 311TOC1stPreviousNextBottomJust 125th
contained in a document incorporated in this prospectus supplement by reference shall be modified or superseded for the purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement by reference in this prospectus supplement also modifies or supersedes the statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement. All consolidated financial statements of the Certificate Insurer and subsidiaries included in documents filed by Ambac Financial Group, Inc. with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, as amended, subsequent to the date of this prospectus supplement and prior to the termination of the offering of the certificates shall be deemed to be incorporated by reference into this prospectus supplement and to be a part hereof from the respective dates of filing such consolidated financial statements. The following table sets forth the capitalization of the Certificate Insurer as of December 31, 2002, December 31, 2003, and June 30, 2004, in conformity with accounting principles generally accepted in the United States of America. [Enlarge/Download Table] AMBAC ASSURANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED CAPITALIZATION TABLE (DOLLARS IN MILLIONS) DECEMBER 31, DECEMBER 31, JUNE 30, 2004 2002 2003 (UNAUDITED) ---- ---- ----------- Unearned premiums................................................ $2,137 $2,553 $2,733 Notes payable to affiliates...................................... 111 84 90 Other liabilities................................................ 1,865 2,197 2,253 ------ ------ ------- Total liabilities........................................... 4,113 4,834 5,076 ------ ------ ------- Stockholder's equity: Common stock................................................ 82 82 82 Additional paid-in capital.................................. 920 1,144 1,157 Accumulated other comprehensive income.................................................. 231 243 97 Retained earnings........................................... 2,849 3,430 3,754 ------ ------ ------- Total stockholder's equity.................................. 4,082 4,899 5,090 ------ ------ ------- Total liabilities and stockholder's equity.................. $8,195 $9,733 $10,166 ====== ====== ======= For additional financial information concerning the Certificate Insurer, see the audited consolidated financial statements of the Certificate Insurer incorporated by reference in this prospectus supplement. Copies of the consolidated financial statements of the Certificate Insurer incorporated by reference and copies of the Certificate Insurer's annual statement for the year ended December 31, 2003 prepared on the basis of accounting practices prescribed or permitted by the State of Wisconsin Office of the Commissioner of Insurance are available, without charge, from the Certificate Insurer. The address of the Certificate Insurer's administrative offices and its telephone number are One State Street Plaza, 19th Floor, New York, New York 10004 and (212) 668-0340. The Certificate Insurer makes no representation regarding the certificates or the advisability of investing in the certificates and makes no representation regarding, nor has it participated in the preparation of, this prospectus supplement other than the information supplied by the Certificate Insurer and presented under the headings "The Certificate Insurer" and "Description of the Certificates -- Description of the S-125
424B5126th Page of 311TOC1stPreviousNextBottomJust 126th
Certificate Guaranty Insurance Policy" in this prospectus supplement and in the financial statements incorporated in this prospectus supplement by reference. DESCRIPTION OF THE CERTIFICATES GENERAL The Series 2004-3 Certificates will consist of seventeen classes of certificates, thirteen of which are offered hereby. Only the Offered Certificates are offered by this prospectus supplement. The Class C, the Class R and Class R-X Certificates, which are not offered hereby, will be entitled to distributions on any distribution date only after all required distributions have been made on the Offered Certificates. The Certificate Principal Balance of the Class C Certificates as of any date of determination will be equal to aggregate stated principal balance of the mortgage loans minus the aggregate Certificate Principal Balance of all other classes of certificates and will be entitled to distributions of interest as provided in the Agreement. The Class R Certificates and Class R-X Certificates will not have principal balances and will not be entitled to distributions of interest. The Class P Certificates, which are not offered hereby, will have an initial Certificate Principal Balance of $100 and will not be entitled to distributions in respect of interest. The Class P Certificates will be entitled to all prepayment charges received in respect of the mortgage loans. The Class 1-A Certificates represent interests primarily in the Group 1 Loans and the Class 2-A Certificates represent interests primarily in the Group 2 Loans. Payments of principal and interest on the Class 1-A Certificates will be made first from payments received on the Group 1 Loans and payments of principal and interest on the Class 2-A Certificates will be made first from payments received on the Group 2 Loans, in each case, as described in this prospectus supplement. SEE "--ALLOCATION OF AVAILABLE FUNDS--INTEREST DISTRIBUTIONS ON THE OFFERED CERTIFICATES", "--ALLOCATION OF AVAILABLE FUNDS--PRINCIPAL DISTRIBUTIONS ON THE OFFERED CERTIFICATES" AND "--OVERCOLLATERALIZATION PROVISIONS" IN THIS PROSPECTUS SUPPLEMENT. Each class of the Offered Certificates will have the approximate initial Certificate Principal Balance as set forth on page S-4 hereof and will have the Pass-Through Rate as defined under "Glossary" in this prospectus supplement. The Pass-Through Rate on each class of the Offered Certificates will be limited to the related Net WAC Rate. The holders of the Offered Certificates WILL NOT be entitled to recover interest in excess of any applicable limitation on the Pass-Through Rate thereof on any future distribution date from excess cashflow or from any other source except as provided in "--Overcollateralization Provisions" below. The Offered Certificates will be issued, maintained and transferred on the book-entry records of DTC and its participants in minimum denominations representing Certificate Principal Balances of $25,000 and integral multiples of $1 in excess thereof. The Book-Entry Certificates will initially be represented by one or more global certificates registered in the name of a nominee of DTC. The company has been informed by DTC that DTC's nominee will be Cede & Co. No person acquiring an interest in any class of the Book-Entry Certificates will be entitled to receive a certificate representing such person's interest, except as set forth below under "--Definitive Certificates." Unless and until definitive certificates are issued under the limited circumstances described in this prospectus supplement, all references to actions by certificateholders with respect to the Book-Entry Certificates shall refer to actions taken by DTC upon instructions from its participants and all references in this prospectus supplement to distributions, notices, reports and statements to certificateholders with respect S-126
424B5127th Page of 311TOC1stPreviousNextBottomJust 127th
to the Book-Entry Certificates shall refer to distributions, notices, reports and statements to DTC or Cede & Co., as the registered holder of the Book-Entry Certificates, for distribution to Certificate Owners in accordance with DTC procedures. SEE "--REGISTRATION OF THE BOOK-ENTRY CERTIFICATES" AND "--DEFINITIVE CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT. The definitive certificates, if ever issued, will be transferable and exchangeable at the offices of the Securities Administrator designated by the Securities Administrator from time to time for these purposes. The Securities Administrator has initially designated its offices located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0113, Attention: Corporate Trust Services - Impac Secured Assets Corp. 2004- 3, for such purpose. No service charge will be imposed for any registration of transfer or exchange, but the Trustee or the Securities Administrator may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith. All distributions to holders of the certificates, other than the final distribution on any class of certificates, will be made on each distribution date by or on behalf of the Securities Administrator to the persons in whose names the certificates are registered at the close of business on the related Record Date. Distributions will be made by wire transfer in immediately available funds to the account of the certificateholders specified in the request. The final distribution on any class of certificates will be made in like manner, but only upon presentment and surrender of the class at the location specified by the Securities Administrator in the notice to certificateholders of the final distribution. REGISTRATION OF THE BOOK-ENTRY CERTIFICATES 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 Exchange Act. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book entries, thereby eliminating the need for physical movement of certificates. Certificate Owners that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, the Book-Entry Certificates may do so only through participants and indirect participants. In addition, Certificate Owners will receive all distributions of principal of and interest on the Book-Entry Certificates from the Securities Administrator on behalf of the Trustee through DTC and DTC participants. Accordingly, Certificate Owners may experience delays in their receipt of payments. Unless and until definitive certificates are issued, it is anticipated that the only certificateholders of the Book-Entry Certificates will be Cede & Co., as nominee of DTC. Certificate Owners will not be recognized by the Trustee or the Securities Administrator as certificateholders, as such term is used in the Agreement and Certificate Owners will be permitted to exercise the rights of certificateholders only indirectly through DTC and its participants. Under the Rules, DTC is required to make book-entry transfers of Book-Entry Certificates among participants and to receive and transmit distributions of principal of, and interest on, the Book-Entry Certificates. Participants and indirect participants with which Certificate Owners have accounts with respect to the Book-Entry Certificates similarly are required to make book-entry transfers and receive and transmit these payments on behalf of their respective Certificate Owners. Accordingly, although Certificate Owners will not possess definitive certificates, the Rules provide a mechanism by which Certificate Owners, through their participants and indirect participants, will receive payments and will be able to transfer their interest in the Book-Entry Certificates. S-127
424B5128th Page of 311TOC1stPreviousNextBottomJust 128th
Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants and on behalf of certain banks, the ability of a Certificate Owner to pledge Book-Entry Certificates to persons or entities that do not participate in the DTC system, or to otherwise act with respect to Book-Entry Certificates, may be limited due to the absence of physical certificates for the Book-Entry Certificates. In addition, under a book-entry format, Certificate Owners may experience delays in their receipt of payments since distribution will be made by the Securities Administrator on behalf of the Trustee to Cede & Co., as nominee for DTC. Under the Rules, DTC will take action permitted to be taken by a certificateholders under the Agreement only at the direction of one or more participants to whose DTC account the Book-Entry Certificates are credited. Additionally, under the Rules, DTC will take actions with respect to specified Voting Rights only at the direction of and on behalf of participants whose holdings of Book-Entry Certificates evidence these specified Voting Rights. DTC may take conflicting actions with respect to Voting Rights, to the extent that participants whose holdings of Book-Entry Certificates evidence Voting Rights, authorize divergent action. The company, the Master Servicer, the Securities Administrator and the Trustee will have no liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Book-Entry Certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to beneficial ownership interests. DEFINITIVE CERTIFICATES Definitive certificates will be issued to Certificate Owners or their nominees, respectively, rather than to DTC or its nominee, only if (1) the company advises the Securities Administrator in writing that DTC is no longer willing or able to discharge properly its responsibilities as clearing agency with respect to the Book- Entry Certificates and the company is unable to locate a qualified successor, (2) the company, at its option, elects to terminate the book-entry system through DTC, or (3) after the occurrence of an Event of Default, Certificate Owners representing in the aggregate not less than 51% of the Voting Rights of the Book-Entry Certificates advise the Securities Administrator and DTC through participants, in writing, that the continuation of a book-entry system through DTC (or a successor thereto) is no longer in the Certificate Owners' best interest. Upon the occurrence of any event described in the immediately preceding paragraph, the Securities Administrator is required to notify all Certificate Owners through participants of the availability of definitive certificates. Upon surrender by DTC of the definitive certificates representing the Book-Entry Certificates and receipt of instructions for re-registration, the Securities Administrator on behalf of the Trustee will reissue the Book-Entry Certificates as definitive certificates issued in the respective principal amounts owned by individual Certificate Owners, and thereafter the Trustee and the Securities Administrator will recognize the holders of definitive certificates as certificateholders under the Agreement. Definitive certificates will be issued in minimum denominations of $25,000, except that any beneficial ownership represented by a Book- Entry Certificate in an amount less than $25,000 immediately prior to the issuance of a definitive certificate shall be issued in a minimum denomination equal to the amount of the beneficial ownership. CALCULATION OF ONE-MONTH LIBOR FOR THE OFFERED CERTIFICATES On each LIBOR Determination Date, the Securities Administrator will determine One-Month LIBOR for the next Accrual Period for the Offered Certificates on the basis of the offered rates of the Reference Banks for one-month United States dollar deposits, as such rate appears on the Telerate Screen Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date. S-128
424B5129th Page of 311TOC1stPreviousNextBottomJust 129th
On each LIBOR Determination Date, if the rate does not appear or is not available on Telerate Screen Page 3750, One-Month LIBOR for the related Accrual Period for the Offered Certificates will be established by the Securities Administrator as follows: (a) If on such LIBOR Determination Date two or more Reference Banks provide such offered quotations, One-Month LIBOR for the related Accrual Period shall be the arithmetic mean of such offered quotations (rounded upwards if necessary to the nearest whole multiple of 0.0625%). (b) If on such LIBOR Determination Date fewer than two Reference Banks provide such offered quotations, One-Month LIBOR for the related Accrual Period shall be the higher of (x) One- Month LIBOR as determined on the previous LIBOR Determination Date and (y) the Reserve Interest Rate. The establishment of One-Month LIBOR on each LIBOR Determination Date by the Securities Administrator and the Securities Administrator's calculation of the rate of interest applicable to the Offered Certificates for the related Accrual Period shall (in the absence of manifest error) be final and binding. ALLOCATION OF AVAILABLE FUNDS Distributions to holders of each class of Offered Certificates will be made on each distribution date from the Available Distribution Amount. INTEREST DISTRIBUTIONS ON THE OFFERED CERTIFICATES On each distribution date the Securities Administrator shall withdraw from the Certificate Account that portion of the Available Distribution Amount for such distribution date consisting of the Interest Remittance Amount for such distribution date, and make the following disbursements and transfers in the order of priority described below, in each case to the extent of the Interest Remittance Amount remaining for such distribution date. (i) (a) from the Interest Remittance Amount in respect of the Group 1 Loans (and after the distribution of the Interest Remittance Amount in respect of the Group 2 Loans as provided in clause (b) below, from the Interest Remittance Amount in respect of the Group 2 Loans), concurrently to the holders of the Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-A-4 and Class 1-A-5 Certificates, the related Monthly Interest Distributable Amount and any Unpaid Interest Shortfall Amount for each such class for such distribution date, and (b) from the Interest Remittance Amount in respect of the Group 2 Loans (and after the distribution of the Interest Remittance Amount in respect of the Group 1 Loans as provided in clause (a) above, from the Interest Remittance Amount in respect of the Group 1 Loans), concurrently to the holders of the Class 2-A-1 Certificates and Class 2-A-2 Certificates, the related Monthly Interest Distributable Amount and any Unpaid Interest Shortfall Amount for each such class for such distribution date; (ii) from the remaining Interest Remittance Amount, to the Class M-1 Certificates, the related Monthly Interest Distributable Amount for such class for such distribution date; (iii) from the remaining Interest Remittance Amount, to the Class M-2 Certificates, the related Monthly Interest Distributable Amount for such class for such distribution date; (iv) from the remaining Interest Remittance Amount, to the Class M-3 Certificates, the related Monthly Interest Distributable Amount for such class for such distribution date; (v) from the remaining Interest Remittance Amount, to the Class M-4 Certificates, the related S-129
424B5130th Page of 311TOC1stPreviousNextBottomJust 130th
Monthly Interest Distributable Amount for such class for such distribution date; (vi) from the remaining Interest Remittance Amount, to the Class M-5 Certificates, the related Monthly Interest Distributable Amount for such class for such distribution date; and (vii) from the remaining Interest Remittance Amount, to the Class B Certificates, the related Monthly Interest Distributable Amount for such class for such distribution date. On any distribution date, any shortfalls resulting from the application of the Relief Act and any Prepayment Interest Shortfalls to the extent not covered by Compensating Interest paid by the related Subservicer or the Master Servicer will be allocated, first, in reduction of amounts otherwise distributable to the Class C, Class R and Class R-X Certificates, and thereafter, to the Monthly Interest Distributable Amounts with respect to the Offered Certificates on a pro rata basis based on the respective amounts of interest accrued on such certificates for such distribution date. The holders of the Offered Certificates will not be entitled to reimbursement for any such interest shortfalls. Unpaid Interest Shortfalls Amounts allocated to the certificates shall only be reimbursed as described in "--Overcollateralization Provisions" below. In addition, during the Funding Period, amounts on deposit in the Pre-Funding Accounts will earn a limited amount of interest which will primarily be available to the Certificateholders. The interest earned will be significantly less than interest generated by the mortgage loans in the trust. Any such shortfalls will be covered by the Interest Coverage Accounts as described in "-- Interest Coverage Accounts" below, but will not be covered by the Certificate Guaranty Insurance Policy or by any other third-party. PRINCIPAL DISTRIBUTIONS ON THE OFFERED CERTIFICATES Except as provided below, on each distribution date (a) prior to the Stepdown Date or (b) on or after the Stepdown Date if a Trigger Event is in effect, the holders of each class of Offered Certificates shall be entitled to receive distributions in respect of principal to the extent of the Principal Distribution Amount in the following amounts and order of priority: (i) first, concurrently (a) to the holders of the Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-A-4 and Class 1-A-5 Certificates, the Principal Distribution Amount for Loan Group 1 (allocated among such Class 1-A Certificates in the priority described below) and (b) to the holders of the Class 2-A-1 Certificates and Class 2-A-2 Certificates, the Principal Distribution Amount for Loan Group 2 (allocated among such Class 2-A Certificates in the priority described below), in each case until the Certificate Principal Balances thereof have been reduced to zero; provided, that if on any distribution date, the Class 1-A Certificates or Class 2-A Certificates are no longer outstanding, the related portion of the Principal Distribution Amount will be allocated to the Class 2-A Certificates and Class 1-A Certificates, respectively, in the order described above, in each case until the Certificate Principal Balances thereof have been reduced to zero; and (ii) second, from the remaining Principal Distribution Amount for both Loan Groups, sequentially to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates, in each case until the Certificate Principal Balance thereof has been reduced to zero. Except as provided below, on each distribution date (a) on or after the Stepdown Date and (b) on which a Trigger Event is not in effect, the holders of each class of Offered Certificates shall be entitled to receive distributions in respect of principal to the extent of the Principal Distribution Amount in the following amounts and order of priority: (i) first, concurrently (a) to the holders of the Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-A-4 and Class 1-A-5 Certificates, the Class 1-A Principal Distribution Amount (allocated among such Class 1-A S-130
424B5131st Page of 311TOC1stPreviousNextBottomJust 131st
Certificates in the priority described below) and (b) to the holders of the Class 2-A-1 Certificates and Class 2-A-2 Certificates, the Class 2-A Principal Distribution Amount (allocated among such Class 2-A Certificates in the priority described below), in each case until the Certificate Principal Balances thereof have been reduced to zero; provided, however, that (x) after the Certificate Principal Balance of the Class 1-A Certificates has been reduced to zero, the remaining Class 1-A Principal Distribution Amount will be applied to the Class 2-A Certificates until the Certificate Principal Balance thereof is reduced to zero and (y) after the Certificate Principal Balance of the Class 2-A Certificates has been reduced to zero, the remaining Class 2-A Principal Distribution Amount will be applied to the Class 1-A Certificates until the Certificate Principal Balance thereof is reduced to zero; (ii) to the Class M-1 Certificates, the Class M-1 Principal Distribution Amount, until the Certificate Principal Balance thereof has been reduced to zero; (iii) to the Class M-2 Certificates, the Class M-2 Principal Distribution Amount, until the Certificate Principal Balance thereof has been reduced to zero; (iv) to the Class M-3 Certificates, the Class M-3 Principal Distribution Amount, until the Certificate Principal Balance thereof has been reduced to zero; (v) to the Class M-4 Certificates, the Class M-4 Principal Distribution Amount, until the Certificate Principal Balance thereof has been reduced to zero; (vi) to the Class M-5 Certificates, the Class M-5 Principal Distribution Amount, until the Certificate Principal Balance thereof has been reduced to zero; and (vii) to the Class B Certificates, the Class B Principal Distribution Amount, until the Certificate Principal Balance thereof has been reduced to zero. With respect to the Class 1-A Certificates, all principal distributions will be distributed concurrently (a) to the holders of the Class 1-A-1, Class 1-A-2 and Class 1-A-3 Certificates, sequentially, and (b) to the holders of the Class 1-A-4 Certificates and Class 1-A-5 Certificates, pro rata. With respect to the Class 2-A Certificates, all principal distributions will be distributed pro rata to the holders of the Class 2-A-1 Certificates and Class 2-A-2 Certificates. Notwithstanding the foregoing, on any distribution date on which the aggregate Certificate Principal Balance of the Mezzanine Certificates and the Overcollateralized Amount have been reduced to zero, the Principal Distribution Amount will be paid to the Class A Certificates on a pro rata basis, based on the Certificate Principal Balances thereof, until reduced to zero. The allocation of distributions in respect of principal to the Class A Certificates on each distribution date (a) prior to the Stepdown Date or (b) on or after the Stepdown Date on which a Trigger Event has occurred, will have the effect of accelerating the amortization of the Class A Certificates while, in the absence of Realized Losses, increasing the respective percentage interest in the principal balance of the mortgage loans evidenced by the Mezzanine Certificates. Increasing the respective percentage interest in the trust of the Mezzanine Certificates relative to that of the Class A Certificates is intended to preserve the availability of the subordination provided by the Mezzanine Certificates. Payments made to the Class A Certificates with amounts from non-related Loan Groups are a type of credit enhancement, which has the effect of providing limited cross-collateralization among the Loan Groups. S-131
424B5132nd Page of 311TOC1stPreviousNextBottomJust 132nd
CREDIT ENHANCEMENT The credit enhancement provided for the benefit of the holders of the Class A Certificates consists of subordination, the Certificate Guaranty Insurance Policy for the Class 2-A Certificates, as described below, excess interest, cross-collateralization and overcollateralization, as described under "--Overcollateralization Provisions" below and corridor contracts as described under "--Corridor Contracts" below. The rights of the holders of the Mezzanine Certificates and the Class C Certificates to receive distributions will be subordinated, to the extent described herein, to the rights of the holders of the Class A Certificates. The protection afforded to the holders of the Class A Certificates by means of the subordination of the Mezzanine Certificates and Class C Certificates will be accomplished by (i) the preferential right of the holders of the Class A Certificates to receive on any distribution date, prior to distributions on the Mezzanine Certificates and Class C Certificates, distributions in respect of interest and principal, subject to funds available for such distributions and (ii) if necessary, the right of the holders of the Class A Certificates to receive future distributions of amounts that would otherwise be payable to the holders of the Mezzanine Certificates and Class C Certificates. The rights of the holders of Mezzanine Certificates with higher payment priorities to receive distributions in respect of interest and principal will be senior to the rights of holders of Mezzanine Certificates with lower payment priorities and the rights of the holders of the Mezzanine Certificates to receive distributions will be senior to the rights of the holders of the Class C Certificates in respect of interest and principal, in each case to the extent described herein. The subordination feature is intended to enhance the likelihood of regular receipt by the holders of more senior certificates of distributions and to afford such holders protection against Realized Losses. OVERCOLLATERALIZATION PROVISIONS Interest collections on the mortgage loans in each Loan Group (including, during the Funding Period, interest contributed by the related Interest Coverage Account) are expected to be generated in excess of the fees and expenses payable by the trust and the amount of interest payable to the holders of the Offered Certificates. The Agreement requires that, on each distribution date, the Net Monthly Excess Cashflow, if any, be applied on such distribution date as follows: (i) to the extent of Net Monthly Excess Cashflow related to the Group 2 Loans, to pay the Certificate Insurer the aggregate of all payments made by the Certificate Insurer under the Certificate Guaranty Insurance Policy with respect to the Class 2-A Certificates; (ii) to the holders of the class or classes of Offered Certificates then entitled to receive distributions in respect of principal, in an amount equal to any Extra Principal Distribution Amount, payable to such holders as part of the Principal Distribution Amount as described under "--Allocation of Available Funds--Principal Distributions on the Offered Certificates" above; (iii) sequentially, to the holders of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates, in that order, an amount equal to any related Unpaid Interest Shortfall Amount for such Mezzanine Certificates; (iv) first, to the Class 1-A-5 Certificates, any related Allocated Realized Loss Amount and second, S-132
424B5133rd Page of 311TOC1stPreviousNextBottomJust 133rd
sequentially to the holders of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates, an amount equal to any related Allocated Realized Loss Amount; (v) to the extent of Net Monthly Excess Cashflow related to the Group 1 Loans, to pay the Certificate Insurer the aggregate of all payments made by the Certificate Insurer under the Certificate Guaranty Insurance Policy with respect to the Class 2-A Certificates; (vi) to the Net WAC Shortfall Reserve Fund to pay the Offered Certificates, to the extent not covered by the related Corridor Contract, the related Net WAC Shortfall Amount, which shall be paid first, to the Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-A-4, Class 1-A-5, Class 2-A-1 and Class 2-A-2 Certificates, pro rata, and second, sequentially to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates, in each case until the related Net WAC Shortfall Amount has been reduced to zero; and (vii) to the holders of the Class C Certificates as provided in the Agreement. DESCRIPTION OF THE CERTIFICATE GUARANTY INSURANCE POLICY On the Closing Date, the Certificate Insurer will issue the Certificate Guaranty Insurance Policy in favor of the Trustee on behalf of the Class 2-A Certificateholders. The Certificate Guaranty Insurance Policy will unconditionally and irrevocably guarantee certain payments on the Class 2-A Certificates. Provided that timely notice has been received by the Certificate Insurer, the Certificate Insurer will be required to forward the Class 2-A Insured Amount, if any, to the Securities Administrator, on behalf of the Trust by the related distribution date. For purposes of the foregoing, amounts in the Certificate Account available for interest payments on any distribution date shall be deemed to include all amounts in the Certificate Account for such distribution date available for payment on such distribution date. Notwithstanding the foregoing two sentences, the Certificate Insurer shall not be obligated to pay any Preference Amount in respect of principal (other than principal paid in connection with Realized Losses) except on the final scheduled distribution date or earlier termination of the trust pursuant to the terms of the Agreement. Prepayment Interest Shortfalls, Net WAC Shortfall Amounts and any Relief Act Shortfalls will not be covered by the Certificate Guaranty Insurance Policy. The Certificate Guaranty Insurance Policy also will not cover any shortfalls as a result of limited earnings in the or Group 2 Pre-Funding Account. Pursuant to the terms of the Agreement, draws under the Certificate Guaranty Insurance Policy in respect of any Insured Undercollateralization Amount with respect to the Class 2-A Certificates will be paid to the Class 2-A Certificateholders by the Securities Administrator as principal. In the absence of payments under the Certificate Guaranty Insurance Policy, Class 2-A Certificateholders will directly bear the credit risks associated with their investment to the extent such risks are not covered by overcollateralization or otherwise. IN THE EVENT THAT THE CERTIFICATE INSURER WERE TO BECOME INSOLVENT, ANY CLAIMS ARISING UNDER THE CERTIFICATE GUARANTY INSURANCE POLICY WOULD BE EXCLUDED FROM COVERAGE BY THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION, ESTABLISHED PURSUANT TO THE LAWS OF THE STATE OF CALIFORNIA. THE CORRIDOR CONTRACTS On the Closing Date, the Corridor Contracts will be assigned to, or entered into by, the trust for the benefit of the holders of the Offered Certificates with the Corridor Contract Provider. The Corridor Contracts will contain Monthly Strike Rates and provide for the calculation of One-Month LIBOR. The Corridor Contracts consists of four cap contracts, where net payments will be made to the trust if One-Month LIBOR exceeds the related Monthly Strike Rate, but not greater than the Ceiling Rate. On any distribution date, any amounts from the related Corridor Contract not paid to the related Offered Certificates will be paid to the S-133
424B5134th Page of 311TOC1stPreviousNextBottomJust 134th
Class C Certificates and will be not be available to make payments to the Offered Certificates on future distribution dates. Payments will be made with respect to the Corridor Contracts based on an effective notional balance in accordance with the schedule set forth in the Corridor Contracts. On each distribution date, the Securities Administrator will determine the total amount payable to the trust under the Corridor Contracts. The Securities Administrator will determine whether a net payment is due to the trust and will collect such payment. The Corridor Contracts will be governed by and construed in accordance with the laws of the State of New York. The obligations of the Corridor Contract Provider are limited to those specifically set forth in the Corridor Contracts. The Corridor Contract Provider, or the guarantor thereof making payments under the Corridor Contracts is, as of the Closing Date, rated at least "AA-" (or its equivalent) by two of S&P, Moody's or Fitch Ratings. The Monthly Strike Rates and the effective notional balances of the Class 1-A Corridor Contract will be determined in accordance with the following table: [Enlarge/Download Table] Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- September 25, 2004............ 1,527,552,000 6.275600 8.300000 October 25, 2004.............. 1,505,511,040 5.270830 8.297820 November 25, 2004............. 1,457,570,071 5.110290 8.294640 December 25, 2004............. 1,411,053,087 5.274040 8.286430 January 25, 2005.............. 1,365,917,994 5.114740 8.279590 February 25, 2005............. 1,322,124,023 5.140410 8.227690 March 25, 2005................ 1,279,634,348 5.678150 8.173920 April 25, 2005................ 1,238,408,214 5.153370 8.180960 May 25, 2005.................. 1,198,406,856 5.318200 8.175470 June 25, 2005................. 1,159,593,797 5.156380 8.179100 July 25, 2005................. 1,121,933,804 5.322830 8.174670 August 25, 2005............... 1,085,392,796 5.198740 8.149890 September 25, 2005............ 1,049,939,886 5.229770 8.130050 October 25, 2005.............. 1,015,541,429 5.397210 8.124750 November 25, 2005............. 982,165,079 5.232300 8.130760 December 25, 2005............. 949,780,519 5.399900 8.125280 January 25, 2006.............. 918,358,357 5.235810 8.131230 February 25, 2006............. 887,870,136 5.274040 8.101450 March 25, 2006................ 858,289,807 5.838220 8.055720 April 25, 2006................ 829,589,308 5.298340 8.079870 May 25, 2006.................. 801,741,914 5.467950 8.073630 June 25, 2006................. 774,722,317 5.450880 7.614310 July 25, 2006................. 748,587,154 5.784940 7.312500 S-134
424B5135th Page of 311TOC1stPreviousNextBottomJust 135th
Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- August 25, 2006............... 723,276,295 6.133830 7.094280 September 25, 2006............ 698,731,812 6.284060 7.981420 October 25, 2006.............. 674,914,922 6.490050 7.935400 November 25, 2006............. 651,802,597 6.290490 7.980820 December 25, 2006............. 629,373,895 6.552990 7.962400 January 25, 2007.............. 607,610,897 6.401890 7.984640 February 25, 2007............. 586,496,232 6.571090 7.846380 March 25, 2007................ 566,011,513 7.311750 7.624390 April 25, 2007................ 546,133,098 6.629830 7.785420 May 25, 2007.................. 526,842,564 6.937690 7.735240 June 25, 2007................. 508,103,490 6.893990 7.616940 July 25, 2007................. 489,952,940 7.348450 7.513170 August 25, 2007............... 472,363,024 7.341520 7.341520 September 25, 2007............ 455,301,948 7.438420 8.165610 October 25, 2007.............. 455,301,948 7.679270 8.092830 November 25, 2007............. 455,301,948 7.440030 8.164310 December 25, 2007............. 442,474,011 7.720190 8.112110 January 25, 2008.............. 429,383,928 7.521560 8.149390 February 25, 2008............. 416,683,393 7.629390 7.956660 March 25, 2008................ 404,360,682 8.183600 8.183600 April 25, 2008................ 392,401,635 7.672990 7.892670 May 25, 2008.................. 380,795,313 7.948120 7.948120 June 25, 2008................. 369,537,277 7.742470 7.870920 July 25, 2008................. 358,611,185 8.025240 8.025240 August 25, 2008............... 348,009,350 7.843970 7.853340 September 25, 2008............ 337,720,824 7.869500 8.846520 October 25, 2008.............. 327,735,749 8.124180 8.764830 November 25, 2008............. 318,045,054 7.870370 8.846730 December 25, 2008............. 308,640,075 8.152280 8.792680 January 25, 2009.............. 299,512,409 7.926380 8.892630 February 25, 2009............. 290,654,099 8.008010 8.924080 March 25, 2009................ 282,057,526 8.879710 8.879710 April 25, 2009................ 273,714,528 8.045750 8.938070 May 25, 2009.................. 265,617,568 8.322130 8.782240 June 25, 2009................. 257,762,289 8.096560 8.895280 July 25, 2009................. 250,138,416 8.396560 8.819070 August 25, 2009............... 242,738,569 8.256360 8.896640 September 25, 2009............ 235,516,449 8.315860 9.846100 October 25, 2009.............. 228,486,947 8.586990 9.765090 November 25, 2009............. 221,665,461 8.318000 9.845150 December 25, 2009............. 215,046,373 8.605480 9.770880 S-135
424B5136th Page of 311TOC1stPreviousNextBottomJust 136th
Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- January 25, 2010.............. 208,623,731 8.357780 9.870810 February 25, 2010............. 202,391,752 8.436450 9.917750 March 25, 2010................ 196,345,573 9.359770 9.696360 April 25, 2010................ 190,479,308 8.479630 9.944080 May 25, 2010.................. 184,787,200 8.768660 9.881900 June 25, 2010................. 179,264,077 8.531590 9.995140 July 25, 2010................. 173,904,966 8.836370 9.946910 August 25, 2010............... 168,705,033 8.604000 10.038490 September 25, 2010............ 163,660,098 8.616360 10.029130 October 25, 2010.............. 158,765,415 8.895320 9.953770 November 25, 2010............. 154,016,144 8.616690 10.027050 December 25, 2010............. 149,407,987 8.904280 9.960750 January 25, 2011.............. 144,936,758 8.639140 10.048300
After the distribution date in January 2011, the Class 1-A Corridor Contract will terminate without termination payments by either party. The Monthly Strike Rates and the effective notional balances of the Class 2-A Corridor Contract will be determined in accordance with the following table: [Enlarge/Download Table] Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- September 25, 2004........... 625,248,000 6.272410 8.304480 October 25, 2004............. 617,653,857 5.256660 8.303480 November 25, 2004............ 597,918,755 5.095490 8.301440 December 25, 2004............ 578,771,449 5.259450 8.295800 January 25, 2005............. 560,194,522 5.098910 8.293120 February 25, 2005............ 542,171,054 5.121050 8.253610 March 25, 2005............... 524,685,765 5.656620 8.216840 April 25, 2005............... 507,722,341 5.133260 8.222020 May 25, 2005................. 491,264,366 5.296790 8.218970 June 25, 2005................ 475,296,765 5.135560 8.221110 July 25, 2005................ 459,804,971 5.299060 8.219030 August 25, 2005.............. 444,774,820 5.170060 8.195120 September 25, 2005........... 430,193,459 5.193690 8.179050 October 25, 2005............. 416,047,315 5.359390 8.174560 November 25, 2005............ 402,322,822 5.195250 8.179130 December 25, 2005............ 389,007,413 5.361570 8.175290 January 25, 2006............. 376,088,931 5.197410 8.179890 February 25, 2006............ 363,555,579 5.229880 8.154090 March 25, 2006............... 351,396,513 5.784600 8.117800 April 25, 2006............... 339,600,443 5.250050 8.135320 May 25, 2006................. 328,156,135 5.417570 8.130450 S-136
424B5137th Page of 311TOC1stPreviousNextBottomJust 137th
Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- June 25, 2006................ 317,053,105 5.280810 8.051290 July 25, 2006................ 306,287,541 5.811520 7.210610 August 25, 2006.............. 295,903,322 6.107990 6.947510 September 25, 2006........... 285,836,634 6.270480 7.814520 October 25, 2006............. 276,070,618 6.473190 7.763730 November 25, 2006............ 266,594,022 6.273590 7.814030 December 25, 2006............ 257,398,211 6.487010 7.772160 January 25, 2007............. 248,475,013 6.412600 7.786930 February 25, 2007............ 239,820,580 6.579610 7.652880 March 25, 2007............... 231,424,971 7.324240 7.406030 April 25, 2007............... 223,278,688 6.641000 7.588590 May 25, 2007................. 215,373,710 6.854820 7.531730 June 25, 2007................ 207,702,880 6.789250 7.407640 July 25, 2007................ 200,272,468 7.353720 7.353720 August 25, 2007.............. 193,076,558 7.417510 7.417510 September 25, 2007........... 186,099,724 7.515710 7.997870 October 25, 2007............. 186,099,724 7.757690 7.918210 November 25, 2007............ 186,099,724 7.513940 7.993470 December 25, 2007............ 180,900,726 7.774070 7.913700 January 25, 2008............. 175,547,726 7.613320 7.982670 February 25, 2008............ 170,354,392 7.743320 7.792020 March 25, 2008............... 165,316,220 8.307200 8.307200 April 25, 2008............... 160,426,804 7.788210 7.788210 May 25, 2008................. 155,681,566 8.039720 8.039720 June 25, 2008................ 151,076,259 7.808330 7.808330 July 25, 2008................ 146,606,765 8.125010 8.125010 August 25, 2008.............. 142,270,226 7.947090 7.947090 September 25, 2008........... 138,062,270 7.971480 8.713340 October 25, 2008............. 133,978,392 8.229240 8.626950 November 25, 2008............ 130,014,938 7.971920 8.713240 December 25, 2008............ 126,168,362 8.242320 8.640010 January 25, 2009............. 122,435,226 8.042930 8.770500 February 25, 2009............ 118,812,333 8.127050 8.775350 March 25, 2009............... 115,296,811 9.012780 9.012780 April 25, 2009............... 111,884,975 8.165490 8.783490 May 25, 2009................. 108,573,768 8.429610 8.699860 June 25, 2009................ 105,360,230 8.180800 8.798770 July 25, 2009................ 102,241,486 8.501210 8.757900 August 25, 2009.............. 99,214,560 8.316400 8.871040 September 25, 2009........... 96,262,184 8.375830 9.824940 October 25, 2009............. 93,388,585 8.648100 9.743940 S-137
424B5138th Page of 311TOC1stPreviousNextBottomJust 138th
Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- November 25, 2009............ 90,600,201 8.377200 9.824750 December 25, 2009............ 87,894,550 8.655340 9.751100 January 25, 2010............. 85,269,187 8.427610 9.873760 February 25, 2010............ 82,721,754 8.503210 9.936180 March 25, 2010............... 80,250,090 9.434720 9.716890 April 25, 2010............... 77,851,984 8.546780 9.962490 May 25, 2010................. 75,525,073 8.823660 9.886540 June 25, 2010................ 73,267,248 8.564450 9.980110 July 25, 2010................ 71,076,466 8.896170 9.958340 August 25, 2010.............. 68,950,752 8.661580 10.062870 September 25, 2010........... 66,888,294 8.672720 10.055750 October 25, 2010............. 64,887,254 8.953560 9.982010 November 25, 2010............ 62,945,665 8.672770 10.055120 December 25, 2010............ 61,061,762 8.957520 9.985930 January 25, 2011............. 59,233,839 8.704490 10.086170
After the distribution date in January 2011, the Class 2-A Corridor Contract will terminate without termination payments by either party. The Monthly Strike Rates and the effective notional balances of the Class 2-A-1 Corridor Contract will be determined in accordance with the following table: [Enlarge/Download Table] Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- September 25, 2004........... 400,124,000 8.304480 12.284480 October 25, 2004............. 395,264,170 8.303480 10.253480 November 25, 2004............ 382,634,801 8.301440 10.251440 December 25, 2004............ 370,381,588 8.295800 10.245800 January 25, 2005............. 358,493,386 8.293120 10.243120 February 25, 2005............ 346,959,368 8.253610 10.203610 March 25, 2005............... 335,769,754 8.216840 10.166840 April 25, 2005............... 324,914,104 8.222020 10.172020 May 25, 2005................. 314,381,914 8.218970 10.168970 June 25, 2005................ 304,163,536 8.221110 10.171110 July 25, 2005................ 294,249,648 8.219030 10.169030 August 25, 2005.............. 284,631,187 8.195120 10.145120 September 25, 2005........... 275,299,925 8.179050 10.129050 October 25, 2005............. 266,247,179 8.174560 10.124560 November 25, 2005............ 257,464,265 8.179130 10.129130 December 25, 2005............ 248,943,143 8.175290 10.125290 January 25, 2006............. 240,676,032 8.179890 10.129890 February 25, 2006............ 232,655,382 8.154090 10.104090 S-138
424B5139th Page of 311TOC1stPreviousNextBottomJust 139th
Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- March 25, 2006............... 224,874,255 8.117800 10.067800 April 25, 2006............... 217,325,426 8.135320 10.085320 May 25, 2006................. 210,001,704 8.130450 10.080450 June 25, 2006................ 202,896,381 8.051290 10.001290 July 25, 2006................ 196,007,018 7.210610 9.160610 August 25, 2006.............. 189,361,695 6.947510 8.897510 September 25, 2006........... 182,919,573 7.814520 8.764520 October 25, 2006............. 176,669,866 7.763730 8.713730 November 25, 2006............ 170,605,370 7.814030 8.764030 December 25, 2006............ 164,720,562 7.772160 8.722160 January 25, 2007............. 159,010,211 7.786930 8.736930 February 25, 2007............ 153,471,854 7.652880 8.602880 March 25, 2007............... 148,099,130 7.406030 8.356030 April 25, 2007............... 142,885,962 7.588590 8.538590 May 25, 2007................. 137,827,215 7.531730 8.481730 June 25, 2007................ 132,918,309 7.407640 8.357640 July 25, 2007................ 128,163,259 7.353720 8.263720 August 25, 2007.............. 123,558,276 7.417510 8.067510
After the distribution date in August 2007, the Class 2-A-1 Corridor Contract will terminate without termination payments by either party. The Monthly Strike Rates and the effective notional balances of the Mezzanine Corridor Contract will be determined in accordance with the following table: [Enlarge/Download Table] Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- September 25, 2004........... 147,200,000 6.293710 8.300000 October 25, 2004............. 147,200,000 5.285730 8.298150 November 25, 2004............ 147,200,000 5.124350 8.295300 December 25, 2004............ 147,200,000 5.288730 8.287750 January 25, 2005............. 147,200,000 5.128420 8.282120 February 25, 2005............ 147,200,000 5.153020 8.233780 March 25, 2005............... 147,200,000 5.691990 8.184700 April 25, 2005............... 147,200,000 5.165590 8.191270 May 25, 2005................. 147,200,000 5.330600 8.186390 June 25, 2005................ 147,200,000 5.168290 8.189580 July 25, 2005................ 147,200,000 5.334430 8.185730 August 25, 2005.............. 147,200,000 5.208260 8.161200 September 25, 2005........... 147,200,000 5.237090 8.142400 October 25, 2005............. 147,200,000 5.404560 8.137220 November 25, 2005............ 147,200,000 5.239220 8.142810 December 25, 2005............ 147,200,000 5.406970 8.137680 S-139
424B5140th Page of 311TOC1stPreviousNextBottomJust 140th
Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- January 25, 2006............. 147,200,000 5.242210 8.143240 February 25, 2006............ 147,200,000 5.278710 8.114560 March 25, 2006............... 147,200,000 5.841940 8.071260 April 25, 2006............... 147,200,000 5.301670 8.093650 May 25, 2006................. 147,200,000 5.471180 8.087660 June 25, 2006................ 147,200,000 5.418690 7.738760 July 25, 2006................ 147,200,000 5.810370 7.280290 August 25, 2006.............. 147,200,000 6.143380 7.049030 September 25, 2006........... 147,200,000 6.297090 7.930250 October 25, 2006............. 147,200,000 6.502610 7.882660 November 25, 2006............ 147,200,000 6.302390 7.929510 December 25, 2006............ 147,200,000 6.551100 7.904090 January 25, 2007............. 147,200,000 6.421630 7.924180 February 25, 2007............ 147,200,000 6.590100 7.787040 March 25, 2007............... 147,200,000 7.333580 7.557390 April 25, 2007............... 147,200,000 6.649410 7.724910 May 25, 2007................. 147,200,000 6.930390 7.672570 June 25, 2007................ 147,200,000 6.879690 7.552600 July 25, 2007................ 147,200,000 7.366530 7.451260 August 25, 2007.............. 147,200,000 7.379500 7.379500 September 25, 2007........... 147,200,000 7.476660 8.113010 October 25, 2007............. 123,872,880 7.718870 8.038600 November 25, 2007............ 101,233,902 7.478280 8.111780 December 25, 2007............ 97,289,699 7.753390 8.051780 January 25, 2008............. 94,411,299 7.565180 8.098340 February 25, 2008............ 91,618,614 7.679440 7.906210 March 25, 2008............... 88,909,112 8.237620 8.237620 April 25, 2008............... 86,279,583 7.723420 7.840030 May 25, 2008................. 83,727,605 7.992260 7.992260 June 25, 2008................ 81,251,824 7.778570 7.830410 July 25, 2008................ 78,849,044 8.071740 8.071740 August 25, 2008.............. 76,517,622 7.890880 7.890880 September 25, 2008........... 74,255,165 7.916080 8.805210 October 25, 2008............. 72,059,433 8.172220 8.722060 November 25, 2008............ 69,928,438 7.916820 8.805330 December 25, 2008............ 67,860,276 8.195960 8.745620 January 25, 2009............. 65,853,099 7.977180 8.854520 February 25, 2009............ 63,905,166 8.059530 8.878250 March 25, 2009............... 62,014,839 8.937120 8.937120 April 25, 2009............... 60,148,324 8.097460 8.890530 May 25, 2009................. 58,367,576 8.370860 8.755570 S-140
424B5141st Page of 311TOC1stPreviousNextBottomJust 141st
Distribution Date Effective Notional Balance ($) Monthly Strike Rate (%) Ceiling Rate (%) ----------------- ------------------------------ ----------------------- ---------------- June 25, 2009................ 56,639,786 8.137980 8.864600 July 25, 2009................ 54,962,904 8.444460 8.798550 August 25, 2009.............. 53,335,312 8.290760 8.886540 September 25, 2009........... 51,747,087 8.350240 9.837290 October 25, 2009............. 50,201,214 8.622270 9.756190 November 25, 2009............ 48,701,102 8.352160 9.836560 December 25, 2009............ 47,245,488 8.637500 9.762390 January 25, 2010............. 45,833,061 8.395020 9.868990 February 25, 2010............ 44,462,550 8.472800 9.920420 March 25, 2010............... 43,132,858 9.400310 9.699350 April 25, 2010............... 41,735,261 8.516090 9.946750 May 25, 2010................. 40,482,436 8.802160 9.880480 June 25, 2010................ 39,266,755 8.558100 9.988100 July 25, 2010................ 38,087,122 8.871260 9.947460 August 25, 2010.............. 36,942,475 8.637680 10.042880 September 25, 2010........... 35,831,876 8.649690 10.034180 October 25, 2010............. 34,754,297 8.929770 9.959210 November 25, 2010............ 33,708,677 8.649940 10.032520 December 25, 2010............ 32,694,072 8.937270 9.965300 January 25, 2011............. 31,709,561 8.675070 10.056610
After the distribution date in January 2011, the Mezzanine Corridor Contract will terminate without termination payments by either party. With respect to the Corridor Contracts, on each distribution date, the Corridor Contract Payment Amount with respect to such distribution date will be allocated to the Offered Certificates and the Class C Certificates in the following order of priority, in each case to the extent of amounts remaining: (i) in respect of amounts received from the Class 1-A Corridor Contract, to the holders of the Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-A-4 and Class 1-A-5 Certificates, pro rata, based on any related Net WAC Shortfall Amount, an amount equal to any related Net WAC Shortfall Amount for such distribution date; (ii) in respect of amounts received from the Class 2-A Corridor Contract, to the holders of the Class 2-A-1 Certificates and Class 2-A-2 Certificates, pro rata, based on any related Net WAC Shortfall Amount, an amount equal to any related Net WAC Shortfall Amount for such distribution date; (iii) in respect of amounts received from the Class 2-A-1 Corridor Contract, to the holders of the Class 2-A-1 Certificates, an amount equal to any related Net WAC Shortfall Amount for such distribution date; (iv) in respect of amounts received from the Mezzanine Corridor Contract, to the holders of the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates, pro rata, based on any related Net WAC Shortfall Amount, an amount equal to any related Net WAC Shortfall Amount for such distribution date; and S-141
424B5142nd Page of 311TOC1stPreviousNextBottomJust 142nd
(v) any remaining amounts to the holders of the Class C Certificates, the Seller or otherwise as provided in the Agreement. ALLOCATION OF LOSSES; SUBORDINATION Any Realized Losses on the mortgage loans will be allocated on any distribution date, first, to Net Monthly Excess Cashflow, through a distribution of the Extra Principal Distribution Amount for that distribution date, second, in reduction of the Overcollateralized Amount, which will also result in a reduction of the Certificate Principal Balance of the Class C Certificates, third, to the Class B Certificates, in reduction of the Certificate Principal Balance thereof, until reduced to zero, fourth, to the Class M-5 Certificates, in reduction of the Certificate Principal Balance thereof, until reduced to zero, fifth, to the Class M-4 Certificates, in reduction of the Certificate Principal Balance thereof, until reduced to zero, sixth, to the Class M-3 Certificates, in reduction of the Certificate Principal Balance thereof, until reduced to zero, seventh, to the Class M-2 Certificates, in reduction of the Certificate Principal Balance thereof, until reduced to zero, and eighth, to the Class M-1 Certificates, in reduction of the Certificate Principal Balance thereof, until reduced to zero. Thereafter, any Realized Losses on the Group 1 Loans will be allocated on any distribution date to the Class 1-A-5 Certificates, in reduction of the Certificate Principal Balance thereof, until reduced to zero. Any allocation of a Realized Loss to a certificate will be made by reducing the Certificate Principal Balance thereof by the amount so allocated as of the distribution date in the month following the calendar month in which such Realized Loss was incurred. The Agreement does not permit the allocation of Realized Losses to the Super Senior Certificates. Investors in the Super Senior Certificates should note that although Realized Losses cannot be allocated to the Super Senior Certificates, under certain loss scenarios there will not be enough principal and interest on the mortgage loans to pay the Super Senior Certificates all interest and principal amounts to which they are then entitled. The Securities Administrator, on behalf of Trustee will make a draw on the Policy to the extent that principal and interest payments on the Class 2-A Certificates cannot be made due to Realized Losses on the Group 2 Loans. Although Realized Losses may reduce the Certificate Principal Balances of the Class 1-A-5 Certificates and Mezzanine Certificates, Allocated Realized Loss Amounts may be paid to the holders of the Class 1-A-5 Certificates and Mezzanine Certificates from available Net Monthly Excess Cashflow, according to the priorities set forth under "--Overcollateralization Provisions" above. If, after taking into account Subsequent Recoveries, the amount of a Realized Loss is reduced, the amount of such Subsequent Recoveries will be applied to increase the Certificate Principal Balance of the class of Class 1-A-5 Certificates and Mezzanine Certificates with the highest payment priority to which Realized Losses have been allocated, but not by more than the amount of Realized Losses previously allocated to that class of certificates. The amount of any remaining Subsequent Recoveries will be applied to increase the Certificate Principal Balance of the class of certificates with the next highest payment priority, up to the amount of such Realized Losses previously allocated to that class of certificates, and so on. Holders of such certificates will not be entitled to any payment in respect of any Monthly Interest Distributable Amount on the amount of such increases for any Accrual Period preceding the Distribution Date on which such increase occurs. Any such increases shall be applied to the Certificate Principal Balance of each certificate of such class in accordance with its respective percentage interest. INTEREST COVERAGE ACCOUNTS On the Closing Date, the company will deliver to the Securities Administrator for deposit in the Group 1 Interest Coverage Account and Group 2 Interest Coverage Account, respectively, a cash amount as S-142
424B5143rd Page of 311TOC1stPreviousNextBottomJust 143rd
specified in the Agreement. On each distribution date during the Funding Period and on the distribution date immediately following the termination of the Funding Period, funds on deposit in the Interest Coverage Accounts will be applied by the Securities Administrator, on behalf of the Trustee, to cover shortfalls in the amount of interest generated by the related assets in the trust attributable to the pre-funding feature. The Agreement permits funds in the Interest Coverage Accounts, to the extent that they will not be needed to fund any shortfall of the kind described above, to be released by the Securities Administrator, on behalf of the Trustee, to the company or its designee on the first distribution date following the termination of the Funding Period (after the distribution on the certificates to be made on such distribution date). The Interest Coverage Account will not be an asset of any REMIC. P&I ADVANCES Subject to the following limitations, the Master Servicer will be obligated to advance or cause to be advanced on or before each distribution date its own funds, advances made by a Subservicer or funds in the Certificate Account that are not included in the Available Distribution Amount for such distribution date, in an amount equal to the P&I Advances for such distribution date. P&I Advances are required to be made only to the extent they are deemed, in the good faith judgment of the Master Servicer, to be recoverable from related late collections, insurance proceeds or liquidation Proceeds. The purpose of making P&I Advances is to maintain a regular cash flow to the certificateholders, rather than to guarantee or insure against losses. The Master Servicer will not be required to make any P&I Advances with respect to reductions in the amount of the monthly payments due on the mortgage loans due to bankruptcy proceedings or the application of the Relief Act. All P&I Advances will be reimbursable to the Master Servicer from late collections, insurance proceeds and liquidation proceeds from the mortgage loan as to which the unreimbursed P&I Advance was made. In addition, any P&I Advances previously made in respect of any mortgage loan that are deemed by the Master Servicer to be nonrecoverable from related late collections, insurance proceeds or liquidation proceeds may be reimbursed to the Master Servicer out of any funds in the Certificate Account prior to the distributions on the certificates. In the event the Master Servicer fails in its obligation to make any such advance, the Trustee, as successor Master Servicer, will be obligated to make any such advance, to the extent required in the Agreement. POOLING AND SERVICING AGREEMENT GENERAL The certificates will be issued pursuant to the Agreement, a form of which is filed as an exhibit to the registration statement. A Current Report on Form 8-K relating to the certificates containing a copy of the Agreement as executed will be filed by the company with the Securities and Exchange Commission within fifteen days of the initial issuance of the certificates. The trust fund created under the Agreement will consist of the following: (1) the mortgage loans; (2) collections in respect of principal and interest on the mortgage loans received after the Cut-off Date (other than payments due on or before the Cut-off Date); (3) the amounts on deposit in any Certificate Account (as defined in the prospectus); (4) certain insurance policies maintained by the related mortgagors or by or on behalf of the Master Servicer or related subservicer in respect of the mortgage loans; (5) an assignment of the company's rights under the Mortgage Loan Purchase Agreement; (6) the Corridor Contracts; (7) the Pre-Funding Accounts and the Interest Coverage Accounts; (8) the Net WAC Shortfall Reserve Fund; (9) the Certificate Guaranty Insurance Policy and (10) proceeds of the foregoing. Reference is made to the prospectus for important information in addition to that set forth in this prospectus supplement regarding the trust fund, the terms and conditions of the Agreement and the Offered S-143
424B5144th Page of 311TOC1stPreviousNextBottomJust 144th
Certificates. The Offered Certificates will be transferable and exchangeable at the office designated by the Securities Administrator for such purposes located in Minneapolis, Minnesota. The company will provide to prospective or actual certificateholders without charge, on written request, a copy (without exhibits) of the Agreement. Requests should be addressed to the Secretary, Impac Secured Assets Corp., 1401 Dove Street, Newport Beach, CA 92660 and its phone number is (949) 475-3600. ASSIGNMENT OF THE MORTGAGE LOANS The company will deliver to the Trustee with respect to each mortgage loan (1) the mortgage note endorsed without recourse to the Trustee to reflect the transfer of the mortgage loan, (2) the original mortgage with evidence of recording indicated thereon and (3) an assignment of the mortgage in recordable form to the Trustee, reflecting the transfer of the mortgage loan. THE SECURITIES ADMINISTRATOR Wells Fargo Bank, N.A., a national banking association organized and existing under the laws of the United States, will be the Securities Administrator under the Agreement. The address of the Securities Administrator for the purpose of notices and other matters shall be the corporate trust office of the Securities Administrator at which at any particular time its corporate trust business with respect to this Agreement shall be administered, which office at the date of the execution of this Agreement is located at (i) for purposes of the transfer and exchange of the certificates, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0113, Attention: Corporate Trust Services - Impac Secured Assets Corp. 2004-3, and (ii) for all other purposes, 9062 Old Annapolis Road, Columbia, Maryland 21045, Attention: Client Manager - Impac Secured Assets Corp. 2004-3, or such other address as the Securities Administrator may designate from time to time by notice to the Certificateholders, the company and the Master Servicer. The principal compensation to be paid to the Securities Administrator in respect of its obligations under the Agreement will be equal to interest or other income earned on funds held in the Certificate Account. The Securities Administrator and any director, officer, employee or agent of the Securities Administrator shall be indemnified and held harmless by the trust fund against any claim, loss, liability, fee or expense incurred in connection with any Event of Default, any breach of the Agreement or any claim or legal action (including any pending or threatened claim or legal action) relating to the acceptance or administration of its obligations and duties under the Agreement or the certificates, other than any claim, loss, liability or expense (i) sustained in connection with the Agreement related to the willful misfeasance, bad faith or negligence of the Master Servicer in the performance of its duties under the Agreement or (ii) incurred in connection with a breach constituting willful misfeasance, bad faith or negligence of the Securities Administrator in the performance of its duties under the Agreement or by reason of reckless disregard of its obligations and duties under the Agreement. The Securities Administrator will make no representation or warranty, express or implied, and will have no liability as to the validity, adequacy or accuracy of any of the information contained in this prospectus supplement. THE TRUSTEE Deutsche Bank National Trust Company will act as Trustee for the certificates pursuant to the Agreement. The Trustee's offices for notices under the Agreement are located at 1761 East St. Andrew Place, Santa Ana, California 92705, Attention: Impac Secured Assets Corp., Series 2004-3 (IM04S3). The principal compensation to be paid to the Trustee in respect of its obligations under the Agreement will be equal to an amount agreed to in a separate agreement. The Trustee and any director, officer, employee S-144
424B5145th Page of 311TOC1stPreviousNextBottomJust 145th
or agent of the Trustee shall be indemnified and held harmless by the trust fund against any claim, loss, liability, fee or expense incurred in connection with any Event of Default, any breach of the Agreement or any claim or legal action (including any pending or threatened claim or legal action) relating to the acceptance or administration of its obligations and duties under the Agreement or the certificates, other than any claim, loss, liability or expense (i) sustained in connection with the Agreement related to the willful misfeasance, bad faith or negligence of the Master Servicer in the performance of its duties under the Agreement or (ii) incurred in connection with a breach constituting willful misfeasance, bad faith or negligence of the Trustee in the performance of its duties under the Agreement or by reason of reckless disregard of its obligations and duties under the Agreement. The Trustee will make no representation or warranty, express or implied, and will have no liability as to the validity, adequacy or accuracy of any of the information contained in this prospectus supplement. REPORTS TO CERTIFICATEHOLDERS On each distribution date, the Securities Administrator will make the monthly statements discussed in the prospectus under "Description of the Securities--Reports to Securityholders" through the Securities Administrator's website. Such website is currently located at www.ctslink.com. Assistance in using the website can currently be obtained by calling the Securities Administrator's investor relations desk at (301) 815-6660. Parties unable to use this distribution method may request that a paper copy be mailed to them via first class mail by calling the investor relations desk. The location of such web page and the procedures used therein are subject to change from time to time at the Securities Administrator's discretion. The Securities Administrator shall have the right to change the way monthly distribution statements are distributed in order to make such distribution more convenient and/or more accessible to interested parties and the Securities Administrator shall provide timely and adequate notification to all above parties regarding any such changes. The Securities Administrator shall be entitled to rely on but shall not be responsible for the content or accuracy of any information provided by third parties for purposes of preparing such monthly statements, and may affix thereto any disclaimer it deems appropriate in its reasonable discretion (without suggesting liability on the part of any other party hereto). As a condition to access the Securities Administrator's website, the Securities Administrator may require registration and the acceptance of a disclaimer. THE SUBSERVICERS Substantially all of the mortgage loans will be subserviced by Countrywide Home Loans Servicing LP and Wells Fargo Bank, N.A. Countrywide Home Loans Servicing LP is an approved mortgage loan servicer for Fannie Mae, Freddie Mac, Ginnie Mae, HUD and VA and is licensed to service mortgage loans in each state where a license is required. As of June 30, 2004, Countrywide Home Loans Servicing LP had a net worth of approximately $11.1 billion. The principal executive offices of Countrywide Home Loans Servicing LP are located at 7105 Corporate Drive, Plano, Texas 75024. Countrywide Home Loans Servicing LP is a Texas limited partnership directly owned by Countrywide GP, Inc. and Countrywide LP, Inc., each a Nevada corporation and a direct wholly owned subsidiary of Countrywide Home Loans, Inc., a New York corporation. Countrywide Home Loans, Inc., is a direct wholly owned subsidiary of Countrywide Financial Corporation, a Delaware corporation (formerly known as Countrywide Credit Industries, Inc.). Countrywide Home Loans Servicing LP is an affiliate of Countrywide Securities Corporation. Wells Fargo Bank, N.A. is an indirect, wholly owned subsidiary of Wells Fargo & Company. Wells Fargo Bank, N.A. is engaged in the business of (i) originating, purchasing and selling residential mortgage loans in its own name and through its affiliates and (ii) servicing residential mortgage loans for its own account and for the account of others. Wells Fargo Bank, N.A. is an approved servicer of Fannie Mae and S-145
424B5146th Page of 311TOC1stPreviousNextBottomJust 146th
Freddie Mac. Wells Fargo Bank N.A.'s principal office for servicing functions is located at 1 Home Campus, Des Moines, Iowa 50328-0001. SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES The principal compensation to be paid to the Master Servicer in respect of its master servicing activities for the mortgage loans will be equal to the Master Servicing Fee. The principal compensation to be paid to any subservicer of the mortgage loans will be equal to the Subservicing Fee. As additional servicing compensation, the Master Servicer or any subservicer is entitled to retain all assumption fees and late payment charges in respect of mortgage loans serviced by it, to the extent collected from mortgagors, together with any interest or other income earned on funds held in the Certificate Account and any escrow accounts in respect of mortgage loans serviced by it. Neither the Master Servicer nor any subservicer is entitled to retain any prepayment charges or penalties; prepayment charges will be distributed to the holders of the Class P Certificates. The Master Servicer is obligated to offset any Prepayment Interest Shortfall in respect of the mortgage loans on any distribution date with Compensating Interest to the extent of the sum of its aggregate Master Servicing Fee and the Subservicing Fee for such distribution date. The Master Servicer or the related subservicer is obligated to pay insurance premiums and ongoing expenses associated with the mortgage pool in respect of mortgage loans serviced by it and incurred by the Master Servicer or such subservicer in connection with its responsibilities under the Agreement or the related subservicing agreement. However, the Master Servicer or such subservicer is entitled to reimbursement therefor as provided in the Agreement or the related subservicing agreement. Each subservicer will be required to represent that it will accurately and fully report its borrower credit files to all three credit repositories in a timely manner. VOTING RIGHTS At all times 98% of all Voting Rights will be allocated among the holders of the Class A Certificates, the Mezzanine Certificates and the Class C Certificates in proportion to the then outstanding Certificate Principal Balances of their respective certificates. At all times 1% of all Voting Rights will be allocated to the holders of the Class P Certificates. At all times 1% of all Voting Rights will be allocated to the holders of the Class R Certificates and the Class R-X Certificates. However, unless an Insurer Default exists, on any date on which any Class 2-A Certificates are outstanding or any amounts are owed to the Certificate Insurer, the Certificate Insurer will have all rights, including all voting rights the Class 2-A Certificates are entitled to under the Agreement and the other transaction documents. The Voting Rights allocated to any class of certificates shall be allocated among all holders of the certificates of such class in proportion to the outstanding percentage interests in such class represented thereby. TERMINATION The circumstances under which the obligations created by the Agreement will terminate in respect of the certificates are described in "The Agreements--Termination; Retirement of Securities" in the prospectus. The Class C Certificateholder will have the option on any distribution date on which the aggregate Stated Principal Balance of the mortgage loans is less than or equal to 10% of the Cut-off Date Balance to purchase all remaining mortgage loans and other assets in the trust, thereby effecting early retirement of the certificates. To the extent that the Class C Certificateholder does not elect to exercise such option, Countrywide Home Loans LP will have the option on any distribution date on which the aggregate Stated Principal Balance of the mortgage loans is less than or equal to 5% of the Cut-off Date Balance to purchase all remaining mortgage loans and other assets in the trust, thereby effecting early retirement of the certificates. However, this option may only be exercised if the termination price is sufficient to pay all amounts owed to the Certificate Insurer under the certificate guaranty insurance policy. If such termination will result in a draw S-146
424B5147th Page of 311TOC1stPreviousNextBottomJust 147th
on the Certificate Guaranty Insurance Policy, the consent of the Certificate Insurer will also be required prior to exercising such option. Any such purchase of mortgage loans and other assets of the trust fund shall be made at a price equal to the sum of (a) 100% of the unpaid principal balance of each mortgage loan (or the fair market value of the related underlying mortgaged properties with respect to defaulted mortgage loans as to which title to such mortgaged properties has been acquired if such fair market value is less than such unpaid principal balance) (net of any unreimbursed P&I Advance attributable to principal) as of the date of repurchase plus (b) accrued interest thereon at the mortgage rate to, but not including, the first day of the month in which such repurchase price is distributed. In the event the Master Servicer exercises this option, the portion of the purchase price allocable to the Offered Certificates will be, to the extent of available funds: (i) 100% of the then outstanding certificate principal balance of the Offered Certificates, plus (ii) one month's interest on the then outstanding Certificate Principal Balance of the Offered Certificates at the then applicable Pass-Through Rate for each class of Offered Certificates, plus (iii) any previously accrued but unpaid interest thereon to which the holders of the Offered Certificates are entitled. The proceeds of any such distribution may not be sufficient to distribute the full amount to each class of certificates if the purchase price is based in part on the fair market value of the underlying mortgaged property and such fair market value is less than 100% of the unpaid principal balance of the related mortgage loan. FEDERAL INCOME TAX CONSEQUENCES GENERAL Elections will be made to treat the trust fund, exclusive of the Corridor Contracts, the Pre-Funding Accounts, the Interest Coverage Accounts and the Net WAC Shortfall Reserve Fund, as two or more separate REMICs for federal income tax purposes. Upon the issuance of the Offered Certificates, Thacher Proffitt & Wood LLP, counsel to the company, will deliver its opinion generally to the effect that, assuming compliance with all provisions of the Agreement, for federal income tax purposes, the trust fund will consist of two or more separate REMICs, and each REMIC elected by the trust fund will qualify as a REMIC under Sections 860A through 860G of the Code. For federal income tax purposes, (i) the Class R Certificates and Class R-X Certificates will consist of components, each of which will represent the sole class of "residual interests" in each REMIC elected by the trust fund and (ii) except as described below with respect to the Net WAC Shortfall Reserve Fund, the Class A, Mezzanine, Class P and Class C Certificates will represent the "regular interests" in, and which generally will be treated as debt instruments of, a REMIC. SEE "FEDERAL INCOME TAX CONSEQUENCES--REMIC--CLASSIFICATION OF REMICS" IN THE PROSPECTUS. For federal income tax reporting purposes, based on expected issue prices, the Class 1-A-1, Class 1-A- 2 and Class 1-A-5 may, and all other classes of Offered Certificates will not, be treated as having been issued with original issue discount. The prepayment assumption that will be used in determining the rate of accrual of original issue discount, premium and market discount, if any, for federal income tax purposes will be based on the assumption that subsequent to the date of any determination the mortgage loans will prepay at 120% of the Prepayment Assumption. No representation is made that the mortgage loans will prepay at that rate S-147
424B5148th Page of 311TOC1stPreviousNextBottomJust 148th
or at any other rate. SEE "FEDERAL INCOME TAX CONSEQUENCES--REMICS--TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES--ORIGINAL ISSUE DISCOUNT" IN THE PROSPECTUS. The IRS has issued OID Regulations under Sections 1271 to 1275 of the Code generally addressing the treatment of debt instruments issued with original issue discount. Purchasers of the Offered Certificates should be aware that the OID Regulations do not adequately address certain issues relevant to, or are not applicable to, prepayable securities such as the Offered Certificates. Because of the uncertainty concerning the application of Section 1272(a)(6) of the Code to the Offered Certificates, the IRS could assert that the Offered Certificates should be treated as issued with original issue discount or should be governed by the rules applicable to debt instruments having contingent payments or by some other method not yet set forth in regulations. Prospective purchasers of the Offered Certificates are advised to consult their tax advisors concerning the tax treatment of such certificates. If the method of computing original issue discount described in the prospectus results in a negative amount for any period with respect to any certificateholders, the amount of original issue discount allocable to such period would be zero, and such certificateholders will be permitted to offset such amounts only against the respective future income (if any) from such certificate. Although uncertain, a certificateholder may be permitted to deduct a loss to the extent that his or her respective remaining basis in such certificate exceeds the maximum amount of future payments to which such certificateholders is entitled, assuming no further prepayments of the mortgage loans. Although the matter is not free from doubt, any such loss might be treated as a capital loss. The OID Regulations in some circumstances permit the holder of a debt instrument to recognize original issue discount under a method that differs from that of the issuer. Accordingly, it is possible that holders of Offered Certificates issued with original issue discount may be able to select a method for recognizing original issue discount that differs from that used in preparing reports to certificateholders and the IRS. Prospective purchasers of Offered Certificates issued with original issue discount are advised to consult their tax advisors concerning the tax treatment of such certificates in this regard. Some classes of Offered Certificates may be treated for federal income tax purposes as having been issued with a premium. Certificateholders may elect to amortize such premium under a constant yield method in which case such amortizable premium will generally be allocated among the interest payments on such certificates and will be applied as an offset against such interest payments. SEE "FEDERAL INCOME TAX CONSEQUENCES-- REMICS--TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES--PREMIUM" IN THE PROSPECTUS. Each holder of an Offered Certificate is deemed to own an undivided beneficial ownership interest in two assets, a REMIC regular interest and the right to receive payments in respect of the Net WAC Shortfall Reserve Fund. The treatment of amounts received by a holder of an Offered Certificate under such certificateholder's right to receive the Net WAC Shortfall Amount will depend on the portion, if any, of such Certificateholder's purchase price allocable thereto. Under the REMIC Regulations, each holder of an Offered Certificate must allocate its purchase price for that certificate between its undivided interest in the REMIC regular interest and its undivided interest in the right to receive payments in respect of the Net WAC Shortfall Amount in accordance with the relative fair market values of each property right. The securities administrator intends to treat payments made to the holders of the Offered Certificates with respect to the Net WAC Shortfall Amount as includible in income based on the tax regulations relating to notional principal contracts. The OID Regulations provide that the trust's allocation of the issue price is binding on all holders unless the holder explicitly discloses on its tax return that its allocation is different from the trust's allocation. For tax reporting purposes, the Underwriters estimate that the right to receive Net WAC Shortfall Amounts has a DE MINIMIS value with respect to the other Offered Certificates entitled to receive Net WAC Shortfall Amounts. Under the REMIC Regulations, the securities administrator is required to account for the REMIC regular interest and the right to receive payments in respect of the Net WAC Shortfall Amount as discrete property S-148
424B5149th Page of 311TOC1stPreviousNextBottomJust 149th
rights. Holders of the Offered Certificates are advised to consult their own tax advisors regarding the allocation of issue price, timing, character and source of income and deductions resulting from the ownership of their Certificates. Treasury regulations have been promulgated under section 1275 of the Code generally providing for the integration of a "qualifying debt instrument" with a hedge if the combined cash flows of the components are substantially equivalent to the cash flows on a variable rate debt instrument. However, such regulations specifically disallow integration of debt instruments subject to Section 1272(a)(6) of the Code. Therefore, holders of such Offered Certificates will be unable to use the integration method provided for under such regulations with respect to such certificates. If the securities administrator's treatment of the Net WAC Shortfall Amount is respected, ownership of the right to the Net WAC Shortfall Amount will nevertheless entitle the owner to amortize the separate price paid for the right to the Net WAC Shortfall Amount under the notional principal contract regulations. In the event that the right to receive the Net WAC Shortfall Amount is characterized as a "notional principal contract" for federal income tax purposes, upon the sale of an Offered Certificate, the amount of the sale allocated to the selling certificateholder's right to receive payments in respect of the Net WAC Shortfall Amount would be considered a "termination payment" under the notional principal contract regulations allocable to the related certificate. A holder of an Offered Certificate would have gain or loss from such a termination of the right to receive payments in respect of the Net WAC Shortfall Amount equal to (i) any termination payment it received or is deemed to have received minus (ii) the unamortized portion of any amount paid, or deemed paid, by the certificateholder upon entering into or acquiring its interest in the right to receive payments in respect of the Net WAC Shortfall Amount. Gain or loss realized upon the termination of the right to receive payments in respect of the Net WAC Shortfall Amount will generally be treated as capital gain or loss. Moreover, in the case of a bank or thrift institution, Code section 582(c) would likely not apply to treat such gain or loss as ordinary. With respect to the Offered Certificates, this paragraph applies exclusive of any rights in respect of the Net WAC Shortfall Amount. The Offered Certificates will be treated as assets described in Section 7701(a)(19)(C) of the Code and "real estate assets" under Section 856(c)(4)(A) of the Code, generally in the same proportion that the assets in the related trust fund would be so treated. In addition, interest on the Offered Certificates will be treated as "interest on obligations secured by mortgages on real property" under Section 856(c)(3)(B) of the Code, generally to the extent that the Offered Certificates are treated as "real estate assets" under Section 856(c)(4)(A) of the Code. Amounts held in the Pre-Funding Accounts and the Interest Coverage Accounts may not be treated as assets described in the foregoing sections of the Code. Moreover, the Offered Certificates also will be treated as "qualified mortgages" under Section 860G(a)(3) of the Code. SEE "POOLING AND SERVICING AGREEMENT--TERMINATION" HEREIN AND "CERTAIN FEDERAL INCOME TAX CONSEQUENCES--REMICS-- CHARACTERIZATION OF INVESTMENTS IN REMIC CERTIFICATES" IN THE PROSPECTUS. SEE "FEDERAL INCOME TAX CONSEQUENCES--REMICS--CHARACTERIZATION OF INVESTMENTS IN REMIC CERTIFICATES" IN THE PROSPECTUS. Each holder of an Offered Certificate is deemed to own an undivided beneficial ownership interest in a REMIC regular interest. Holders of the Offered Certificates are advised to consult their own tax advisors regarding the allocation of issue price, timing, character and source of income and deductions resulting from the ownership of their Certificates. Treasury regulations have been promulgated under section 1275 of the Code generally providing for the integration of a "qualifying debt instrument" with a hedge if the combined cash flows of the components are substantially equivalent to the cash flows on a variable rate debt instrument. However, such regulations specifically disallow integration of debt instruments subject to Section 1272(a)(6) of the Code. Therefore, holders of such Offered Certificates will be unable to use the integration method provided for under such regulations with respect to such certificates. S-149
424B5150th Page of 311TOC1stPreviousNextBottomJust 150th
It is not anticipated that any REMIC elected by the trust will engage in any transactions that would subject it to the prohibited transactions tax as defined in Section 860F(a)(2) of the Code, the contributions tax as defined in Section 860G(d) of the Code or the tax on net income from foreclosure property as defined in Section 860G(c) of the Code. However, in the event that any such tax is imposed on any such REMIC, such tax will be borne (1) by the Trustee, if the Trustee has breached its obligations with respect to REMIC compliance under the Agreement, (2) by the Master Servicer, if the Master Servicer has breached its obligations with respect to REMIC compliance under the Agreement and (3) otherwise by the trust fund, with a resulting reduction in amounts otherwise distributable to holders of the Offered Certificates. See "Description of the Certificates--General" and "Federal Income Tax Consequences--REMICs--Prohibited Transactions Tax and Other Taxes" in the prospectus. The responsibility for filing annual federal information returns and other reports will be borne by the Securities Administrator. SEE "FEDERAL INCOME TAX CONSEQUENCES--REMICS--REPORTING AND OTHER ADMINISTRATIVE MATTERS" IN THE PROSPECTUS. FOR FURTHER INFORMATION REGARDING THE FEDERAL INCOME TAX CONSEQUENCES OF INVESTING IN THE OFFERED CERTIFICATES, SEE "FEDERAL INCOME TAX CONSEQUENCES--REMICS" IN THE PROSPECTUS. METHOD OF DISTRIBUTION Subject to the terms and conditions set forth in an underwriting agreement, dated August 30, 2004, the Underwriters have agreed to purchase and the company has agreed to sell to the Underwriters the Offered Certificates. It is expected that delivery of the Offered Certificates will be made only in book-entry form through the Same Day Funds Settlement System of DTC on or about August 31, 2004, against payment therefor in immediately available funds. The Offered Certificates will be purchased from the company by the Underwriters and will be offered by the Underwriters from time to time to the public in negotiated transactions or otherwise at varying prices to be determined at the time of sale. The proceeds to the company from the sale of the Offered Certificates are expected to be approximately 99.75% of the aggregate initial Certificate Principal Balance of the Offered Certificates, less expenses expected to equal approximately $900,000. The Underwriters may effect such transactions by selling the Offered Certificates to or through dealers, and such dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the Underwriters. In connection with the sale of the Offered Certificates, the Underwriters may be deemed to have received compensation from the company in the form of underwriting compensation. The Underwriters and any dealers that participate with the Underwriters in the distribution of the Offered Certificates may be deemed to be underwriters and any profit on the resale of the Offered Certificates positioned by them may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended. The underwriting agreement provides that the company, the Seller and Impac Holdings will jointly and severally indemnify the Underwriters, and that under limited circumstances the Underwriters will indemnify the company, the Seller and Impac Holdings against certain civil liabilities under the Securities Act of 1933, as amended, or contribute to payments required to be made in respect thereof. Countrywide Securities Corporation is an affiliate of Countrywide Home Loans Servicing LP. S-150
424B5151st Page of 311TOC1stPreviousNextBottomJust 151st
SECONDARY MARKET There can be no assurance that a secondary market for the Offered Certificates will develop or, if it does develop, that it will continue. The primary source of information available to investors concerning the Offered Certificates will be the monthly statements discussed in the prospectus under "Description of the Securities--Reports to Securityholders", which will include information as to the outstanding principal balance of the Offered Certificates and the status of the applicable form of credit enhancement. There can be no assurance that any additional information regarding the Offered Certificates will be available through any other source. In addition, the company is not aware of any source through which price information about the Offered Certificates will be generally available on an ongoing basis. The limited nature of information regarding the Offered Certificates may adversely affect the liquidity of the Offered Certificates, even if a secondary market for the Offered Certificates becomes available. EXPERTS The consolidated financial statements of Ambac Assurance Corporation and subsidiaries as of December 31, 2003 and 2002 and for each of the years in the three-year period ended December 31, 2003, are incorporated by reference in this prospectus supplement and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated by reference in this prospectus supplement and in the registration statement upon the authority of that firm as experts in accounting and auditing. The report of KPMG LLP refers to changes, in 2003, in Ambac Assurance Corporation's methods of accounting for variable interest entities and stock-based compensation. LEGAL OPINIONS Legal matters relating to the Offered Certificates will be passed upon for the company by Thacher Proffitt & Wood LLP, New York, New York and for the Underwriters by Sidley Austin Brown & Wood LLP, New York, New York. Sidley Austin Brown & Wood LLP represents Impac Holdings on certain matters from time to time. RATINGS It is a condition to the issuance of the certificates that the Class A Certificates be rated "AAA" by S&P and "Aaa" by Moody's, that the Class M-1 Certificates be rated at least "AA+" by S&P and "Aa1" by Moody's, that the Class M-2 Certificates be rated at least "AA+" by S&P and "Aa2" by Moody's, that the Class M-3 Certificates be rated at least "AA+" by S&P and "Aa3" by Moody's, that the Class M-4 Certificates be rated at least "AA" by S&P and "A1" by Moody's, that the Class M-5 Certificates be rated at least "AA" by S&P and "A2" by Moody's, and that the Class B Certificates be rated at least "A+" by S&P and "Baa1" by Moody's. The ratings of S&P and Moody's assigned to mortgage pass-through certificates address the likelihood of the receipt by certificateholders of all distributions to which the certificateholders are entitled. The rating process addresses structural and legal aspects associated with the certificates, including the nature of the underlying mortgage loans. The ratings assigned to mortgage pass-through certificates do not represent any assessment of the likelihood that principal prepayments will be made by the mortgagors or the degree to which the rate and timing principal prepayments will differ from that originally anticipated. The ratings do not address the possibility that certificateholders might suffer a lower than anticipated yield due to non-credit events. S-151
424B5152nd Page of 311TOC1stPreviousNextBottomJust 152nd
In addition, the ratings by S&P and Moody's do not address the likelihood of the receipt of any amounts in respect of Net WAC Shortfall Amounts. 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. In the event that the ratings initially assigned to the Offered Certificates are subsequently lowered for any reason, no person or entity is obligated to provide any additional credit support or credit enhancement with respect to the Offered Certificates. The company has not requested that any rating agency rate any class of the Offered Certificates other than as stated above. However, there can be no assurance as to whether any other rating agency will rate any class of the Offered Certificates, or, if it does, what rating would be assigned by any other rating agency. A rating on any class of the Offered Certificates by another rating agency, if assigned at all, may be lower than the ratings assigned to the Offered Certificates as stated above. LEGAL INVESTMENT The Class A, Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 Certificates will constitute "mortgage related securities" for purposes of SMMEA for so long as they are rated not lower than the second highest rating category by a Rating Agency (as defined in the prospectus) and, as such, will be legal investments for entities to the extent provided in SMMEA. SMMEA, however, provides for state limitation on the authority of these entities to invest in "mortgage related securities" provided that restrictive legislation by the state was enacted prior to October 3, 1991. Some states have enacted legislation which overrides the preemption provisions of SMMEA. The Class B Certificates will not constitute "mortgage related securities" for purposes of SMMEA. The company makes no representations as to the proper characterization of any class of Offered Certificates for legal investment or other purposes, or as to the ability of particular investors to purchase any class of 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 legal advisors in determining whether and to what extent any class of Offered Certificates constitutes a legal investment or is subject to investment, capital or other restrictions. SEE "LEGAL INVESTMENT" IN THE PROSPECTUS. ERISA CONSIDERATIONS A fiduciary of any Plan and any person investing Plan Assets of any Plan should carefully review with its legal advisors whether the purchase, sale or holding of certificates will give rise to a prohibited transaction under ERISA or Section 4975 of the Code. The U.S. Department of Labor has issued an Exemption, as described under "ERISA Considerations" in the prospectus, to the Underwriters. The Exemption generally exempts from the application of certain of the prohibited transaction provisions of Section 406 of ERISA, and the excise taxes imposed on such prohibited transactions by Section 4975(a) and (b) of the Code and Section 502(i) of ERISA, transactions relating to the purchase, sale and holding of pass-through certificates rated at least "BBB-" (or its equivalent) by S&P, Fitch Ratings or Moody's at the time of purchase and underwritten by the Underwriters, such as the S-152
424B5153rd Page of 311TOC1stPreviousNextBottomJust 153rd
Offered Certificates, and the servicing and operation of asset pools, such as the mortgage loans, provided that the conditions of the Exemption are satisfied. The purchase of the Offered Certificates by, on behalf of or with the Plan Assets of any Plan may qualify for exemptive relief under the Exemption, as amended and as currently in effect. However, the Exemption contains a number of conditions which must be met for the Exemption, as amended, to apply (as described in the prospectus), including the requirement that any such Plan must be 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. A fiduciary of a Plan contemplating purchasing an Offered Certificate must make its own determination that the conditions set forth in the Exemption, as amended, will be satisfied with respect to such certificates, including the requirement that the rating on a particular class of certificates be "BBB-" or higher at the time of purchase. Each beneficial owner of a Mezzanine Certificate or any interest therein shall be deemed to have represented, by virtue of its acquisition or holding of that certificate or interest therein, that either (i) it is not a Plan or investing with "Plan Assets", (ii) it has acquired and is holding such certificate in reliance on the Exemption, and that it understands that there are certain conditions to the availability of the Exemption, including that the certificate must be rated, at the time of purchase, not lower than "BBB-"(or its equivalent) by S&P, Fitch or Moody's Investors Service, Inc., and the certificate is so rated or (iii) (1) it is an insurance company, (2) the source of funds used to acquire or hold the certificate or interest therein is an "insurance company general account," as such term is defined in Prohibited Transaction Class Exemption ("PTCE") 95- 60, and (3) the conditions in Sections I and III of PTCE 95-60 have been satisfied. Any fiduciary or other investor of Plan Assets that proposes to acquire or hold an Offered Certificate on behalf of or with Plan Assets of any Plan should consult with its counsel with respect to the application of the fiduciary responsibility provisions of ERISA and the prohibited transaction provisions of the ERISA and the Code to the proposed investment. SEE "ERISA CONSIDERATIONS" IN THE PROSPECTUS. The sale of any class of Offered Certificates to a Plan is in no respect a representation by the company, the Trustee or the Underwriters that such an investment meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan, or that such an investment is appropriate for Plans generally or any particular Plan. S-153
424B5154th Page of 311TOC1stPreviousNextBottomJust 154th
GLOSSARY ACCRUAL PERIOD -- For any class of Offered Certificates, (i) with respect to the distribution date in September 2004, the period commencing on the closing date and ending on the day preceding the distribution date in September 2004, and (ii) with respect to any distribution date after the distribution date in September 2004, the period commencing on the distribution date in the month immediately preceding the month in which that distribution date occurs and ending on the day preceding that distribution date. AGREEMENT -- The pooling and servicing agreement, dated as of August 1, 2004, among Impac Secured Assets Corp., as company, Impac Funding Corporation, as master servicer, Deutsche Bank National Trust Company, as trustee, and Wells Fargo Bank, N.A., as securities administrator. ALLOCATED REALIZED LOSS AMOUNT -- With respect to any class of the Class 1-A-5 Certificates and Mezzanine Certificates and any distribution date, an amount equal to the sum of any Realized Loss allocated to that class of certificates on that distribution date and any Allocated Realized Loss Amount for that class remaining unpaid from any previous distribution date. ALLOWABLE CLAIM -- For any mortgage loan covered by a Primary Insurance Policy, the current principal balance of such mortgage loan plus accrued interest and allowable expenses at the time of the claim. APPRAISED VALUE -- The appraised value of the related mortgaged property at the time of origination of such mortgage loan. AVAILABLE DISTRIBUTION AMOUNT -- For any distribution date, an amount equal to the amount received by the Securities Administrator and available in the Certificate Account on that distribution date. The Available Distribution Amount will generally be equal to (a) the sum of (1) the aggregate amount of scheduled payments on the mortgage loans received or advanced that were due during the related Due Period, (2) any unscheduled payments and receipts, including mortgagor prepayments on such mortgage loans, Insurance Proceeds, Liquidation Proceeds and Subsequent Recoveries, received during the related Prepayment Period, in each case, net of amounts reimbursable therefrom to the Trustee, the Securities Administrator, the Master Servicer and any Subservicer, (3) any Compensating Interest paid by the Master Servicer in respect of the mortgage loans,(4) amounts transferred from the Interest Coverage Accounts and, at the end of the Funding Period, any excess amounts transferred from the Pre-Funding Accounts and (5) interest earned on amounts on deposit in the Pre-Funding Accounts and reduced by (b) Master Servicing Fees, Subservicing Fees, the fees of the Trustee, the fees to the Securities Administrator, any amounts in respect of the premiums payable to Radian under the Radian Lender-Paid PMI Policies and, with respect to such amounts related to the Group 2 Loans, the amount payable to the Certificate Insurer. The holders of the Class P Certificates will be entitled to all prepayment charges received on the mortgage loans and such amounts will not be available for distribution to the Offered Certificates. BASIC PRINCIPAL DISTRIBUTION AMOUNT -- With respect to any distribution date and each Loan Group, the related Principal Remittance Amount and, with respect to the Group 2 Loans, the Class 2-A Insured Amount, if any, for such distribution date. BOOK-ENTRY CERTIFICATES -- Each class of the Offered Certificates for so long as they are issued, maintained and transferred at the DTC. CERTIFICATE GUARANTY INSURANCE POLICY - The certificate guaranty insurance policy issued by the Certificate Insurer for the benefit of the Class 2-A Certificateholders. S-154
424B5155th Page of 311TOC1stPreviousNextBottomJust 155th
CERTIFICATE MARGIN -- With respect to the Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-A-4, Class 1-A-5, Class 2-A-1, Class 2-A-2, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates, on any distribution date prior to the Step-Up Date, 0.200%, 0.350%, 0.530%, 0.400%, 0.470%, 0.320%, 0.320%, 0.600%, 0.650%, 0.700%, 1.150%, 1.250% and 1.850% per annum, respectively, and on any distribution date on and after the Step-Up Date, 0.400%, 0.700%, 1.060%, 0.800%, 0.940%, 0.640%, 0.640%, 0.900%, 0.975%, 1.050%, 1.725%, 1.875% and 2.775% per annum, respectively. CERTIFICATE PRINCIPAL BALANCE -- With respect to any Offered Certificate as of any date of determination, the initial Certificate Principal Balance thereof, increased by any Subsequent Recoveries allocated thereto, and reduced by the aggregate of (a) all amounts allocable to principal previously distributed with respect to such Offered Certificate and (b) in the case of any Class 1-A-5 Certificates and Mezzanine Certificates, any reductions in the Certificate Principal Balance thereof deemed to have occurred in connection with allocations of Realized Losses in the manner described herein. CLASS 1-A CORRIDOR CONTRACT -- The Corridor Contract between the trust and the Corridor Contract Provider for the benefit of the Class 1-A Certificates. CLASS 1-A NET WAC RATE -- With respect to the Class 1-A Certificates, a per annum rate equal to the weighted average of the Net Mortgage Rates of the Group 1 Loans as of the first day of the month preceding the month in which such distribution date occurs, multiplied by a fraction equal to (x) 30 divided by (y) the number of days in the related Accrual Period. CLASS 1-A PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date will equal the product of (x) the Class A Principal Distribution Target Amount and (y) a fraction, the numerator of which is the Class 1-A Principal Distribution Target Amount and the denominator of which is the sum of the Class 1-A Principal Distribution Target Amount and Class 2-A Principal Distribution Target Amount. CLASS 1-A PRINCIPAL DISTRIBUTION TARGET AMOUNT -- For any distribution date will equal the excess of: (1) the Certificate Principal Balance of the Class 1-A Certificates immediately prior to such distribution date, over (2) the lesser of (x) 86.50% of the sum of (i) aggregate Stated Principal Balance of the Group 1 Loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Group 1 Pre-Funded Amount and (y) the aggregate sum of (i) the Stated Principal Balance of the Group 1 Loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Group 1 Pre-Funded Amount minus 0.35% of the sum of (i) the aggregate Stated Principal Balance of the Group 1 Loans as of the Cut-off Date and (ii) the Group 1 Original Pre-Funded Amount. CLASS 2-A CORRIDOR CONTRACT -- The Corridor Contract between the trust and the Corridor Contract Provider for the benefit of the Class 2-A Certificates. CLASS 2-A-1 CORRIDOR CONTRACT -- The Corridor Contract between the trust and the Corridor Contract Provider for the benefit of the Class 2-A-1 Certificates. CLASS 2-A INSURED AMOUNT - Draws on the Certificate Guaranty Insurance Policy to cover related Deficiency Amounts and Preference Amounts on the Class 2-A Certificates. CLASS 2-A NET WAC RATE -- With respect to the Class 2-A Certificates, a per annum rate equal to (i) the weighted average of the Net Mortgage Rates of the Group 2 Loans as of the first day of the month preceding S-155
424B5156th Page of 311TOC1stPreviousNextBottomJust 156th
the month in which such distribution date occurs, multiplied by a fraction equal to (x) 30 divided by (y) the number of days in the related Accrual Period, minus (ii) the Policy Premium Rate in respect of the Class 2-A Certificates. CLASS 2-A PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date will equal the product of (x) the Class A Principal Distribution Target Amount and (y) a fraction, the numerator of which is the Class 2-A Principal Distribution Target Amount and the denominator of which is the sum of the Class 1-A Principal Distribution Target Amount and Class 2-A Principal Distribution Target Amount. CLASS 2-A PRINCIPAL DISTRIBUTION TARGET AMOUNT -- For any distribution date will equal the excess of: (2) the Certificate Principal Balance of the Class 2-A Certificates immediately prior to such distribution date, over (2) the lesser of (x) 86.50% of the sum of (i) the aggregate Stated Principal Balance of the Group 2 Loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Group 2 Pre-Funded Amount and (y) the sum of (i) the aggregate Stated Principal Balance of the Group 2 Loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Group 2 Pre-Funded Amount minus 0.35% of (i) the aggregate Stated Principal Balance of the Group 2 Loans as of the Cut-off Date and (ii) the Group 2 Original Pre-Funded Amount. CLASS A CERTIFICATES -- The Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-A-4, Class 1-A-5, Class 2-A-1 and Class 2-A-2 Certificates. CLASS A PRINCIPAL DISTRIBUTION TARGET AMOUNT -- For any distribution date will equal the excess of: (1) the sum of the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A Certificates immediately prior to such distribution date, over (2) the lesser of (x) 86.50% of the sum of (i) the aggregate Stated Principal Balance of the mortgage loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Pre-Funded Amounts and (y) (i) the sum of (A) the aggregate Stated Principal Balance of the mortgage loans for such distribution date after giving effect to distributions to be made on that distribution date and (B) the Pre-Funded Amounts minus (ii) the Overcollateralization Floor. CLASS B PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date is the excess of: (1) the sum of: (a) the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A Certificates (after taking into account distributions of the Class 1-A Principal Distribution Amount and Class 2-A Principal Distribution Amount for such distribution date); (b) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account distributions of the Class M-1 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; S-156
424B5157th Page of 311TOC1stPreviousNextBottomJust 157th
(c) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account distributions of the Class M-2 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (d) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account distributions of the Class M-3 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (e) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account distributions of the Class M-4 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (f) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account distributions of the Class M-5 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; and (g) the Certificate Principal Balance of the Class B Certificates immediately prior to such distribution date OVER (2) the lesser of (x) 99.30% of the sum of (i) the aggregate Stated Principal Balance of the mortgage loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Pre-Funded Amounts and (y)(i) the sum of (A) the aggregate Stated Principal Balance of the mortgage loans after giving effect to distributions to be made on that distribution date and (B) the Pre-Funded Amounts minus (ii) the Overcollateralization Floor; provided, however, that if the Class B Certificates are the only class of certificates outstanding on such distribution date they will be entitled to receive the entire Principal Distribution Amount until the Certificate Principal Balance thereof is reduced to zero. CLASS C CERTIFICATES -- The Class C Certificates. CLASS M-1 PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date is the excess of: (1) the sum of: (a) the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A Certificates (after taking into account distributions of the Class 1-A Principal Distribution Amount and Class 2-A Principal Distribution Amount for such distribution date); and (b) the Certificate Principal Balance of the Class M-1 Certificates immediately prior to such distribution date OVER (2) the lesser of (x) 88.80% of the sum of (i) the aggregate Stated Principal Balance of the mortgage loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Pre-Funded Amounts and (y) (i) the sum of (A) the aggregate Stated Principal Balance of the mortgage loans after giving effect to distributions to be made on that distribution date and (B) the Pre-Funded Amounts minus (ii) the Overcollateralization Floor; S-157
424B5158th Page of 311TOC1stPreviousNextBottomJust 158th
provided, however, that if the Class M-1 Certificates are the only class of certificates outstanding on such distribution date they will be entitled to receive the entire Principal Distribution Amount until the Certificate Principal Balance thereof is reduced to zero. CLASS M-2 PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date is the excess of: (1) the sum of: (a) the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A Certificates (after taking into account distributions of the Class 1-A Principal Distribution Amount and Class 2-A Principal Distribution Amount for such distribution date); (b) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account distributions of the Class M-1 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; and (c) the Certificate Principal Balance of the Class M-2 Certificates immediately prior to such distribution date OVER (2) the lesser of (x) 90.80% of the sum of (i) the aggregate Stated Principal Balance of the mortgage loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Pre-Funded Amounts and (y) (i) the sum of (A) the aggregate Stated Principal Balance of the mortgage loans after giving effect to distributions to be made on that distribution date and (B) the Pre-Funded Amounts minus (ii) the Overcollateralization Floor; provided, however, that if the Class M-2 Certificates are the only class of certificates outstanding on such distribution date they will be entitled to receive the entire Principal Distribution Amount until the Certificate Principal Balance thereof is reduced to zero. CLASS M-3 PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date is the excess of: (1) the sum of: (a) the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A Certificates (after taking into account distributions of the Class 1-A Principal Distribution Amount and Class 2-A Principal Distribution Amount for such distribution date); (b) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account distributions of the Class M-1 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (c) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account distributions of the Class M-2 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; and S-158
424B5159th Page of 311TOC1stPreviousNextBottomJust 159th
(d) the Certificate Principal Balance of the Class M-3 Certificates immediately prior to such distribution date OVER (2) the lesser of (x) 92.80% of the sum of (i) the aggregate Stated Principal Balance of the mortgage loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Pre-Funded Amounts and (y) (i) the sum of (A) the aggregate Stated Principal Balance of the mortgage loans after giving effect to distributions to be made on that distribution date and (B) the Pre-Funded Amounts minus (ii) the Overcollateralization Floor; provided, however, that if the Class M-3 Certificates are the only class of certificates outstanding on such distribution date they will be entitled to receive the entire Principal Distribution Amount until the Certificate Principal Balance thereof is reduced to zero. CLASS M-4 PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date is the excess of: (1) the sum of: (a) the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A Certificates (after taking into account distributions of the Class 1-A Principal Distribution Amount and Class 2-A Principal Distribution Amount for such distribution date); (b) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account distributions of the Class M-1 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (c) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account distributions of the Class M-2 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (d) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account distributions of the Class M-3 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; and (e) the Certificate Principal Balance of the Class M-4 Certificates immediately prior to such distribution date OVER (2) the lesser of (x) 94.80% of the sum of (i) the aggregate Stated Principal Balance of the mortgage loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Pre-Funded Amounts and (y) (i) the sum of (A) the aggregate Stated Principal Balance of the mortgage loans after giving effect to distributions to be made on that distribution date and (B) the Pre-Funded Amounts minus (ii) the Overcollateralization Floor; provided, however, that if the Class M-4 Certificates are the only class of certificates outstanding on such distribution date they will be entitled to receive the entire Principal Distribution Amount until the Certificate Principal Balance thereof is reduced to zero. S-159
424B5160th Page of 311TOC1stPreviousNextBottomJust 160th
CLASS M-5 PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date is the excess of: (1) the sum of: (a) the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A Certificates (after taking into account distributions of the Class 1-A Principal Distribution Amount and Class 2-A Principal Distribution Amount for such distribution date); (b) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account distributions of the Class M-1 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (c) the Certificate Principal Balance of the Class M-2 Certificates (after taking into account distributions of the Class M-2 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (d) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account distributions of the Class M-3 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; (e) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account distributions of the Class M-4 Principal Distribution Amount for such distribution date) immediately prior to such distribution date; and (f) the Certificate Principal Balance of the Class M-5 Certificates immediately prior to such distribution date OVER (2) the lesser of (x) 96.80% of the sum of (i) the aggregate Stated Principal Balance of the mortgage loans for such distribution date after giving effect to distributions to be made on that distribution date and (ii) the Pre-Funded Amounts and (y) (i) the sum of (A) the aggregate Stated Principal Balance of the mortgage loans after giving effect to distributions to be made on that distribution date and (B) the Pre-Funded Amounts minus (ii) the Overcollateralization Floor; provided, however, that if the Class M-5 Certificates are the only class of certificates outstanding on such distribution date they will be entitled to receive the entire Principal Distribution Amount until the Certificate Principal Balance thereof is reduced to zero. CLASS P CERTIFICATES -- The Class P Certificates. CLASS R CERTIFICATES -- The Class R Certificates. CLASS R-X CERTIFICATES -- The Class R-X Certificates. CODE -- The Internal Revenue Code of 1986. COMPENSATING INTEREST -- Any payments made by the Subservicer or Master Servicer from its own funds to cover Prepayment Interest Shortfalls. S-160
424B5161st Page of 311TOC1stPreviousNextBottomJust 161st
CORRIDOR CONTRACT -- Any of the Class 1-A Corridor Contract, Class 2-A Corridor Contract, Class 2-A-1 Corridor Contract or Mezzanine Corridor Contract. CORRIDOR CONTRACT PROVIDER -- Wachovia Bank, National Association. CORRIDOR CONTRACT PAYMENT AMOUNT -- With respect to any distribution date, the amount equal to the aggregate amount payable on that distribution date to the trust from the Corridor Contract Provider pursuant to the related Corridor Contract, as described in "Description of the Certificates--The Corridor Contracts" in this prospectus supplement. CPR -- A constant rate of prepayment on the mortgage loans. CREDIT ENHANCEMENT PERCENTAGE -- For any distribution date is the percentage equivalent of a fraction, the numerator of which is equal to (a) the excess of (i) the aggregate principal balance of the mortgage loans for the preceding distribution date over (ii) (1) before the Certificate Principal Balances of the Class A Certificates have been reduced to zero, the sum of the Certificate Principal Balances of the Class A Certificates, or (2) after such time, the Certificate Principal Balance of the most senior class of Mezzanine Certificates outstanding, as of the preceding distribution date, and the denominator of which is equal to (b) the aggregate principal balance of the mortgage loans, calculated after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period and distribution of the Principal Distribution Amount to the holders of the certificates then entitled to distributions of principal on the distribution date. CREDIT SCORE -- A measurement of the relative degree of risk a borrower represents to a lender obtained from credit reports utilizing, among other things, payment history, delinquencies on accounts, levels of outstanding indebtedness, length of credit history, types of credit, and bankruptcy experience. CUT-OFF DATE -- August 1, 2004. CUT-OFF DATE BALANCE -- The sum of (a) the aggregate Stated Principal Balance of the initial mortgage loans as of the Cut-off Date and (b) the Original Pre-Funded Amounts. DEFICIENCY AMOUNT - With respect to each distribution date prior to the final scheduled distribution date and the Class 2-A Certificates, an amount equal to the sum of (i) the excess, if any, of (a) the amount of any Monthly Interest Distributable Amount on the Class 2-A Certificates for that distribution date over (b) the related Available Distribution Amount for that distribution date, and (ii) the excess, if any of (a) the Certificate Principal Balance of the Class 2-A Certificates over (b) the sum of the aggregate Stated Principal Balance of the Group 2 Loans and the Group 2 Pre-Funded Amount, in each case immediately following such distribution date. With respect to the final scheduled distribution date and the Class 2-A Certificates, an amount equal to the sum of (i) the excess, if any, of (a) the amount of any Monthly Interest Distributable Amount on the Class 2-A Certificates for that distribution date over (b) the related Available Distribution Amount for that distribution date and (ii) the excess, if any, of the Certificate Principal Balance of all outstanding Class 2-A Certificates due on such final scheduled distribution date to the extent not paid from the related Available Distribution Amount on that distribution date. For the Class 2-A Certificates and any date on which the acceleration of the certificates has been directed or consented to by the Certificateholders pursuant to the Agreement, the amount required to pay the Certificate Principal Balance of the Class 2-A Certificates in full, together with accrued and unpaid interest thereon through the date of payment of the Class 2-A Certificates. S-161
424B5162nd Page of 311TOC1stPreviousNextBottomJust 162nd
DETERMINATION DATE -- With respect to any distribution date is on the 15th day of the month in which such distribution date occurs or, if such day is not a business day, on the immediately preceding business day. DUE DATE -- With respect to each mortgage loan, the first day of the month. DUE PERIOD -- With respect to any distribution date commences on the second day of the month immediately preceding the month in which such distribution date occurs and ends on the first day of the month in which such distribution date occurs. ERISA -- The Employee Retirement Income Security Act of 1974, as amended. EXTRA PRINCIPAL DISTRIBUTION AMOUNT -- With respect to any distribution date and Loan Group, the lesser of (x) the Overcollateralization Deficiency Amount for such distribution date multiplied by a fraction, the numerator of which is the Principal Remittance Amount for such Loan Group and the denominator of which is the Principal Remittance Amount for both Loan Groups and (y) the Loan Group Excess Cashflow Allocation Amount for such distribution date available for payment thereof in the priority set forth in this prospectus supplement. EXEMPTION -- Prohibited Transaction Exemption 90-30, as amended. FINAL DISPOSITION -- With respect to a defaulted mortgage loan, when a determination is made by the Master Servicer that it has received all Insurance Proceeds, Liquidation Proceeds and other payments or cash recoveries which the Master Servicer reasonably and in good faith expects to be finally recoverable with respect to such mortgage loan. FUNDING PERIOD - The period from the Closing Date until the earlier of (i) the date on which the amount on deposit in the Pre-Funding Account is reduced to less than $10,000 or (ii) September 30, 2004. GROUP 1 INTEREST COVERAGE ACCOUNT -- A trust account that the Securities Administrator, on behalf of the Trustee, will establish for the benefit of the Certificateholders. GROUP 1 ORIGINAL PRE-FUNDED AMOUNT - The amount deposited in the Group 1 Pre-Funding Account on the Closing Date by the Securities Administrator. GROUP 1 PRE-FUNDED AMOUNT - The amount on deposit in the Group 1 Pre-Funding Account on any date of determination. GROUP 1 PRE-FUNDING ACCOUNT - An account established by the Securities Administrator for the benefit of the Certificateholders and funded on the Closing Date by the company with the Group 1 Original Pre-Funded Amount. GROUP 1 PRINCIPAL FRACTION -- With respect to any distribution date, a fraction equal to (x) the Principal Remittance Amount received from the Group 1 Loans for that distribution date over (y) the Principal Remittance Amount received from all of the mortgage loans for that distribution date. GROUP 2 INTEREST COVERAGE ACCOUNT -- A trust account that the Securities Administrator, on behalf of the Trustee, will establish for the benefit of the Certificateholders. GROUP 2 ORIGINAL PRE-FUNDED AMOUNT - The amount deposited in the Group 2 Pre-Funding Account on the Closing Date by the Securities Administrator. S-162
424B5163rd Page of 311TOC1stPreviousNextBottomJust 163rd
GROUP 2 PRE-FUNDED AMOUNT - The amount on deposit in the Group 2 Pre-Funding Account on any date of determination. GROUP 2 PRE-FUNDING ACCOUNT - An account established by the Securities Administrator for the benefit of the Certificateholders and funded on the Closing Date by the company with the Group 2 Original Pre-Funded Amount. GROUP 2 PRINCIPAL FRACTION -- With respect to any distribution date, a fraction equal to (x) the Principal Remittance Amount received from the Group 2 Loans for that distribution date over (y) the Principal Remittance Amount received from all of the mortgage loans for that distribution date. IMPAC HOLDINGS -- Impac Mortgage Holdings, Inc., an affiliate of the company and the Seller. INSURED UNDERCOLLATERALIZATION AMOUNT - With respect to any distribution date and the Group 2 Loans, the amount by which the Certificate Principal Balance of the Class 2-A Certificates exceeds the aggregate Stated Principal Balance of the Group 2 Loans and the Group 2 Pre-Funded Amount immediately following distributions on that distribution date. INSURER DEFAULT - An insurer default will occur in the event the certificate insurer fails to make a payment under the Certificate Guaranty Insurance Policy or if certain events of bankruptcy or insolvency occur with respect to the certificate insurer. INTEREST COVERAGE ACCOUNT -- Either of the Group 1 Interest Coverage Account or Group 2 Interest Coverage Account. INTEREST REMITTANCE AMOUNT -- For any distribution date, that portion of the Available Distribution Amount for such distribution date that represents interest received or advanced on the mortgage loans. IRS -- The Internal Revenue Service. LIBOR BUSINESS DAY -- A day on which banks are open for dealing in foreign currency and exchange in London and New York City. LIBOR DETERMINATION DATE -- With respect to each distribution date, the second LIBOR Business Day immediately preceding the commencement of the related Accrual Period. LOAN GROUP EXCESS CASHFLOW ALLOCATION AMOUNT -- With respect to any distribution date and Loan Group, the product of Net Monthly Excess Cashflow for such distribution date multiplied by a fraction, the numerator of which is the Principal Remittance Amount for such Loan Group for such distribution date and the denominator of which is the sum of the Principal Remittance Amount for both Loan Groups. MASTER SERVICER -- Impac Funding Corporation, in its capacity as master servicer under the Agreement. MASTER SERVICING FEE -- With respect to each mortgage loan, an amount, payable out of any payment of interest on the mortgage loan, equal to interest at the Master Servicing Fee Rate on the Stated Principal Balance of such mortgage loan for the calendar month preceding the month in which the payment is due. The Master Servicing Fee consists of servicing compensation payable to the Master Servicer in respect of its master servicing responsibilities. MASTER SERVICING FEE RATE -- On each mortgage loan, a rate equal to 0.03% per annum. S-163
424B5164th Page of 311TOC1stPreviousNextBottomJust 164th
MEZZANINE CERTIFICATES -- The Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B Certificates. MEZZANINE CORRIDOR CONTRACT -- The Corridor Contract between the trust and the Corridor Contract Provider for the benefit of the Mezzanine Certificates. MEZZANINE NET WAC RATE -- With respect to the Mezzanine Certificates, a per annum rate equal to the weighted average (weighted in proportion to the results of subtracting from the aggregate principal balance of each Loan Group the aggregate Certificate Principal Balance of the related Class A Certificates) of (i) the weighted average of the net mortgage rates of the mortgage loans in loan group 1 and (ii) the weighted average of the net mortgage rates of the mortgage loans in loan group 2, in each case, as of the first day of the month preceding the month in which the distribution occurs. MONTHLY INTEREST DISTRIBUTABLE AMOUNT -- For any distribution date and each class of Offered Certificates, the amount of interest accrued during the related Accrual Period at the related Pass-Through Rate on the Certificate Principal Balance of such Class immediately prior to such distribution date, in each case, reduced by any Prepayment Interest Shortfalls to the extent not covered by Compensating Interest payable by the Subservicer or Master Servicer and any shortfalls resulting from the application of the Relief Act (in each case to the extent allocated to such class of Offered Certificates as described under "Description of the Certificates--Allocation of Available Funds--Interest Distributions on the Offered Certificates" in this prospectus supplement). The Monthly Interest Distributable Amount on the Offered Certificates will be calculated on the basis of the actual number of days in the related Accrual Period and a 360-day year. MONTHLY STRIKE RATE - With respect to the Corridor Contract, the fixed rate set forth in the Corridor Contract used to determine payments to the trust. MOODY'S -- Moody's Investors Service, Inc. MORTGAGE LOAN PURCHASE AGREEMENT -- The Mortgage Loan Purchase Agreement among the Seller, Impac Holdings and the company, whereby the mortgage loans are being sold to the company. NET MONTHLY EXCESS CASHFLOW -- For any distribution date, the excess of (x) the Available Distribution Amount and, with respect to the Group 2 Loans, the Class 2-A Insured Amount, if any, for such distribution date over (y) the sum for such distribution date of (A) the aggregate Monthly Interest Distributable Amount for the Offered Certificates and (B) the Principal Remittance Amount. NET MORTGAGE RATE -- On any mortgage loan, the then applicable mortgage rate thereon minus the sum of (1) the Master Servicing Fee Rate, (2) the Subservicing Fee Rate and (3) the related Radian PMI Rate, if such mortgage loan is a Radian PMI Insured Loan. NET WAC RATE -- Any of the Class 1-A Net WAC Rate, Class 2-A Net WAC Rate or the Mezzanine Net WAC Rate. NET WAC SHORTFALL AMOUNT -- If on any distribution date the pass-through rate for the Offered Certificates is limited to the related Net WAC Rate, the sum of (i) the excess of (a) the amount of interest such Offered Certificates would have been entitled to receive on such distribution date if the Net WAC Rate would not have been applicable to such certificates over (b) the amount of interest accrued on such classes at the applicable Net WAC Pass-Through Rate plus (ii) the related Net WAC Shortfall Amount from the prior distribution date not previously distributed together with interest thereon at the related pass-through rate for the most recently ended Accrual Period. S-164
424B5165th Page of 311TOC1stPreviousNextBottomJust 165th
NET WAC SHORTFALL RESERVE FUND -- A reserve fund established by the Securities Administrator for the benefit of the holders of the Offered Certificates. OFFERED CERTIFICATES -- The Class A Certificates and the Mezzanine Certificates. OID REGULATIONS -- Treasury regulations under Sections 1271 to 1275 of the Code generally addressing the treatment of debt instruments issued with original issue discount. ONE-MONTH LIBOR -- The London interbank offered rate for one-month United States dollar deposits, determined as described in "Description of the Certificates--Calculation of One-Month LIBOR for the Offered Certificates" in this prospectus supplement. ORIGINAL PRE-FUNDED AMOUNT - Any of the Group 1 Original Pre-Funded Amount or Group 2 Original Pre- Funded Amount. OVERCOLLATERALIZATION DEFICIENCY AMOUNT -- With respect to any distribution date, the amount, if any, by which the Overcollateralization Target Amount exceeds the Overcollateralized Amount on such distribution date (after giving effect to distributions in respect of the Basic Principal Distribution Amount on such distribution date). OVERCOLLATERALIZATION FLOOR -- With respect to any distribution date, 0.35% of the Cut-off Date Balance. OVERCOLLATERALIZATION TARGET AMOUNT -- With respect to any distribution date prior to the distribution date occurring in February 2005, $0. With respect to any distribution date on or after the distribution date in February 2005, 0.35% of the Cut-off Date Balance. OVERCOLLATERALIZED AMOUNT -- For any distribution date, the amount, if any, by which (i) the aggregate principal balance of the mortgage loans (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, unscheduled collections of principal received during the related Prepayment Period and any Realized Losses on the mortgage loans during the related Prepayment Period), plus the amount on deposit in the Pre-Funding Accounts, exceeds (ii) the aggregate Certificate Principal Balance of the Offered Certificates and the Class P Certificates as of such distribution date (after giving effect to distributions to be made on such distribution date). P&I ADVANCE -- The aggregate of all payments of principal and interest, net of the Master Servicing Fee and the Subservicing Fee, that were due during the related Due Period on the mortgage loans master serviced by it and that were delinquent on the related Determination Date. PASS-THROUGH RATE -- With respect to any distribution date and o the Class 1-A Certificates, the least of (x) One-Month LIBOR plus the related Certificate Margin, (y) the Class 1-A Net WAC Rate and (z) 11.25% per annum; o the Class 2-A Certificates, the least of (x) One-Month LIBOR plus the related Certificate Margin, (y) the Class 2-A Net WAC Rate and (z) 11.25% per annum; o the Mezzanine Certificates, the least of (x) One-Month LIBOR plus the related Certificate Margin, (y) the Mezzanine Net WAC Rate and (z) 11.25% per annum; PLAN -- Any employee benefit plan subject to ERISA and any plan or other arrangement described in Section 4975(e)(1) of the Code. S-165
424B5166th Page of 311TOC1stPreviousNextBottomJust 166th
PLAN ASSETS -- The assets of a Plan as determined under Department of Labor regulation section 2510.3-101 or other applicable law. POLICY PREMIUM RATE - The rate per annum set forth in the Agreement. PREFERENCE AMOUNT - With respect to the Class 2-A Certificates, any amount previously distributed to a Class 2-A Certificateholder that is recoverable and sought to be recovered as a voidable preference by a trustee in bankruptcy pursuant to the United States Bankruptcy Code, as amended from time to time, in accordance with a final nonappealable order of a court having competent jurisdiction. PRE-FUNDED AMOUNT - Any of the Group 1 Pre-Funded Amount or Group 2 Pre-Funded Amount. PRE-FUNDING ACCOUNT - Any of the Group 1 Pre-Funding Account or Group 2 Pre-Funding Account. PREPAYMENT PERIOD -- With respect to any distribution date is the calendar month immediately preceding the month in which such distribution date occurs. PREPAYMENT ASSUMPTION -- A Prepayment Assumption of 100% assumes that the outstanding balance of a pool of mortgage loans prepays at a rate of 30% CPR. PRINCIPAL DISTRIBUTION AMOUNT -- For any distribution date and any Loan Group, the related Basic Principal Distribution Amount plus the related Extra Principal Distribution Amount. PRINCIPAL REMITTANCE AMOUNT -- For any distribution date and each Loan Group, the sum of (1) the principal portion of all scheduled monthly payments on the related mortgage loans due on the related Due Date, to the extent received or advanced; (2) the principal portion of all proceeds of the repurchase of a mortgage loan (or, in the case of a substitution, certain amounts representing a principal adjustment) in the related Loan Group as required by the Agreement during the preceding calendar month; (3) the principal portion of all other unscheduled collections received during the preceding calendar month, including full and partial prepayments, Liquidation Proceeds, Insurance Proceeds and Subsequent Recoveries, in each case to the extent applied as recoveries of principal with respect to the mortgage loans in the related Loan Group; (4) any amount remaining on deposit in the related Pre-Funding Accounts at the end of the Funding Period; and (5) with respect to the Group 2 Loans, any portion of any Class 2-A Insured Amount for such distribution date representing an Insured Undercollateralization Amount allocable to the Class 2-A Certificates. RADIAN -- Radian Guaranty, Inc., formerly known as Commonwealth Mortgage Assurance Company. RADIAN LENDER-PAID PMI POLICY -- A Primary Insurance Policy issued by Radian in accordance with a March 29, 2002 letter between the Seller and Radian. RADIAN PMI INSURED LOANS -- The mortgage loans covered by a Radian Lender-Paid PMI Policy. S-166
424B5167th Page of 311TOC1stPreviousNextBottomJust 167th
RADIAN PMI RATE -- With respect to each Radian PMI Insured Loan, the per annum rate payable to Radian under the related Radian Lender-Paid PMI Policy. RATING AGENCIES -- S&P and Moody's. RECORD DATE -- For each distribution date and the Offered Certificates, so long as such certificates are Book- Entry Certificates, the business day prior to such distribution date. With respect to any Offered Certificates which are not Book-Entry Certificates, the close of business on the last business day of the month preceding the month in which such distribution date occurs. REFERENCE BANKS -- Leading banks selected by the Securities Administrator (after consultation with the Master Servicer)and engaged in transactions in Eurodollar deposits in the international Eurocurrency market (i) with an established place of business in London, (ii) whose quotations appear on the Telerate Screen Page 3750 on the applicable LIBOR Determination Date, (iii) which have been designated as such by the Securities Administrator (after consultation with the Master Servicer and the Certificate Insurer) and (iv) not controlling, controlled by, or under common control with, the company or the Seller. REMIC -- A real estate mortgage investment conduit within the meaning of Section 860D of the Code. REMIC REGULATIONS -- Treasury regulations under Sections 860A to 860G of the Code generally addressing the treatment of REMICs. RELIEF ACT SHORTFALL -- For any distribution date and any mortgage loan (other than a mortgage loan relating to an REO Property), any shortfalls relating to the Relief Act or similar legislation or regulations. RESERVE INTEREST RATE - With respect to any LIBOR Determination Date, the rate per annum that the Securities Administrator determines to be either (i) the arithmetic mean (rounded upwards if necessary to the nearest whole multiple of 0.0625%) of the one-month United States dollar lending rates which New York City banks selected by the Securities Administrator are quoting on the relevant LIBOR Determination Date to the principal London offices of leading banks in the London interbank market or (ii) in the event that the Securities Administrator can determine no such arithmetic mean, the lowest one-month United States dollar lending rate which New York City banks selected by the Securities Administrator are quoting on such LIBOR Determination Date to leading European banks. RULES -- The rules, regulations and procedures creating and affecting DTC and its operations. S&P -- Standard & Poor's, a division of The McGraw-Hill Companies, Inc. SECURITIES ADMINISTRATOR -- Wells Fargo Bank, N.A. SELLER -- Impac Funding Corporation, in its capacity as seller under the Mortgage Loan Purchase Agreement. STATED PRINCIPAL BALANCE -- With respect to any mortgage loan as of any date of determination, the principal balance thereof as of the Cut-off Date, after application of all scheduled principal payments due on or before the Cut-off Date, whether or not received, reduced by all amounts allocable to principal that have been distributed to certificateholders with respect to such mortgage loan on or before such date, and as further reduced to the extent that any Realized Loss thereon has been allocated to one or more classes of certificates on or before the date of determination. S-167
424B5168th Page of 311TOC1stPreviousNextBottomJust 168th
STEP-UP DATE -- The first distribution date following the first month in which the aggregate unpaid principal balance of the mortgage loans, and properties acquired in respect thereof, remaining in the trust has been reduced to less than or equal to 10% of the Cut-off Date Balance. STEPDOWN DATE -- Is the earlier of (i) the first distribution date on which the certificate principal balances of the Class A Certificates have been reduced to zero and (ii) the later to occur of (x) the distribution date occurring in September 2007 and (y) the first distribution date on which the aggregate certificate principal balance of the Class A Certificates (calculated for this purpose only after taking into account the receipt of principal on the mortgage loans, but prior to any distribution of principal to the holders of the certificates) is less than or equal to approximately 86.50% of the aggregate principal balance of the mortgage loans, calculated after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period. SUBSEQUENT CUT-OFF DATE - With respect to any subsequent mortgage loan, the date, as designated by the company, that is the later of (i) the first day of the month in which the related Subsequent Transfer Date occurs and (ii) the origination date of such subsequent mortgage loan, as the cut-off date with respect to the related subsequent mortgage loan. SUBSEQUENT RECOVERIES -- Any liquidation proceeds (net of amounts owed to the Master Servicer or any subservicer with respect to the related mortgage loan) received after the final liquidation of a mortgage loan. If Subsequent Recoveries are received, they will be included as part of the Principal Remittance Amount for the following distribution date and distributed in accordance with the priorities described in this prospectus supplement. In addition, after giving effect to all distributions on a distribution date, if any Allocated Realized Loss Amounts are outstanding, the Allocated Realized Loss Amount for the class of Class 1-A-5 Certificates or Mezzanine Certificates then outstanding with the highest distribution priority will be decreased by the amount of such Subsequent Recoveries until reduced to zero (with any remaining Subsequent Recoveries applied to reduce the Allocated Realized Loss Amount of the class with the next highest distribution priority), and the Certificate Principal Balance of such class or classes of Class 1-A-5 Certificates or Mezzanine Certificates will be increased by the same amount. Thereafter, such class or classes of Class 1-A-5 Certificates or Mezzanine Certificates will accrue interest on the increased Certificate Principal Balance. SUBSEQUENT TRANSFER DATE - With respect to any subsequent mortgage loan , the applicable date upon which such mortgage loan was purchased from the Seller with amounts on deposit in the Pre-Funding Account. SUBSEQUENT TRANSFER INSTRUMENT - With respect to the subsequent mortgage loans, the subsequent transfer instrument, dated as of the applicable Subsequent Transfer Date, between the company and the Trustee, or such other instrument as agreed upon by the company and the Trustee. SUBSERVICERS -- Countrywide Home Loans Servicing LP and Wells Fargo Bank, N.A. SUBSERVICING FEE -- With respect to each mortgage loan, accrued interest at the Servicing Fee Rate with respect to the mortgage loan on the same principal balance on which interest on the mortgage loan accrues for the calendar month. The Subservicing Fee consists of subservicing and other related compensation payable to the Subservicer or to the Master Servicer if the Master Servicer is directly servicing the loan. SUBSERVICING FEE RATE -- On each mortgage loan, a rate equal to 0.375% per annum. SUPER SENIOR CERTIFICATE -- Any of the Class 1-A-1, Class 1-A-2, Class 1-A-3 and Class 1-A-4 Certificates. S-168
424B5169th Page of 311TOC1stPreviousNextBottomJust 169th
TRIGGER EVENT -- A Trigger Event is in effect with respect to any distribution date if (1) the average three-month rolling percentage obtained by dividing (x) aggregate principal balance of mortgage loans that are 60 or more days delinquent (including for this purpose any such mortgage loans in foreclosure, mortgage loans with respect to which the related mortgaged property has been acquired by the trust, and mortgage loans discharged due to bankruptcy) by (y) the aggregate principal balance of the mortgage loans, in each case, as of the last day of the previous calendar month, exceeds 44.50% multiplied by the Credit Enhancement Percentage; or (2) the cumulative amount of Realized Losses incurred on the mortgage loans from the Cut-off Date through the end of the calendar month immediately preceding such distribution date divided by the Cut-off Date Balance exceeds (i) 1.00% with respect to the distribution date occurring in September 2007, plus an additional 1/12th of 0.50% for each month thereafter up to and including the distribution date in August 2008, (ii) 1.50% with respect to the distribution date occurring in September 2008, plus an additional 1/12th of 0.50% for each month thereafter up to and including the distribution date in August 2009, (iii) 2.00% with respect to the distribution date occurring in September 2009, plus an additional 1/12th of 0.50% for each month thereafter up to and including the distribution date in August 2010 and (iv) 2.50% with respect to any distribution date occurring in September 2010 and thereafter. For purposes of the foregoing calculation, a mortgage loan is considered "60 days" delinquent if a payment due on the first day of a month has not been received by the second day of the second following month. TRUSTEE -- Deutsche Bank National Trust Company. UNDERWRITERS -- Countrywide Securities Corporation and Bear, Stearns & Co. Inc. UNPAID INTEREST SHORTFALL AMOUNT -- For each class of Offered Certificates and the first distribution date, zero, and with respect to each class of Offered Certificates and any distribution date after the first distribution date, the amount, if any, by which (a) the sum of (1) the Monthly Interest Distributable Amount for such class for the immediately preceding distribution date and (2) the outstanding Unpaid Interest Shortfall Amount, if any, for such class for such preceding distribution date exceeds (b) the aggregate amount distributed on such class in respect of interest pursuant to clause (a) of this definition on such preceding distribution date, plus interest on the amount of interest due but not paid on the certificates of such class on such preceding distribution date, to the extent permitted by law, at the Pass-Through Rate for such class for the related Accrual Period. S-169
424B5170th Page of 311TOC1stPreviousNextBottomJust 170th
ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in certain limited circumstances, the globally offered Impac Mortgage Pass-Through Certificates, Series 2004-3 Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-A-4, Class 1-A-5, Class 2-A-1, Class 2-A-2, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class B (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold interests in such Global Securities through any of DTC, Clearstream or Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same day funds. Capitalized terms used but not defined in this Annex I have the meanings assigned to them in the prospectus supplement and the prospectus. Secondary market trading between investors holding interests in Global Securities through Clearstream and Euroclear will be conducted in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding interests in Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations. Secondary cross-market trading between investors holding interests in Global Securities through Clearstream or Euroclear and investors holding interests in Global Securities through DTC participants will be effected on a delivery-against-payment basis through the respective depositories of Clearstream and Euroclear (in such capacity) and as DTC participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. Clearstream and Euroclear will hold positions on behalf of their participants through their respective depositories, which in turn will hold such positions in accounts as DTC participants. Investors electing to hold interests in Global Securities through DTC participants will be subject to the settlement practices applicable to similar issues of pass-through certificates. Investors' securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold interests in Global Securities through Clearstream or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. I-1
424B5171st Page of 311TOC1stPreviousNextBottomJust 171st
TRANSFERS BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC participants will be settled using the DTC procedures applicable to similar issues of pass-through certificates in same-day funds. TRANSFERS BETWEEN CLEARSTREAM AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading between Clearstream participants or Euroclear participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. TRANSFERS BETWEEN DTC SELLER AND CLEARSTREAM OR EUROCLEAR PURCHASER. When Global Securities are to be transferred from the account of a DTC participant to the account of a Clearstream participant or a Euroclear participant, the purchaser will send instructions to Clearstream or Euroclear through a Clearstream participant or Euroclear participant at least one business day prior to settlement. Clearstream or Euroclear will instruct its respective depository to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last distribution date to but excluding the settlement date. Payment will then be made by the respective depository to the DTC participant's account against delivery of the Global Securities. After such settlement has been completed, the Global Securities will be credited to the respective clearing system, and by the clearing system, in accordance with its usual procedures, to the Clearstream participant's or Euroclear participant's account. The Global Securities credit will appear on the next business day (European time) and the cash debit will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed through DTC on the intended value date (i.e., the trade fails), the Clearstream or Euroclear cash debit will be valued instead as of the actual settlement date. Clearstream participants and Euroclear participants will need to make available to the respective clearing system the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-position funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring with Clearstream or Euroclear. Under this approach, they may take on credit exposure to Clearstream or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream or Euroclear has extended a line of credit to them, Clearstream participants or Euroclear participants can elect not to pre-position funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, Clearstream participants or Euroclear participants purchasing Global Securities would incur overdraft charges for one day, to the extent they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, the investment income on the interest in the Global Securities earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this result will depend on each Clearstream participant's or Euroclear participant's cost of funds. Since the settlement through DTC will take place during New York business hours, DTC participants can employ their usual procedures for sending Global Securities to the respective depository for the benefit of Clearstream participants or Euroclear participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participant, a cross-market transaction will settle no differently than a trade between two DTC participants. TRANSFERS BETWEEN CLEARSTREAM OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Clearstream participants and Euroclear participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective depository, to a DTC participant. The seller will send instructions to Clearstream or the Euroclear Operator through a Clearstream participant or Euroclear participant at least one business day prior to settlement. Clearstream or Euroclear will instruct its respective depository, to deliver the Global I-2
424B5172nd Page of 311TOC1stPreviousNextBottomJust 172nd
Securities to the DTC participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last distribution date to but excluding the settlement date. The payment will then be reflected in the account of the Clearstream participant or Euroclear participant the following business day, and receipt of the cash proceeds in the Clearstream participant's or Euroclear participant's account would be back- valued to the value date (which would be the preceding day, when settlement occurred through DTC in New York). Should the Clearstream participant or Euroclear participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back- valuation will extinguish any overdraft charges incurred over that one- day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream participant's or Euroclear participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream or Euroclear and purchase Global Securities from DTC participants for delivery to Clearstream participants or Euroclear participants should note that these trades will automatically fail on the sale side unless affirmative action were taken. At least three techniques should be available to eliminate this potential problem: (a) borrowing Global Securities through Clearstream or Euroclear for one day (until the purchase side of the day trade is reflected in the relevant Clearstream or Euroclear accounts) in accordance with the clearing system's customary procedures; (b) borrowing Global Securities in the United States from a DTC participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in the relevant Clearstream or Euroclear accounts in order to settle the sale side of the trade; or (c) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Clearstream participant or Euroclear participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Global Securities holding securities through Clearstream or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons (as defined below), unless (i) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between such beneficial owner and the U.S. entity required to withhold tax, complies with applicable certification requirements and (ii) such beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial Holders of Global Securities that are Non-U.S. Persons (as defined below) can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status). If the information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of such change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM W-8ECI). A Non-U.S. Person (as defined below), including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) or a substitute form. I-3
424B5173rd Page of 311TOC1stPreviousNextBottomJust 173rd
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM W-8BEN). Non- U.S. Persons residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form W-8BEN (Ownership, Exemption or Reduced Rate Certificate). Form W-8BEN may be filed by a beneficial owner or its agent. EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a Global Security or, in the case of a Form W-8BEN or a Form W-8ECI filer, his agent, files by submitting the appropriate form to the person through whom it holds the security (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8BEN and Form W-8ECI are effective until the third succeeding calendar year from the date the form is signed. The term "U.S. Person" means (i) a citizen or resident of the United States, (ii) a corporation, a partnership or other entity treated as a corporation or a partnership for United States federal income tax purposes, organized in or under the laws of the United States or any state thereof, including for this purpose the District of Columbia, (iii) an estate, the income of which is includible in gross income for United States tax purposes, regardless of its source, (iv) a trust if a court within the United States is able to exercise primary supervision of the administration of the trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust; or (v) to the extent provided in Treasury regulations, certain trusts in existence on August 20, 1996 that are treated as United States persons prior to such date and elect to continue to be treated as United States persons. The term "Non-U.S. Person" means any person who is not a U.S. Person. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of the Global Securities. I-4
424B5174th Page of 311TOC1stPreviousNextBottomJust 174th
IMPAC SECURED ASSETS CORP. Company MORTGAGE PASS-THROUGH CERTIFICATES MORTGAGE-BACKED NOTES -------------------------------------------------------------------------------- YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS IN THE PROSPECTUS SUPPLEMENT. -------------------------------------------------------------------------------- THE OFFERED SECURITIES The company proposes to establish one or more trusts to issue and sell from time to time one or more classes of offered securities, which shall be mortgage pass-through certificates or mortgage-backed notes. THE TRUST FUND Each series of securities will be secured by a trust fund consisting primarily of a segregated pool of mortgage loans, including: o mortgage loans secured by first and junior liens on the related mortgage property; o home equity revolving lines of credit; o mortgage loans where the borrower has little or no equity in the related mortgaged property; o mortgage loans secured by one- to four-family residential properties; o mortgage loans secured by multifamily properties, commercial properties and mixed residential and commercial properties, provided that the concentration of these properties is less than 10% of the pool; and o manufactured housing conditional sales contracts and installment loan agreements or interests therein; in each case acquired by the company from one or more affiliated or unaffiliated institutions. CREDIT ENHANCEMENT If so specified in the related prospectus supplement, the trust for a series of securities may include any one or any combination of a financial guaranty insurance policy, mortgage pool insurance policy, letter of credit, special hazard insurance policy or reserve fund, and currency or interest rate exchange agreements. In addition to or in lieu of the foregoing, credit enhancement may be provided by means of subordination of one or more classes of securities, by cross-support or by overcollateralization. The offered securities may be offered to the public through different methods as described in "Methods of Distribution" in this prospectus. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED HEREBY OR DETERMINED THAT THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is August 30, 2004.
424B5175th Page of 311TOC1stPreviousNextBottomJust 175th
[Enlarge/Download Table] TABLE OF CONTENTS Caption Page ------- ---- INTRODUCTION......................................................................................................3 General..........................................................................................................3 THE MORTGAGE POOLS................................................................................................4 General..........................................................................................................4 The Mortgage Loans...............................................................................................6 Underwriting Standards..........................................................................................10 Qualifications of Originators and Sellers.......................................................................12 Representations by Sellers......................................................................................13 SERVICING OF MORTGAGE LOANS......................................................................................16 General.........................................................................................................16 The Master Servicer.............................................................................................16 Collection and Other Servicing Procedures; Mortgage Loan Modifications...................................................................................................17 Subservicers....................................................................................................19 Special Servicers...............................................................................................19 Realization Upon or Sale of Defaulted Mortgage Loans............................................................19 Servicing and Other Compensation and Payment of Expenses; Retained Interest...............................................................................................22 Evidence as to Compliance.......................................................................................23 DESCRIPTION OF THE SECURITIES....................................................................................24 General.........................................................................................................24 Form of Securities..............................................................................................26 Global Securities...............................................................................................27 Assignment of Trust Fund Assets.................................................................................30 Certificate Account.............................................................................................33 Distributions...................................................................................................37 Distributions of Interest and Principal on the Securities.......................................................37 Pre-Funding Account.............................................................................................38 Distributions on the Securities in Respect of Prepayment Premium..............................................................................................39 Allocation of Losses and Shortfalls.............................................................................39 Advances........................................................................................................39 Reports to Securityholders......................................................................................40 DESCRIPTION OF CREDIT ENHANCEMENT................................................................................41 General ........................................................................................................41 Subordinate Securities..........................................................................................42 Cross-Support...................................................................................................42 Overcollateralization...........................................................................................43 Financial Guaranty Insurance Policy ............................................................................43 Mortgage Pool Insurance Policies................................................................................43 Letter of Credit ...............................................................................................45 Special Hazard Insurance Policies ..............................................................................45 Reserve Funds...................................................................................................46 Cash Flow Agreements............................................................................................47 Maintenance of Credit Enhancement ..............................................................................47 Reduction or Substitution of Credit Enhancement ................................................................49 OTHER FINANCIAL OBLIGATIONS RELATED TO THE SECURITIES.......................................................................................................50 Swaps and Yield Supplement Agreements...........................................................................50 Purchase Obligations ...........................................................................................50 PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER................................................................................................51 General.........................................................................................................51 Primary Mortgage Insurance Policies ............................................................................51 Hazard Insurance Policies.......................................................................................52 FHA Insurance...................................................................................................54 VA Mortgage Guaranty............................................................................................54 THE COMPANY .....................................................................................................55 IMPAC FUNDING CORPORATION........................................................................................55 IMPAC MORTGAGE HOLDINGS, INC.....................................................................................55 THE AGREEMENTS...................................................................................................56 General.........................................................................................................56 Certain Matters Regarding the Master Servicer and the Company...................................................56 Events of Default and Rights Upon Event Default.................................................................57 Amendment.......................................................................................................61 Termination; Retirement of Securities...........................................................................62 The Trustee.....................................................................................................64 Duties of the Trustee...........................................................................................64 Some Matters Regarding the Trustee..............................................................................64 Resignation and Removal of the Trustee..........................................................................64 YIELD CONSIDERATIONS.............................................................................................65 MATURITY AND PREPAYMENT CONSIDERATIONS...........................................................................67 LEGAL ASPECTS OF MORTGAGE LOANS..................................................................................69 Mortgages.......................................................................................................69 Cooperative Mortgage Loans......................................................................................70 Tax Aspects of Cooperative Ownership............................................................................71 Leases and Rents ...............................................................................................71 Contracts.......................................................................................................71 Foreclosure on Mortgages and Some Contracts.....................................................................73 Foreclosure on Shares of Cooperatives...........................................................................75 Repossession with respect to Contracts..........................................................................76 Rights of Redemption............................................................................................78 Anti-Deficiency Legislation and Other Limitations on Lenders....................................................78 Environmental Legislation.......................................................................................80 Consumer Protection Laws with Respect to Contracts..............................................................81 Enforceability of Some Provisions...............................................................................82 Subordinate Financing...........................................................................................84 Installment Contracts...........................................................................................84 Applicability of Usury Laws.....................................................................................85 Alternative Mortgage Instruments................................................................................85 Formaldehyde Litigation with Respect to Contracts...............................................................86 Servicemembers' Civil Relief Act of 1940........................................................................86 Forfeitures in Drug and RICO Proceedings........................................................................87 Junior Mortgages................................................................................................87 Negative Amortization Loans.....................................................................................88 FEDERAL INCOME TAX CONSEQUENCES..................................................................................88 General.........................................................................................................88 REMICS..........................................................................................................89 Notes..........................................................................................................107 Grantor Trust Funds............................................................................................107 STATE AND OTHER TAX CONSEQUENCES ...............................................................................117 ERISA CONSIDERATIONS............................................................................................117 Representation from Plans Investing in Notes with "Substantial Equity Features" or Non-exempt Certificates...........................................................................122 Tax Exempt Investors...........................................................................................123 Consultation with Counsel......................................................................................123 LEGAL INVESTMENT MATTERS........................................................................................123 USE OF PROCEEDS.................................................................................................125 METHODS OF DISTRIBUTION.........................................................................................125 LEGAL MATTERS...................................................................................................126 FINANCIAL INFORMATION...........................................................................................126 RATING..........................................................................................................126 AVAILABLE INFORMATION...........................................................................................127 REPORTS TO SECURITYHOLDERS......................................................................................127 INCORPORATION OF INFORMATION BY REFERENCE.......................................................................127 GLOSSARY........................................................................................................129 2
424B5176th Page of 311TOC1stPreviousNextBottomJust 176th
INTRODUCTION ALL CAPITALIZED TERMS IN THIS PROSPECTUS ARE DEFINED IN THE GLOSSARY AT THE END. GENERAL The mortgage pass-through certificates or mortgage-backed notes offered by this prospectus and the prospectus supplement will be offered from time to time in series. The securities of each series will consist of the offered securities of the series, together with any other mortgage pass-through certificates or mortgage-backed notes of the series. Each series of certificates will represent in the aggregate the entire beneficial ownership interest in, and each series of notes will represent indebtedness of, a trust fund to be established by the company. Each trust fund will consist primarily of a mortgage pool of mortgage loans or interests therein, which may include mortgage securities, acquired by the company from one or more affiliated or unaffiliated sellers. See "The Company" and "The Mortgage Pools." The mortgage loans may include sub-prime mortgage loans. The trust fund assets may only include, if applicable, the mortgage loans, reinvestment income, reserve funds, cash accounts and various forms of credit enhancement as described in this prospectus and will be held in trust for the benefit of the related securityholders pursuant to: (1) with respect to each series of certificates, a pooling and servicing agreement or other agreement, or (2) with respect to each series of notes, an indenture, in each case as more fully described in this prospectus and in the related prospectus supplement. Information regarding the offered securities of a series, and the general characteristics of the mortgage loans and other trust fund assets in the related trust fund, will be set forth in the related prospectus supplement. Each series of securities will include one or more classes. Each class of securities of any series will represent the right, which right may be senior or subordinate to the rights of one or more of the other classes of the securities, to receive a specified portion of payments of principal or interest or both on the mortgage loans and the other trust fund assets in the related trust fund in the manner described in this prospectus under "Description of the Securities" and in the related prospectus supplement. A series may include one or more classes of securities entitled to principal distributions, with disproportionate, nominal or no interest distributions, or to interest distributions, with disproportionate, nominal or no principal distributions. A series may include two or more classes of securities which differ as to the timing, sequential order, priority of payment, pass-through rate or amount of distributions of principal or interest or both. The company's only obligations with respect to a series of securities will be pursuant to representations and warranties made by the company, except as provided in the related prospectus supplement. The master servicer for any series of securities will be named in the related prospectus supplement. The principal obligations of the master servicer will be pursuant to its contractual servicing obligations, which include its limited obligation to make advances in the event of delinquencies in payments on the related mortgage loans. See "Description of the Securities." If so specified in the related prospectus supplement, the trust fund for a series of securities may include any one or any combination of a financial guaranty insurance policy, mortgage pool insurance policy, letter of credit, special hazard insurance policy, reserve fund or currency or interest rate exchange agreements. In addition to or in lieu of the foregoing, credit enhancement may be provided by means of subordination of one or more classes of securities or by overcollateralization. See "Description of Credit Enhancement." The rate of payment of principal of each class of securities entitled to a portion of principal payments on the mortgage loans in the related mortgage pool and the trust fund assets will depend on the priority of 3
424B5177th Page of 311TOC1stPreviousNextBottomJust 177th
payment of the class and the rate and timing of principal payments on the mortgage loans and other trust fund assets, including by reason of prepayments, defaults, liquidations and repurchases of mortgage loans. A rate of principal payments lower or faster than that anticipated may affect the yield on a class of securities in the manner described in this prospectus and in the related prospectus supplement. See "Yield Considerations." With respect to each series of certificates, one or more separate elections may be made to treat the related trust fund or a designated portion thereof as a REMIC for federal income tax purposes. If applicable, the prospectus supplement for a series of certificates will specify which class or classes of the related series of certificates will be considered to be regular interests in the related REMIC and which class of certificates or other interests will be designated as the residual interest in the related REMIC. See "Federal Income Tax Consequences" in this prospectus. The offered securities may be offered through one or more different methods, including offerings through underwriters, as more fully described under "Methods of Distribution" and in the related prospectus supplement. There will be no secondary market for the offered securities of any series prior to the offering thereof. There can be no assurance that a secondary market for any of the offered securities will develop or, if it does develop, that it will continue. The offered securities will not be listed on any securities exchange. THE MORTGAGE POOLS GENERAL Each mortgage pool will consist primarily of mortgage loans, minus any interest retained by the company or any affiliate of the company. The mortgage loans may consist of single family loans, multifamily loans, commercial loans, mixed-use loans and Contracts, each as described below. The single family loans will be evidenced by mortgage notes and secured by mortgages that, in each case, create a first or junior lien on the related mortgagor's fee or leasehold interest in the related mortgaged property. The related mortgaged property for a single family loan may be owner-occupied or may be a vacation, second or non-owner-occupied home. If specified in the related prospectus supplement relating to a series of securities, the single family loans may include cooperative apartment loans evidenced by a mortgage note secured by security interests in the related mortgaged property including shares issued by cooperatives and in the related proprietary leases or occupancy agreements granting exclusive rights to occupy specific dwelling units in the related buildings. The multifamily loans will be evidenced by mortgage notes and secured by mortgages that create a first or junior lien on residential properties consisting of five or more dwelling units in high-rise, mid-rise or garden apartment structures or projects. The commercial loans will be evidenced by mortgage notes and secured mortgages that create a first or junior lien on commercial properties including office building, retail building and a variety of other commercial properties as may be described in the related prospectus supplement. The mixed-use loans will be evidenced by mortgage loans and secured by mortgages that create a first or junior lien on properties consisting of mixed residential and commercial structures. 4
424B5178th Page of 311TOC1stPreviousNextBottomJust 178th
The aggregate concentration by original principal balance of commercial, multifamily and mixed-use loans in any mortgage pool will be less than 10% of the original principal balance of the mortgage pool. Mortgaged properties may be located in any one of the 50 states, the District of Columbia or the Commonwealth of Puerto Rico. The mortgage loans will not be guaranteed or insured by the company or any of its affiliates. However, if so specified in the related prospectus supplement, the mortgage loans may be insured by the FHA or the VA. See "Description of Primary Insurance Policies--FHA Insurance" and "--VA Insurance." A mortgage pool may include mortgage loans that are delinquent as of the date the related series of securities is issued. In that case, the related prospectus supplement will set forth, as to each mortgage loan, available information as to the period of delinquency and any other information relevant for a prospective purchaser to make an investment decision. No mortgage loan in a mortgage pool shall be 90 days or more delinquent. Mortgage loans which are more than 30 and less than 90 days delinquent included in any mortgage pool will have delinquency data relating to them included in the related prospectus supplement. No mortgage pool will include a concentration of mortgage loans which is more than 30 and less than 90 days delinquent of 20% or more. The mortgage loans may include "sub-prime" mortgage loans. "Sub-prime" mortgage loans will be underwritten in accordance with underwriting standards which are less stringent than guidelines for "A" quality borrowers. Mortgagors may have a record of outstanding judgments, prior bankruptcies and other credit items that do not satisfy the guidelines for "A" quality borrowers. They may have had past debts written off by past lenders. A mortgage pool may include mortgage loans that do not meet the purchase requirements of Fannie Mae and Freddie Mac. These mortgage loans are known as nonconforming loans. The mortgage loans may be nonconforming because they exceed the maximum principal balance of mortgage loans purchased by Fannie Mae and Freddie Mac, known as jumbo loans, because they are sub-prime mortgage loans, or because of some other failure to meet the purchase criteria of Fannie Mae and Freddie Mac. The related prospectus supplement will detail to what extent the mortgage loans are nonconforming mortgage loans. Each mortgage loan will be selected by the company for inclusion in a mortgage pool from among those purchased by the company, either directly or through its affiliates, from Unaffiliated Sellers or Affiliated Sellers. If a mortgage pool is composed of mortgage loans acquired by the company directly from Unaffiliated Sellers, the related prospectus supplement will specify the extent of mortgage loans so acquired. The characteristics of the mortgage loans are as described in the related prospectus supplement. Other mortgage loans available for purchase by the company may have characteristics which would make them eligible for inclusion in a mortgage pool but were not selected for inclusion in the mortgage pool. The mortgage loans may be delivered to the trust fund pursuant to a Designated Seller Transaction, concurrently with the issuance of the related series of securities. These securities may be sold in whole or in part to the Seller in exchange for the related mortgage loans, or may be offered under any of the other methods described in this prospectus under "Methods of Distribution." The related prospectus supplement for a mortgage pool composed of mortgage loans acquired by the company pursuant to a Designated Seller Transaction will generally include information, provided by the related Seller, about the Seller, the mortgage loans and the underwriting standards applicable to the mortgage loans. 5
424B5179th Page of 311TOC1stPreviousNextBottomJust 179th
If specified in the related prospectus supplement, the trust fund for a series of securities may include mortgage securities, as described in this prospectus. The mortgage securities may have been issued previously by the company or an affiliate thereof, a financial institution or other entity engaged generally in the business of mortgage lending or a limited purpose corporation organized for the purpose of, among other things, acquiring and depositing mortgage loans into trusts, and selling beneficial interests in trusts. The mortgage securities will be generally similar to securities offered under this prospectus. However, any mortgage securities included in a trust fund will (1) either have been (a) previously registered under the Securities Act, or (b) eligible for sale under Rule 144(k) under the Exchange Act; and (2) be acquired in bona fide secondary market transactions. If the mortgage securities are the securities of the company or an affiliate thereof, they will be registered under the Securities Act, even if they satisfy the requirements of the preceding sentence. As to any series of mortgage securities, the related prospectus supplement will include a description of (1) the mortgage securities and any related credit enhancement, and (2) the mortgage loans underlying the mortgage securities. THE MORTGAGE LOANS Each of the mortgage loans will be a type of mortgage loan described or referred to below, with any variations described in the related prospectus supplement: o Fixed-rate, fully-amortizing mortgage loans (which may include mortgage loans converted from adjustable-rate mortgage loans or otherwise modified) providing for level monthly payments of principal and interest and terms at origination or modification of not more than approximately 15 years; o Fixed-rate, fully-amortizing mortgage loans (which may include mortgage loans converted from adjustable-rate mortgage loans or otherwise modified) providing for level monthly payments of principal and interest and terms at origination or modification of more than 15 years, but not more than approximately 30 years; o Fully-amortizing ARM Loans having an original or modified term to maturity of not more than approximately 30 years with a related mortgage rate which generally adjusts initially either three months, six months or one, two, three, five, seven or ten years or other intervals subsequent to the initial payment date, and thereafter at either three-month, six-month, one-year or other intervals (with corresponding adjustments in the amount of monthly payments) over the term of the mortgage loan to equal the sum of the related Note Margin and the Note Index. The related prospectus supplement will set forth the relevant Index and the highest, lowest and weighted average Note Margin with respect to the ARM Loans in the related mortgage pool. The related prospectus supplement will also indicate any periodic or lifetime limitations on changes in any per annum mortgage rate at the time of any adjustment. If specified in the related prospectus supplement, an ARM Loan may include a provision that allows the mortgagor to convert the adjustable mortgage rate to a fixed rate at some point during the term of the ARM Loan generally not later than six to ten years subsequent to the initial payment date; o Negatively-amortizing ARM Loans having original or modified terms to maturity of not more than approximately 30 years with mortgage rates which generally adjust initially on the payment date referred to in the related prospectus supplement, and on each of specified periodic payment dates thereafter, to equal the sum of the Note Margin and the Index. The scheduled monthly payment will be adjusted as and when described in the related prospectus 6
424B5180th Page of 311TOC1stPreviousNextBottomJust 180th
supplement to an amount that would fully amortize the mortgage loan over its remaining term on a level debt service basis; provided that increases in the scheduled monthly payment may be subject to limitations as specified in the related prospectus supplement. Any Deferred Interest will be added to the principal balance of the mortgage loan; o Fixed-rate, graduated payment mortgage loans having original or modified terms to maturity of not more than approximately 15 years with monthly payments during the first year calculated on the basis of an assumed interest rate which is a specified percentage below the mortgage rate on the mortgage loan. Monthly payments on these mortgage loans increase at the beginning of the second year by a specified percentage of the monthly payment during the preceding year and each year thereafter to the extent necessary to amortize the mortgage loan over the remainder of its approximately 15-year term. Deferred Interest, if any, will be added to the principal balance of these mortgage loans; o Fixed-rate, graduated payment mortgage loans having original or modified terms to maturity of not more than approximately 30 years with monthly payments during the first year calculated on the basis of an assumed interest rate which is a specified percentage below the mortgage rate. The monthly payments on these mortgage loans increase at the beginning of the second year by a specified percentage of the monthly payment during the preceding year and each year thereafter to the extent necessary to fully amortize the mortgage loan within its approximately 25- or 30-year term. Deferred Interest, if any, will be added to the principal balance of these mortgage loans; o Balloon loans having payment terms similar to those described in one of the preceding paragraphs, calculated on the basis of an assumed amortization term, but providing for a balloon payment of all outstanding principal and interest to be made at the end of a specified term that is shorter than the assumed amortization term. o Mortgage loans that provide for a line of credit pursuant to which amounts may be advanced to the borrower from time to time; or o Another type of mortgage loan described in the related prospectus supplement. The mortgage pool may contain mortgage loans secured by junior liens, and the related senior liens may not be included in the mortgage pool. The primary risk to holders of mortgage loans secured by junior liens is the possibility that adequate funds will not be received in connection with a foreclosure of the related senior liens to satisfy fully both the senior liens and the mortgage loan. In the event that a holder of a senior lien forecloses on a mortgaged property, the proceeds of the foreclosure or similar sale will be applied first to the payment of court costs and fees in connection with the foreclosure, second to real estate taxes, third in satisfaction of all principal, interest, prepayment or acceleration penalties, if any, and any other sums due and owing to the holder of the senior liens. The claims of the holders of the senior liens will be satisfied in full out of proceeds of the liquidation of the related mortgaged property, if the proceeds are sufficient, before the trust fund as holder of the junior lien receives any payments in respect of the mortgage loan. If the master servicer were to foreclose on a mortgage loan secured by a junior lien, it would do so subject to any related senior liens. In order for the debt related to the mortgage loan to be paid in full at the sale, a bidder at the foreclosure sale of the mortgage loan would have to bid an amount sufficient to pay off all sums due under the mortgage loan and the senior liens or purchase the mortgaged property subject to the senior liens. In the event that the proceeds from a foreclosure or similar sale of the related mortgaged property are insufficient to satisfy all senior liens and the mortgage loan in the aggregate, the trust fund, as the holder of the junior 7
424B5181st Page of 311TOC1stPreviousNextBottomJust 181st
lien, and, accordingly, holders of one or more classes of the securities of the related series bear (1) the risk of delay in distributions while a deficiency judgment against the borrower is sought and (2) the risk of loss if the deficiency judgment is not realized upon. Moreover, deficiency judgments may not be available in some jurisdictions or the mortgage loan may be nonrecourse. In addition, a junior mortgagee may not foreclose on the property securing a junior mortgage unless it forecloses subject to the senior mortgages. A mortgage loan may contain a prohibition on prepayment or lock-out period or require payment of a prepayment penalty. A multifamily, commercial or mixed-use loan may also contain a provision that entitles the lender to a share of profits realized from the operation or disposition of the related mortgaged property. If the holders of any class or classes of offered securities of a series will be entitled to all or a portion of this type of equity participation, the related prospectus supplement will describe the equity participation and the method or methods by which distributions in respect thereof will be made to such holders. The mortgage loans may be "equity refinance" mortgage loans, as to which a portion of the proceeds are used to refinance an existing mortgage loan, and the remaining proceeds may be retained by the mortgagor or used for purposes unrelated to the mortgaged property. Alternatively, the mortgage loans may be "rate and term refinance" mortgage loans, as to which substantially all of the proceeds (net of related costs incurred by the mortgagor) are used to refinance an existing mortgage loan or loans (which may include a junior lien) primarily in order to change the interest rate or other terms thereof. The mortgage loans may be mortgage loans which have been consolidated and/or have had various terms changed, mortgage loans which have been converted from adjustable rate mortgage loans to fixed rate mortgage loans, or construction loans which have been converted to permanent mortgage loans. In addition, a mortgaged property may be subject to secondary financing at the time of origination of the mortgage loan or thereafter. In addition, some or all of the single family loans secured by junior liens may be High LTV Loans. A mortgage pool may contain convertible ARM Loans which allow the mortgagors to convert the adjustable rates on these mortgage loans to a fixed rate at some point during the life of these mortgage loans, generally not later than six to ten years subsequent to the date of origination, depending upon the length of the initial adjustment period. If specified in the related prospectus supplement, upon any conversion, the company, the related master servicer, the applicable Seller or a third party will purchase the converted mortgage loan as and to the extent set forth in the related prospectus supplement. Alternatively, if specified in the related prospectus supplement, the company or the related master servicer (or another specified party) may agree to act as remarketing agent with respect to the converted mortgage loans and, in this capacity, to use its best efforts to arrange for the sale of converted mortgage loans under specified conditions. Upon the failure of any party so obligated to purchase any converted mortgage loan, the inability of any remarketing agent to arrange for the sale of the converted mortgage loan and the unwillingness of the remarketing agent to exercise any election to purchase the converted mortgage loan for its own account, the related mortgage pool will thereafter include both fixed rate and adjustable rate mortgage loans. If provided for in the related prospectus supplement, the mortgage loans may include buydown mortgage loans. Under the terms of a buydown mortgage loan, the monthly payments made by the mortgagor during the early years of the mortgage loan will be less than the scheduled monthly payments on the mortgage loan. The resulting difference will made up from: o funds contributed by the seller of the mortgaged property or another source and placed in a custodial account, 8
424B5182nd Page of 311TOC1stPreviousNextBottomJust 182nd
o if funds contributed by the seller are contributed on a present value basis, investment earnings on these funds or o additional funds to be contributed over time by the mortgagor's employer or another source. See "Description of the Securities--Payments on Mortgage Loans; Deposits to Certificate Account." Generally, the mortgagor under each buydown mortgage loan will be qualified at the applicable lower monthly payment. Accordingly, the repayment of a buydown mortgage loan is dependent on the ability of the mortgagor to make larger level monthly payments after the Buydown Funds have been depleted and, for some buydown mortgage loans, during the Buydown Period. The prospectus supplement for each series of securities will contain information, to the extent known or reasonably ascertainable, as to the loss and delinquency experience of the Seller and/or the master servicer with respect to mortgage loans similar to those included in the trust fund. Information generally will be provided when the Seller and/or master servicer have a seasoned portfolio of mortgage loans. The prospectus supplement for each series of securities will contain information as to the type of mortgage loans that will be included in the related mortgage pool. Each prospectus supplement applicable to a series of securities will include information, generally as of the cut-off date and to the extent then available to the company, on an approximate basis, as to the following: o the aggregate principal balance of the mortgage loans, o the type of property securing the mortgage loans, o the original or modified terms to maturity of the mortgage loans, o the range of principal balances of the mortgage loans at origination or modification, o the earliest origination or modification date and latest maturity date of the mortgage loans, o the loan-to-value ratios of the mortgage loans, o the mortgage rate or range of mortgage rates borne by the mortgage loans, o if any of the mortgage loans are ARM Loans, the applicable Index, the range of Note Margins and the weighted average Note Margin, o the geographical distribution of the mortgage loans, o the number of buydown mortgage loans, if applicable, and o the percent of ARM Loans which are convertible to fixed-rate mortgage loans, if applicable. A Current Report on Form 8-K will be available upon request to holders of the related series of securities and will be filed, together with the related pooling and servicing agreement, with respect to each series of certificates, or the related servicing agreement, owner trust agreement and indenture, with respect to each series of notes, with the Commission within fifteen days after the initial issuance of the securities. In the 9
424B5183rd Page of 311TOC1stPreviousNextBottomJust 183rd
event that mortgage loans are added to or deleted from the trust fund after the date of the related prospectus supplement, the addition or deletion will be noted in the Current Report on Form 8-K. In no event, however, will more than 5% (by principal balance at the cut-off date) of the mortgage loans or mortgage securities deviate from the characteristics of the mortgage loans or mortgage securities set forth in the related prospectus supplement. The company will cause the mortgage loans constituting each mortgage pool, or mortgage securities evidencing interests therein, to be assigned, without recourse, to the trustee named in the related prospectus supplement, for the benefit of the holders of all of the securities of a series. Except to the extent that servicing of any mortgage loan is to be transferred to a special servicer, the master servicer named in the related prospectus supplement will service the mortgage loans, directly or through subservicers, pursuant to a pooling and servicing agreement, with respect to each series of certificates, or a servicing agreement, with respect to each series of notes, and will receive a fee for these services. See "Servicing of Mortgage Loans," "Description of the Securities" and "The Agreements." With respect to those mortgage loans serviced by the master servicer through a subservicer, the master servicer will remain liable for its servicing obligations under the related pooling and servicing agreement or servicing agreement as if the master servicer alone were servicing the mortgage loans. The master servicer's obligations with respect to the mortgage loans will consist principally of its contractual servicing obligations under the related pooling and servicing agreement or servicing agreement (including its obligation to enforce the purchase and other obligations of subservicers and Sellers, as more fully described in this prospectus under "--Representations by Sellers" in this prospectus, "Servicing of Mortgage Loans--Subservicers," and "Description of the Securities--Assignment of Trust Fund Assets," and, if and to the extent set forth in the related prospectus supplement, its obligation to make cash advances in the event of delinquencies in payments on or with respect to the mortgage loans as described in this prospectus under "Description of the Securities--Advances") or pursuant to the terms of any mortgage securities. UNDERWRITING STANDARDS Mortgage loans to be included in a mortgage pool will have been purchased by the company, either directly or indirectly from Sellers. The mortgage loans, as well as mortgage loans underlying mortgage securities, will have been originated in accordance with underwriting standards acceptable to the company and generally described below. Any mortgage loan not directly underwritten by the company or its affiliates will be reunderwritten by the company or its affiliates, except in the case of a Designated Seller's Transaction, in which case each mortgage loan will be underwritten by the Seller or an affiliate thereof. The reunderwriting standards of the company or its affiliates for these mortgage loans generally will be in accordance with the same standards as those for mortgage loans directly underwritten, with any variations described in the related prospectus supplement. The underwriting standards to be used in originating the mortgage loans are primarily intended to assess the creditworthiness of the mortgagor, the value of the mortgaged property and the adequacy of the property as collateral for the mortgage loan. The primary considerations in underwriting a mortgage loan are the mortgagor's employment stability and whether the mortgagor has sufficient monthly income available (1) to meet the mortgagor's monthly obligations on the proposed mortgage loan (generally determined on the basis of the monthly payments due in the year of origination) and other expenses related to the home (including property taxes and hazard insurance) and (2) to meet monthly housing expenses and other financial obligations and monthly living expenses. However, the loan-to-value ratio of the mortgage loan is another critical factor. In addition, 10
424B5184th Page of 311TOC1stPreviousNextBottomJust 184th
a mortgagor's credit history and repayment ability, as well as the type and use of the mortgaged property, are also considerations. High LTV Loans are underwritten with an emphasis on the creditworthiness of the related mortgagor. High LTV Loans are underwritten with a limited expectation of recovering any amounts from the foreclosure of the related mortgaged property. In the case of the multifamily loans, commercial loans or mixed-use loans, lenders typically look to the debt service coverage ratio of a loan as an important measure of the risk of default on that loan. Unless otherwise defined in the related prospectus supplement, the debt service coverage ratio of a multifamily loan or commercial loan at any given time is the ratio of (1) the net operating income of the related mortgaged property for a twelve-month period which is to (2) the annualized scheduled payments on the mortgage loan and on any other loan that is secured by a lien on the mortgaged property prior to the lien of the related mortgage. The total operating revenues derived from a multifamily, commercial or mixed-use property, as applicable, during that period, minus the total operating expenses incurred in respect of that property during that period other than (a) non-cash items such as depreciation and amortization, (b) capital expenditures and (c) debt service on loans (including the related mortgage loan) secured by liens on that property. The net operating income of a multifamily, commercial or mixed-use property, as applicable, will fluctuate over time and may or may not be sufficient to cover debt service on the related mortgage loan at any given time. As the primary source of the operating revenues of a multifamily, commercial or mixed-use property, as applicable, rental income (and maintenance payments from tenant-stockholders of a cooperatively owned multifamily property) may be affected by the condition of the applicable real estate market and/or area economy. Increases in operating expenses due to the general economic climate or economic conditions in a locality or industry segment, such as increases in interest rates, real estate tax rates, energy costs, labor costs and other operating expenses, and/or to changes in governmental rules, regulations and fiscal policies, may also affect the risk of default on a multifamily, commercial or mixed-use loan. Lenders also look to the loan-to-value ratio of a multifamily, commercial or mixed-use loan as a measure of risk of loss if a property must be liquidated following a default. Each prospective mortgagor will generally complete a mortgage loan application that includes information on the applicant's liabilities, income, credit history, employment history and personal information. One or more credit reports on each applicant from national credit reporting companies generally will be required. The report typically contains information relating to credit history with local and national merchants and lenders, installment debt payments and any record of defaults, bankruptcies, repossessions, or judgments. In the case of a multifamily loan, commercial loan or mixed-use loan, the mortgagor will also be required to provide certain information regarding the related mortgaged property, including a current rent roll and operating income statements (which may be pro forma and unaudited). In addition, the originator will generally also consider the location of the mortgaged property, the availability of competitive lease space and rental income of comparable properties in the relevant market area, the overall economy and demographic features of the geographic area and the mortgagor's prior experience in owning and operating properties similar to the multifamily properties or commercial properties, as the case may be. Mortgaged properties generally will be appraised by licensed appraisers. The appraiser will generally address neighborhood conditions, site and zoning status and condition and valuation of improvements. In the case of mortgaged properties secured by single family loans, the appraisal report will generally include a reproduction cost analysis (when appropriate) based on the current cost of constructing a similar home and a market value analysis based on recent sales of comparable homes in the area. With respect to multifamily properties, commercial properties and mixed-use properties, the appraisal must specify whether an income analysis, a market analysis or a cost analysis was used. An appraisal employing the income approach to value 11
424B5185th Page of 311TOC1stPreviousNextBottomJust 185th
analyzes a property's projected net cash flow, capitalization and other operational information in determining the property's value. The market approach to value analyzes the prices paid for the purchase of similar properties in the property's area, with adjustments made for variations between those other properties and the property being appraised. The cost approach to value requires the appraiser to make an estimate of land value and then determine the current cost of reproducing the improvements less any accrued depreciation. In any case, the value of the property being financed, as indicated by the appraisal, must support, and support in the future, the outstanding loan balance. All appraisals are required to be on forms acceptable to Fannie Mae or Freddie Mac. Notwithstanding the foregoing, loan-to-value ratios will not necessarily constitute an accurate measure of the risk of liquidation loss in a pool of mortgage loans. For example, the value of a mortgaged property as of the date of initial issuance of the related series of securities may be less than the Value determined at loan origination, and will likely continue to fluctuate from time to time based upon changes in economic conditions and the real estate market. Mortgage loans which are subject to negative amortization will have loan-to-value ratios which will increase after origination as a result of negative amortization. Also, even when current, an appraisal is not necessarily a reliable estimate of value for a multifamily property or commercial property. As stated above, appraised values of multifamily, commercial and mixed-use properties are generally based on the market analysis, the cost analysis, the income analysis, or upon a selection from or interpolation of the values derived from those approaches. Each of these appraisal methods can present analytical difficulties. It is often difficult to find truly comparable properties that have recently been sold; the replacement cost of a property may have little to do with its current market value; and income capitalization is inherently based on inexact projections of income and expenses and the selection of an appropriate capitalization rate. Where more than one of these appraisal methods are used and provide significantly different results, an accurate determination of value and, correspondingly, a reliable analysis of default and loss risks, is even more difficult. If so specified in the related prospectus supplement, the underwriting of a multifamily loan, commercial loan or mixed-use loan may also include environmental testing. Under the laws of some states, contamination of real property may give rise to a lien on the property to assure the costs of cleanup. In several states, this type of lien has priority over an existing mortgage lien on that property. In addition, under the laws of some states and under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, a lender may be liable, as an "owner" or "operator", for costs of addressing releases or threatened releases of hazardous substances at a property, if agents or employees of the lender have become sufficiently involved in the operations of the borrower, regardless of whether or not the environmental damage or threat was caused by the borrower or a prior owner. A lender also risks such liability on foreclosure of the mortgage as described under "Legal Aspects of Mortgage Loans--Environmental Legislation" in this prospectus. With respect to any FHA loan or VA loans the mortgage loan Seller will be required to represent that it has complied with the applicable underwriting policies of the FHA or VA, respectively. See "Description of Primary Insurance Policies--FHA Insurance" and "--VA Insurance" in this prospectus. QUALIFICATIONS OF ORIGINATORS AND SELLERS Each mortgage loan generally will be originated, directly or through mortgage brokers and correspondents, by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution which is supervised and examined by a federal or state authority, or by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to sections 203 and 211 of the Housing Act. 12
424B5186th Page of 311TOC1stPreviousNextBottomJust 186th
REPRESENTATIONS BY SELLERS Each Seller will have made representations and warranties in respect of the mortgage loans and/or mortgage securities sold by the Seller and evidenced by a series of securities. In the case of mortgage loans, representations and warranties will generally include, among other things, that as to each mortgage loan: o any required hazard and primary mortgage insurance policies were effective at the origination of the mortgage loan, and each the policy remained in effect on the date of purchase of the mortgage loan from the Seller by or on behalf of the company; o with respect to each mortgage loan other than a Contract or a cooperative mortgage loan, either (A) a title insurance policy insuring (subject only to permissible title insurance exceptions) the lien status of the mortgage was effective at the origination of the mortgage loan and the policy remained in effect on the date of purchase of the mortgage loan from the Seller by or on behalf of the company or (B) if the mortgaged property securing the mortgage loan is located in an area where these policies are generally not available, there is in the related mortgage file an attorney's certificate of title indicating (subject to permissible exceptions set forth therein) the lien status of the mortgage; o the Seller has good title to the mortgage loan and the mortgage loan was subject to no offsets, defenses or counterclaims except as may be provided under the Relief Act and except to the extent that any buydown agreement exists for a buydown mortgage loan; o there are no mechanics' liens or claims for work, labor or material affecting the related mortgaged property which are, or may be a lien prior to, or equal with, the lien of the related mortgage (subject only to permissible title insurance exceptions); o the related mortgaged property is free from damage and in good repair; o there are no delinquent tax or assessment liens against the related mortgaged property; o the mortgage loan is not more than 90 days delinquent as to any scheduled payment of principal and/or interest; o if a Primary Insurance Policy is required with respect to the mortgage loan, the mortgage loan is the subject of the policy; and o the mortgage loan was made in compliance with, and is enforceable under, all applicable local, state and federal laws in all material respects. If the mortgage loans include cooperative mortgage loans, representations and warranties with respect to title insurance or hazard insurance may not be given. Generally, the cooperative itself is responsible for the maintenance of hazard insurance for property owned by the cooperative, and the borrowers (tenant-stockholders) of the cooperative do not maintain hazard insurance on their individual dwelling units. In the case of mortgage securities, representations and warranties will generally include, among other things, that as to each mortgage security: (1) the mortgage security is validly issued and outstanding and entitled to the benefits of the agreement pursuant to which it was issued; and (2) the Seller has good title to the mortgage security. In the event of a breach of a Seller's representation or warranty that materially adversely affects the interests of the securityholders in a mortgage loan or mortgage security, the related Seller will be 13
424B5187th Page of 311TOC1stPreviousNextBottomJust 187th
obligated to cure the breach or repurchase or, if permitted, replace the mortgage loan or mortgage security as described below. However, there can be no assurance that a Seller will honor its obligation to repurchase or, if permitted, replace any mortgage loan or mortgage security as to which a breach of a representation or warranty arises. All of the representations and warranties of a Seller in respect of a mortgage loan or mortgage security will have been made as of the date on which the mortgage loan or mortgage security was purchased from the Seller by or on behalf of the company. As a result, the date as of which the representations and warranties were made may be a date prior to the date of initial issuance of the related series of securities or, in the case of a Designated Seller Transaction, will be the date of closing of the related sale by the applicable Seller. A substantial period of time may have elapsed between the date as of which there presentations and warranties were made and the later date of initial issuance of the related series of securities. Accordingly, the Seller's purchase obligation (or, if specified in the related prospectus supplement, limited replacement option) described below will not arise if, during the period commencing on the date of sale of a mortgage loan or mortgage security by the Seller, an event occurs that would have given rise to a purchase obligation had the event occurred prior to sale of the affected mortgage loan or mortgage security, as the case may be. The only representations and warranties to be made for the benefit of holders of securities in respect of any related mortgage loan or mortgage security relating to the period commencing on the date of sale of the mortgage loan or mortgage security by the Seller to or on behalf of the company will be the limited representations of the company and the master servicer described under "Description of the Securities--Assignment of Trust Fund Assets" below. The company will assign to the trustee for the benefit of the holders of the related series of securities all of its right, title and interest in each purchase agreement by which it purchased a mortgage loan or mortgage security from a Seller insofar as the purchase agreement relates to the representations and warranties made by the Seller in respect of the mortgage loan or mortgage security and any remedies provided for with respect to any breach of representations and warranties with respect to the mortgage loan or mortgage security. If a Seller cannot cure a breach of any representation or warranty made by it in respect of a mortgage loan or mortgage security which materially and adversely affects the interests of the securityholders therein within a specified period after having discovered or received notice of a breach, then, the Seller will be obligated to purchase the mortgage loan or mortgage security at a purchase price set forth in the related pooling and servicing agreement or other agreement which purchase price generally will be equal to the principal balance thereof as of the date of purchase plus accrued and unpaid interest through or about the date of purchase at the related mortgage rate or pass-through rate, as applicable (net of any portion of this interest payable to the Seller in respect of master servicing compensation, special servicing compensation or subservicing compensation, as applicable, and any interest retained by the company). As to any mortgage loan required to be purchased by a Seller as provided above, rather than repurchase the mortgage loan, the Seller, if so specified in the related prospectus supplement, will be entitled, at its sole option, to remove the Deleted Mortgage Loan from the trust fund and substitute in its place a Qualified Substitute Mortgage Loan; however, with respect to a series of certificates for which no REMIC election is to be made, the substitution must be effected within 120 days of the date of the initial issuance of the related series of certificates. With respect to a trust fund for which a REMIC election is to be made, the substitution of a defective mortgage loan must be effected within two years of the date of the initial issuance of the related series of certificates, and may not be made if the substitution would cause the trust fund, or any portion thereof, to fail to qualify as a REMIC or result in a Prohibited Transaction Tax under the Code. Any Qualified Substitute Mortgage Loan generally will, on the date of substitution: 14
424B5188th Page of 311TOC1stPreviousNextBottomJust 188th
o have an outstanding principal balance, after deduction of the principal portion of the monthly payment due in the month of substitution, not in excess of the outstanding principal balance of the Deleted Mortgage Loan (the amount of any shortfall to be deposited in the Certificate Account by the related Seller or the master servicer in the month of substitution for distribution to the securityholders), o have a mortgage rate and a Net Mortgage Rate not less than (and not more than one percentage point greater than) the mortgage rate and Net Mortgage Rate, respectively, of the Deleted Mortgage Loan as of the date of substitution, o have a loan-to-value ratio at the time of substitution no higher than that of the Deleted Mortgage Loan at the time of substitution, o have a remaining term to maturity not greater than (and not more than one year less than) that of the Deleted Mortgage Loan and o comply with all of the representations and warranties made by the Seller as of the date of substitution. The related mortgage loan purchase agreement may include additional requirements relating to ARM Loans or other specific types of mortgage loans, or additional provisions relating to meeting the foregoing requirements on an aggregate basis where a number of substitutions occur contemporaneously. No Seller will have any option to substitute for a mortgage security that it is obligated to repurchase in connection with a breach of a representation and warranty. The master servicer will be required under the applicable pooling and servicing agreement or servicing agreement to use reasonable efforts to enforce this purchase or substitution obligation for the benefit of the trustee and the securityholders, following those practices it would employ in its good faith business judgment and which are normal and usual in its general mortgage servicing activities; provided, however, that this purchase or substitution obligation will not become an obligation of the master servicer in the event the applicable Seller fails to honor the obligation. In instances where a Seller is unable, or disputes its obligation, to purchase affected mortgage loans and/or mortgage securities, the master servicer, employing the standards set forth in the preceding sentence, may negotiate and enter into one or more settlement agreements with the related Seller that could provide for the purchase of only a portion of the affected mortgage loans and/or mortgage securities. Any settlement could lead to losses on the mortgage loans and/or mortgage securities which would be borne by the related securities. In accordance with the above described practices, the master servicer will not be required to enforce any purchase obligation of a Seller arising from any misrepresentation by the Seller, if the master servicer determines in the reasonable exercise of its business judgment that the matters related to the misrepresentation did not directly cause or are not likely to directly cause a loss on the related mortgage loan or mortgage security. If the Seller fails to repurchase and no breach of any other party's representations has occurred, the Seller's purchase obligation will not become an obligation of the company or any other party. In the case of a Designated Seller Transaction where the Seller fails to repurchase a mortgage loan or mortgage security and neither the company nor any other entity has assumed the representations and warranties, the repurchase obligation of the Seller will not become an obligation of the company or any other party. The foregoing obligations will constitute the sole remedies available to securityholders or the trustee for a breach of any representation by a Seller or for any other event giving rise to the obligations as described above. 15
424B5189th Page of 311TOC1stPreviousNextBottomJust 189th
Neither the company nor the master servicer will be obligated to purchase a mortgage loan or mortgage security if a Seller defaults on its obligation to do so, and no assurance can be given that the Sellers will carryout their purchase obligations. A default by a Seller is not a default by the company or by the master servicer. However, to the extent that a breach of there presentations and warranties of a Seller also constitutes a breach of a representation made by the company or the master servicer, as described below under "Description of the Securities--Assignment of Trust Fund Assets," the company or the master servicer may have a purchase or substitution obligation. Any mortgage loan or mortgage security not so purchased or substituted for shall remain in the related trust fund and any losses related thereto shall be allocated to the related credit enhancement, to the extent available, and otherwise to one or more classes of the related series of securities. If a person other than a Seller makes the representations and warranties referred to in the first paragraph of this "--Representations by Sellers" section, or a person other than a Seller is responsible for repurchasing or replacing any mortgage loan or mortgage security for a breach of those representations and warranties, the identity of that person will be specified in the related prospectus supplement. SERVICING OF MORTGAGE LOANS GENERAL The mortgage loans and mortgage securities included in each mortgage pool will be serviced and administered pursuant to either a pooling and servicing agreement or a servicing agreement. Forms of pooling and servicing agreements and a form of servicing agreement have been filed as an exhibit to the registration statement of which this prospectus is a part. However, the provisions of each pooling and servicing agreement or servicing agreement will vary depending upon the nature of the related mortgage pool. The following summaries describe the material servicing-related provisions that may appear in a pooling and servicing agreement or servicing agreement for a mortgage pool that includes mortgage loans. The related prospectus supplement will describe any servicing-related provision of its related pooling and servicing agreement or servicing agreement that materially differs from the description thereof contained in this prospectus. If the related mortgage pool includes mortgage securities, the related prospectus supplement will summarize the material provisions of the related pooling and servicing agreement and identify the responsibilities of the parties to that pooling and servicing agreement. With respect to any series of securities as to which the related mortgage pool includes mortgage securities, the servicing and administration of the mortgage loans underlying any mortgage securities will be pursuant to the terms of those mortgage securities. Mortgage loans underlying mortgage securities in a mortgage pool will be serviced and administered generally in the same manner as mortgage loans included in a mortgage pool, however, there can be no assurance that this will be the case, particularly if the mortgage securities are issued by an entity other than the company or any of its affiliates. The related prospectus supplement will describe any material differences between the servicing described below and the servicing of the mortgage loans underlying mortgage securities in any mortgage pool. THE MASTER SERVICER The master servicer, if any, for a series of securities will be named in the related prospectus supplement and may be Impac Funding Corporation or another affiliate of the company. The master servicer is required to maintain a fidelity bond and errors and omissions policy with respect to its officers and employees and other persons acting on behalf of the master servicer in connection with its activities under a pooling and servicing agreement or a servicing agreement. 16
424B5190th Page of 311TOC1stPreviousNextBottomJust 190th
COLLECTION AND OTHER SERVICING PROCEDURES; MORTGAGE LOAN MODIFICATIONS The master servicer for any mortgage pool, directly or through subservicers, will be obligated under the pooling and servicing agreement or servicing agreement to service and administer the mortgage loans in the mortgage pool for the benefit of the related securityholders, in accordance with applicable law, the terms of the pooling and servicing agreement or servicing agreement, the mortgage loans and any instrument of credit enhancement included in the related trust fund, and, to the extent consistent with the foregoing, the customs and standards of prudent institutional mortgage lenders servicing comparable mortgage loans for their own account in the jurisdictions where the related mortgaged properties are located. Subject to the foregoing, the master servicer will have full power and authority to do any and all things in connection with servicing and administration that it may deem necessary and desirable. As part of its servicing duties, the master servicer will be required to make reasonable efforts to collect all payments called for under the terms and provisions of the mortgage loans that it services. The master servicer will be obligated to follow the same collection procedures as it would follow for comparable mortgage loans held for its own account, so long as these procedures are consistent with the servicing standard of and the terms of the related pooling and servicing agreement or servicing agreement and the servicing standard generally described in the preceding paragraph, and do not impair recovery under any instrument of credit enhancement included in the related trust fund. Consistent with the foregoing, the master servicer will be permitted, in its discretion, to waive any prepayment premium, late payment charge or other charge in connection with any mortgage loan. Under a pooling and servicing agreement or a servicing agreement, a master servicer will be granted discretion to extend relief to mortgagors whose payments become delinquent. In the case of single family loans and Contracts, a master servicer may, for example, grant a period of temporary indulgence to a mortgagor or may enter into a liquidating plan providing for repayment of delinquent amounts within a specified period from the date of execution of the plan. However, the master servicer must first determine that any waiver or extension will not impair the coverage of any related insurance policy or materially adversely affect the security for the mortgage loan. In addition, unless otherwise specified in the related prospectus supplement, if a material default occurs or a payment default is reasonably foreseeable with respect to a multifamily loan, commercial loan or mixed-use loan, the master servicer will be permitted, subject to any specific limitations set forth in the related pooling and servicing agreement or servicing agreement and described in the related prospectus supplement, to modify, waive or amend any term of such mortgage loan, including deferring payments, extending the stated maturity date or otherwise adjusting the payment schedule, provided that the modification, waiver or amendment (1) is reasonably likely to produce a greater recovery with respect to that mortgage loan on a present value basis than would liquidation and (2) will not adversely affect the coverage under any applicable instrument of credit enhancement. In the case of multifamily loans, commercial loans and mixed-use loans, a mortgagor's failure to make required mortgage loan payments may mean that operating income is insufficient to service the mortgage debt, or may reflect the diversion of that income from the servicing of the mortgage debt. In addition, a mortgagor under a multifamily, commercial or mixed-use loan that is unable to make mortgage loan payments may also be unable to make timely payment of taxes and otherwise to maintain and insure the related mortgaged property. Generally, the related master servicer will be required to monitor any multifamily loan or commercial loan that is in default, evaluate whether the causes of the default can be corrected over a reasonable period without significant impairment of the value of the related mortgaged property, initiate corrective action in cooperation with the mortgagor if cure is likely, inspect the related mortgaged property and take any other actions as are consistent with the servicing standard described above and in the pooling and servicing agreement or servicing agreement. A significant period of time may elapse 17
424B5191st Page of 311TOC1stPreviousNextBottomJust 191st
before the master servicer is able to assess the success of any such corrective action or the need for additional initiatives. The time within which the master servicer can make the initial determination of appropriate action, evaluate the success of corrective action, develop additional initiatives, institute foreclosure proceedings and actually foreclose (or accept a deed to a mortgaged property in lieu of foreclosure) on behalf of the securityholders of the related series may vary considerably depending on the particular multifamily, commercial or mixed-use loan, the mortgaged property, the mortgagor, the presence of an acceptable party to assume that loan and the laws of the jurisdiction in which the mortgaged property is located. If a mortgagor files a bankruptcy petition, the master servicer may not be permitted to accelerate the maturity of the related multifamily, commercial or mixed-use loan or to foreclose on the mortgaged property for a considerable period of time. See "Legal Aspects of Mortgage Loans." Some or all of the mortgage loans in a mortgage pool may contain a due-on-sale clause that entitles the lender to accelerate payment of the mortgage loan upon any sale or other transfer of the related mortgaged property made without the lender's consent. In any case in which a mortgaged property is being conveyed by the mortgagor, the master servicer will in general be obligated, to the extent it has knowledge of the conveyance, to exercise its rights to accelerate the maturity of the related mortgage loan under any due-on-sale clause applicable thereto, but only if the exercise of these rights is permitted by applicable law and only to the extent it would not adversely affect or jeopardize coverage under any Primary Insurance Policy or applicable credit enhancement arrangements. If applicable law prevents the master servicer from enforcing a due-on-sale or due-on-encumbrance clause or if the master servicer determines that it is reasonably likely that the related mortgagor would institute a legal action to avoid enforcement of a due-on-sale or due-on-encumbrance clause, the master servicer may enter into an assumption and modification agreement with the person to whom the property has been or is about to be conveyed, pursuant to which this person becomes liable under the mortgage loan subject to specified conditions. The original mortgagor may be released from liability on a single family loan if the master servicer shall have determined in good faith that the release will not adversely affect the collectability of the mortgage loan. The master servicer will determine whether to exercise any right the trustee may have under any due-on-sale or due-on-encumbrance provision in a multifamily loan, commercial loan or mixed-use loan in a manner consistent with the servicing standard. The master servicer generally will be entitled to retain as additional servicing compensation any fee collected in connection with the permitted transfer of a mortgaged property. See "Legal Aspects of Mortgage Loans--Enforceability of Certain Provisions." FHA loans do not contain due-on-sale or due-on-encumbrance clauses and may be assumed by the purchaser of the mortgaged property. Mortgagors may, from time to time, request partial releases of the mortgaged properties, easements, consents to alteration or demolition and other similar matters. The master servicer may approve a request if it has determined, exercising its good faith business judgment in the same manner as it would if it were the owner of the related mortgage loan, that approval will not adversely affect the security for, or the timely and full collectability of, the related mortgage loan. Any fee collected by the master servicer for processing these requests will be retained by the master servicer as additional servicing compensation. In the case of mortgage loans secured by junior liens on the related mortgaged properties, the master servicer will be required to file (or cause to be filed) of record a request for notice of any action by a superior lienholder under the senior lien for the protection of the related trustee's interest, where permitted by local law and whenever applicable state law does not require that a junior lienholder be named as a party defendant in foreclosure proceedings in order to foreclose the junior lienholder's equity of redemption. The master servicer also will be required to notify any superior lienholder in writing of the existence of the mortgage loan and request notification of any action (as described below) to be taken against the mortgagor or the mortgaged property by the superior lienholder. If the master servicer is notified that any superior lienholder has accelerated or intends to accelerate the obligations secured by the related senior lien, or has declared or 18
424B5192nd Page of 311TOC1stPreviousNextBottomJust 192nd
intends to declare a default under the mortgage or the promissory note secured thereby, or has filed or intends to file an election to have the related mortgaged property sold or foreclosed, then, the master servicer will be required to take, on behalf of the related trust fund, whatever actions are necessary to protect the interests of the related securityholders, and/or to preserve the security of the related mortgage loan, subject to the REMIC Provisions, if applicable. The master servicer will be required to advance the necessary funds to cure the default or reinstate the superior lien, if the advance is in the best interests of the related securityholders and the master servicer determines the advances are recoverable out of payments on or proceeds of the related mortgage loan. The master servicer for any mortgage pool will also be required to perform other customary functions of a servicer of comparable loans, including maintaining escrow or impound accounts for payment of taxes, insurance premiums and similar items, or otherwise monitoring the timely payment of those items; adjusting mortgage rates on ARM Loans; maintaining Buydown Accounts; supervising foreclosures and similar proceedings; managing REO properties; and maintaining servicing records relating to the mortgage loans in the mortgage pool. The master servicer will be responsible for filing and settling claims in respect of particular mortgage loans under any applicable instrument of credit enhancement. See "Description of Credit Enhancement." SUBSERVICERS A master servicer may delegate its servicing obligations in respect of the mortgage loans serviced by it to one or more third-party subservicers, but the master servicer will remain liable for its obligations under the related pooling and servicing agreement or servicing agreement. The master servicer will be solely liable for all fees owed by it to any subservicer, regardless of whether the master servicer's compensation pursuant to the related pooling and servicing agreement or servicing agreement is sufficient to pay the subservicer's fees. Each subservicer will be entitled to reimbursement for some of the expenditures which it makes, generally to the same extent as would the master servicer for making the same expenditures. See "--Servicing and Other Compensation and Payment of Expenses; Retained Interest" below and "Description of the Securities--The Certificate Account." SPECIAL SERVICERS If and to the extent specified in the related prospectus supplement, a special servicer may be a party to the related pooling and servicing agreement or servicing agreement or may be appointed by the master servicer or another specified party to perform specified duties in respect of servicing the related mortgage loans that would otherwise be performed by the master servicer (for example, the workout and/or foreclosure of defaulted mortgage loans). The rights and obligations of any special servicer will be specified in the related prospectus supplement, and the master servicer will be liable for the performance of a special servicer only if, and to the extent, set forth in that prospectus supplement. REALIZATION UPON OR SALE OF DEFAULTED MORTGAGE LOANS Except as described below, the master servicer will be required, in a manner consistent with the servicing standard, to foreclose upon or otherwise comparably convert the ownership of properties securing any mortgage loans in the related mortgage pool that come into and continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments. Generally, the foreclosure process will commence no later than 90 days after delinquency of the related mortgage loan. The master servicer will be authorized to institute foreclosure proceedings, exercise any power of sale contained in the related mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title to the related mortgaged 19
424B5193rd Page of 311TOC1stPreviousNextBottomJust 193rd
property, by operation of law or otherwise, if the action is consistent with the servicing standard. The master servicer's actions in this regard must be conducted, however, in a manner that will permit recovery under any instrument of credit enhancement included in the related trust fund. In addition, the master servicer will not be required to expend its own funds in connection with any foreclosure or to restore any damaged property unless it shall determine that (1) the foreclosure and/or restoration will increase the proceeds of liquidation of the mortgage loan to the related securityholders after reimbursement to itself for these expenses and (2) these expenses will be recoverable to it from related Insurance Proceeds, Liquidation Proceeds or amounts drawn out of any fund or under any instrument constituting credit enhancement (respecting which it shall have priority for purposes of withdrawal from the Certificate Account in accordance with the pooling and servicing agreement or servicing agreement). However, unless otherwise specified in the related prospectus supplement, the master servicer may not acquire title to any multifamily property or commercial property securing a mortgage loan or take any other action that would cause the related trustee, for the benefit of securityholders of the related series, or any other specified person to be considered to hold title to, to be a "mortgagee-in-possession" of, or to be an "owner" or an "operator" of such mortgaged property within the meaning of federal environmental laws, unless the master servicer has previously determined, based on a report prepared by a person who regularly conducts environmental audits (which report will be an expense of the trust fund), that either: (1) the mortgaged property is in compliance with applicable environmental laws and regulations or, if not, that taking actions as are necessary to bring the mortgaged property into compliance with these laws is reasonably likely to produce a greater recovery on a present value basis than not taking those actions; and (2) there are no circumstances or conditions present at the mortgaged property that have resulted in any contamination for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any applicable environmental laws and regulations or, if those circumstances or conditions are present for which any such action could be required, taking those actions with respect to the mortgaged property is reasonably likely to produce a greater recovery on a present value basis than not taking those actions. See "Legal Aspects of Mortgage Loans--Environmental Legislation." The master servicer will not be obligated to foreclose upon or otherwise convert the ownership of any mortgaged property securing a single family loan if it has received notice or has actual knowledge that the property may be contaminated with or affected by hazardous wastes or hazardous substances; however, environmental testing will not be required. The master servicer will not be liable to the securityholders of the related series if, based on its belief that no such contamination or effect exists, the master servicer forecloses on a mortgaged property and takes title to the mortgaged property, and thereafter the mortgaged property is determined to be so contaminated or affected. With respect to a mortgage loan in default, the master servicer may pursue foreclosure (or similar remedies) concurrently with pursuing any remedy for a breach of a representation and warranty. However, the master servicer is not required to continue to pursue both remedies if it determines that one remedy is more likely than the other to result in a greater recovery. Upon the first to occur of final liquidation (by foreclosure or otherwise) or a repurchase or substitution pursuant to a breach of a representation and warranty, the mortgage loan will be removed from the related trust fund if it has not been removed previously. The master servicer may elect to treat a defaulted mortgage loan as having been finally liquidated if a substantial portion or all of the amounts expected to be received from that mortgage loan have been received. Any additional liquidation expenses relating to the mortgage loan thereafter incurred will be 20
424B5194th Page of 311TOC1stPreviousNextBottomJust 194th
reimbursable to the master servicer (or any subservicer) from any amounts otherwise distributable to holders of securities of the related series, or may be offset by any subsequent recovery related to the mortgage loan. Alternatively, for purposes of determining the amount of related Liquidation Proceeds to be distributed to securityholders, the amount of any Realized Loss or the amount required to be drawn under any applicable form of credit support, the master servicer may take into account minimal amounts of additional receipts expected to be received, as well as estimated additional liquidation expenses expected to be incurred in connection with the defaulted mortgage loan. As provided above, the master servicer may pass through less than the full amount it expects to receive from the related mortgage loan; however, the master servicer may only do this if the master servicer reasonably believes it will maximize the proceeds to the securityholders in the aggregate. To the extent the master servicer receives additional recoveries following liquidation, the amount of the Realized Loss will be restated, and the additional recoveries will be passed through the trust as Liquidation Proceeds. In the event the amount of the Realized Loss is restated, the amount of overcollateralization or the principal balance of the most subordinate class of securities in the trust may be increased. However, the holders of any securities whose principal balance is increased will not be reimbursed interest for the period during which the principal balance of their securities was lower. With respect to a series of securities, if so provided in the related prospectus supplement, the applicable form of credit enhancement may provide, to the extent of coverage, that a defaulted mortgage loan will be removed from the trust fund prior to the final liquidation thereof. In addition, a pooling and servicing agreement or servicing agreement may grant to the master servicer, a special servicer, a provider of credit enhancement and/or the holder or holders of specified classes of securities of the related series a right of first refusal to purchase from the trust fund, at a predetermined purchase price, any mortgage loan as to which a specified number of scheduled payments are delinquent. If the purchase price is insufficient to fully fund the entitlements of securityholders to principal and interest, it will be specified in the related prospectus supplement. Furthermore, a pooling and servicing agreement or a servicing agreement may authorize the master servicer to sell any defaulted mortgage loan if and when the master servicer determines, consistent with the servicing standard, that the sale would produce a greater recovery to securityholders on a present value basis than would liquidation of the related mortgaged property. In the event that title to any mortgaged property is acquired by foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale will be issued to the trustee or to its nominee on behalf of securityholders of the related series. Notwithstanding any acquisition of title and cancellation of the related mortgage loan, the REO Mortgage Loan will be considered for most purposes to be an outstanding mortgage loan held in the trust fund until the mortgaged property is sold and all recoverable Liquidation Proceeds and Insurance Proceeds have been received with respect to the defaulted mortgage loan. For purposes of calculations of amounts distributable to securityholders in respect of an REO Mortgage Loan, the amortization schedule in effect at the time of any acquisition of title (before any adjustment thereto by reason of any bankruptcy or any similar proceeding or any moratorium or similar waiver or grace period) will be deemed to have continued in effect (and, in the case of an ARM Loan, the amortization schedule will be deemed to have adjusted in accordance with any interest rate changes occurring on any adjustment date therefor) so long as the REO Mortgage Loan is considered to remain in the trust fund. If title to any mortgaged property is acquired by a trust fund as to which a REMIC election has been made, the master servicer, on behalf of the trust fund, will be required to sell the mortgaged property within three years of acquisition, unless (1) the IRS grants an extension of time to sell the property or (2) the trustee receives an opinion of independent counsel to the effect that the holding of the property by the trust fund for more than three years after its acquisition will not result in the imposition of a tax on the trust fund or cause 21
424B5195th Page of 311TOC1stPreviousNextBottomJust 195th
the trust fund to fail to qualify as a REMIC under the Code at any time that any certificate is outstanding. Subject to the foregoing and any other tax-related constraints, the master servicer generally will be required to solicit bids for any mortgaged property so acquired in a manner as will be reasonably likely to realize a fair price for the property. If title to any mortgaged property is acquired by a trust fund as to which a REMIC election has been made, the master servicer will also be required to ensure that the mortgaged property is administered so that it constitutes "foreclosure property" within the meaning of Section 860G(a)(8) of the Code at all times, that the sale of the property does not result in the receipt by the trust fund of any income from non-permitted assets as described in Section 860F(a)(2)(B) of the Code, and that the trust fund does not derive any "net income from foreclosure property" within the meaning of Section 860G(c)(2) of the Code with respect to the property. If Liquidation Proceeds collected with respect to a defaulted mortgage loan are less than the outstanding principal balance of the defaulted mortgage loan plus accrued interest plus the aggregate amount of reimbursable expenses incurred by the master servicer with respect to the mortgage loan, and the shortfall is not covered under any applicable instrument or fund constituting credit enhancement, the trust fund will realize a loss in the amount of the difference. The master servicer will be entitled to reimburse itself from the Liquidation Proceeds recovered on any defaulted mortgage loan, prior to the distribution of Liquidation Proceeds to securityholders, amounts that represent unpaid servicing compensation in respect of the mortgage loan, unreimbursed servicing expenses incurred with respect to the mortgage loan and any unreimbursed advances of delinquent payments made with respect to the mortgage loan. If so provided in the related prospectus supplement, the applicable form of credit enhancement may provide for reinstatement subject to specified conditions in the event that, following the final liquidation of a mortgage loan and a draw under the credit enhancement, subsequent recoveries are received. In addition, if a gain results from the final liquidation of a defaulted mortgage loan or an REO Mortgage Loan which is not required by law to be remitted to the related mortgagor, the master servicer will be entitled to retain the gain as additional servicing compensation unless the related prospectus supplement provides otherwise. For a description of the master servicer's (or other specified person's) obligations to maintain and make claims under applicable forms of credit enhancement and insurance relating to the mortgage loans, see "Description of Credit Enhancement" and "Primary Mortgage Insurance, Hazard Insurance; Claims Thereunder." SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES; RETAINED INTEREST The principal servicing compensation to be paid to the master servicer in respect of its master servicing activities for a series of securities will be equal to the percentage or range of percentages per annum described in the related prospectus supplement of the outstanding principal balance of each mortgage loan, and this compensation will be retained by it on a monthly or other periodic basis from collections of interest on each mortgage loan in the related trust fund at the time the collections are deposited into the applicable Certificate Account. This portion of the servicing fee will be calculated with respect to each mortgage loan by multiplying the fee by the principal balance of the mortgage loan. In addition, the master servicer may retain all prepayment premiums, assumption fees and late payment charges, to the extent collected from mortgagors, and any benefit which may accrue as a result of the investment of funds in the applicable Certificate Account. Any additional servicing compensation will be described in the related prospectus supplement. Any subservicer will receive a portion of the master servicer's compensation as its subservicing compensation. In addition to amounts payable to any subservicer, the master servicer will pay or cause to be paid some of the ongoing expenses associated with each trust fund and incurred by it in connection with its responsibilities under the pooling and servicing agreement or servicing agreement, including, if so specified in the related prospectus supplement, payment of any fee or other amount payable in respect of any 22
424B5196th Page of 311TOC1stPreviousNextBottomJust 196th
alternative credit enhancement arrangements, payment of the fees and disbursements of the trustee, any custodian appointed by the trustee and the security registrar, and payment of expenses incurred in enforcing the obligations of subservicers and Sellers. The master servicer will be entitled to reimbursement of expenses incurred in enforcing the obligations of subservicers and Sellers under limited circumstances. In addition, the master servicer will be entitled to reimbursements for some of its expenses incurred in connection with liquidated mortgage loans and in connection with the restoration of mortgaged properties, this right of reimbursement being prior to the rights of securityholders to receive any related Liquidation Proceeds or Insurance Proceeds. If and to the extent so provided in the related prospectus supplement, the master servicer will be entitled to receive interest on amounts advanced to cover reimbursable expenses for the period that the advances are outstanding at the rate specified in the prospectus supplement, and the master servicer will be entitled to payment of the interest periodically from general collections on the mortgage loans in the related trust fund prior to any payment to securityholders or as otherwise provided in the related pooling and servicing agreement or servicing agreement and described in the prospectus supplement. The prospectus supplement for a series of securities will specify whether there will be any interest in the mortgage loans retained by the company. Any retained interest will be a specified portion of the interest payable on each mortgage loan in a mortgage pool and will not be part of the related trust fund. Any retained interest will be established on a loan-by-loan basis and the amount thereof with respect to each mortgage loan in a mortgage pool will be specified on an exhibit to the related pooling and servicing agreement or servicing agreement. Any partial recovery of interest in respect of a mortgage loan will be allocated between the owners of any retained interest and the holders of classes of securities entitled to payments of interest as provided in the related prospectus supplement and the applicable pooling and servicing agreement or servicing agreement. If and to the extent provided in the related prospectus supplement, the master servicer may be required to apply a portion of the servicing compensation otherwise payable to it in respect of any period to any Prepayment Interest Shortfalls resulting from mortgagor prepayments during that period. See "Yield Considerations." EVIDENCE AS TO COMPLIANCE Each pooling and servicing agreement and servicing agreement will provide that on or before a specified date in each year, beginning the first such date that is at least a specified number of months after the cut-off date, a firm of independent public accountants will furnish a statement to the company and the trustee to the effect that, on the basis of an examination by the firm conducted substantially in compliance with the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for mortgages serviced for Freddie Mac, the servicing of mortgage loans under agreements (including the related pooling and servicing agreement or servicing agreement) substantially similar to each other was conducted in compliance with the agreements except for significant exceptions or errors in records that, in the opinion of the firm, the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for mortgages serviced for Freddie Mac requires it to report. In rendering its statement the firm may rely, as to the matters relating to the direct servicing of mortgage loans by subservicers, upon comparable statements for examinations conducted substantially in compliance with the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for mortgages serviced for Freddie Mac (rendered within one year of the statement) of firms of independent public accountants with respect to those subservicers which also have been the subject of this type of examination. Each pooling and servicing agreement and servicing agreement will also provide for delivery to the trustee, on or before a specified date in each year, of an annual statement signed by one or more officers of 23
424B5197th Page of 311TOC1stPreviousNextBottomJust 197th
the master servicer to the effect that, to the best knowledge of each officer, the master servicer has fulfilled in all material respects its obligations under the pooling and servicing agreement or servicing agreement throughout the preceding year or, if there has been a material default in the fulfillment of any obligation, the statement shall specify each known default and the nature and status thereof. This statement may be provided as a single form making the required statements as to more than one pooling and servicing agreement or servicing agreement. Copies of the annual accountants' statement and the annual statement of officers of a master servicer may be obtained by securityholders without charge upon written request to the master servicer or trustee. DESCRIPTION OF THE SECURITIES GENERAL The securities will be issued in series. Each series of certificates (or, in some instances, two or more series of certificates) will be issued pursuant to a pooling and servicing agreement, similar to one of the forms filed as an exhibit to the registration statement of which this prospectus is a part. Each pooling and servicing agreement will be filed with the Commission as an exhibit to a Current Report on Form 8-K. Each series of notes (or, in some instances, two or more series of notes) will be issued pursuant to an indenture between the related Issuer and the trustee, similar to the form filed as an exhibit to the registration statement of which this prospectus is a part. The trust fund will be created pursuant to an owner trust agreement between the company and the owner trustee. Each indenture, along with the related servicing agreement and owner trust agreement, will be filed with the Commission as an exhibit to a Current Report on Form 8-K. Qualified counsel will render an opinion to the effect that the trust fund's assets will not be considered assets of the Seller or the company in the event of the bankruptcy Seller or the company. The following summaries (together with additional summaries under "The Agreements" below) describe the material provisions relating to the securities common to each Agreements. Certificates of each series covered by a particular pooling and servicing agreement will evidence specified beneficial ownership interests in a separate trust fund created pursuant to the pooling and servicing agreement. Each series of notes covered by a particular indenture will evidence indebtedness of a separate trust fund created pursuant to the related owner trust agreement. A trust fund will consist of, to the extent provided in the pooling and servicing agreement or owner trust agreement: o the mortgage loans (and the related mortgage documents) or interests therein (including any mortgage securities) underlying a particular series of securities as from time to time are subject to the pooling and servicing agreement or servicing agreement, exclusive of, if specified in the related prospectus supplement, any interest retained by the company or any of its affiliates with respect to each mortgage loan; o all payments and collections in respect of the mortgage loans or mortgage securities due after the related cut-off date, as from time to time are identified as deposited in respect thereof in the related Certificate Account as described below; o any property acquired in respect of mortgage loans in the trust fund, whether through foreclosure of a mortgage loan or by deed in lieu of foreclosure; o hazard insurance policies, Primary Insurance Policies and FHA insurance policies, if any, maintained in respect of mortgage loans in the trust fund and the proceeds of these policies; 24
424B5198th Page of 311TOC1stPreviousNextBottomJust 198th
o the rights of the company under any mortgage loan purchase agreement, including in respect of any representations and warranties therein; and o any combination, as and to the extent specified in the related prospectus supplement, of a financial guaranty insurance policy, mortgage pool insurance policy, letter of credit, special hazard insurance policy, or currency or interest rate exchange agreements as described under "Description of Credit Enhancement." If provided in the related prospectus supplement, the original principal amount of a series of securities may exceed the principal balance of the mortgage loans or mortgage securities initially being delivered to the trustee. Cash in an amount equal to this difference will be deposited into a pre-funding account maintained with the trustee. During the period set forth in the related prospectus supplement, amounts on deposit in the pre-funding account may be used to purchase additional mortgage loans or mortgage securities for the related trust fund. Any amounts remaining in the pre-funding account at the end of the period will be distributed as a principal prepayment to the holders of the related series of securities at the time and in the manner set forth in the related prospectus supplement. Each series of securities may consist of any one or a combination of the following: o a single class of securities; o two or more classes of securities, one or more classes of which will be senior in right of payment to one or more of the other classes, and as to which some classes of senior (or subordinate) securities may be senior to other classes of senior (or subordinate) securities, as described in the respective prospectus supplement; o two or more classes of securities, one or more classes of which will be Strip Securities; o two or more classes of securities which differ as to the timing, sequential order, rate, pass-through rate or amount of distributions of principal or interest or both, or as to which distributions of principal or interest or both on a class may be made upon the occurrence of specified events, in accordance with a schedule or formula (including "planned amortization classes" and "targeted amortization classes"), or on the basis of collections from designated portions of the mortgage pool, and which classes may include one or more classes of Accrual Securities; or o other types of classes of securities, as described in the related prospectus supplement. With respect to any series of notes, the related Equity Certificates, insofar as they represent the beneficial ownership interest in the Issuer, will be subordinate to the related notes. As to each series, the offered securities will be rated in one of the four highest rating categories by one or more Rating Agencies. Credit support for the offered securities of each series may be provided by a financial guaranty insurance policy, mortgage pool insurance policy, letter of credit, reserve fund, overcollateralization, and currency or interest rate exchange agreements as described under "Description of Credit Enhancement," by the subordination of one or more other classes of securities as described under "Subordination" or by any combination of the foregoing. If so specified in the prospectus supplement relating to a series of certificates, one or more elections may be made to treat the related trust fund, or a designated portion thereof, as a REMIC. If an election is 25
424B5199th Page of 311TOC1stPreviousNextBottomJust 199th
made with respect to a series of certificates, one of the classes of certificates in the series will be designated as evidencing the sole class of "residual interests" in each related REMIC, as defined in the Code; alternatively, a separate class of ownership interests will evidence the residual interests. All other classes of certificates in the series will constitute "regular interests" in the related REMIC, as defined in the Code. As to each series of certificates as to which a REMIC election is to be made, the master servicer, trustee or other specified person will be obligated to take specified actions required in order to comply with applicable laws and regulations. FORM OF SECURITIES Except as described below, the offered securities of each series will be issued as physical certificates or notes in fully registered form only in the denominations specified in the related prospectus supplement, and will be transferrable and exchangeable at the corporate trust office of the registrar named in the related prospectus supplement. No service charge will be made for any registration of exchange or transfer of offered securities, but the trustee may require payment of a sum sufficient to cover any tax or other governmental charge. A "securityholder" or "holder" is the entity whose name appears on the records of the registrar (consisting of or including the security register) as the registered holder of a security. If so specified in the related prospectus supplement, specified classes of a series of securities will be initially issued through the book-entry facilities of the DTC. As to any class of DTC Registered Securities, the recordholder of the securities will be DTC's nominee. DTC is a limited-purpose trust company organized under the laws of the State of New York, which holds securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes in the accounts of participants. Intermediaries have indirect access to DTC's clearance system. No Beneficial Owner will be entitled to receive a Security representing its interest in registered, certificated form, unless either (1) DTC ceases to act as depository in respect thereof and a successor depository is not obtained, or (2) the company elects in its sole discretion to discontinue the registration of the securities through DTC. Prior to one of these events, Beneficial Owners will not be recognized by the trustee or the master servicer as holders of the related securities for purposes of the related pooling and servicing agreement or indenture, and Beneficial Owners will be able to exercise their rights as owners of the securities only indirectly through DTC, participants and Intermediaries. Any Beneficial Owner that desires to purchase, sell or otherwise transfer any interest in DTC Registered Securities may do so only through DTC, either directly if the Beneficial Owner is a participant or indirectly through participants and, if applicable, Intermediaries. Pursuant to the procedures of DTC, transfers of the beneficial ownership of any DTC Registered Securities will be required to be made in minimum denominations specified in the related prospectus supplement. The ability of a Beneficial Owner to pledge DTC Registered Securities to persons or entities that are not participants in the DTC system, or to otherwise act with respect to the securities, may be limited because of the lack of physical certificates or notes evidencing the securities and because DTC may act only on behalf of participants. Distributions in respect of the DTC Registered Securities will be forwarded by the trustee or other specified person to DTC, and DTC will be responsible for forwarding the payments to participants, each of which will be responsible for disbursing the payments to the Beneficial Owners it represents or, if applicable, to Intermediaries. Accordingly, Beneficial Owners may experience delays in the receipt of payments in respect of their securities. Under DTC's procedures, DTC will take actions permitted to be taken by holders of any class of DTC Registered Securities under the pooling and servicing agreement or indenture only at the direction of one or more participants to whose account the DTC Registered Securities are credited and whose aggregate holdings represent no less than any minimum amount of Percentage Interests or voting 26
424B5200th Page of 311TOC1stPreviousNextBottomJust 200th
rights required therefor. DTC may take conflicting actions with respect to any action of holders of securities of any class to the extent that participants authorize these actions. None of the master servicer, the company, the trustee or any of their respective affiliates will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the DTC Registered Securities, or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. GLOBAL SECURITIES Some of the offered securities may be Global Securities. Except in some limited circumstances, the Global Securities will be available only in book-entry form. Investors in the Global Securities may hold those Global Securities through any of DTC, Clearstream Banking, societe anonyme, formerly known as Cedelbank SA, or Euroclear. The Global Securities will be traceable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors through Clearstream and Euroclear will be conducted in the ordinary way in accordance with the normal rules and operating procedures of Clearstream and Euroclear and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors through DTC will be conducted according to DTC's rules and procedures applicable to U.S. corporate debt obligations. Secondary cross-market trading between Clearstream or Euroclear and DTC participants holding Notes will be effected on a delivery-against-payment basis through the respective Depositaries of Clearstream and Euroclear (in that capacity) and as DTC participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless those holders meet various requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. As a result, Clearstream and Euroclear will hold positions on behalf of their participants through their Relevant Depositary which in turn will hold those positions in their accounts as DTC participants. Investors electing to hold their Global Securities through DTC will follow DTC settlement practices. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. 27
424B5201st Page of 311TOC1stPreviousNextBottomJust 201st
Secondary market trading between DTC participants will be settled using the procedures applicable to prior mortgage loan asset-backed notes issues in same-day funds. Secondary market trading between Clearstream participants or Euroclear participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. When Global Securities are to be transferred from the account of a DTC participant to the account of a Clearstream participant or a Euroclear participant, the purchaser will send instructions to Clearstream or Euroclear through a Clearstream participant or Euroclear participant at least one business day prior to settlement. Clearstream or Euroclear will instruct the Relevant Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date, on the basis of the actual number of days in that accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the Relevant Depositary to the DTC participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream participant's or Euroclear participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails),the Clearstream or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream participants and Euroclear participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream or Euroclear. Under this approach, they may take on credit exposure to Clearstream or Euroclear until the Global Securities are credited to their account one day later. As an alternative, if Clearstream or Euroclear has extended a line of credit to them, Clearstream participants or Euroclear participants can elect not to preposition funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Clearstream participants or Euroclear participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of those overdraft charges, although the result will depend on each Clearstream participant's or Euroclear participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC participants can employ their usual procedures for crediting Global Securities to the respective European depositary for the benefit of Clearstream participants or Euroclear participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participants a cross-market transaction will settle no differently than a trade between two DTC participants. Due to time zone differences in their favor, Clearstream participants and Euroclear participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective depositary, to a DTC participant. The seller will send instructions to Clearstream or Euroclear through a Clearstream participant or Euroclear participant at least one business day prior to settlement. In these cases Clearstream or Euroclear will instruct the respective depositary, as appropriate, to credit the Global Securities to the DTC participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment to and excluding the settlement date on the basis of the actual number of days in that accrual period and a year assumed to consist to 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected 28
424B5202nd Page of 311TOC1stPreviousNextBottomJust 202nd
in the account of Clearstream participant or Euroclear participant the following day, and receipt of the cash proceeds in the Clearstream participant's or Euroclear participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream participant or Euroclear participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream participant's or Euroclear participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Clearstream or Euroclear and that purchase Global Securities from DTC participants for delivery to Clearstream participants or Euroclear participants should note that these trades would automatically fail on the sale side unless affirmative action is taken. At least three techniques should be readily available to eliminate this potential problem: o borrowing through Clearstream or Euroclear for one day (until the purchase side of the trade is reflected in their Clearstream or Euroclear accounts) in accordance with the clearing system's customary procedures; o borrowing the Global Securities in the U.S. from a DTC participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream or Euroclear account in order to settle the sale side of the trade; or o staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Clearstream participant or Euroclear participant. A beneficial owner of Global Securities holding securities through Clearstream or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons (as defined below), unless (i) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between that beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (ii) that beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: Exemption for Non-U.S. Persons (Form W-8BEN). Beneficial holders of Global Securities that are Non-U.S. Persons (as defined below) can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding). If the information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of that change. A Non-U.S. Person (as defined below), including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States). Non-U.S. Persons residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form W-8BEN (Holdership, Exemption or Reduced Rate Certificate). Form W-8BEN may be filed by Noteholders or their agent. 29
424B5203rd Page of 311TOC1stPreviousNextBottomJust 203rd
U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). The holder of a Global Security or, in the case of a Form W-8BEN or a Form W-8ECI filer, his agent, files by submitting the appropriate form to the person through whom it holds the security (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8BEN and Form W-8ECI are effective for three calendar years. The term "U.S. Person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in, or under the laws of, the United States or any political subdivision thereof (except, in the case of a partnership, to the extent provided in regulations), or an estate whose income is subject to United States federal income tax regardless of its source, or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States Persons have the authority to control all substantial decisions of the trust. The term "Non-U.S. Person" means any person who is not a U.S. Person. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of the Global Securities. ASSIGNMENT OF TRUST FUND ASSETS At the time of issuance of a series of securities, the company will assign, or cause to be assigned, to the related trustee (or its nominee),without recourse, the mortgage loans or mortgage securities being included in the related trust fund, together with, all principal and interest received on or with respect to the mortgage loans or mortgage securities after the cut-off date, other than principal and interest due on or before the cut-off date. If specified in the related prospectus supplement, the company or any of its affiliates may retain an interest in the trust fund assets, if any, for itself or transfer the same to others. The trustee will, concurrently with the assignment, deliver the securities of the series to or at the direction of the company in exchange for the mortgage loans and/or mortgage securities in the related trust fund. Each mortgage loan will be identified in a schedule appearing as an exhibit to the related pooling and servicing agreement or servicing agreement. The schedule will include, among other things, information as to the principal balance of each mortgage loan in the related trust fund as of the cut-off date, as well as information respecting the mortgage rate, the currently scheduled monthly payment of principal and interest, the maturity of the mortgage note and the loan-to-value ratio at origination or modification (without regard to any secondary financing). In addition, the company will, as to each mortgage loan, other than mortgage loans underlying any mortgage securities and other than Contracts, deliver, or cause to be delivered, to the related trustee (or to the custodian described below) the following documents: o the mortgage note endorsed, without recourse, either in blank or to the order of the trustee (or its nominee), o the mortgage with evidence of recording indicated on the mortgage (except for any mortgage not returned from the public recording office) or, in the case of a cooperative mortgage loan, on the related financing statement, o an assignment of the mortgage in blank or to the trustee (or its nominee) in recordable form (or, with respect to a cooperative mortgage loan, an assignment of the respective security agreements, any applicable UCC financing statements, recognition agreements, relevant stock certificates, related blank stock powers and the related proprietary leases or occupancy agreements), 30
424B5204th Page of 311TOC1stPreviousNextBottomJust 204th
o any intervening assignments of the mortgage with evidence of recording on the assignment (except for any assignment not returned from the public recording office), o if applicable, any riders or modifications to the mortgage note and mortgage, and o any other documents set forth in the related pooling and servicing agreement, mortgage loan purchase agreement or servicing agreement. The assignments may be blanket assignments covering mortgages on mortgaged properties located in the same county, if permitted by law. Notwithstanding the foregoing, a trust fund may include mortgage loans where the original mortgage note is not delivered to the trustee if the company delivers, or causes to be delivered, to the related trustee (or the custodian) a copy or a duplicate original of the mortgage note, together with an affidavit certifying that the original thereof has been lost or destroyed. In addition, if the company cannot deliver, with respect to any mortgage loan, the mortgage or any intervening assignment with evidence of recording on the assignment concurrently with the execution and delivery of the related pooling and servicing agreement or servicing agreement because of a delay caused by the public recording office, the company will deliver, or cause to be delivered, to the related trustee (or the custodian) a true and correct photocopy of the mortgage or assignment as submitted for recording within one year. The company will deliver, or cause to be delivered, to the related trustee (or the custodian) the mortgage or assignment with evidence of recording indicated on the assignment after receipt thereof from the public recording office. If the company cannot deliver, with respect to any mortgage loan, the mortgage or any intervening assignment with evidence of recording on the mortgage or assignment concurrently with the execution and delivery of the related pooling and servicing agreement or servicing agreement because the mortgage or assignment has been lost, the company will deliver, or cause to be delivered, to the related trustee (or the custodian) a true and correct photocopy of the mortgage or assignment with evidence of recording on the mortgage or assignment. Assignments of the mortgage loans to the trustee (or its nominee) will be recorded in the appropriate public recording office, except in states where, in the opinion of counsel acceptable to the trustee, recording is not required to protect the trustee's interests in the mortgage loan against the claim of any subsequent transferee or any successor to or creditor of the company or the originator of the mortgage loan. As to each Contract, the company will deliver, or cause to be delivered, to the related trustee (or the custodian) the following documents: o the original Contract endorsed, without recourse, to the order of the trustee, o copies of documents and instruments related to the Contract and the security interest in the Manufactured Home securing the Contract, and o a blanket assignment to the trustee of all Contracts in the related trust fund and the related documents and instruments. In order to give notice of the right, title and interest of the securityholders to the Contracts, the company will cause to be executed and delivered to the trustee a UCC-1 financing statement identifying the trustee as the secured party and identifying all Contracts as collateral. The company will, as to each mortgage security included in a mortgage pool, deliver, or cause to be delivered, to the related trustee (or the custodian), a physical certificate or note evidencing the mortgage 31
424B5205th Page of 311TOC1stPreviousNextBottomJust 205th
security, registered in the name of the related trustee (or its nominee), or endorsed in blank or to the related trustee (or its nominee), or accompanied by transfer documents sufficient to effect a transfer to the trustee (or its nominee). The trustee (or the custodian) will hold the documents in trust for the benefit of the related securityholders, and generally will review the documents within 120 days after receipt thereof in the case of documents delivered concurrently with the execution and delivery of the related pooling and servicing agreement or indenture, and within the time period specified in the related pooling and servicing agreement or indenture in the case of all other documents delivered. If any document is found to be missing or defective in any material respect, the trustee (or the custodian) will be required to promptly so notify the master servicer, the company, and the related Seller. If the related Seller does not cure the omission or defect within a specified period after notice is given thereto by the trustee, and the omission or defect materially and adversely affects the interests of securityholders in the affected mortgage loan or mortgage security, then, the related Seller will be obligated to purchase the mortgage loan or mortgage security from the trustee at its purchase price (or, if and to the extent it would otherwise be permitted to do so for a breach of representation and warranty as described under "The Mortgage Pools--Representations of Sellers," to substitute for the mortgage loan or mortgage security). The trustee will be obligated to enforce this obligation of the Seller to the extent described above under "The Mortgage Pools--Representations by Sellers," but there can be no assurance that the applicable Seller will fulfill its obligation to purchase (or substitute for) the affected mortgage loan or mortgage security as described above. The company will not be obligated to purchase or substitute for the mortgage loan or mortgage security if the Seller defaults on its obligation to do so. This purchase or substitution obligation constitutes the sole remedy available to the related securityholders and the related trustee for omission of, or a material defect in, a constituent document. Any affected mortgage loan or mortgage security not so purchased or substituted for shall remain in the related trust fund. The trustee will be authorized at any time to appoint one or more custodians pursuant to a custodial agreement to hold title to the mortgage loans and/or mortgage securities in any mortgage pool, and to maintain possession of and, if applicable, to review, the documents relating to the mortgage loans and/or mortgage securities, in any case as the agent of the trustee. The identity of any custodian to be appointed on the date of initial issuance of the securities will be set forth in the related prospectus supplement. A custodian may be an affiliate of the company or the master servicer. Except in the case of a Designated Seller Transaction or as to mortgage loans underlying any mortgage securities, the company will make representations and warranties as to the types and geographical concentrations of the mortgage loans and as to the accuracy of some of the information furnished to the related trustee in respect of each mortgage loan (for example, the original Loan-to-Value Ratio, the principal balance as of the cut-off date, the mortgage rate and maturity). Upon a breach of any of these representations which materially and adversely affects the interests of the securityholders in a mortgage loan, the company will be obligated to cure the breach in all material respects, to purchase the mortgage loan at its purchase price or, to substitute for the mortgage loan a Qualified Substitute Mortgage Loan in accordance with the provisions for substitution by Affiliated Sellers as described above under "The Mortgage Pools--Representations by Sellers." However, the company will not be required to repurchase or substitute for any mortgage loan in connection with a breach of a representation and warranty if the substance of the breach also constitutes fraud in the origination of the related mortgage loan. This purchase or substitution obligation constitutes the sole remedy available to securityholders or the trustee for a breach of a representation by the company. Any mortgage loan not so purchased or substituted for shall remain in the related trust fund. 32
424B5206th Page of 311TOC1stPreviousNextBottomJust 206th
Pursuant to the related pooling and servicing agreement or servicing agreement, the master servicer for any mortgage pool, either directly or through subservicers, will service and administer the mortgage loans included in the mortgage pool and assigned to the related trustee as more fully set forth under "Servicing of Mortgage Loans." The master servicer will make representations and warranties regarding its authority to enter into, and its ability to perform its obligations under, the pooling and servicing agreement or servicing agreement. CERTIFICATE ACCOUNT GENERAL. The master servicer and/or the trustee will, as to each trust fund, establish and maintain or cause to be established and maintained a Certificate Account, which will be established so as to comply with the standards of each Rating Agency that has rated any one or more classes of securities of the related series. A Certificate Account shall be maintained as an Eligible Account, and the funds held therein may be held as cash or invested in Permitted Investments. Any Permitted Investments shall not cause the company to register under the Investment Company Act of 1940. Any interest or other income earned on funds in the Certificate Account will be paid to the related master servicer or trustee as additional compensation. If permitted by the Rating Agency or Agencies and so specified in the related prospectus supplement, a Certificate Account may contain funds relating to more than one series of mortgage pass-through certificates and may contain other funds representing payments on mortgage loans owned by the related master servicer or serviced by it on behalf of others. DEPOSITS. With respect to each series of securities, the related master servicer, trustee or special servicer will be required to deposit or cause to be deposited in the Certificate Account for the related trust fund within a period following receipt (in the case of collections and payments), the following payments and collections received, or advances made, by the master servicer, the trustee or any special servicer subsequent to the cut-off date with respect to the mortgage loans and/or mortgage securities in the trust fund (other than payments due on or before the cut-off date): o all payments on account of principal, including principal prepayments, on the mortgage loans; o all payments on account of interest on the mortgage loans, including any default interest collected, in each case net of any portion thereof retained by the master servicer, any special servicer or subservicer as its servicing compensation or as compensation to the trustee, and further net of any retained interest of the company; o all payments on the mortgage securities; o all Insurance Proceeds and Liquidation Proceeds; o any amounts paid under any instrument or drawn from any fund that constitutes credit enhancement for the related series of securities as described under "Description of Credit Enhancement"; o any advances made as described under "--Advances" below; o any Buydown Funds (and, if applicable, investment earnings on the Buydown Funds) required to be paid to securityholders, as described below; 33
424B5207th Page of 311TOC1stPreviousNextBottomJust 207th
o any amounts paid by the master servicer to cover Prepayment Interest Shortfalls arising out of the prepayment of mortgage loans as described under "Servicing of Mortgage Loans--Servicing and Other Compensation and Payment of Expenses; Retained Interest"; o to the extent that any item does not constitute additional servicing compensation to the master servicer or a special servicer, any payments on account of modification or assumption fees, late payment charges or prepayment premiums on the mortgage loans; o any amount required to be deposited by the master servicer or the trustee in connection with losses realized on investments for the benefit of the master servicer or the trustee, as the case may be, of funds held in the Certificate Account; and o any other amounts required to be deposited in the Certificate Account as provided in the related pooling and servicing agreement or the related servicing agreement and indenture and described in this prospectus or in the related prospectus supplement. With respect to each buydown mortgage loan, the master servicer will be required to deposit the related Buydown Funds provided to it in a Buydown Account which will comply with the requirements set forth in this prospectus with respect to the Certificate Account. The terms of all buydown mortgage loans provide for the contribution of Buydown Funds in an amount equal to or exceeding either (1) the total payments to be made from the funds pursuant to the related buydown plan or (2) if the Buydown Funds are to be deposited on a discounted basis, that amount of Buydown Funds which, together with investment earnings on the Buydown Funds at a rate as will support the scheduled level of payments due under the buydown mortgage loan. Neither the master servicer nor the company will be obligated to add to any discounted Buydown Funds any of its own funds should investment earnings prove insufficient to maintain the scheduled level of payments. To the extent that any insufficiency is not recoverable from the mortgagor or, in an appropriate case, from the Seller, distributions to securityholders may be affected. With respect to each buydown mortgage loan, the master servicer will be required monthly to withdraw from the Buydown Account and deposit in the Certificate Account as described above the amount, if any, of the Buydown Funds (and, if applicable, investment earnings on the Buydown Funds)for each buydown mortgage loan that, when added to the amount due from the mortgagor on the buydown mortgage loan, equals the full monthly payment which would be due on the buydown mortgage loan if it were not subject to the buydown plan. The Buydown Funds will in no event be a part of the related trust fund. If the mortgagor on a buydown mortgage loan prepays the mortgage loan in its entirety during the Buydown Period, the master servicer will be required to withdraw from the Buydown Account and remit to the mortgagor or the other designated party in accordance with the related buydown plan any Buydown Funds remaining in the Buydown Account. If a prepayment by a mortgagor during the Buydown Period together with Buydown Funds will result in full prepayment of a buydown mortgage loan, the master servicer generally will be required to withdraw from the Buydown Account and deposit in the Certificate Account the Buydown Funds and investment earnings on the Buydown Funds, if any, which together with the prepayment will result in a prepayment in full; provided that Buydown Funds may not be available to cover a prepayment under some mortgage loan programs. Any Buydown Funds so remitted to the master servicer in connection with a prepayment described in the preceding sentence will be deemed to reduce the amount that would be required to be paid by the mortgagor to repay fully the related mortgage loan if the mortgage loan were not subject to the buydown plan. Any investment earnings remaining in the Buydown Account after prepayment or after termination of the Buydown Period will be remitted to the related mortgagor or the other designated party pursuant to the Buydown Agreement relating to each buydown mortgage loan. If the mortgagor defaults during the Buydown Period with respect to a buydown mortgage loan and the property 34
424B5208th Page of 311TOC1stPreviousNextBottomJust 208th
securing the buydown mortgage loan is sold in liquidation (either by the master servicer, the primary insurer, any pool insurer or any other insurer), the master servicer will be required to withdraw from the Buydown Account the Buydown Funds and all investment earnings on the Buydown Funds, if any, and either deposit the same in the Certificate Account or, alternatively, pay the same to the primary insurer or the pool insurer, as the case may be, if the mortgaged property is transferred to the insurer and the insurer pays all of the loss incurred in respect of the default. WITHDRAWALS. With respect to each series of securities, the master servicer, trustee or special servicer may make withdrawals from the Certificate Account for the related trust fund for any of the following purposes, unless otherwise provided in the related agreement and described in the related prospectus supplement: (1) to make distributions to the related securityholders on each distribution date; (2) to reimburse the master servicer or any other specified person for unreimbursed amounts advanced by it in respect of mortgage loans in the trust fund as described under "--Advances" below, these reimbursement to be made out of amounts received which were identified and applied by the master servicer as late collections of interest (net of related servicing fees) on and principal of the particular mortgage loans with respect to which the advances were made or out of amounts drawn under any form of credit enhancement with respect to the mortgage loans; (3) to reimburse the master servicer or a special servicer for unpaid servicing fees earned by it and some unreimbursed servicing expenses incurred by it with respect to mortgage loans in the trust fund and properties acquired in respect thereof, these reimbursement to be made out of amounts that represent Liquidation Proceeds and Insurance Proceeds collected on the particular mortgage loans and properties, and net income collected on the particular properties, with respect to which the fees were earned or the expenses were incurred or out of amounts drawn under any form of credit enhancement with respect to the mortgage loans and properties; (4) to reimburse the master servicer or any other specified person for any advances described in clause (2) above made by it and any servicing expenses referred to in clause (3) above incurred by it which, in the good faith judgment of the master servicer or the other person, will not be recoverable from the amounts described in clauses (2) and (3), respectively, the reimbursement to be made from amounts collected on other mortgage loans in the trust fund or, if and to the extent so provided by the related pooling and servicing agreement or the related servicing agreement and indenture and described in the related prospectus supplement, only from that portion of amounts collected on the other mortgage loans that is otherwise distributable on one or more classes of subordinate securities of the related series; (5) if and to the extent described in the related prospectus supplement, to pay the master servicer, a special servicer or another specified entity (including a provider of credit enhancement) interest accrued on the advances described in clause (2) above made by it and the servicing expenses described in clause (3) above incurred by it while these remain outstanding and unreimbursed; 35
424B5209th Page of 311TOC1stPreviousNextBottomJust 209th
(6) to reimburse the master servicer, the company, or any of their respective directors, officers, employees and agents, as the case may be, for expenses, costs and liabilities incurred thereby, as and to the extent described under "The Agreements--Certain Matters Regarding the Master Servicer and the Company"; (7) if and to the extent described in the related prospectus supplement, to pay the fees of the trustee; (8) to reimburse the trustee or any of its directors, officers, employees and agents, as the case may be, for expenses, costs and liabilities incurred thereby, as and to the extent described under "The Agreements--Certain Matters Regarding the Trustee"; (9) to pay the master servicer or the trustee, as additional compensation, interest and investment income earned in respect of amounts held in the Certificate Account; (10) to pay (generally from related income) the master servicer or a special servicer for costs incurred in connection with the operation, management and maintenance of any mortgaged property acquired by the trust fund by foreclosure or by deed in lieu of foreclosure; (11) if one or more elections have been made to treat the trust fund or designated portions thereof as a REMIC, to pay any federal, state or local taxes imposed on the trust fund or its assets or transactions, as and to the extent described under "Federal Income Tax Consequences--REMICS--Prohibited Transactions and Other Possible REMIC Taxes"; (12) to pay for the cost of an independent appraiser or other expert in real estate matters retained to determine a fair sale price for a defaulted mortgage loan or a property acquired in respect thereof in connection with the liquidation of the mortgage loan or property; (13) to pay for the cost of various opinions of counsel obtained pursuant to the related pooling and servicing agreement or the related servicing agreement and indenture for the benefit of the related securityholders; (14) to pay to itself, the company, a Seller or any other appropriate person all amounts received with respect to each mortgage loan purchased, repurchased or removed from the trust fund pursuant to the terms of the related pooling and servicing agreement or the related servicing agreement and indenture and not required to be distributed as of the date on which the related purchase price is determined; (15) to make any other withdrawals permitted by the related pooling and servicing agreement or the related servicing agreement and indenture and described in the related prospectus supplement; (16) to pay for costs and expenses incurred by the trust fund for environmental site assessments performed with respect to multifamily or commercial properties that constitute security for defaulted mortgage loans, and for any containment, clean-up or remediation of hazardous wastes and materials present on that mortgaged properties, as described under "Servicing of Mortgage Loans--Realization Upon or Sale of Defaulted Mortgage Loans"; and (17) to clear and terminate the Certificate Account upon the termination of the trust fund. 36
424B5210th Page of 311TOC1stPreviousNextBottomJust 210th
DISTRIBUTIONS Distributions on the securities of each series will be made by or on behalf of the related trustee or master servicer on each distribution date as specified in the related prospectus supplement from the available distribution amount for the series and the distribution date. The available distribution amount for any series of securities and any distribution date will generally refer to the total of all payments or other collections (or advances in lieu thereof) on, under or in respect of the mortgage loans and/or mortgage securities and any other assets included in the related trust fund that are available for distribution to the securityholders of the series on that date. The particular components of the available distribution amount for any series on each distribution date will be more specifically described in the related prospectus supplement. Distributions on the securities of each series (other than the final distribution in retirement of any certificate) will be made to the persons in whose names the securities are registered on the Record Date, and the amount of each distribution will be determined as of the Determination Date. All distributions with respect to each class of securities on each distribution date will be allocated in equal proportion among the outstanding securities in the class. Payments will be made either by wire transfer in immediately available funds to the account of a securityholder at a bank or other entity having appropriate facilities therefor, if the securityholder has provided the trustee or other person required to make the payments with wiring instructions no later than five business days prior to the related Record Date or other date specified in the related prospectus supplement (and, if so provided in the related prospectus supplement, the securityholder holds securities in the requisite amount or denomination specified therein), or by check mailed to the address of the securityholder as it appears on the security register; provided, however, that the final distribution in retirement of any class of securities will be made only upon presentation and surrender of the securities at the location specified in the notice to securityholders of the final distribution. Payments will be made to each certificateholder in accordance with the holder's Percentage Interest in a particular class. DISTRIBUTIONS OF INTEREST AND PRINCIPAL ON THE SECURITIES Each class of securities of each series, other than Strip Securities and REMIC Residual Certificates that have no security interest rate, may have a different per annum rate at which interest accrues on that class of securities, which may be fixed, variable or adjustable, or any combination of rates. The related prospectus supplement will specify the security interest rate or, in the case of a variable or adjustable security interest rate, the method for determining the security interest rate, for each class. The related prospectus supplement will specify whether interest on the securities of the series will be calculated on the basis of a 360-day year consisting of twelve 30-day months or on a different method. Distributions of interest in respect of the securities of any class, other than any class of Accrual Securities, Strip Securities or REMIC Residual Certificates that is not entitled to any distributions of interest, will be made on each distribution date based on the accrued interest for the class and the distribution date, subject to the sufficiency of the portion of the available distribution amount allocable to the class on the distribution date. Prior to the time interest is distributable on any class of Accrual Securities, the amount of accrued interest otherwise distributable on the class will be added to the principal balance thereof on each distribution date. With respect to each class of interest-bearing securities, accrued interest for each distribution date will be equal to interest at the applicable security interest rate accrued for a specified period (generally one month) on the outstanding principal balance thereof immediately prior to the distribution date. Accrued interest for each distribution date on Strip Securities entitled to distributions of interest will be similarly calculated except that it will accrue on a notional amount that is based on either (1) based on the principal balances of some or all of the mortgage loans and/or mortgage securities in the related trust fund or (2)equal to the principal balances of one or more other classes of securities of the same series. Reference 37
424B5211th Page of 311TOC1stPreviousNextBottomJust 211th
to a notional amount with respect to a class of Strip Securities is solely for convenience in making calculations of accrued interest and does not represent the right to receive any distribution of principal. If so specified in the related prospectus supplement, the amount of accrued interest that is otherwise distributable on (or, in the case of Accrual Securities, that may otherwise be added to the principal balance of) one or more classes of the securities of a series will be reduced to the extent that any Prepayment Interest Shortfalls, as described under "Yield Considerations", exceed the amount of any sums (including, if and to the extent specified in the related prospectus supplement, the master servicer's servicing compensation) that are applied to offset the shortfalls. The particular manner in which the shortfalls will be allocated among some or all of the classes of securities of that series will be specified in the related prospectus supplement. The related prospectus supplement will also describe the extent to which the amount of accrued interest that is otherwise distributable on (or, in the case of Accrual Securities, that may otherwise be added to the principal balance of) a class of offered securities may be reduced as a result of any other contingencies, including delinquencies, losses and Deferred Interest on or in respect of the related mortgage loans or application of the Relief Act with respect to the mortgage loans. Any reduction in the amount of accrued interest otherwise distributable on a class of securities by reason of the allocation to the class of a portion of any Deferred Interest on or in respect of the related mortgage loans will result in a corresponding increase in the principal balance of the class. As and to the extent described in the related prospectus supplement, distributions of principal with respect to a series of securities will be made on each distribution date to the holders of the class or classes of securities of the series entitled thereto until the principal balance(s) of the securities have been reduced to zero. In the case of a series of securities which includes two or more classes of securities, the timing, sequential order, priority of payment or amount of distributions in respect of principal, and any schedule or formula or other provisions applicable to the determination thereof (including distributions among multiple classes of senior securities or subordinate securities), shall be as set forth in the related prospectus supplement. Distributions of principal with respect to one or more classes of securities may be made at a rate that is faster (and, in some cases, substantially faster) than the rate at which payments or other collections of principal are received on the mortgage loans and/or mortgage securities in the related trust fund, may not commence until the occurrence of events such as the retirement of one or more other classes of securities of the same series, or maybe made at a rate that is slower (and, in some cases, substantially slower) than the rate at which payments or other collections of principal are received on the mortgage loans and/or mortgage securities. In addition, distributions of principal with respect to one or more classes of securities may be made, subject to available funds, based on a specified principal payment schedule and, with respect to one or more classes of securities, may be contingent on the specified principal payment schedule for another class of the same series and the rate at which payments and other collections of principal on the mortgage loans and/or mortgage securities in the related trust fund are received. PRE-FUNDING ACCOUNT If so specified in the related prospectus supplement, the pooling and servicing agreement or other agreement may provide for the transfer by the Sellers of additional mortgage loans to the related trust after the Closing Date. The additional mortgage loans will be required to conform to the requirements set forth in the related Agreement or other agreement providing for the transfer, and will be underwritten to the same standards as the mortgage loans initially included in the trust fund as described in the prospectus supplement. As specified in the related prospectus supplement, the transfer maybe funded by the establishment of a pre-funding account with the trustee. If a pre-funding account is established, all or a portion of the proceeds of the sale of one or more classes of securities of the related series will be deposited in the account to be released as additional mortgage loans are transferred. A pre-funding account will be required to be maintained as an Eligible Account, the amounts therein may be required to be invested in Permitted 38
424B5212th Page of 311TOC1stPreviousNextBottomJust 212th
Investments and the amount held therein shall at no time exceed 40% of the aggregate outstanding principal balance of the related securities. The related Agreement or other agreement providing for the transfer of additional mortgage loans generally will provide that the transfers must be made within up to three months (with respect to any series of certificates) or up to one year (with respect to any series of notes) after the Closing Date, and that amounts set aside to fund the transfers (whether in a pre-funding account or otherwise) and not so applied within the required period of time will be deemed to be principal prepayments and applied in the manner set forth in the prospectus supplement. To the extent amounts in any pre-funding account have not been used to purchase additional mortgage loans, holders of the securities may receive an additional prepayment, which may affect their yield to maturity. In addition, securityholders may not be able to reinvest amounts received from any pre-funding account in comparable securities, or may only be able to do so at a lower interest rate. DISTRIBUTIONS ON THE SECURITIES IN RESPECT OF PREPAYMENT PREMIUMS Prepayment premiums will generally be retained by the master servicer or by the Seller as additional compensation. However, if so provided in the related prospectus supplement, prepayment premiums received on or in connection with the mortgage loans or mortgage securities in any trust fund will be distributed on each distribution date to the holders of the class or classes of securities of the related series entitled thereto in accordance with the provisions described in the prospectus supplement. ALLOCATION OF LOSSES AND SHORTFALLS The amount of any losses or shortfalls in collections on the mortgage loans and/or mortgage securities in any trust fund (to the extent not covered or offset by draws on any reserve fund or under any instrument of credit enhancement) will be allocated among the respective classes of securities of the related series in the priority and manner, and subject to the limitations, specified in the related prospectus supplement. As described in the related prospectus supplement, these allocations may result in reductions in the entitlements to interest and/or principal balances of one or more classes of securities, or may be effected simply by a prioritization of payments among classes of securities. ADVANCES If and to the extent provided in the related prospectus supplement, and subject to any limitations specified therein, the related master servicer may be obligated to advance, or have the option of advancing, on or before each distribution date, from its or their own funds or from excess funds held in the related Certificate Account that are not part of the available distribution amount for the related series of securities for the distribution date, an amount up to the aggregate of any payments of interest (and, if specified in the related prospectus supplement, principal) that were due on or in respect of the mortgage loans during the related Due Period and were delinquent on the related Determination Date. No notice will be given to the certificateholders of these advances. Scheduled payments on the mortgage loans in any trust fund that became due during a given Due Period will, to the extent received by the related Determination Date or advanced by the related master servicer or other specified person, be distributed on the distribution date next succeeding the Determination Date. Advances are intended to maintain a regular flow of scheduled interest and principal payments to holders of the class or classes of securities entitled thereto, rather than to guarantee or insure against losses. Accordingly, all advances made from the master servicer's own funds will be reimbursable out of related recoveries on the mortgage loans (including amounts received under any fund or instrument constituting credit enhancement) respecting which advances were made and other specific sources as may be identified in the related prospectus supplement, including amounts which would otherwise be payable to the offered securities. No Nonrecoverable Advance will be required to be made by the master 39
424B5213th Page of 311TOC1stPreviousNextBottomJust 213th
servicer; and, if previously made by a master servicer, a Nonrecoverable Advance will be reimbursable from any amounts in the related Certificate Account prior to any distributions being made to the related series of securityholders. If advances have been made from excess funds in a Certificate Account, the master servicer that advanced the funds will be required to replace the funds in the Certificate Account on any future distribution date to the extent that funds then in the Certificate Account are insufficient to permit full distributions to securityholders on that date. If so specified in the related prospectus supplement, the obligation of a master servicer to make advances maybe secured by a cash advance reserve fund or a surety bond. If applicable, information regarding the characteristics of, and the identity of any obligor on, a surety bond, will be set forth in the related prospectus supplement. If any person other than the master servicer has any obligation to make advances as described above, the related prospectus supplement will identify the person. If and to the extent so provided in the related prospectus supplement, any entity making advances will be entitled to receive interest on the advances for the period that the advances are outstanding at the rate specified in the prospectus supplement, and the entity will be entitled to payment of the interest periodically from general collections on the mortgage loans in the related trust fund prior to any payment to securityholders or as otherwise provided in the related pooling and servicing agreement or servicing agreement and described in the prospectus supplement. As specified in the related prospectus supplement with respect to any series of securities as to which the trust fund includes mortgage securities, the advancing obligations with respect to the underlying mortgage loans will be pursuant to the terms of the mortgage securities, as may be supplemented by the terms of the applicable pooling and servicing agreement or servicing agreement, and may differ from the provisions described above. REPORTS TO SECURITYHOLDERS With each distribution to securityholders of a particular class of offered securities, the related master servicer or trustee will forward or cause to be forwarded to each holder of record of the class of securities a statement or statements with respect to the related trust fund setting forth the information specifically described in the related pooling and servicing agreement or the related servicing agreement or indenture, which generally will include the following as applicable except as otherwise provided therein: o the amount, if any, of the distribution allocable to principal; o the amount, if any, of the distribution allocable to interest; o the amount, if any, of the distribution allocable to prepayment premiums; o with respect to a series consisting of two or more classes, the outstanding principal balance or notional amount of each class after giving effect to the distribution of principal on the distribution date; o the amount of servicing compensation received by the related master servicer (and, if payable directly out of the related trust fund, by any special servicer and any subservicer); o the aggregate amount of advances included in the distributions on the distribution date, and the aggregate amount of unreimbursed advances at the close of business on the distribution date; o the aggregate principal balance of the mortgage loans in the related mortgage pool on, or as of a specified date shortly prior to, the distribution date; 40
424B5214th Page of 311TOC1stPreviousNextBottomJust 214th
o the number and aggregate principal balance of any mortgage loans in the related mortgage pool in respect of which (A) one scheduled payment is delinquent, (B) two scheduled payments are delinquent, (C) three or more scheduled payments are delinquent and (D) foreclosure proceedings have been commenced; o the book value of any real estate acquired the trust fund by foreclosure or by a deed in lieu of foreclosure; o the balance of the reserve fund, if any, at the close of business on the distribution date; o the amount of coverage under any financial guaranty insurance policy, mortgage pool insurance policy or letter of credit covering default risk as of the close of business on the applicable Determination Date and a description of any credit enhancement substituted therefor; o the Special Hazard Amount, Fraud Loss Amount and Bankruptcy Amount as of the close of business on the applicable distribution date and a description of any change in the calculation of these amounts; o with respect to any series of securities as to which the trust fund includes mortgage securities, additional information as required under the related pooling and servicing agreement and specified in the related prospectus supplement; and o any other material information as required under the related pooling and servicing agreement. In the case of information furnished pursuant to the first three items above, the amounts will be expressed as a dollar amount per minimum denomination of the relevant class of offered securities or per a specified portion of the minimum denomination. In addition to the information described above, reports to securityholders will contain other information as is set forth in the applicable pooling and servicing agreement or the applicable servicing agreement or indenture, which may include prepayments, reimbursements to subservicers and the master servicer and losses borne by the related trust fund. In addition, within a reasonable period of time after the end of each calendar year, the master servicer or trustee will furnish a report to each holder of record of a class of offered securities at any time during the calendar year which, for example, will include information as to the aggregate of amounts reported pursuant to the first three items above for the calendar year or, in the event the person was a holder of record of a class of securities during a portion of the calendar year, for the applicable portion of the year. DESCRIPTION OF CREDIT ENHANCEMENT GENERAL Credit support with respect to the offered securities of each series may be comprised of one or more of the following components. Each component will have limitations and will provide coverage with respect to Realized Losses on the related mortgage loans. Credit support will cover Defaulted Mortgage Losses, but coverage may be limited or unavailable with respect to Special Hazard Losses, Fraud Losses, Bankruptcy Losses and Extraordinary Losses. To the extent that the credit support for the offered securities of any series is exhausted, the holders thereof will bear all further risk of loss. 41
424B5215th Page of 311TOC1stPreviousNextBottomJust 215th
As set forth below and in the applicable prospectus supplement, coverage with respect to Realized Losses may be provided by one or more of a financial guaranty insurance policy, a special hazard insurance policy, a mortgage pool insurance policy or a letter of credit. In addition, if provided in the applicable prospectus supplement, in lieu of or in addition to any or all of the foregoing arrangements, credit enhancement may be in the form of a reserve fund to cover the losses, in the form of subordination of one or more classes of subordinate securities to provide credit support to one or more classes of senior securities, in the form of overcollateralization, or in the form of a combination of the foregoing. The credit support may be provided by an assignment of the right to receive specified cash amounts, a deposit of cash into a reserve fund or other pledged assets, or by banks, insurance companies, guarantees or any combination thereof identified in the applicable prospectus supplement. The amounts and type of credit enhancement arrangement as well as the provider thereof, if applicable, with respect to the offered securities of each series will be set forth in the related prospectus supplement. To the extent provided in the applicable prospectus supplement and the pooling and servicing agreement or indenture, the credit enhancement arrangements may be periodically modified, reduced and substituted for based on the aggregate outstanding principal balance of the mortgage loans covered thereby. See "Description of Credit Enhancement--Reduction or Substitution of Credit Enhancement." If specified in the applicable prospectus supplement, credit support for the offered securities of one series may cover the offered securities of one or more other series. In general, references to "mortgage loans" under this "Description of Credit Enhancement" section are to mortgage loans in a trust fund. However, if so provided in the prospectus supplement for a series of securities, any mortgage securities included in the related trust fund and/or the related underlying mortgage loans may be covered by one or more of the types of credit support described in this prospectus. The related prospectus supplement will specify, as to each form of credit support, the information indicated below with respect thereto, to the extent the information is material and available. SUBORDINATE SECURITIES If so specified in the related prospectus supplement, one or more classes of securities of a series may be subordinate securities. To the extent specified in the related prospectus supplement, the rights of the holders of subordinate securities to receive distributions from the Certificate Account on any distribution date will be subordinated to the corresponding rights of the holders of senior securities. If so provided in the related prospectus supplement, the subordination of a class may apply only in the event of (or may be limited to) some types of losses or shortfalls. The related prospectus supplement will set forth information concerning the manner and amount of subordination provided by a class or classes of subordinate securities in a series and the circumstances under which the subordination will be available. The offered securities of any series may include one or more classes of subordinate securities. CROSS-SUPPORT If the mortgage loans and/or mortgage securities in any trust fund are divided into separate groups, each supporting a separate class or classes of securities of the related series, credit enhancement may be provided by cross-support provisions requiring that distributions be made on senior securities evidencing interests in one group of mortgage loans and/or mortgage securities prior to distributions on subordinate securities evidencing interests in a different group of mortgage loans and/or mortgage securities within the trust fund. The prospectus supplement for a series that includes a cross-support provision will describe the manner and conditions for applying the provisions. 42
424B5216th Page of 311TOC1stPreviousNextBottomJust 216th
OVERCOLLATERALIZATION If so specified in the related prospectus supplement, interest collections on the mortgage loans may exceed interest payments on the securities for the related distribution date. The excess interest may be deposited into a reserve fund or applied as a payment of principal on the securities. To the extent excess interest is applied as principal payments on the securities, the effect will be to reduce the principal balance of the securities relative to the outstanding balance of the mortgage loans, thereby creating overcollateralization and additional protection to the security holders, as specified in the related prospectus supplement. If so provided in the related prospectus supplement, overcollateralization may also be provided as to any series of securities by the issuance of securities in an initial aggregate principal amount which is less than the aggregate principal amount of the related mortgage loans. FINANCIAL GUARANTY INSURANCE POLICY If so specified in the related prospectus supplement, a financial guaranty insurance policy may be obtained and maintained for a class or series of securities. The insurer with respect to a financial guaranty insurance policy will be described in the related prospectus supplement and a copy of the form of financial guaranty insurance policy will be filed with the related Current Report on Form 8-K. A financial guaranty insurance policy will be unconditional and irrevocable and will guarantee to holders of the applicable securities that an amount equal to the full amount of payments due to the holders will be received by the trustee or its agent on behalf of the holders for payment on each distribution date. The specific terms of any financial guaranty insurance policy will be set forth in the related prospectus supplement. A financial guaranty insurance policy may have limitations and generally will not insure the obligation of the Sellers or the master servicer to purchase or substitute for a defective mortgage loan and will not guarantee any specific rate of principal prepayments. The insurer will be subrogated to the rights of each holder to the extent the insurer makes payments under the financial guaranty insurance policy. MORTGAGE POOL INSURANCE POLICIES Any mortgage pool insurance policy obtained by the company for each trust fund will be issued by the pool insurer named in the applicable prospectus supplement. Each mortgage pool insurance policy will, subject to the limitations described below, cover Defaulted Mortgage Losses in an amount equal to a percentage specified in the applicable prospectus supplement of the aggregate principal balance of the mortgage loans on the cut-off date. As set forth under "Maintenance of Credit Enhancement," the master servicer will use reasonable efforts to maintain the mortgage pool insurance policy and to present claims thereunder to the pool insurer on behalf of itself, the related trustee and the related securityholders. The mortgage pool insurance policies, however, are not blanket policies against loss, since claims thereunder may only be made respecting particular defaulted mortgage loans and only upon satisfaction of the conditions precedent described below. Unless specified in the related prospectus supplement, the mortgage pool insurance policies may not cover losses due to a failure to pay or denial of a claim under a Primary Insurance Policy, irrespective of the reason therefor. Each mortgage pool insurance policy will generally provide that no claims may be validly presented thereunder unless, among other things: o any required Primary Insurance Policy is in effect for the defaulted mortgage loan and a claim thereunder has been submitted and settled, 43
424B5217th Page of 311TOC1stPreviousNextBottomJust 217th
o hazard insurance on the property securing the mortgage loan has been kept in force and real estate taxes and other protection and preservation expenses have been paid by the master servicer, o if there has been physical loss or damage to the mortgaged property, it has been restored to its condition (reasonable wear and tear excepted) at the cut-off date and o the insured has acquired good and merchantable title to the mortgaged property free and clear of liens, except for permitted encumbrances. Upon satisfaction of these conditions, the pool insurer will have the option either (1) to purchase the property securing the defaulted mortgage loan at a price equal to the principal balance thereof plus accrued and unpaid interest at the applicable mortgage rate to the date of purchase and expenses incurred by the master servicer, special servicer or subservicer on behalf of the related trustee and securityholders, or (2) to pay the amount by which the sum of the principal balance of the defaulted mortgage loan plus accrued and unpaid interest at the mortgage rate to the date of payment of the claim and the aforementioned expenses exceeds the proceeds received from an approved sale of the mortgaged property, in either case net of amounts paid or assumed to have been paid under any related Primary Insurance Policy. Securityholders will experience a shortfall in the amount of interest payable on the related securities in connection with the payment of claims under a mortgage pool insurance policy because the pool insurer is only required to remit unpaid interest through the date a claim is paid rather than through the end of the month in which the claim is paid. In addition, the securityholders will also experience losses with respect to the related securities in connection with payments made under a mortgage pool insurance policy to the extent that the master servicer expends funds to cover unpaid real estate taxes or to repair the related mortgaged property in order to make a claim under a mortgage pool insurance policy, as those amounts will not be covered by payments under the policy and will be reimbursable to the master servicer from funds otherwise payable to the securityholders. If any mortgaged property securing a defaulted mortgage loan is damaged and proceeds, if any (see "--Special Hazard Insurance Policies" below for risks which are not covered by the policies), from the related hazard insurance policy or applicable special hazard insurance policy are insufficient to restore the damaged property to a condition sufficient to permit recovery under the mortgage pool insurance policy, the master servicer is not required to expend its own funds to restore the damaged property unless it determines (x) that the restoration will increase the proceeds to one or more classes of securityholders on liquidation of the mortgage loan after reimbursement of the master servicer for its expenses and (y) that the expenses will be recoverable by it through Liquidation Proceeds or Insurance Proceeds. A mortgage pool insurance policy (and most Primary Insurance Policies)will likely not insure against loss sustained by reason of a default arising from, among other things, (1) fraud or negligence in the origination or servicing of a mortgage loan, including misrepresentation by the mortgagor, the Seller or other persons involved in the origination thereof, or (2) failure to construct a mortgaged property in accordance with plans and specifications. Depending upon the nature of the event, a breach of representation made by a Seller may also have occurred. This breach, if it materially and adversely affects the interests of securityholders and cannot be cured, would give rise to a purchase obligation on the part of the Seller, as more fully described under "The Mortgage Pools--Representations by Sellers." However, this event would not give rise to a breach of a representation and warranty or a purchase obligation on the part of the company or master servicer. The original amount of coverage under each mortgage pool insurance policy will be reduced over the life of the related series of securities by the aggregate dollar amount of claims paid less the aggregate of the net amounts realized by the pool insurer upon disposition of all foreclosed properties. The amount of 44
424B5218th Page of 311TOC1stPreviousNextBottomJust 218th
claims paid includes expenses incurred by the master servicer, special servicer or subservicer as well as accrued interest on delinquent mortgage loans to the date of payment of the claim. Accordingly, if aggregate net claims paid under any mortgage pool insurance policy reach the original policy limit, coverage under that mortgage pool insurance policy will be exhausted and any further losses will be borne by holders of the related series of securities. In addition, unless the master servicer could determine that an advance in respect of a delinquent mortgage loan would be recoverable to it from the proceeds of the liquidation of the mortgage loan or otherwise, the master servicer would not be obligated to make an advance respecting the delinquency since the advance would not be ultimately recoverable to it from either the mortgage pool insurance policy or from any other related source. See "Description of the Securities--Advances." Since each mortgage pool insurance policy will require that the property subject to a defaulted mortgage loan be restored to its original condition prior to claiming against the pool insurer, the policy will not provide coverage against hazard losses. As set forth under "Primary Mortgage Insurance, Hazard Insurance; Claims Thereunder," the hazard policies covering the mortgage loans typically exclude from coverage physical damage resulting from a number of causes and, even when the damage is covered, may afford recoveries which are significantly less than full replacement cost of the losses. Further, no coverage in respect of Special Hazard Losses, Fraud Losses or Bankruptcy Losses will cover all risks, and the amount of the coverage will be limited. See "Special Hazard Insurance Policies" below. As a result, some hazard risks will not be insured against and will therefore be borne by the related securityholders. LETTER OF CREDIT If any component of credit enhancement as to the offered securities of any series is to be provided by a letter of credit, a bank will deliver to the related trustee an irrevocable letter of credit. The letter of credit may provide direct coverage with respect to the mortgage loans. The bank that delivered the letter of credit, as well as the amount available under the letter of credit with respect to each component of credit enhancement, will be specified in the applicable prospectus supplement. If so specified in the related prospectus supplement, the letter of credit may permit draws only in the event of some types of losses and shortfalls. The letter of credit may also provide for the payment of advances which the master servicer would be obligated to make with respect to delinquent monthly mortgage payments. The amount available under the letter of credit will, in all cases, be reduced to the extent of the unreimbursed payments thereunder and may otherwise be reduced as described in the related prospectus supplement. The letter of credit will expire on the expiration date set forth in the related prospectus supplement, unless earlier terminated or extended in accordance with its terms. SPECIAL HAZARD INSURANCE POLICIES Any special hazard insurance policy covering Special Hazard Losses obtained by the company for a trust fund will be issued by the insurer named in the applicable prospectus supplement. Each special hazard insurance policy will, subject to limitations described below, protect holders of the related series of securities from Special Hazard Losses. See "Primary Mortgage Insurance, Hazard Insurance; Claims Thereunder." However, a special hazard insurance policy will not cover losses occasioned by war, civil insurrection, some governmental actions, errors in design, faulty workmanship or materials (except under some circumstances), nuclear reaction, chemical contamination, waste by the mortgagor and other risks. Aggregate claims under a special hazard insurance policy will be limited to the amount set forth in the related prospectus supplement and will be subject to reduction as described in the related prospectus supplement. A special hazard insurance policy will provide that no claim may be paid unless hazard and, if applicable, flood insurance on the property securing the mortgage loan has been kept in force and other protection and preservation expenses have been paid by the master servicer. 45
424B5219th Page of 311TOC1stPreviousNextBottomJust 219th
Subject to the foregoing limitations, a special hazard insurance policy will provide that, where there has been damage to property securing a foreclosed mortgage loan (title to which has been acquired by the insured) and to the extent the damage is not covered by the hazard insurance policy or flood insurance policy, if any, maintained by the mortgagor or the master servicer, special servicer or the subservicer, the insurer will pay the lesser of (1) the cost of repair or replacement of the property or (2) upon transfer of the property to the insurer, the unpaid principal balance of the mortgage loan at the time of acquisition of the property by foreclosure or deed in lieu of foreclosure, plus accrued interest at the mortgage rate to the date of claim settlement and expenses incurred by the master servicer, special servicer or subservicer with respect to the property. If the property is transferred to a third party in a sale approved by the issuer of the special hazard insurance policy, the amount that the issuer will pay will be the amount under (ii) above reduced by the net proceeds of the sale of the property. No claim may be validly presented under the special hazard insurance policy unless hazard insurance on the property securing a defaulted mortgage loan has been kept in force and other reimbursable protection, preservation and foreclosure expenses have been paid (all of which must be approved in advance by the issuer of the special hazard insurance policy). If the unpaid principal balance plus accrued interest and expenses is paid by the insurer, the amount of further coverage under the related special hazard insurance policy will be reduced by that amount less any net proceeds from the sale of the property. Any amount paid as the cost of repair of the property will further reduce coverage by that amount. Restoration of the property with the proceeds described under (1) above will satisfy the condition under each mortgage pool insurance policy that the property be restored before a claim under the mortgage pool insurance policy may be validly presented with respect to the defaulted mortgage loan secured by the property. The payment described under (2) above will render presentation of a claim in respect of the mortgage loan under the related mortgage pool insurance policy unnecessary. Therefore, so long as a mortgage pool insurance policy remains in effect, the payment by the insurer under a special hazard insurance policy of the cost of repair or of the unpaid principal balance of the related mortgage loan plus accrued interest and expenses will not affect the total Insurance Proceeds paid to securityholders, but will affect the relative amounts of coverage remaining under the related special hazard insurance policy and mortgage pool insurance policy. As and to the extent set forth in the applicable prospectus supplement, coverage in respect of Special Hazard Losses for a series of securities may be provided, in whole or in part, by a type of instrument other than a special hazard insurance policy or by means of a special hazard representation of the Seller or the company. RESERVE FUNDS If so provided in the related prospectus supplement, the company will deposit or cause to be deposited in a reserve fund account any combination of cash, one or more irrevocable letters of credit or one or more Permitted Investments in specified amounts, or any other instrument satisfactory to the relevant Rating Agency or Agencies, which will be applied and maintained in the manner and under the conditions specified in the prospectus supplement. In the alternative or in addition to the deposit, to the extent described in the related prospectus supplement, a reserve fund may be funded through application of all or a portion of amounts otherwise payable on any related subordinate securities, from the retained interest of the company or otherwise. To the extent that the funding of the reserve fund is dependent on amounts otherwise payable on related subordinate securities, any retained interest of the company or other cash flows attributable to the related mortgage loans or on reinvestment income, the reserve fund may provide less coverage than initially expected if the cash flows or reinvestment income on which the funding is dependent are lower than anticipated. In addition, with respect to any series of securities as to which credit enhancement includes a letter of credit, if so specified in the related prospectus supplement, if specified conditions are met, the remaining amount of the letter of credit may be drawn by the trustee and deposited in a reserve fund. 46
424B5220th Page of 311TOC1stPreviousNextBottomJust 220th
Amounts in a reserve fund may be distributed to securityholders, or applied to reimburse the master servicer for outstanding advances, or may be used for other purposes, in the manner and to the extent specified in the related prospectus supplement. The related prospectus supplement will disclose whether a reserve fund is part of the related trust fund. If set forth in the related prospectus supplement, a reserve fund may provide coverage to more than one series of securities. In connection with the establishment of any reserve fund, the reserve fund will be structured so that the trustee will have a perfected security interest for the benefit of the securityholders in the assets in the reserve fund. However, to the extent that the company, any affiliate thereof or any other entity has an interest in any reserve fund, in the event of the bankruptcy, receivership or insolvency of that entity, there could be delays in withdrawals from the reserve fund and corresponding payments to the securityholders which could adversely affect the yield to investors on the related securities. Amounts deposited in any reserve fund for a series will be invested in Permitted Investments by, or at the direction of, and for the benefit of the master servicer or any other person named in the related prospectus supplement. CASH FLOW AGREEMENTS If so provided in the related prospectus supplement, the trust fund may include guaranteed investment contracts pursuant to which moneys held in the funds and accounts established for the related series will be invested at a specified rate. The principal terms of a guaranteed investment contract or other cash flow agreement, and the identity of the obligor, will be described in the prospectus supplement for a series of notes. MAINTENANCE OF CREDIT ENHANCEMENT To the extent that the applicable prospectus supplement does not expressly provide for alternative credit enhancement arrangements in lieu of some or all of the arrangements mentioned below, the following paragraphs shall apply. If a financial guaranty insurance policy has been obtained for a series of securities, the master servicer will be obligated to exercise reasonable efforts to keep the financial guaranty insurance policy in full force and effect throughout the term of the applicable pooling and servicing agreement, unless coverage thereunder has been exhausted through payment of claims or until the financial guaranty insurance policy is replaced in accordance with the terms of the applicable pooling and servicing agreement. The master servicer will agree to pay the premiums for each financial guaranty insurance policy on a timely basis. In the event the insurer ceases to be a qualified insurer as described in the related prospectus supplement, or fails to make a required payment under the related financial guaranty insurance policy, the master servicer will have no obligation to replace the insurer. Any losses associated with any reduction or withdrawal in rating by an applicable Rating Agency shall be borne by the related securityholders. If a mortgage pool insurance policy has been obtained for a series of securities, the master servicer will be obligated to exercise reasonable efforts to keep the mortgage pool insurance policy (or an alternate form of credit support) in full force and effect throughout the term of the applicable pooling and servicing agreement or servicing agreement, unless coverage thereunder has been exhausted through payment of claims or until the mortgage pool insurance policy is replaced in accordance with the terms of the applicable pooling and servicing agreement or servicing agreement. The master servicer will agree today the premiums for each mortgage pool insurance policy on a timely basis. In the event the pool insurer ceases to be a qualified insurer 47
424B5221st Page of 311TOC1stPreviousNextBottomJust 221st
because it ceases tone qualified by law to transact pool insurance business or coverage is terminated for any reason other than exhaustion of the coverage, the master servicer will use reasonable efforts to obtain from another qualified insurer replacement insurance policy comparable to the mortgage pool insurance policy with a total coverage equal to the then outstanding coverage of the mortgage pool insurance policy, provided that, if the cost of the replacement policy is greater than the cost of the mortgage pool insurance policy, the coverage of the replacement policy will, unless otherwise agreed to by the company, be reduced to a level such that its premium rate does not exceed the premium rate on the mortgage pool insurance policy. In the event that the pool insurer ceases to be a qualified insurer because it ceases to be approved as an insurer by Freddie Mac, Fannie Mae or any successor entity, the master servicer will be obligated to review, not less often than monthly, the financial condition of the pool insurer with a view toward determining whether recoveries under the mortgage pool insurance policy are jeopardized for reasons related to the financial condition of the pool insurer. If the master servicer determines that recoveries are so jeopardized, it will be obligated to exercise its best reasonable efforts to obtain from another qualified insurer a replacement insurance policy as described above, subject to the same cost limit. Any losses associated with any reduction or withdrawal in rating by an applicable Rating Agency shall be borne by the related securityholders. If a letter of credit or alternate form of credit enhancement has been obtained for a series of securities, the master servicer will be obligated to exercise reasonable efforts cause to be kept or to keep the letter of credit (or an alternate form of credit support) in full force and effect throughout the term of the applicable pooling and servicing agreement or indenture, unless coverage thereunder has been exhausted through payment of claims or otherwise, or substitution therefor is made as described below under "--Reduction or Substitution of Credit Enhancement." Unless otherwise specified in the applicable prospectus supplement, if a letter of credit obtained for a series of securities is scheduled to expire prior to the date the final distribution on the securities is made and coverage under the letter of credit has not been exhausted and no substitution has occurred, the trustee will draw the amount available under the letter of credit and maintain the amount in trust for the securityholders. In lieu of the master servicer's obligation to maintain a financial guaranty insurance policy, mortgage pool insurance policy or letter of credit as provided above, the master servicer may obtain a substitute financial guaranty insurance policy, mortgage pool insurance policy or letter of credit. If the master servicer obtains a substitute, it will maintain and keep the substitute in full force and effect as provided in this prospectus. Prior to its obtaining any substitute financial guaranty insurance policy, mortgage pool insurance policy or letter of credit, the master servicer will obtain written confirmation from the Rating Agency or Agencies that rated the related series of securities that the substitution of the financial guaranty insurance policy, mortgage pool insurance policy or letter of credit for the existing credit enhancement will not adversely affect the then-current ratings assigned to the securities by the Rating Agency or Agencies. If a special hazard insurance policy has been obtained for a series of securities, the master servicer will also be obligated to exercise reasonable efforts to maintain and keep the policy in full force and effect throughout the term of the applicable pooling and servicing agreement or servicing agreement, unless coverage thereunder has been exhausted through payment of claims or otherwise or substitution therefor is made as described below under "--Reduction or Substitution of Credit Enhancement." If coverage for Special Hazard Losses takes the form of a special hazard insurance policy, the policy will provide coverage against risks of the type described in this prospectus under"Description of Credit Enhancement--Special Hazard Insurance Policies." The master servicer may obtain a substitute policy for the existing special hazard insurance policy if prior to the substitution the master servicer obtains written confirmation from the Rating Agency or Agencies that rated the related securities that the substitution shall not adversely affect the then-current ratings assigned to the securities by the Rating Agency or Agencies. 48
424B5222nd Page of 311TOC1stPreviousNextBottomJust 222nd
The master servicer, on behalf of itself, the trustee and securityholders, will provide the trustee information required for the trustee to draw under the letter of credit and will present claims to each pool insurer, to the issuer of each special hazard insurance policy, and, in respect of defaulted mortgage loans for which there is no subservicer, to each primary insurer and take any reasonable steps as are necessary to permit recovery under the letter of credit, insurance policies or comparable coverage respecting defaulted mortgage loans or mortgage loans which are the subject of a bankruptcy proceeding. As set forth above, all collections by the master servicer under any mortgage pool insurance policy or any Primary Insurance Policy and, where the related property has not been restoration special hazard insurance policy, are to be deposited in the related certificate Account, subject to withdrawal as described above. All draws under any letter of credit are also to be deposited in the related Certificate account. In those cases in which a mortgage loan is serviced by a subservicer, the subservicer, on behalf of itself, the trustee and the securityholders will present claims to the primary insurer, and all paid claims shall initially be deposited in a subservicing account that generally meets the requirements for the Certificate Account prior to being delivered to the master servicer for deposit in the related Certificate Account. If any property securing a defaulted mortgage loan is damaged and proceeds, if any, from the related hazard insurance policy or any applicable special hazard insurance policy are insufficient to restore the damaged property to a condition sufficient to permit recovery under any financial guaranty insurance policy, mortgage pool insurance policy, letter of credit or any related Primary Insurance Policy, the master servicer is not required to expend its own funds to restore the damaged property unless it determines (1) that the restoration will increase the proceeds to one or more classes of securityholders on liquidation of the mortgage loan after reimbursement of the master servicer for its expenses and (2) that the expenses will be recoverable by it through liquidation Proceeds or Insurance Proceeds. If recovery under any financial guaranty insurance policy, mortgage pool insurance policy, letter of credit or any related Primary Insurance Policy is not available because the master servicer has been unable to make the above determinations, has made the determinations incorrectly or recovery is not available for any other reason, the master servicer is nevertheless obligated to follow the normal practices and procedures (subject to the preceding sentence) as it deems necessary or advisable to realize upon the defaulted mortgage loan and in the event the determination has been incorrectly made, is entitled to reimbursement of its expenses in connection with the restoration. REDUCTION OR SUBSTITUTION OF CREDIT ENHANCEMENT The amount of credit support provided pursuant to any form of credit enhancement may be reduced. In most cases, the amount available pursuant to any form of credit enhancement will be subject to periodic reduction in accordance with a schedule or formula on a nondiscretionary basis pursuant to the terms of the related pooling and servicing agreement or indenture. Additionally, in most cases, the form of credit support (and any replacements therefor) may be replaced, reduced or terminated, and the formula used in calculating the amount of coverage with respect to Bankruptcy Losses, Special Hazard Losses or Fraud Losses may be changed, without the consent of the securityholders, upon the written assurance from each applicable Rating Agency that the then-current rating of the related series of securities will not be adversely affected. Furthermore, in the event that the credit rating of any obligor under any applicable credit enhancement is downgraded, the credit rating(s) of the related series of securities may be downgraded to a corresponding level, and, the master servicer will not be obligated to obtain replacement credit support in order to restore the rating(s) of the related series of securities. The master servicer will also be permitted to replace the credit support with other credit enhancement instruments issued by obligors whose credit ratings are equivalent to the downgraded level and in lower amounts which would satisfy the downgraded level, provided that the then-current rating(s) of the related series of securities are maintained. Where the credit support is in the form of a reserve fund, a permitted reduction in the amount of credit enhancement will result in a release of all 49
424B5223rd Page of 311TOC1stPreviousNextBottomJust 223rd
or a portion of the assets in the reserve fund to the company, the master servicer or the other person that is entitled thereto. Any assets so released will not be available for distributions in future periods. OTHER FINANCIAL OBLIGATIONS RELATED TO THE SECURITIES SWAPS AND YIELD SUPPLEMENT AGREEMENTS The trustee on behalf of a trust fund may enter into interest rate swaps and related caps, floors and collars to minimize the risk of securityholders from adverse changes in interest rates, which are collectively referred to as swaps, and other yield supplement agreements or similar yield maintenance arrangements that do not involve swap agreements or other notional principal contracts, which are collectively referred to as yield supplement agreements. An interest rate swap is an agreement between two parties to exchange a stream of interest payments on an agreed hypothetical or "notional" principal amount. No principal amount is exchanged between the counterparties to an interest rate swap. In the typical swap, one party agrees to pay a fixed rate on a notional principal amount, while the counterparty pays a floating rate based on one or more reference interest rates including the London Interbank Offered Rate, or LIBOR, a specified bank's prime rate or U.S. Treasury Bill rates. Interest rate swaps also permit counterparties to exchange a floating rate obligation based upon one reference interest rate, such as LIBOR, for a floating rate obligation based upon another referenced interest rate, such as U.S. Treasury Bill rates. Yield supplement agreements may be entered into to supplement the interest rate or other rates on one or more classes of the securities of any series. Additionally, agreements relating to other types of derivative products that are designed to provide credit enhancement to the related series may be entered into by a trustee and one or more counterparties. The terms of any derivative product agreement and any counterparties will be described in the accompanying prospectus supplement. There can be no assurance that the trustee will be able to enter into or offset swaps or enter into yield supplement agreements or derivative product agreements at any specific time or at prices or on other terms that are advantageous. In addition, although the terms of the swaps and yield supplement agreements may provide for termination under various circumstances, there can be no assurance that the trustee will be able to terminate a swap or yield supplement agreement when it would be economically advantageous to the trust fund to do so. PURCHASE OBLIGATIONS Some types of trust assets and some classes of securities of any series, as specified in the accompanying prospectus supplement, may be subject to a purchase obligation that would become applicable on one or more specified dates, or upon the occurrence of one or more specified events, or on demand made by or on behalf of the applicable securityholders. A purchase obligation may be in the form of a conditional or unconditional purchase commitment, liquidity facility, remarketing agreement, maturity guaranty, put option or demand feature. The terms and conditions of each purchase obligation, including the purchase price, timing and payment procedure, will be described in the accompanying prospectus supplement. A purchase obligation relating to trust assets may apply to those trust assets or to the related securities. Each purchase obligation may be a secured or unsecured obligation of the provider thereof, which may include a bank or other financial institution or an insurance company. Each purchase obligation will be evidenced by an instrument delivered to the trustee for the benefit of the applicable securityholders of the related series. As specified in the accompanying prospectus supplement, each purchase obligation relating to trust assets 50
424B5224th Page of 311TOC1stPreviousNextBottomJust 224th
will be payable solely to the trustee for the benefit of the securityholders of the related series. Other purchase obligations may be payable to the trustee or directly to the holders of the securities to which that obligation relate. PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER GENERAL The mortgaged property with respect to each mortgage loan will be required to be covered by a hazard insurance policy and, if required as described below, a Primary Insurance Policy. The following is only a brief description of these insurance policies and does not purport to summarize or describe all of the provisions of these policies. The insurance is subject to underwriting and approval of individual mortgage loans by the respective insurers. PRIMARY MORTGAGE INSURANCE POLICIES In a securitization of single family loans, single family loans included in the related mortgage pool having a loan-to-value ratio at origination of over 80% (or other percentage as described in the related prospectus supplement) may be required by the company to be covered by a Primary Insurance Policy. The Primary Insurance Policy will insure against default on a mortgage loan as to at least the principal amount thereof exceeding 75% of the Value of the related mortgaged property (or other percentage as described in the related prospectus supplement) at origination of the mortgage loan, unless and until the principal balance of the mortgage loan is reduced to a level that would produce a loan-to-value ratio equal to or less than at least 80% (or other percentage as described in the prospectus supplement). The company will represent and warrant that, to the best of the company's knowledge, mortgage loans of this type are so covered. This type of mortgage loan will not be considered to be an exception to the foregoing standard if no Primary Insurance Policy was obtained at origination but the mortgage loan has amortized to below the above loan-to-value ratio percentage as of the applicable cut-off date. Mortgage loans which are subject to negative amortization will only be covered by a Primary Insurance Policy if the coverage was so required upon their origination, notwithstanding that subsequent negative amortization may cause the mortgage loan's loan-to-value ratio, based on the then-current balance, to subsequently exceed the limits which would have required the coverage upon their origination. Multifamily, commercial and mixed-use loans will not be covered by a Primary Insurance Policy, regardless of the related loan-to-value ratio. While the terms and conditions of the Primary Insurance Policies issued by a primary insurer will differ from those in Primary Insurance Policies issued by other primary insurers, each Primary Insurance Policy will in general cover the Primary Insurance Covered Loss. The primary insurer generally will be required to pay: o the insured percentage of the Primary Insurance Covered Loss; o the entire amount of the Primary Insurance Covered Loss, after receipt by the primary insurer of good and merchantable title to, and possession of, the mortgaged property; or o at the option of the primary insurer, the sum of the delinquent monthly payments plus any advances made by the insured, both to the date of the claim payment and, thereafter, monthly payments in the amount that would have become due under the mortgage loan if it had not been discharged plus any advances made by the insured until the earlier of (1) the 51
424B5225th Page of 311TOC1stPreviousNextBottomJust 225th
date the mortgage loan would have been discharged in full if the default had not occurred or (2) an approved sale. As conditions precedent to the filing or payment of a claim under a Primary Insurance Policy, in the event of default by the mortgagor, the insured will typically be required, among other things, to: o advance or discharge (1) hazard insurance premiums and (2) as necessary and approved in advance by the primary insurer, real estate taxes, protection and preservation expenses and foreclosure and related costs; o in the event of any physical loss or damage to the mortgaged property, have the mortgaged property restored to at least its condition at the effective date of the Primary Insurance Policy (ordinary wear and tear excepted); and o tender to the primary insurer good and merchantable title to, and possession of, the mortgaged property. For any single family loan for which the coverage is required under the standard described above, the master servicer will maintain or cause each subservicer to maintain, as the case may be, in full force and effect and to the extent coverage is available a Primary Insurance Policy with regard to each single family loan, provided that the Primary Insurance Policy was in place as of the cut-off date and the company had knowledge of the Primary Insurance Policy. In the event the company gains knowledge that as of the Closing Date, a mortgage loan which required a Primary Insurance Policy did not have one, then the master servicer is required to use reasonable efforts to obtain and maintain a Primary Insurance Policy to the extent that the policy is obtainable at a reasonable price. The master servicer or the Seller will not cancel or refuse to renew a Primary Insurance Policy in effect at the time of the initial issuance of a series of securities that is required to be kept in force under the applicable pooling and servicing agreement or indenture unless the replacement Primary Insurance Policy for the canceled or non-renewed policy is maintained with an insurer whose claims-paying ability is acceptable to the Rating Agency or Agencies that rated the series of securities for mortgage pass-through certificates having a rating equal to or better than the highest then-current rating of any class of the series of securities. For further information regarding the extent of coverage under any mortgage pool insurance policy or primary Insurance Policy, see "Description of Credit Enhancement--Mortgage Pool insurance Policies." HAZARD INSURANCE POLICIES The terms of the mortgage loans require each mortgagor to maintain a hazard insurance policy for their mortgage loan. Additionally, the pooling and servicing agreement or servicing agreement will require the master servicer to cause to be maintained for each mortgage loan a hazard insurance policy providing for no less than the coverage of the standard form of fire insurance policy with extended coverage customary in the state in which the property is located. The coverage generally will be in an amount equal to the lesser of the principal balance owing on the mortgage loan or 100% of the insurable value of the improvements securing the mortgage loan except that, if generally available, the coverage must not be less than the minimum amount required under the terms thereof to fully compensate for any damage or loss on a replacement cost basis. The ability of the master servicer to ensure that hazard insurance proceeds are appropriately applied may be dependent on its being named as an additional insured under any hazard insurance policy and under any flood insurance policy referred to below, or upon the extent to which information in this regard is furnished to the master servicer by mortgagors or subservicers. 52
424B5226th Page of 311TOC1stPreviousNextBottomJust 226th
As set forth above, all amounts collected by the master servicer under any hazard policy (except for amounts to be applied to the restoration or repair of the mortgaged property or released to the mortgagor in accordance with teamster servicer's normal servicing procedures) will be deposited in the related Certificate Account. The pooling and servicing agreement or servicing agreement will provide that the master servicer may satisfy its obligation to cause hazard policies to be maintained by maintaining a blanket policy insuring against losses on the mortgage loans. If the blanket policy contains a deductible clause, the master servicer will deposit in the applicable certificate Account all sums which would have been deposited therein but for the clause. In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements on the property by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy. Although the policies relating to the mortgage loans will be underwritten by different insurers under different state laws in accordance with different applicable state forms and therefore will not contain identical terms and conditions, the basic terms thereof are dictated by respective state laws, and most of these policies typically do not cover any physical damage resulting from the following: war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mudflows), nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic animals, theft and, depending on the case, vandalism. The foregoing list is merely indicative of the kinds of uninsured risks and is not intended to be all-inclusive. Where the improvements securing a mortgage loan are located in a federally designated flood area at the time of origination of the mortgage loan, the pooling and servicing agreement or servicing agreement requires the master servicer to cause to be maintained for this mortgage loan, flood insurance (to the extent available) in an amount equal in general to the lesser of the amount required to compensate for any loss or damage on a replacement cost basis or the maximum insurance available under the federal flood insurance program. The hazard insurance policies covering the mortgaged properties typically contain a co-insurance clause which in effect requires the insured at all times to carry insurance of a specified percentage (generally 80% to 90%) of the full replacement value of the improvements on the property in order to recover the full amount of any partial loss. If the insured's coverage falls below this specified percentage, the clause generally provides that the insurer's liability in the event of partial loss does not exceed the greater of (1) the replacement cost of the improvements damaged or destroyed less physical depreciation or (2) the proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of the improvements. Since the amount of hazard insurance that mortgagors are required to maintain on the improvements securing the mortgage loans may decline as the principal balances of the related mortgage loans decrease, and since residential properties have historically appreciated in value over time, hazard insurance proceeds could be insufficient to restore fully the damaged property in the event of a partial loss. See "Description of Credit Enhancement--Special Hazard Insurance Policies" for a description of the limited protection afforded by any special hazard insurance policy against losses occasioned by hazards which are otherwise uninsured against (including losses caused by the application of the co-insurance clause described in the preceding paragraph). Under the terms of the mortgage loans, mortgagors are generally required to present claims to insurers under hazard insurance policies maintained on the mortgaged properties. The master servicer, on behalf of the trustee and securityholders, is obligated to present claims under any special hazard insurance policy and any blanket insurance policy insuring against hazard losses on the mortgaged properties. However, 53
424B5227th Page of 311TOC1stPreviousNextBottomJust 227th
the ability of the master servicer to present the claims is dependent upon the extent to which information in this regard is furnished to the master servicer or the subservicers by mortgagors. FHA INSURANCE The FHA is responsible for administering various federal programs, including mortgage insurance, authorized under The Housing Act and the United States Housing Act of 1937, as amended. There are two primary FHA insurance programs that are available for multifamily mortgage loans. Sections 221(d)(3) and (d)(4) of the Housing Act allow HUD to insure mortgage loans that are secured by newly constructed and substantially rehabilitated multifamily rental projects. Section 244 of the Housing Act provides for co-insurance of such mortgage loans made under Sections 221(d)(3) and (d)(4) by HUD/FHA and a HUD-approved co-insurer. Generally the term of such a mortgage loan may be up to 40 years and the ratio of the loan amount to property replacement cost can be up to 90%. Section 223(f) of the Housing Act allows HUD to insure mortgage loans made for the purchase or refinancing of existing apartment projects which are at least three years old. Section 244 also provides for co-insurance of mortgage loans made under Section 223(f). Under Section 223(f), the loan proceeds cannot be used for substantial rehabilitation work, but repairs may be made for up to, in general, the greater of 15% of the value of the project or a dollar amount per apartment unit established from time to time by HUD. In general the loan term may not exceed 35 years and a loan to value ratio of no more than 85% is required for the purchase of a project and 70% for the refinancing of a project. HUD has the option, in most cases, to pay insurance claims in cash or in debentures issued by HUD. Presently, claims are being paid in cash, and claims have not been paid in debentures since 1965. HUD debentures issued in satisfaction of FHA insurance claims bear interest at the applicable HUD debenture interest rate. The master servicer will be obligated to purchase a debenture issued in satisfaction of a defaulted FHA insured mortgage loan serviced by it for an amount equal to the principal amount of any the debenture. The master servicer will be required to take steps reasonably necessary to keep FHA insurance in full force and effect. VA MORTGAGE GUARANTY The Servicemen's Readjustment Act of 1944, as amended, permits a veteran or, in some instances, his or her spouse, to obtain a mortgage loan guaranty by the VA covering mortgage financing of the purchase of a one- to four-family dwelling unit to be occupied as the veteran's home at an interest rate not exceeding the maximum rate in effect at the time the loan is made, as established by HUD. The program has no limit on the amount of a mortgage loan, requires no down payment for the purchaser and permits the guaranty of mortgage loans with terms, limited by the estimated economic life of the property, up to 30 years. The maximum guaranty that may be issued by the VA under this program is 50% of the original principal amount of the mortgage loan up to a dollar limit established by the VA. The liability on the guaranty is reduced or increased pro rata with any reduction or increase in amount of indebtedness, but in no event will the amount payable on the guaranty exceed the amount of the original guaranty. Notwithstanding the dollar and percentage limitations of the guaranty, a mortgagee will ordinarily suffer a monetary loss only when the difference between the unsatisfied indebtedness and the proceeds of a foreclosure sale of mortgaged premises is greater than the original guaranty as adjusted. The VA may, at its option, and without regard to the 54
424B5228th Page of 311TOC1stPreviousNextBottomJust 228th
guaranty, make full payment to a mortgagee of the unsatisfied indebtedness on a mortgage upon its assignment to the VA. Since there is no limit imposed by the VA on the principal amount of a VA-guaranteed mortgage loan but there is a limit on the amount of the VA guaranty, additional coverage under a Primary Mortgage Insurance Policy may be required by the company for VA loans in excess of amounts specified by the VA. The amount of the additional coverage will beset forth in the related prospectus supplement. Any VA guaranty relating to Contracts underlying a series of certificates will be described in the related prospectus supplement. THE COMPANY The company is a wholly-owned subsidiary of Impac Funding Corporation. The company was incorporated in the State of Delaware on May 6, 1996. The company was organized for the purpose of serving as a private secondary mortgage market conduit. The company does not have, nor is it expected in the future to have, any significant assets. On January 29, 1998, the company changed its name from ICIFC Secured Assets Corp. to Impac Secured Assets Corp. The company maintains its principal office at 2037 Irvine Avenue, Suite 200, Santa Ana Heights, California 92707. Its telephone number is (714) 556-0122. IMPAC FUNDING CORPORATION Impac Funding Corporation, the Company's parent, will be a Seller and may act as master servicer with respect to a mortgage pool. Impac Funding is a mortgage banking conduit that acquires conventional one- to four-family residential mortgage loans nationwide and has, from time to time, acquired condominium conversion loans. Impac Funding is a non-consolidating subsidiary of Impac Mortgage Holdings, Inc. Impac Funding primarily acquires mortgage loans from approved correspondents. Prior to November 1995, Impac Funding was a division of Imperial Credit industries, Inc. In November 1995, Imperial Credit Industries, Inc. restructured its operations pursuant to which Impac Funding became a separate corporation and Imperial Credit Industries, Inc. contributed, among other things, all of the outstanding nonvoting preferred stock of Impac Funding, which represents 99% of the economic interest in Impac Funding, to Impac Mortgage Holdings, Inc., in exchange for approximately 10% of the common stock of Impac Mortgage Holdings, Inc. The common stock of Impac Funding was retained by Imperial Credit Industries, Inc. until March 1997 when it was distributed to certain officers and/or directors of Impac Funding who are also officers and/or directors of Impac Mortgage Holdings, Inc. Impac Funding's executive offices are located at 1401 Dove Street, Newport Beach, California 92660, and its telephone number is (949) 475-3700. IMPAC MORTGAGE HOLDINGS, INC. Impac Mortgage Holdings, Inc. is a publicly traded, recently formed specialty finance company which operates three businesses: (1) long-term investment operations, (2) conduit operations, and (3) warehouse lending operations. The long-term investment operations is a recently-created business that invests primarily in nonconforming residential mortgage loans and securities backed by such loans. The conduit operations, conducted by Impac Funding, primarily purchases and sells or securitizes non-conforming mortgage loans, and the warehouse lending operations provides short-term lines of credit to originators of 55
424B5229th Page of 311TOC1stPreviousNextBottomJust 229th
mortgage loans. These two businesses include certain ongoing operations contributed to Impac Mortgage Holdings by Imperial Credit Industries, Inc., a leading specialty finance company, in November 1995. Impac Mortgage Holdings is organized as a real estate investment trust for tax purposes, which allows it generally to pass through earnings to stockholders without federal income tax at the corporate level. Impac Mortgage Holdings, Inc.'s executive offices are located at 20371 Irvine Avenue, Santa Ana Heights, California 92707, and its telephone number is (714) 556-0122. THE AGREEMENTS GENERAL Each series of certificates will be issued pursuant to a pooling and servicing agreement or other agreement specified in the related prospectus supplement. In general, the parties to a pooling and servicing agreement will include the company, the trustee, the master servicer and, in some cases, a special servicer. However, a pooling and servicing agreement that relates to a trust fund that includes mortgage securities may include a party solely responsible for the administration of the mortgage securities, and a pooling and servicing agreement that relates to a trust fund that consists solely of mortgage securities may not include a master servicer, special servicer or other servicer as a party. All parties to each pooling and servicing agreement under which securities of a series are issued will be identified in the related prospectus supplement. Each series of notes will be issued pursuant to an indenture. The parties to each indenture will be the related Issuer and the trustee. The Issuer will be created pursuant to an owner trust agreement between the company and the owner trustee. Forms of the Agreements have been filed as exhibits to the registration statement of which this prospectus is a part. However, the provisions of each Agreement will vary depending upon the nature of the related securities and the nature of the related trust fund. The following summaries describe provisions that may appear in a pooling and servicing agreement with respect to a series of certificates or in either the servicing agreement or indenture with respect to a series of notes. The prospectus supplement for a series of securities will describe any provision of the related Agreements that materially differs from the description thereof set forth below. The company will provide a copy of the Agreement (without exhibits) that relates to any series of securities without charge upon written request of a holder of an offered security of the series addressed to it at its principal executive offices specified in this prospectus under "The Company". CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE COMPANY The pooling and servicing agreement or servicing agreement for each series of securities will provide that the master servicer may not resign from its obligations and duties except upon a determination that performance of the duties is no longer permissible under applicable law or except (1) in connection with a permitted transfer of servicing or (2) upon appointment of a successor servicer reasonably acceptable to the trustee and upon receipt by the trustee of letter from each Rating Agency generally to the effect that the resignation and appointment will not, in and of itself, result in a downgrading of the securities. No resignation will become effective until the trustee or a successor servicer has assumed the master servicer's responsibilities, duties, liabilities and obligations under the pooling and servicing agreement or servicing agreement. Each pooling and servicing agreement and servicing agreement will also provide that the master servicer, the company and their directors, officers, employees or agents will not be under any liability to the trust fund or the securityholders for any action taken or for refraining from the taking of any action in good 56
424B5230th Page of 311TOC1stPreviousNextBottomJust 230th
faith, or for errors in judgment, unless the liability which would otherwise be imposed was by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties. Each pooling and servicing agreement and servicing agreement will further provide that the master servicer, the company, and any director, officer, employee or agent of the master servicer or the company are entitled to indemnification by the trust fund and will be held harmless against any loss, liability or expense incurred in connection with any legal action relating to the pooling and servicing agreement or servicing agreement or the related series of securities, other than any loss, liability or expense related to any specific mortgage loan or mortgage loans (except a loss, liability or expense otherwise reimbursable pursuant to the pooling and servicing agreement) and any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of reckless disregard of obligations and duties. In addition, each pooling and servicing agreement and servicing agreement will provide that neither the master servicer nor the company will be under any obligation to appear in, prosecute or defend any legal or administrative action that is not incidental to its respective duties under the pooling and servicing agreement or servicing agreement and which in its opinion may involve it in any expense or liability. The master servicer or the company may, however, in its discretion undertake any action which it may deem necessary or desirable with respect to the pooling and servicing agreement or servicing agreement and the rights and duties of the parties to that agreement and the interests of the securityholders. The legal expenses and costs of the action and any resulting liability will be expenses, costs and liabilities of the trust fund, and the master servicer or the company, as the case may be, will be entitled reimbursement from funds otherwise distributable to securityholders. Any person into which the master servicer may be merged or consolidated, any person resulting from any merger or consolidation to which the master servicer is a party or any person succeeding to the business of the master servicer will be the successor of the master servicer under the related pooling and servicing agreement or servicing agreement, provided that (1) the person is qualified to service mortgage loans on behalf of Fannie Mae or Freddie Mac and(2) the merger, consolidation or succession does not adversely affect the then-current ratings of the classes of securities of the related series that have been rated. In addition, notwithstanding the prohibition on its resignation, the master servicer may assign its rights under a pooling and servicing agreement or servicing agreement to any person to whom the master servicer is transferring a substantial portion of its mortgage servicing portfolio, provided clauses (1) and (2) above are satisfied and the person is reasonably satisfactory to the company and the trustee. In the case of an assignment, the master servicer will be released from its obligations under the pooling and servicing agreement or servicing agreement, exclusive of liabilities and obligations incurred by it prior to the time of the assignment. EVENTS OF DEFAULT AND RIGHTS UPON EVENT DEFAULT POOLING AND SERVICING AGREEMENT Events of default under the pooling and servicing agreement in respect of a series of certificates, unless otherwise specified in the prospectus supplement, will include: o any failure by the master servicer to make a required deposit to the Certificate Account or, if the master servicer is so required, to distribute to the holders of any class of certificates of the series any required payment which continues unremedied for 5 days (or other time period described in the related prospectus supplement) after the giving of written notice of the failure to the master servicer by the trustee or the company, or to the master servicer, the company and the trustee by the holders of certificates evidencing not less than 25% of the aggregate undivided interests (or, if applicable, voting rights) in the related trust fund; 57
424B5231st Page of 311TOC1stPreviousNextBottomJust 231st
o any failure by the master servicer duly to observe or perform in any material respect any other of its covenants or agreements in the pooling and servicing agreement with respect to the series of certificates which continues unremedied for 30 days (15 days in the case of a failure to pay the premium for any insurance policy which is required to be maintained under the pooling and servicing agreement) after the giving of written notice of the failure to the master servicer by the trustee or the company, or to the master servicer, the company and the trustee by the holders of certificates evidencing not less than 25% of the aggregate undivided interests (or, if applicable, voting rights) in the related trust fund; o events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings regarding the master servicer and some actions by the master servicer indicating its insolvency or inability to pay its obligations, as specified in the related pooling and servicing agreement; and o any failure of the master servicer to make advances as described in this prospectus under "Description of the Securities--Advances." Additional events of default will be described in the related prospectus supplement. A default pursuant to the terms of any mortgage securities included in any trust fund will not constitute an event of default under the related pooling and servicing agreement. So long as an event of default remains unremedied, either the company or the trustee may, and at the direction of the holders of certificates evidencing not less than 51% of the aggregate undivided interests (or, if applicable, voting rights) in the related trust fund the trustee shall, by written notification to the master servicer and to the company or the trustee, as applicable, terminate all of the rights and obligations of the master servicer under the pooling and servicing agreement (other than any rights of the master servicer as certificateholder) covering the trust fund and in and to the mortgage loans and the proceeds thereof, whereupon the trustee or, upon notice to the company and with the company's consent, its designee will succeed to all responsibilities, duties and liabilities of the master servicer under the pooling and servicing agreement (other than any obligation to purchase mortgage loans) and will be entitled to similar compensation arrangements. In the event that the trustee would be obligated to succeed the master servicer but is unwilling so to act, it may appoint (or if it is unable so to act, it shall appoint) or petition a court of competent jurisdiction for the appointment of, an established mortgage loan servicing institution with a net worth of at least $15,000,000 to act as successor to the master servicer under the pooling and servicing agreement (unless otherwise set forth in the pooling and servicing agreement). Pending an appointment, the trustee is obligated to act as master servicer. The trustee and the successor may agree upon the servicing compensation to be paid, which in no event may be greater than the compensation to the initial master servicer under the pooling and servicing agreement. No certificateholder will have any right under a pooling and servicing agreement to institute any proceeding with respect to the pooling and servicing agreement unless (1) that holder previously gave the trustee written notice of a default that is continuing, (2) the holders of certificates evidencing not less than 25% of the aggregate undivided interests (or, if applicable, voting rights) in the related trust fund requested the trustee in writing to institute the proceeding in its own name as trustee, (3) the trustee receives reasonable security or indemnity against the costs, expenses and liabilities that may be incurred in or because of the proceeding and (4) the trustee for a reasonable time after receipt of the request and indemnity has neglected or refused to institute any proceeding. 58
424B5232nd Page of 311TOC1stPreviousNextBottomJust 232nd
The holders of certificates representing at least 66% of the aggregate undivided interests (or, if applicable, voting rights) evidenced by those certificates affected by a default or event of default may waive the default or event of default (other than a failure by the master servicer to make an advance); provided, however, that (1) a default or event of default under the first or fourth items listed under "--Events of Default" above may be waived only by all of the holders of certificates affected by the default or event of default and (2) no waiver shall reduce in any manner the amount of, or delay the timing of, payments received on mortgage loans which are required to be distributed to, or otherwise materially adversely affect, any non-consenting certificateholder. SERVICING AGREEMENT For a series of notes, a servicing default under the related servicing agreement generally will include: o any failure by the master servicer to make a required deposit to the Certificate Account or, if the master servicer is so required, to distribute to the holders of any class of notes or Equity Certificates of the series any required payment which continues unremedied for 5 business days (or other period of time described in the related prospectus supplement) after the giving of written notice of the failure to the master servicer by the trustee or the Issuer; o any failure by the master servicer duly to observe or perform in any material respect any other of its covenants or agreements in the servicing agreement with respect to the series of securities which continues unremedied for 45 days after the giving of written notice of the failure to the master servicer by the trustee or the Issuer; o events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings regarding the master servicer and some actions by the master servicer indicating its insolvency or inability to pay its obligations, as specified in the related servicing agreement; and o any other servicing default as set forth in the servicing agreement. So long as a servicing default remains unremedied, either the company or the trustee may, by written notification to the master servicer and to the Issuer or the trustee or trust fund, as applicable, terminate all of the rights and obligations of the master servicer under the servicing agreement (other than any right of the master servicer as noteholder or as holder of the Equity Certificates and other than the right to receive servicing compensation and expenses for servicing the mortgage loans during any period prior to the date of the termination), whereupon the trustee will succeed to all responsibilities, duties and liabilities of the master servicer under the servicing agreement (other than any obligation to purchase mortgage loans) and will be entitled to similar compensation arrangements. In the event that the trustee would be obligated to succeed the master servicer but is unwilling so to act, it may appoint (or if it is unable so to act, it shall appoint) or petition a court of competent jurisdiction for the appointment of an approved mortgage servicing institution with a net worth of at least $15,000,000 to act as successor to the master servicer under the servicing agreement (unless otherwise set forth in the servicing agreement). Pending the appointment, the trustee is obligated to act in the capacity. The trustee and the successor may agree upon the servicing compensation to be paid, which in no event may be greater than the compensation to the initial master servicer under the servicing agreement. 59
424B5233rd Page of 311TOC1stPreviousNextBottomJust 233rd
INDENTURE For a series of notes, an event of default under the indenture generally will include: o a default for five days or more (or other period of time described in the related prospectus supplement) in the payment of any principal of or interest on any note of the series; o failure to perform any other covenant of the company or the trust fund in the indenture which continues for a period of thirty days after notice thereof is given in accordance with the procedures described in the related prospectus supplement; o any representation or warranty made by the company or the trust fund in the indenture or in any certificate or other writing delivered pursuant thereto or in connection therewith with respect to or affecting the series having been incorrect in a material respect as of the time made, and the breach is not cured within thirty days after notice thereof is given in accordance with the procedures described in the related prospectus supplement; o events of bankruptcy, insolvency, receivership or liquidation of the company or the trust fund, as specified in the indenture; or o any other event of default provided with respect to notes of that series. If an event of default with respect to the notes of any series at the time outstanding occurs and is continuing, the trustee or the holders of a majority of the then aggregate outstanding amount of the notes of the series may declare the principal amount of all the notes of the series to be due and payable immediately. The declaration may, in some circumstances, be rescinded and annulled by the holders of a majority in aggregate outstanding amount of the related notes. If following an event of default with respect to any series of notes, the notes of the series have been declared to be due and payable, the trustee may, in its discretion, notwithstanding the acceleration, elect to maintain possession of the collateral securing the notes of the series and to continue to apply payments on the collateral as if there had been no declaration of acceleration if the collateral continues to provide sufficient funds for the payment of principal of and interest on the notes of the series as they would have become due if there had not been a declaration. In addition, the trustee may not sell or otherwise liquidate the collateral securing the notes of a series following an event of default, unless (1) the holders of 100% of the then aggregate outstanding amount of the notes of the series consent to the sale, (2) the proceeds of the sale or liquidation are sufficient to pay in full the principal of and accrued interest, due and unpaid, on the outstanding notes of the series at the date of the sale or (3) the trustee determines that the collateral would not be sufficient on an ongoing basis to make all payments on the notes as the payments would have become due if the notes had not been declared due and payable, and the trustee obtains the consent of the holders of 66 2/3% of the then aggregate outstanding amount of the notes of the series. In the event that the trustee liquidates the collateral in connection with an event of default, the indenture provides that the trustee will have a prior lien on the proceeds of the liquidation for unpaid fees and expenses. As a result, upon the occurrence of the event of default, the amount available for payments to the noteholders would be less than would otherwise be the case. However, the trustee may not institute a proceeding for the enforcement of its lien except in connection with a proceeding for the enforcement of the lien of the indenture for the benefit of the noteholders after the occurrence of the event of default. 60
424B5234th Page of 311TOC1stPreviousNextBottomJust 234th
In the event the principal of the notes of a series is declared due and payable, as described above, the holders of the notes issued at a discount from par may be entitled to receive no more than an amount equal to the unpaid principal amount thereof less the amount of the discount that is unamortized. No noteholder or holder of an Equity Certificate generally will have any right under an owner trust agreement or indenture to institute any proceeding with respect to the Agreement unless (1) that holder previously has given to the trustee written notice of default and the continuance thereof, (2) the holders of notes or Equity Certificates of any class evidencing not less than 25% of the aggregate Percentage Interests constituting that class (a) have made written request upon the trustee to institute the proceeding in its own name as trustee and (b) have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred in or because of the proceeding, (3) the trustee has neglected or refused to institute the proceeding for 60 days after receipt of the request and indemnity and (4) no direction inconsistent with the written request has been given to the trustee during the 60- day period by the holders of a majority of the Note Balances of that class. AMENDMENT Each pooling and servicing agreement may be amended by the parties thereto, without the consent of any of the holders of certificates covered by the pooling and servicing agreement, o to cure any ambiguity, o to correct, modify or supplement any provision therein which may be inconsistent with any other provision therein or to correct any error, o to change the timing and/or nature of deposits in the Certificate Account, provided that (1) the change would not adversely affect in any material respect the interests of any certificateholder, as evidenced by an opinion of counsel, and (2) the change would not adversely affect the then-current rating of any rated classes of certificates, as evidenced by a letter from each applicable Rating Agency, o if a REMIC election has been made with respect to the related trust fund, to modify, eliminate or add to any of its provisions (A) to the extent as shall be necessary to maintain the qualification of the trust fund as a REMIC or to avoid or minimize the risk of imposition of any tax on the related trust fund, provided that the trustee has received an opinion of counsel to the effect that (1) the action is necessary or desirable to maintain the qualification or to avoid or minimize the risk, and (2) the action will not adversely affect in any material respect the interests of any holder of certificates covered by the pooling and servicing agreement, or (B) to restrict the transfer of the REMIC Residual Certificates, provided that the company has determined that the then-current ratings of the classes of the certificates that have been rated will not be adversely affected, as evidenced by a letter from each applicable Rating Agency, and that the amendment will not give rise to any tax with respect to the transfer of the REMIC Residual Certificates to a non-permitted transferee, o to make any other provisions with respect to matters or questions arising under the pooling and servicing agreement which are not materially inconsistent with the provisions thereof, provided that the action will not adversely affect in any material respect the interests of any certificateholder, or 61
424B5235th Page of 311TOC1stPreviousNextBottomJust 235th
o to amend specified provisions that are not material to holders of any class of certificates offered under this prospectus. The pooling and servicing agreement may also be amended by the parties thereto with the consent of the holders of certificates of each class affected thereby evidencing, in each case, at least 66% of the aggregate Percentage Interests constituting the class for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the pooling and servicing agreement or of modifying in any manner the rights of the holders of certificates covered by the pooling and servicing agreement, except that the amendment may not (1) reduce in any manner the amount of, or delay the timing of, payments received on mortgage loans which are required to be distributed on a certificate of any class without the consent of the holder of the certificate or (2) reduce the aforesaid percentage of certificates of any class the holders of which are required to consent to the amendment without the consent of the holders of all certificates of the class covered by the pooling and servicing agreement then outstanding. Notwithstanding the foregoing, if a REMIC election has been made with respect to the related trust fund, the trustee will not be entitled to consent to any amendment to a pooling and servicing agreement without having first received an opinion of counsel to the effect that the amendment or the exercise of any power granted to the master servicer, the company, the trustee or any other specified person in accordance with the amendment will not result in the imposition of a tax on the related trust fund or cause the trust fund to fail to qualify as a REMIC. With respect to each series of notes, each related servicing agreement or indenture may be amended by the parties thereto without the consent of any of the holders of the notes covered by the Agreement, to cure any ambiguity, to correct, modify or supplement any provision therein, or to make any other provisions with respect to matters or questions arising under the Agreement which are not inconsistent with the provisions thereof, provided that the action will not adversely affect in any material respect the interests of any holder of notes covered by the Agreement. Each Agreement may also be amended by the parties thereto with the consent of the holders of notes evidencing not less than 66% of the voting rights, for any purpose; provided, however, that the amendment may not: (1) reduce in any manner the amount of or delay the timing of, payments received on trust fund assets which are required to be distributed on any certificate without the consent of the holder of the certificate, (2) adversely affect in any material respect the interests of the holders of any class of notes in a manner other than as described in (1), without the consent of the holders of notes of the class evidencing not less than 66% of the aggregate voting rights of the class or (3) reduce the aforesaid percentage of voting rights required for the consent to the amendment without the consent of the holders of all notes covered by the Agreement then outstanding. The voting rights evidenced by any security will be the portion of the voting rights of all of the securities in the related series allocated in the manner described in the related prospectus supplement. TERMINATION; RETIREMENT OF SECURITIES The obligations created by the related Agreements for each series of securities (other than the limited payment and notice obligations of the trustee and the company, respectively) will terminate upon the payment to securityholders of that series of all amounts held in the Certificate Account or by the master servicer and 62
424B5236th Page of 311TOC1stPreviousNextBottomJust 236th
required to be paid to them pursuant to the Agreements following the earlier of (1) the final payment or other liquidation or disposition (or any advance with respect thereto) of the last mortgage loan, REO property and/or mortgage security subject thereto and (2) the purchase by the master servicer or the company or (a) if specified in the related prospectus supplement with respect to each series of certificates, by the holder of the REMIC Residual Certificates (see "Federal Income Tax Consequences" below) or (b) if specified in the prospectus supplement with respect to each series of notes, by the holder of the Equity Certificates, from the trust fund for the series of all remaining mortgage loans, REO properties and/or mortgage securities. In addition to the foregoing, the master servicer or the company will have the option to purchase, in whole but not in part, the securities specified in the related prospectus supplement in the manner set forth in the related prospectus supplement. With respect to any series of certificates, the purchase shall not be made unless either: (1) the aggregate principal balance of the certificates as of the date is equal to or less than the percentage specified in the related prospectus supplement (which shall not be greater than 10%) of the aggregate principal balance of the certificates as of the Closing Date or (2) the aggregate principal balance of the mortgage loans as of the date is equal to or less than the percentage specified in the related prospectus supplement (which shall not be greater than 10%) of the aggregate principal balance of the mortgage loans as of the cut-off date. With respect to any series of notes, the purchase shall not be made unless the aggregate principal balance of the notes as of the date is equal to or less than the percentage specified in the related prospectus supplement (which shall not be greater than 25%) of the aggregate principal balance of the notes as of the Closing Date or a period specified in the related prospectus supplement (which shall not be shorter than seven years) has elapsed since the initial distribution date. Upon the purchase of the securities or at any time thereafter, at the option of the master servicer or the company, the assets of the trust fund may be sold, thereby effecting a retirement of the securities and the termination of the trust fund, or the securities so purchased may be held or resold by the master servicer or the company. In no event, however, will the trust created by the pooling and servicing agreement continue beyond the expiration of 21 years from the death of the survivor of the persons named in the pooling and servicing agreement. Written notice of termination of the pooling and servicing agreement will be given to each securityholder, and the final distribution will be made only upon surrender and cancellation of the securities at an office or agency appointed by the trustee which will be specified in the notice of termination. If the securityholders are permitted to terminate the trust under the applicable pooling and servicing agreement, a penalty may be imposed upon the securityholders based upon the fee that would be foregone by the master servicer because of the termination. The purchase of mortgage loans and property acquired in respect of mortgage loans evidenced by a series of securities shall be made at the option of the master servicer, the company or, if applicable, the holder of the REMIC Residual Certificates or Equity Certificates at the price specified in the related prospectus supplement. The exercise of the right will effect early retirement of the securities of that series, but the right of the master servicer, the company or, if applicable, the holder to so purchase is subject to the aggregate principal balance of the mortgage loans and/or mortgage securities in the trust fund for that series as of the distribution date on which the purchase proceeds are to be distributed to securityholders being less than the percentage specified in the related prospectus supplement of the aggregate principal balance of the mortgage loans and/or mortgage securities at the cut-off date for that series. The prospectus supplement for each series of securities will set forth the amounts that the holders of the securities will be entitled to receive upon the early retirement. The early termination may adversely affect the yield to holders of the securities. With respect to any series of certificates, an optional purchase of the mortgage loans in the related trust fund may not result in the related certificates receiving an amount equal to the principal balance thereof plus accrued and unpaid interest and any undistributed shortfall on the related certificates. If a REMIC election has been made, the termination of the related trust fund will be effected in a manner consistent with applicable federal income tax regulations and its status as a REMIC. 63
424B5237th Page of 311TOC1stPreviousNextBottomJust 237th
Following any optional termination, there will be no continuing direct or indirect liability of the trust fund or any securityholder as sellers of the assets of the trust fund. THE TRUSTEE The trustee under each pooling and servicing agreement and indenture will be named in the related prospectus supplement. The commercial bank, national banking association, banking corporation or trust company that serves as trustee may have typical banking relationships with the company and its affiliates. The trustee shall at all times be a corporation or an association organized and doing business under the laws of any state or the United States of America, authorized under the laws to exercise corporate trust powers, having a combined capital and surplus of at least $15,000,000 and subject to supervision or examination by federal or state authority. DUTIES OF THE TRUSTEE The trustee for each series of securities will make no representation as to the validity or sufficiency of the related Agreements, the securities or any underlying mortgage loan, mortgage security or related document and will not be accountable for the use or application by or on behalf of any master servicer or special servicer of any funds paid to the master servicer or special servicer in respect of the securities or the underlying mortgage loans or mortgage securities, or any funds deposited into or withdrawn from the Certificate Account for the series or any other account by or on behalf of the master servicer or special servicer. If no event of default has occurred and is continuing, the trustee for each series of securities will be required to perform only those duties specifically required under the related pooling and servicing agreement or indenture. However, upon receipt of any of the various certificates, reports or other instruments required to be furnished to it pursuant to the related Agreement, a trustee will be required to examine the documents and to determine whether they conform to the requirements of the agreement. SOME MATTERS REGARDING THE TRUSTEE As and to the extent described in the related prospectus supplement, the fees and normal disbursements of any trustee may be the expense of the related master servicer or other specified person or may be required to be borne by the related trust fund. The trustee for each series of securities generally will be entitled to indemnification, from amounts held in the Certificate Account for the series, for any loss, liability or expense incurred by the trustee in connection with the trustee's acceptance or administration of its trusts under the related pooling and servicing agreement or indenture unless the loss, liability, cost or expense was incurred by reason of willful misfeasance, bad faith or gross negligence on the part of the trustee in the performance of its obligations and duties, or by reason of its reckless disregard of its obligations or duties. RESIGNATION AND REMOVAL OF THE TRUSTEE 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 under the pooling and servicing agreement or if the trustee becomes insolvent. Upon becoming aware of the circumstances, the company will be obligated to appoint a successor trustee. The trustee may also be removed at anytime by the holders of securities evidencing not less than 51% of the aggregate undivided interests (or, if applicable, voting rights) in the related trust fund. Any resignation or removal of the trustee and 64
424B5238th Page of 311TOC1stPreviousNextBottomJust 238th
appointment of a successor trustee will not become effective until acceptance of the appointment by the successor trustee. YIELD CONSIDERATIONS The yield to maturity of an offered certificate will depend on the price paid by the holder for the certificate, the security interest rate on a certificate entitled to payments of interest (which security interest rate may vary if so specified in the related prospectus supplement) and the rate and timing of principal payments (including prepayments, defaults, liquidations and repurchases) on the mortgage loans and the allocation thereof to reduce the principal balance of the certificate (or notional amount thereof if applicable) and other factors. A class of securities may be entitled to payments of interest at a fixed security interest rate, a variable security interest rate or adjustable security interest rate, or any combination of the security interest rates, each as specified in the related prospectus supplement. A variable security interest rate may be calculated based on the weighted average of the Net Mortgage Rates of the related mortgage loans for the month preceding the distribution date if so specified in the related prospectus supplement. As will be described in the related prospectus supplement, the aggregate payments of interest on a class of securities, and their yield to maturity, will be affected by the rate of payment of principal on the securities (or the rate of reduction in the notional balance of securities entitled only to payments of interest) and, in the case of securities evidencing interests in ARM Loans, by changes in the Net Mortgage Rates on the ARM Loans. See "Maturity and Prepayment Considerations" below. The yield on the securities will also be affected by liquidations of mortgage loans following mortgagor defaults and by purchases of mortgage loans in the event of breaches of representations made in respect of the mortgage loans by the company, the master servicer and others, or conversions of ARM Loans to a fixed interest rate. See "The Mortgage Pools--Representations by Sellers" and "Descriptions of the Securities--Assignment of Trust Fund Assets" above. Holders of Strip Securities or a class of securities having a security interest rate that varies based on the weighted average mortgage rate of the underlying mortgage loans may be affected by disproportionate prepayments and repurchases of mortgage loans having higher Net Mortgage Rates or rates applicable to the Strip Securities, as applicable. With respect to any series of securities, a period of time will elapse between the date upon which payments on the related mortgage loans are due and the distribution date on which the payments are passed through to securityholders. That delay will effectively reduce the yield that would otherwise be produced if payments on the mortgage loans were distributed to securityholders on or near the date they were due. In general, if a class of securities is purchased at initial issuance at a premium and payments of principal on the related mortgage loans occur at a rate faster than anticipated at the time of purchase, the purchaser's actual yield to maturity will be lower than that assumed at the time of purchase. Similarly, if a class of securities is purchased at initial issuance at a discount and payments of principal on the related mortgage loans occur at a rate slower than that assumed at the time of purchase, the purchaser's actual yield to maturity will be lower than that originally anticipated. The effect of principal prepayments, liquidations and purchases on yield will be particularly significant in the case of a series of securities having a class entitled to payments of interest only or to payments of interest that are disproportionately high relative to the principal payments to which the class is entitled. This class will likely be sold at a substantial premium to its principal balance and any faster than anticipated rate of prepayments will adversely affect the yield to holders thereof. Extremely rapid prepayments may result in the failure of the holders to recoup their original investment. In addition, the yield to maturity on other types of classes of securities, including Accrual Securities and securities with a security interest rate which fluctuates inversely with or at a multiple of an 65
424B5239th Page of 311TOC1stPreviousNextBottomJust 239th
index, may be relatively more sensitive to the rate of prepayment on the related mortgage loans than other classes of securities. The timing of changes in the rate of principal payments on or repurchases of the mortgage loans 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 expectation. In general, the earlier a prepayment of principal on the underlying mortgage loans or a repurchase thereof, the greater will be the effect on an investor's yield to maturity. As a result, the effect on an investor's yield of principal payments and repurchases occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of a series of securities would not be fully offset by a subsequent like reduction (or increase) in the rate of principal payments. When a principal prepayment in full is made on a mortgage loan, the borrower is generally charged interest only for the period from the due date of the preceding scheduled payment up to the date of the prepayment, instead of for the full accrual period, that is, the period from the due date of the preceding scheduled payment up to the due date for the next scheduled payment. In addition, a partial principal prepayment may likewise be applied as of a date prior to the next scheduled due date (and, accordingly, be accompanied by accrued interest for less than the full accrual period). However, interest accrued and distributable on any series of securities on any distribution date will generally correspond to interest accrued on the principal balance of mortgage loans for their respective full accrual periods. Consequently, if a prepayment on any mortgage loan is distributable to securityholders on a particular distribution date, but the prepayment is not accompanied by accrued interest for the full accrual period, the interest charged to the borrower (net of servicing and administrative fees and any retained interest of the company) may be less than the corresponding amount of interest accrued and otherwise payable on the related mortgage loan, and a Prepayment Interest Shortfall will result. If and to the extent that the shortfall is allocated to a class of offered securities, its yield will be adversely affected. The prospectus supplement for a series of securities will describe the manner in which the shortfalls will be allocated among the classes of the securities. If so specified in the related prospectus supplement, the master servicer will be required to apply some or all of its servicing compensation for the corresponding period to offset the amount of the shortfalls. The related prospectus supplement will also describe any other amounts available to off set the shortfalls. See "Servicing of Mortgage Loans--Servicing and Other Compensation and Payment of Expenses; Retained Interest". The trust fund with respect to any series may include convertible ARM Loans. As is the case with conventional, fixed-rate mortgage loans originated in a high interest rate environment which may be subject to a greater rate of principal prepayments when interest rates decrease, convertible ARM Loans may be subject to a greater rate of principal prepayments (or purchases by the related subservicer or the master servicer) due to their refinancing or conversion to fixed interest rate loans in a low interest rate environment. For example, if prevailing interest rates fall significantly, convertible ARM Loans could be subject to higher prepayment and conversion rates than if prevailing interest rates remain constant because the availability of fixed-rate or other adjustable-rate mortgage loans at competitive interest rates may encourage mortgagors to refinance their adjustable-rate mortgages to "lock in" a lower fixed interest rate or to take advantage of the availability of other adjustable-rate mortgage loans, or, in the case of convertible adjustable-rate mortgage loans, to exercise their option to convert the adjustable interest rates to fixed interest rates. The conversion feature may also be exercised in arising interest rate environment as mortgagors attempt to limit their risk of higher rates. A rising interest rate environment may also result in an increase in the rate of defaults on the mortgage loans. If the related subservicer or the master servicer purchases convertible ARM Loans, a mortgagor's exercise of the conversion option will result in a distribution of the principal portion thereof to the securityholders, as described in this prospectus. Alternatively, to the extent subservicers or the master servicer fail to purchase converting ARM Loans, the mortgage pool will include fixed-rate mortgage loans. 66
424B5240th Page of 311TOC1stPreviousNextBottomJust 240th
The rate of defaults on the mortgage loans will also affect the rate and timing of principal payments on the mortgage loans and thus the yield on the securities. In general, defaults on single family loans are expected to occur with greater frequency in their early years. The rate of default on single family loans which are refinance or limited documentation mortgage loans, and on mortgage loans, with high loan-to-value ratios, may be higher than for other types of mortgage loans. Furthermore, the rate and timing of prepayments, defaults and liquidations on the mortgage loans will be affected by the general economic condition of the region of the country in which the related mortgaged properties are located. The risk of delinquencies and loss is greater and prepayments are less likely in regions where a weak or deteriorating economy exists, as may be evidenced by, among other factors, increasing unemployment or falling property values. With respect to some mortgage loans in a mortgage pool, the mortgage rate at origination may be below the rate that would result if the index and margin relating thereto were applied at origination. Under the applicable underwriting standards, the mortgagor under each mortgage loan generally will be qualified, or the mortgage loan otherwise approved, on the basis of the mortgage rate in effect at origination. The repayment of the mortgage loan may thus be dependent on the ability of the mortgagor to make larger level monthly payments following the adjustment of the mortgage rate. In addition, the periodic increase in the amount paid by the mortgagor of a buydown mortgage loan during or at the end of the applicable Buydown Period may create a greater financial burden for the mortgagor, who might not have otherwise qualified for a mortgage under applicable underwriting guidelines, and may accordingly increase the risk of default with respect to the related mortgage loan. The mortgage rates on ARM Loans subject to negative amortization generally adjust monthly and their amortization schedules adjust less frequently. During a period of rising interest rates as well as immediately after origination(initial mortgage rates are generally lower than the sum of the Indices applicable at origination and the related Note Margins), the amount of interest accruing on the principal balance of the mortgage loans may exceed the amount of their minimum scheduled monthly payment. As a result, a portion of the accrued interest on negatively amortizing mortgage loans may become Deferred Interest which will be added to the principal balance thereof and will bear interest at the applicable mortgage rate. The addition of the Deferred Interest to the principal balance of any related class or classes of securities will lengthen the weighted average life thereof and may adversely affect yield to holders thereof, depending upon the price at which the securities were purchased. In addition, with respect to ARM Loans subject to negative amortization, during a period of declining interest rates, it might be expected that each minimum scheduled monthly payment on the mortgage loan would exceed the amount of scheduled principal and accrued interest on the principal balance thereof, and since the excess will be applied to reduce the principal balance of the related class or classes of securities, the weighted average life of the securities will be reduced and may adversely affect yield to holders thereof, depending upon the price at which the securities were purchased. MATURITY AND PREPAYMENT CONSIDERATIONS As indicated above under "The Mortgage Pools," the original terms to maturity of the mortgage loans in a given mortgage pool will vary depending upon the type of mortgage loans included in the mortgage pool. The prospectus supplement for a series of securities will contain information with respect to the types and maturities of the mortgage loans in the related mortgage pool. All of the mortgage loans may be prepaid without penalty in full or in part at anytime. The prepayment experience with respect to the mortgage loans in a mortgage pool will affect the life and yield of the related series of securities. With respect to balloon loans, payment of the balloon payment (which, based on the amortization schedule of the mortgage loans, is expected to be a substantial amount) will generally depend on the 67
424B5241st Page of 311TOC1stPreviousNextBottomJust 241st
mortgagor's ability to obtain refinancing of the mortgage loans or to sell the mortgaged property prior to the maturity of the balloon loan. The ability to obtain refinancing will depend on a number of factors prevailing at the time refinancing or sale is required, including real estate values, the mortgagor's financial situation, prevailing mortgage loan interest rates, the mortgagor's equity in the related mortgaged property, tax laws and prevailing general economic conditions. None of the company, the master servicer, or any of their affiliates will be obligated to refinance or repurchase any mortgage loan or to sell the mortgaged property. The extent of prepayments of principal of the mortgage loans may be affected by a number of factors, including solicitations and the availability of mortgage credit, the relative economic vitality of the area in which the mortgaged properties are located and, in the case of multifamily, commercial and mixed-use loans, the quality of management of the mortgage properties, the servicing of the mortgage loans, possible changes in tax laws and other opportunities for investment. In addition, the rate of principal payments on the mortgage loans may be affected by the existence of lock-out periods and requirements that principal prepayments be accompanied by prepayment premiums, as well as due-on- sale and due-on-encumbrance provisions, and by the extent to which the provisions may be practicably enforced. See "Servicing of Mortgage Loans--Collection and Other Servicing Procedures" and "Legal Aspects of the Mortgage Loans--Enforceability of Some Provisions" for a description of provisions of the pooling and servicing agreement and legal aspects of mortgage loans that may affect the prepayment experience on the mortgage loans. The rate of prepayment on a pool of mortgage loans is also affected by prevailing market interest rates for mortgage loans of a comparable type, term and risk level. When the prevailing market interest rate is below a mortgage coupon, a borrower may have an increased incentive to refinance its mortgage loan. In addition, as prevailing market interest rates decline, even borrowers with ARM Loans that have experienced a corresponding interest rate decline may have an increased incentive to refinance for purposes of either (1) converting to a fixed rate loan and thereby "locking in" the rate or (2) taking advantage of the initial "teaser rate" (a mortgage interest rate below what it would otherwise be if the applicable index and gross margin were applied) on another adjustable rate mortgage loan. Moreover, although the mortgage rates on ARM Loans will be subject to periodic adjustments, the adjustments generally will not increase or decrease the mortgage rates by more than a fixed percentage amount on each adjustment date, will not increase the mortgage rates over a fixed percentage amount during the life of any ARM Loan and will be based on an index (which may not rise and fall consistently with mortgage interest rates)plus the related Note Margin (which may be different from margins being used at the time for newly originated adjustable rate mortgage loans). As a result, the mortgage rates on the ARM Loans at any time may not equal the prevailing rates for similar, newly originated adjustable rate mortgage loans. In high interest rate environments, the prevailing rates on fixed-rate mortgage loans may be sufficiently high in relation to the then-current mortgage rates on newly originated ARM Loans that the rate of prepayment may increase as a result of refinancings. There can be no assurance as to the rate of prepayments on the mortgage loans during any period or over the life of any series of securities. If the applicable pooling and servicing agreement for a series of securities provides for a pre-funding account or other means of funding the transfer of additional mortgage loans to the related trust fund, as described under "Description of the Securities--Pre-Funding Account" in this prospectus, and the trust fund is unable to acquire the additional mortgage loans within any applicable time limit, the amounts set aside for the purpose may be applied as principal payments on one or more classes of securities of the series. See "Yield Considerations." There can be no assurance as to the rate of prepayment of the mortgage loans. The company is not aware of any publicly available statistics relating to the principal prepayment experience of diverse portfolios 68
424B5242nd Page of 311TOC1stPreviousNextBottomJust 242nd
of mortgage loans such as the mortgage loans over an extended period of time. All statistics known to the company that have been compiled with respect to prepayment experience on mortgage loans indicate that while some mortgage loans may remain outstanding until their stated maturities, a substantial number will be paid prior to their respective stated maturities. No representation is made as to the particular factors that will affect the prepayment of the mortgage loans or as to the relative importance of these factors. As described in this prospectus and in the prospectus supplement, teamster servicer, the company or a person specified in the related prospectus supplement (other than holder of any class of offered certificates, other than the REMIC Residual Certificates, if offered) may have the option to purchase the assets in a trust fund and effect early retirement of the related series of securities. See "The Agreements--Termination; Retirement of Securities." LEGAL ASPECTS OF MORTGAGE LOANS The following discussion summarizes legal aspects of mortgage loans that is general in nature. The summaries do not purport to be complete. They do not reflect the laws of any particular state nor the laws of all states in which the mortgaged properties may be situated. This is because these legal aspects are governed in part by the law of the state that applies to a particular mortgaged property and the laws of the states may vary substantially. You should refer to the applicable federal and state laws governing the mortgage loans. MORTGAGES Each single family, multifamily, commercial and mixed-use loan and, if applicable, the Contracts (in each case other than cooperative mortgage loans),will be evidenced by a note or bond and secured by an instrument granting a security interest in real property, which may be a mortgage, deed of trust or a deed to secure debt, depending upon the prevailing practice and law in the state in which the related mortgaged property is located, and may have first, second or third priority. Mortgages and deeds to secure debt are referred to as"mortgages." Contracts evidence both the obligation of the obligor to repay the loan evidenced thereby and grant a security interest in the related Manufactured Homes to secure repayment of the loan. However, as Manufactured Homes have become larger and often have been attached to their sites without any apparent intention by the borrowers to move them, courts in many states have held that Manufactured Homes may become subject to real estate title and recording laws. See "--Contracts" below. In some states, a mortgage or deed of trust creates alien upon the real property encumbered by the mortgage or deed of trust. However, in other states, the mortgage or deed of trust conveys legal title to the property respectively, to the mortgagee or to a trustee for the benefit of the mortgagee subject to a condition subsequent (i.e., the payment of the indebtedness secured thereby). The lien created by the mortgage or deed of trust is not prior to the lien for real estate taxes and assessments and other charges imposed under governmental police powers. Priority between mortgages depends on their terms or on the terms of separate subordination or inter-creditor agreements, the knowledge of the parties in some cases and generally on the order of recordation of the mortgage in the appropriate recording office. There are two parties to a mortgage, the mortgagor, who is the borrower and homeowner, and the mortgagee, who is the lender. Under the mortgage instrument, the mortgagor delivers to the mortgagee a note or bond and the mortgage. In the case of a land trust, there are three parties because title to the property is held by a land trustee under a land trust agreement of which the borrower is the beneficiary; at origination of a mortgage loan, the borrower executes a separate undertaking to make payments on the mortgage note. Although a deed of trust is similar to a mortgage, a deed of trust has three parties: the trustor who is the borrower-homeowner; the beneficiary who is the lender; and a third-party grantee called the trustee. Under a deed of trust, the borrower grants the property, irrevocably until the debt is paid, in trust, generally with a power of sale, to the trustee to secure payment of the obligation. The 69
424B5243rd Page of 311TOC1stPreviousNextBottomJust 243rd
trustee's authority under a deed of trust, the grantee's authority under a deed to secure debt and the mortgagee's authority under a mortgage are governed by the law of the state in which the real property is located, the express provisions of the deed of trustor mortgage, and, in deed of trust transactions, the directions of the beneficiary. COOPERATIVE MORTGAGE LOANS If specified in the prospectus supplement relating to a series of certificates, the mortgage loans and Contracts may include cooperative mortgage loans. Each mortgage note evidencing a cooperative mortgage loan will be secured by a security interest in shares issued by the related Cooperative, and in the related proprietary lease or occupancy agreement granting exclusive rights to occupy a specific dwelling unit in the Cooperative's building. The security agreement will create a lien upon the shares of the Cooperative, the priority of which will depend on, among other things, the terms of the particular security agreement as well as the order of recordation and/or filing of the agreement (or financing statements related thereto) in the appropriate recording office. All Cooperative buildings relating to the cooperative mortgage loans are located primarily in the State of New York. Generally, each Cooperative owns in fee or has a long-term leasehold interest in all the real property and owns in fee or leases the building and all separate dwelling units therein. The Cooperative is directly responsible for property management and, in most cases, payment of real estate taxes, other governmental impositions and hazard and liability insurance. If there is an underlying mortgage (or mortgages) on the Cooperative's building or underlying land, as is generally the case, or an underlying lease of the land, as is the case in some instances, the Cooperative, as mortgagor or lessor, as the case may be, is also responsible for fulfilling the mortgage or rental obligations. An underlying mortgage loan is ordinarily obtained by the Cooperative in connection with either the construction or purchase of the Cooperative's building or the obtaining of capital by the Cooperative. The interest of the occupant under proprietary leases or occupancy agreements as to which that Cooperative is the landlord is generally subordinate to the interest of the holder of an underlying mortgage and to the interest of the holder of a land lease. If the Cooperative is unable to meet the payment obligations (1) arising under an underlying mortgage, the mortgagee holding an underlying mortgage could foreclose on that mortgage and terminate all subordinate proprietary leases and occupancy agreements or (2) arising under its land lease, the holder of the landlord's interest under the land lease could terminate it and all subordinate proprietary leases and occupancy agreements. In addition, an underlying mortgage on a Cooperative may provide financing in the form of a mortgage that does not fully amortize, with a significant portion of principal being due in one final payment at maturity. The inability of the Cooperative to refinance a mortgage and its consequent inability to make the final payment could lead to foreclosure by the mortgagee. Similarly, a land lease has an expiration date and the inability of the Cooperative to extend its term or, in the alternative, to purchase the land, could lead to termination of the Cooperative's interest in the property and termination of all proprietary leases and occupancy agreements. In either event, a foreclosure by the holder of an underlying mortgage or the termination of the underlying lease could eliminate or significantly diminish the value of any collateral held by the mortgagee who financed the purchase by an individual tenant-stockholder of shares of the Cooperative or, in the case of the mortgage loans, the collateral securing the cooperative mortgage loans. Each Cooperative is owned by shareholders (referred to as tenant-stockholders) who, through ownership of stock or shares in the Cooperative, receive proprietary leases or occupancy agreements which confer exclusive rights to occupy specific dwellings. Generally, a tenant-stockholder of a Cooperative must make a monthly payment to the Cooperative pursuant to the proprietary lease, which payment represents the tenant-stockholder's proportional share of the Cooperative's payments for its underlying mortgage, real property taxes, maintenance expenses and other capital or ordinary expenses. An ownership interest in a 70
424B5244th Page of 311TOC1stPreviousNextBottomJust 244th
Cooperative and accompanying occupancy rights may be financed through a cooperative mortgage loan evidenced by a mortgage note and secured by an assignment of and a security interest in the occupancy agreement or proprietary lease and a security interest in the related shares of the related Cooperative. The mortgagee generally takes possession of the share certificate and a counterpart of the proprietary lease or occupancy agreement and a financing statement covering the proprietary lease or occupancy agreement and the Cooperative shares is filed in the appropriate state and local offices to perfect the mortgagee's interest in its collateral. Subject to the limitations discussed below, upon default of the tenant-stockholder, the lender may sue for judgment on the mortgage note, dispose of the collateral at a public or private sale or otherwise proceed against the collateral or tenant-stockholder as an individual as provided in the security agreement covering the assignment of the proprietary lease or occupancy agreement and the pledge of Cooperative shares. See "--Foreclosure on Shares of Cooperatives" below. TAX ASPECTS OF COOPERATIVE OWNERSHIP In general, a "tenant-stockholder" (as defined in Section 216(b)(2) of the Code) of a corporation that qualifies as a "cooperative housing corporation" within the meaning of Section 216(b)(1) of the Code is allowed a deduction for amounts paid or accrued within his taxable year to the corporation representing his proportionate share of interest expenses and real estate taxes allowable as a deduction under Section 216(a) of the Code to the corporation under Sections 163 and 164 of the Code. In order for a corporation to qualify under Section 216(b)(1) of the Code for its taxable year in which the items are allowable as a deduction to the corporation, the section requires, among other things, that at least 80% of the gross income of the corporation be derived from its tenant-stockholders. By virtue of this requirement, the status of a corporation for purposes of Section 216(b)(1) of the Code must be determined on a year-to-year basis. Consequently, there can be no assurance that Cooperatives relating to the cooperative mortgage loans will qualify under the section for any particular year. In the event that the Cooperative fails to qualify for one or more years, the value of the collateral securing any related cooperative mortgage loans could be significantly impaired because no deduction would be allowable to tenant-stockholders under Section 216(a) of the Code with respect to those years. In view of the significance of the tax benefits accorded tenant-stockholders of a corporation that qualifies under Section 216(b)(1) of the Code, the likelihood that a failure would be permitted to continue over a period of years appears remote. LEASES AND RENTS Mortgages that encumber income-producing multifamily and commercial properties often contain an assignment of rents and leases, pursuant to which the borrower assigns to the lender the borrower's right, title and interest as landlord under each lease and the income derived therefrom, while (unless rents are to be paid directly to the lender) retaining a revocable license to collect the rents for so long as there is no default. If the borrower defaults, the license terminates and the lender is entitled to collect the rents. Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled to collect the rents. CONTRACTS Under the laws of most states, manufactured housing constitutes personal property and is subject to the motor vehicle registration laws of the state or other jurisdiction in which the unit is located. In a few states, where certificates of title are not required for manufactured homes, security interests are perfected by the filing of a financing statement under Article 9 of the UCC which has been adopted by all states. Financing statements are effective for five years and must be renewed prior to the end of each five year period. The certificate of title laws adopted by the majority of states provide that ownership of motor vehicles 71
424B5245th Page of 311TOC1stPreviousNextBottomJust 245th
and manufactured housing shall be evidenced by a certificate of title issued by the motor vehicles department (or a similar entity) of the state. In the states that have enacted certificate of title laws, a security interest in a unit of manufactured housing, so long as it is not attached to land in so permanent a fashion as to become a fixture, is generally perfected by the recording of the interest on the certificate of title to the unit in the appropriate motor vehicle registration office or by delivery of the required documents and payment of a fee to the office, depending on state law. The master servicer will be required under the related pooling and servicing agreement or servicing agreement to effect the notation or delivery of the required documents and fees, and to obtain possession of the certificate of title, as appropriate under the laws of the state in which any Manufactured Home is registered. In the event the master servicer fails, due to clerical errors or otherwise, to effect the notation or delivery, or files the security interest under the wrong law (for example, under a motor vehicle title statute rather than under the UCC, in a few states), the trustee may not have a first priority security interest in the Manufactured Home securing a Contract. As manufactured homes have become larger and often have been attached to their sites without any apparent intention by the borrowers to move them, courts in many states have held that manufactured homes may become subject to real estate title and recording laws. As a result, a security interest in a manufactured home could be rendered subordinate to the interests of other parties claiming an interest in the home under applicable state real estate law. In order to perfect a security interest in a manufactured home under real estate laws, the holder of the security interest must file either a "fixture filing" under the provisions of the UCC or a real estate mortgage under the real estate laws of the state where the home is located. These filings must be made in the real estate records office of the county where the home is located. Generally, Contracts will contain provisions prohibiting the obligor from permanently attaching the Manufactured Home to its site. So long as the obligor does not violate this agreement, a security interest in the Manufactured Home will be governed by the certificate of title laws or the UCC, and the notation of the security interest on the certificate of title or the filing of a UCC financing statement will be effective to maintain the priority of the security interest in the Manufactured Home. If, however, a Manufactured Home is permanently attached to its site, other parties could obtain an interest in the Manufactured Home that is prior to the security interest originally retained by the Seller and transferred to the company. The company will assign or cause to be assigned a security interest in the Manufactured Homes to the trustee, on behalf of the securityholders. Neither the company, the master servicer nor the trustee will amend the certificates of title to identify the trustee, on behalf of the securityholders, as the new secured party and, accordingly, the company or the Seller will continue to be named as the secured party on the certificates of title relating to the Manufactured Homes. In most states, the assignment is an effective conveyance of the security interest without amendment of any lien noted on the related certificate of title and the new secured party succeeds to the company's rights as the secured party. However, in some states there exists a risk that, in the absence of an amendment to the certificate of title, the assignment of the security interest might not be held effective against creditors of the company or Seller. In the absence of fraud, forgery or permanent affixation of the Manufactured Home to its site by the Manufactured Home owner, or administrative error by state recording officials, the notation of the lien of the company on the certificate of title or delivery of the required documents and fees will be sufficient to protect the trustee against the rights of subsequent purchasers of a Manufactured Home or subsequent lenders who take a security interest in the Manufactured Home. If there are any Manufactured Homes as to which the company has failed to perfect or cause to be perfected the security interest assigned to the trust fund, the security interest would be subordinate to, among others, subsequent purchasers for value of Manufactured Homes and holders of perfected security interests. There also exists a risk in not identifying the trustee, on behalf of the securityholders, as the new secured party on the certificate of title that, through fraud or negligence, the security interest of the trustee could be released. 72
424B5246th Page of 311TOC1stPreviousNextBottomJust 246th
In the event that the owner of a Manufactured Home moves it to a state other than the state in which the Manufactured Home initially is registered, under the laws of most states the perfected security interest in the Manufactured Home would continue for four months after the relocation and thereafter until the owner re-registers the Manufactured Home in the state. If the owner were to relocate a Manufactured Home to another state and re-register the Manufactured Home in the state, and if the company did not take steps to re-perfect its security interest in the state, the security interest in the Manufactured Home would cease to be perfected. A majority of states generally require surrender of a certificate of title to re-register a Manufactured Home; accordingly, the company must surrender possession if it holds the certificate of title to the Manufactured Home or, in the case of Manufactured Homes registered in states that provide for notation of lien, the company would receive notice of surrender if the security interest in the Manufactured Home is noted on the certificate of title. Accordingly, the company would have the opportunity to re-perfect its security interest in the Manufactured Home in the state of relocation. In states that do not require a certificate of title for registration of a manufactured home, re-registration could defeat perfection. Similarly, when an obligor under a manufactured housing conditional sales contract sells a manufactured home, the obligee must surrender possession of the certificate of title or it will receive notice as a result of its lien noted thereon and accordingly will have an opportunity to require satisfaction of the related manufactured housing conditional sales contract before release of the lien. Under each related pooling and servicing agreement or servicing agreement, the master servicer will be obligated to take these steps, at the master servicer's expense, as are necessary to maintain perfection of security interests in the Manufactured Homes. Under the laws of most states, liens for repairs performed on a Manufactured Home take priority even over a perfected security interest. The company will obtain the representation of the related Seller that it has no knowledge of any of these liens with respect to any Manufactured Home securing a Contract. However, these liens could arise at any time during the term of a Contract. No notice will be given to the trustee or securityholders in the event this type of lien arises. FORECLOSURE ON MORTGAGES AND SOME CONTRACTS Foreclosure of a deed of trust is generally accomplished by a non-judicial trustee's sale under a specific provision in the deed of trust which authorizes the trustee to sell the property upon any default by the borrower under the terms of the note or deed of trust. In addition to any notice requirements contained in a deed of trust, in some states, the trustee must record a notice of default and send a copy to the borrower trustor and to any person who has recorded a request for a copy of notice of default and notice of sale. In addition, the trustee must provide notice in some states to any other individual having an interest of record in the real property, including any junior lienholders. If the deed of trust is not reinstated within a specified period, a notice of sale must be posted in a public place and, in most states, published for a specific period of time in one or more newspapers in a specified manner prior to the date of trustee's sale. In addition, some state laws require that a copy of the notice of sale be posted on the property and sent to all parties having an interest of record in the real property. In some states, the borrower-trustor has the right to reinstate the loan at any time following default until shortly before the trustee's sale. In general, in these states, the borrower, or any other person having a junior encumbrance on the real estate, may, during a reinstatement period, cure the default by paying the entire amount in arrears plus the costs and expenses incurred in enforcing the obligation. Foreclosure of a mortgage is generally accomplished by judicial action. Generally, the action is initiated by the service of legal pleadings upon all parties having an interest of record in the real property. Delays in completion of the foreclosure may occasionally result from difficulties in locating necessary parties. Judicial foreclosure proceedings are often not contested by any of the applicable parties. If the 73
424B5247th Page of 311TOC1stPreviousNextBottomJust 247th
mortgagee's right to foreclose is contested, the legal proceedings necessary to resolve the issue can be time-consuming. In the case of foreclosure under either a mortgage or a deed of trust, the sale by the referee or other designated officer or by the trustee is a public sale. However, because of the difficulty a potential buyer at the sale would have in determining the exact status of title and because the physical condition of the property may have deteriorated during the foreclosure proceedings, it is uncommon for a third party to purchase the property at a foreclosure sale. Rather, it is common for the lender to purchase the property from the trustee or referee for a credit bid less than or equal to the unpaid principal amount of note plus the accrued and unpaid interest and the expense of foreclosure, in which case the mortgagor's debt will be extinguished unless the lender purchases the property for a lesser amount in order to preserve its right against a borrower to seek a deficiency judgment and the remedy is available under state law and the related loan documents. In the same states, there is a statutory minimum purchase price which the lender may offer for the property and generally, state law controls the amount of foreclosure costs and expenses, including attorneys' fees, which may be recovered by a lender. Thereafter, subject to the right of the borrower in some states to remain in possession during the redemption period, the lender will assume the burdens of ownership, including obtaining hazard insurance, paying taxes and making the repairs at its own expense as are necessary to render the property suitable for sale. Generally, the lender will obtain the services of a real estate broker and pay the broker's commission in connection with the sale of the property. Depending upon market conditions, the ultimate proceeds of the sale of the property may not equal the lender's investment in the property and, in some states, the lender may be entitled to a deficiency judgment. Any loss may be reduced by the receipt of any mortgage insurance proceeds or other forms of credit enhancement for a series of certificates. See "Description of Credit Enhancement". A junior mortgagee may not foreclose on the property securing a junior mortgage unless it forecloses subject to the senior mortgages. The junior mortgagee must either pay the entire amount due on the senior mortgages prior to or at the time of the foreclosure sale or undertake to pay on any senior mortgages that the mortgagor is currently in a state of default under. Under either course of action, the junior mortgagee may add the amounts paid to the balance due on the junior loan, and may be subrogated to the rights of the senior mortgagees. In addition, in the event that the foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale" clause, the junior mortgagee may be required to pay the full amount of the senior mortgages to the senior mortgagees. Accordingly, with respect to those single family loans which are junior mortgage loans, if the lender purchases the property, the lender's title will be subject to all senior liens and claims and governmental liens. The proceeds received by the referee or trustee from the sale are applied first to the costs, fees and expenses of sale and then in satisfaction of the indebtedness secured by the mortgage or deed of trust under which the sale was conducted. Any remaining proceeds are generally payable to the holders of junior mortgages or deeds of trust and other liens and claims in order of their priority, whether or not the borrower is in default. Any additional proceeds are generally payable to the mortgagor or trustor. The payment of the proceeds to the holders of junior mortgages may occur in the foreclosure action of the senior mortgagee or may require the institution of separate legal proceeds. In foreclosure, courts have imposed general equitable principles. The equitable principles are generally designed to relieve the borrower from the legal effect of its defaults under the loan documents. Examples of judicial remedies that have been fashioned include judicial requirements that the lender undertake affirmative and expensive actions to determine the causes for the borrower's default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender's judgment and have required that lenders reinstate loans or recast payment schedules in order to accommodate borrowers who are suffering from temporary financial disability. In other cases, courts have limited the right of lender to foreclose if the default under the mortgage instrument is not 74
424B5248th Page of 311TOC1stPreviousNextBottomJust 248th
monetary, such as the borrower's failure to adequately maintain the property or the borrower's execution of a second mortgage or deed of trust affecting the property. Finally, some courts have been faced with the issue of whether or not federal or state constitutional provisions reflecting due process concerns for adequate notice require that borrowers under deeds of trust or mortgages receive notices in addition to the statutorily-prescribed minimums. For the most part, these cases have upheld the notice provisions as being reasonable or have found that the sale by a trustee under a deed of trust, or under a mortgage having a power of sale, does not involve sufficient state action to afford constitutional protection to the borrower. FORECLOSURE ON SHARES OF COOPERATIVES The Cooperative shares owned by the tenant-stockholder, together with the rights of the tenant- stockholder under the proprietary lease or occupancy agreement, are pledged to the lender and are, in almost all cases, subject to restrictions on transfer as set forth in the Cooperative's certificate of incorporation and by-laws, as well as in the proprietary lease or occupancy agreement. The Cooperative may cancel the proprietary lease or occupancy agreement, even while pledged, for failure by the tenant- stockholder to pay its obligations or charges owed by the tenant-stockholder, including mechanics' liens against the Cooperative's building incurred by the tenant-stockholder. Generally, obligations and charges arising under a proprietary lease or occupancy agreement which are owed to the Cooperative are made liens upon the shares to which the proprietary lease or occupancy agreement relates. In addition, the Cooperative may generally terminate a proprietary lease or occupancy agreement in the event the borrower breaches its covenants in the proprietary lease or occupancy agreement. Typically, the lender and the Cooperative enter into a recognition agreement which, together with any lender protection provisions contained in the proprietary lease or occupancy agreement, establishes the rights and obligations of both parties in the event of a default by the tenant-stockholder on its obligations under the proprietary lease or occupancy agreement. A default by the tenant-stockholder under the proprietary lease or occupancy agreement will usually constitute a default under the security agreement between the lender and the tenant-stockholder. The recognition agreement generally provides that, in the event that the tenant-stockholder has defaulted under the proprietary lease or occupancy agreement, the Cooperative will take no action to terminate the lease or agreement until the lender has been provided with notice of and an opportunity to cure the default. The recognition agreement typically provides that if the proprietary lease or occupancy agreement is terminated, the Cooperative will recognize the lender's lien against proceeds from a sale of the shares and the proprietary lease or occupancy agreement allocated to the dwelling, subject, however, to the Cooperative's right to sums due under the proprietary lease or occupancy agreement or which have become liens on the shares relating to the proprietary lease or occupancy agreement. The total amount owed to the Cooperative by the tenant-stockholder, which the lender generally cannot restrict and does not monitor, could reduce the amount realized upon a sale of the collateral below the outstanding principal balance of the cooperative mortgage loan and accrued and unpaid interest on the loan. Recognition agreements also generally provide that in the event the lender succeeds to the tenant- shareholder's shares and proprietary lease or occupancy agreement as the result of realizing upon its collateral for a cooperative mortgage loan, the lender must obtain the approval or consent of the board of directors of the Cooperative as required by the proprietary lease before transferring the Cooperative shares or assigning the proprietary lease. The approval or consent is usually based on the prospective purchaser's income and net worth, among other factors, and may significantly reduce the number of potential purchasers, which could limit the ability of the lender to sell and realize upon the value of the collateral. Generally, the lender is not limited in any rights it may have to dispossess the tenant-stockholder. 75
424B5249th Page of 311TOC1stPreviousNextBottomJust 249th
Because of the nature of cooperative mortgage loans, lenders do not require the tenant-stockholder (i.e., the borrower) to obtain title insurance of any type. Consequently, the existence of any prior liens or other imperfections of title affecting the Cooperative's building or real estate also may adversely affect the marketability of the shares allocated to the dwelling unit in the event of foreclosure. In New York, foreclosure on the Cooperative shares is accomplished by public sale in accordance with the provisions of Article 9 of the New York UCC and the security agreement relating to those shares. Article 9 of the New York UCC requires that a sale be conducted in a "commercially reasonable" manner. Whether a sale has been conducted in a "commercially reasonable" manner will depend on the facts in each case. In determining commercial reasonableness, a court will look to the notice given the debtor and the method, manner, time, place and terms of the sale and the sale price. Generally, a sale conducted according to the usual practice of banks selling similar collateral in the same area will be considered reasonably conducted. Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and then to satisfy the indebtedness secured by the lender's security interest. The recognition agreement, however, generally provides that the lender's right to reimbursement is subject to the right of the Cooperative corporation to receive sums due under the proprietary lease or occupancy agreement. If there are proceeds remaining, the lender must account to the tenant-stockholder for the surplus. Conversely, if a portion of the indebtedness remains unpaid, the tenant-stockholder is generally responsible for the deficiency. See "--Anti-Deficiency Legislation and other Limitations on Lenders" below. REPOSSESSION WITH RESPECT TO CONTRACTS GENERAL. Repossession of manufactured housing is governed by state law. A few states have enacted legislation that requires that the debtor be given an opportunity to cure its default (typically 30 days to bring the account current) before repossession can commence. So long as a manufactured home has not become so attached to real estate that it would be treated as a part of the real estate under the law of the state where it is located, repossession of the home in the event of a default by the obligor generally will be governed by the UCC (except in Louisiana). Article 9 of the UCC provides the statutory framework for the possession of manufactured housing. While the UCC as adopted by the various states may vary in small particulars, the general repossession procedure established by the UCC is as follows: o Except in those states where the debtor must receive notice of the right to cure a default, repossession can commence immediately upon default without prior notice. Repossession may be effected either through self-help (peaceable retaking without court order), voluntary repossession or through judicial process (repossession pursuant to court-issued writ of replevin). The self-help and/or voluntary repossession methods are more commonly employed, and are accomplished simply by retaking possession of the manufactured home. In cases in which the debtor objects or raises a defense to repossession, a court order must be obtained from the appropriate state court, and the manufactured home must then be repossessed in accordance with that order. Whether the method employed is self-help, voluntary repossession or judicial repossession, the repossession can be accomplished either by an actual physical removal of the manufactured home to a secure location for refurbishment and resale or by removing the occupants and their belongings from the manufactured home and maintaining possession of the manufactured home on the location where the occupants were residing. Various factors may affect whether the manufactured home is physically removed or left on location, such as the nature and term of the lease of the site on which it is located and the condition of the unit. In many cases, leaving the 76
424B5250th Page of 311TOC1stPreviousNextBottomJust 250th
manufactured home on location is preferable, in the event that the home is already set up, because the expenses of retaking and redelivery will be saved. However, in those cases where the home is left on location, expenses for site rentals will usually be incurred. o Once repossession has been achieved, preparation for the subsequent disposition of the manufactured home can commence. The disposition may be by public or private sale provided the method, manner, time, place and terms of the sale are commercially reasonable. o Sale proceeds are to be applied first to repossession expenses (expenses incurred in retaking, storage, preparing for sale to include refurbishing costs and selling) and then to satisfaction of the indebtedness. While some states impose prohibitions or limitations on deficiency judgments if the net proceeds from resale do not cover the full amount of the indebtedness, the remainder may be sought from the debtor in the form of a deficiency judgement in those states that do not prohibit or limit the judgments. The deficiency judgment is a personal judgment against the debtor for the shortfall. Occasionally, after resale of a manufactured home and payment of all expenses and indebtedness, there is a surplus of funds. In that case, the UCC requires the party suing for the deficiency judgment to remit the surplus to the debtor. Because the defaulting owner of a manufactured home generally has very little capital or income available following repossession, a deficiency judgment may not be sought in many cases or, if obtained, will be settled at a significant discount in light of the defaulting owner's strained financial condition. LOUISIANA LAW. Any contract secured by a manufactured home located in Louisiana will be governed by Louisiana law rather than Article 9 of the UCC. Louisiana laws provide similar mechanisms for perfection and enforcement of security interests in manufactured housing used as collateral for an installment sale contract or installment loan agreement. Under Louisiana law, a manufactured home that has been permanently affixed to real estate will nevertheless remain subject to the motor vehicle registration laws unless the obligor and any holder of a security interest in the property execute and file in the real estate records for the parish in which the property is located a document converting the unit into real property. A manufactured home that is converted into real property but is then removed from its site can be converted back to personal property governed by the motor vehicle registration laws if the obligor executes and files various documents in the appropriate real estate records and all mortgagees under real estate mortgages on the property and the land to which it was affixed file releases with the motor vehicle commission. So long as a manufactured home remains subject to the Louisiana motor vehicle laws, liens are recorded on the certificate of title by the motor vehicle commissioner and repossession can be accomplished by voluntary consent of the obligor, executory process (repossession proceedings which must be initiated through the courts but which involve minimal court supervision) or a civil suit for possession. In connection with a voluntary surrender, the obligor must be given a full release from liability for all amounts due under the contract. In executory process repossessions, a sheriff's sale (without court supervision) is permitted, unless the obligor brings suit to enjoin the sale, and the lender is prohibited from seeking a deficiency judgment against the obligor unless the lender obtained an appraisal of the manufactured home prior to the sale and the property was sold for at least two-thirds of its appraised value. 77
424B5251st Page of 311TOC1stPreviousNextBottomJust 251st
RIGHTS OF REDEMPTION SINGLE FAMILY, MULTIFAMILY AND COMMERCIAL PROPERTIES. The purposes of a foreclosure action in respect of a mortgaged property is to enable the lender to realize upon its security and to bar the borrower, and all persons who have interests in the property that are subordinate to that of the foreclosing lender, from exercise of their "equity of redemption". The doctrine of equity of redemption provides that, until the property encumbered by a mortgage has been sold in accordance with a properly conducted foreclosure and foreclosure sale, those having interests that are subordinate to that of the foreclosing lender have an equity of redemption and may redeem the property by paying the entire debt with interest. Those having an equity of redemption must generally be made parties and joined in the foreclosure proceeding in order for their equity of redemption to be terminated. The equity of redemption is a common-law (non-statutory) right which should be distinguished from post-sale statutory rights of redemption. In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the borrower and foreclosed junior lienors are given a statutory period in which to redeem the property. In some states, statutory redemption may occur only upon payment of the foreclosure sale price. In other states, redemption may be permitted if the former borrower pays only a portion of the sums due. The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property because the exercise of a right of redemption would defeat the title of any purchase through a foreclosure. Consequently, the practical effect of the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has expired. In some states, a post-sale statutory right of redemption may exist following a judicial foreclosure, but not following a trustee's sale under a deed of trust. MANUFACTURED HOMES. While state laws do not usually require notice to be given to debtors prior to repossession, many states do require delivery of a notice of default and of the debtor's right to cure defaults before repossession. The law in most states also requires that the debtor be given notice of sale prior to the resale of the home so that the owner may redeem at or before resale. In addition, the sale must comply with the requirements of the UCC. ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS SINGLE FAMILY, MULTIFAMILY AND COMMERCIAL LOANS. Some states have imposed statutory prohibitions which limit the remedies of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some states (including California), statutes limit the right of the beneficiary or mortgagee to obtain a deficiency judgment against the borrower following non-judicial foreclosure by power of sale. A deficiency judgment is a personal judgment against the former borrower equal in most cases to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender. In the case of a mortgage loan secured by a property owned by a trust where the mortgage note is executed on behalf of the trust, a deficiency judgment against the trust following foreclosure or sale under a deed of trust, even if obtainable under applicable law, may be of little value to the mortgagee or beneficiary if there are no trust assets against which the deficiency judgment may be executed. Some state statutes require the beneficiary or mortgagee to exhaust the security afforded under a deed of trust or mortgage by foreclosure in an attempt to satisfy the full debt before bringing a personal action against the borrower. In other states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting the security; however in some of these states, the lender, following judgment on the personal action, may be deemed to have elected a remedy and may be precluded from exercising remedies with respect to the security. Consequently, the practical effect of the election requirement, in those states permitting the election, is that lenders will usually proceed against the security first rather than bringing a personal action against the 78
424B5252nd Page of 311TOC1stPreviousNextBottomJust 252nd
borrower. Finally, in some states, statutory provisions limit any deficiency judgment against the former borrower following a foreclosure to the excess of the outstanding debt over the fair value of the property at the time of the public sale. The purpose of these statutes is generally to prevent a beneficiary or mortgagee from obtaining a large deficiency judgment against the former borrower as a result of low or no bids at the judicial sale. Generally, Article 9 of the UCC governs foreclosure on Cooperative Shares and the related proprietary lease or occupancy agreement. Some courts have interpreted Article 9 to prohibit or limit a deficiency award in some circumstances, including circumstances where the disposition of the collateral (which, in the case of a cooperative mortgage loan, would be the shares of the Cooperative and the related proprietary lease or occupancy agreement) was not conducted in a commercially reasonable manner. In addition to laws limiting or prohibiting deficiency judgments, numerous other federal and state statutory provisions, including the federal bankruptcy laws and state laws affording relief to debtors, may interfere with or affect the ability of the secured mortgage lender to realize upon collateral or enforce a deficiency judgment. For example, under the federal Bankruptcy Code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) to collect a debt are automatically stayed upon the filing of the bankruptcy petition and, often, no interest or principal payments are made during the course of the bankruptcy case. The delay and the consequences thereof caused by the automatic stay can be significant. Also, under the Bankruptcy Code, the filing of a petition in a bankruptcy by or on behalf of a junior lienor may stay the senior lender from taking action to foreclose out the junior lien. Moreover, with respect to federal bankruptcy law, a court with federal bankruptcy jurisdiction may permit a debtor through his or her Chapter 11 or Chapter 13 rehabilitative plan to cure a monetary default in respect of a mortgage loan on a debtor's residence by paying arrearage within a reasonable time period and reinstating the original mortgage loan payment schedule even though the lender accelerated the mortgage loan and final judgment of foreclosure had been entered in state court (provided no sale of the residence had yet occurred) prior to the filing of the debtor's petition. Some courts with federal bankruptcy jurisdiction have approved plans, based on the particular facts of the reorganization case, that effected the curing of a mortgage loan default by paying arrearage over a number of years. Courts with federal bankruptcy jurisdiction have also indicated that the terms of a mortgage loan secured by property of the debtor may be modified. These courts have allowed modifications that include reducing the amount of each monthly payment, changing the rate of interest, altering the repayment schedule, forgiving all or a portion of the debt and reducing the lender's security interest to the value of the residence, thus leaving the lender a general unsecured creditor for the difference between the value of the residence and the outstanding balance of the loan. Generally, however, the terms of a mortgage loan secured only by a mortgage on real property that is the debtor's principal residence may not be modified pursuant to a plan confirmed pursuant to Chapter 13 except with respect to mortgage payment arrearages, which may be cured within a reasonable time period. In the case of income-producing multifamily properties, federal bankruptcy law may also have the effect of interfering with or affecting the ability of the secured lender to enforce the borrower's assignment of rents and leases related to the mortgaged property. Under Section 362 of the Bankruptcy Code, the lender will be stayed from enforcing the assignment, and the legal proceedings necessary to resolve the issue could be time-consuming, with resulting delays in the lender's receipt of the rents. Tax liens arising under the Code may have priority over the lien of a mortgage or deed of trust. In addition, substantive requirements are imposed upon mortgage lenders in connection with the origination and the servicing of mortgage loans by numerous federal and some state consumer protection laws. These laws 79
424B5253rd Page of 311TOC1stPreviousNextBottomJust 253rd
include the federal Truth-in-Lending Act ("TILA"), Real Estate Settlement Procedures Act ("RESPA"), Equal Credit Opportunity Act ("ECOA"), Fair Credit Billing Act ("FCBA"), Fair Credit Reporting Act ("FCRA") and related statutes. These federal laws impose specific statutory liabilities upon lenders who originate mortgage loans and who fail to comply with the provisions of the law. In some cases, this liability may affect assignees of the mortgage loans. CONTRACTS. In addition to the laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including federal bankruptcy laws and related state laws, may interfere with or affect the ability of a lender to realize upon collateral and/or enforce a deficiency judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a lender from repossessing a home, and, as part of the rehabilitation plan, reduce the amount of the secured indebtedness to the market value of the home at the time of bankruptcy (as determined by the court), leaving the party providing financing as a general unsecured creditor for the remainder of the indebtedness. A bankruptcy court may also reduce the monthly payments due under a contract or change the rate of interest and time of repayment of the indebtedness. ENVIRONMENTAL LEGISLATION Under CERCLA, and under state law in some states, a secured party which takes a deed-in-lieu of foreclosure, purchases a mortgaged property at a foreclosure sale, or operates a mortgaged property may become liable for the costs of cleaning up hazardous substances regardless of whether they have contaminated the property. CERCLA imposes strict, as well as joint and several, liability on several classes of potentially responsible parties, including current owners and operators of the property who did not cause or contribute to the contamination. Furthermore, liability under CERCLA is not limited to the original or unamortized principal balance of a loan or to the value of the property securing a loan. Lenders may be held liable under CERCLA as owners or operators unless they qualify for the secured creditor exemption to CERCLA. This exemption exempts from the definition of owners and operators those who, without participating in the management of a facility, hold indicia of ownership primarily to protect a security interest in the facility. The Conservation Act amended, among other things, the provisions of CERCLA with respect to lender liability and the secured creditor exemption. The Conservation Act offers substantial protection to lenders by defining the activities in which a lender can engage and still have the benefit of the secured creditor exemption. In order for lender to be deemed to have participated in the management of a mortgaged property, the lender must actually participate in the operational affairs of the property of the borrower. The Conservation Act provides that "merely having the capacity to influence, or unexercised right to control" operations does not constitute participation in management. A lender will lose the protection of the secured creditor exemption only if it exercises decision-making control over the borrower's environmental compliance and hazardous substance handling and disposal practices, or assumes day-to-day management of all operational functions of the mortgaged property. The Conservation Act also provides that a lender will continue to have the benefit of the secured creditor exemption even if it forecloses on a mortgaged property, purchases it at a foreclosure sale or accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell the mortgaged property at the earliest practicable commercially reasonable time on commercially reasonable terms. Other federal and state laws may impose liability on a secured party which takes a deed-in-lieu of foreclosure, purchases a mortgaged property at a foreclosure sale, or operates a mortgaged property on which contaminants other than CERCLA hazardous substances are present, including petroleum, agricultural chemicals, hazardous wastes, asbestos, radon, and lead-based paint. The cleanup costs may be substantial. 80
424B5254th Page of 311TOC1stPreviousNextBottomJust 254th
It is possible that the cleanup costs could become a liability of a trust fund and reduce the amounts otherwise distributable to the holders of the related series of certificates. Moreover, federal statutes and states by statute may impose a lien for any cleanup costs incurred by the state on the property that is the subject of the cleanup costs. All subsequent liens on the property generally are subordinated to the lien and, in some states, even prior recorded liens are subordinated to such lien. In the latter states, the security interest of the trustee in a related parcel of real property that is subject to the lien could be adversely affected. Traditionally, many residential mortgage lenders have not taken steps to evaluate whether contaminants are present with respect to any mortgaged property prior to the origination of the mortgage loan or prior to foreclosure or accepting a deed-in-lieu of foreclosure. Accordingly, the company has not made and will not make the evaluations prior to the origination of the Secured Contracts. Neither the company nor any replacement Servicer will be required by any Agreement to undertake these evaluations prior to foreclosure or accepting a deed-in-lieu of foreclosure. The company does not make any representations or warranties or assume any liability with respect to the absence or effect of contaminants on any related real property or any casualty resulting from the presence or effect of contaminants. However, the company will not be obligated to foreclose on related real property or accept a deed-in-lieu of foreclosure if it knows or reasonably believes that there are material contaminated conditions on the property. A failure so to foreclose may reduce the amounts otherwise available to certificateholders of the related series. CONSUMER PROTECTION LAWS WITH RESPECT TO CONTRACTS In addition, substantive requirements are imposed upon mortgage lenders in connection with the origination and the servicing of mortgage loans by numerous federal and some state consumer protection laws. These laws include TILA, as implemented by Regulation Z, RESPA, as implemented by Regulation X, ECOA, as implemented by Regulation B, FCBA, FCRA and related statutes. These federal laws impose specific statutory liabilities upon lenders who originate mortgage loans and who fail to comply with the provisions of the law. In some cases, this liability may affect assignees of the mortgage loans. In particular, an originator's failure to comply with certain requirements of the federal TILA, as implemented by Regulation Z, could subject both originators and assignees of such obligations to monetary penalties and could result in obligors' rescinding the mortgage loans either against the originators or assignees. Some of the mortgage loans, known as High Cost Loans, may be subject to the Homeownership Act, which amended TILA to provide new requirements applicable to loans that exceed certain interest rates and/or points and fees thresholds. Purchasers or assignees of any High Cost Loan, including any trust, could be liable under federal law for all claims and subject to all defenses that the borrower could assert against the originator of the High Cost Loan. Remedies available to the borrower include monetary penalties, as well as rescission rights if the appropriate disclosures were not given as required. The maximum damages that may be recovered under these provisions from an assignee, including the trust, is the remaining amount of indebtedness plus the total amount paid by the borrower in connection with the mortgage loan. In addition to the Homeownership Act, a number of legislative proposals have been introduced at both the federal and state level that are designed to discourage predatory lending practices. Some states have enacted, or may enact, laws or regulations that prohibit inclusion of some provisions in mortgage loans that have interest rates or origination costs in excess of prescribed levels, and require that borrowers be given certain disclosures prior to the consummation of the mortgage loans. In some cases, state law may impose requirements and restrictions greater than those in the Homeownership Act. An originators' failure to comply with these laws could subject the trust (and other assignees of the mortgage loans) to monetary penalties and could result in the borrowers rescinding the mortgage loans against either the trust or subsequent holders of the mortgage loans. 81
424B5255th Page of 311TOC1stPreviousNextBottomJust 255th
Lawsuits have been brought in various states making claims against assignees of High Cost Loans for violations of state law allegedly committed by the originator. Named defendants in these cases include numerous participants within the secondary mortgage market, including some securitization trusts. Manufactured housing contracts often contain provisions obligating the obligor to pay late charges if payments are not timely made. Federal and state law may specifically limit the amount of late charges that may be collected. Under the related pooling and servicing agreement or servicing agreement, late charges will be retained by the master servicer as additional servicing compensation, and any inability to collect these amounts will not affect payments to Securityholders. Courts have imposed general equitable principles upon repossession and litigation involving deficiency balances. These equitable principles are generally designed to relieve a consumer from the legal consequences of a default. In several cases, consumers have asserted that the remedies provided to secured parties under the UCC and related laws violate the due process protections provided under the 14th Amendment to the Constitution of the United States. For the most part, courts have upheld the notice provisions of the UCC and related laws as reasonable or have found that the repossession and resale by the creditor does not involve sufficient state action to afford constitutional protection to consumers. The FTC Rule has the effect of subjecting a seller (and some related creditors and their assignees) in a consumer credit transaction and any assignee of the creditor to all claims and defenses which the debtor in the transaction could assert against the seller of the goods. Liability under the FTC Rule is limited to the amounts paid by a debtor on the contract, and the holder of the contract may also be unable to collect amounts still due under the contract. Most of the Contracts in a trust fund will be subject to the requirements of the FTC Rule. Accordingly, the trust fund, as holder of the Contracts, will be subject to any claims or defenses that the purchaser of the related manufactured home may assert against the seller of the manufactured home, subject to a maximum liability equal to the amounts paid by the obligor on the Contract. If an obligor is successful in asserting the claim or defense, and if the Seller had or should have had knowledge of the claim or defense, the master servicer will have the right to require the Seller to repurchase the Contract because of breach of its Seller's representation and warranty that no claims or defenses exist that would affect the obligor's obligation to make the required payments under the Contract. The Seller would then have the right to require the originating dealer to repurchase the Contract from it and might also have the right to recover from the dealer any losses suffered by the Seller with respect to which the dealer would have been primarily liable to the obligor. ENFORCEABILITY OF SOME PROVISIONS TRANSFER OF MORTGAGED PROPERTIES. Unless the related prospectus supplement indicates otherwise, the mortgage loans generally contain due-on-sale clauses. These clauses permit the lender to accelerate the maturity of the loan if the borrower sells, transfers or conveys the property without the prior consent of the lender. The enforceability of these clauses has been the subject of legislation or litigation in many states, and in some cases the enforceability of these clauses was limited or denied. However, Garn-St Germain Act preempts state constitutional, statutory and case law that prohibits the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to limited exceptions. The Garn-St Germain Act does "encourage" lenders to permit assumption of loans at the original rate of interest or at some other rate less than the average of the original rate and the market rate. 82
424B5256th Page of 311TOC1stPreviousNextBottomJust 256th
The Gain-St Germain Act also sets forth nine specific instances in which a mortgage lender covered by the Gain-St Germain Act may not exercise a due-on-sale clause, notwithstanding the fact that a transfer of the property may have occurred. These include intra-family transfers, some transfers by operation of law, leases of fewer than three years and the creation of a junior encumbrance. Regulations promulgated under the Gain-St Germain Act also prohibit the imposition of a prepayment penalty upon the acceleration of a loan pursuant to a due-on-sale clause. The inability to enforce a due-on-sale clause may result in a mortgage loan bearing an interest rate below the current market rate being assumed by the buyer rather than being paid off, which may have an impact upon the average life of the mortgage loans and the number of mortgage loans which may be outstanding until maturity. TRANSFER OF MANUFACTURED HOMES. Generally, manufactured housing contracts contain provisions prohibiting the sale or transfer of the related manufactured homes without the consent of the obligee on the contract and permitting the acceleration of the maturity of the contracts by the obligee on the contract upon the sale or transfer that is not consented to. The master servicer will, to the extent it has knowledge of the conveyance or proposed conveyance, exercise or cause to be exercised its rights to accelerate the maturity of the related Contracts through enforcement of due-on-sale clauses, subject to applicable state law. In some cases, the transfer may be made by a delinquent obligor in order to avoid a repossession proceeding with respect to a Manufactured Home. In the case of a transfer of a Manufactured Home as to which the master servicer desires to accelerate the maturity of the related Contract, the master servicer's ability to do so will depend on the enforceability under state law of the due-on-sale clause. The Gain-St Germain Act preempts, subject to certain exceptions and conditions, state laws prohibiting enforcement of due-on-sale clauses applicable to the Manufactured Homes. Consequently, in some cases teamster servicer may be prohibited from enforcing a due-on-sale clause in respect of a Manufactured Home. LATE PAYMENT CHARGES AND PREPAYMENT RESTRICTIONS. Notes and mortgages, as well as manufactured housing conditional sales contracts and installment loan agreements, may contain provisions that obligate the borrower to pay a late charge or additional interest if payments are not timely made, and in some circumstances, may prohibit prepayments for a specified period and/or condition prepayments upon the borrower's payment of prepayment fees or yield maintenance penalties. In some states, there are or may be specific limitations upon the late charges which a lender may collect from a borrower for delinquent payments or the amounts that a lender may collect from a borrower as an additional charge if the loan is prepaid even when the loans expressly provide for the collection of those charges. Although the Parity Act permits the collection of prepayment charges and late fees in connection with some types of eligible loans preempting any contrary state law prohibitions, some states may not recognize the preemptive authority of the Parity Act or have formally opted out of the Parity Act. As a result, it is possible that prepayment charges and late fees may not be collected even on loans that provide for the payment of those charges unless otherwise specified in the accompanying prospectus supplement. The master servicer or another entity identified in the accompanying prospectus supplement will be entitled to all prepayment charges and late payment charges received on the loans and those amounts will not be available for payment on the bonds. The Office of Thrift Supervision (OTS), the agency that administers the Parity Act for unregulated housing creditors, withdrew its favorable Parity Act regulations and Chief Counsel Opinions that previously authorized lenders to charge prepayment charges and late fees in certain circumstances notwithstanding contrary state law, effective with respect to loans originated on or after July 1, 2003. However, the OTS's ruling does not retroactively affect loans originated before July 1, 2003. 83
424B5257th Page of 311TOC1stPreviousNextBottomJust 257th
SUBORDINATE FINANCING When the mortgagor encumbers mortgaged property with one or more junior liens, the senior lender is subjected to additional risk. First, the mortgagor may have difficulty servicing and repaying multiple loans. In addition, if the junior loan permits recourse to the mortgagor (as junior loans often do) and the senior loan does not, a mortgagor may be more likely to repay sums due on the junior loan than those on the senior loan. Second, acts of the senior lender that prejudice the junior lender or impair the junior lender's security may create a superior equity in favor of the junior lender. For example, if the mortgagor and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent an existing junior lender is harmed or the mortgagor is additionally burdened. Third, if the mortgagor defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with or delay the taking of action by the senior lender. Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or similar proceedings by the senior lender. INSTALLMENT CONTRACTS The trust fund assets may also consist of installment sales contracts. Under an installment contract the seller (referred to in this section as the "lender") retains legal title to the property and enters into an agreement with the purchaser (referred to in this section as the "borrower") for the payment of the purchase price, plus interest, over the term of the contract. Only after full performance by the borrower of the installment contract is the lender obligated to convey title to the property to the purchaser. As with mortgage or deed of trust financing, during the effective period of the installment contract, the borrower is generally responsible for the maintaining the property in good condition and for paying real estate taxes, assessments and hazard insurance premiums associated with the property. The method of enforcing the rights of the lender under an installment contract varies on a state-by- state basis depending upon the extent to which state courts are willing, or able pursuant to state statute, to enforce the contract strictly according to its terms. The terms of installment contracts generally provide that upon a default by the borrower, the borrower loses his or her right to occupy the property, the entire indebtedness is accelerated and the buyer's equitable interest in the property is forfeited. The lender in this situation is not required to foreclose in order to obtain title to the property, although in some cases a quiet title action is in order if the borrower has filed the installment contract in local land records and an ejectment action maybe necessary to recover possession. In a few states, particularly in cases of borrower default during the early years of an installment contract, the courts will permit ejectment of the buyer and a forfeiture of his or her interest in the property. However, most state legislatures have enacted provisions by analogy to mortgage law protecting borrowers under installment contracts from the harsh consequences of forfeiture. Under these statutes, a judicial or nonjudicial foreclosure may be required, the lender may be required to give notice of default and the borrower may be granted some grace period during which the installment contract may be reinstated upon full payment of the defaulted amount and the borrower may have a post-foreclosure statutory redemption right. In other states, courts in equity may permit a borrower with significant investment in the property under an installment contract for the sale of real estate to share in the proceeds of sale of the property after the indebtedness is repaid or may otherwise refuse to enforce the forfeiture clause. Nevertheless, the lender's procedures for obtaining possession and clear title under an installment contract in a given state are simpler and less time consuming and costly than are the procedures for foreclosing and obtaining clear title to a property subject to one or more liens. 84
424B5258th Page of 311TOC1stPreviousNextBottomJust 258th
APPLICABILITY OF USURY LAWS Title V provides that state usury limitations shall not apply to some types of residential first mortgage loans originated by some lenders after March 31,1980. A similar federal statute was in effect with respect to mortgage loans made during the first three months of 1980. The Office of Thrift Supervision is authorized to issue rules and regulations and to publish interpretations governing implementation of Title V. The statute authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or constitutional provision which expressly rejects application of the federal law. In addition, even where Title V is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V. Some states have taken action to reimpose interest rate limits or to limit discount points or other charges. Title V also provides that, subject to the following conditions, state usury limitations shall not apply to any loan that is secured by a first lien on some kinds of manufactured housing. Contracts would be covered if they satisfy conditions including, among other things, terms governing any prepayments, late charges and deferral fees and requiring a 30-day notice period prior to instituting any action leading to repossession of or foreclosure with respect to the related unit. Title V authorized any state to reimpose limitations on interest rates and finance charges by adopting before April 1,1983 a law or constitutional provision which expressly rejects application of the federal law. Fifteen states adopted this type of law prior to the April 1,1983 deadline. In addition, even where Title V was not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on loans covered by Title V. In any state in which application of Title V was expressly rejected or a provision limiting discount points or other charges has been adopted, no Contract which imposes finance charges or provides for discount points or charges in excess of permitted levels has been included in the trust fund. Usury limits apply to junior mortgage loans in many states. Any applicable usury limits in effect at origination will be reflected in the maximum mortgage rates for ARM Loans, as set forth in the related prospectus supplement. As indicated above under "The Mortgage Pools--Representations by Sellers," each Seller of a mortgage loan will have represented that the mortgage loan was originated in compliance with then applicable state laws, including usury laws, in all material respects. However, the mortgage rates on the mortgage loans will be subject to applicable usury laws as in effect from time to time. ALTERNATIVE MORTGAGE INSTRUMENTS Alternative mortgage instruments, including adjustable rate mortgage loans and early ownership mortgage loans, originated by non-federally chartered lenders historically have been subjected to a variety of restrictions. The restrictions differed from state to state, resulting in difficulties in determining whether a particular alternative mortgage instrument originated by a state-chartered lender was in compliance with applicable law. These difficulties were alleviated substantially as a result of the enactment of Title VIII. Title VIII provides that, notwithstanding any state law to the contrary, (1) state-chartered banks may originate alternative mortgage instruments in accordance with regulations promulgated by the Comptroller of the Currency with respect to origination of alternative mortgage instruments by national banks,(2) state-chartered credit unions may originate alternative mortgage instruments in accordance with regulations promulgated by the National Credit Union Administration with respect to origination of alternative mortgage instruments by federal credit unions, and (3) all other non-federally chartered housing creditors, including state-chartered savings and loan associations, state-chartered savings banks and mutual savings banks and mortgage banking companies, may originate alternative mortgage instruments in accordance with the regulations promulgated 85
424B5259th Page of 311TOC1stPreviousNextBottomJust 259th
by the Federal Home Loan Bank Board, predecessor to the Office of Thrift Supervision, with respect to origination of alternative mortgage instruments by federal savings and loan associations. Title VIII provides that any state may reject applicability of the provisions of Title VIII by adopting, prior to October 15, 1985, a law or constitutional provision expressly rejecting the applicability of the provisions. Some states have taken this action. FORMALDEHYDE LITIGATION WITH RESPECT TO CONTRACTS A number of lawsuits are pending in the United States alleging personal injury from exposure to the chemical formaldehyde, which is present in many building materials, including components of manufactured housing such as plywood flooring and wall paneling. Some of these lawsuits are pending against manufacturers of manufactured housing, suppliers of component parts, and related persons in the distribution process. The company is aware of a limited number of cases in which plaintiffs have won judgments in these lawsuits. Under the FTC Rule, which is described above under "Consumer Protection Laws", the holder of any Contract secured by a Manufactured Home with respect to which a formaldehyde claim has been successfully asserted may be liable to the obligor for the amount paid by the obligor on the related Contract and may be unable to collect amounts still due under the Contract. In the event an obligor is successful in asserting this claim, the related securityholders could suffer a loss if (1) the related Seller fails or cannot be required to repurchase the affected Contract for a breach of representation and warranty and (2) the master servicer or the trustee were unsuccessful in asserting any claim of contribution or subornation on behalf of the securityholders against the manufacturer or other persons who were directly liable to the plaintiff for the damages. Typical products liability insurance policies held by manufacturers and component suppliers of manufactured homes may not cover liabilities arising from formaldehyde in manufactured housing, with the result that recoveries from these manufacturers, suppliers or other persons may be limited to their corporate assets without the benefit of insurance. SERVICEMEMBERS' CIVIL RELIEF ACT OF 1940 Under the terms of the Relief Act, a mortgagor who enters military service after the origination of the mortgagor's mortgage loan (including a mortgagor who was in reserve status and is called to active duty after origination of the mortgage loan), may not be charged interest (including fees and charges) above an annual rate of 6% during the period of the mortgagor's active duty status, unless a court orders otherwise upon application of the lender. A court may grant a lender relief from the requirements of the Relief Act if, in the court's opinion, the servicemember's ability to pay interest upon the loan at a rate in excess of 6% percent is not materially affected by reason of the servicemembers' military service. The Relief Act applies to mortgagors who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard, officers of the U.S. Public Health Service, officers of the National Oceanic and Atmosphere Administration and draftees under an induction order assigned to duty with the military. Because the Relief Act applies to mortgagors who enter military service, including reservists who are called to active duty, after origination of the related mortgage loan, no information can be provided as to the number of loans that may be affected by the Relief Act. Application of the Relief Act would adversely affect, for an indeterminate period of time, the ability of the master servicer to collect full amounts of interest on the mortgage loans subject to the Relief Act. Any shortfall in interest collections resulting from the application of the Relief Act or similar legislation or regulations, which would not be recoverable from the related mortgage loans, would result in a reduction of the amounts distributable to the holders of the related securities, and would not be covered by advances by the master servicer or other entity or by any form of credit enhancement provided in connection with the related series of securities, unless described in the prospectus supplement. In addition, 86
424B5260th Page of 311TOC1stPreviousNextBottomJust 260th
the Relief Act imposes limitations that would impair the ability of the master servicer to foreclose on an affected single family loan or enforce rights under a Contract during the mortgagor's period of active duty status, and, under some circumstances, during an additional three month period thereafter. Thus, in the event that the Relief Actor similar legislation or regulations applies to any mortgage loan which goes into default, there may be delays in payment and losses on the related securities in connection therewith. Any other interest shortfalls, deferrals or forgiveness of payments on the mortgage loans resulting from similar legislation or regulations may result in delays in payments or losses to securityholders of the related series. FORFEITURES IN DRUG AND RICO PROCEEDINGS Federal law provides that property owned by persons convicted of drug-related crimes or of criminal violations of RICO can be seized by the government if the property was used in, or purchased with the proceeds of, these crimes. Under procedures contained in the Crime Control Act, the government may seize the property even before conviction. The government must publish notice of the forfeiture proceeding and may give notice to all parties "known to have an alleged interest in the property", including the holders of mortgage loans. A lender may avoid forfeiture of its interest in the property if it establishes that: (1) its mortgage was executed and recorded before commission of the crime upon which the forfeiture is based, or (2) the lender was, at the time of execution of the mortgage, "reasonably without cause to believe" that the property was used in, or purchased with the proceeds of, illegal drug or RICO activities. Certain states have enacted or may enact their own versions of the Relief Act which may provide for more enhanced consumer protection provisions than those set forth in the Relief Act. The Relief Act may not preempt those state laws. JUNIOR MORTGAGES Some of the mortgage loans may be secured by mortgages or deeds of trust which are junior to senior mortgages or deeds of trust which are not part of the trust fund. The rights of the securityholders, as mortgagee under a junior mortgage, are subordinate to those of the mortgagee under the senior mortgage, including the prior rights of the senior mortgagee to receive hazard insurance and condemnation proceeds and to cause the property securing the mortgage loan to be sold upon default of the mortgagor, which may extinguish the junior mortgagee's lien unless the junior mortgagee asserts its subordinate interest in the property in foreclosure litigation and, in some cases, either reinitiates or satisfies the defaulted senior loan or loans. A junior mortgagee may satisfy a defaulted senior loan in full or, in some states, may cure the default and bring the senior loan current thereby reinstating the senior loan, in either event usually adding the amounts expended to the balance due on the junior loan. In most states, absent a provision in the mortgage or deed of trust, no notice of default is required to be given to a junior mortgagee. Where applicable law or the terms of the senior mortgage or deed of trust do not require notice of default to the junior mortgagee, the lack of this notice may prevent the junior mortgagee from exercising any right to reinstate the loan which applicable law may provide. The standard form of the mortgage or deed of trust used by most institutional lenders confers on the mortgagee the right both to receive all proceeds collected under any hazard insurance policy and all awards made in connection with condemnation proceedings, and to apply the proceeds and awards to any indebtedness secured by the mortgage or deed of trust, in the order the mortgagee may determine. Thus, in the event improvements on the property are damaged or destroyed by fire or other casualty, or in the event the property is taken by condemnation, the mortgagee or beneficiary under underlying senior mortgages will 87
424B5261st Page of 311TOC1stPreviousNextBottomJust 261st
have the prior right to collect any insurance proceeds payable under a hazard insurance policy and any award of damages in connection with the condemnation and to apply the same to the indebtedness secured by the senior mortgages. Proceeds in excess of the amount of senior mortgage indebtedness, in most cases, may be applied to the indebtedness of junior mortgages in the order of their priority. Another provision sometimes found in the form of the mortgage or deed of trust used by institutional lenders obligates the mortgagor to pay before delinquency all taxes and assessments on the property and, when due, all encumbrances, charges and liens on the property which are prior to the mortgage or deed of trust, to provide and maintain fire insurance on the property, to maintain and repair the property and not to commit or permit any waste thereof, and to appear in and defend any action or proceeding purporting to affect the property or the rights of the mortgagee under the mortgage. Upon a failure of the mortgagor to perform any of these obligations, the mortgagee or beneficiary is given the right under some mortgages or deeds of trust to perform the obligation itself, at its election, with the mortgagor agreeing to reimburse the mortgagee for any sums expended by the mortgagee on behalf of the mortgagor. All sums so expended by a senior mortgagee become part of the indebtedness secured by the senior mortgage. NEGATIVE AMORTIZATION LOANS A notable case decided by the United States Court of Appeals, First Circuit, held that state restrictions on the compounding of interest are not preempted by the provisions of the DIDMC and as a result, a mortgage loan that provided for negative amortization violated New Hampshire's requirement that first mortgage loans provide for computation of interest on a simple interest basis. The holding was limited to the effect of DIDMC on state laws regarding the compounding of interest and the court did not address the applicability of the Parity Act, which authorizes lender to make residential mortgage loans that provide for negative amortization. The First Circuit's decision is binding authority only on Federal District Courts in Maine, New Hampshire, Massachusetts, Rhode Island and Puerto Rico. FEDERAL INCOME TAX CONSEQUENCES GENERAL The following discussion is the opinion of Thacher Proffitt & Wood LLP, counsel to the company, with respect to the anticipated material federal income tax consequences of the purchase, ownership and disposition of offered securities offered under this prospectus and the prospectus supplement insofar as it relates to matters of law or legal conclusions with respect thereto. This discussion is directed solely to securityholders that hold the securities as capital assets within the meaning of Section 1221 of the Code and does not purport to discuss all federal income tax consequences that may be applicable to the individual circumstances of particular categories of investors, some of which (such as banks, insurance companies and foreign investors) may be subject special treatment under the Code. Further, the authorities on which this discussion, and the opinion referred to below, are based are subject to change or differing interpretations, which could apply retroactively. Prospective investors should note that no rulings have been or will be sought from the IRS with respect to any of the federal income tax consequences discussed below, and no assurance can be given the IRS will not take contrary positions. Taxpayers and preparers of tax returns (including those filed by any REMIC or other issuer) should be aware that under applicable Treasury regulations a provider of advice on specific issues of law is not considered an income tax return preparer unless the advice (1) is given with respect to events that have occurred at the time the advice is rendered and is not given with respect to the consequences of contemplated actions, and (2) is directly relevant to the determination of an entry on a tax return. Accordingly, taxpayers should consult their own tax advisors and tax return preparers regarding the preparation of any item on a tax return, even where the anticipated tax treatment has been 88
424B5262nd Page of 311TOC1stPreviousNextBottomJust 262nd
discussed in this prospectus. In addition to the federal income tax consequences described in this prospectus, potential investors should consider the state and local tax consequences, if any, of the purchase, ownership and disposition of the securities. See "State and Other Tax Consequences." The following discussion addresses securities of three general types: o REMIC Certificates representing interests in a trust fund, or a portion thereof, that the REMIC Administrator will elect to have treated as a REMIC under the REMIC Provisions of the Code, o notes representing indebtedness of a trust fund as to which no REMIC election will be made, and o Grantor Trust Certificates representing interests in a Grantor Trust Fund as to which no REMIC election will be made. The prospectus supplement for each series of certificates will indicate whether a REMIC election (or elections) will be made for the related trust fund and, if this election is to be made, will identify all "regular interests" and "residual interests" in the REMIC. For purposes of this tax discussion, references to a "securityholder," "certificateholder" or a "holder" are to the beneficial owner of a security or certificate, as the case may be. The following discussion is based in part upon the OID Regulations and in part upon REMIC Regulations. The OID Regulations do not adequately address issues relevant to securities such as the offered securities. In some instances, the OID Regulations provide that they are not applicable to securities such as the offered securities. REMICS CLASSIFICATION OF REMICS. On or prior to the date of the related prospectus supplement with respect to the proposed issuance of each series of REMIC Certificates, Thacher Proffitt & Wood LLP, counsel to the company, will deliver its opinion generally to the effect that, assuming compliance with all provisions of the related pooling and servicing agreement, for federal income tax purposes, the related trust fund (or each applicable portion thereof) will qualify as a REMIC and the REMIC Certificates offered with respect thereto will be considered to evidence ownership of REMIC Regular Certificates or REMIC Residual Certificates in that REMIC within the meaning of the REMIC Provisions. If an entity electing to be treated as a REMIC fails to comply with one or more of the ongoing requirements of the Code for status as a REMIC during any taxable year, the Code provides that the entity will not be treated as a REMIC for that year and thereafter. In that event, the entity may be taxable as a corporation under Treasury regulations, and the related REMIC Certificates may not be accorded the status or given the tax treatment described below. Although the Code authorizes the Treasury Department to issue regulations providing relief in the event of an inadvertent termination of REMIC status, no such regulations have been issued. Any such relief, moreover, may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the REMIC's income for the period in which the requirements for status as a REMIC are not satisfied. The pooling and servicing agreement with respect to each REMIC will include provisions designed to maintain the related trust fund's status as a REMIC under the REMIC Provisions. It is not anticipated that the status of any trust fund as a REMIC will be inadvertently terminated. 89
424B5263rd Page of 311TOC1stPreviousNextBottomJust 263rd
CHARACTERIZATION OF INVESTMENTS IN REMIC CERTIFICATES. In general, the REMIC Certificates will be "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code and assets described in Section 7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC underlying the certificates would be so treated. Moreover, if 95% or more of the assets of the REMIC qualify for any of the foregoing treatments at all times during a calendar year, the REMIC Certificates will qualify for the corresponding status in their entirety for that calendar year. Interest (including original issue discount) on the REMIC Regular Certificates and income allocated to the class of REMIC Residual Certificates will be interest described in Section 856(c)(3)(B) of the Code to the extent that the certificates are treated as "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code. In addition, the REMIC Regular Certificates will be "qualified mortgages" within the meaning of Section 860G(a)(3) of the Code if transferred to another REMIC on its startup day in exchange for regular or residual interests therein. The determination as to the percentage of the REMIC's assets that constitute assets described in the foregoing sections of the Code will be made with respect to each calendar quarter based on the average adjusted basis of each category of the assets held by the REMIC during the calendar quarter. The REMIC Administrator will report those determinations to certificateholders in the manner and at the times required by applicable Treasury regulations. The assets of the REMIC will include, in addition to mortgage loans, payments on mortgage loans held pending distribution on the REMIC Certificates and any property acquired by foreclosure held pending sale, and may include amounts in reserve accounts. It is unclear whether property acquired by foreclosure held pending sale and amounts in reserve accounts would be considered to be part of the mortgage loans, or whether the assets (to the extent not invested in assets described in the foregoing sections) otherwise would receive the same treatment as the mortgage loans for purposes of all of the Code sections mentioned in the immediately preceding paragraph. In addition, in some instances mortgage loans may not be treated entirely as assets described in the foregoing sections of the Code. If so, the related prospectus supplement will describe the mortgage loans that may not be so treated. The REMIC Regulations do provide, however, that cash received from payments on mortgage loans held pending distribution is considered part of the mortgage loans for purposes of Section 856(c)(4)(A) of the Code. Furthermore, foreclosure property will qualify as "real estate assets" under Section 856(c)(4)(A) of the Code. TIERED REMIC STRUCTURES. For some series of REMIC Certificates, two or more separate elections may be made to treat designated portions of the related trust fund as REMICs for federal income tax purposes. As to each such series of REMIC Certificates, in the opinion of counsel to the company, assuming with all provisions of the related pooling and servicing agreement, each of the REMICs in that trust fund will qualify as a REMIC and the REMIC Certificates issued by these REMICs will be considered to evidence ownership of REMIC Regular Certificates or REMIC Residual Certificates in the related REMIC within the meaning of the REMIC Provisions. Solely for purposes of determining whether the REMIC Certificates will be "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code, and "loans secured by an interest in real property" under Section 7701(a)(19)(C) of the Code, and whether the income on the certificates is interest described in Section 856(c)(3)(B) of the Code, all of the REMICs in that trust fund will be treated as one REMIC. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES. General. Except as otherwise stated in this discussion, REMIC Regular Certificates will be treated for federal income tax purposes as debt instruments issued by the REMIC and not as ownership interests in the REMIC or its assets. Moreover, holders of REMIC Regular Certificates that otherwise report income 90
424B5264th Page of 311TOC1stPreviousNextBottomJust 264th
under a cash method of accounting will be required to report income with respect to REMIC Regular Certificates under an accrual method. Original Issue Discount. A REMIC Regular Certificate may be issued with "original issue discount" within the meaning of Section 1273(a) of the Code. Any holder of a REMIC Regular Certificate issued with original issue discount generally will be required to include original issue discount in income as it accrues, in accordance with the "constant yield" method described below, in advance of the receipt of the cash attributable to that income. In addition, Section 1272(a)(6) of the Code provides special rules applicable to REMIC Regular Certificates and some other debt instruments issued with original issue discount. Regulations have not been issued under that section. The Code requires that a reasonable prepayment assumption be used with respect to mortgage loans held by a REMIC in computing the accrual of original issue discount on REMIC Regular Certificates issued by that REMIC, and that adjustments be made in the amount and rate of accrual of that discount to reflect differences between the actual prepayment rate and the prepayment assumption. The prepayment assumption is to be determined in a manner prescribed in Treasury regulations; as noted above, those regulations have not been issued. The Committee Report indicates that the regulations will provide that the prepayment assumption used with respect to a REMIC Regular Certificate must be the same as that used in pricing the initial offering of the REMIC Regular Certificate. The Prepayment Assumption used in reporting original issue discount for each series of REMIC Regular Certificates will be consistent with this standard and will be disclosed in the related prospectus supplement. However, none of the company, the master servicer or the trustee will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment Assumption or at any other rate. The original issue discount, if any, on a REMIC Regular Certificate will be the excess of its stated redemption price at maturity over its issue price. The issue price of a particular class of REMIC Regular Certificates will be the first cash price at which a substantial amount of REMIC Regular Certificates of that class is sold (excluding sales to bond houses, brokers and underwriters). If less than a substantial amount of a particular class of REMIC Regular Certificates is sold for cash on or prior to the Closing Date, the issue price for that class will be the fair market value of that class on the Closing Date. Under the OID Regulations, the stated redemption price of a REMIC Regular Certificate is equal to the total of all payments to be made on the certificate other than "qualified stated interest." "Qualified stated interest" is interest that is unconditionally payable at least annually (during the entire term of the instrument) at a single fixed rate, or at a "qualified floating rate," an "objective rate," a combination of a single fixed rate and one or more "qualified floating rates" or one "qualified inverse floating rate," or a combination of "qualified floating rates" that does not operate in a manner that accelerates or defers interest payments on the REMIC Regular Certificate. In the case of REMIC Regular Certificates bearing adjustable interest rates, the determination of the total amount of original issue discount and the timing of the inclusion thereof will vary according to the characteristics of the REMIC Regular Certificates. If the original issue discount rules apply to the certificates in a particular series, the related prospectus supplement will describe the manner in which these rules will be applied with respect to the certificates in that series that bear an adjustable interest rate in preparing information returns to the certificateholders and the IRS. The first interest payment on a REMIC Regular Certificate may be made more than one month after the date of issuance, which is a period longer than the subsequent monthly intervals between interest payments. Assuming the "accrual period" (as defined below) for original issue discount is each monthly period that ends on the day prior to each distribution date, in some cases, as a consequence of this "long first 91
424B5265th Page of 311TOC1stPreviousNextBottomJust 265th
accrual period," some or all interest payments may be required to be included in the stated redemption price of the REMIC Regular Certificate and accounted for as original issue discount. Because interest on REMIC Regular Certificates must in any event be accounted for under an accrual method, applying this analysis would result in only a slight difference in the timing of the inclusion in income of the yield on the REMIC Regular Certificates. In addition, if the accrued interest to be paid on the first distribution date is computed with respect to a period that begins prior to the Closing Date, a portion of the purchase price paid for a REMIC Regular Certificate will reflect the accrued interest. In such cases, information returns to the certificateholders and the IRS will be based on the position that the portion of the purchase price paid for the interest accrued with respect to periods prior to the Closing Date is treated as part of the overall cost of the REMIC Regular Certificate (and not as a separate asset the cost of which is recovered entirely out of interest received on the next distribution date) and that portion of the interest paid on the first distribution date in excess of interest accrued for a number of days corresponding to the number of days from the Closing Date to the first distribution date should be included in the stated redemption price of the REMIC Regular Certificate. However, the OID Regulations state that all or some portion of the accrued interest may be treated as a separate asset the cost of which is recovered entirely out of interest paid on the first distribution date. It is unclear how an election to do so would be made under the OID Regulations and whether such an election could be made unilaterally by a certificateholder. Notwithstanding the general definition of original issue discount, original issue discount on a REMIC Regular Certificate will be considered to be de minimis if it is less than 0.25% of the stated redemption price of the REMIC Regular Certificate multiplied by its weighted average life. For this purpose, the weighted average life of a REMIC Regular Certificate is computed as the sum of the amounts determined, as to each payment included in the stated redemption price of the REMIC Regular Certificate, by multiplying (1) the number of complete years (rounding down for partial years) from the issue date until that payment is expected to be made (presumably taking into account the Prepayment Assumption) by (2) a fraction, the numerator of which is the amount of the payment, and the denominator of which is the stated redemption price at maturity of the REMIC Regular Certificate. Under the OID Regulations, original issue discount of only a de minimis amount (other than de minimis original issue discount attributable to a so-called "teaser" interest rate or an initial interest holiday) will be included in income as each payment of stated principal is made, based on the product of the total amount of de minimis original issue discount attributable to that certificate and a fraction, the numerator of which is the amount of the principal payment and the denominator of which is the outstanding stated principal amount of the REMIC Regular Certificate. The OID Regulations also would permit a certificateholder to elect to accrue de minimis original issue discount into income currently based on a constant yield method. See "Taxation of Owners of REMIC Regular Certificates--Market Discount" for a description of this election under the OID Regulations. If original issue discount on a REMIC Regular Certificate is in excess of a de minimis amount, the holder of the certificate must include in ordinary gross income the sum of the "daily portions" of original issue discount for each day during its taxable year on which it held the REMIC Regular Certificate, including the purchase date but excluding the disposition date. In the case of an original holder of a REMIC Regular Certificate, the daily portions of original issue discount will be determined as follows. As to each "accrual period," that is, each period that ends on a date that corresponds to the day prior to each distribution date and begins on the first day following the immediately preceding accrual period (or in the case of the first such period, begins on the Closing Date), a calculation will be made of the portion of the original issue discount that accrued during the accrual period. The portion of original issue discount that accrues in any accrual period will equal the excess, if any, of (1) the sum of (a) the present value, as of the 92
424B5266th Page of 311TOC1stPreviousNextBottomJust 266th
end of the accrual period, of all of the distributions remaining to be made on the REMIC Regular Certificate, if any, in future periods and (b) the distributions made on the REMIC Regular Certificate during the accrual period of amounts included in the stated redemption price, over (2) the adjusted issue price of the REMIC Regular Certificate at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence will be calculated (1) assuming that distributions on the REMIC Regular Certificate will be received in future periods based on the mortgage loans being prepaid at a rate equal to the Prepayment Assumption, (2) using a discount rate equal to the original yield to maturity of the certificate and (3) taking into account events (including actual prepayments) that have occurred before the close of the accrual period. For these purposes, the original yield to maturity of the certificate will be calculated based on its issue price and assuming that distributions on the certificate will be made in all accrual periods based on the mortgage loans being prepaid at a rate equal to the Prepayment Assumption. The adjusted issue price of a REMIC Regular Certificate at the beginning of any accrual period will equal the issue price of the certificate, increased by the aggregate amount of original issue discount that accrued with respect to the certificate in prior accrual periods, and reduced by the amount of any distributions made on the certificate in prior accrual periods of amounts included in the stated redemption price. The original issue discount accruing during any accrual period, computed as described above, will be allocated ratably to each day during the accrual period to determine the daily portion of original issue discount for that day. A subsequent purchaser of a REMIC Regular Certificate that purchases a certificate that is treated as having been issued with original issue discount at a cost (excluding any portion of the cost attributable to accrued qualified stated interest) less than its remaining stated redemption price will also be required to include in gross income the daily portions of any original issue discount with respect to the certificate. However, each such daily portion will be reduced, if the cost of the certificate is in excess of its "adjusted issue price," in proportion to the ratio the excess bears to the aggregate original issue discount remaining to be accrued on the REMIC Regular Certificate. The adjusted issue price of a REMIC Regular Certificate on any given day equals the sum of (1) the adjusted issue price (or, in the case of the first accrual period, the issue price) of the certificate at the beginning of the accrual period which includes that day and (2) the daily portions of original issue discount for all days during the accrual period prior to that day. Market Discount. A certificateholder that purchases a REMIC Regular Certificate at a market discount, that is, in the case of a REMIC Regular Certificate issued without original issue discount, at a purchase price less than its remaining stated principal amount, or in the case of a REMIC Regular Certificate issued with original issue discount, at a purchase price less than its adjusted issue price will recognize gain upon receipt of each distribution representing stated redemption price. In particular, under Section 1276 of the Code such a certificateholder generally will be required to allocate the portion of each distribution representing stated redemption price first to accrued market discount not previously included in income, and to recognize ordinary income to that extent. A certificateholder may elect to include market discount in income currently as it accrues rather than including it on a deferred basis in accordance with the foregoing. If made, the election will apply to all market discount bonds acquired by the certificateholder on or after the first day of the first taxable year to which the election applies. In addition, the OID Regulations permit a certificateholder to elect to accrue all interest, discount (including de minimis market or original issue discount) in income as interest, and to amortize premium, based on a constant yield method. If such an election were made with respect to a REMIC Regular Certificate with market discount, the certificateholder would be deemed to have made an election to include currently market discount in income with respect to all other debt instruments having market discount that the certificateholder acquires during the taxable year of the election or thereafter, and possibly previously acquired instruments. Similarly, a certificateholder that made this election for a certificate that is acquired at a premium would be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that the certificateholder owns or acquires. See "Taxation of Owners of REMIC Regular Certificates--Premium" 93
424B5267th Page of 311TOC1stPreviousNextBottomJust 267th
below. Each of these elections to accrue interest, discount and premium with respect to a certificate on a constant yield method or as interest would be irrevocable, except with the approval of the IRS. However, market discount with respect to a REMIC Regular Certificate will be considered to be de minimis for purposes of Section 1276 of the Code if the market discount is less than 0.25% of the remaining stated redemption price of the REMIC Regular Certificate multiplied by the number of complete years to maturity remaining after the date of its purchase. In interpreting a similar rule with respect to original issue discount on obligations payable in installments, the OID Regulations refer to the weighted average maturity of obligations, and it is likely that the same rule will be applied with respect to market discount, presumably taking into account the Prepayment Assumption. If market discount is treated as de minimis under this rule, it appears that the actual discount would be treated in a manner similar to original issue discount of a de minimis amount. See "Taxation of Owners of REMIC Regular Certificates--Original Issue Discount" above. This treatment would result in discount being included in income at a slower rate than discount would be required to be included in income using the method described above. Section 1276(b)(3) of the Code specifically authorizes the Treasury Department to issue regulations providing for the method for accruing market discount on debt instruments, the principal of which is payable in more than one installment. Until regulations are issued by the Treasury Department, the rules described in the Committee Report apply. The Committee Report indicates that in each accrual period market discount on REMIC Regular Certificates should accrue, at the certificateholder's option: (1) on the basis of a constant yield method, (2) in the case of a REMIC Regular Certificate issued without original issue discount, in an amount that bears the same ratio to the total remaining market discount as the stated interest paid in the accrual period bears to the total amount of stated interest remaining to be paid on the REMIC Regular Certificate as of the beginning of the accrual period, or (3) in the case of a REMIC Regular Certificate issued with original issue discount, in an amount that bears the same ratio to the total remaining market discount as the original issue discount accrued in the accrual period bears to the total original issue discount remaining on the REMIC Regular Certificate at the beginning of the accrual period. Moreover, the Prepayment Assumption used in calculating the accrual of original issue discount is also used in calculating the accrual of market discount. Because the regulations referred to in this paragraph have not been issued, it is not possible to predict what effect these regulations might have on the tax treatment of a REMIC Regular Certificate purchased at a discount in the secondary market. To the extent that REMIC Regular Certificates provide for monthly or other periodic distributions throughout their term, the effect of these rules may be to require market discount to be includible in income at a rate that is not significantly slower than the rate at which the discount would accrue if it were original issue discount. Moreover, in any event a holder of a REMIC Regular Certificate generally will be required to treat a portion of any gain on the sale or exchange of the certificate as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income. Further, under Section 1277 of the Code a holder of a REMIC Regular Certificate may be required to defer a portion of its interest deductions for the taxable year attributable to any indebtedness incurred or continued to purchase or carry a REMIC Regular Certificate purchased with market discount. For these purposes, the de minimis rule referred to above applies. Any such deferred interest expense would not exceed the market discount that accrues during the taxable year and is, in general, allowed as a deduction not later than the year in which the market discount is includible in income. If a holder elects to include market discount in income currently as it accrues on all market discount instruments acquired by the holder in that taxable year or thereafter, the interest deferral rule described above will not apply. 94
424B5268th Page of 311TOC1stPreviousNextBottomJust 268th
Premium. A REMIC Regular Certificate purchased at a cost (excluding any portion of the cost attributable to accrued qualified stated interest) greater than its remaining stated redemption price will be considered to be purchased at a premium. The holder of a REMIC Regular Certificate may elect under Section 171of the Code to amortize the premium under the constant yield method over the life of the certificate. If made, the election will apply to all debt instruments having amortizable bond premium that the holder owns or subsequently acquires. Amortizable premium will be treated as an offset to interest income on the related debt instrument, rather than as a separate interest deduction. The OID Regulations also permit certificateholders to elect to include all interest, discount and premium in income based on a constant yield method, further treating the certificateholder as having made the election to amortize premium generally. See "Taxation of Owners of REMIC Regular Certificates--Market Discount" above. The Committee Report states that the same rules that apply to accrual of market discount (which rules will require use of a Prepayment Assumption in accruing market discount with respect to REMIC Regular Certificates without regard to whether the certificates have original issue discount) will also apply in amortizing bond premium under Section 171 of the Code. The use of an assumption that there will be no prepayments may be required. Realized Losses. Under Section 166 of the Code, both corporate holders of the REMIC Regular Certificates and non-corporate holders of the REMIC Regular Certificates that acquire the certificates in connection with a trade or business should be allowed to deduct, as ordinary losses, any losses sustained during a taxable year in which their certificates become wholly or partially worthless as the result of one or more realized losses on the mortgage loans. However, it appears that a non-corporate holder that does not acquire a REMIC Regular Certificate in connection with a trade or business will not be entitled to deduct a loss under Section 166 of the Code until the holder's certificate becomes wholly worthless (i.e., until its outstanding principal balance has been reduced to zero) and that the loss will be characterized as a short-term capital loss. Each holder of a REMIC Regular Certificate will be required to accrue interest and original issue discount with respect to the certificate, without giving effect to any reductions in distributions attributable to defaults or delinquencies on the mortgage loans or the certificate underlying the REMIC Certificates, as the case may be, until it can be established that the reduction ultimately will not be recoverable. As a result, the amount of taxable income reported in any period by the holder of a REMIC Regular Certificate could exceed the amount of economic income actually realized by that holder in the period. Although the holder of a REMIC Regular Certificate eventually will recognize a loss or reduction in income attributable to previously accrued and included income that as the result of a realized loss ultimately will not be realized, the law is unclear with respect to the timing and character of this loss or reduction in income. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES General. Although a REMIC is a separate entity for federal income tax purposes, a REMIC generally is not subject to entity-level taxation, except with regard to prohibited transactions and some other transactions. See "--Prohibited Transactions Tax and Other Taxes" below. Rather, the taxable income or net loss of a REMIC is generally taken into account by the holder of the REMIC Residual Certificates. Accordingly, the REMIC Residual Certificates will be subject to tax rules that differ significantly from those that would apply if the REMIC Residual Certificates were treated for federal income tax purposes as direct ownership interests in the mortgage loans or as debt instruments issued by the REMIC. A holder of a REMIC Residual Certificate generally will be required to report its daily portion of the taxable income or, subject to the limitations noted in this discussion, the net loss of the REMIC for each day during a calendar quarter that the holder owned the REMIC Residual Certificate. For this purpose, the taxable income or net loss of the REMIC will be allocated to each day in the calendar quarter ratably using 95
424B5269th Page of 311TOC1stPreviousNextBottomJust 269th
a "30 days per month/90 days per quarter/360 days per year" convention unless otherwise disclosed in the related prospectus supplement. The daily amounts so allocated will then be allocated among the REMIC Residual Certificateholders in proportion to their respective ownership interests on that day. Any amount included in the gross income or allowed as a loss of any REMIC Residual Certificateholder by virtue of this paragraph will be treated as ordinary income or loss. The taxable income of the REMIC will be determined under the rules described below in "Taxable Income of the REMIC" and will be taxable to the REMIC Residual Certificateholders without regard to the timing or amount of cash distributions by the REMIC. Ordinary income derived from REMIC Residual Certificates will be "portfolio income" for purposes of the taxation of taxpayers subject to limitations under Section 469 of the Code on the deductibility of "passive losses." A holder of a REMIC Residual Certificate that purchased the certificate from a prior holder of that certificate also will be required to report on its federal income tax return amounts representing its daily share of the taxable income (or net loss) of the REMIC for each day that it holds the REMIC Residual Certificate. Those daily amounts generally will equal the amounts of taxable income or net loss determined as described above. The Committee Report indicates that some modifications of the general rules may be made, by regulations, legislation or otherwise to reduce (or increase) the income of a REMIC Residual Certificateholder that purchased the REMIC Residual Certificate from a prior holder of the certificate at a price greater than (or less than) the adjusted basis (as defined below) the REMIC Residual Certificate would have had in the hands of an original holder of the certificate. The REMIC Regulations, however, do not provide for any such modifications. Any payments received by a holder of a REMIC Residual Certificate in connection with the acquisition of the REMIC Residual Certificate will be taken into account in determining the income of the holder for federal income tax purposes. Although it appears likely that any of these payments would be includible in income immediately upon its receipt, the IRS might assert that these payments should be included in income over time according to an amortization schedule or according to some other method. Because of the uncertainty concerning the treatment of these payments, holders of REMIC Residual Certificates should consult their tax advisors concerning the treatment of these payments for income tax purposes. The amount of income REMIC Residual Certificateholders will be required to report (or the tax liability associated with the income) may exceed the amount of cash distributions received from the REMIC for the corresponding period. Consequently, REMIC Residual Certificateholders should have other sources of funds sufficient to pay any federal income taxes due as a result of their ownership of REMIC Residual Certificates or unrelated deductions against which income may be offset, subject to the rules relating to "excess inclusions" and "noneconomic" residual interests discussed below. The fact that the tax liability associated with the income allocated to REMIC Residual Certificateholders may exceed the cash distributions received by the REMIC Residual Certificateholders for the corresponding period may significantly adversely affect the REMIC Residual Certificateholders' after-tax rate of return. This disparity between income and distributions may not be offset by corresponding losses or reductions of income attributable to the REMIC Residual Certificateholder until subsequent tax years and, then, may not be completely offset due to changes in the Code, tax rates or character of the income or loss. On May 11, 2004, the Internal Revenue Service issued final regulations relating to the federal income tax treatment of "inducement fees" received by transferees of non-economic REMIC residual interests. The regulations provide tax accounting rules for the inclusion of such fees in income over an appropriate period, and clarify that inducement fees represent income from sources within the United States. These rules apply to taxable years ending on or after May 11, 2004. On the same date, the IRS issued administrative guidance 96
424B5270th Page of 311TOC1stPreviousNextBottomJust 270th
addressing the procedures by which transferees of such REMIC residual interests may obtain consent to change the method of accounting for REMIC inducement fee income to one of the methods provided in the regulations. Prospective purchasers of REMIC residual certificates should consult with their tax advisors regarding the effect of these regulations and the related administrative guidance. Taxable Income of the REMIC. The taxable income of the REMIC will equal the income from the mortgage loans and other assets of the REMIC plus any cancellation of indebtedness income due to the allocation of realized losses to REMIC Regular Certificates, less the deductions allowed to the REMIC for interest (including original issue discount and reduced by any premium on issuance) on the REMIC Regular Certificates (and any other class of REMIC Certificates constituting "regular interests" in the REMIC not offered by the prospectus), amortization of any premium on the mortgage loans, bad debt losses with respect to the mortgage loans and, except as described below, for servicing, administrative and other expenses. For purposes of determining its taxable income, the REMIC will have an initial aggregate basis in its assets equal to the sum of the issue prices of all REMIC Certificates (or, if a class of REMIC Certificates is not sold initially, their fair market values). The aggregate basis will be allocated among the mortgage loans and the other assets of the REMIC in proportion to their respective fair market values. The issue price of any offered REMIC Certificates will be determined in the manner described above under "--Taxation of Owners of REMIC Regular Certificates--Original Issue Discount." The issue price of a REMIC Certificate received in exchange for an interest in the mortgage loans or other property will equal the fair market value of the interests in the mortgage loans or other property. Accordingly, if one or more classes of REMIC Certificates are retained initially rather than sold, the REMIC Administrator may be required to estimate the fair market value of the interests in order to determine the basis of the REMIC in the mortgage loans and other property held by the REMIC. Subject to possible application of the de minimis rules, the method of accrual by the REMIC of original issue discount income and market discount income with respect to mortgage loans that it holds will be equivalent to the method for accruing original issue discount income for holders of REMIC Regular Certificates (that is, under the constant yield method taking into account the Prepayment Assumption). However, a REMIC that acquires loans at a market discount must include the market discount in income currently, as it accrues, on a constant yield basis. See "--Taxation of Owners of REMIC Regular Certificates" above, which describes a method for accruing discount income that is analogous to that required to be used by a REMIC as to mortgage loans with market discount that it holds. A mortgage loan will be deemed to have been acquired with discount (or premium) to the extent that the REMIC's basis therein, determined as described in the preceding paragraph, is less than (or greater than) its stated redemption price. Any such discount will be includible in the income of the REMIC as it accrues, in advance of receipt of the cash attributable to the income, under a method similar to the method described above for accruing original issue discount on the REMIC Regular Certificates. It is anticipated that each REMIC will elect under Section 171 of the Code to amortize any premium on the mortgage loans. Premium on any mortgage loan to which the election applies may be amortized under a constant yield method, presumably taking into account a Prepayment Assumption. Further, such an election would not apply to any mortgage loan originated on or before September 27, 1985. Instead, premium on such a mortgage loan should be allocated among the principal payments thereon and be deductible by the REMIC as those payments become due or upon the prepayment of the mortgage loan. A REMIC will be allowed deductions for interest (including original issue discount) on the REMIC Regular Certificates (including any other class of REMIC Certificates constituting "regular interests" in the 97
424B5271st Page of 311TOC1stPreviousNextBottomJust 271st
REMIC not offered by this prospectus) equal to the deductions that would be allowed if the REMIC Regular Certificates (including any other class of REMIC Certificates constituting "regular interests" in the REMIC not offered by this prospectus) were indebtedness of the REMIC. Original issue discount will be considered to accrue for this purpose as described above under "--Taxation of Owners of REMIC Regular certificates--Original Issue Discount," except that the de minimis rule and the adjustments for subsequent holders of REMIC Regular Certificates (including any other class of REMIC Certificates constituting "regular interests" in the REMIC not offered by this prospectus) described therein will not apply. If a class of REMIC Regular Certificates is issued with Issue Premium, the net amount of interest deductions that are allowed the REMIC in each taxable year with respect to the REMIC Regular Certificates of that class will be reduced by an amount equal to the portion of the Issue Premium that is considered to be amortized or repaid in that year. Although the matter is not entirely clear, it is likely that Issue Premium would be amortized under a constant yield method in a manner analogous to the method of accruing original issue discount described above under "--Taxation of Owners of REMIC Regular certificates--Original Issue Discount." As a general rule, the taxable income of a REMIC will be determined in the same manner as if the REMIC were an individual having the calendar year as its taxable year and using the accrual method of accounting. However, no item of income, gain, loss or deduction allocable to a prohibited transaction will betaken into account. See "--Prohibited Transactions Tax and Other Taxes" below. Further, the limitation on miscellaneous itemized deductions imposed on individuals by Section 67 of the Code (which allows these deductions only to the extent they exceed in the aggregate two percent of the taxpayer's adjusted gross income) will not be applied at the REMIC level so that the REMIC will be allowed deductions for servicing, administrative and other non-interest expenses in determining its taxable income. All such expenses will be allocated as a separate item to the holders of REMIC Certificates, subject to the limitation of Section 67 of the Code. See "--Possible Pass-Through of Miscellaneous Itemized Deductions" below. If the deductions allowed to the REMIC exceed its gross income for a calendar quarter, the excess will be the net loss for the REMIC for that calendar quarter. Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC Residual Certificate will be equal to the amount paid for the REMIC Residual Certificate, increased by amounts included in the income of the REMIC Residual Certificateholder and decreased (but not below zero) by distributions made, and by net losses allocated, to the REMIC Residual Certificateholder. A REMIC Residual Certificateholder is not allowed to take into account any net loss for any calendar quarter to the extent the net loss exceeds the REMIC Residual Certificateholder's adjusted basis in its REMIC Residual Certificate as of the close of the calendar quarter (determined without regard to the net loss). Any loss that is not currently deductible by reason of this limitation may be carried forward indefinitely to future calendar quarters and, subject tothe same limitation, may be used only to offset income from the REMIC Residual Certificate. The ability of REMIC Residual Certificateholders to deduct net losses may be subject to additional limitations under the Code, as to which REMIC Residual Certificateholders should consult their tax advisors. Any distribution on a REMIC Residual Certificate will be treated as a non-taxable return of capital to the extent it does not exceed the holder's adjusted basis in the REMIC Residual Certificate. To the extent a distribution on a REMIC Residual Certificate exceeds the adjusted basis, it will be treated as gain from the sale of the REMIC Residual Certificate. Holders of REMIC Residual Certificates may be entitled to distributions early in the term of the related REMIC under circumstances in which their bases in the REMIC 98
424B5272nd Page of 311TOC1stPreviousNextBottomJust 272nd
Residual Certificates will not be sufficiently large that the distributions will be treated as nontaxable returns of capital. Their bases in the REMIC Residual Certificates will initially equal the amount paid for the REMIC Residual Certificates and will be increased by their allocable shares of taxable income of the REMIC. However, these bases increases may not occur until the end of the calendar quarter, or perhaps the end of the calendar year, with respect to which the REMIC taxable income is allocated to the REMIC Residual Certificateholders. To the extent the REMIC Residual Certificateholders' initial bases are less than the distributions to the REMIC Residual Certificateholders, and increases in initial bases either occur after the distributions or (together with their initial bases) are less than the amount of the distributions, gain will be recognized to the REMIC Residual Certificateholders on these distributions and will be treated as gain from the sale of their REMIC Residual Certificates. The effect of these rules is that a REMIC Residual Certificateholder may not amortize its basis in a REMIC Residual Certificate, but may only recover its basis through distributions, through the deduction of any net losses of the REMIC or upon the sale of its REMIC Residual Certificate. See "--Sales of REMIC Certificates" below. For a discussion of possible modifications of these rules that may require adjustments to income of a holder of a REMIC Residual Certificate other than an original holder in order to reflect any difference between the cost of the REMIC Residual Certificate to the REMIC Residual Certificateholder and the adjusted basis the REMIC Residual Certificate would have in the hands of an original holder, see "--Taxation of Owners of REMIC Residual Certificates--General" above. Excess Inclusions. Any "excess inclusions" with respect to a REMIC Residual Certificate will be subject to federal income tax in all events. In general, the "excess inclusions" with respect to a REMIC Residual Certificate for any calendar quarter will be the excess, if any, of (1) the daily portions of REMIC taxable income allocable to the REMIC Residual Certificate over (2) the sum of the "daily accruals" (as defined below) for each day during the quarter that the REMIC Residual Certificate was held by the REMIC Residual Certificateholder. The daily accruals of a REMIC Residual Certificateholder will be determined by allocating to each day during a calendar quarter its ratable portion of the product of the "adjusted issue price" of the REMIC Residual Certificate at the beginning of the calendar quarter and 120% of the "long-term Federal rate" in effect on the Closing Date. For this purpose, the adjusted issue price of a REMIC Residual Certificate as of the beginning of any calendar quarter will be equal to the issue price of the REMIC Residual Certificate, increased by the sum of the daily accruals for all prior quarters and decreased (but not below zero) by any distributions made with respect to the REMIC Residual Certificate before the beginning of that quarter. The issue price of a REMIC Residual Certificate is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the REMIC Residual Certificates were sold. The "long-term Federal rate" is an average of current yields on Treasury securities with a remaining term of greater than nine years, computed and published monthly by the IRS. Although it has not done so, the Treasury has authority to issue regulations that would treat the entire amount of income accruing on a REMIC Residual Certificate as an excess inclusion if the REMIC Residual Certificates are considered to have "significant value." For REMIC Residual Certificateholders, an excess inclusion (1) will not be permitted to be offset by deductions, losses or loss carryovers from other activities, (2) will be treated as "unrelated business taxable income" to an otherwise tax-exempt organization and (3) will not be eligible for any rate reduction or exemption under any applicable tax treaty with respect to the 30% United States withholding tax imposed on distributions to REMIC Residual Certificateholders that are foreign investors. See, however, "--Foreign investors in REMIC Certificates," below. 99
424B5273rd Page of 311TOC1stPreviousNextBottomJust 273rd
Furthermore, for purposes of the alternative minimum tax, excess inclusions will not be permitted to be offset by the alternative tax net operating loss deduction and alternative minimum taxable income may not be less than the taxpayer's excess inclusions. The latter rule has the effect of preventing nonrefundable tax credits from reducing the taxpayer's income tax to an amount lower than the tentative minimum tax on excess inclusions. In the case of any REMIC Residual Certificates held by a real estate investment trust, the aggregate excess inclusions with respect to the REMIC Residual Certificates, reduced (but not below zero) by the real estate investment trust taxable income (within the meaning of Section 857(b)(2) of the Code, excluding any net capital gain), will be allocated among the shareholders of the trust in proportion to the dividends received by the shareholders from the trust, and any amount so allocated will be treated as an excess inclusion with respect to a REMIC Residual Certificate as if held directly by the shareholder. Treasury regulations yet to be issued could apply a similar rule to regulated investment companies, common trust funds and cooperatives; the REMIC Regulations currently do not address this subject. Noneconomic REMIC Residual Certificates. Under the REMIC Regulations, transfers of "non- economic" REMIC Residual Certificates will be disregarded for all federal income tax purposes if "a significant purpose of the transfer was to enable the transferor to impede the assessment or collection of tax." If the transfer is disregarded, the purported transferor will continue to remain liable for any taxes due with respect to the income on the "non-economic" REMIC Residual Certificate. The REMIC Regulations provide that a REMIC Residual Certificate is non-economic unless, based on the Prepayment Assumption and on any required or permitted clean up calls, or required liquidation provided for in the REMIC's organizational documents, (1) the present value of the expected future distributions (discounted using the "applicable Federal rate" for obligations whose term ends on the close of the last quarter in which excess inclusions are expected to accrue with respect to the REMIC Residual Certificate, which rate is computed and published monthly by the IRS) on the REMIC Residual Certificate equals at least the present value of the expected tax on the anticipated excess inclusions, and (2) the transferor reasonably expects that the transferee will receive distributions with respect to the REMIC Residual Certificate at or after the time the taxes accrue on the anticipated excess inclusions in an amount sufficient to satisfy the accrued taxes. Accordingly, all transfers of REMIC Residual Certificates that may constitute non-economic residual interests will be subject to restrictions under the terms of the related pooling and servicing agreement that are intended to reduce the possibility of any such transfer being disregarded. These restrictions will require each party to a transfer to provide an affidavit that no purpose of the transfer is to impede the assessment or collection of tax, including representations as to the financial condition of the prospective transferee, as to which the transferor is also required to make a reasonable investigation to determine the transferee's historic payment of its debts and ability to continue to pay its debts as they come due in the future. The IRS has issued proposed changes to REMIC Regulations that would add to the conditions necessary to assure that a transfer of a non-economic residual interest would be respected. The proposed additional condition would require that the amount received by the transferee be no less on a present value basis than the present value of the net tax detriment attributable to holding a residual interest reduced by the present value of the projected payments to be received on the residual interest. In Revenue Procedure 2001-12, pending finalization of the new regulations, the IRS has expanded the "safe harbor" for transfers of non-economic residual interests to include certain transfers to domestic taxable corporations with large amounts of gross and net assets where agreement is made that all future transfers will be to taxable domestic corporations in transactions that qualify for one of the "safe harbor" provisions. Eligibility for this safe harbor requires, among other things, that the facts and circumstances known to the transferor at the time of transfer not indicate to a reasonable person that the taxes with respect to the residual interest will not be paid, with an unreasonably low cost for the transfer specifically mentioned as negating eligibility. The changes would be effective for transfers of residual interests occurring after February 4, 2000. Prior to purchasing a REMIC Residual Certificate, prospective 100
424B5274th Page of 311TOC1stPreviousNextBottomJust 274th
purchasers should consider the possibility that a purported transfer of the REMIC Residual Certificate by such a purchaser to another purchaser at some future date may be disregarded in accordance with the above-described rules which would result in the retention of tax liability by the purchaser. The related prospectus supplement will disclose whether offered REMIC Residual Certificates may be considered "noneconomic" residual interests under the REMIC Regulations; provided, however, that any disclosure that a REMIC Residual Certificate will not be considered "non-economic" will be based upon assumptions, and the company will make no representation that a REMIC Residual Certificate will not be considered "non-economic" for purposes of the above-described rules. See "--Foreign Investors in REMIC Certificates--REMIC Residual Certificates" below for additional restrictions applicable to transfers of REMIC Residual Certificates to foreign persons. Mark-to-Market Rules. In general, all securities owned by a dealer, except to the extent that the dealer has specifically identified a security as held for investment, must be marked to market in accordance with the applicable Code provision and the related regulations. However, the IRS has issued regulations which provide that for purposes of this mark-to-market requirement, a REMIC Residual Certificate acquired after January 4, 1995 is not treated as a security and thus may not be marked to market. Prospective purchasers of a REMIC Residual Certificate should consult their tax advisors regarding the possible application of the mark-to-market requirement to REMIC Residual Certificates. Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and expenses of a REMIC generally will be allocated to the holders of the related REMIC Residual Certificates. The applicable Treasury regulations indicate, however, that in the case of a REMIC that is similar to a single class grantor trust, all or a portion of these fees and expenses should be allocated to the holders of the related REMIC Regular Certificates. Except as stated in the related prospectus supplement, these fees and expenses will be allocated to holders of the related REMIC Residual Certificates in their entirety and not to the holders of the related REMIC Regular Certificates. With respect to REMIC Residual Certificates or REMIC Regular Certificates the holders of which receive an allocation of fees and expenses in accordance with the preceding discussion, if any holder thereof is an individual, estate or trust, or a "pass-through entity" beneficially owned by one or more individuals, estates or trusts, (1) an amount equal to the individual's, estate's or trust's share of the fees and expenses will be added to the gross income of the holder and (2) the individual's, estate's or trust's share of the fees and expenses will be treated as a miscellaneous itemized deduction allowable subject to the limitation of Section 67 of the Code, which permits these deductions only to the extent they exceed in the aggregate two percent of taxpayer's adjusted gross income. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted gross income exceeds a specified amount will be. The amount of additional taxable income reportable by REMIC Certificateholders that are subject to the limitations of either Section 67 or Section 68 of the Code may be substantial. Furthermore, in determining the alternative minimum taxable income of such a holder of a REMIC Certificate that is an individual, estate or trust, or a "pass-through entity" beneficially owned by one or more individuals, estates or trusts, no deduction will be allowed for the holder's allocable portion of servicing fees and other miscellaneous itemized deductions of the REMIC, even though an amount equal to the amount of the fees and other deductions will be included in the holder's gross income. Accordingly, these REMIC Certificates may not be appropriate investments for individuals, estates, or trusts, or pass-through entities beneficially owned by one or more individuals, estates or trusts. Prospective investors should consult with their tax advisors prior to making an investment in the certificates. 101
424B5275th Page of 311TOC1stPreviousNextBottomJust 275th
SALES OF REMIC CERTIFICATES. If a REMIC Certificate is sold, the selling Certificateholder will recognize gain or loss equal to the difference between the amount realized on the sale and its adjusted basis in the REMIC Certificate. The adjusted basis of a REMIC Regular Certificate generally will equal the cost of the REMIC Regular Certificate to the certificateholder, increased by income reported by the certificateholder with respect to the REMIC Regular Certificate (including original issue discount and market discount income) and reduced (but not below zero) by distributions on the REMIC Regular Certificate received by the certificateholder and by any amortized premium. The adjusted basis of a REMIC Residual Certificate will be determined as described under "--Taxation of Owners of REMIC Residual Certificates--Basis Rules, Net Losses and Distributions." Except as provided in the following four paragraphs, any such gain or loss will be capital gain or loss, provided the REMIC Certificate is held as a capital asset (generally, property held for investment) within the meaning of Section 1221 of the Code. Gain from the sale of a REMIC Regular Certificate that might otherwise be capital gain will be treated as ordinary income to the extent the gain does not exceed the excess, if any, of (1) the amount that would have been includible in the seller's income with respect to the REMIC Regular Certificate assuming that income had accrued thereon at a rate equal to 110% of the "applicable Federal rate" (generally, a rate based on an average of current yields on Treasury securities having a maturity comparable to that of the certificate based on the application of the Prepayment Assumption to the certificate, which rate is computed and published monthly by the IRS), determined as of the date of purchase of the REMIC Regular Certificate, over (2) the amount of ordinary income actually includible in the seller's income prior to the sale. In addition, gain recognized on the sale of a REMIC Regular Certificate by a seller who purchased the REMIC Regular Certificate at a market discount will be taxable as ordinary income in an amount not exceeding the portion of the discount that accrued during the period the REMIC Certificate was held by the holder, reduced by any market discount included in income under the rules described above under "--Taxation of Owners of REMIC Regular Certificates--Market Discount" and "--Premium." REMIC Certificates will be "evidences of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale of a REMIC Certificate by a bank or thrift institution to which this section applies will be ordinary income or loss. A portion of any gain from the sale of a REMIC Regular Certificate that might otherwise be capital gain may be treated as ordinary income to the extent that the certificate is held as part of a "conversion transaction" within the meaning of Section 1258 of the Code. A conversion transaction generally is one in which the taxpayer has taken two or more positions in the same or similar property that reduce or eliminate market risk, if substantially all of the taxpayer's return is attributable to the time value of the taxpayer's net investment in the transaction. The amount of gain so realized in a conversion transaction that is recharacterized as ordinary income generally will not exceed the amount of interest that would have accrued on the taxpayer's net investment at 120% of the appropriate "applicable Federal rate" (which rate is computed and published monthly by the IRS) at the time the taxpayer enters into the conversion transaction, subject to appropriate reduction for prior inclusion of interest and other ordinary income items from the transaction. Finally, a taxpayer may elect to have net capital gain taxed at ordinary income rates rather than capital gains rates in order to include the net capital gain in total net investment income for the taxable year, for purposes of the rule that limits the deduction of interest on indebtedness incurred to purchase or carry property held for investment to a taxpayer's net investment income. 102
424B5276th Page of 311TOC1stPreviousNextBottomJust 276th
Except as may be provided in Treasury regulations yet to be issued, if the seller of a REMIC Residual Certificate reacquires the REMIC Residual Certificate, or acquires any other residual interest in a REMIC or any similar interest in a "taxable mortgage pool" (as defined in Section 7701(i) of the Code) during the period beginning six months before, and ending six months after, the date of the sale, such sale will be subject to the "wash sale" rules of Section 1091 of the Code. In that event, any loss realized by the REMIC Residual Certificateholder on the sale will not be deductible, but instead will be added to the REMIC Residual Certificateholder's adjusted basis in the newly-acquired asset. PROHIBITED TRANSACTIONS AND OTHER POSSIBLE REMIC TAXES. In the event a REMIC engages in a prohibited transaction, the Code imposes a 100% tax on the income derived by the REMIC from the prohibited transaction. In general, subject to specified exceptions, a prohibited transaction means the disposition of a mortgage loan, the receipt of income from a source other than a mortgage loan or other permitted investments, the receipt of compensation for services, or gain from the disposition of an asset purchased with the payments on the mortgage loans for temporary investment pending distribution on the REMIC Certificates. It is not anticipated that any REMIC will engage in any prohibited transactions in which it would recognize a material amount of net income. In addition, a contribution to a REMIC made after the day on which the REMIC issues all of its interests could result in the imposition on the REMIC of a tax equal to 100% of the value of the contributed property. Each pooling and servicing agreement will include provisions designed to prevent the acceptance of any contributions that would be subject to this tax. REMICs also are subject to federal income tax at the highest corporate rate on "net income from foreclosure property," determined by reference to the rules applicable to real estate investment trusts. "Net income from foreclosure property" generally means gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust. It is not anticipated that any REMIC will recognize "net income from foreclosure property" subject to federal income tax. To the extent permitted by then applicable laws, any tax resulting from a prohibited transaction, tax resulting from a contribution made after the Closing Date, tax on "net income from foreclosure property" or state or local income or franchise tax that may be imposed on the REMIC will be borne by the related master servicer or trustee in either case out of its own funds, provided that the master servicer or the trustee, as the case may be, has sufficient assets to do so, and provided further that the tax arises out of a breach of the master servicer's or the trustee's obligations, as the case may be, under the related pooling and servicing agreement and in respect of compliance with applicable laws and regulations. Any such tax not borne by the master servicer or the trustee will be charged against the related trust fund resulting in a reduction in amounts payable to holders of the related REMIC Certificates. TAX AND RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES TO CERTAIN ORGANIZATIONS. If a REMIC Residual Certificate is transferred to a "disqualified organization" (as defined below), a tax would be imposed in an amount (determined under the REMIC Regulations) equal to the product of (1) the present value (discounted using the "applicable Federal rate" for obligations whose term ends on the close of the last quarter in which excess inclusions are expected to accrue with respect to the REMIC Residual Certificate, which rate is computed and published monthly by the IRS) of the total anticipated excess inclusions with respect to the REMIC Residual Certificate for periods after the transfer and (2) the highest marginal federal income tax rate applicable to corporations. The anticipated excess inclusions must be determined as of the date that the REMIC Residual Certificate is transferred and must be based on events that have occurred up 103
424B5277th Page of 311TOC1stPreviousNextBottomJust 277th
to the time of the transfer, the Prepayment Assumption and any required or permitted clean up calls or required liquidation provided for in the REMIC's organizational documents. Such a tax generally would be imposed on the transferor of the REMIC Residual Certificate, except that where the transfer is through an agent for a disqualified organization, the tax would instead be imposed on the agent. However, a transferor of a REMIC Residual Certificate would in no event be liable for the tax with respect to a transfer if the transferee furnishes to the transferor an affidavit that the transferee is not a disqualified organization and, as of the time of the transfer, the transferor does not have actual knowledge that the affidavit is false. Moreover, an entity will not qualify as a REMIC unless there are reasonable arrangements designed to ensure that (1) residual interests in the entity are not held by disqualified organizations and (2) information necessary for the application of the tax described herein will be made available. Restrictions on the transfer of REMIC Residual Certificates and other provisions that are intended to meet this requirement will be included in the pooling and servicing agreement, and will be discussed more fully in any prospectus supplement relating to the offering of any REMIC Residual Certificate. In addition, if a "pass-through entity" (as defined below) includes in income excess inclusions with respect to a REMIC Residual Certificate, and a disqualified organization is the record holder of an interest in the entity, then a tax will be imposed on the entity equal to the product of (1) the amount of excess inclusions on the REMIC Residual Certificate that are allocable to the interest in the pass-through entity held by the disqualified organization and (2) the highest marginal federal income tax rate imposed on corporations. A pass-through entity will not be subject to this tax for any period, however, if each record holder of an interest in the pass-through entity furnishes to the pass-through entity (1) the holder's social security number and a statement under penalties of perjury that the social security number is that of the recordholder or (2) a statement under penalties of perjury that the record holder is not a disqualified organization. For taxable years beginning after December 31,1997, notwithstanding the preceding two sentences, in the case of a REMIC Residual Certificate held by an "electing large partnership," all interests in the partnership shall be treated as held by disqualified organizations (without regard to whether the record holders of the partnership furnish statements described in the preceding sentence) and the amount that is subject to tax under the second preceding sentence is excluded from the gross income of the partnership allocated to the partners (in lieu of allocating to the partners a deduction for the tax paid by the partnership). For these purposes, a "disqualified organization" means: o the United States, any State or political subdivision thereof, any foreign government, any international organization, or any agency or instrumentality of the foregoing (but would not include instrumentalities described in Section 168(h)(2)(D) of the Code or Freddie Mac), o any organization (other than a cooperative described in Section 521 of the Code) that is exempt from federal income tax, unless it is subject to the tax imposed by Section 511 of the Code, or o any organization described in Section 1381(a)(2)(C) of the Code. For these purposes, a "pass-through entity" means any regulated investment company, real estate investment trust, trust, partnership or certain other entities described in Section 860E(e)(6) of the Code. In addition, a person holding an interest in a pass-through entity as a nominee for another person will, with respect to the interest, be treated as a pass-through entity. 104
424B5278th Page of 311TOC1stPreviousNextBottomJust 278th
TERMINATION. A REMIC will terminate immediately after the distribution date following receipt by the REMIC of the final payment in respect of the mortgage loans or upon a sale of the REMIC's assets following the adoption by the REMIC of a plan of complete liquidation. The last distribution on a REMIC Regular Certificate will be treated as a payment in retirement of a debt instrument. In the case of a REMIC Residual Certificate, if the last distribution on the REMIC Residual Certificate is less than the REMIC Residual Certificateholder's adjusted basis in the certificate, the REMIC Residual Certificateholder should (but may not) be treated as realizing a loss equal to the amount of the difference, and the loss may be treated as a capital loss. REPORTING AND OTHER ADMINISTRATIVE MATTERS. Solely for purposes of the administrative provisions of the Code, the REMIC will be treated as a partnership and REMIC Residual Certificateholders will be treated as partners. The REMIC Administrator (or other party described in the related prospectus supplement) will file REMIC federal income tax returns on behalf of the related REMIC, and under the terms of the related Agreement, will either (1) be irrevocably appointed by the holders of the largest percentage interest in the related REMIC Residual Certificates as their agent to perform all of the duties of the "tax matters person" with respect to the REMIC in all respects or (2) will be designated as and will act as the "tax matters person" with respect to the related REMIC in all respects and will hold at least a nominal amount of REMIC Residual Certificates. The REMIC Administrator, as the tax matters person or as agent for the tax matters person, subject to notice requirements and various restrictions and limitations, generally will have the authority to act on behalf of the REMIC and the REMIC Residual Certificateholders in connection with the administrative and judicial review of items of income, deduction, gain or loss of the REMIC, as well as the REMIC's classification. REMIC Residual Certificateholders generally will be required to report these REMIC items consistently with their treatment on the REMIC's tax return and may in some circumstances be bound by a settlement agreement between the REMIC Administrator, as either tax matters person or as agent for the tax matters person, and the IRS concerning any such REMIC item. Adjustments made to the REMIC tax return may require a REMIC Residual Certificateholder to make corresponding adjustments on its return, and an audit of the REMIC's tax return, or the adjustments resulting from such an audit, could result in an audit of a REMIC Residual Certificateholder's return. Any person that holds a REMIC Residual Certificate as a nominee for another person may be required to furnish the REMIC, in a manner to be provided in Treasury regulations, with the name and address of the person and other information. Reporting of interest income, including any original issue discount, with respect to REMIC Regular Certificates is required annually, and may be required more frequently under Treasury regulations. These information reports generally are required to be sent to individual holders of REMIC Regular Interests and the IRS; holders of REMIC Regular Certificates that are corporations, trusts, securities dealers and some other non-individuals will be provided interest and original issue discount income information and the information set forth in the following paragraph upon request in accordance with the requirements of the applicable regulations. The information must be provided by the later of 30 days after the end of the quarter for which the information was requested, or two weeks after the receipt of the request. The REMIC must also comply with rules requiring a REMIC Regular Certificate issued with original issue discount to disclose on its face the amount of original issue discount and the issue date, and requiring the information to be reported to the IRS. Reporting with respect to the REMIC Residual Certificates, including income, excess inclusions, investment expenses and relevant information regarding qualification of the REMIC's assets will be made as required under the Treasury regulations, generally on a quarterly basis. 105
424B5279th Page of 311TOC1stPreviousNextBottomJust 279th
As applicable, the REMIC Regular Certificate information reports will include a statement of the adjusted issue price of the REMIC Regular Certificate at the beginning of each accrual period. In addition, the reports will include information required by regulations with respect to computing the accrual of any market discount. Because exact computation of the accrual of market discount on a constant yield method would require information relating to the holder's purchase price that the REMIC may not have, Treasury regulations only require that information pertaining to the appropriate proportionate method of accruing market discount be provided. See "--Taxation of Owners of REMIC Regular Certificates--Market Discount." The responsibility for complying with the foregoing reporting rules will be borne by the REMIC Administrator or other party designated in the related prospectus supplement. BACKUP WITHHOLDING WITH RESPECT TO REMIC CERTIFICATES. Payments of interest and principal, as well as payments of proceeds from the sale of REMIC Certificates, may be subject to the "backup withholding tax" under Section 3406 of the Code if recipients of the payments fail to furnish to the payor certain information, including their taxpayer identification numbers, or otherwise fail to establish an exemption from the backup withholding tax. Any amounts deducted and withheld from a distribution to a recipient would be allowed as a credit against the recipient's federal income tax. Furthermore, penalties may be imposed by the IRS on a recipient of payments that is required to supply information but that does not do so in the proper manner. FOREIGN INVESTORS IN REMIC CERTIFICATES. A REMIC Regular Certificateholder that is not a United States Person and is not subject to federal income tax as a result of any direct or indirect connection to the United States in addition to its ownership of a REMIC Regular Certificate will not be subject to United States federal income or withholding tax in respect of a distribution on a REMIC Regular Certificate, provided that the holder complies to the extent necessary with identification requirements, including delivery of a statement, signed by the certificateholder under penalties of perjury, certifying that the certificateholder is not a United States person and providing the name and address of the certificateholder. This statement is generally made on IRS Form W-8BEN and must be updated whenever required information has changed or within 3 calendar years after the statement is first delivered. It is possible that the IRS may assert that the foregoing tax exemption should not apply with respect to a REMIC Regular Certificate held by a REMIC Residual Certificateholder that owns directly or indirectly a 10% or greater interest in the REMIC Residual Certificates. If the holder does not qualify for exemption, distributions of interest, including distributions in respect of accrued original issue discount, to the holder may be subject to a tax rate of 30%, subject to reduction under any applicable tax treaty. Special rules apply to partnerships, estates and trusts, and in certain circumstances certifications as to foreign status and other matters may be required to be provided by partners and beneficiaries thereof. In addition, in certain circumstances the foregoing rules will not apply to exempt a United States shareholder of a controlled foreign corporation from taxation on the United States shareholder's allocable portion of the interest income received by the controlled foreign corporation. Further, it appears that a REMIC Regular Certificate would not be included in the estate of a non- resident alien individual and would not be subject to United States estate taxes. However, certificateholders who are non-resident alien individuals should consult their tax advisors concerning this question. 106
424B5280th Page of 311TOC1stPreviousNextBottomJust 280th
Except as stated in the related prospectus supplement, transfers of REMIC Residual Certificates to investors that are not United States persons will be prohibited under the related pooling and servicing agreement. NEW WITHHOLDING REGULATIONS The Treasury Department has issued new final regulations which provide in greater detail the procedures for complying with, or obtaining exemptions under, the withholding, backup withholding and information reporting rules described above. Prospective investors are urged to consult their tax advisors regarding the procedures for obtaining an exemption from withholding under these regulations. NOTES On or prior to the date of the related prospectus supplement with respect to the proposed issuance of each series of notes, Thacher Proffitt & Wood LLP, counsel to the company, will deliver its opinion to the effect that, assuming compliance with all provisions of the indenture, owner trust agreement and other related documents, for federal income tax purposes (1) the notes will be treated as indebtedness and (2) the Issuer, as created pursuant to the terms and conditions of the owner trust agreement, will not be characterized as an association (or publicly traded partnership) taxable as a corporation or as a taxable mortgage pool. For purposes of this tax discussion, references to a "noteholder" or a "holder" are to the beneficial owner of a note. STATUS AS REAL PROPERTY LOANS (1) Notes held by a domestic building and loan association will not constitute "loans . . . secured by an interest in real property" within the meaning of Code section 7701(a)(19)(C)(v); and (2) notes held by a real estate investment trust will not constitute "real estate assets" within the meaning of Code section 856(c)(4)(A) and interest on notes will not be considered "interest on obligations secured by mortgages on real property" within the meaning of Code section 856(c)(3)(B). TAXATION OF NOTEHOLDERS Notes generally will be subject to the same rules of taxation as REMIC Regular Certificates issued by a REMIC, as described above, except that (1) income reportable on the notes is not required to be reported under the accrual method unless the holder otherwise uses the accrual method and (2) the special rule treating a portion of the gain on sale or exchange of a REMIC Regular Certificate as ordinary income is inapplicable to the notes. See "--REMICs--Taxation of Owners of REMIC Regular Certificates" and "--Sales of REMIC Certificates." GRANTOR TRUST FUNDS CLASSIFICATION OF GRANTOR TRUST FUNDS. On or prior to the date of the related prospectus supplement with respect to the proposed issuance of each series of Grantor Trust Certificates, Thacher Proffitt & Wood LLP, counsel to the company, will deliver its opinion generally to the effect that, assuming compliance with all provisions of the related pooling and servicing agreement, the related Grantor Trust Fund will be 107
424B5281st Page of 311TOC1stPreviousNextBottomJust 281st
classified as a grantor trust under subpart E, part I of subchapter J of Chapter 1 of the Code and not as a partnership or an association taxable as a corporation. CHARACTERIZATION OF INVESTMENTS IN GRANTOR TRUST CERTIFICATES. GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES. In the case of Grantor Trust Fractional Interest Certificates, except as disclosed in the related prospectus supplement, counsel to the company will deliver an opinion that, in general, Grantor Trust Fractional Interest Certificates will represent interests in (1) "loans . . . secured by an interest in real property" within the meaning of Section 7701(a)(19)(C)(v) of the Code; (2) "obligation[s] (including any participation or Certificate of beneficial ownership therein) which [are] principally secured by an interest in real property" within the meaning of Section 860G(a)(3) of the Code; and (3) "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code. In addition, counsel to the company will deliver an opinion that interest on Grantor Trust Fractional Interest Certificates will to the same extent be considered "interest on obligations secured by mortgages on real property or on interests in real property" within the meaning of Section 856(c)(3)(B) of the Code. GRANTOR TRUST STRIP CERTIFICATES. Even if Grantor Trust Strip Certificates evidence an interest in a Grantor Trust Fund consisting of mortgage loans that are "loans . . . secured by an interest in real property" within the meaning of Section 7701(a)(19)(C)(v) of the Code, and "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code, and the interest on which is "interest on obligations secured by mortgages on real property" within the meaning of Section 856(c)(3)(B) of the Code, it is unclear whether the Grantor Trust Strip Certificates, and the income therefrom, will be so characterized. However, the policies underlying these sections (namely, to encourage or require investments in mortgage loans by thrift institutions and real estate investment trusts) may suggest that this characterization is appropriate. Counsel to the company will not deliver any opinion on these questions. Prospective purchasers to which the characterization of an investment in Grantor Trust Strip Certificates is material should consult their tax advisors regarding whether the Grantor Trust Strip Certificates, and the income therefrom, will be so characterized. The Grantor Trust Strip Certificates will be "obligation[s] (including any participation or Certificate of beneficial ownership therein) which . . ..[are] principally secured by an interest in real property" within the meaning of Section 860G(a)(3)(A) of the Code. TAXATION OF OWNERS OF GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES. Holders of a particular series of Grantor Trust Fractional Interest Certificates generally will be required to report on their federal income tax returns their shares of the entire income from the mortgage loans (including amounts used to pay reasonable servicing fees and other expenses) and will be entitled to deduct their shares of any such reasonable servicing fees and other expenses. Because of stripped interests, market or original issue discount, or premium, the amount includible in income on account of a Grantor Trust Fractional Interest Certificate may differ significantly from the amount distributable thereon representing interest on the mortgage loans. Under Section 67 of the Code, an individual, estate or trust holding a Grantor Trust Fractional Interest Certificate directly or through some pass-through entities will be allowed a deduction for the reasonable servicing fees and expenses only to the extent that the aggregate of the holder's miscellaneous itemized deductions exceeds two percent of the holder's adjusted gross income. In addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted gross income exceeds a specified amount will be reduced by the lesser of (1) 3% of the excess of the individual's adjusted gross income over the amount or (2) 80% of the amount of itemized deductions otherwise allowable for the taxable year. The amount of additional taxable income reportable by holders of Grantor Trust 108
424B5282nd Page of 311TOC1stPreviousNextBottomJust 282nd
Fractional Interest Certificates who are subject to the limitations of either Section 67 or Section 68 of the Code may be substantial. Further, certificateholders (other than corporations) subject to the alternative minimum tax may not deduct miscellaneous itemized deductions in determining the holder's alternative minimum taxable income. Although it is not entirely clear, it appears that in transactions in which multiple classes of Grantor Trust Certificates (including Grantor Trust Strip Certificates) are issued, the fees and expenses should be allocated among the classes of Grantor Trust Certificates using a method that recognizes that each such class benefits from the related services. In the absence of statutory or administrative clarification as to the method to be used, it currently is intended to base information returns or reports to the IRS and certificateholders on a method that allocates the expenses among classes of Grantor Trust Certificates with respect to each period based on the distributions made to each such class during that period. The federal income tax treatment of Grantor Trust Fractional Interest Certificates of any series will depend on whether they are subject to the "stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional Interest Certificates may be subject to those rules if (1) a class of Grantor Trust Strip Certificates is issued as part of the same series of certificates or (2) the company or any of its affiliates retains (for its own account or for purposes of resale) a right to receive a specified portion of the interest payable on the mortgage loans. Further, the IRS has ruled that an unreasonably high servicing fee retained by a seller or servicer will be treated as a retained ownership interest in mortgages that constitutes a stripped coupon. For purposes of determining what constitutes reasonable servicing fees for various types of mortgages the IRS has established "safe harbors." The servicing fees paid with respect to the mortgage loans for a series of Grantor Trust Certificates may be higher than the "safe harbors" and, accordingly, may not constitute reasonable servicing compensation. The related prospectus supplement will include information regarding servicing fees paid to the master servicer, any subservicer or their respective affiliates necessary to determine whether the preceding "safe harbor" rules apply. IF STRIPPED BOND RULES APPLY. If the stripped bond rules apply, each Grantor Trust Fractional Interest Certificate will be treated as having been issued with "original issue discount" within the meaning of Section 1273(a) of the Code, subject, however, to the discussion below regarding the treatment of some stripped bonds as market discount bonds and the discussion regarding de minimis market discount. See "--Taxation of Owners of Grantor Trust Fractional Interest Certificates--Market Discount" below. Under the stripped bond rules, the holder of a Grantor Trust Fractional Interest Certificate (whether a cash or accrual method taxpayer) will be required to report interest income from its Grantor Trust Fractional Interest Certificate for each month in an amount equal to the income that accrues on the certificate in that month calculated under a constant yield method, in accordance with the rules of the Code relating to original issue discount. The original issue discount on a Grantor Trust Fractional Interest Certificate will be the excess of the certificate's stated redemption price over its issue price. The issue price of a Grantor Trust Fractional Interest Certificate as to any purchaser will be equal to the price paid by the purchaser for the Grantor Trust Fractional Interest Certificate. The stated redemption price of a Grantor Trust Fractional Interest Certificate will be the sum of all payments to be made on the certificate, other than "qualified stated interest," if any, as well as the certificate's share of reasonable servicing fees and other expenses. See "--Taxation of Owners of Grantor Trust Fractional Interest Certificates--If Stripped Bond Rules Do Not Apply" for a definition of "qualified stated interest." In general, the amount of the income that accrues in any month would equal the product of the holder's adjusted basis in the Grantor Trust Fractional Interest Certificate at the beginning of the month (see "Sales of Grantor Trust Certificates") and the yield of the Grantor Trust Fractional Interest Certificate to the holder. This yield would be computed at the rate (compounded based on the regular interval between distribution dates) that, if used to discount the holder's share of future payments on the mortgage loans, would cause the present value of those future payments to equal the price at which the holder purchased the certificate. In computing yield under the stripped bond rules, a certificateholder's share of 109
424B5283rd Page of 311TOC1stPreviousNextBottomJust 283rd
future payments on the mortgage loans will not include any payments made in respect of any ownership interest in the mortgage loans retained by the company, the master servicer, any subservicer or their respective affiliates, but will include the certificateholder's share of any reasonable servicing fees and other expenses. To the extent the Grantor Trust Fractional Interest Certificates represent an interest in any pool of debt instruments the yield on which may be affected by reason of prepayments, for taxable years beginning after August 5, 1997, Section 1272(a)(6) of the Code requires (1) the use of a reasonable prepayment assumption in accruing original issue discount and (2) adjustments in the accrual of original issue discount when prepayments do not conform to the prepayment assumption. It is unclear whether those provisions would be applicable to the Grantor Trust Fractional Interest Certificates that do not represent an interest in any pool of debt instruments the yield on which may be affected by reason of prepayments, or for taxable years beginning prior to August 5, 1997 or whether use of a reasonable prepayment assumption may be required or permitted without reliance on these rules. It is also uncertain, if a prepayment assumption is used, whether the assumed prepayment rate would be determined based on conditions at the time of the first sale of the Grantor Trust Fractional Interest Certificate or, with respect to any holder, at the time of purchase of the Grantor Trust Fractional Interest Certificate by that holder. Certificateholders are advised to consult their own tax advisors concerning reporting original issue discount with respect to Grantor Trust Fractional Interest Certificates and, in particular, whether a prepayment assumption should be used in reporting original issue discount. In the case of a Grantor Trust Fractional Interest Certificate acquired at a price equal to the principal amount of the mortgage loans allocable to the certificate, the use of a prepayment assumption generally would not have any significant effect on the yield used in calculating accruals of interest income. In the case, however, of a Grantor Trust Fractional Interest Certificate acquired at a discount or premium (that is, at a price less than or greater than the principal amount, respectively), the use of a reasonable prepayment assumption would increase or decrease the yield, and thus accelerate or decelerate, respectively, the reporting of income. If a prepayment assumption is not used, then when a mortgage loan prepays in full, the holder of a Grantor Trust Fractional Interest Certificate acquired at a discount or a premium generally will recognize ordinary income or loss equal to the difference between the portion of the prepaid principal amount of the mortgage loan that is allocable to the certificate and the portion of the adjusted basis of the certificate that is allocable to the certificateholder's interest in the mortgage loan. If a prepayment assumption is used, it appears that no separate item of income or loss should be recognized upon a prepayment. Instead, a prepayment should be treated as a partial payment of the stated redemption price of the Grantor Trust Fractional Interest Certificate and accounted for under a method similar to that described for taking account of original issue discount on REMIC Regular Certificates. See "--REMICs--Taxation of Owners of REMIC Regular Certificates--Original Issue Discount." It is unclear whether any other adjustments would be required to reflect differences between an assumed prepayment rate and the actual rate of prepayments. It is currently intended to base information reports or returns to the IRS and certificateholders in transactions subject to the stripped bond rules on a Prepayment Assumption that will be disclosed in the related prospectus supplement and on a constant yield computed using a representative initial offering price for each class of certificates. However, none of the company, the master servicer or the trustee will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment Assumption or any other rate and certificateholders should bear in mind that the use of a representative initial offering 110
424B5284th Page of 311TOC1stPreviousNextBottomJust 284th
price will mean that the information returns or reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders of each series who bought at that price. Under Treasury regulation Section 1.1286-1, some stripped bonds are to be treated as market discount bonds and, accordingly, any purchaser of such a bond is to account for any discount on the bond as market discount rather than original issue discount. This treatment only applies, however, if immediately after the most recent disposition of the bond by a person stripping one or more coupons from the bond and disposing of the bond or coupon (1) there is no original issue discount (or only a de minimis amount of original issue discount) or (2) the annual stated rate of interest payable on the original bond is no more than one percentage point lower than the gross interest rate payable on the original mortgage loan (before subtracting any servicing fee or any stripped coupon). If interest payable on a Grantor Trust Fractional Interest Certificate is more than one percentage point lower than the gross interest rate payable on the mortgage loans, the related prospectus supplement will disclose that fact. If the original issue discount or market discount on a Grantor Trust Fractional Interest Certificate determined under the stripped bond rules is less than 0.25% of the stated redemption price multiplied by the weighted average maturity of the mortgage loans, then that original issue discount or market discount will be considered to be de minimis. Original issue discount or market discount of only a de minimis amount will be included in income in the same manner as de minimis original issue and market discount described in "Characteristics of Investments in Grantor Trust Certificates--If Stripped Bond Rules Do Not Apply" and "--Market Discount" below. IF STRIPPED BOND RULES DO NOT APPLY. Subject to the discussion below on original issue discount, if the stripped bond rules do not apply to a Grantor Trust Fractional Interest Certificate, the certificateholder will be required to report its share of the interest income on the mortgage loans in accordance with the certificateholder's normal method of accounting. The original issue discount rules will apply to a Grantor Trust Fractional Interest Certificate to the extent it evidences an interest in mortgage loans issued with original issue discount. The original issue discount, if any, on the mortgage loans will equal the difference between the stated redemption price of the mortgage loans and their issue price. Under the OID Regulations, the stated redemption price is equal to the total of all payments to be made on the mortgage loan other than "qualified stated interest." "Qualified stated interest" is interest that is unconditionally payable at least annually at a single fixed rate, or at a "qualified floating rate," an "objective rate," a combination of a single fixed rate and one or more "qualified floating rates" or one "qualified inverse floating rate," or a combination of "qualified floating rates" that does not operate in a manner that accelerates or defers interest payments on the mortgage loan. In general, the issue price of a mortgage loan will be the amount received by the borrower from the lender under the terms of the mortgage loan, less any "points" paid by the borrower, and the stated redemption price of a mortgage loan will equal its principal amount, unless the mortgage loan provides for an initial below-market rate of interest or the acceleration or the deferral of interest payments. The determination as to whether original issue discount will be considered to be de minimis will be calculated using the same test described in the REMIC discussion. See "--Taxation of Owners of REMIC Regular Certificates--Original Issue Discount" above. In the case of mortgage loans bearing adjustable or variable interest rates, the related prospectus supplement will describe the manner in which the rules will be applied with respect to those mortgage loans by the master servicer or the trustee in preparing information returns to the certificateholders and the IRS. If original issue discount is in excess of a de minimis amount, all original issue discount with respect to a mortgage loan will be required to be accrued and reported in income each month, based on a constant 111
424B5285th Page of 311TOC1stPreviousNextBottomJust 285th
yield. Section1272(a)(6) of the Code requires that a prepayment assumption be made in computing yield with respect to any pool of debt instruments the yield on which may be affected by reason of prepayments. Accordingly, for certificates backed by these pools, it is intended to base information reports and returns to the IRS and certificateholders for taxable years beginning after August 5, 1997, on the use of a prepayment assumption. However, in the case of certificates not backed by these pools or with respect to taxable years beginning prior to August 5, 1997, it currently is not intended to base the reports and returns on the use of a prepayment assumption. Certificateholders are advised to consult their own tax advisors concerning whether a prepayment assumption should be used in reporting original issue discount with respect to Grantor Trust Fractional Interest Certificates. Certificateholders should refer to the related prospectus supplement with respect to each series to determine whether and in what manner the original issue discount rules will apply to mortgage loans in the series. A purchaser of a Grantor Trust Fractional Interest Certificate that purchases the Grantor Trust Fractional Interest Certificate at a cost less than the certificate's allocable portion of the aggregate remaining stated redemption price of the mortgage loans held in the related trust fund will also be required to include in gross income the certificate's daily portions of any original issue discount with respect to the mortgage loans. However, each such daily portion will be reduced, if the cost of the Grantor Trust Fractional Interest Certificate to the purchaser is in excess of the certificate's allocable portion of the aggregate "adjusted issue prices" of the mortgage loans held in the related trust fund, approximately in proportion to the ratio the excess bears to the certificate's allocable portion of the aggregate original issue discount remaining to be accrued on the mortgage loans. The adjusted issue price of a mortgage loan on any given day equals the sum of (1) the adjusted issue price (or, in the case of the first accrual period, the issue price) of the mortgage loan at the beginning of the accrual period that includes the day and (2) the daily portions of original issue discount for all days during the accrual period prior to the day. The adjusted issue price of a mortgage loan at the beginning of any accrual period will equal the issue price of the mortgage loan, increased by the aggregate amount of original issue discount with respect to the mortgage loan that accrued in prior accrual periods, and reduced by the amount of any payments made on the mortgage loan in prior accrual periods of amounts included in its stated redemption price. In addition to its regular reports, the master servicer or the trustee, except as provided in the related prospectus supplement, will provide to any holder of a Grantor Trust Fractional Interest Certificate such information as the holder may reasonably request from time to time with respect to original issue discount accruing on Grantor Trust Fractional Interest Certificates. See "Grantor Trust Reporting" below. MARKET DISCOUNT. If the stripped bond rules do not apply to the Grantor Trust Fractional Interest Certificate, a certificateholder may be subject to the market discount rules of Sections 1276 through 1278 of the Code to the extent an interest in a mortgage loan is considered to have been purchased at a "market discount," that is, in the case of a mortgage loan issued without original issue discount, at a purchase price less than its remaining stated redemption price (as defined above), or in the case of a mortgage loan issued with original issue discount, at a purchase price less than its adjusted issue price (as defined above). If market discount is in excess of a de minimis amount (as described below), the holder generally will be required to include in income in each month the amount of the discount that has accrued (under the rules described in the next paragraph) through the month that has not previously been included in income, but limited, in the case of the portion of the discount that is allocable to any mortgage loan, to the payment of stated redemption price on the mortgage loan that is received by (or, in the case of accrual basis certificateholders, due to) the trust fund in that month. A certificateholder may elect to include market discount in income currently as it accrues (under a constant yield method based on the yield of the certificate to the holder) rather than including it on a deferred basis in accordance with the foregoing under rules similar to those described in "--Taxation of Owners of REMIC Regular Certificates--Market Discount" above. 112
424B5286th Page of 311TOC1stPreviousNextBottomJust 286th
Section 1276(b)(3) of the Code authorized the Treasury Department to issue regulations providing for the method for accruing market discount on debt instruments, the principal of which is payable in more than one installment. Until such time as regulations are issued by the Treasury Department, some rules described in the Committee Report will apply. Under those rules, in each accrual period market discount on the mortgage loans should accrue, at the certificateholder's option: (1) on the basis of a constant yield method, (2) in the case of a mortgage loan issued without original issue discount, in an amount that bears the same ratio to the total remaining market discount as the stated interest paid in the accrual period bears to the total stated interest remaining to be paid on the mortgage loan as of the beginning of the accrual period, or (3) in the case of a mortgage loan issued with original issue discount, in an amount that bears the same ratio to the total remaining market discount as the original issue discount accrued in the accrual period bears to the total original issue discount remaining at the beginning of the accrual period. The prepayment assumption, if any, used in calculating the accrual of original issue discount is to be used in calculating the accrual of market discount. The effect of using a prepayment assumption could be to accelerate the reporting of the discount income. Because the regulations referred to in this paragraph have not been issued, it is not possible to predict what effect the regulations might have on the tax treatment of a mortgage loan purchased at a discount in the secondary market. Because the mortgage loans will provide for periodic payments of stated redemption price, the market discount may be required to be included in income at a rate that is not significantly slower than the rate at which the discount would be included in income if it were original issue discount. Market discount with respect to mortgage loans may be considered to be de minimis and, if so, will be includible in income under de minimis rules similar to those described above in "--REMICs--Taxation of Owners of REMIC Regular Certificates--Original Issue Discount" with the exception that it is less likely that a prepayment assumption will be used for purposes of these rules with respect to the mortgage loans. Further, under the rules described in "--REMICs--Taxation of Owners of REMIC Regular Certificates--Market Discount," above, any discount that is not original issue discount and exceeds a de minimis amount may require the deferral of interest expense deductions attributable to accrued market discount not yet includible in income, unless an election has been made to report market discount currently as it accrues. This rule applies without regard to the origination dates of the mortgage loans. PREMIUM. If a certificateholder is treated as acquiring the underlying mortgage loans at a premium, that is, at a price in excess of their remaining stated redemption price, the certificateholder may elect under Section 171 of the Code to amortize using a constant yield method the portion of the premium allocable to mortgage loans originated after September 27, 1985. Amortizable premium is treated as an offset to interest income on the related debt instrument, rather than as a separate interest deduction. However, premium allocable to mortgage loans originated before September 28, 1985 or to mortgage loans for which an amortization election is not made, should be allocated among the payments of stated redemption price on the mortgage loan and be allowed as a deduction as these payments are made (or, for a certificateholder using the accrual method of accounting, when the payments of stated redemption price are due). It is unclear whether a prepayment assumption should be used in computing amortization of premium allowable under Section 171 of the Code. If premium is not subject to amortization using a prepayment assumption and a mortgage loan prepays in full, the holder of a Grantor Trust Fractional Interest Certificate acquired at a premium should recognize a loss, equal to the difference between the portion of the prepaid principal amount of the mortgage loan that is allocable to the certificate and the portion of the adjusted basis of the certificate that is allocable to the mortgage loan. If a prepayment assumption is used to amortize 113
424B5287th Page of 311TOC1stPreviousNextBottomJust 287th
premium, it appears that such a loss would be unavailable. Instead, if a prepayment assumption is used, a prepayment should be treated as a partial payment of the stated redemption price of the Grantor Trust Fractional Interest Certificate and accounted for under a method similar to that described for taking account of original issue discount on REMIC Regular Certificates. See "REMICs--Taxation of Owners of REMIC Regular Certificates--Original Issue Discount." It is unclear whether any other adjustments would be required to reflect differences between the prepayment assumption used, and the actual rate of prepayments. TAXATION OF OWNERS OF GRANTOR TRUST STRIP CERTIFICATES. The "stripped coupon" rules of Section 1286 of the Code will apply to the Grantor Trust Strip Certificates. Except as described above in "Characterization of Investments in Grantor Trust Certificates--If Stripped Bond Rules Apply," no regulations or published rulings under Section 1286 of the Code have been issued and some uncertainty exists as to how it will be applied to securities such as the Grantor Trust Strip Certificates. Accordingly, holders of Grantor Trust Strip Certificates should consult their own tax advisors concerning the method to be used in reporting income or loss with respect to the certificates. The OID Regulations do not apply to "stripped coupons," although they provide general guidance as to how the original issue discount sections of the Code will be applied. In addition, the discussion below is subject to the discussion under "--Possible Application of Contingent Payment Rules" and assumes that the holder of a Grantor Trust Strip Certificate will not own any Grantor Trust Fractional Interest Certificates. Under the stripped coupon rules, it appears that original issue discount will be required to be accrued in each month on the Grantor Trust Strip Certificates based on a constant yield method. In effect, each holder of Grantor Trust Strip Certificates would include as interest income in each month an amount equal to the product of the holder's adjusted basis in the Grantor Trust Strip Certificate at the beginning of that month and the yield of the Grantor Trust Strip Certificate to the holder. The yield would be calculated based on the price paid for that Grantor Trust Strip Certificate by its holder and the payments remaining to be made thereon at the time of the purchase, plus an allocable portion of the servicing fees and expenses to be paid with respect to the mortgage loans. See "Characterization of Investments in Grantor Trust Certificates--If Stripped Bond Rules Apply" above. As noted above, Section 1272(a)(6) of the Code requires that a prepayment assumption be used in computing the accrual of original issue discount with respect to some categories of debt instruments, and that adjustments be made in the amount and rate of accrual of the discount when prepayments do not conform to the prepayment assumption. To the extent the Grantor Trust Strip Certificates represent an interest in any pool of debt instruments the yield on which may be affected by reason of prepayments, those provisions will apply to the Grantor Trust Strip Certificates for taxable years beginning after August 5, 1997. It is unclear whether those provisions would be applicable to the Grantor Trust Strip Certificates that do not represent an interest in any such pool or for taxable years beginning prior to August 5, 1997, or whether use of a prepayment assumption may be required or permitted in the absence of these provisions. It is also uncertain, if a prepayment assumption is used, whether the assumed prepayment rate would be determined based on conditions at the time of the first sale of the Grantor Trust Strip Certificate or, with respect to any subsequent holder, at the time of purchase of the Grantor Trust Strip Certificate by that holder. The accrual of income on the Grantor Trust Strip Certificates will be significantly slower if a prepayment assumption is permitted to be made than if yield is computed assuming no prepayments. It currently is intended to base information returns or reports to the IRS and certificateholders on the prepayment Assumption disclosed in the related prospectus supplement and on a constant yield computed using a representative initial offering price for each class of certificates. However, none of the company, the 114
424B5288th Page of 311TOC1stPreviousNextBottomJust 288th
master servicer or the trustee will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment Assumption or at any other rate and certificateholders should bear in mind that the use of a representative initial offering price will mean that the information returns or reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders of each series who bought at that price. Prospective purchasers of the Grantor Trust Strip Certificates should consult their own tax advisors regarding the use of the Prepayment Assumption. It is unclear under what circumstances, if any, the prepayment of a mortgage loan will give rise to a loss to the holder of a Grantor Trust Strip Certificate. If a Grantor Trust Strip Certificate is treated as a single instrument (rather than an interest in discrete mortgage loans) and the effect of prepayments is taken into account in computing yield with respect to the Grantor Trust Strip Certificate, it appears that no loss may be available as a result of any particular prepayment unless prepayments occur at a rate faster than the Prepayment Assumption. However, if a Grantor Trust Strip Certificate is treated as an interest in discrete mortgage loans, or if the Prepayment Assumption is not used, then when a mortgage loan is prepaid, the holder of a Grantor Trust Strip Certificate should be able to recognize a loss equal to the portion of the adjusted issue price of the Grantor Trust Strip Certificate that is allocable to the mortgage loan. POSSIBLE APPLICATION OF CONTINGENT PAYMENT RULES. The coupon stripping rules' general treatment of stripped coupons is to regard them as newly issued debt instruments in the hands of each purchaser. To the extent that payments on the Grantor Trust Strip Certificates would cease if the mortgage loans were prepaid in full, the Grantor Trust Strip Certificates could be considered to be debt instruments providing for contingent payments. Under the OID Regulations, debt instruments providing for contingent payments are not subject to the same rules as debt instruments providing for noncontingent payments. Regulations were promulgated on June 14, 1996, regarding contingent payment debt instruments (the "Contingent Payment Regulations"), but it appears that Grantor Trust Strip Certificates, to the extent subject to Section 1272(a)(6) of the Code, as described above, or due to their similarity to other mortgage-backed securities(such as REMIC regular interests and debt instruments subject to Section 1272(a)(6) of the Code) that are expressly excepted from the application of the Contingent Payment Regulations, are or may be excepted from these regulations. Like the OID Regulations, the Contingent Payment Regulations do not specifically address securities, such as the Grantor Trust Strip Certificates, that are subject to the stripped bond rules of Section 1286 of the Code. If the contingent payment rules under the Contingent Payment Regulations were to apply, the holder of a Grantor Trust Strip Certificate would be required to apply the "noncontingent bond method." Under the "noncontingent bond method," the issuer of a Grantor Trust Strip Certificate determines a projected payment schedule on which interest will accrue. Holders of Grantor Trust Strip Certificates are bound by the issuer's projected payment schedule. The projected payment schedule consists of all noncontingent payments and a projected amount for each contingent payment based on the projected yield (as described below) of the Grantor Trust Strip Certificate. The projected amount of each payment is determined so that the projected payment schedule reflects the projected yield. The projected amount of each payment must reasonably reflect the relative expected values of the payments to be received by the holder of a Grantor Trust Strip Certificate. The projected yield referred to above is a reasonable rate, not less than the "applicable Federal rate" that, as of the issue date, reflects general market conditions, the credit quality of the issuer, and the terms and conditions of the mortgage loans. The holder of a Grantor Trust Strip Certificate would be required to include as interest income in each month the adjusted issue price of the Grantor Trust Strip Certificate at the beginning of the period multiplied by the projected yield, and would add to, or subtract from, the income any variation between the payment actually received in that month and the payment originally projected to be made in that month. 115
424B5289th Page of 311TOC1stPreviousNextBottomJust 289th
Assuming that a prepayment assumption were used, if the Contingent Payment Regulations or their principles were applied to Grantor Trust Strip Certificates, the amount of income reported with respect thereto would be substantially similar to that described under "Taxation of Owners of Grantor Trust Strip Certificates". Certificateholders should consult their tax advisors concerning the possible application of the contingent payment rules to the Grantor Trust Strip Certificates. SALES OF GRANTOR TRUST CERTIFICATES. Any gain or loss equal to the difference between the amount realized on the sale or exchange of a Grantor Trust Certificate and its adjusted basis, recognized on the sale or exchange of a Grantor Trust Certificate by an investor who holds the Grantor Trust Certificate as a capital asset, will be capital gain or loss, except to the extent of accrued and unrecognized market discount, which will be treated as ordinary income, and (in the case of banks and other financial institutions) except as provided under Section 582(c) of the Code. The adjusted basis of a Grantor Trust Certificate generally will equal its cost, increased by any income reported by the seller (including original issue discount and market discount income) and reduced (but not below zero) by any previously reported losses, any amortized premium and by any distributions with respect to the Grantor Trust Certificate. Gain or loss from the sale of a Grantor Trust Certificate may be partially or wholly ordinary and not capital in some circumstances. Gain attributable to accrued and unrecognized market discount will be treated as ordinary income, as will gain or loss recognized by banks and other financial institutions subject Section 582(c) of the Code. Furthermore, a portion of any gain that might otherwise be capital gain may be treated as ordinary income to the extent that the Grantor Trust Certificate is held as part of a "conversion transaction" within the meaning of Section 1258 of the Code. A conversion transaction generally is one in which the taxpayer has taken two or more positions in the same or similar property that reduce or eliminate market risk, if substantially all of the taxpayer's return is attributable to the time value of the taxpayer's net investment in the transaction. The amount of gain realized in a conversion transaction that is recharacterized as ordinary income generally will not exceed the amount of interest that would have accrued on the taxpayer's net investment at 120% of the appropriate "applicable Federal rate" (which rate is computed and published monthly by the IRS) at the time the taxpayer enters into the conversion transaction, subject to appropriate reduction for prior inclusion of interest and other ordinary income items from the transaction. Finally, a taxpayer may elect to have net capital gain taxed at ordinary income rates rather than capital gains rates in order to include the net capital gain in total net investment income for that taxable year, for purposes of the rule that limits the deduction of interest on indebtedness incurred to purchase or carry property held for investment to a taxpayer's net investment income. GRANTOR TRUST REPORTING. The master servicer or the trustee will furnish to each holder of a Grantor Trust Fractional Interest Certificate with each distribution a statement setting forth the amount of the distribution allocable to principal on the underlying mortgage loans and to interest thereon at the related pass-through rate. In addition, the master servicer or the trustee will furnish, within a reasonable time after the end of each calendar year, to each holder of a Grantor Trust Certificate who was a holder at any time during that year, information regarding the amount of servicing compensation received by the master servicer and subservicer (if any) and any other customary factual information as the master servicer or the trustee deems necessary or desirable to enable holders of Grantor Trust Certificates to prepare their tax returns and will furnish comparable information to the IRS as and when required by law to do so. Because the rules for accruing discount and amortizing premium with respect to the Grantor Trust Certificates are uncertain in various respects, there is no assurance the IRS will agree with the trust fund's information reports of these items of income and expense. Moreover, these information reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as to the initial certificateholders that bought their certificates at the representative initial offering price used in preparing the reports. 116
424B5290th Page of 311TOC1stPreviousNextBottomJust 290th
Except as disclosed in the related prospectus supplement, the responsibility for complying with the foregoing reporting rules will be borne by the master servicer or the trustee. BACKUP WITHHOLDING. In general, the rules described in "--REMICS--Backup Withholding with Respect to REMIC Certificates" will also apply to Grantor Trust Certificates. FOREIGN INVESTORS. In general, the discussion with respect to REMIC Regular certificates in "REMICS--Foreign Investors in REMIC Certificates" applies to Grantor Trust Certificates except that Grantor Trust Certificates will, except as disclosed in the related prospectus supplement, be eligible for exemption from U.S. withholding tax, subject to the conditions described in the discussion, only to the extent the related mortgage loans were originated after July 18, 1984. To the extent that interest on a Grantor Trust Certificate would be exempt under Sections 871(h)(1) and 881(c) of the Code from United States withholding tax, and the Grantor Trust Certificate is not held in connection with a certificateholder's trade or business in the United States, the Grantor Trust Certificate will not be subject to United States estate taxes in the estate of a non-resident alien individual. STATE AND OTHER TAX CONSEQUENCES In addition to the federal income tax consequences described in "Federal Income Tax Consequences", potential investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the securities offered under this prospectus and the prospectus supplement. State tax law may differ substantially from the corresponding federal tax law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction. Therefore, prospective investors should consult their own tax advisors with respect to the various state and other tax consequences of investments in the securities offered under this prospectus and the prospectus supplement. ERISA CONSIDERATIONS Sections 404 and 406 of ERISA impose fiduciary and prohibited transaction restrictions on ERISA Plans and on various other retirement plans and arrangements, including bank collective investment funds and insurance company general and separate accounts in which ERISA Plans are invested. Section 4975 of the Code imposes essentially the same prohibited transaction restrictions on Tax Favored Plans. ERISA and the Code prohibit a broad range of transactions involving assets of Plans and Parties in Interest, unless a statutory or administrative exemption is available with respect to any such transaction. Some employee benefit plans, including governmental plans (as defined in Section 3(32) of ERISA), and, if no election has been made under Section 410(d) of the Code, church plans (as defined in Section 3(33) of ERISA) are not subject the ERISA requirements. Accordingly, assets of these plans may be invested in the securities without regard to the ERISA considerations described below, subject to the provisions of other applicable federal, state and local law. Any such plan which is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code, however, is subject to the prohibited transaction rules set forth in Section 503 of the Code. ERISA generally imposes on Plan fiduciaries general fiduciary requirements, including those of investment prudence and diversification and the requirement that a Plan's investments be made in accordance 117
424B5291st Page of 311TOC1stPreviousNextBottomJust 291st
with the documents governing the Plan. Any person who has discretionary authority or control with respect to the management or disposition of a Plan's assets, or "Plan Assets," and any person who provides investment advice with respect to Plan Assets for a fee is a fiduciary of the investing Plan. If the mortgage loans and other assets included in the trust fund were to constitute Plan Assets, then any party exercising management or discretionary control with respect to those Plan Assets may be deemed to be a Plan "fiduciary," and thus subject to the fiduciary responsibility provisions of ERISA and the prohibited transaction provisions of ERISA and Section 4975 of the Code with respect to any investing Plan. In addition, the acquisition or holding of securities by or on behalf of a Plan or with Plan Assets, as well as the operation of the trust fund, may constitute or involve a prohibited transaction under ERISA and the Code unless a statutory or administrative exemption is available. Further, ERISA and the Code prohibit a broad range of transactions involving Plan Assets and persons, called Parties in Interest unless a statutory or administrative exemption is available. Some Parties in Interest that participate in a prohibited transaction may be subject to a penalty (or an excise tax) imposed under Section 502(i) of ERISA or Section 4975 of the Code, unless a statutory or administrative exemption is available with respect to any transaction of this sort. Some transactions involving the trust fund might be deemed to constitute prohibited transactions under ERISA and the Code with respect to a Plan that purchases the securities, if the mortgage loans and other assets included in a trust fund are deemed to be assets of the Plan. The DOL has promulgated the DOL Regulations concerning whether or not a Plan's assets would be deemed to include an interest in the underlying assets of an entity, including a trust fund, for purposes of applying the general fiduciary responsibility provisions of ERISA and the prohibited transaction provisions of ERISA and the Code. Under the DOL Regulations, generally, when a Plan acquires an "equity interest" in another entity (such as the trust fund), the underlying assets of that entity may be considered to be Plan Assets unless an exception applies. Exceptions contained in the DOL Regulations provide that Plan Assets will not include an undivided interest in each asset of an entity in which the Plan makes an equity investment if: (1) the entity is an operating company; (2) the equity investment made by the Plan is either a "publicly-offered security" that is "widely held," both as defined in the DOL Regulations, or a security issued by an investment company registered under the Investment Company Act of 1940, as amended; or (3) Benefit Plan Investors do not own 25% or more in value of any class of equity securities issued by the entity. In addition, the DOL Regulations provide that the term "equity interest" means any interest in an entity other than an instrument which is treated as indebtedness under applicable local law and which has no "substantial equity features." Under the DOL Regulations, Plan Assets will be deemed to include an interest in the instrument evidencing the equity interest of a Plan (such as a certificate or a note with "substantial equity features"), and, because of the factual nature of some of the rules set forth in the DOL Regulations, Plan Assets may be deemed to include an interest in the underlying assets of the entity in which a Plan acquires an interest (such as the trust fund). Without regard to whether the securities are characterized as equity interests, the purchase, sale and holding of notes by or on behalf of a Plan could be considered to give rise to a prohibited transaction if the Issuer, the trustee or any of their respective affiliates is or becomes a Party in Interest with respect to the Plan. Neither Plans nor persons investing Plan Assets should acquire or hold securities in reliance upon the availability of any exception under the DOL Regulations. The DOL has issued Exemptions to some underwriters, which generally exempt from the application of the prohibited transaction provisions of Section 406 of ERISA, and the excise taxes imposed on those prohibited transactions pursuant to Section 4975(a) and (b) of the Code, some transactions, among others, relating to the servicing and operation of mortgage pools and the initial purchase, holding and subsequent resale of mortgage pass-through certificates or other "securities" underwritten by an Underwriter, as defined below, provided that the conditions set forth in the Exemption are satisfied. For purposes of this section "ERISA Considerations", the term "Underwriter" shall include (1) the underwriter, (2) any person directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with 118
424B5292nd Page of 311TOC1stPreviousNextBottomJust 292nd
the underwriter and (3) any member of the underwriting syndicate or selling group of which a person described in (1) or (2) is a manager or co-manager with respect to a class of securities. The Exemption sets forth six general conditions which must be satisfied for the Exemption to apply. First, the acquisition of securities by a Plan or with Plan Assets must be on terms that are at least as favorable to the Plan as they would be in an arm's-length transaction with an unrelated party. Second, the Exemption applies only to securities evidencing rights and interests that are not subordinated to the rights and interests evidenced by other securities of the same trust, unless none of the mortgage loans has a loan-to-value ratio or combined loan-to-value ratio at the date of issuance of the securities that exceeds 100%. Third, the securities at the time of acquisition by a Plan or with Plan Assets must be rated in one of the four highest generic rating categories by either of Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc., Moody's Investor Service, Inc. or Fitch Ratings, collectively referred to as the Exemption Rating Agencies. However, the securities must be rated in one of the two highest generic categories by an Exemption Rating Agency if the loan-to-value ratio or combined loan-to-value ratio of any one- to four-family residential mortgage loan or home equity loan held in the trust exceeds 100% but does not exceed 125% at the date of issuance of the securities, and in that case the Exemption will not apply: (1) to any of the securities if any mortgage loan or other asset held in the trust (other than a one- to four-family residential mortgage loan or home equity loan) has a loan-to-value ratio or combined loan-to-value ratio that exceeds 100% at the Closing Date or (2) to any subordinate securities. Fourth, the trustee cannot be an affiliate of any member of the "Restricted Group" (which consists of any Underwriter, the company, the master servicer, the special servicer, any subservicer and any obligor with respect to assets included in the trust fund constituting more than 5% of the aggregate unamortized principal balance of the assets in the trust fund as of the date of initial issuance of the securities) other than the underwriter. Fifth, the sum of all payments made to and retained by the Underwriter(s) must represent not more than reasonable compensation for underwriting the securities; the sum of all payments made to and retained by the company pursuant to the assignment of the assets to the related trust fund must represent not more than the fair market value of the obligations; and the sum of all payments made to and retained by the master servicer, the special servicer and any subservicer must represent not more than reasonable compensation for the person's services under the related Agreement and reimbursement of the person's reasonable expenses in connection therewith. Sixth, the investing Plan or Plan Asset investor must be an accredited investor as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act. In addition, except as otherwise specified in the accompanying prospectus supplement or as described below, the exemptive relief afforded by the Exemption may not apply to any securities where the related trust fund contains a swap, a yield maintenance agreement or a pre-funding arrangement unless certain conditions are met. The Exemption also requires that the trust fund meet the following requirements: (1) the trust fund must consist solely of assets of the type that have been included in other investment pools; (2) securities evidencing interests in the other investment pools must have been rated in one of the four highest generic categories of one of the Exemption Rating Agencies for at least one year prior to the acquisition of securities by or on behalf of a Plan or with Plan Assets; and (3) securities evidencing interests in the other investment pools must have been purchased by investors other than Plans for at least one year prior to any acquisition of securities by or on behalf of a Plan or with Plan Assets. A fiduciary of a Plan or any person investing Plan Assets to purchase a security must make its own determination that the conditions set forth above will be satisfied with respect to the security. If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)of ERISA, and the excise taxes imposed by 119
424B5293rd Page of 311TOC1stPreviousNextBottomJust 293rd
Sections 4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code, in connection with the direct or indirect sale, exchange or transfer of securities in the initial issuance of the securities or the direct or indirect acquisition or disposition in the secondary market of securities by a Plan or with Plan Assets or the continued holding of securities acquired by a Plan or with Plan Assets pursuant to either of the foregoing. However, no exemption is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a Security on behalf of an "Excluded Plan" by any person who has discretionary authority or renders investment advice with respect to the assets of an Excluded Plan. For purposes of the securities, an Excluded Plan is a Plan sponsored by any member of the Restricted Group. If the specific conditions of the Exemption are also satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code, in connection with (1) the direct or indirect sale, exchange or transfer of securities in the initial issuance of securities between the company or an Underwriter and a Plan when the person who has discretionary authority or renders investment advice with respect to the investment of Plan Assets in the securities is (a) a mortgagor with respect to 5% or less of the fair market value of the trust fund assets or (b) an affiliate of such a person, (2) the direct or indirect acquisition or disposition in the secondary market of securities by a Plan or with Plan Assets and (3) the continued holding of securities acquired by a Plan or with Plan Assets pursuant to either of the foregoing. Further, if the specific conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(a), 406(b) and 407 of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code for transactions in connection with the servicing, management and operation of the trust fund. The company expects that the specific conditions of the Exemption required for this purpose will be satisfied with respect to the securities so that the Exemption would provide an exemption from the restrictions imposed by Sections 406(a) and (b) of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code)for transactions in connection with the servicing, management and operation of the trust fund, provided that the general conditions of the Exemption are satisfied. The Exemption also may provide an exemption from the application of the prohibited transaction provisions of Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed by Section 4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code if the restrictions are deemed to otherwise apply merely because a person is deemed to be a Party in Interest with respect to an investing Plan by virtue of providing services to the Plan (or by virtue of having a specified relationship to such a person) solely as a result of the Plan's ownership of securities. The Exemption extends exemptive relief to mortgage-backed and asset-backed securities transactions using pre-funding accounts for trusts issuing securities. With respect to the securities, the Exemption will generally allow mortgage loans supporting payments to securityholders, and having a value equal to no more than 25% of the total principal amount of the securities being offered by a trust fund, to be transferred to the trust fund within the Pre-Funding Period instead of requiring that all the mortgage loans be either identified or transferred on or before the Closing Date. In general, the relief applies to the purchase, sale and holding of securities which otherwise qualify for the Exemption, provided that the following general conditions are met: 120
424B5294th Page of 311TOC1stPreviousNextBottomJust 294th
o as mentioned, the ratio of the amount allocated to the pre-funding account to the total principal amount of the securities being offered must be less than or equal to 25%; o all additional mortgage loans transferred to the related trust fund after the Closing Date must meet the same terms and conditions for eligibility as the original mortgage loans used to create the trust fund, which terms and conditions have been approved by one of the Exemption Rating Agencies; o the transfer of the additional mortgage loans to the trust fund during the Pre-Funding Period must not result in the securities to be covered by the Exemptions receiving a lower credit rating from an Exemption Rating Agency upon termination of the Pre-Funding Period than the rating that was obtained at the time of the initial issuance of the securities by the trust fund; o solely as a result of the use of pre-funding, the weighted average annual percentage interest rate for the mortgage loans included in the related trust fund on the Closing Date and all additional mortgage loans transferred to the related trust fund after the Closing Date at the end of the Pre-Funding Period must not be more than 100 basis points lower than the rate for the mortgage loans which were transferred to the trust fund on the Closing Date; o either: (1) the characteristics of the additional mortgage loans transferred to the related trust fund after the Closing Date must be monitored by an insurer or other credit support provider which is independent of the company; or (2) an independent accountant retained by the company must provide the company with a letter (with copies provided to the Exemption Rating Agency rating the securities, the Underwriter and the trustee) stating whether or not the characteristics of the additional mortgage loans transferred to the related trust fund after the Closing Date conform to the characteristics described in the prospectus or prospectus supplement and/or agreement. In preparing the letter, the independent accountant must use the same type of procedures as were applicable to the mortgage loans which were transferred to the trust fund as of the Closing Date; o the Pre-Funding Period must end no later than three months or 90 days after the Closing Date or earlier in some circumstances if the pre-funding accounts falls below the minimum level specified in the Agreement or an event of default occurs; o amounts transferred to any pre-funding accounts and/or capitalized interest account used in connection with the pre-funding may be invested only in investments which are permitted by the Exemption Rating Agencies rating the securities and must: (1) be direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof (provided that the obligations are backed by the full faith and credit of the United States); or 121
424B5295th Page of 311TOC1stPreviousNextBottomJust 295th
(2) have been rated (or the obligor has been rated) in one of the three highest generic rating categories by one of the Exemption Rating Agencies ("ERISA Permitted Investments"); o the prospectus or prospectus supplement must describe the duration of the Pre-Funding Period; o the trustee (or any agent with which the trustee contracts to provide trust services) must be a substantial financial institution or trust company experienced in trust activities and familiar with its duties, responsibilities and liabilities with ERISA. The trustee, as legal owner of the trust fund, must enforce all the rights created in favor of securityholders of the trust fund, including employee benefit plans subject to ERISA. In addition to the Exemption, a Plan fiduciary or other Plan Asset investor should consider any available class exemptions granted by the DOL, which may provide relief from some of the prohibited transaction provisions of ERISA and the related excise tax provisions of the Code, including PTCE 83-1, regarding transactions involving mortgage pool investment trusts; PTCE 84-14, regarding transactions effected by a "qualified professional asset manager"; PTCE 90-1, regarding transactions by insurance company pooled separate accounts; PTCE 91-38, regarding investments by bank collective investment funds; PTCE 95-60, regarding transactions by insurance company general accounts; and PTCE 96-23, regarding transactions effected by an "in-house asset manager." Insurance companies contemplating the investment of general account assets in the securities should consult with their legal advisors with respect to the applicability of Section 401(c) of ERISA. The DOL issued final regulations under Section 401(c) which were published in the Federal Register on January 5, 2000, but these final regulations are generally not applicable until July 5, 2001. REPRESENTATION FROM PLANS INVESTING IN NOTES WITH "SUBSTANTIAL EQUITY FEATURES" OR NON-EXEMPT CERTIFICATES Because the exemptive relief afforded by the Exemption (or any similar exemption that might be available) will not apply to the purchase, sale or holding of certain securities, such as notes with "substantial equity features," subordinate securities in trusts containing mortgage loans with loan-to-value ratios in excess of 100%, REMIC Residual Certificates and any securities which are not rated in one of the four highest generic rating categories by the Exemption Rating Agencies, the prospectus supplement may provide that transfers of these securities to a Plan, to a trustee or other person acting on behalf of any Plan, or to any other person investing Plan Assets to effect the acquisition will not be registered by the trustee unless the transferee provides the trustee with an opinion of counsel satisfactory to the company, the trustee (or Indenture Trustee in the case of transfer of notes) and the master servicer, and on which the company, the trustee and the master servicer may rely, which opinion will not be at the expense of the company, the trustee (or the Indenture Trustee in the case of the transfer of notes) or the master servicer, that the purchase of the securities by or on behalf of the Plan is permissible under applicable law, will not constitute or result in any non-exempt prohibited transaction under ERISA or Section 4975 of the Code and will not subject the company, the trustee (or the indenture trustee in the case of the transfer of notes) or the master servicer to any obligation in addition to those undertaken in the related Agreement. 122
424B5296th Page of 311TOC1stPreviousNextBottomJust 296th
TAX EXEMPT INVESTORS A Plan that is exempt from federal income taxation pursuant to Section 501 of the Code nonetheless will be subject to federal income taxation to the extent that its income is "unrelated business taxable income" within the meaning of Section 512 of the Code. All "excess inclusion" of a REMIC allocated to a REMIC Residual Certificate and held by such an investor will be considered "unrelated business taxable income" and thus will be subject to federal income tax. See "Federal Income Tax Consequences--Taxation of Owners of REMIC Residual Certificates--Excess Inclusions." CONSULTATION WITH COUNSEL There can be no assurance that the Exemptions or any other DOL exemption will apply with respect to any particular Plan that acquires the securities or, even if all the conditions specified therein were satisfied, that any such exemption would apply to transactions involving the trust fund. Prospective Plan investors should consult with their legal counsel concerning the impact of ERISA and the Code and the potential consequences to their specific circumstances prior to making an investment in the securities. Neither the company, the trustees, the master servicer nor any of their respective affiliates will make any representation to the effect that the securities satisfy all legal requirements with respect to the investment therein by Plans generally or any particular Plan or to the effect that the securities are an appropriate investment for Plans generally or any particular Plan. BEFORE PURCHASING AN OFFERED SECURITY, A FIDUCIARY OF A PLAN OR OTHER PLAN ASSET INVESTOR SHOULD ITSELF CONFIRM THAT (A) ALL THE SPECIFIC AND GENERAL CONDITIONS SET FORTH IN THE EXEMPTION, ONE OF THE CLASS EXEMPTIONS OR SECTION 401(C) OF ERISA WOULD BE SATISFIED AND (B) IN THE CASE OF A SECURITY PURCHASED UNDER THE EXEMPTION, THE SECURITY CONSTITUTES A "SECURITY" FOR PURPOSES OF THE EXEMPTION. IN ADDITION TO MAKING ITS OWN DETERMINATION AS TO THE AVAILABILITY OF THE EXEMPTIVE RELIEF PROVIDED IN THE EXEMPTION, ONE OF THE CLASS EXEMPTIONS OR SECTION 410(C) OF ERISA, THE PLAN FIDUCIARY SHOULD CONSIDER ITS GENERAL FIDUCIARY OBLIGATIONS UNDER ERISA IN DETERMINING WHETHER TO PURCHASE THE SECURITIES ON BEHALF OF A PLAN. LEGAL INVESTMENT MATTERS Each class of certificates offered by this prospectus and by the related prospectus supplement will be rated at the date of issuance in one of the four highest rating categories by at least one Rating Agency. If so specified in the related prospectus supplement, each such class that is rated in one of the two highest rating categories by at least one Rating Agency will constitute "mortgage related securities" for purposes of SMMEA, and, as such, will be legal investments for persons, trusts, corporations, partnerships, associations, business trusts and business entities (including depository institutions, life insurance companies and pension funds) created pursuant to or existing under the laws of the United States or of any State whose authorized investments are subject to state regulation to the same extent that, under applicable law, obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof constitute legal investments for the entities. Under SMMEA, if a State enacted legislation on or prior to October 3, 1991 specifically limiting the legal investment authority of any such entities with respect to "mortgage related securities," such securities will constitute legal investments for entities subject to the legislation only to the extent provided therein. Some States have enacted legislation which overrides the preemption provisions of SMMEA. SMMEA provides, however, that in no event will the enactment of any such legislation affect the validity of any contractual commitment to purchase, hold or invest in "mortgage 123
424B5297th Page of 311TOC1stPreviousNextBottomJust 297th
related securities," or require the sale or other disposition of the securities, so long as the contractual commitment was made or the securities acquired prior to the enactment of the legislation. SMMEA also amended the legal investment authority of federally-chartered depository institutions as follows: federal savings and loan associations and federal savings banks may invest in, sell or otherwise deal with "mortgage related securities" without limitation as to the percentage of their assets represented thereby, federal credit unions may invest in the securities, and national banks may purchase the securities for their own account without regard to the limitations generally applicable to investment securities set forth in 12 U.S.C. 24 (Seventh), subject in each case to such regulations as the applicable federal regulatory authority may prescribe. The Federal Financial Institutions Examination Council has issued a supervisory policy statement applicable to all depository institutions, setting forth guidelines for and significant restrictions on investments in "high-risk mortgage securities." The policy statement has been adopted by the Federal Reserve Board, the Office of the Comptroller of the Currency, the FDIC and the OTS with an effective date of February 10, 1992. The policy statement generally indicates that a mortgage derivative product will be deemed to be high risk if it exhibits greater price volatility than a standard fixed rate thirty-year mortgage security. According to the policy statement, prior to purchase, a depository institution will be required to determine whether a mortgage derivative product that it is considering acquiring is high-risk, and if so that the proposed acquisition would reduce the institution's overall interest rate risk. Reliance on analysis and documentation obtained from a securities dealer or other outside party without internal analysis by the institution would be unacceptable. There can be no assurance as to which classes of offered securities will be treated as high-risk under the policy statement. The predecessor to the OTS issued a bulletin, entitled, "Mortgage Derivative Products and Mortgage Swaps", which is applicable to thrift institutions regulated by the OTS. The bulletin established guidelines for the investment by savings institutions in certain "high-risk" mortgage derivative securities and limitations on the use of the securities by insolvent, undercapitalized or otherwise "troubled" institutions. According to the bulletin, such "high-risk" mortgage derivative securities include securities having specified characteristics, which may include some classes of offered securities. In addition, the National Credit Union Administration has issued regulations governing federal credit union investments which prohibit investment in specified types of securities, which may include some classes of offered securities. Similar policy statements have been issued by regulators having jurisdiction over other types of depository institutions. Any class of securities that is not rated in one of the two highest rating categories by at least one Rating Agency, and any other class of securities specified in the related prospectus supplement, will not constitute "mortgage related securities" for purposes of SMMEA. Prospective investors in these classes of securities, in particular, should consider the matters discussed in the following paragraph. There may be other restrictions on the ability of investors either to purchase some classes of offered securities or to purchase any class of offered securities representing more than a specified percentage of the investors' assets. The company will make no representations as to the proper characterization of any class of offered securities for legal investment or other purposes, or as to the ability of particular investors to purchase any class of certificates under applicable legal investment restrictions. These uncertainties may adversely affect the liquidity of any class of certificates. Accordingly, all investors whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult with their own legal advisors in determining whether and to what extent the offered securities of any class thereof constitute legal investments or are subject to investment, capital 124
424B5298th Page of 311TOC1stPreviousNextBottomJust 298th
or other restrictions, and, if applicable, whether SMMEA has been overridden in any jurisdiction relevant to the investor. USE OF PROCEEDS Substantially all of the net proceeds to be received from the sale of certificates will be applied by the company to finance the purchase of, or to repay short-term loans incurred to finance the purchase of, the mortgage loans and/or mortgage securities in the respective mortgage pools and to pay other expenses. The company expects that it will make additional sales of securities similar to the offered securities from time to time, but the timing and amount of any such additional offerings will be dependent upon a number of factors, including the volume of mortgage loans purchased by the company, prevailing interest rates, availability of funds and general market conditions. METHODS OF DISTRIBUTION The certificates offered by this prospectus and by the related prospectus supplements will be offered in series through one or more of the methods described below. The prospectus supplement prepared for each series will describe the method of offering being utilized for that series and will state the net proceeds to the company from the sale. The company intends that offered securities will be offered through the following methods from time to time and that offerings may be made concurrently through more than one of these methods or that an offering of the offered securities of a particular series may be made through a combination of two or more of these methods. The methods are as follows: o By negotiated firm commitment or best efforts underwriting and public re-offering by underwriters; o By placements by the company with institutional investors through dealers; and o By direct placements by the company with institutional investors. If underwriters are used in a sale of any offered securities (other than in connection with an underwriting on a best efforts basis), the certificates will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at fixed public offering prices or at varying prices to be determined at the time of sale or at the time of commitment therefor. The underwriters may be broker-dealers affiliated with the company whose identities and relationships to the company will be as set forth in the related prospectus supplement. The managing underwriter or underwriters with respect to the offer and sale of the offered securities of a particular series will be set forth on the cover of the prospectus supplement relating to the series and the members of the underwriting syndicate, if any, will be named in the prospectus supplement. In connection with the sale of the offered securities, underwriters may receive compensation from the company or from purchasers of the certificates in the form of discounts, concessions or commissions. Underwriters and dealers participating in the distribution of the offered securities may be deemed to be underwriters in connection with the certificates, and any discounts or commissions received by them from 125
424B5299th Page of 311TOC1stPreviousNextBottomJust 299th
the company and any profit on the resale of offered securities by them may be deemed to be underwriting discounts and commissions under the Securities Act. It is anticipated that the underwriting agreement pertaining to the sale of offered securities of any series will provide that the obligations of the underwriters will be subject to conditions precedent, that the underwriters will be obligated to purchase all such certificates if any are purchased (other than in connection with an underwriting on a best efforts basis) and that, in limited circumstances, the company will indemnify the several underwriters and the underwriters will indemnify the company against specified civil liabilities, including liabilities under the Securities Act or will contribute to payments required to be made in respect thereof. The prospectus supplement with respect to any series offered by placements through dealers will contain information regarding the nature of the offering and any agreements to be entered into between the company and purchasers of offered securities of the series. The company anticipates that the certificates offered by this prospectus and the prospectus supplement will be sold primarily to institutional investors or sophisticated non-institutional investors. Purchasers of offered securities, including dealers, may, depending on the facts and circumstances of the purchases, be deemed to be "underwriters" within the meaning of the Securities Act in connection with reoffers and sales by them of the certificates. Holders of offered securities should consult with their legal advisors in this regard prior to any such reoffer or sale. LEGAL MATTERS Legal matters, including federal income tax matters, in connection with the securities of each series will be passed upon for the company by Thacher Proffitt & Wood LLP, New York, New York. With respect to each series of securities, a copy of this opinion will be filed with the Commission on Form 8-K within 15 days after the Closing Date. FINANCIAL INFORMATION With respect to each series of certificates, a new trust fund will be formed, and no trust fund will engage in any business activities or have any assets or obligations prior to the issuance of the related series of certificates. Accordingly, no financial statements with respect to any trust fund related to a series of certificates will be included in this prospectus or in the related prospectus supplement. With respect to each series of notes, where the issuer is a statutory business trust or a limited liability company, financial statements will be filed as required by the Exchange Act. Each such issuer will suspend filing the reports if and when the reports are no longer required under the Exchange Act. RATING It is a condition to the issuance of any class of offered securities that they shall have been rated not lower than investment grade, that is, in one of the four highest rating categories, by at least one Rating Agency. 126
424B5300th Page of 311TOC1stPreviousNextBottomJust 300th
Ratings on mortgage pass-through certificates and mortgage-backed notes address the likelihood of receipt by the holders thereof of all collections on the underlying mortgage assets to which the holders are entitled. These ratings address the structural, legal and issuer-related aspects associated with the certificates and notes, the nature of the underlying mortgage assets and the credit quality of the guarantor, if any. Ratings on mortgage pass-through certificates and mortgage-backed notes do not represent any assessment of the likelihood of principal prepayments by borrowers or of the degree by which the prepayments might differ from those originally anticipated. As a result, securityholders might suffer a lower than anticipated yield, and, in addition, holders of stripped interest securities in extreme cases might fail to recoup their initial investments. 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. AVAILABLE INFORMATION The company is subject to the informational requirements of the Exchange Act and in accordance therewith files reports and other information with the Commission. Reports and other information filed by the company can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and its Regional Offices located as follows: Chicago Regional Office, 500 West Madison, 14th Floor, Chicago, Illinois 60661; New York Regional Office, 233 Broadway, New York, New York 10279. Copies of the material can also be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates and electronically through the Commission's Electronic Data Gathering, Analysis and Retrieval system at the Commission's Website (http://www.sec.gov). The company does not intend to send any financial reports to securityholders. This prospectus does not contain all of the information set forth in the registration statement (of which this prospectus forms a part) and exhibits thereto which the company has filed with the Commission under the Securities Act and to which reference is hereby made. REPORTS TO SECURITYHOLDERS The master servicer or another designated person will be required to provide periodic unaudited reports concerning each trust fund to all registered holders of offered securities of the related series with respect to each trust fund as are required under the Exchange Act and the Commission's related rules and regulations. See "Description of the Securities--Reports to Securityholders." INCORPORATION OF INFORMATION BY REFERENCE There are incorporated in this prospectus and in the related prospectus supplement by reference all documents and reports filed or caused to be filed by the company with respect to a trust fund pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering of the offered securities of the related series. The company will provide or cause to be provided without charge to each person to whom this prospectus is delivered in connection with the offering of one or more classes of offered securities, upon written or oral request of the person, a copy of any or all the reports incorporated in this prospectus by reference, in each case to the extent the reports relate to one or more of such classes of the offered securities, other than the exhibits to the documents, unless the exhibits are specifically incorporated 127
424B5301st Page of 311TOC1stPreviousNextBottomJust 301st
by reference in the documents. Requests should be directed in writing to Impac Secured Assets Corp., 20371 Irvine Avenue, Santa Ana Heights, California 92707, or by telephone at (714) 556-0122. The company has determined that its financial statements will not be material to the offering of any offered securities. 128
424B5302nd Page of 311TOC1stPreviousNextBottomJust 302nd
GLOSSARY ACCRUAL SECURITY -- A security with respect to which some or all of its accrued interest will not be distributed but rather will be added to the principal balance thereof on each distribution date for the period described in the related prospectus supplement. AFFILIATED SELLER -- Impac Funding Corporation, the parent of the company, and their respective affiliates. AGREEMENT -- An owner trust agreement, servicing agreement, indenture or pooling and servicing agreement. ARM LOAN -- A mortgage loan with an adjustable interest rate. BANKRUPTCY CODE -- Title 11 of the United States Code, as amended from time to time. BANKRUPTCY LOSS -- A Realized Loss attributable to certain actions which may be taken by a bankruptcy court in connection with a mortgage loan, including a reduction by a bankruptcy court of the principal balance of or the mortgage rate on a mortgage loan or an extension of its maturity. BENEFICIAL OWNER -- A person acquiring an interest in any DTC Registered Security. BENEFIT PLAN INVESTORS -- Plans, as well as any "employee benefit plan" (as defined in Section 3(3) or ERISA) which is not subject to Title I of ERISA, such as governmental plans (as defined in Section 3(32) of ERISA) and church plans (as defined in Section 3(33) of ERISA) which have not made an election under Section 410(d) of the Code, and any entity whose underlying assets include Plan Assets by reason of a Plan's investment in the entity. BUYDOWN ACCOUNT -- With respect to a buydown mortgage loan, the custodial account where the Buydown Funds are placed. BUYDOWN FUNDS -- With respect a buydown mortgage loan, the amount contributed by the seller of the mortgaged property or another source and placed in the Buydown Account. BUYDOWN PERIOD -- The period during which funds on a buydown mortgage loan are made up for from the Buydown Account. CERCLA -- The federal Comprehensive Environmental Response, Compensation and Liability Act, as amended. CERTIFICATE ACCOUNT -- One or more separate accounts for the collection of payments on the related mortgage loans and/or mortgage securities constituting the related trust fund. CLOSING DATE -- With respect to any series of securities, the date on which the securities are issued. 129
424B5303rd Page of 311TOC1stPreviousNextBottomJust 303rd
CODE -- The Internal Revenue Code of 1986. COMMISSION -- The Securities and Exchange Commission. COMMITTEE REPORT -- The Conference Committee Report accompanying the Tax Reform Act of 1986. CONSERVATION ACT -- The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996. CONTRACT -- Manufactured housing conditional sales contracts and installment loan agreements each secured by a Manufactured Home. CONTRIBUTIONS TAX -- With respect to specific contributions to a REMIC made after the Closing Date, a tax on the REMIC equal to 100% of the value of the contributed property. COOPERATIVE -- With respect to a cooperative mortgage loan, the corporation that owns the related apartment building. CRIME CONTROL ACT -- The Comprehensive Crime Control Act of 1984. DEFAULTED MORTGAGE LOSS -- A Realized Loss other than a Special Hazard Loss, Extraordinary Loss or other losses resulting from damage to a mortgaged property, Bankruptcy Loss or Fraud Loss. DEFERRED INTEREST -- If an adjustment to the mortgage rate on a mortgage loan has caused the amount of accrued interest on the mortgage loan in any month to exceed the scheduled monthly payment on the mortgage loan, the resulting amount of interest that has accrued but is not then payable. DELETED MORTGAGE LOAN -- A mortgage loan which has been removed from the related trust fund. DESIGNATED SELLER TRANSACTION -- A series of securities where the related mortgage loans are provided either directly or indirectly to the company by one or more Sellers identified in the related prospectus supplement. DETERMINATION DATE -- The close of business on the date on which the amount of each distribution to securityholders will be determined, which shall be stated in each prospectus supplement. DIDMC -- The Depository Institutions Deregulation and Monetary Control Act of 1980. DOL -- The U.S. Department of Labor. DOL REGULATIONS -- Regulations by the DOL promulgated at 29 C.F.R. ss. 2510.3-101. DTC REGISTERED SECURITY -- Any security initially issued through the book-entry facilities of the DTC. 130
424B5304th Page of 311TOC1stPreviousNextBottomJust 304th
DUE PERIOD -- The period between distribution dates. ELIGIBLE ACCOUNT -- An account maintained with a federal or state chartered depository institution (i) the short-term obligations of which are rated by each of the Rating Agencies in its highest rating at the time of any deposit therein, or (ii) insured by the FDIC (to the limits established by the FDIC), the uninsured deposits in which account are otherwise secured such that, as evidenced by an opinion of counsel (obtained by and at the expense of the person requesting that the account be held pursuant to this clause (ii)) delivered to the trustee prior to the establishment of the account, the security holders will have a claim with respect to the funds in the account and a perfected first priority security interest against any collateral (which shall be limited to Permitted Instruments) securing the funds that is superior to claims of any other depositors or general creditors of the depository institution with which the account is maintained or (iii) a trust account or accounts maintained with a federal or state chartered depository institution or trust company with trust powers acting in its fiduciary capacity or (iv) an account or accounts of a depository institution acceptable to the Rating Agencies (as evidenced in writing by the Rating Agencies that use of any such account as the Certificate Account will not have an adverse effect on the then-current ratings assigned to the classes of the securities then rated by the Rating Agencies). Eligible Accounts may or may not bear interest. EQUITY CERTIFICATES -- With respect to any series of notes, the certificate or certificates representing a beneficial ownership interest in the related issuer. ERISA -- The Employee Retirement Income Security Act of 1974, as amended. ERISA PLANS -- Employee pension and welfare benefit plans subject to ERISA. EXEMPTION -- An individual prohibited transactions exemption issued by the DOL to an underwriter, as amended by PTE 97-34, 62 Fed. Reg. 39021 (July 21,1997), and PTE 2000-58, 65 Fed. Reg. 67765 (November 13, 2000). EXEMPTION RATING AGENCY -- Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., or Fitch, Inc. EXCHANGE ACT -- The Securities Exchange Act of 1934, as amended. EXTRAORDINARY LOSS -- Any Realized Loss occasioned by war, civil insurrection, certain governmental actions, nuclear reaction and certain other risks. FRAUD LOSS -- A Realized Loss incurred on a defaulted mortgage loan as to which there was fraud in the origination of the mortgage loan. FTC RULE -- The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission. GAIN-ST GERMAIN ACT -- The Gain-St Germain Depository Institutions Act of 1982. GLOBAL SECURITIES -- The globally offered securities of the classes specified in the related prospectus supplement. 131
424B5305th Page of 311TOC1stPreviousNextBottomJust 305th
GRANTOR TRUST CERTIFICATE -- A certificate representing an interest in a Grantor Trust Fund. GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATE -- A Grantor Trust Certificate representing an undivided equitable ownership interest in the principal of the mortgage loans constituting the related Grantor Trust Fund, together with interest on the Grantor Trust Certificates at a pass-through rate. GRANTOR TRUST STRIP CERTIFICATE -- A certificate representing ownership of all or a portion of the difference between interest paid on the mortgage loans constituting the related Grantor Trust Fund (net of normal administration fees and any retained interest of the company) and interest paid to the holders of Grantor Trust Fractional Interest Certificates issued with respect to the Grantor Trust Fund. A Grantor Trust Strip Certificate may also evidence a nominal ownership interest in the principal of the mortgage loans constituting the related Grantor Trust Fund. GRANTOR TRUST FUND -- A trust fund as to which no REMIC election will be made and which qualifies as a "grantor trust" within the meaning of Subpart E, part I of subchapter J of the Code. HIGH COST LOANS -- Mortgage loans subject to the Homeownership Act, which amended TILA to provide new requirements applicable to loans that exceed certain interest rate and/or points and fees thresholds. HIGH LTV LOANS -- Mortgage loans with loan-to-value ratios in excess of 80% and as high as 150% and which are not be insured by a Primary Insurance Policy. HOMEOWNERSHIP ACT --The Home Ownership and Equity Protection Act of 1994. HOUSING ACT -- The National Housing Act of 1934, as amended. INDEX -- With respect to an ARM Loan, the related index, which will be specified in the related prospectus supplement and may include one of the following indexes: (1) the weekly average yield on U.S. Treasury securities adjusted to a constant maturity of either six months or one year, (2) the weekly auction average investment yield of U.S. Treasury bills of six months, (3) the daily Bank Prime Loan rate made available by the Federal Reserve Board, (4) the cost of funds of member institutions for the Federal Home Loan Bank of San Francisco, (5) the interbank offered rates for U.S. dollar deposits in the London market, each calculated as of a date prior to each scheduled interest rate adjustment date which will be specified in the related prospectus supplement or (6) any other index described in the related prospectus supplement. INSURANCE PROCEEDS -- Proceeds received under any hazard, title, primary mortgage, FHA or other insurance policy that provides coverage with respect to a particular mortgaged property or the related mortgage loan (other than proceeds applied to the restoration of the property or released to the related borrower in accordance with the customary servicing practices of the master servicer (or, if applicable, a special servicer) and/or the terms and conditions of the related mortgage. INTERMEDIARY -- An institution that is not a participant in the DTC but clears through or maintains a custodial relationship with a participant. IRS -- The Internal Revenue Service. 132
424B5306th Page of 311TOC1stPreviousNextBottomJust 306th
ISSUE PREMIUM -- The excess of the issue price of a REMIC Regular Certificate over its stated redemption price. ISSUER -- With respect to a series of notes, the Delaware business trust or other trust, created pursuant to the owner trust agreement, that issues the notes. LIQUIDATION PROCEEDS -- (1) All amounts, other than Insurance Proceeds received and retained in connection with the liquidation of defaulted mortgage loans or property acquired in respect thereof, by foreclosure or otherwise, together with the net operating income (less reasonable reserves for future expenses) derived from the operation of any mortgaged properties acquired by the trust fund through foreclosure or otherwise and (2) all proceeds of any mortgage loan or mortgage security purchased (or, in the case of a substitution, amounts representing a principal adjustment) by the master servicer, the company, a Seller or any other person pursuant to the terms of the related pooling and servicing agreement or servicing agreement as described under "The Mortgage Pools--Representations by Sellers," "Servicing of Mortgage Loans--Realization Upon and Sale of Defaulted Mortgage Loans," "--Assignment of Trust Fund Assets" above and "The Agreements--Termination." MANUFACTURED HOME -- Manufactured homes within the meaning of 42 United States Code, Section 5402(6), which defines a "manufactured home" as "a structure, transportable in one or more sections, which in the traveling mode, is eight body feet or more in width or forty body feet or more in length, or, when erected on site, is three hundred twenty or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein; except that the term shall include any structure which meets all the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the Secretary of Housing and Urban Development and complies with the standards established under this chapter." NET MORTGAGE RATE -- With respect to a mortgage loan, the mortgage rate net of the per annum rate or rates applicable to the calculation of servicing and administrative fees and any retained interest of the company. NONRECOVERABLE ADVANCE -- An advance which, in the good faith judgment of the master servicer, will not be recoverable from recoveries on the related mortgage loan or another specifically identified source. NOTE MARGIN -- With respect to an ARM Loan, the fixed percentage set forth in the related mortgage note, which when added to the related Index, provides the mortgage rate for the ARM Loan. OID REGULATIONS -- The rules governing original issue discount that are set forth in Sections 1271-1273 and 1275 of the Code and in the related Treasury regulations. OTS -- The Office of Thrift Supervision. PARITY ACT -- The Alternative Mortgage Transaction Parity Act of 1982. 133
424B5307th Page of 311TOC1stPreviousNextBottomJust 307th
PARTIES IN INTEREST -- With respect to a Plan, persons who have specified relationships to the Plans, either "Parties in Interest" within the meaning of ERISA or "Disqualified Persons" within the meaning of the Code. PERCENTAGE INTEREST -- With respect to a security of a particular class, the percentage obtained by dividing the initial principal balance or notional amount of the security by the aggregate initial amount or notional balance of all the securities of the class. PERMITTED INVESTMENTS -- United States government securities and other investment grade obligations specified in the related pooling and servicing agreement or the related servicing agreement and indenture. PLAN ASSETS -- "Plan assets" of a Plan, within the meaning of the DOL Regulations. PLANS -- ERISA Plans and Tax Favored Plans. PREPAYMENT ASSUMPTION -- With respect to a REMIC Regular Certificate or a Grantor Trust Certificate, the prepayment assumption used in pricing the initial offering of that security. PREPAYMENT INTEREST SHORTFALL -- With respect to any mortgage loan with a prepayment in part or in full the excess, if any, of interest accrued and otherwise payable on the related mortgage loan over the interest charged to the borrower (net of servicing and administrative fees and any retained interest of the company). PRIMARY INSURANCE COVERED LOSS -- With respect to a mortgage loan covered by a Primary Insurance Policy, the amount of the related loss covered pursuant to the terms of the Primary Insurance Policy, which will generally consist of the unpaid principal amount of the mortgage loan and accrued and unpaid interest on the mortgage loan and reimbursement of specific expenses, less (1) rents or other payments collected or received by the insured (other than the proceeds of hazard insurance) that are derived from the related mortgaged property, (2) hazard insurance proceeds in excess of the amount required to restore the related mortgaged property and which have not been applied to the payment of the mortgage loan, (3) amounts expended but not approved by the primary insurer, (4) claim payments previously made on the mortgage loan and (5) unpaid premiums and other specific amounts. PRIMARY INSURANCE POLICY -- A primary mortgage guaranty insurance policy. PRIMARY INSURER -- An issuer of a Primary Insurance Policy. PTCE -- Prohibited Transaction Class Exemption. QUALIFIED SUBSTITUTE MORTGAGE LOAN -- A mortgage loan substituted for a Deleted Mortgage Loan, meeting the requirements described under "The Mortgage Pools-- Representations by Sellers" in this prospectus. RATING AGENCY -- A "nationally recognized statistical rating organization" within the meaning of Section 3(a)(41) of the Exchange Act. 134
424B5308th Page of 311TOC1stPreviousNextBottomJust 308th
REALIZED LOSS -- Any loss on a mortgage loan attributable to the mortgagor's failure to make any payment of principal or interest as required under the mortgage note. RECORD DATE -- The close of business on the last business day of the month preceding the month in which the applicable distribution date occurs. RELIEF ACT -- The Servicemembers' Civil Relief Act of 1940, as amended. REMIC -- A real estate mortgage investment conduit as defined in Sections 860A through 860G of the Code. REMIC ADMINISTRATOR -- The trustee, the master servicer or another specified party who administers the related REMIC. REMIC CERTIFICATES -- Certificates evidencing interests in a trust fund as to which a REMIC election has been made. REMIC PROVISIONS -- Sections 860A through 860G of the Code. REMIC REGULAR CERTIFICATE -- A REMIC Certificate designated as a "regular interest" in the related REMIC. REMIC REGULAR CERTIFICATEHOLDER -- A holder of a REMIC Regular Certificate. REMIC RESIDUAL CERTIFICATE -- A REMIC Certificate designated as a "residual interest" in the related REMIC. REMIC RESIDUAL CERTIFICATEHOLDER -- A holder of a REMIC Residual Certificate. REMIC REGULATIONS -- The REMIC Provisions and the related Treasury regulations. REO MORTGAGE LOAN -- A mortgage loan where title to the related mortgaged property has been obtained by the trustee or to its nominee on behalf of securityholders of the related series. RICO -- The Racketeer Influenced and Corrupt Organizations statute. SECURITIES ACT -- The Securities Act of 1933, as amended. SELLER -- The seller of the mortgage loans or mortgage securities included in a trust fund to the company with respect a series of securities, who shall be an Affiliated Seller or an Unaffiliated Seller. SINGLE FAMILY PROPERTY -- An attached or detached one-family dwelling unit, two-to four-family dwelling unit, condominium, townhouse, row house, individual unit in a planned-unit development and other individual dwelling units. 135
424B5309th Page of 311TOC1stPreviousNextBottomJust 309th
SMMEA -- The Secondary Mortgage Market Enhancement Act of 1984. SPECIAL HAZARD LOSS -- (1) losses due to direct physical damage to a mortgaged property other than any loss of a type covered by a hazard insurance policy or a flood insurance policy, if applicable, and (2) losses from partial damage caused by reason of the application of the co-insurance clauses contained in hazard insurance policies. STRIP SECURITY -- A security which will be entitled to (1) principal distributions, with disproportionate, nominal or no interest distributions or (2) interest distributions, with disproportionate, nominal or no principal distributions. TAX FAVORED PLANS -- Tax-qualified retirement plans described in Section 401(a) of the Code and on individual retirement accounts described in Section 408 of the Code. TILA -- The Federal Truth-in-Lending Act. TITLE V -- Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980, enacted in March 1980. TITLE VIII -- Title VIII of the Garn-St Germain Act. UNAFFILIATED SELLERS -- Banks, savings and loan associations, mortgage bankers, mortgage brokers, investment banking firms, the Resolution Trust Corporation, the FDIC and other mortgage loan originators or sellers not affiliated with the company. UNITED STATES PERSON -- A citizen or resident of the United States, a corporation or partnership (including an entity treated as a corporation or partnership for federal income tax purposes) created or organized in, or under the laws of, the United States or any state thereof or the District of Columbia (except, in the case of a partnership, to the extent provided in regulations), or an estate whose income is subject to United States federal income tax regardless of its source, or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. To the extent prescribed in regulations by the Secretary of the Treasury, which have not yet been issued, a trust which was in existence on August 20, 1996 (other than a trust treated as owned by the grantor under subpart E of part I of subchapter J of chapter 1 of the Code), and which was treated as a United States person on August 20, 1996 may elect to continue to be treated as a United States person notwithstanding the previous sentence. VALUE -- With respect to a mortgaged property securing a single family, multifamily, commercial or mixed-use loan, the lesser of (x) the appraised value determined in an appraisal obtained at origination of the mortgage loan, if any, or, if the related mortgaged property has been appraised subsequent to origination, the value determined in the subsequent appraisal and (y) the sales price for the related mortgaged property (except in circumstances in which there has been a subsequent appraisal). However, in the case of refinanced, modified or converted single family, multifamily, commercial or mixed-use loans, the "Value" of the related mortgaged property will be equal to the lesser of (x) the appraised value of the related mortgaged property determined at origination or in an appraisal, if any, obtained at the time of refinancing, modification or conversion and (y) the sales price of the related mortgaged property or, if the mortgage loan 136
424B5310th Page of 311TOC1stPreviousNextBottomJust 310th
is not a rate and term refinance mortgage loan and if the mortgaged property was owned for a relatively short period of time prior to refinancing, modification or conversion, the sum of the sales price of the related mortgaged property plus the added value of any improvements. With respect to a new Manufactured Home, the "Value" is no greater than the sum of a fixed percentage of the list price of the unit actually billed by the manufacturer to the dealer (exclusive of freight to the dealer site), including "accessories" identified in the invoice, plus the actual cost of any accessories purchased from the dealer, a delivery and set-up allowance, depending on the size of the unit, and the cost of state and local taxes, filing fees and up to three years prepaid hazard insurance premiums. With respect to a used Manufactured Home, the "Value" is the least of the sale price, the appraised value, and the National Automobile Dealer's Association book value plus prepaid taxes and hazard insurance premiums. The appraised value of a Manufactured Home is based upon the age and condition of the manufactured housing unit and the quality and condition of the mobile home park in which it is situated, if applicable. 137
424B5Last Page of 311TOC1stPreviousNextBottomJust 311th
IMPAC SECURED ASSETS CORP. COMPANY $2,300,000,000 MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2004-3 PROSPECTUS SUPPLEMENT COUNTRYWIDE SECURITIES CORPORATION BEAR, STEARNS & CO. INC. UNDERWRITERS YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT OFFERING THE OFFERED CERTIFICATES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. Dealers will be required to deliver a prospectus supplement and prospectus when acting as underwriters of the certificates offered by this prospectus supplement and with respect to their unsold allotments or subscriptions. In addition, all dealers selling the offered certificates, whether or not participating in this offering, may be required to deliver a prospectus supplement and prospectus until 90 days after the date hereof.

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘424B5’ Filing    Date First  Last      Other Filings
10/1/345960
9/1/342643
8/25/34111123
8/25/33111123
8/25/32111123
8/25/31111123
8/25/30111123
8/25/29111123
8/25/28111123
8/25/27111123
8/25/26111123
8/25/25111123
8/25/24111123
8/25/23111123
8/25/22111123
8/25/21111123
8/25/20111123
8/25/19111123
8/25/18111123
8/25/17111123
8/25/16111123
8/25/15111123
8/25/14111123
7/1/143147
6/1/1431
5/1/1431
8/25/13111123
8/25/12111123
9/1/1131
8/25/11111123
8/1/1131
7/1/1131
6/1/113147
4/1/1131
3/1/1131
1/25/11136141
12/25/10136141
11/25/10136141
10/25/10136141
10/1/1031
9/25/10136141
8/25/10111141
8/1/1031
7/25/10136141
6/25/10136141
5/25/10136141
4/25/10136141
3/25/10136141
2/25/10136141
1/25/10136141
12/25/09135141
11/25/09135141
10/25/09135141
10/1/0931
9/25/09135141
9/1/093147
8/25/09111141
8/1/093147
7/25/09135141
7/1/093147
6/25/09135141
6/1/093147
5/25/09135140
5/1/093147
4/25/09135140
4/1/093147
3/25/09135140
3/1/0931
2/25/09135140
2/1/0931
1/25/09135140
1/1/0931
12/25/08135140
11/25/08135140
10/25/08135140
9/25/08135140
8/25/08111140
7/25/08135140
6/25/08135140
5/25/08135140
4/25/08135140
3/25/08135140
2/25/08135140
1/25/08135140
12/25/07135140
11/25/07135140
10/25/07135140
9/25/07135140
9/1/073147
8/25/07111140
8/1/073147
7/25/07135140
7/1/073147
6/25/07135140
6/1/073147
5/25/07135140
5/1/073147
4/25/07135140
4/1/073147
3/25/07135140
3/1/073147
2/25/07135140
2/1/073147
1/25/07135140
1/1/073147
12/25/06135140
12/1/063147
11/25/06135140
10/25/06135140
10/1/0631
9/25/06135140
9/1/063147
8/25/06111140
8/1/063147
7/25/06134140
7/1/063147
6/25/06134140
6/1/063147
5/25/06134140
5/1/063147
4/25/06134140
4/1/063147
3/25/06134140
3/1/063147
2/25/06134140
2/1/063147
1/25/06134140
1/1/0647
12/25/05134139
12/1/053147
11/25/05134139
10/25/05134139
9/25/05134139
9/1/053147
8/25/05111139
8/1/053147
7/25/05134139
7/1/053147
6/25/05134139
6/1/0531
5/25/05134139
4/25/05134139
3/25/05134139
3/1/053147
2/25/05134139
2/1/053147
1/25/05134139
1/1/053147
12/25/04134139
12/1/043147
11/25/04134139
11/1/043160
10/25/041341398-K
10/1/0426478-K
9/30/047162
9/25/041341398-K
Filed on:9/1/0431478-K
8/31/0431508-K
8/30/0411748-K
8/20/04124
8/9/04124
8/1/043161
7/23/0476
7/22/04124
6/30/0471145
5/11/04269
5/10/04124
4/22/04124
3/31/0476124
3/15/04124
1/1/0443
12/31/0371151
7/1/03256
6/30/03124424B5,  8-K
3/31/0376124
12/31/027115110-K,  NT 10-K
3/29/02166
12/31/01717610-K/A
7/5/01295
12/31/00717210-K
11/13/00304
2/4/00273
1/5/00295
9/1/9926
1/29/982288-K
8/5/972832878-K
8/20/96173309
6/14/96288
5/6/96228
1/4/95274
2/10/92297
 List all Filings 
Top
Filing Submission 0000882377-04-001809   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
AboutPrivacyRedactionsHelp — Mon., Mar. 18, 10:25:36.3pm ET